Beauty Contests Can Turn Ugly
An initial interview can establish an attorney-client relationship
and cause future disqualification
By Craig E. Holden
The process of prospective clients consulting with and considering multiple
law firms for potential representation has been characterized as the law firm
But the so-called beauty contest can produce ugly results. Beauty contests
are particularly common for attorneys competing for major litigation or prized
clients. While it may be an honor to be considered for such beauty contests,
rainmakers beware: law firm beauty contests are replete with ethical pitfalls.
By consulting with multiple law firms for potential representation, some sophisticated
litigants have employed a strategy of attempting to create a conflict of interest
and disqualify these law firms from representing their adversaries.
Even unsophisticated or good faith prospective clients who share too much confidential
information in initial interviews can effectively disqualify a law firm from
representing their opposition in the same or substantially related future litigation.
While the prospective client may only meet with you once and never retain you,
your firm may still be disqualified because the prospective client now qualifies
as a “former client” to whom you owe fiduciary duties.
Specifically, your firm may owe the now former client a duty of confidentiality
that prevents your representation of adverse parties on related matters.
Adding insult to injury, after losing a beauty contest, attorneys may unwittingly
find that the disqualification extends to a large host of potentially adverse
parties. One court poignantly explained this quagmire: “[h]aving apparently
failed the swimsuit competition, [law firms] do not wish to be saddled with
the ethical encumbrances of an attorney/client relationship for which it never
received any money.” Bridge Products Inc. v. Quantum Chem. Corp.,
No. 88-C-10734, 1990 WL 70857 (N.D. Ill.).
In California, attorneys are prohibited from undertaking representation in
a matter that is adverse to a former client when there is a “substantial
relationship” between the current and former matters.
This prohibition stems from an attorney’s duty to maintain confidential
information obtained from a former client. Business & Professions Code §6068(e)
(attorneys must “maintain inviolate the confidence, and at every peril
to himself or herself to preserve the secrets, of his or her [current or former]
client.”) An initial consultation with a prospective client (that never
retains you) is sufficient to create an attorney-client relationship and make
the prospective client a “former client” when confidential information
Evidence Code §951 broadly defines a “client” as anyone who
“consults a lawyer for the purpose of retaining the lawyer or securing
legal service or advice . . . .” With this broad definition, virtually
every prospective client that consults with you (but never hires you) becomes
a former client.
Ergo, mere participation in a beauty contest can land the losing law firm with
onerous fiduciary obligations for years to come. Sullivan v. Sup. Ct.
(Spignola), 29 Cal. App. 3d 64, 69, 105 Cal. Rptr. 241 (1972).
Moreover, the ability of a former client to disqualify their former attorney
often yields unfair results — particularly since the passage of time does
not cure the conflict. River West Inc. v. Nickel, 188 Cal. App. 3d
1297, 1301-1304 (1987) (attorney disqualified from representing new client in
matter “substantially related” to water rights case handled 30 years
Identifying the ethical pitfalls
Naive attorneys who enter beauty contests and receive confidential information
can unwittingly be disqualified from representing parties that may not seem
Consider the recent Orange County bankruptcy/securities fiasco which had Wall
Street broker-dealers scrambling to interview the best securities and bankruptcy
lawyers in town.
An invitation to one of these beauty contests could be considered a potentially
profitable blessing or a potential curse. One meeting with the wrong Wall Street
firm for an initial consultation — coupled with exposure to vast amounts
of their confidential information — could easily disqualify your firm
from representing the many other brokerage firms that are not currently adverse,
but may become adverse as the litigation matures.
In today’s competitive legal market, sophisticated litigants and repeat
players often consult with and consider dozens of firms for potential representation,
especially in high-stakes litigation.
Additionally, business clients often hire multiple firms for a single case.
In the recent high-profile MGM v. Sony litigation concerning the rights
to the James Bond trademark, each studio hired four top Los Angeles firms for
the single lawsuit. This environment of attorney-shopping and the hiring of
teams of law firms creates a fertile field for potential conflicts and future
disqualifications for active business developers.
Legal specialists and top-flight litigators are the primary target of the bad
faith litigant whose only intention is to limit the adversary’s selection
Certainly courts recognize that “motions to disqualify are often used
as a tactical device” by former clients. Metro-Goldwyn-Mayer v. Tracinda
Corp., 36 Cal. App. 4th 1832, 1847 (1995). Nonetheless, courts still mechanically
apply the former client conflict rules, often without regard for seemingly unfair
For instance, in Mailer v. Mailer, 390 Mass. 371, 390, 455 N.E. 2d
1211 (1983), the former prospective client successfully disqualified an attorney
he consulted with (for approximately one hour) on only one occasion five years
earlier — even though there was no evidence that any confidential information
was disclosed to the disqualified attorney.
Similarly, the California Supreme Court found an attorney-client relationship
to exist based on a single brief consultation which resulted in no retention
of the attorney. Flatt v. Sup. Ct. (Daniel), 9 Cl. 4th 275, 280, (1994)
(“We have little quarrel [finding that the prospective client became]
that of a client,” after one hour-long meeting).
In contrast, see Zimmerman v. Zimmerman, 16 Cal. App. 4th 556 (1993)
(attorney’s 20-minute conversation with a prospective client was insufficient
to prevent the law firm from subsequently representing the other side in the
exact same matter).
The inherent flaw with beauty contests is that the initial consultation —
in order to be successful — almost always requires that the attorney obtain
confidential information from the prospective client.
Without this discussion, it is almost impossible for the attorney and prospective
client to determine if, and on what terms, representation would be appropriate.
City & County of San Francisco v. Sup. Ct., 37 Cal. 2d 227, 235
(1951) (for adequate representation the prospective client should provide “full
disclosure of the facts”).
For these reasons, the prospective client’s initial consultation (which
results in no representation) almost invariably transforms the former prospective
client into a former client for purposes of the ethical rules.
The attorney who was briefly consulted and never hired is now (perhaps unfairly)
bound with onerous fiduciary obligations to avoid representing potentially adverse
new clients on substantially related matters.
The governing conflict rules
The primary California statutes governing an attorney’s fiduciary obligations
to a former client are rule 3-310(E) of the California Rules of Professional
Conduct (CRPC) and Business & Professions Code §6068(e). CRPC 3-310(E)
provides that “[a] member shall not, without the informed written consent
of the . . . former client, accept employment adverse to the . . . former client
where, by reason of the representation of the . . . former client, the member
obtained confidential information material to the employment.” Since “client”
can be loosely defined as those who merely “consult” an attorney
to consider “retaining,” the strictures of the foregoing statutes
can easily come into play when attorneys participate in beauty contests.
California courts apply the “substantial relationship test” to
determine if a prior representation conflicts with or is adverse to a current
representation. Flatt v. Sup. Ct., 9 Cal. 4th 275, 283 (1994).
The California Supreme Court explained (in a case involving a motion to disqualify
a law firm beauty contestant) the ethical rules relating to the subsequent representation
of interests adverse to a former client:
“Where the potential conflict is one that arises from successive representation
of clients with potentially adverse interests . . . the chief fiduciary value
jeopardized is that of client confidentiality. Thus, where a former client seeks
to have a previous attorney disqualified . . . the governing test requires that
the client demonstrate a ‘substantial relationship’ between the
subjects of the antecedent and current representations. The ‘substantial
relationship’ test mediates . . . the interest of the former client in
ensuring the permanent confidentiality of matters disclosed to the attorney
in the course of the prior representation . . . .” Flatt, 9 Cal.
4th at 283.
Once the former client demonstrates a “substantial relationship”
between the two representations, there is a presumption that material confidential
information relevant to the second representation was obtained from the former
client, and disqualification is therefore mandatory.
Once the former client satisfies the substantial relationship test, it does
not have to prove that confidential information was actually disclosed in the
beauty contest. The attorney is automatically disqualified under the strictures
of CRPC 3-310(E) and Bus. & Prof. Code §6068(e), unless the former
client waives the conflict.
In determining whether a substantial relationship exists between a prior consultation
and current representation, courts will examine several factors such as: (a)
the similarities between the factual and legal questions posed in the two representations;
(b) the nature and extent of the attorney’s involvement in the prior consultation,
including the amount of time spent by the attorney at the prior consultation;
and (c) the attorney’s exposure to the former client’s policy and
Losing beauty contest participants are usually not so lucky in avoiding disqualification
from a former client since a “substantial relationship” will naturally
exist when a law firm is retained by the former client’s adversary in
the matter that was the subject of the beauty contest.
When the substantial relationship test is not satisfied, courts have still
entertained motions to disqualify attorneys who switch sides after a beauty
contest based on the general appearance of impropriety. B.F. Goodrich Co.
v. Formosa Plastics Corp., 638 F. Supp. 1050 (S.D. Tex. 1986).
However, “California has never had a rule requiring that attorneys avoid
the appearance of impropriety, and has expressly refused to adopt such a rule.”
In re Mortgage & Realty Trust, 195 B.R. 740 (1996). See also Gregori
v. Bank of America, 207 Cal. App. 3d 291, 305-308, (1989) (appearance of
impropriety by itself does not compel disqualification, but is a factor).
Recent court decisions
Significant spotlight has been placed on two unrelated cases involving motions
to disqualify law firms that switched sides after participating in beauty contests
— particularly since the facts in both cases are similar, but the outcomes
are not. See Bridge Products Inc. v. Quantum Chemical Corp., No. 88-C-10734,
1990 WL 70857 (N.D. Ill.); and B.F. Goodrich Co. v. Formosa Plastics Corp.,
638 F. Supp. 1050 (S.D. Tex. 1986).
In Bridge, plaintiff Bridge interviewed four Chicago area firms, including
Sidley & Austin. Bridge disclosed confidential information to Sidley, including
its trial strategy, weaknesses and bottom-line settlement figures. Bridge ultimately
hired another firm. Defendant Quantum, however, ended up hiring Sidley.
The court granted Bridge’s motion to disqualify Sidley and admonished
Sidley for failing to caution Bridge not to disclose confidential information
during the beauty contest. The Bridge court said:
“. . . It was Sidley that was responsible for making it clear to Bridge
that the initial meeting was purely preliminary and that confidences would not
necessarily be protected . . . . Sidley did not have Bridge sign a conflicts
waiver . . . [or] indicate whether Bridge would be billed for the meeting; such
knowledge would also have made Bridge more wary of making indiscriminate disclosures
[of confidential information].”
In Goodrich, plaintiff Goodrich moved to disqualify defendant Formosa’s
attorney, who was one of five that Goodrich had previously consulted, but never
retained for its suit against Formosa. Goodrich (like Bridge) shared its trial
strategy, and the strengths and weaknesses of its case during the beauty contest.
The court, however, strangely denied Goodrich’s disqualification motion
by finding that the substantial relationship test was not satisfied, even though
Formosa’s attorney had “switched sides” in the same litigation.
The substantial relationship test would have created a presumption that Goodrich
shared confidential information during the beauty contest interview. Having
failed to satisfy the substantial relationship test, Goodrich was left with
the more onerous burden of proving (which it failed to do) that Formosa’s
attorneys actually received confidential information.
Business developers should not take too much solace in the Goodrich holding,
however, since most commentators agree that the Goodrich outcome is the exception,
whereas the Bridge holding is the rule.
Notwithstanding the plethora of ethical pitfalls facing law firm beauty contestants,
there are several prophylactic measures law firms can take to avoid the conflicts
of interest that arise. The first line of defense for a law firm takes place
before the beauty contest commences.
Law firms should have in place a comprehensive conflicts check system that
not only identifies present and former clients, but also identifies individuals
and companies that have interviewed (but not retained) the firm for representation.
Most law firms lack a conflicts system that identifies the latter.
This definitely creates problems with beauty contests at large firms, since
attorneys do not know if their colleagues have ever participated in a beauty
contest with the adversary of a new law firm client. In other words, the firm’s
left hand not knowing what its right hand is doing is exacerbated at large firms
— particularly those with multiple offices.
Hence, having attorneys enter into a computerized conflicts system the prospective
clients with whom they have consulted helps identify potential conflicts before
Ideally, the best defense to a disqualification motion is an ironclad waiver
agreement obtained from the prospective client before the beauty contest.
Although it may seem impractical to begin your sales pitch with “Dear
prospective client, please be advised that any confidential information you
share may later be used against you,” the most effective insurance against
future disqualification is to have the prospective client waive the potential
future conflicts. CRPC 3-310(E).
Law firms should have boilerplate waiver agreements for prospective clients
to sign before the beauty contest begins. While many attorneys are only focused
on winning the beauty contest, the waiver agreement can act as a form of insurance
— particularly against malicious litigants whose only focus is to secure
The contents of the waiver agreement, at the very least, should advise the
prospective client that: (a) the meeting is merely preliminary and the prospective
client will not disclose any confidential information; (b) if the attorney is
not retained, any confidential information intentionally or inadvertently disclosed
will not be protected and may be used in future litigation adverse to the prospective
client; and (c) if the attorney is not retained, the prospective client waives
the right to disqualify the attorney from representing any adverse party in
the same or similar litigation.
Undoubtedly, some attorneys who request a prospective client to sign a waiver
agreement will be at a disadvantage before the beauty contest begins. Accordingly,
attorneys will have to make the waiver agreement more palatable by informing
prospective clients that it is also a device designed to protect the prospective
client. This can be accomplished by noting that the waiver agreement also safeguards
the prospective client’s confidential information by requesting that it
not be disclosed unless or until the attorney is retained.
While some prospective clients will reject your firm’s participation
in the beauty contest if you first demand a waiver agreement, the prospective
client who is considering hiring you in good faith should be less likely to
object to a waiver agreement.
As a final good measure, the unsuccessful law firm beauty contestant who is
later hired by an adversary must also disclose to the new client the firm’s
previous meeting with the other party. CRPC 3-310(B). Attorneys failing to make
said disclosure can be exposed to both malpractice and disciplinary claims.
Attorneys uncomfortable with requesting a waiver from prospective clients should
at least verbally admonish the prospective clients not to share any confidential
information unless and until they are retained.
After the beauty contest, the attorney can send a thank you letter to the prospective
client that memorializes: (a) the verbal admonishments made before the meeting;
and (b) that the attorney has learned no confidential information from the prospective
client. Of course, confirming letters are not as effective as a waiver agreement.
It should be noted that waiver agreements have their limitations and may be
declared invalid under certain circumstances. In this regard, attorneys should
remember that the most important precaution one can take in a beauty contest
is to avoid ever receiving any confidential information.
If an attorney actually receives confidential information from a prospective
client, a waiver agreement will be deemed invalid. The rationale is that the
waiver agreement lacks “informed consent” because the prospective
client cannot consent to an actual breach of confidence. Elliott v. McFarland
Unified School Dist., 165 Cal. App. 3d 562, 573 (1985).
Thus, a waiver agreement can only rebut the presumption that confidential information
was shared during the beauty contest that bears a “substantial relationship”
with the new representation.
Even if a law firm secures a valid waiver agreement, the law firm may still
run afoul of the obligation not to represent a client when a “previous
relationship would substantially affect the member’s representation.”
CRPC 3-310 (B)(2)(b). In this regard, an attorney’s confidentiality duty
to a former client may interfere with the new client’s right to effective
representation, not to mention expose the attorney to a potential malpractice
Some law firms choose to erect the proverbial Chinese Wall around the tainted
attorney as an effort to cure the conflict resulting from representation of
a party adverse to a former client in substantially related litigation.
However, courts have not readily accepted this as sufficient means to overcome
disqualification. Henriksen v. Great American Sav. & Loan, 11 Cal.
App. 4th 109, 114 (1992) (law firm vicariously disqualified notwithstanding
ethical screening wall around attorney infected with former client’s confidences).
Aside from waiver agreements, seasoned business developers rely on good discretion
and common sense to avoid conflicts in beauty contests.
However, business developers should take particular caution when entering beauty
contests involving: (a) multiple opposing parties; (b) high-stakes litigation
where both sides are consulting many firms; (c) unknown or cold-call prospective
clients who will not sign a waiver agreement, but nonetheless wish to volunteer
confidential information; (d) a prospective client that is adverse to a prized
potential client your firm wishes to represent (e.g. prospective Doe vs.
Fortune 500 company); or (e) a prospective client that you do not have
a strong chance of acquiring.
When entering such contests, the primary goal (aside from winning) is to ensure
that no confidential information is disclosed before retention, and more important,
that this understanding is reduced to writing.
Applying the foregoing efforts and discretion, law firms can better balance
the risks of (a) choosing to receive confidential information from prospective
clients in order to put on a good show at the contest, or (b) protecting the
firm from future disqualification.
Sometimes law firms make the mistake of relaxing their conflict protection
measures when a beauty contest manifests itself in unexpected forms. Tellingly,
business developers should keep their guard up when participating in a prospective
client’s Request for Proposal (RFP), which is merely another form of the
law firm beauty contest.
RFPs, like traditional beauty contests, can also be fraught with peril. The
prospective client at certain phases of the RFP evaluation may disclose confidential
information for your firm to consider.
Moreover, unsuccessful participation in the RFP can disqualify participating
attorneys from representing new clients adverse to the company that issued the
RFP. Law firms should therefore consider circulating a waiver agreement before
responding to the RFP.
Despite the inherent ethical and business development dangers posed by beauty
contests, many attorneys still fail to undertake any precautionary measures
before entering them. Perhaps these attorneys are only focused on winning the
beauty contest, and not on protecting against the theoretical risk of being
disqualified in the future.
However, in an era of eroding client loyalty, cost-conscious clients, and clients
desiring legal specialists, beauty contests are becoming more common, as is
the risk of future disqualification.
Remember that your former client that never hired you may: (a) disqualify you
from representing the adverse parties in the same litigation; and (b) conflict
you out from representing a host of future potential clients who are adverse
to your short-lived former client in substantially related matters.
It might appear that the beauty contest is powerful weaponry for the prospective
client or in-house counsel who wishes to disqualify the best law firms in town
from representing their adversaries. This is a dangerous tactic for prospective
clients to employ, however, because if the participating law firm is not disqualified,
then the prospective client’s case may be compromised by the adversary’s
attorney’s knowledge of disclosed confidences.
One court noted this reality: “disqualifying all the lawyers interviewed
by a company for prospective employment would itself undermine the public’s
confidence in the judicial process.” Goodrich, 638 F. Supp. at
It behooves both the prospective clients and the attorneys who participate
in beauty contests to avoid discussing confidential information during initial
consultations and to reduce this understanding to an agreement.
The attorneys who do employ scrupulous protection measures before entering
beauty contests are far less likely to face the prospect of losing twice: i.e.,
the beauty contest and the subsequent new client.
Craig E. Holden is a senior associate at Robins, Kaplan, Miller &
Ciresi LLP in Los Angeles, specializing in intellectual property
- This self-study activity has been approved for Minimum Continuing Legal
Education credit by the State Bar of California in the amount of one hour
of legal ethics.
- The State Bar of California certifies that this activity conforms to the
standards for approved education activities prescribed by the rules and regulations
of the State Bar of California governing minimum continuing legal education.
Answer the following true-false questions after reading the MCLE article on
“beauty contests.” Use the
answer form provided to send the test, along with a $20 processing fee,
to the State Bar. If you do not receive your certificate within four weeks,
- One meeting with a potential client that discloses confidential information
(but never retains you) can prevent you from later representing an adverse
party on the same matter.
- One meeting with a potential client that discloses confidential information
(but never retains you) can prevent you from later representing an adverse
party on a different matter.
- An attorney’s duty to a former potential client that disclosed confidential
information (but never retained you) lasts forever.
- Participation in a “beauty contest” where the potential client
discloses confidential information (but never retains you) prevents you from
later representing an adverse party on the same matter.
- A one-hour conversation with a potential client that discloses confidential
information (but never retains you) prevents you from later representing an
adverse party on the same matter.
- A potential conflict with a former potential client can be cured by the
attorney providing written notice.
- A potential conflict with a former potential client can be cured by the
attorney obtaining written consent.
- Disqualification is mandatory where a former potential client demonstrates
a “substantial relationship” between their matter and your new
- A waiver agreement signed by a potential client, before any confidences
are disclosed, prevents the potential client from challenging your subsequent
representation of adverse parties.
- One possible protective measure against disqualification by a former client
who ends up never hiring you is to have him or her agree in writing that the
meeting is preliminary and that confidential information should not be disclosed.
- A potential client would never be regarded as a “former” client.
- There may be reason to add a potential client’s name to your conflict
check system even if that potential client ends up not hiring your firm after
all and thus never becomes an actual client.
- There has never been a case where a court refused to disqualify an attorney
who was given information by the potential client that disclosed their trial
strategy and strengths and weaknesses.
- During a beauty contest, most courts would consider a disclosure by a potential
client of his or her trial strategy and the strengths and weaknesses of his
or her case to be “confidential” information.
- The reasoning behind prohibiting an attorney from representing a party adverse
to a former client, even when the “former” client ended up not
hiring the attorney, is to protect confidences disclosed by the former client.
- After losing a beauty contest, the attorney cannot represent the adverse
party if there is a “substantial relationship” between the current
and former matters.
- A potential client would not use the beauty contest as a tactic to disqualify
numerous attorneys from representing adverse parties.
- It is often difficult to have a meaningful initial consultation with a potential
client if the client fails to disclose confidential information; nevertheless,
to avoid disqualification in the future, you must adhere to this rule.
- Once a former client (who never hired your firm) shows a “substantial
relationship” between his matter and the current matter, there is a
presumption that confidential information was given by the former client.
- The mere appearance of impropriety will automatically disqualify an attorney