Seattle-based law firm Keller Rohrback LLP may continue to represent homeowners suing USAA Casualty Insurance Co. over its alleged bad-faith refusal to pay for expenses after a house fire, the Washington Supreme Court said in a matter of first impression.
The case is factually distinct from Keller’s previous defense of USAA in a bad-faith insurance suit involving a house fire, the high court said Thursday. Its decision interpreting changes to professional conduct rules reverses a state appeals court ruling disqualifying Keller and reinstates the trial court’s order.
The firm’s extensive representation of USAA for a decade, stretching into 2017, also doesn’t interfere with its current representation of Richard and Debra Plein, the high court said.
The court looked to other states’ interpretations of the American Bar Association’s version of the rule on conflicts of interest and its comments, which Washington “effectively adopted” in 2006, it said. The rule bars a lawyer from representing someone “in the same or a substantially related matter in which that person’s interests are materially adverse” to a former client’s interests, without the former client’s consent.
The resolution here “depends on just how related the former and current representation must be,” the high court said in an opinion by Justice Sheryl Gordon McCloud.
The Pleins allege they hired The Sterling Group Inc., on USAA’s recommendation, to make repairs following a fire in their home. But Sterling allegedly concealed fire damage and did a shoddy job.
USAA refused to pay for further repairs and alternative housing, they say.
The Pleins hired attorney Joel Hanson, according to the court. He spoke with Keller’s William Smart and Ian Birk, whom the Pleins also hired to sue USAA.
USAA sought to have the Keller attorneys disqualified. A team at the firm represented USAA in over 165 matters from 2007 to 2017, was privy to its litigation strategy and many other confidential matters, and handled a bad faith claim involving an alleged refusal to provide alternative housing after a house fire, it said.
The trial court declined to disqualify, and the appeals court reversed.
The supreme court said the firm shouldn’t be disqualified. “Keller did not represent USAA on the Plein matter or on anything factually related to the Plein matter,” Gordon McCloud said. “As a result, it did not represent USAA on any matter substantially related to the instant case, so it may now represent the Pleins.”
The court joined the majority of jurisdictions that place the burden of showing that matters are substantially related on the former client.
One of the comments to the rule “anticipates the exact situation presented by this case: a lawyer representing a current client against a former organizational client on a ‘factually distinct problem’ of the same type as the prior representation,” Gordon McCloud said. The representation is allowed, she said.
Another comment, focusing on a 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,” is a closer question, she said. But USAA didn’t suggest “that Keller obtained confidential information that would materially advance the Pleins’ case,” she said.
Talmadge/Fitzpatrick also represented the Pleins.
Lewis Brisbois Bisgaard & Smith LLP represented Sterling.
DKM Law Group LLP represents USAA.
The case is Plein v. USAA Cas. Ins. Co., 2020 BL 189668, Wash., No. 97563-9, 5/21/20.