The Effect of Covid-19 on Business Contracts

By: Arend J. Abel, Attorney

With much of the nation shut down during the Covid-19 pandemic, many business contracts may not be performed.  One of the questions that arises from that circumstance is whether non-performance will be considered a breach of contract, subjecting the non-performing party to an action for damages.  There are three areas to consider in analyzing that question:  1) Force Majeure; 2) Impossibilitiy; and 3) Impracticability.  Impracticability is confined to contracts for the sale of goods governed by the Uniform Commercial Code

Force Majeure

Force Majeure, a French term meaning “superior force,” is a doctrine that excuses contractual performance made impossible by events listed in a contractual force majeure clause.  As the Indiana Court of Appeals has observed “the scope and effect of a force majeure clause depends on the specific contract language, and not on any traditional definition of the term. Specialty Foods of Indiana, Inc. v. City of South Bend, 997 N.E.2d 23, 27 (Ind. Ct. App. 2013).  A typical force majeure clause may look something like the following:

If a party cannot perform the obligations of this agreement due to an act of God, legal prohibition, fire, flood, natural disasters, military operations, or any other circumstance not within the control of the party, then the party is excused from performing such obligations.

The key question to ask in considering whether a force majeure clause excused a party’s performance is whether the event causing the non-performance is one of the events listed in the clause.  If the language does not specifically include diseases or epidemics, a court may or may not find that general language describing “other circumstances not within the control of the party” covers the event.  The Court of Appeals decision in Specialty Foods suggests that the particular clause set out above would cover such an event.  However, even slight changes in language can affect the result.  For example, a clause that excuse a party from performing for “reasons outside the party’s control such as an act of God, legal prohibition, fire, flood, natural disasters or military operations” might not cover CoVid-19 because the “such as” language might be interpreted to require the unlisted events to be similar in kind to those listed.  See Kel Kim Corp. v. Central Markets, Inc., 70 N.Y.2d 900, 902, 519 N.E.2d 295, 296 n.* (1987) (language that “other similar causes beyond the control of such party” did not cover an inability to perform due to an inability to obtain insurance coverage).

Impossibility

Under Indiana law, as well as the law of most States, impossibility of performance excuses contractual performance, even in the absence of a force majeure clause.  Wagler v. West Boggs Sewer District, 980 N.E.2d 363, 378 (Ind. Ct. App. 2012).  However, the party claiming the defense must  show that performance is “not merely difficult or relatively impossible, but absolutely impossible, owing to the act of God, the act of the law, or the loss or destruction of the subject-matter of the contract.” Id. (quoting Ross Clinic, Inc. v. Tabion, 419 N.E.2d 219, 223 (Ind.Ct.App.1981), which in turn quoted Krause v. Bd. of Trustees of Sch. Town of Crothersville, 162 Ind. 278, 283–284, 70 N.E. 264, 265 (1904)).

This may be difficult to meet in the case of Covid-19, though perhaps a business ordered to close by the authorities could meet the requirements, depending on the specific contract involved.

The Indiana Court of Appeals has considered whether an epidemic excuses contractual performance on two occasions.  Gregg School Township v. Hinshaw, 76 Ind. App. 503, 132 N.E. 586, 587 (1921); Gear v. Gray, 10 Ind. App. 428, 37 N.E. 1059 (1894).  In Gregg, the Court held that the fact that a school was ordered closed due to the 1918 flu pandemic meant that the School board did not have to pay teachers during the time the school was closed.  In Gear, the Court reached the opposite conclusion when a school was closed due to a local diptheria epidemic.  Explaining the different results, the Court in Gregg noted that in Gear, the local health authorities who ordered the school closed did not have express statutory authority to close the schools.  In Gregg, the Court noted, there was such authority, and the contract had to be read as incorporating such authority, which rendered performance of the contract impossible.

It is unclear how Gregg will affect contracts of businesses that have been shut down in the latest pandemic.  If the contract is one that literally cannot be performed when the business is shut down (such as a contract for an entertainer to appear at a venue), then most likely a court would excuse performance on grounds of impossibility.  However, contracts by which a business purchases goods and services may be technically possible to perform, even if pointless.  Courts may hold that performance is not excused in such cases.

Impracticability

Where contracts are for the sale of goods, the impracticability provisions of the Uniform Commercial Code could come into play.  Section 2-615(a) of the U.C.C. provides:

Delay in delivery or non-delivery in whole or in part by a seller who complies with paragraphs (b) and (c) is not a breach of his duty under a contract for sale if performance as agreed has been made impracticable by the occurrence of a contingency the non-occurrence of which was a basic assumption on which the contract was made or by compliance in good faith with any applicable foreign or domestic governmental regulation or order whether or not it later proves to be invalid.

Significantly, the provision excuses a failure to deliver goods by a seller but offers no relief to buyers.  In addition, to be excused from performance, the seller must comply with paragraphs (b) and (c) of the statute.  If the situation only partially affects the seller’s ability to deliver goods, paragraph (b) requires the seller to allocate production and deliveries among customers in a manner that is “fair and reasonable.”  Paragraph (c) requires the seller to provide the buyer with notice that there will be a non-delivery or delay, and if an allocation is required under paragraph (b) what the buyer’s allocation will be.

Impracticability is a lesser standard than impossibility, so sellers may have the ability to avoid contracts that become burdensome to perform, though not strictly impossible.

Regardless of whether Force Majeure, impossibility, or impracticability is invoked, the result will depend on particular facts and circumstances affecting contract performance.  The issues will also likely depend on contractual language that covers, or can be read to cover, the specific events in question. I have represented businesses in a variety of litigation for over 30 years. If you are in a contract dispute as a result of this pandemic, contact me to discuss how I can help your business and protect your rights.

Will Your Business Also Survive COVID 19?

By: George W. Hopper, Attorney

The well-being of you and your family are of utmost concern during this pandemic.  What about the well-being of your business?  All businesses, large and small are navigating through the current economic downturn and its unique challenges.

Over the past 38 years, I have been advising business clients through five economic recessions.  Each recession had certain similarities, but each was also unique in cause, effect and length.  Nevertheless, during each recession, the business clients that survived and ultimately prospered each made the same crucial decisions in common:

1. Each client chose to be proactive rather than reactive in confronting economic and legal challenges to their businesses before they exhausted their financial resources; and
2. Each client engaged competent legal counsel and financial advisors sooner rather than later in the process.

Of course, it is without question extremely challenging to successfully manage a business in a good economy.  During a recession, the task becomes even more challenging and can easily become overwhelming with the addition of new legal issues, shrinking cash flow and reduced available credit. The situation can change and will change dramatically and quickly during this crisis.  For this reason, there will be no substitute for timely and competent legal and financial advice.

Depending on the situation confronting your business, there are a variety of tools that can be employed to find solutions.  Early in the process, management can consider and pursue solutions that do not involve a formal legal case or proceeding such as:

• Refinancing
• Loan restructuring
• Turnaround negotiations with affected creditors
• Recapitalization
• Sale or merger

If circumstances do not lend themselves to any of the forgoing tools, business clients may have to resort to litigation, or chapter 11 bankruptcy or a combination of the two approaches.

The bottom line is the sooner the business client proactively meets the challenges presented by the current economic crisis, the greater number of options will be available to address the client’s needs.  In fact, during and as a result of the 2008 great recession, the vast majority of cases that I was involved in were successfully resolved out of court, which saved many thousands of dollars in professional fees and generated a superior outcome for both the struggling business and its creditors.  Each one of those cases began and ended as a result of the timely decision by management to engage experienced legal counsel.  It does not pay to wait. Contact me to discuss ways I can help you protect your business.

Nursing Homes in Indiana and Across the Country are Overwhelmed by COVID-19

By: Amina A. Young, Attorney

On Friday, April 10, 2020, the Indiana State Department of Health (ISDH) Commissioner Kristina Box confirmed that twenty-four residents at Bethany Pointe Health Campus in Anderson, Indiana had passed away.  Sixteen of the residents who died had tested positive for COVID-19.  The other eight showed similar symptoms.  Bethany Pointe, owned by Trilogy Health Services, LLC, is one of many nursing homes across the country facing coronavirus outbreaks.

Health care experts and officials have long stated that the elderly are likely one of the most vulnerable populations to the coronavirus due to compromised immune systems and/or underlying conditions.

On March 21, 2020, the Centers for Disease Control and Prevention (CDC) issued guidance for nursing homes and other long-term care facilities to take steps to assess and improve their preparedness for responding to COVID-19.  The CDC noted nursing homes are among the highest at risk of being affected by COVID-19 because of their “congregate nature and the residents served (e.g., older adults often with underlying chronic medical conditions).”  In its guidance, the CDC recommended rapid implementation of active screening of residents and health care personnel for fever and respiratory symptoms, restricting all visitation except for certain compassionate care situations, such as end of life situations, and implementing sick leave policies and other occupational health considerations.

The CDC also released a Coronavirus Disease 2019 (COVID-19) Preparedness Checklist for Nursing Homes and other Long-Term Care Settings, which identifies key areas that long-term care facilities should consider in their COVID-19 planning.  The CDC’s checklist includes a comprehensive communication plan for facilities to ensure that they are communicating with staff, residents, and their families regarding the status and impact of COVID-19 in the facility.

On its website, Trilogy Health Services declares, in responding to the COVID-19 virus, it is “following guidance from the CDC, CMS, and state officials” and is “taking extra precautions over the coming weeks and months to ensure that [its] campuses remain guarded against the spread of viral infections.”

However, a chief complaint of Bethany Pointe residents’ families is that they aren’t being kept informed on the status of the facility’s overall impact from COVID-19, or with regard to their loved one in particular.  Many families of Bethany Pointe residents state they were not even so much as notified when the first known cases were confirmed in the nursing home, and before they knew it or had a chance to respond to the situation, their loved one was showing symptoms of COVID-19.

Residents in nursing homes are members of our community and should be given the same respect and access to resources that the rest of the community has access to during a crisis.  Families of nursing home residents should be kept timely informed on the overall status of the facility’s impact to COVID-19, and on their loved one’s health.

If your loved one is residing in a nursing home or long-term care facility, and you are concerned about the facility’s handling of its response to COVID-19, one action you can take is to file a complaint or report an incident to the ISDH.  Complaint forms can be found on the Indiana State Department of Health’s website.

COVID-19 presents unchartered territory.  This article is not legal advice.  To discuss the specific facts of your situation, contact us.

How Might the COVID-19 Outbreak Affect Your Family Law Case?

By: Nicole Makris, Attorney

The coronavirus (COVID-19) has had a significant effect on daily life as we know it. With school closures, travel advisories, and the economic repercussions of the virus, the COVID-19 outbreak presents numerous possible implications for family law cases. Your family law matter could potentially be impacted in the following areas:

Parenting Time

Parents should strive in these unprecedented times to cooperate with one another for the child’s wellbeing. Efforts should be made to maintain the normal parenting time schedule to the extent possible. The Executive Order (“Directive for Hoosiers to Stay at Home”) issued on March 23, 2020 includes that travel required to transport children pursuant to a custody agreement falls within the category of “Essential Travel”. Parents should communicate with one another regarding any changes to the parenting time schedule and should be flexible with make-up time. While flexibility is important, any changes to the parenting time schedule and the reasons for the change should be documented in writing. Expectations regarding the child’s E-learning should be clearly communicated between parents, as should any changes in the health of the child or other household family members in each parent’s respective households. If a parent opts to self-quarantine or is otherwise unable to exercise parenting time, the other parent should facilitate FaceTime and phone calls with the child.

Child Support

If you have encountered a significant decrease in hours, a loss of employment, or other financial hardship, you should consult with a family law attorney to review your current child support order. It is crucial to be proactive when seeking a modification of child support because the modification can only be retroactive to the date that the request to modify child support is filed (except in very specific circumstances, such as when the child has moved in with the parent who is paying child support).

Prenuptial Agreements

If you have executed a prenuptial agreement but have had to delay your wedding, you should ensure that the agreement is up to date by the time that your wedding is rescheduled, including updated lists of each party’s non-marital assets and debts and their values and balances, as well as the new date of the wedding.

Property Issues in Dissolutions of Marriage

If your dissolution of marriage is pending, you should obtain updated valuations of marital property before your case is finalized. Changes in the values of marital assets such as retirement accounts should be documented, and verified financial declarations should be updated.

Marital Settlement Agreements

It is possible that the effects of the COVID-19 outbreak could cause you to experience financial hardship to the extent that it is not possible for you to meet your obligations pursuant to your marital settlement agreement. For example, if you are unable to perform according to the property settlement or spousal maintenance provisions of your agreement due to the current events, you should consult with a family law attorney to review your settlement agreement and discuss your options in seeking to modify the agreement.

Upcoming Hearings

Precautionary court closures may cause continuances of upcoming hearings. Mediations are also likely to be either rescheduled or conducted by video conference.

Given the uncharted territory that coronavirus (COVID-19) presents, these are general topics to consider. This article is not legal advice. For specific questions on how the COVID-19 outbreak may affect your case, consult with an experienced family law attorney to discuss the facts of your situation.

When May A Request for Grandparent Visitation Be Granted?

By: Nicole Makris, Attorney

A grandparent may seek visitation rights with a child if 1) a parent of the child has passed away; 2) the parents’ marriage has been dissolved in Indiana; or 3) if the child’s parents were not married when the child was born. It is important that paternity of the child be established, otherwise a paternal grandparent cannot be granted visitation. If there is an adoption proceeding pending regarding the child, a petition for grandparent visitation must be filed before a decree of adoption is entered.

When a grandparent requests visitation, the court considers whether the visitation would be in the best interests of the child and whether the requesting grandparent has had or attempted to have meaningful contact with the child. There are specific factors that courts are required to consider when determining whether grandparent visitation is in the child’s best interests. Following the United States Supreme Court case Troxel v. Granville, the factors that the court must address when a grandparent requests visitation are 1) a presumption that a fit parent’s decision regarding grandparent visitation is in the child’s best interests; 2) the “special weight” that is given to the decision of a fit parent; 3) “some weight” given to whether the parent has completely denied grandparent visitation or has allowed some visitation; and 4) whether the requesting grandparent has met the burden of showing that grandparent visitation is in the child’s best interests.

The requesting grandparents have the burden of proof in these cases, and these factors emphasize the amount of deference that is given to a fit parent’s wishes regarding the grandparents’ contact with the child. The judge may allow an in-camera (in chambers) interview of the child to help determine whether grandparent visitation is in the child’s best interest.

I help individuals and families in central Indiana on a variety of family law matters. Contact me if you have questions.

The Ins & Outs of Owning Recreational Property

By: Rick Malad, Attorney

Let’s say you acquired some recreational land like I did years ago. You will likely encounter many issues that you did not expect.

Recreational Land Liability

Liability is always or should be a concern. If you use your land for hunting and/or fishing and you invite your friends and family to participate or you are concerned about trespassers, you should know the following;

Indiana Code 34-31-9 Limited Liability Arising from Agritourism Activities. Agritourism is defined, among other things as natural resource-based activities. This includes hunting, fishing, hiking, and trail riding. A provider (owner) is immune from liability for injury to a participant. There are many exceptions, however, such as if the provider charges a fee or knows of some dangerous condition on the land that is not disclosed.

Waiver and Release/ Insurance

Notwithstanding the statute, which is a good one designed to encourage an owner to share his good fortune with his friends and family, the owner should require each participant to sign a waiver and release of liability agreement where the inherent dangers of the activities are acknowledged by the participant. I even include surrounding landowners as releasees since it is always possible for a participant to cross over the boundaries of the owner’s property.

Always purchase insurance on your recreational land and improvements and include liability insurance and medical pay insurance to protect you.

Limited Liability Corporation or Other Entity

You may choose to acquire the recreational land in the name of a Limited Liability Corporation (LLC) or other legal entity which gives you an extra layer of protection. This is beyond the scope of this piece, but certainly recommended in some situations.

Trespassers

An owner owes very little duty to a true trespasser. The owner cannot willfully or maliciously cause a trespasser harm. The best protection you can have is to make sure you have signs on your property indicating that it is private property and no trespassing, for any purpose, is allowed.

Indiana Code 35-43-2-2 Purple Paint Law. Effective July 1, 2018, Indiana followed several other states to enact the Purple Paint Law. Keeping uninvited people off your land can be a full-time job. The Purple Paint Law allows an owner to use purple paint markings to deny entry to his property, basically informing a person, just like a sign would, that the property is private and no trespassing is allowed. Signs are expensive, labor intensive to install, and difficult to maintain. This statute sets out where you must place the markers, the distance between the markers and the size and height of the purple markers.

Ways to Generate Income

Some owners want to simply enjoy and share the enjoyment of this recreational land. There are ways, however, to generate income.

Farming/Farm Leases

Recreational land assumes that you do not farm your land for profit. If you have some tillable land you may be able to lease it to a local farmer. Those leases should contain information including

1. The term of the lease and extension, if any;
2. Participation, if any, by the owner which could include paying for a portion of the seed and fertilizer cost;
3. Cash rent amount per acre and when it will be paid if no participation by the owner;
4. Any other provision such as exclusivity, release and waiver of liability and lease limitation

Timbering

Conservationists now pretty much agree that selective timbering periodically is healthy for your woods. Hire a well-respected timbering company and, like I have, negotiate a timber management plan that coincides with your wishes and uses for the property. It is a good way to pay for improvements you might want to make on your property.

Hunting Leases

If you are not a hunter you may be able to lease all or a portion of your land to a third party and his guests for hunting and hunting preparation activities. I would not recommend this if you truly want to enjoy your recreational land. I lease land from other landowners for hunting and recreational purposes. Hunting leases are very complex and beyond the scope of this piece.

Tax advantage options and “keeping it as it is”

There are some options to accomplish both of these things at the same time. My goal for the future of my recreational land is to “keep it as it is” while allowing some limited future option. Two programs that I have taken advantage of are:

Classified Forest— Enrolling in the Indiana Classified Forest program is relatively simple, inexpensive and very tax advantageous. Contact the District Forester in your county for an application and procedures. Basically, if you have over 20 contiguous acres and are willing to observe the rules regarding the classified forest program (such as no development, no timbering without an approved timber management plan and no commercial activities) you may enroll all or a part of your land in the programs and obtain a significant property tax reduction.

Conservation Easement — This is a more complicated and restrictive program. Contact an accredited land trust organization. I used Sycamore Land Trust in Bloomington, Indiana, to start the process on my land. A conservation easement, in its simplest terms, is an agreement between the owner and the land trust to prohibit certain activities from ever taking place on the real estate and specifically allowing certain activities to take place. While there are many negotiable activities, the land trust will insist on certain prohibitions such as raising livestock, use as a commercial enterprise, mining, development of any kind and timbering without an approved timber management plan. Certain allowed activities may be specifically allowed such as hunting, fishing, trail construction and management, some farming and food plat cultivation. Some of your land may be excluded if you have some plans to do development like build a home or, in my case, to expand an already improved area of my land. You must have your land surveyed and you will need to pay a monitoring fee for the land trust to walk your property once a year to make sure all the “promises’ in the conservation easement are followed.

Once you have negotiated your written agreement, an appraisal is made to determine the market value of the land involved before the easement and after the easement with its restrictions. The difference between the two values is considered a charitable contribution to a tax-exempt organization. Both are win-win for an owner who wants to “keep it like it is”. Enjoy your recreational land!

Child Support Modifications: When Child Support Orders May Be Modified

By: Nicole Makris, Attorney

Child support is intended to provide children with the standard of living that they would have enjoyed if their household had remained intact. Once the court issues a child support order, the order may only be modified if statutory criteria are met. The same rules apply to an order for college or post-secondary education expenses, which is in the nature of a child support order. Indiana Code § 31-16-8-1 includes the standards that must be met before a parent may request a modification of a child support order.

Substantial and Continuing Change of Circumstances

The first way that a child support order may be modified is if the parent requesting the modification is able to show that substantial and continuing changed circumstances have occurred that have made the current child support order unreasonable. Examples of these changes of circumstances are the emancipation of one of the children who are subject to a child support order, changes in employment and income of a parent, incarceration of a parent, or if an agreed change in the custodial arrangement between the parents has occurred.

Changes to Factors in Child Support Calculation  

The second way that a child support order may be modifiable is if an updated child support calculation would result in more than a 20% change from the child support order in effect, and if the child support order has been in place for at least twelve months before the petition for modification is filed. A more than 20% change in the child support amounts can come about through an increase or decrease in the income of a parent, or changes to the other factors considered in a child support calculation such as the number of children subject to the order, the cost of the children’s healthcare and/or work-related childcare expenses, or the number of overnights exercised by the non-custodial parent.

If a modification of child support is granted, the earliest date that the modification may be retroactive to is the date that the petition to modify was filed. The two exceptions to this rule are if the parents have agreed to and complied with a different method of payment which is in substantial compliance with the intention of the child support order, or if the parent who is paying child support assumes custody of the child so that a permanent change of custody occurs.

Child support modifications are very fact-sensitive. Consult with an experienced family law attorney regarding the details of your case.

Legislative Update: Indiana Emancipation and Relocation Laws July 2019

By: Nicole Makris, Attorney

On July 1, 2019, new legislation went into effect in Indiana that anyone with a child custody order should be aware of. Primarily, a notable change was made to Indiana Code § 31-16-6-6. Under this statute, a child is emancipated when they reach the age of nineteen, which terminates the non-custodial parent’s child support obligation. Now, the law provides for an exception if a child is a full-time student in a secondary school when they turn nineteen years old. Under these circumstances, the parent or guardian has the opportunity to request that the child support obligation continue until and terminate upon the child’s high school graduation.

In order to ensure that child support continues until the child graduates from high school, it is the parent or guardian’s responsibility to file a notice with the court within the time frame of — after the child’s seventeenth birthday and before the child’s nineteenth birthday. The notice must include proof of the child’s enrollment in high school and his or her expected date of graduation. The parent who is paying child support has the opportunity to file an objection or request for a hearing within thirty days of service of the notice.

Relocation Statute Changes

The relocation statute also underwent changes that took effect on July 1, 2019. These changes to Indiana Code § 31-17-2.2-1 affect anyone with a child custody order or parenting time pursuant to a parenting time affidavit. A parent who is relocating now has thirty days before the date that they intend to move or less than fourteen days after they become aware that they will be moving to file their notice of relocation with the court, whichever is sooner. The non-relocating parent then has twenty days from service of the notice to file their response stating their position on the relocation.

In addition to the change in filing deadlines, the updates to the statute allow for informal notice of relocation in some circumstances rather than a formal filing with the court. The relocating parent does not need to file a notice with the court if the move was already addressed in a court order or if the parent is moving closer to the non-relocating parent. The moving parent also does not need to file a formal notice if the new residence is not more than twenty miles away from the non-relocating parent’s residence and the move will not result in a change in the child’s school. Even if a formal notice is not required, the parent who is moving still needs to provide their home address, all telephone numbers, and e-mail addresses in writing (text message or e-mail is acceptable) to any individual who has or is seeking custody, parenting time, or grandparent visitation with the child.

If the parent is required to file a notice of intent to relocate, the notice must include specific information, including the parent’s new residential/mailing address, phone numbers, expected moving date, and a brief summary of the reason for the move, as previously required. The notice must also state whether the parent who is moving believes that the current parenting time or grandparent visitation order should be modified, and that the parent who is not relocating needs to file his or her response within twenty days of receiving the notice. The parent who is not moving may file a request to prevent the temporary or permanent relocation of the child and/or a petition to modify an order regarding custody, parenting time, grandparent visitation, or child support. If the relocation occurs, all current orders for custody, parenting time, grandparent visitation, and child support remain in place until the court modifies them.

Consult with an experienced family law attorney regarding the specific facts of your case.

Glen Mills Schools Faces Lawsuit Over Child Abuse Allegations

A class action lawsuit has been filed against Glen Mills Schools in Pennsylvania after an investigation uncovered numerous of claims of abuse at the reformatory school for boys. Allegations made by students at the school include counselors and staff inflicting physical violence on the boys like punching, kicking, slamming them into walls or lockers, slapping, and choking them. In one instance, a boy stated he was grabbed by the shirt and slammed onto a pool table for not acknowledging a staff member when the boy walked into the room. The investigation uncovered years of physical abuse at the school. Victims were often silenced with threats of more violence or relocation to a worse school.  Many did not report abuse and went to lengths to ensure family members who saw injuries like cuts, bruises, and sprains did not take action.

The lawsuit alleges that in addition to the injuries from physical abuse and trauma from emotional abuse, students enrolled at Glen Mills were also deprived of their right to an education. It claims that in several instances students were provided self-directed online resources and did not receive instruction or support from teachers. Some were only provided a GED prep book rather than receive secondary education instruction.

State of Pennsylvania closes Glen Mills Schools amid reports of abuse

In April 2019, the State Department of Human Services in Pennsylvania revoked Glen Mills’ license after further investigation into child abuse and cover-ups at the Delaware County facility.

If you or someone you know has a child who attended Glen Mills Schools in Pennsylvania, contact us. Our personal injury attorneys have handled numerous child abuse claims including claims of physical violence and sexual assault and can provide you with a confidential case evaluation at no cost.

When do former clients create conflicts of interest?

By: Arend J. Abel, Attorney

Lawyers often conclude that once representation of a client ends, they are free to take on matters adverse to the former client.  However, that is not always the case.  The Indiana Rules of Professional Conduct specifically provide that there are circumstances where a lawyer may not take a representation that is adverse to a former client.  Indiana Rule of Professional Conduct 1.9 provides that a lawyer may not, absent informed consent, represent a client who is adverse to a former client where the matters are “the same or substantially related.”  It’s easy to tell if matters are “the same.”  The trick is to determine what counts as a “substantially related matter.”

The answer to the question of whether matters are “substantially related” is sometimes counterintuitive.  For example, a lawyer who has generally represented a business owner and obtained information regarding the business owner’s finances likely cannot later represent the business owner’s spouse in a divorce, because the financial information learned from the previous representation may be highly relevant to property settlement issues.

On the other hand, a lawyer who has repeatedly defended employment matters for a business may not be disqualified from later representing persons making employment claims against the former client, because the facts of each separate employment matter stand on their own.

There are some cases that fall between those two types of representations.  For example, the Indiana Court of Appeals in XYZ, D.O. v. Sykes, 20 N.E.3d 582 (Ind. Ct. App. 2014) disqualified a law firm because one of its lawyers had previously represented the adverse party doctor in six medical malpractice suits and the current representation involved an additional allegation of malpractice, coupled with a negligent credentialing allegation against a hospital for failure to adequately investigate the circumstances of the six prior malpractice suits.  The Court of Appeals held that the two matters were substantially related and therefore the lawyer and her firm were disqualified.

The key test to determine whether matters are “substantially related” is whether there is a substantial risk that specific confidential factual information of the kind that would normally have been obtained in the prior representation would materially advance the new client’s position against the former client.  General knowledge of the former client’s policies and practices is ordinarily not enough to result in disqualification, at least for organizational clients.

Before taking on a representation that is adverse to a former client, an attorney must carefully consider the scope of the prior representation and the kind of information that would normally have been obtained from the former client for that sort of representation.  Then, the lawyer must assess whether information that would normally have been obtained from the former representation could be helpful to the new client.  If it is, the lawyer must decline the new representation.