## Facts

- Krutzfeldt Ranch, LLC and the Krutzfeldts obtained a $5 million loan commitment from Pinnacle Bank to fund subdivision development.
- After a dispute over loan disbursements, the Krutzfeldts sued Pinnacle; Pinnacle was represented by the law firm Crowley Fleck PLLP.
- The Krutzfeldts’ counsel retained attorney Lance Hoskins to provide tax advice connected to the project and litigation; Hoskins met with counsel and clients, sent an engagement letter, and billed for the work.
- While still viewed as representing the Krutzfeldts, Hoskins entered into concrete employment discussions with Crowley, the opposing party’s firm.
- Hoskins did not promptly inform the Krutzfeldts, did not obtain consent, did not end the employment discussions, and did not withdraw from the representation.
- Hoskins later joined Crowley; Crowley circulated a general announcement letter about his move that did not clearly state the Krutzfeldts were not his clients.
- The Krutzfeldts moved to disqualify Crowley and to permanently enjoin Crowley from representing Pinnacle; Crowley asserted it had implemented an ethical screen and that Hoskins would not work on the case or share fees.
- The district court denied disqualification and injunctive relief; the Krutzfeldts appealed.

## Issues

1. Whether a lawyer’s employment negotiations with the opposing firm, while still representing a client, create a concurrent conflict of interest requiring disclosure, consent, termination of discussions, or withdrawal.
2. Whether the resulting conflict is imputed to the hiring firm, requiring firm-wide disqualification from representing the adverse party.
3. Whether an ethical screen and fee isolation can cure or prevent disqualification where the conflict arose during an ongoing representation.

## Decision

- The Montana Supreme Court reversed the district court.
- The Court held Hoskins’s employment negotiations with the opposing firm, during an ongoing attorney-client relationship, created a concurrent conflict of interest.
- The conflict was imputed to Crowley as the firm that hired Hoskins.
- Crowley’s screening measures and assurances were inadequate in these circumstances.
- The Court remanded with instructions to disqualify Crowley from representing Pinnacle and to enter a permanent injunction barring Crowley’s further participation in the litigation.

## Legal Principles

- A lawyer’s concrete employment discussions with an adversary’s firm during an active representation can create a personal-interest concurrent conflict because the lawyer’s loyalty may be materially limited.
- When such a conflict exists, the lawyer must promptly disclose the discussions to the client and obtain informed consent, or terminate the discussions, or withdraw from the representation.
- A concurrent conflict arising from a lawyer’s conduct is generally imputed to the lawyer’s new firm, particularly when the firm represents the adverse party in the same matter.
- Ethical screens may be insufficient where the conflict originated while the lawyer still owed undivided loyalty to the client; screening cannot retroactively cure the breach of disclosure and loyalty obligations.
- Disqualification and injunctive relief may be required to protect client confidences, preserve loyalty duties, and maintain confidence in the integrity of the judicial process.

## Conclusion

The court required disqualification and a permanent injunction because an attorney’s undisclosed employment negotiations with opposing counsel’s firm created a concurrent, imputed conflict that could not be cured by screening after the attorney joined the opposing firm.


Krutzfeldt Ranch, LLC v. Pinnacle Bank, 272 P.3d 635 (Mont. 2012)