13.10. “Hot Potato” Rule

Once you know that you cannot go adverse to a current client without concent and that it is much easier to go adverse to a former client, it should be clear that lawyers will want to categorize as many clients as former clients as possible.  One way that a lawyer may want to try to convert a current client into a former client is by withdrawing from representing one of the clients (dropping them like a hot potato), which would make them a former client, and allow the lawyer to sue them in unrelated matters.  You can imagine, lawyers would have an incentive to drop the less lucrative client in favor of the more lucrative one.  The general rule is that a lawyer cannot do this.  A lawyer cannot cure a conflict of interest by withdrawing from representation.[1] 

GT, a lawfirm, represented Hasbro, Inc. in a number of matters related to general sales promotion and charitable promotion laws and patent applications.  In 2015, Plaintiff sued Hasbro, Inc. for breach of contract related to royalties to be paid to Plaintiff for the board game Life.  In the lawsuit against Hasbro, Inc., Plaintiff was represented by S&C.  Subsequently, S&C sought to join the GT lawfirm.  To eliminate the conflict, GT dropped Hasbro, Inc. as a client and sought to continue representing Plaintiff in the royalty dispute.  Hasbro, Inc. filed a motion to disqualify GT.  Should GT be disqualified? [Markham Concepts, Inc. v. Hasbro, Inc., 196 F.Supp. 3d 345 (D. R.I. 2016)]

Yes.  This is a classic example where the hot potato doctrine applies.  The lawfirm sought to drop one client (Hasbro), make them a former client and pursue the claim on behalf of Plaintiff.  This was not the same matter in which the firm had previously represented Hasbro and it was not substantially related (the prior representation related to sales promotion laws and patent applications.  This relates to a breach of contract claim.  The court, however, held that it was not proper for a law firm to just drop one client to represent the more lucrative client – and granted the motion to disqualify.

[1] Picker Int’l v. Varian Assoc., 670 F.Supp. 1363, 1365 (N.D. Ohio 1987) (“a firm may not drop a client like a hot potato, especially if it is in order to keep happy a far more lucrative client.”).