The Risk Manager, Summer 2015

Marcum v. Hon. Ernesto Scorsone, No. 2014-SC-000172-MR (4/2/2015)

The appearance of impropriety standard has a long and checkered history as a basis for finding a disqualifying conflict of interest. Condemned as vague and little more than the subjective judgment of the offended party, the 1990 Kentucky Rules of Professional Conduct attempted to delete it as a basis for disqualification of Kentucky lawyers.

Unfortunately, in two cases in the mid-1990s the Supreme Court reinstated the appearance of impropriety standard. The Court opined in Lovell v. Winchester, Ky., 941 S.W.2d 466 (1997) that "Although the appearance of impropriety formula is vague and leads to uncertain results, it nonetheless serves the useful function of stressing that disqualification properly may be imposed to protect the reasonable expectations of former and present clients. The impropriety standard also promotes the public’s confidence in the integrity of the legal profession. For these reasons, courts still retain the appearance of impropriety standard as an independent basis of assessment."

In Marcum the Court reversed Lovell as follows:

The simple fact is that disqualification is easier to achieve under the appearance-of-impropriety standard. While that is appropriate for judicial recusal questions, see SCR 4.300, Canon 2 ("A judge shall avoid impropriety and the appearance of impropriety in all of the judge’s activities."), because there is a heightened concern about public confidence in the judiciary, that concern is less pressing when dealing with the private lawyer-client relationship. If anything, use of such a low standard in that context creates a "greater ... likelihood of public suspicion of both the bar and the judiciary" and "would ultimately be self-defeating," Woods v. Covington County Bank, 537 F.2d 804, 813 (5th Cir. 1976), because it creates the impression that courts are ruling based on appearances rather than facts. Before a lawyer is disqualified based on a relationship with a former client or existing clients, the complaining party should be required to show an actual conflict, not just a vague and possibly deceiving appearance of impropriety. And that conflict should be established with facts, not just vague assertions of discomfort with the representation.

Lovell applied a standard that is no longer a part of the Rules of Professional Conduct and is simply inadequate to preserve the interests involved when a conflict of interest is alleged. To the extent that Lovell and other cases have approved the appearance-of-impropriety standard, they are overruled. Instead, in deciding disqualification questions, trial courts should apply the standard that is currently in the Rules of Professional Conduct, which at this time requires a showing of an actual conflict of interest.

Marcum came to the Supreme Court as an appeal of a denial of a writ of prohibition to bar the enforcement of the trial court’s order disqualifying the appellants’ lawyers. The underlying case concerned a shareholder-derivative suit. The complicated facts of this suit involve multiple parties, lawsuits, and a multitude of lawyers. The Supreme Court referred to these facts as an example of the infamous "Gordian knot." We recommend Marcum for your professional reading and alert law professors to what a great professional responsibility exam question could be made out of this decision.