Richard Watkins v. Trans Union, LLC
Filing
Filed opinion of the court by Judge Hamilton. AFFIRMED. Michael S. Kanne, Circuit Judge; Diane S. Sykes, Circuit Judge, concurring in part and dissenting in part, and David F. Hamilton, Circuit Judge. [6863429-1] [6863429] [17-1142]
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In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 17‐1142
RICHARD WATKINS,
Plaintiff‐Appellee,
v.
TRANS UNION, LLC,
Defendant‐Appellant.
____________________
Appeal from the United States District Court for the
Southern District of Indiana, Terre Haute Division.
No. 2:14‐cv‐135‐WTL‐DKL — William T. Lawrence, Judge.
____________________
ARGUED MAY 31, 2017 — DECIDED AUGUST 22, 2017
____________________
Before KANNE, SYKES, and HAMILTON, Circuit Judges.
HAMILTON, Circuit Judge. Plaintiff Richard Watkins has
sued Trans Union for violating the Fair Credit Reporting Act.
The merits of his claims are not the subject of this appeal. The
issue here is whether attorney John Cento should be disqual‐
ified from representing Watkins. That is because over ten
years ago Cento earned a living defending Trans Union in
hundreds of lawsuits alleging Fair Credit Reporting Act vio‐
lations. Because the Southern District of Indiana makes use of
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Indiana’s rules governing attorney conduct, Indiana Rule of
Professional Conduct 1.9 (Duties to Former Clients) governs
Trans Union’s effort to have Cento disqualified.
The district court found that Rule 1.9 does not require
Cento’s disqualification, but the court authorized an interloc‐
utory appeal of that decision under 28 U.S.C. § 1292(b), which
we accepted. Trans Union argues that the district court ap‐
plied the wrong legal standard to decide disqualification and
misapplied the standard that it did apply. We disagree and
affirm the decision of the district court. Because this case turns
on the trajectory of Cento’s legal career, we begin there. We
then review the facts and procedural history of Watkins’s case
before reviewing the district court’s reasons for denying dis‐
qualification under Rule 1.9.
I. Factual and Procedural History
A. John Cento’s Legal Career
John Cento began his career as an attorney at the Indian‐
apolis law firm of Katz & Korin, P.C., where he worked with
Robert Schuckit. Trans Union was a client first of Schuckit,
and then Katz & Korin when Schuckit joined the firm. Cento
began representing Trans Union in 2001, and between 2003
and 2005 worked almost exclusively on Trans Union cases.
Schuckit then left Katz & Korin in June 2005 to form his own
law firm. Cento followed, but he stayed with Schuckit’s new
firm for just a month.
Almost all of the cases in which Cento represented Trans
Union involved the Fair Credit Reporting Act (FCRA). The
FCRA imposes a duty to maintain reasonable procedures for
accurate reporting. See 15 U.S.C. § 1681e(b). The Act author‐
izes a private cause of action for consumers against consumer
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reporting agencies such as Trans Union for willful, knowing,
or negligent failures to comply with the law. 15 U.S.C.
§§ 1681n–p. A defendant may avoid liability for violations
that occur despite the defendant’s good‐faith effort to comply
with the law. See, e.g., 15 U.S.C. §§ 1681g(e)(5), (7).
Cento defended Trans Union against those claims of FCRA
violations for five years. Between 2001 and 2005, he repre‐
sented Trans Union in over 250 cases and billed over 4,000
hours of work for Trans Union. He worked with Trans Union’s
in‐house counsel and employees, and he was given access to
any information necessary for litigation. Today, twelve years
after Cento last represented Trans Union, Schuckit and his
firm continue to represent Trans Union. Some of the Trans Un‐
ion employees with whom Cento worked remain with the
company.
In 2013, Cento formed Cento Law, which represents con‐
sumers bringing FCRA violation claims against credit report‐
ing agencies. The law firm advertises the experience of its at‐
torneys on its webpage: “Our credit report attorneys have lit‐
igated hundreds of Fair Credit Reporting Act cases across the
country. Our experience in this area of law is derived not only
from representing consumers, but from years of prior repre‐
sentation of two of the three national consumer reporting
agencies, Trans Union and Equifax.” Cento Law,
http://www.centolaw.com (last visited Aug. 21, 2017). In 2012,
and again in 2013, Cento was disqualified from cases in which
he represented plaintiffs who brought claims against his for‐
mer client, Trans Union. Childress v. Trans Union, LLC (Chil‐
dress I), No. 1:12‐CV‐00184‐TWP‐DML, 2012 WL 6728339 (S.D.
Ind. Dec. 28, 2012); Hobson v. Trans Union, LLC, No. 1:13‐CV‐
54, 2013 WL 2443917 (N.D. Ind. June 5, 2013).
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B. The Watkins Litigation
In the present case, Richard Watkins selected Cento to rep‐
resent him in his case alleging FCRA violations against Trans
Union under 15 U.S.C. §§ 1681e, 1681g, and 1681i. Watkins
had applied for a loan in 2009 and discovered that his Trans
Union credit file contained twenty “collection tradelines” that
were not his. He disputed the accuracy of his credit file, and
Trans Union removed the incorrectly attributed collections.
But when Watkins applied for a mortgage in 2013, he learned
that the collections had once again been placed in his credit
file. The problem, Watkins alleges, is that Trans Union’s algo‐
rithms have resulted in the merging or mixing of Watkins’s
credit file with that of another person to create a “mixed file,”
and that Trans Union has failed to remedy the continued in‐
clusion of collections not belonging to Watkins. The merits of
Watkins’ claims will turn on whether the procedures Trans
Union used “reasonable procedures to assure maximum pos‐
sible accuracy” of the information about Watkins, see 15
U.S.C. § 1681e(b), and whether Trans Union made good‐faith
efforts to comply with the law, § 1681g(e)(5) & (e)(7).
Cento filed Watkins’s complaint in May 2014. One month
later, Trans Union filed a motion to order Cento to show cause
why he should not be disqualified as Watkins’ lawyer. Watkins
v. Trans Union, LLC, No. 2:14‐cv‐135‐WTL‐DKL, 2016 WL
4919999, at *1 (S.D. Ind. Sept. 15, 2016). The district court
granted that motion and permitted Cento to seek limited dis‐
covery to aid in showing cause. Id. This was an unusual pro‐
cedural path for seeking attorney disqualification. Rather
than file a motion to disqualify, Trans Union sought a show‐
cause order in reliance on the cases in which Trans Union had
successfully sought disqualification against Cento in the past.
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Id.; see also Childress I, 2012 WL 6728339; Hobson, 2013 WL
2443917. The discovery process that followed the show‐cause
order resulted in a magistrate judge report with three alter‐
nate recommendations (to hold an evidentiary hearing; to de‐
cline to disqualify; or, alternatively, to disqualify), but Judge
Lawrence, to whom the case was reassigned after the magis‐
trate proceedings, decided to “exercise [the court’s] authority
to begin with a clean slate.” Watkins, 2016 WL 4919999, at *2.
The parties briefed the attorney disqualification issue and the
court held a hearing before issuing its decision. Id. at *1.
In the district court, as on appeal, Trans Union relied on
LaSalle National Bank v. Lake County, 703 F.2d 252 (7th Cir.
1983), and Analytica, Inc. v. NPD Research, Inc., 708 F.2d 1263
(7th Cir. 1983), to argue that federal common law governs the
standard for disqualification. Both cases predate Indiana Rule
of Professional Conduct 1.9, which, as the district court found
here, governs the issue of disqualification. After analyzing the
precedents and the history of the adoption of the Rules of Pro‐
fessional Conduct, Judge Lawrence followed the guidance of
Rule 1.9 rather than LaSalle National Bank or Analytica and held
that Cento should not be disqualified. Watkins, 2016 WL
4919999, at *6. The prior representations are not factually re‐
lated such that the same matter is in dispute in Watkins. Nor,
the judge found, is there a risk that confidential information
from the prior matters would materially advance Watkins’
present claims. Id. at *4–6. Moreover, the judge noted, over a
decade has passed since Cento represented Trans Union. Id.
at *6. Accordingly, the judge held that the requirements for
disqualification were not met. He permitted Cento to con‐
tinue representing Watkins. Id.
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In this interlocutory appeal under 28 U.S.C. § 1292(b),
Trans Union argues that the district court applied the wrong
legal standard for attorney disqualification and misapplied
the standard it chose. We affirm the decision of the district
court.
II. Analysis
We review for abuse of discretion the district court deci‐
sion rejecting disqualification. Owen v. Wangerin, 985 F.2d 312,
317 (7th Cir. 1993); Whiting Corp. v. White Machinery Corp., 567
F.2d 713, 715 (7th Cir. 1977) (The district court “possesses
broad discretion in determining whether disqualification is
required in a particular case … .”), quoting Schoetter v. Railoc
of Ind., Inc., 546 F.2d 706, 710 (7th Cir. 1976). An abuse of dis‐
cretion can be shown when the district court based its deci‐
sion on an erroneous view of the law or a clearly erroneous
evaluation of evidence. See, e.g., Novo Terapeutisk Lab. A/S v.
Baxter Travenol Lab., Inc., 607 F.2d 186, 188–89 (7th Cir. 1979)
(“This court has relied on the broad discretion of the district
court in refusing to disturb a disqualification order, but we
have not allowed a strict standard of review to prevent rever‐
sal when the district court predicated its disqualification rul‐
ing on a misunderstanding of the law.”) (citations omitted).
This standard of review is consistent with other areas of law
in which district judges have discretion but in exercising it
must apply the correct rule of law. See, e.g., Cooter & Gell v.
Hartmarx Corp., 496 U.S. 384, 405 (1990) (“district court would
necessarily abuse its discretion [in deciding Rule 11 sanctions
motion] if it based its ruling on an erroneous view of the
law”); Ervin v. OS Restaurant Services, Inc., 632 F.3d 971, 976
(7th Cir. 2011) (application of incorrect legal rule to decide
class certification would amount to abuse of discretion).
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We have observed that granting a motion for disqualifica‐
tion has “immediate, severe, and often irreparable … conse‐
quences” for the party and disqualified attorney. Freeman v.
Chicago Musical Instrument Co., 689 F.2d 715, 719 (1982). Dis‐
qualifying a lawyer immediately deprives the losing party
from the “representation of his choice” and disrupts the liti‐
gation. Id. In sum, “disqualification, as a prophylactic device
for protecting the attorney‐client relationship, is a drastic
measure which courts should hesitate to impose except when
absolutely necessary … [because it] destroy[s] a relationship
by depriving a party of representation of their own choosing.”
Id. at 721.
However, the duty of confidentiality represented in the
Rules of Professional Conduct, like the Code of Professional
Responsibility that came before them, is fundamental to the
profession and the relationship between lawyer and client.
See id. Courts have a duty to safeguard the privacy of the at‐
torney‐client relationship and in doing so to “maintain public
confidence in the legal profession” and to protect “the integ‐
rity of the judicial proceeding.” Id.
Whether disqualification is appropriate in this case is gov‐
erned by the Indiana Rules of Professional Conduct. Lawyers
representing clients in federal courts must follow federal
rules, but most “federal courts use the ethical rules of the
states in which they sit.” Huusko v. Jenkins, 556 F.3d 633, 636
(7th Cir. 2009). Watkins filed suit in the Southern District of
Indiana, which has adopted the Indiana Rules of Professional
Conduct to govern attorneys’ conduct. S.D. Ind. Local Rule 83‐
5(e). Indiana adopted the ABA Model Rules of Professional
Conduct as its Rules of Professional Conduct in 1987. United
States v. Goot, 894 F.2d 231, 234 (7th Cir. 1990). Rule 1.9 governs
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the duties lawyers owe to former clients and thus whether
Cento should be disqualified from representing Watkins be‐
cause of a duty he may owe to his former client, Trans Union.1
A. Indiana Rule of Professional Conduct 1.9
Indiana Rule of Professional Conduct 1.9 mirrors the
A.B.A. Model Rule of the same number and reads, in relevant
part:
A lawyer who has formerly represented a client
in a matter shall not thereafter represent an‐
other person in the same or a substantially re‐
lated 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.
In interpreting the Rules of Professional Conduct, federal
courts may rely on the specific guidance offered in the com‐
mentary. See Nix v. Whiteside, 475 U.S. 157, 166 (1986); Strick‐
land v. Washington, 466 U.S. 668, 688 (1984); United States v. Wil‐
liams, 698 F.3d 374, 386 (7th Cir. 2012) (Hamilton, J., dissenting
1 Special considerations apply to federal government lawyers but are not
implicated here. See, e.g., United States v. Supreme Court of New Mexico, 839
F.3d 888, 893, 929–30 (10th Cir. 2016) (holding that a New Mexico Rule of
Professional Conduct as applied in part to federal prosecutors violated
Supremacy Clause), petition for cert. filed, No. 16‐1450 (June 5, 2017). The
McDade Act requires that an “attorney for the Government shall be sub‐
ject to State laws and rules, and local Federal court rules, governing attor‐
neys in each State where such attorney engages in that attorney’s duties,
to the same extent and in the same manner as other attorneys in that
State.” 28 U.S.C. § 530B. However, the Act “should not be construed in any
way to alter federal substantive, procedural, or evidentiary law… .” 28
C.F.R. § 77.1(b).
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in part) (commentary to A.B.A. standards governing norms of
legal practice can be “valuable guidance”). The commentary
to Rule 1.9 defines two matters as “substantially related”
when two matters “involve the same transaction or legal dis‐
pute,” or when there is 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.” Ind. R. Prof’l Conduct 1.9,
cmt. 3.
Whether two matters “involve the same transaction” is de‐
termined by an inquiry into whether the matters are factually
related. Comment 2 states: “The scope of a ‘matter’ for pur‐
poses of this Rule depends on the facts of a particular situa‐
tion or transaction.” It is the direct involvement “in a specific
transaction,” that makes “subsequent representation of other
clients with materially adverse interests in that transaction
clearly … prohibited.” Id., cmt. 2.
If the prior and present matters do not involve the same
transaction or legal dispute, they may still be substantially re‐
lated if there is a substantial risk that confidential information
would materially advance the client’s position in the present
matter. The commentary tells us that information “disclosed
to the public or to other parties adverse to the former client
ordinary will not be disqualifying,” and that information “ac‐
quired in a prior representation may have been rendered ob‐
solete by the passage of time.” Id., cmt. 3.
On the issue most pertinent to this case, the commentary
explains that “a lawyer who recurrently handled a type of
problem for a former client is not precluded from later repre‐
senting another client in a factually distinct problem of that
type even though the subsequent representation involves a
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position adverse to the prior client.” Id., cmt. 2. “In the case of
an organizational client, general knowledge of the client’s pol‐
icies and practices ordinarily will not preclude a subsequent
representation.” Id., cmt. 3.
Rule 1.9 clarified and narrowed the contours of an older
federal common‐law rule for attorney disqualification re‐
ferred to as the “substantial relationship test.” The Model
Rules of Professional Conduct, of which Rule 1.9 is a part, re‐
placed the Model Code of Professional Conduct, which was
based on canons first promulgated in 1908. Monroe Freed‐
man, The Kutak Model Rules v. The American Lawyer’s Code of
Conduct, 26 Vill. L. Rev. 1165 (1981); Kathleen Maher, Keeping
Up Appearances, 16 Prof. Law. 1 (2005). The Rules were the
product of the Kutak Commission, as it became known,
formed in 1977 to assemble a set of governing rules for the
profession. Freedman, Kutak Model Rules, at 1166. Some of the
Model Rules, including Rule 1.9, explicitly rejected the old
canons. Maher, Keeping Up Appearances (2002 revisions to Rule
1.9 deleted the lingering reference to “appearance of impro‐
priety” originally housed in Canon 9 because it was “no
longer helpful to the analysis of questions arising under this
Rule”). The Kutak Commission’s proposed Model Rules of
Professional Conduct were issued in 1983 and then adopted
by the states in the years that followed. Indiana adopted the
Model Rules of Professional Conduct as its Rules of Profes‐
sional Conduct in 1987. Goot, 894 F.2d at 234.
B. Rule 1.9 Does Not Disqualify Cento from Representing
Watkins
The district court looked to the language of Rule 1.9 and
its commentary and determined that the dispute between
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Watkins and Trans Union neither involved the “same transac‐
tion or legal dispute” as those prior cases in which Cento rep‐
resented Trans Union nor involved a “substantial risk” of con‐
fidential information Cento may have gained while working
for Trans Union materially advancing Watkins’ claim. Wat‐
kins, 2016 WL 4919999, at *4, *6. We agree.
1. Different Transactions
First, the present and prior matters are not part of the same
legal dispute. The question turns “on the facts of a particular
situation or transaction,” not whether the matters merely in‐
volve the same type of legal issues. Ind. R. Prof’l Conduct 1.9,
cmt. 2. Here, Cento’s prior representations of Trans Union and
his present representation of Watkins both involve FCRA vio‐
lations but do not turn on the same facts of one “particular
situation or transaction.” Id. The facts upon which Watkins’
case will turn—recurrent false collection listings on his credit
report, despite multiple requests to remove them—are unique
to his claim against Trans Union and are not interwoven with
any individual case in which Cento represented Trans Union
in the past.
A comparison between Cento’s representation of Watkins
and the representation at issue in an Indiana Court of Appeal
opinion reinforces this conclusion. In XYZ, D.O. v. Sykes, at‐
torney Kathleen Clark represented a doctor in six malpractice
cases. 20 N.E.3d 582, 583–84 (Ind. App. 2014). Five years after
her representation of the doctor concluded, she began work‐
ing for another law firm. Id. at 584. At that firm, Clark con‐
ducted an intake interview for a plaintiff asserting a malprac‐
tice claim against the same doctor she previously represented.
The firm took the case and directed Clark to work on it. Id.
The trial court denied a motion to disqualify the entire firm
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for which Clark now worked, but the appellate court re‐
versed. Id.
Although there are superficial similarities between the
two cases, on closer examination, the facts presented in XYZ
are distinct from those in the present case, which point to a
different outcome. The problem was that the plaintiff in XYZ
was suing both the doctor and the hospital where he per‐
formed surgery on the plaintiff. The plaintiff’s claim against
the hospital was that it had been negligent in issuing creden‐
tials to the doctor based on the same surgeries in which attorney
Clark had defended him. Looking to the language of Comment
3 to Rule 1.9, XYZ found that the old and new representations
were substantially related because the new complaint was
“based in part upon the Hospital’s alleged failure to ade‐
quately investigate the circumstances surrounding those six
prior malpractice cases in which Clark represented [the d]oc‐
tor.” Id. at 587. Accordingly, the appellate court found the new
and old representations were substantially related, and that
the passage of time did not cure the problem: “If the six prior
medical malpractice cases remain relevant regarding the cur‐
rent allegation of negligent credentialing, as [the law firm] ad‐
mits, any confidential factual information gleaned during
those prior representations can hardly be deemed stale or ob‐
solete.” Id. at 587–88.
XYZ is easy to understand on those terms, but this case is
quite different. Watkins’ claims do not turn on any specific
facts of any prior matter in which Cento represented Trans
Union. Watkins’ complaint does not refer to any specific prior
litigation against Trans Union in which Cento represented the
company. In contrast, in XYZ, the prior malpractice cases
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were specifically at issue in the complaint in the present liti‐
gation against the doctor. Thus, while the old and new repre‐
sentations in XYZ involved the “same transaction or legal dis‐
pute,” the same cannot be said of the old and new represen‐
tations at issue in this case. The district court did not err in
finding the disputes here to be factually distinct.2
2. No Substantial Risk of Using Confidential Information
On Trans Union’s other route to show that disqualification
is needed, it must show 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.” Ind. R. Prof’l Conduct 1.9,
cmt. 3. We look first to the nature of the information Cento
gained as an attorney for Trans Union.
Some of the information Cento learned while working for
Trans Union might be categorized as general knowledge and
experience. It is undisputed that Cento gained experience
while working for Trans Union. In the words of the district
court, that experience “will indisputably benefit his current
and future clients.” Watkins, 2016 WL 4919999, at *6. Cento
even advertises his extensive experience with FCRA litigation
for both plaintiffs and defendants on his website, which is
bound to raise eyebrows. However, having experience is not
the same as possessing confidential information.
2 We have observed that district courts may construe their own local rules.
Even when a federal court has incorporated a state’s rules by reference,
nothing compels the federal court to adopt the state court’s interpretation
of the rule. Weibrecht v. Southern Ill. Transfer, Inc., 241 F.3d 875, 882 (7th Cir.
2001).
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It is also undisputed that general knowledge about Trans
Union policies and practices to ensure that credit reports are
accurate is discoverable if it is relevant to Watkins’s alleged
FCRA violation. To determine the merits of Watkins’ claims,
the court or jury will need to make findings of fact about
whether the procedures Trans Union used to prepare and to
check the accuracy of Watkins’ consumer report were reason‐
able. See 15 U.S.C. § 1681e(b). As in other cases in which Trans
Union has been a defendant, its policies and procedures that
allegedly resulted in the mixed file and that were used to rem‐
edy the problem will be subject to scrutiny. See, e.g., Price v.
Trans Union, LLC, 839 F. Supp. 2d 785, 790–91 (E.D. Penn. 2012)
(explaining how defendant credit reporting agency’s proce‐
dures result in mixed files); O’Connor v. Trans Union Corp., No.
Civ. A. 97‐4633, 1998 WL 770626, at *3 (E.D. Penn. Nov. 5, 1998)
(compelling response to interrogatory regarding procedures
used in handling plaintiff’s mixed file). Comment 3 makes
clear that information “disclosed to the public or to other par‐
ties adverse to the former client ordinary will not be disqual‐
ifying.” Ind. R. Prof’l Conduct 1.9, cmt. 3.
Further, in cases involving an organizational client like
Trans Union, “general knowledge of the client’s policies and
practices ordinarily will not preclude a subsequent represen‐
tation.” Ind. R. Prof’l Conduct 1.9, cmt. 3. Thus, the general
knowledge and experience Cento gained while defending
Trans Union is not the type of confidential information with
which Rule 1.9 is concerned. The commentary makes clear
that Cento’s repeated representations of Trans Union in FCRA
violation cases do not preclude him from representing a new
client in a factually distinct suit even if his new representation
is adverse to his former client. Id., cmt. 2.
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Nevertheless, while some information Cento gained was
of the experience‐building sort, the district court found that
Cento also “undoubtedly did learn some truly confidential in‐
formation” while working for Trans Union. Watkins, 2016 WL
4919999, at *5. The commentary teaches that courts and law‐
yers should consider the possibility that confidential infor‐
mation “acquired in a prior representation may have been
rendered obsolete by the passage of time,” and that prospect
may be “relevant in determining whether two representations
are substantially related.” Ind. R. Prof’l Conduct 1.9, cmt 3.
The district court found here that the passage of time had
removed any substantial risk that any confidential infor‐
mation from years ago might advance Watkins’s litigation. We
do not find a clear error or an abuse of discretion. Not only, as
the district court noted, have some 500 opinions been issued
since Cento ceased representing Trans Union on “just one of
several provisions of the FCRA [15 U.S.C. § 1681e] that Wat‐
kins alleges Trans Union violated,” but also, as Cento points
out, competitive advantage in credit reporting is created
through technological advances, of which there have been
many over the last twelve years. Watkins, 2016 WL 4919999, at
*5 n.2. In light of the technological advancements and the
sheer number of FCRA claims litigated between the old and
new representations, the district court observed that it is not
“reasonable to believe that the manner in which [Trans Union]
ha[s] handled [litigation] has remained static.” Id. at *5. Over
ten years have passed since Cento last represented Trans Un‐
ion. It was not clear error for the district court to find that any
confidential information he may have gained during his prior
representation has been rendered obsolete.
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Again, a comparison to the Indiana Court of Appeals de‐
cision in XYZ is instructive. There, the court rejected the ar‐
gument that the passage of time—almost seven years—would
render obsolete the confidential factual information gained by
the attorney. It reached that conclusion because the six prior
malpractice cases remained relevant in the present litigation.
XYZ, 20 N.E.3d at 587–88. The attorney in XYZ had learned
factual information regarding specific malpractice claims that
were at issue in the new lawsuit. In this case, by contrast, at‐
torney Cento learned no factual information regarding the
specific FCRA violation at issue in Watkins’ case during his
prior representations of Trans Union. Also, the XYZ doctor
was not an “organizational client,” which Trans Union was to
Cento. See Ind. R. Prof’l Conduct 1.9, cmt 3.
Because of the passage of time and the lack of any factual
overlap between the Watkins’s complaint and any prior mat‐
ter in which Cento defended Trans Union, the district court
did not abuse its discretion in applying Rule 1.9 to hold that
the Cento’s prior and present representations do not involve
the same or substantially related matters.
C. No Mistake of Law
In an attempt to avoid this application of Rule 1.9, Trans
Union argues that the district court abused its discretion by
applying the wrong law. Trans Union relies on two disquali‐
fication cases involving former clients, both decided in a dif‐
ferent state in 1983 before the adoption of the Model Rules in
Indiana. LaSalle National Bank, 703 F.2d 252; Analytica, 708 F.2d
1263. This argument has worked for Trans Union in the past.
In fact, Cento has already twice lost to Trans Union on dis‐
qualification motions decided under the reasoning of LaSalle
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National Bank and Analytica. See Childress I, 2012 WL 6728339;
Hobson, 2013 WL 2443917.
In LaSalle National Bank, we applied a “substantial relation‐
ship” test that “embod[ied] the substance of Canon 4 of the
A.B.A. Code of Professional Responsibility, which protect[ed]
the confidences of a client against disclosure and possible use
against him, and of Canon 9, which provide[d] that an attor‐
ney must avoid even the appearance of impropriety.” 703 F.2d
at 255; see also Goot, 894 F.2d at 234 (Canon 4 stated a “lawyer
should preserve the confidences and secrets of a client,” and
Canon 9 stated a “lawyer should avoid even the appearance
of professional impropriety.”). The substantial relationship
test for disqualification in place prior to the adoption of Rule
1.9 was broad. It was satisfied if “it could reasonably be said
that during the former representation the attorney might have
acquired information related to the subject matter of the sub‐
sequent representation.” LaSalle National Bank, 703 F.2d at 255,
citing Cannon v. U.S. Acoustics Corp., 398 F. Supp. 209, 223
(N.D. Ill. 1975), aff’d in part and rev’d in part, 532 F.2d 1118
(7th Cir. 1976). Whether the party seeking disqualification
could prove that the attorney actually received confidential
information during his employment was irrelevant. LaSalle
National Bank, 703 F.2d at 255, citing Schloetter, 546 F.2d at 710;
see also Analytica, 708 F.2d at 1266 (“It is irrelevant whether
[the lawyer] actually obtained such [confidential] infor‐
mation.”).3
3 We used a three‐part test to determine whether a substantial relationship
was present. “First, the trial judge must make a factual reconstruction of
the scope of the prior legal representation. Second, it must be determined
whether it is reasonable to infer that the confidential information allegedly
given would have been given to a lawyer representing a client in those
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In the Childress litigation, the magistrate and district
judges applied to Cento the substantial relationship test out‐
lined in LaSalle National Bank and Analytica. Childress I, 2012
WL 6728339, at *3; Childress v. Trans Union, LLC (Childress II),
No. 1:12‐CV‐00184‐TWP‐DML, 2013 WL 1828050, at *3 (S.D.
Ind. Apr. 30, 2013). The district judge found that Cento acted
as a practical extension of Trans Union’s in‐house counsel and
that his extended representation of Trans Union in hundreds
of cases established a substantial relationship between his
prior representation of Trans Union and his representation of
Childress in the pending litigation. Childress II, 2013 WL
1828050, at *4–5. The district court in Hobson undertook a sim‐
ilar analysis in denying Cento’s request for discovery and mo‐
tion to stay the disqualification proceedings. Hobson, 2013 WL
2443917.
The Childress and Hobson opinions did not address the
commentary to Rule 1.9. Instead, the Hobson court empha‐
sized that the Seventh Circuit’s substantial relationship test
embodied Canons 4 and 9 of the A.B.A. Code of Professional
Responsibility. Id. at *2, citing Westinghouse, 588 F.2d at 244.
The Childress district court emphasized in its order denying
Cento’s motion to reconsider that LaSalle National Bank and
Analytica decisions “remain good law to the extent they set
forth the well‐regarded Seventh Circuit approach to the sub‐
stantial relationship standard.” Childress v. Trans Union, LLC
matters. Third, it must be determined whether that information is relevant
to the issues raised in the litigation pending against the former client.”
LaSalle National bank, 703 F.2d at 255–56, citing Westinghouse Electric Corp.
v. Gulf Oil Corp., 588 F.2d 221, 225 (7th Cir. 1978). The satisfaction of the
test triggered a rebuttable presumption that the attorney received confi‐
dential information during the prior representation. Id. at 256.
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(Childress III), No. 1:12‐CV‐00184‐TWP‐DML, 2013 WL
3071273, at *2 (S.D. Ind. June 18, 2013).
The problem is that the substantial relationship test ap‐
plied in Childress and Hobson embodied Canons 4 and 9 of the
A.B.A. Code. The Code and those canons no longer governed
Indiana attorneys at the time of the Childress and Hobson deci‐
sions and no longer govern them now. Trans Union argues
that the district court here “applied the wrong stand‐
ard … based on Indiana Rule 1.9” and “improperly relied on
language in the Comments … to fashion a new … test for at‐
torney disqualification.” We disagree. The district court cor‐
rectly looked to Rule 1.9 and its commentary adopted after
LaSalle National Bank “to clarify the contours” of the substan‐
tial relationship test. See Shelton v. Trans Union, LLC, No. 1:16‐
cv‐01278‐SEB‐MJD, slip op. at 4 (S.D. Ind. Dec. 19, 2016).4
Trans Union’s reliance on LaSalle National Bank and other
federal precedents pre‐dating Indiana’s adoption of Rule 1.9
is not persuasive. Both state and federal district courts look to
Rule 1.9’s commentary for guidance in deciding disqualifica‐
tion issues based involving former clients. The commentary
to Rule 1.9 states plainly that to require disqualification of an
4
In Shelton, another recent case in which Cento represented a client
against Trans Union, Judge Barker rejected Trans Union’s argument that
Judge Lawrence’s reliance on the commentary to Rule 1.9 in his Watkins
opinion created a new substantial relationship test. Shelton, No. 1:16‐cv‐
01278‐SEB‐MJD, slip op. at 3. Rather than create a new substantial rela‐
tionship test, Judge Barker observed, Rule 1.9 was adopted after LaSalle
National Bank to clarify the contours of the test and provided guidance for
its application. Id. at 4. Judge Barker agreed with Judge Lawrence that
Cento should not be disqualified from representing clients in new cases
against Trans Union. Id. at 5.
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attorney from a new representation against a former client,
either the old and new matters must be the same factual dis‐
pute or there must be a substantial risk of confidential infor‐
mation being used to materially advance the new client’s in‐
terests. Cento’s old and new representations do not amount to
“a changing of sides” in a specific legal dispute. See Ind. R.
Prof’l Conduct, cmt. 2. There is no specific factual overlap be‐
tween Cento’s prior representations of Trans Union and his
representation of Watkins. The general knowledge Cento
gained while working at Trans Union is not the type of confi‐
dential information that poses a substantial risk of materially
advancing Watkins’ claims. Moreover, more than a decade has
passed since Cento was privy to Trans Union’s internal poli‐
cies and practices or legal strategy—confidential or otherwise.
Accordingly, the decision of the district court is
AFFIRMED.
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SYKES, Circuit Judge, concurring in part and dissenting in
part. I agree with my colleagues that this disqualification
dispute is governed by Rule 1.9 of the Indiana Rules of
Professional Conduct, not the old common-law standard
derived from Canons 4 and 9 of the ABA’s Model Code of
Professional Responsibility and elaborated in LaSalle National
Bank v. Lake County, 703 F.2d 252 (7th Cir. 1983), and
Analytica, Inc. v. NPD Research, Inc., 708 F.2d 1263 (7th Cir.
1983). I therefore join Parts I, IIA, and IIC of the majority
opinion. In these sections my colleagues explain the background of this case and the evolution of the legal standard. I
agree and have nothing to add about the current state of
Indiana and circuit law.
I part company with my colleagues over the consequences of Rule 1.9 for this case. The rule, as expounded in the
commentary, prohibits John Cento from suing his former
client Trans Union, LLC, the national credit-reporting agency, for alleged violations of the Fair Credit Reporting Act
(“FCRA” or “the Act”). Accordingly, I do not join Part IIB or
the mandate to affirm. I would reverse and remand with
instructions to disqualify Cento.
I.
For almost five years (from 2001 through July 2005),
Cento served as Trans Union’s outside litigation counsel, first
with Katz & Korin, P.C., and later with Schuckit & Associates, P.C. In that capacity Cento defended the company in
hundreds of FCRA suits. For at least two and a half of those
five years, Cento worked nearly exclusively on FCRA cases
brought against Trans Union. In total, Cento billed Trans
Union for approximately 4,200 hours of work on some
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250 cases filed by consumers against the agency alleging
violations of the Act.
Most of this litigation involved claims alleging violations
of 15 U.S.C. §§ 1681e(b) and 1681i. Briefly, § 1681e(b) requires
credit-reporting agencies to follow “reasonable procedures”
to assure the accuracy of the information they report, and
§ 1681i(a)(1)(A) requires the agencies to conduct a “reasonable reinvestigation” if a consumer disputes the completeness
or accuracy of the information in his file. Having spent years
and thousands of billed hours defending the reasonableness
of Trans Union’s credit-reporting procedures and reinvestigations, Cento now sues his former client alleging violations
of these same statutory provisions.
Cento’s role as Trans Union’s outside FCRA counsel was
not limited to serving as the agency’s litigation counsel.
Cento also supervised other lawyers working on Trans
Union cases, advised Trans Union on general litigation
strategy in FCRA matters, and counseled his client on how to
avoid FCRA risk. I’ll have more to say about the scope of
Cento’s representation later. For now it’s enough to note that
it was lengthy, extensive, and undeniably relevant to the
claims in the present suit.
Cento last represented Trans Union in July 2005 when he
left Schuckit & Associates for another firm. Later, in 2013, he
formed Cento Law, a boutique specialty firm that represents
consumers in FCRA suits against credit-reporting agencies.
The firm’s website touts the qualifications of its attorneys to
litigate FCRA claims against the major credit-reporting
agencies—including, as my colleagues have noted, their
“years of prior representation of two of the three national
consumer reporting agencies, Trans Union and Equifax.”
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Majority Op. at p. 3. My colleagues go only so far as to say
that this advertisement “is bound to raise eyebrows.” Id. at
p. 13. I go further. Cento is hustling litigation business
against Trans Union by implying that he has useful inside
information about his former client’s operations that would
advance a prospective client’s cause.
Even before he set up his own practice specializing in
consumer suits against credit-reporting agencies, Cento had
changed sides in FCRA litigation and begun to litigate these
claims against his former client. In January 2012 he filed a
proposed FCRA class action against Trans Union and immediately faced a disqualification motion. He lost; the district
court removed him from the case. Childress v. Trans Union,
LLC, No. 1:12-cv-00184-TWP-DML, 2012 WL 6728339 (S.D.
Ind. Dec. 28, 2012) (magistrate judge’s decision disqualifying
Cento); id., 2013 WL 1828050 (S.D. Ind. Apr. 30, 2013) (district
judge’s decision overruling Cento’s objections to disqualification). In 2013 he was again disqualified in another FCRA suit
against Trans Union. Hobson v. Trans Union, LLC, No. 1:13-cv00054-JD-RBC (N.D. Ind. Nov. 21, 2013), ECF No. 63 (magistrate judge’s decision disqualifying Cento; the suit was then
dismissed by the parties with prejudice).
The present FCRA suit on behalf of plaintiff Richard
Watkins is not materially different, but this time Cento
persuaded a district judge to let him proceed against his
former client. My colleagues affirm that decision. With
respect, I disagree. They and the district judge have overlooked key parts of the commentary to Rule 1.9 and in doing
so have misapplied the rule. The result does regrettable
damage to the professional norms that hold lawyers to a
continuing duty to maintain the confidences acquired from
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former clients and to refrain from subsequent professional
engagements that exploit those confidences against the
former client.
II.
Rule 1.9, entitled “Duties to Former Clients,” provides in
relevant part:
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.
IND. R. OF CT., R. OF PROF’L CONDUCT 1.9(a) (2016). The
commentary to the rule makes clear that after a client-lawyer
relationship ends, “[the] lawyer has certain continuing
duties [to the former client] with respect to confidentiality
and conflicts of interest and thus may not represent another
client except in conformity with this Rule.” Id. cmt. 1.
Like most problems in professional ethics, sorting out
where the lawyer’s duties lie under this rule is a highly
contextual inquiry. The commentary contains instructions,
illustrations, and guideposts to help lawyers and judges
properly apply the rule. To begin, the commentary explains
that “[t]he scope of a ‘matter’ for purposes of this [r]ule
depends on the facts of a particular situation or transaction”
and “[t]he lawyer’s involvement in a matter can also be a
question of degree.” Id. cmt. 2. That does not tell us much,
but it does convey the idea that a “matter” for purposes of
the rule is not a narrow or static concept. As applied to
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litigators, a “matter” may be a single case or it may extend
more broadly, depending on the circumstances.
As my colleagues have noted, Comment 2 goes on to say
that “a lawyer who recurrently handled a type of problem
for a former client is not precluded from later representing
another client in a factually distinct problem of that type
even though the subsequent representation involves a
position adverse to the prior client.” Id. At first blush this
seems to give Cento the green light to represent any FCRA
claimant in a suit against Trans Union as long as the case is
factually distinct from those he previously handled on behalf
of his former client.
But there is a qualifier. In all cases “[t]he underlying
question is whether the lawyer was so involved in the matter
that the subsequent representation can be justly regarded as
a changing of sides in the matter in question.” Id. There’s no
question that Cento has changed sides in FCRA matters. It’s
not controversial for a litigator to shift from one side to the
other in a particular area of litigation. Cento is certainly free
to use the expertise he gained as Trans Union’s FCRA counsel to represent consumers in cases against other creditreporting agencies. But Cento has changed sides in FCRA
litigation involving his former client—from defending Trans
Union in § 1681e(b) and § 1681i litigation to prosecuting
these claims on behalf of consumers in suits against his
former client. Yes, this case is factually distinct from the
others; literally speaking, it is not the “same matter” as any
of the other cases. That does not, by itself, end the ethical
inquiry.
The disqualification question turns on whether the present case is “substantially related” to the 250 or so FCRA
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cases Cento handled for Trans Union. 1 Comment 3 covers
this subject, explaining that
[m]atters are “substantially related” for purposes of this [r]ule if they involve the same
transaction or legal dispute or if there otherwise
is 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.
Id. cmt. 3 (emphasis added).
This suit does not involve the “same transaction or legal
dispute” as the prior litigation, though it does involve the
identical type of legal action. As I’ve already noted, however,
Comment 2 tells us that a lawyer who recurrently handled
matters of a certain type for a client is not automatically
foreclosed from handling a factually different matter of the
same type against the client after the relationship ends. Still,
Cento must be disqualified from this suit if the nature and
scope of his prior work for Trans Union creates a substantial
risk that Trans Union’s confidential information—that is, the
confidential client information that Cento would have
acquired in the ordinary course of a representation of that
type—would materially advance Watkins’s position.
The commentary provides several examples to illustrate
how this general principle applies in actual practice:
For example, a lawyer who has represented a
businessperson and learned extensive private
1
Watkins’s position is obviously materially adverse to Trans Union’s, so
that element of Rule 1.9 is met.
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financial information about that person may
not then represent that person’s spouse in seeking a divorce. Similarly, a lawyer who has previously represented a client in securing environmental permits to build a shopping center
would be precluded from representing neighbors seeking to oppose rezoning of the property on the basis of environmental considerations; however, the lawyer would not be precluded, on the grounds of substantial relationship, from defending a tenant of the completed
shopping center in resisting eviction for nonpayment of rent.
Id.
These examples clarify that a lawyer who acquires confidential client information of a particular type (e.g., a client’s
financial information or information about a client’s environmental compliance) owes a continuing duty to the client
after the relationship ends: He must keep that information
confidential and may not represent a new client if there is a
substantial risk that the information would materially
advance the new client’s position in the subsequent matter.
When a substantial risk of information exploitation exists,
the duties owed to the old and new client are in conflict, and
the new representation is prohibited even if the subsequent
matter is factually distinct.
As Trans Union’s litigation counsel in hundreds of FCRA
cases spanning almost five years, Cento necessarily acquired
comprehensive confidential information about his client’s
credit-reporting and reinvestigation operations, as well as its
litigation and settlement strategies, risk-avoidance protocols,
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and overall FCRA compliance. The present suit—like most of
the suits Cento defended for Trans Union—alleges that the
company failed to follow reasonable credit-reporting and
reinvestigation procedures in violation of §§ 1681e(b) and
1681i. Having acquired extensive private information about
Trans Union’s past compliance with §§ 1681e(b) and 1681i,
Cento cannot now represent Watkins in this suit against
Trans Union for violating those same statutes. In the ordinary course of the prior representation, Trans Union would
have given him unfettered access to all internal information
necessary to defend it against liability under §§ 1681e(b) and
1681i—information that is undoubtedly relevant to and
would advance Watkins’s position in the present suit. The
risk of exploitation of the former client’s confidences is both
real and substantial. Rule 1.9 requires his disqualification.
The district judge’s contrary conclusion rests largely on
this passage in Comment 3:
Information that has been disclosed to the public or to other parties adverse to the former client ordinarily will not be disqualifying. Information acquired in a prior representation may
have been rendered obsolete by the passage of
time, a circumstance that may be relevant in
determining whether two representations are
substantially related. In the case of an organizational client, general knowledge of the client’s policies and practices ordinarily will not
preclude a subsequent representation … .
Id. My colleagues also rely heavily on this passage. See
Majority Op. at pp. 13–15. Fair enough, but their analysis
omits what comes next in the commentary:
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[O]n the other hand, knowledge of specific facts
gained in a prior representation that are relevant to
the matter in question ordinarily will preclude such
a representation. A former client is not required
to reveal the confidential information learned
by the lawyer in order to establish a substantial
risk that the lawyer has confidential information to use in the subsequent matter. A conclusion about the possession of such information
may be based on the nature of the services the lawyer provided the former client and information that
would in ordinary practice be learned by a lawyer
providing such services.
Id. (emphases added).
This part of the commentary adds two important points.
First, the test for disqualification focuses on the nature of the
prior representation and the specific factual information that
a lawyer could be expected to acquire from his client in the
ordinary course of providing legal services of that type. In
other words, the test is an objective one. The former client is
not required to divulge the specific information it disclosed
to the lawyer in order to establish a substantial risk that the
information would advance the new client’s position in the
subsequent matter. 2 The inquiry instead looks to the nature
of the services the lawyer provided and the kind of information a lawyer normally would learn in the ordinary
course of a representation of that type.
2
Because a former client need not reveal the specific confidential
information it gave to the lawyer, the discovery order in this case was
questionable.
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Second, disqualification is required if the confidential client information the lawyer normally would have acquired in
the prior representation is relevant to the subsequent representation. If the information is relevant to the new matter,
then a substantial risk of exploitation exists. The lawyer’s
continuing duty to keep the former client’s confidences
conflicts with his duty to zealously represent the interests of
the new client. The two examples given in the commentary
confirm this understanding of the rule. See supra pp. 26–27.
Putting all these elements together, Cento is disqualified
from this case. For an extended period of time he served as
Trans Union’s FCRA litigation counsel and in that capacity
was deeply involved in defending the agency in hundreds of
suits alleging violations of §§ 1681e(b) and 1681i. Legal
services of this nature necessarily require broad access to
confidential factual information about the client’s datacollection and credit-reporting operations, its protocols for
ensuring the accuracy of information in credit reports,
information relating to the reasonableness of its reinvestigations, and the client’s litigation and dispute-resolution
strategies. An engagement of this nature and scope also
necessarily entails extensive confidential communication
with the client’s managerial and other staff—as well as inhouse counsel—regarding operational and transactional
facts and FCRA compliance and risk-avoidance more generally.
My colleagues maintain that much of this information
was discoverable and would have been disclosed in the prior
litigation. Majority Op. at p. 14. They also find no error in
the district judge’s conclusion that any remaining confidential information has become obsolete in the 12 years since
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Cento last represented Trans Union. Id. at p. 15. I do not
doubt that some of this information would have been turned
over in discovery in the prior litigation, and a subset of that
discovery material may have found its way into the public
court record. But not all. The parties agree that protective
orders were used in some cases. And some of the confidential information Cento can be presumed to have acquired
would not have been subject to discovery at all—at a minimum, the factual and strategic information gleaned from
privileged communications with Trans Union personnel, risk
analyses, and settlement strategies.
The district judge also concluded that any confidential
client information that Cento acquired from Trans Union is
surely obsolete due to the passage of time, owing to unspecified “technological advances” and the “sheer number of
FCRA claims litigated between the old and new representations.” Id. My colleagues find no abuse of discretion, but I’m
not so sanguine. Many of the key Trans Union personnel
remain with the company, and Cento worked with them in
the prior representation to develop factual records, prepare
and defend depositions, devise litigation strategies, and
analyze settlement options. The information exchanged in
these communications is clearly confidential. We have no
nonspeculative basis to declare it irrelevant or obsolete.
Quite the contrary. Now that he’s been given the goahead to represent Watkins in this suit, Cento may depose
some of the same Trans Union personnel he previously
prepared and defended in depositions. That he has inside
information about their past testimony is a strategic advantage and far from obsolete. He may cross-examine them
in court or sit across from them at the negotiating table.
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Having been privy to their thinking about the strengths and
weaknesses of prior FCRA cases against Trans Union, he can
now use that information for Watkins’s benefit, either in
court or in settlement negotiations. It’s simply unreasonable
to conclude that in nearly five years as Trans Union’s FCRA
litigation counsel—personally handling hundreds of cases—
Cento acquired no confidential Trans Union information that
has any continuing relevance to this FCRA suit against his
former client.
Finally, I disagree with my colleagues that comparing
this case to XYZ, D.O. v. Sykes, 20 N.E.3d 582 (Ind. Ct. App.
2014), supports the district judge’s no-disqualification ruling.
XYZ was a case of imputed disqualification. From 2003 to
2005, Kathleen Clark represented a doctor in six malpractice
suits, initially as a sole practitioner and later with a firm. Id.
at 583–84. Her representation of the doctor ceased in April
2005 when she left for another firm, and in February 2010
she again changed firms. Id. In mid-2012 Clark did some
initial intake work for her firm in a new malpractice case
against the doctor. Although she turned her work over to a
colleague and he assumed responsibility for the case, the
doctor and hospital moved to disqualify the entire firm. Id.
The trial judge denied the motion, but on interlocutory
appeal the Indiana Court of Appeals reversed.
Applying Rule 1.9, the appellate court first noted that the
case involved a malpractice claim against the doctor and a
claim against the hospital for negligent credentialing “based
in part upon the [h]ospital’s alleged failure to adequately
investigate the circumstances surrounding those six prior
malpractice cases in which Clark represented the [d]octor.”
Id. at 587. Although the cases did not literally involve the
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“same transaction,” they were nonetheless “substantially
related for the purposes of Rule 1.9.” Id. The new representation involved “one claim of the same subject matter as
Clark’s prior representation[] of [the] [d]octor, and another
claim that grew out of and is directly related to Clark’s prior
representation[] of [the] [d]octor.” Id. In these circumstances,
the court held, “there is a substantial risk that confidential
factual information as would normally have been obtained
in the prior representation[] would materially advance the
[p]laintiff’s position in the present case.” Id.
The firm argued that the passage of time—about seven
years—rendered the confidential information obsolete. The
court quickly dispatched that argument: “If the six prior
medical malpractice cases remain relevant regarding the
current allegation of negligent credentialing, as [the firm]
admits, any confidential factual information gleaned during
those prior representations can hardly be deemed stale or
obsolete.” Id. at 587–88. Finally, the court held that because
Clark had been the doctor’s primary counsel in the prior
cases, the presumption that she shared his confidences
within her new firm was irrebuttable; the entire firm was
disqualified. Id. at 588–89.
My colleagues are quite right that in XYZ the attorney’s
prior representation of the doctor was directly relevant to the
negligent-credentialing claim against the hospital. Majority
Op. at p. 12. That made the conflict of interest fairly obvious,
but it doesn’t make the decision inapplicable here. The
important lesson of XYZ for this case is the court’s “substantial risk” analysis, which was not limited to the negligentcredentialing claim.
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Because the nature and scope of Cento’s prior work as
Trans Union’s FCRA counsel was so extensive, there is a
substantial risk—even after 12 years—that the confidential
client information he learned in the prior representation
would materially advance Watkins’s position in this litigation. We should reverse with instructions to grant the disqualification motion. I respectfully dissent.
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