From Silicon Graphics, Inc. v. ATI Techs., Inc., 2010 U.S. Dist. LEXIS 107057 (W.D. Wis. Oct. 5, 2010):

In recent years, "attorney mobility and firm mergers have increased exponentially." Kirk v. First American Title Insurance Co., 183 Cal. App. 4th 776, 802 (Ct. App. 2010). One consequence of this phenomenon is that a lawyer is now more likely to find herself working for a law firm that represents a client with interests adverse to the client of a former employer. Particularly in large-scale, protracted litigation, the lawyer may end up working for law firms on both sides of the same case at different stages of the proceedings.

When a lawyer "switches sides," it implicates a number of competing interests. First, the former client may be understandably concerned about confidential information that could be shared with the opposing party. In addition, "[t]he bar and this court have an interest in maintaining the integrity and favorable public image of both the legal profession and the judicial system by preventing even the 'appearance of professional impropriety.'" Tucker v. George, 569 F. Supp. 2d 834, 837-38 (W.D. Wis. 2008) (quoting Code of Professional Responsibility, Canon 9). On the other side, the client of the law firm that hired the lawyer has an interest in keeping the law firm that it has chosen and that is familiar with the case. Particularly in a case like this one that has lasted for several years, a requirement to choose a new law firm is potentially devastating to defendants and could lead to substantial delays in the final resolution of this case. It is no answer to say that it is the client's own fault because the client may have played no part in the circumstances that led to the potential conflict. In the middle is the individual lawyer who has an interest in finding fulfilling employment. In re County of Los Angeles, 223 F.3d 990, 996 (9th Cir. 2000) ("An automatic disqualification rule would make firms be understandably more reluctant to hire mid-career lawyers, who would find themselves cast adrift as 'Typhoid Marys.'")

Courts considering motions to disqualify counsel must strive to find the appropriate balance in weighing these concerns. *** At the center of these considerations is a desire to prevent either side from using the switch to obtain a tactical advantage in the lawsuit. Former clients should not be exposed to unfair risks that a lawyer will use confidential information to aid her new employer at the expense of the former client. At the same time, former clients should not be permitted to use ethical rules as a weapon to cripple their opponent when there is no legitimate concern about potential harm. Manning v. Waring, Cox, James, Sklar and Allen, 849 F.2d 222, 224 (6th Cir. 1988) ("[T]he ability to deny one's opponent the services of capable counsel, is a potent weapon."); Board of Education of City of New York v. Nyquist, 590 F.2d 1241, 1246 (2d Cir. 1979) ("[D]isqualification motions are often interposed for tactical reasons.").

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At least 12 states have a rule of imputed disqualification similar to the ABA model rule [Rule 1.10 of the Model Rules of Professional Conduct] that allows for screening regardless of the scope of the work conducted by the lawyer for the former client. *** About the same number of states allow for screening under more limited circumstances. ***

This leaves about half of the states that require automatic disqualification. However, some predict that, "[w]ith the passage of amended Model Rule 1.10, more states will likely follow suit" to allow screening under more circumstances. ***

A. Choice of Law In this case, the parties point to different sources of law that they say should guide the court's decision on the question whether Robins Kaplan should be disqualified from representing defendants in this case. Plaintiff says that the court should apply Wisconsin Supreme Court Rules 20:1.9(a) and 20:1.10(a), which allow screening, but only in limited circumstances. ***

Defendants point to a standard that the Court of Appeals for the Seventh Circuit has applied in the past:

First, we must determine whether a substantial relationship exists between the subject matter of the prior and present representations. If we conclude a substantial relationship does exist, we must next ascertain whether the presumption of shared confidences with respect to the prior representation has been rebutted. If we conclude this presumption has not been rebutted, we must then determine whether the presumption of shared confidences has been rebutted with respect to the present representation. Failure to rebut this presumption would also make disqualification proper.

Schiessle v. Stephens, 717 F.2d 417, 420 (7th Cir. 1983) (footnote omitted). See also Cromley v. Board of Education of Lockport Township High School District 205, 17 F.3d 1059, 1064 (7th Cir. 1994) (applying same standard). Defendants do not deny that the first two parts of this standard are met, but they argue that "the presumption of shared confidences has been rebutted with respect to the present representation." ***

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The next question is whether the Wisconsin Supreme Court rules have any role in resolving motions to disqualify filed in federal court. There is surprisingly little discussion of that question in this circuit. Plaintiff points out that this court has cited the Wisconsin Supreme Court rules in the past in resolving other motions for disqualification. *** However, neither side cites any cases in which the court of appeals or a district court discussed the extent to which state rules should be considered in a motion for disqualification. ***

Despite the lack of a clear holding in this circuit, I agree with defendants that federal law is controlling. As a general matter, federal courts apply state law to "substantive" questions when state law created the underlying cause of action. Bevolo v. Carter, 447 F.3d 979, 982 (7th Cir. 2006). In addition, federal courts may "borrow" state law principles when federal law is silent on a particular question. E.g., Owens v. Okure, 488 U.S. 235, 239 (1989) (federal courts may refer to statute of limitations under state law when federal law does not provide one). However, the Supreme Court has held that "[t]he state code of professional responsibility does not by its own terms apply to sanctions in the federal courts." In re Snyder, 472 U.S. 634, 645 (1985). This is because a federal court's authority to regulate lawyer conduct in its own cases comes from its inherent power, not from a particular state rule. Id. See also In re Finkelstein, 901 F.2d 1560, 1564 (11th Cir. 1990) ("It is axiomatic that federal courts admit and suspend attorneys as an exercise of their inherent power."). If decisions whether to sanction a lawyer for misconduct are decided under federal law, it follows that "[m]otions to disqualify are . . . decided under federal law" as well. FDIC v. United States Fire Insurance Co., 50 F.3d 1304, 1311-12 (5th Cir. 1995). See also United States v. Miller, 624 F.2d 1198, 1200-01 (3d Cir. 1980)("Supervision of the professional conduct of attorneys practicing in a federal court is a matter of federal law."); 30 Moore's Federal Practice § 808.06[2][b], at 808-80 (3d. ed. 2010) ("Screening is a good example in which courts tend to refer to the emerging body of federal law rather than to the state law."). If that were not the case, district courts could not grant motions filed by lawyers who are not admitted to the state bar to practice in federal court.

Plaintiff cites In re County of Los Angeles, 223 F.3d 990, 995 (9th Cir. 2000), in which the court stated, "we apply state law in determining matters of disqualification," but this decision seems to be an outlier. The court's only support for the proposition was Paul E. Iacono Structural Engineer, Inc. v. Humphrey, 722 F.2d 435, 439 (9th Cir. 1983), in which the court upheld a local rule of a district court that required lawyers to comply with the state rules of professional conduct on the ground that "district courts are free to regulate the conduct of lawyers appearing before them." Thus, Humphrey simply stands for the principle that district courts have discretion to develop their own standards for the conduct of lawyers appearing before them and that it is not an abuse of discretion to include state rules as part of these standards. 30 Moore's Federal Practice § 802.01, at 802-6 (3d ed. 2010) (noting that "[m]ost district courts regulate attorney conduct by local rules"). Any other interpretation would be contrary to Cord v. Smith, 338 F.2d 516, 524 (9th Cir. 1964), in which the court rejected the view that state rules of professional conduct bind federal courts.

Humphrey is consistent with the view of other courts that have acknowledged that the federal standard may be informed by multiple sources, including state ethical rules. [Citations omitted.] However, the Court of Appeals for the Seventh Circuit does not seem to have taken this approach in the context of motions for disqualification. Although plaintiff says that the court of appeals was simply applying the Illinois rules in cases such as Cromley, the court did not actually mention state law in that decision. In fact, plaintiff does not cite any cases involving a motion for disqualification in which the court of appeals relied on or even discussed a state's rules of conduct. Rather, the court has emphasized that the standard for disqualification "has been developed through the prior caselaw of the Seventh Circuit." Freeman, 689 F.2d at 722. This may be a recognition that considering multiple sources of law could lead to conflict and confusion. 30 Moore's Federal Practice § 802.02, at 802-9 (3d ed. 2010) (stating that there are "inherent problems" with federal court's reliance on state rules because of lack of clarity regarding result when state rules conflict with other sources).

The natural inference to be drawn from the court's silence regarding state rules of professional conduct is that the federal standard does not incorporate state rules and that district courts should not use those rules as supplemental authority, at least when there is a conflict between the two. Although district courts in Wisconsin, including this one, have cited the state rules in deciding motions for disqualification, this means little because the standards are the same in many respects. *** In this case, there is a clear difference between SCR 20:1.10(a) and the federal standard. Plaintiff does not point to any cases in which a district court in the Seventh Circuit used a state rule to impose a requirement above and beyond those in the federal standard. E.g., Chapman v. Chrysler Corp., 54 F. Supp. 2d 864, 865 (S.D. Ind. 1999) (Tinder, J.) (rejecting more restrictive disqualification rule under Indiana law in favor of standard in Cromley).