A conflicts check at Keller Rohrback revealed the firm’s past relationship with USAA. For more than a decade, Keller Rohrback represented USAA and its affiliates in at least 165 cases, approximately 12 of which involved insurance bad faith litigation by homeowners and in one of which Keller Rohrback represented a USAA subsidiary in an insurance bad faith lawsuit that involved issues very similar to the issues involved in the Pleins’ case. Moreover, Keller Rohrback served as USAA’s primary law firm in Washington for bad faith litigation. In the final two years of its representation, Keller Rohrback billed over 8,000 hours of work for USAA.

Keller Rohrback asked the trial court to rule on the asserted conflict of interest. The trial court found no conflict under Washington Rules of Professional Conduct (“RPC”) 1.9.

The dispute reached a Washington appellate court.

Washington’s Rules of Professional Conduct

Washington RPC 1.9(a) provides:

A lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related matter in which that person’s interests are materially adverse to the interests of the former client unless the former client gives informed consent, confirmed in writing.

(Emphasis added.)

Additionally, RPC 1.10(a) provides:

[W]hile lawyers are associated in a firm, none of them shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so by Rules 1.7 or 1.9, unless the prohibition is based on a personal interest of the disqualified lawyer and does not present a significant risk of materially limiting the representation of the client by the remaining lawyers in the firm.

The Appellate Court’s Decision

The appellate court reversed, concluding that Keller Rohrback’s representation of the Pleins violated RPC 1.9(a).

In its decision, the appellate court pointed out that Comment 3 to RPC 1.9 explained that matters were “substantially related” for purposes of RPC 1.9 if they involved the same transaction or legal dispute or if there otherwise was “a substantial risk that confidential factual information as would normally have been obtained in the prior representation would materially advance the client’s position in the subsequent matter.”

The appellate court observed that although the specific facts of the Pleins’ case might qualify as distinct, Keller Rohrback had “learned significant confidential information about USAA’s strategies for bad faith litigation.”

The appellate court noted that USAA asserted that it trusted Keller Rohrback attorneys “with direct access to confidential and proprietary business information of USAA CIC and its affiliated companies” including confidential claims handling materials, thought processes of adjusters and in-house attorneys, business and litigation philosophies, and strategies such as “approaches to settlement discussions, motion practice, case analysis, defenses, witness meetings, witness preparation, trial preparation, and discovery both on a case-by-case and institutional, company-wide level.”

Moreover, the appellate court continued, Keller Rohrback served as one of the few law firms involved in insurance bad faith litigation on behalf of USAA in Washington, and had “intimate business and litigation knowledge.” Keller Rohrback provided USAA and its affiliates with advice including “insurance coverage matters, litigation strategies, factual positions, litigation mitigation recommendations for training and communication materials, and legal arguments.”

The appellate court added that Keller Rohrback also participated in seminars as part of enterprise-wide strategic discussions where attorneys became privy to “proprietary information including litigation approach and strategies that has only been shared with a limited group of all of the law firms nationally representing USAA CIC and its affiliate companies in alleged bad faith litigation across the United States.” And Keller Rohrback attorneys “had electronic login credentials to certain internal proprietary and confidential documents concerning insurance bad faith litigation,” including “document repositories holding attorney-client information and electronic claim databases.”

In the appellate court’s opinion, USAA demonstrated a “significant risk” that Keller Rohrback had knowledge of “specific and general confidential information that could materially advance the Pleins’ case.”

Additionally, it continued, the “temporal proximity” of the prior representation also was a concern given that Keller Rohrback agreed to represent the Pleins “within three months of the end of its relationship with USAA.” The appellate court found that this “short time frame” provided “scant opportunity for obsolescence, particularly given the extent – in substance and duration – of the prior representation.”

The appellate court ruled that Keller Rohrback’s knowledge of USAA’s legal strategies went beyond the permitted “general knowledge of the client’s policies and practices.” It concluded that the bad faith litigation defense conducted by Keller Rohrback on behalf of USAA created “significant concern” that Keller Rohrback possessed specific confidential information that could unfairly aid the Pleins.

Therefore, the appellate court concluded that Keller Rohrback’s representation of the Pleins generated a substantial risk that USAA’s confidential information would materially advance the Pleins’ position in this case, that there was a conflict of interest under RPC 1.9(a); and that Mr. Smart, Mr. Birk, and their firm were disqualified from representing the Pleins in this matter.

The case is Plein v. USAA Casualty Ins. Co., No. 78190-1-I (Wash. Ct. App. July 29, 2019). Attorneys involved include: For Petitioner: Robert Stewart Mclay, Joshua Nathan Kastan, DKM Law Group LLP, Seattle, WA; Brian Roger Esq Davis, Attorney at Law, San Francisco, CA; Jaime Yoshimi Ritton, Attorney at Law, Seattle, WA. For Respondent: Joel Hanson, Attorney at Law PLLC, Seattle, WA; William Candler Smart, Keller Rohrback LLP, Seattle, WA; Ian S Birk, Keller Rohrback, LLP, Seattle, WA; Philip Albert Talmadge, Talmadge/Fitzpatrick/Tribe, Seattle, WA; Isaac Ruiz, Plaintiff Litigation Group PLLC, Seattle, WA. For Other Parties: Mick Anthony Jaeger, Lewis Brisbois Bisgaard & Smith LLP, Seattle, WA; William W Simmons, Lewis Brisbois Bisgaard & Smith, Seattle, WA.