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UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
PAUL S. DAMRON, No. 94-35043
Plaintiff-Appellant, D.C. No. CV-94-00105-EJL
VERN HERZOG, JR.,
Appeal from the United States District Court for the District of Idaho
Edward J. Lodge, District Judge, Presiding
Argued and Submitted January 11, 1995 Submission deferred March 31, 1995
Resubmitted May 23, 1995 Seattle, Washington
Filed September 26, 1995
Before: Eugene A. Wright and Melvin Brunetti, Circuit Judges, and Robert
J. Kelleher, District Judge.
Opinion by Judge Kelleher
Allen B. Ellis, Ellis, Brown & Sheils, Boise, Idaho, for the plaintiff-
Mark S. Geston, Eberle, Berlin, Kading, Turnbow & McKleven, Boise,
Idaho, for the defendant-appellee.
KELLEHER, District Judge:
The Idaho District Court held that the state of Idaho does not recognize
a general duty of care owed by attorneys to former clients.
Accordingly, the district court granted Herzog's motion for summary
judgment. Damron appeals. We have jurisdiction pursuant to 28 U.S.C. S
1291 and we reverse and remand to the Idaho District Court for trial.
In 1982 Plaintiff-Appellant Paul Damron (Damron) hired Defendant-
Appellee Vern Herzog (Herzog) to prepare documents for the sale of
Damron's funeral and cemetery business to Richard, Patricia, Wayne, and
Marie Wheatley (collectively, "the Wheatleys"). As part of his
representation, Herzog drafted a Stock Purchase Agreement (1982 Stock
Purchase Agreement), which provided, among other things, for the
Wheatleys to make payments to Damron. Herzog did not represent Damron on
any further legal matters.
In 1983 Damron sued the Wheatleys regarding tax refunds due in
connection with the 1982 sale. The Wheatleys filed a counterclaim
against Damron, seeking sums allegedly owed by Damron as a result of
advanced payments on funeral services (pre-need contracts). Eventually
the counterclaim was dismissed with prejudice and judgment was entered
in favor of Damron in February 1987. Herzog did not represent either
party in this litigation.
After 1982 Herzog represented the Wheatleys on miscellaneous matters
unrelated to Damron. During the first part of 1991, the Wheatleys
consulted Herzog concerning their obligations under the 1982 Stock
Purchase Agreement. Herzog advised the Wheatleys to discontinue further
payments to Damron under the 1982 Stock Purchase Agreement. In addition,
Herzog sent a letter to Damron, dated March 29, 1991, detailing the
advice he had given to the Wheatleys. *fn1
As a consequence of the letter, Damron instituted foreclosure
proceedings against the Wheatleys. Shortly thereafter, the Wheatleys
retained new counsel to advise them about their dispute with Damron. On
August 20, 1991, pursuant to the advice of their new counsel, the
Wheatleys filed suit against Damron. The Wheatleys' suit sought to stay
the foreclosure proceedings on the ground that the Wheatleys were
entitled to offsets for undisclosed liabilities, including the preneed
contracts that were the subject of the Wheatleys' previously dismissed
counterclaim. This litigation was eventually resolved through a
Compromise and Settlement Agreement (Settlement Agreement). The
Settlement Agreement included modifications to the original purchase
agreement and returned a portion of the business to Damron.
On March 26, 1993, Damron, an Arizona resident, filed a diversity action
against Herzog in United States District Court for the District of
Idaho. Damron's complaint alleged the facts described above. He further
alleged that Herzog's advice to the Wheatleys proximately caused him
over $155,000 in damages for legal defense costs incurred in resolving
the 1991 conflict with the Wheatleys. Damron did not allege that Herzog
revealed any confidential information to the Wheatleys obtained during
Herzog's representation of Damron.
On September 7, 1993, Herzog moved for summary judgment. The district
court held that Idaho law does not recognize a duty, breach of which is
actionable at law, owed by attorneys to former clients beyond the duty
of confidentiality. Finding little guidance in Idaho law, we certified
the following question to the Idaho Supreme Court:
Can a former client maintain an action under Idaho law for damages
against an attorney that represents a new client, whose interests are
materially adverse to the former client, in a matter that is
substantially related to that on which the attorney represented the
The Idaho Supreme Court rejected certification.
STANDARD OF REVIEW
Because the Idaho Supreme Court declined to clarify its law regarding
attorney/client relationships, we now review de novo the district
court's grant of summary judgment. Jesinger v. Nevada Fed. Credit Union,
24 F.3d 1127, 1130 (9th Cir. 1994). Viewing the evidence in the light
most favorable to the nonmoving party, we must determine whether there
are any genuine issues of material fact and whether the district court
correctly applied relevant substantive law. Id. We also review de novo
the district court's interpretation of state law. Salve Regina College
v. Russell, 499 U.S. 225, 231 (1991).
 Indisputably, Herzog breached his ethical duty of loyalty to his
former client, Damron. See Idaho Rule of Professional Conduct (IRPC)
1.9. It is equally undisputed that Damron could have sought either to
disqualify Herzog (if Herzog had continued representation of the
Wheatleys), or to institute disciplinary proceedings against Herzog.
See. e.g., In re American Airlines, Inc. 972 F.2d 605, 621-28 (5th Cir.
1992) (finding disqualification proper when law firm engaged in
impermissible conflicts of interest in substantially related matters),
cert. denied, Northwest Airlines, Inc. v. American Airlines, 113 S. Ct.
1262 (1993); Idaho State Bar v. Williams, 893 P.2d 202, 210 (Idaho 1995)
(upholding disbarment imposed for violations of the IRPC). However,
Damron's appeal presents us with a more novel problem: whether, under
Idaho law, Herzog owed Damron a continuing duty of care as to the same
or substantially related matter of Herzog's initial representation of
Damron. The district court expressly held that to find such a duty would
be to extend current Idaho law "to create a duty to former clients
beyond the duty of confidentiality." We reject the district court's
conclusion. We do not think that a drastic extension of Idaho law is
necessary; rather, we find in the common law a continuing duty owed by
attorneys to former clients not to represent an interest adverse to a
former client on a matter substantially related to the matter of
engagement. When such a duty is breached, the former client may bring a
cause of action at law.
A. Attorney-Client Relationship
In order to bring a claim for malpractice, Damron must demonstrate the
existence of an attorney-client relationship, a duty with respect to
that relationship, breach of such duty, and damages flowing from the
breach. See Johnson v. Jones, 103 Idaho 702, 706, 652 P.2d 650, 654
Damron argues that for the purposes of a malpractice action, an
attorney-client relationship existed at the time of Herzog's advice to
the Wheatleys in 1991. Damron concedes that ordinarily an attorney-
client relationship is terminated once representation has been
completed. In this case, however, Herzog interposed himself into a
matter substantially related to that for which he was previously
retained by Damron. In so doing, Herzog created a situation in which the
attorney-client relationship re-attaches. Under such circumstances,
Damron argues, the duty of loyalty must continue after the
representation is complete in the same way the duty of confidentiality
continues. Because the duty of loyalty continues in this respect, Damron
argues, Herzog should be subject to a malpractice action for breach of
that duty. We agree.
 The Supreme Court of Idaho has stated that "the scope of an
attorney's contractual duty to a client is defined by the purposes for
which the attorney is retained." Johnson, 652 P.2d at 652. It is clear
in this action that Herzog was retained by Damron to advise him
regarding the sale of his funeral business and draw a contract for the
terms of that sale. Payments under the terms of the contract were to
continue until 1997. While this contract was still binding between
Damron and the Wheatleys, Herzog undertook representation of the
Wheatleys, whose interests were directly adverse to those of Damron.
 For the purpose of Herzog's adverse representation in a
substantially related matter, his attorney-client relationship with
Damron was still in effect. We find it nonsensical to hold that the
attorney-client relationship does not remain intact with respect to
matters substantially related to the initial matter of engagement. Such
a result is contrary to the basic tenets of attorney-client
relationships. The Supreme Court has long held attorneys to stringent
standards of loyalty and fairness with respect to their clients. In
1850, the Supreme Court stated:
There are few of the business relations of life involving a higher trust
and confidence than that of attorney and client, or, generally speaking,
one more honorably and faithfully discharged; few more anxiously guarded
by the law, or governed by sterner principles of morality and justice;
and it is the duty of the court to administer them in a corresponding
spirit, and to be watchful and industrious, to see that confidence thus
reposed shall not be used to the detriment or prejudice of the rights of
the party bestowing it. Stockton v. Ford, 52 U.S. (11 How.) 232 (1850).
In the same vein, the Idaho Supreme Court has stated:
The relationship of client and attorney is one of trust, binding an
attorney to the utmost good faith in dealing with his client. In the
discharge of that trust, an attorney must act with complete fairness,
honor, honesty, loyalty, and fidelity in all his dealings with his
client. An attorney is held to strict accountability for the performance
and observance of those professional duties and for a breach or
violation thereof, the client may hold the attorney liable or
accountable. Beal v. Mars Larsen Ranch Corp., Inc., 99 Idaho 662, 667-
668, 586 P.2d 1378, 1383-1384 (1978) (citation omitted).
 Mindful of the historical importance of the public trust in the
attorney-client relationship, we find that just as the attorney-client
relationship remains intact for purposes of a continuing duty of
confidentiality, so does it remain intact for purposes of a continuing
duty of loyalty with respect to matters substantially related to the
initial matter of engagement. Rather than being a drastic extension of
Idaho law, such a result is a natural complement to the law as defined
by Idaho courts.
B. Duty of Loyalty Correlative to Duty of Confidentiality
 Damron could have brought a cause of action based on breach of the
duty of confidentiality. There is support in the law for the contention
that where prior and current representations involve the same
transaction, access to confidential information by the attorney in the
course of the first representation is presumed. See Flatt v. Superior
Court, 9 Cal. 4th 275, 283, 885 P.2d 950, 954, 36 Cal. Rptr.2d 537, 541
(1994); David Welch Co. v. Erskine & Tulley, 203 Cal. App. 3d 884, 891,
250 Cal. Rptr. 339, 342 (1988) ("the actual use or misuse of
confidential information is not determinative; it is the possibility of
breach which controls") (emphasis added). Due to the grave risk of
disclosure, some courts conclude that attorneys simply may not undertake
to represent a client whose interests are adverse to those of a former
client in matters substantially related to the representation of the
former client. T.C. Theatre Corp. v. Warner Bros. Pictures, 113 F. Supp.
265, 269 (S.D.N.Y. 1953).
Although confidential information may not have been disclosed, Damron
argues that Herzog's advice to the Wheatleys necessarily involved
decisions based on confidential information, which inevitably created
the risk of a breach.
 We agree that when an attorney engages in a conflict of interest on
the same matter, he or she is in a position to act on the confidential
information learned from the relationship with the first client, whether
or not that information is actually disclosed or acted upon in advising
the new client. Maritrans GP, Inc. v. Pepper, Hamilton, & Scheetz, 529
Pa. 241, 254, 602 A.2d 1277, 1283 (1992); David Welch Co., 203 Cal. App.
3d at 891. Because this position creates such a grave risk of breach of
confidence, it is anomalous to find that the duty of confidentiality
does not have as its direct correlation a duty of loyalty. Therefore,
because the duty of confidentiality remains intact with respect to
Herzog's representation of Damron, the duty of loyalty also continues
with respect to those matters substantially related to that
An integral purpose of the rule of confidentiality is to encourage
clients to fully and freely disclose to their attorneys all facts
pertinent to their cause with absolute assurance that such information
will not be used to their disadvantage. T.C. Theatre Corp., 113 F. Supp.
at 269; See also Maritrans, 602 A.2d at 1283. Allowing Damron's action
to go forward does not place undue restrictions on Herzog's role as an
We note that our conclusion does not augment any of the obligations
attorneys already bear under the rules that govern professional conduct.
Under those rules, attorneys are prohibited from adverse representations
on substantially related matters. See IRPC 1.9. Nor does our conclusion
alter the ability of an attorney to engage in representation adverse to
a former client after the former client's consent. See id. Although we
find that, in the narrow realm of the duty of loyalty, an attorney-
client relationship continues after formal representation ends, our
finding is for the limited purpose of malpractice analysis.
C. Duty of Loyalty Based on Impermissible Conflict of Interest
Damron also argues that he can maintain a cause of action for breach of
the common-law duty of loyalty upon which IRPC 1.9 is predicated.*fn2
Damron concedes that the preamble of the IRPC admonishes that "
`violation of a Rule should not give rise to a cause of action nor
should it create any presumption that a legal duty has been breached.
The Rules . . . are not designed to be a basis for civil liability.' "
Weaver v. Millard, 120 Idaho 692, 697, 819 P.2d 110, 115 (Ct. App. 1991)
(quoting the preamble to the IRPC). Relying on the Pennsylvania Supreme
Court's holding in Maritrans, however, Damron argues that he is suing
for breach of the common-law fiduciary duty which forms the basis of
In Maritrans, the Pennsylvania Supreme Court held that an attorney's
subsequent representation of a client, whose interests were materially
adverse to a former client in a matter substantially related to that in
which he or she represented the former client, was an impermissible
conflict of interest, giving rise to breach of a fiduciary duty. 602
A.2d at 1282. The Pennsylvania Supreme Court reasoned that an action at
law was available because the common-law fiduciary duty imposed on
attorneys prohibited them from engaging in impermissible conflicts of
interest. Id. at 1283 (citing Stockton v. Ford, 52 U.S. (11 How.) 232
(1850); Woods v. Nat'l Bank & Trust Co., 312 U.S. 262 (1941); T.C.
Theatre Corp. v. Warner Bros. Pictures, 113 F. Supp. 265 (S.D.N.Y.
We do not find it necessary to take such a novel approach here. Rather,
we find the basis for a continuing duty in the fact that the attorney-
client relationship remains intact under certain limited circumstances.
Certainly with respect to the specific subject matter of the initial
representation, there is a continuing duty of loyalty.
However, the court's holding in Maritrans is not inconsistent with the
present state of Idaho law. In fact, in Johnson v. Jones, the Idaho
Supreme Court concluded that "there is a question of material fact as to
whether [the defendant-attorney] breached a duty to the [plaintiffs] to
disclose the possible conflict of interest involved in drawing up a
contract for both the buyer and the seller." 652 P.2d at 654. Although
the court ultimately affirmed dismissal of the claim based on plaintiff-
appellants' failure to show any triable issue of fact as to causation,
the court did not foreclose the possibility of an action at law based on
a breach of duty caused by an impermissible conflict of interest.*fn3
 We need not decide whether the cause of action alluded to in Johnson
exists. Rather, we find that a duty of loyalty to a former client is
coterminous with the duty of confidentiality with respect to matters
substantially related to the initial matter of engagement. Accordingly,
the judgment of the district court is reversed and remanded for trial.
*fn1 In this letter, Herzog informed Damron that he had advised the
Wheatleys to "discontinue any further payment under the [1982 Stock
Purchase Agreement]" due to the $340,000 in outstanding pre-need
contracts allegedly still owed by Damron.
*fn2 Alternatively, a duty to avoid conflicts of interest may be found
in the proposed Restatements of the Law Governing Lawyers Comment c to
section 72 which states:
After a client-lawyer relationship ends . . . a lawyer still owes
certain duties to a former client, for example, to .. . avoid certain
conflicts of interest (SS 213-214). A breach of such duties may be
remedied through a malpractice action in such circumstances coming
within this section. Id.
While the Idaho courts have not adopted the proposed Restatement,
several other state and federal courts have followed the proposed
Restatement, albeit in different circumstances. See, e.g., Petrillo v.
Bachenberg, 139 N.J. 472, 483-484, 655 A.2d 1354, 1359-60 (1995).
*fn3 In Beal v. Mars Larsen, the Supreme Court of Idaho recognized that
an impermissible conflict of interest ordinarily exists in a situation
where an attorney represents both the buyer and seller in a real estate
transaction without the consent of both parties. 586 P.2d at 1384.
However, because the attorney in Beal was deemed to be merely a
"scrivener", the court found that no misconduct had occurred and thus
the attorney was not liable for damages. Id.
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