It’s not often that a court disqualifies one of the lawyers who appears before it. That’s what makes the Seventh Circuit’s recent decision in Doe v. Nielsen, No. 17-2040 (7th Cir. Feb. 26, 2018), one for the history books. The decision, written by Judge Diane Sykes, took the “drastic measure” of disqualifying counsel who appeared for a plaintiff seeking lawful-permanent residence under the EB-5 program—a visa program that allows immigrant investors to apply for a green card if they can prove that they have invested a minimum amount in a “new commercial enterprise.”

The court’s power to disqualify a lawyer of a client’s choosing, the Seventh Circuit explained, stems from its duty to “maintain public confidence in the legal profession and assist[] in protecting the integrity of the judicial proceeding.”  Slip op. 3. The facts of this case, as the court put it, “force[d its] hand.” Id.

The appellant was represented by a three-attorney Chicago firm specializing in immigration law. As recently as last year, however, and while briefing was underway in the Seventh Circuit in this appeal, the Securities and Exchange Commission brought a civil action against the firm’s principal. The SEC charged him with defrauding hundreds of EB-5 clients by misappropriating funds, and the Seventh Circuit found that there was “significant overlap between the SEC’s claims and the facts in this case.”

After ordering supplemental briefing from the parties, the court found two unwaivable conflicts of interest (despite the fact that the appellant’s firm submitted a conflict waiver from its client). First, the court found that the firm might reject “lines of inquiry or argument that might help [the] client’s case” because pursuing those arguments might harm the principal’s defense in the action brought by the SEC. Slip op. 4. Second, the court found that the principal could not fulfill his duty of “undivided fidelity” to his client. The SEC had alleged that he would be forced to choose which of his clients’ underfunded investments he would see through to completion. The Seventh Circuit held that this “catch-22” was the “epitome of divided loyalty,” making his “continued representation untenable.” Slip op. 5.

The court also decided that the principal’s conflict should be imputed to his associates, one of whom was counsel of record on this case. The court held that Illinois Rule of Professional Conduct 1.10(a) barred the associate from representing the appellant because the principal’s civil case would “present[] a significant risk of materially limiting” the appellant’s representation. Slip op. 6. There was, the court found, “virtually no chance [the associate] would do anything to upset [the principal’s] case,” even if it might work to the client’s benefit.