LeBoeuf scrapes through CAIB Chinese wall before rule change

The Court of Appeal last week (26 May) propped up LeBoeuf Lamb Greene & MacRae’s Chinese walls following a conflict of interest row with a client.

The ruling, which supported LeBoeuf’s use of a Chinese wall, or information barrier, comes shortly after the Law Society’s new conflicts and confidentiality rules were finally approved by the Government.

The rules do not apply to LeBoeuf’s case because they have only just come into force, but it seems likely that the latest guidelines would have prevented the firm from acting on this particular case.

Gus Consulting, the investment bank formerly known as CAIB, brought the case against LeBoeuf following the firm’s hire of a London litigation team from Debevoise & Plimpton last summer.

The team, led by Arthur Marriott QC, brought with it work on an arbitration against CAIB over share investments in Russian energy giant Gazprom. During the arbitration, which is due to kick off this October in London, Marriott’s client, DCL-KF Corporation, will seek wide disclosure of CAIB’s Russian operations as it claims fraud and dishonesty against the bank.

Shortly after the Debevoise team arrived at LeBoeuf, it emerged that the latter had previously advised CAIB on Russian issues in the late 1990s. The firm immediately set up a Chinese wall to prevent first Marriott and his team, then all employees, from having access to the relevant files. It also made sure that the LeBoeuf partners who had worked on the earlier transaction, including London managing partner Peter Sharp, were on a different floor in the firm’s Mincing Lane office.

In October 2005, Judge Mackie QC, sitting as a deputy High Court judge, found that LeBoeuf’s information barriers were sufficient. Gus’s appeal was heard at the end of May.

The appeal judges, Lord Justices Brooke, Mummery and Scott Baker, applied the existing conflicts of interest and confidentiality principles to the case and concluded: “A ‘bright line’ rule, that a law firm can never act against a former client, would be easier to apply, [it would] produce more predictable outcomes and give the former client comprehensive protection against the risk of unwitting disclosure or misuse of his confidential information. The confidentiality principles do not, however, go as wide as a blanket rule of that kind.”

The Court of Appeal decided that, while CAIB was right to have reservations about LeBoeuf handling the arbitration, there was no reason to believe the firm would not abide by its undertakings to avoid breaching confidentiality.

The Chinese wall put up by LeBoeuf in the CAIB case broadly follows the principles of the new guidelines, namely: separating the lawyers concerned, restricting access to the information and reaffirming the barrier regularly.

But Chris Perrin, Clifford Chance general counsel, says that applying the new rules would have brought the Court of Appeal to a different conclusion in the LeBoeuf case. His opinion is backed up by the guidelines.

“An individual solicitor joining a new firm could not act personally for a client of the new firm where to do so would put at risk confidential information which he or she personally possesses about a client of the previous firm,” says the Law Society’s guidance.

However, past cases would not have been affected. Sarah Lee, the Slaughter and May partner who successfully injuncted Freshfields Bruckhaus Deringer from acting for Philip Green on his bid for Marks & Spencer in July 2004, says the rules would not have altered the case but may have made it clearer.

Lee adds that possibly the greatest concern came from having to obtain client consent to act in cases where there might be a conflict of interest.

“Does that give clients too much of an ability to block law firms from working for competitors?” Lee queries. “Quite how that rule plays out will be interesting to see.”