How can the following conflict of interest situation be dealt with?

Question

A, an individual, sues a large corporation, X. The action is acrimonious and goes on for several years.

A junior associate at A's law firm leaves the firm and goes to work for the law department of Company X, which starts a countersuit or takes other action, using the associate's knowledge both of the case, and personal details of the individual.

Does the above represent a conflict of interest for the associate and/or company X? If so, how might A deal with this? Through "estoppel" or other means?

Answer 1

Does the above represent a conflict of interest for the associate and/or company X?

Yes. This is in violation of, for instance, rule 1.9 of Michigan Rules of Professional Conduct (MRPC). See also Ulrich v. Hearst Corp., 809 F.Supp.229 (1192). Commentary in MRPC regarding Lawyers moving between firms explains:

there is a presumption that all confidences known by a partner in the first firm are known to all partners in the second firm.

See also Audio Mpeg, Inc. v. Dell, Inc., 219 F.Supp.3d 563, 574-575 (2016):

Though the attorney in question has not made an appearance in this case, he "could have" — and did — "obtain[ ] confidential information in the first representation that [is] relevant" here.

[T]he surety that he received confidential information from Plaintiffs [...] weighs heavily in favor of W&S being disqualified even though he is not working on this case. [...] Moreover, the attorney possesses confidential information which could harm Plaintiffs if used by one of the W&S attorneys who has appeared in this case and works in his office.

Your description reflects that, in his former employment, the junior associate has confidential information which can be used in a way materially adverse to the interests of the former client. The junior associate violated the aforementioned rule insofar as X already "start[ed] a countersuit or [took] another action" using the junior associate's knowledge. This warrants disqualification of X's law firm as in Audio Mpeg.

But disqualification might not suffice. X itself might already have become aware of the disclosure by the junior associate. That enables X to use that information even if it switches law firms. This might estop X from asserting counterclaims, at least those that otherwise would be covered by the tolling of the statute of limitations in this multi-year litigation.

Answer 2

Every U.S. state, and every U.S. district, commonwealth and territory has rules of professional conduct that follow the model of the ABA Model Rule of Professional Conduct (most have some jurisdiction specific variants of a few of the rules at least, such as the exceptions to the duty to confidentiality under Rule 1.6). Those rules set forth what to do, both in their language, in the official comments, in advisory opinions written by state ethics boards, and in adjudicated cases that have value as precedents. The pertinent rules are:

Rule 1.2 Scope of Representation and Allocation of Authority Between Client and Lawyer

Rule 1.4 Communications

Rule 1.5 Fees

Rule 1.6 Confidentiality of Information

Rule 1.7 Conflict of Interest: Current Clients

Rule 1.8 Conflict of Interest: Current Clients: Specific Rules

Rule 1.9 Duties to Former Clients

Rule 1.10 Imputation of Conflicts of Interest: General Rule

Rule 1.11 Special Conflicts of Interest for Former and Current Government Officers and Employees

Rule 1.12 Former Judge, Arbitrator, Mediator or Other Third-Party Neutral

Rule 1.13 Organization as Client

Rule 1.16 Declining or Terminating Representation

Rule 1.17 Sale of Law Practice

Rule 1.18 Duties to Prospective Client

Not all of the relevant rules apply to every situation. Roughly speaking, when a firm considers making a lateral hire, it does a full fledged conflict check comparing its current list of clients against every case that the lateral hire has enough of a connection to, in order to allow it to count as a potential conflict of interest given the attribution rules of Rule 1.10.

At that point, the hiring firm then analyzes potential conflicts to determine if they actually or potentially violate the rules, and if so, how the conflicts can be resolved.

The hiring firm can decline to hire, postpone a hire until a conflict ends (an associate attorney I know had a hiring delayed for about a year and a half due to that), withdraw from representing a conflicted client, obtain consent from the client that the hire represented to waive the conflict, or determine that the conflict doesn't violate the rule. If a client or former client disagrees there can be disqualification litigation in pending cases. Sometimes it is possible to "screen" a new hire from the case (something sometimes called a "Chinese wall"), but more often, it isn't.

Once the new hire is on board, new cases have to consider conflicts that the later hire brought with them, as new clients of the firm are evaluated. In a big law firm, you start every working day with a multi-page list of potential new clients that you have to flag for any conflicts that may be present based upon your list of past clients.

What you describe would probably present a conflict of interest that would cause the lawyer to be disqualified from representing the company (which might have to hire outside counsel that has no contact with the company lawyer, if the lawyer was hired).

In some areas of practice, as all of this suggests, lateral hiring is very ticklish and often not even worth attempting, in others (e.g. personal injury plaintiff's work or criminal defense) it is very rare for a lateral hire to cause of conflict of interest to arise. The risk of conflicts when larger firms are involved is one of the main reasons that "boutique" law firms that look like a single department within a large law firm have emerged as common in specialty areas like intellectual property.