Opinion
No. X07-CV04-4001923S
May 5, 2006
MEMORANDUM OF DECISION
This decision addresses both a motion to quash a subpoena for deposition, filed on behalf of a nonparty, prospective deponent, Bradley Nitkin, and a motion, filed by the defendants, Capital City Economic Development Authority and the Office of Policy and Management, to disqualify the law firm of Bingham McCutchen LLP (Bingham McCutchen) from continuing to represent the plaintiff, Capital Properties L.P., in this lawsuit. These motions are based on discussions Nitkin had with a partner of Bingham McCutchen when Nitkin contemplated retaining that firm to represent his business with respect to developing a housing and retail district within the Adriaen's Landing project in Hartford. On March 27, 2006, the court held an evidentiary hearing on these motions and makes the following findings of fact.
On November 3, 2004, Attorney Robert Dombroff of Bingham McCutchen filed this action on behalf of the plaintiff in the Hartford Judicial District. The plaintiff claims that the plaintiff and the defendants entered into a contract on August 1, 2002, for the development of the residential and retail district at the Adriaen's Landing site; that the contract obligated the defendants to engage in several specific activities to assist the plaintiff with the construction of apartments and retail space; that the defendants, in bad faith, reneged on these commitments, concealed essential information from the plaintiffs, withheld necessary cooperation, and undermined the plaintiff's ability to complete the project successfully; and, on August 16, 2004, wrongfully terminated the plaintiff as developer for this phase of the project. The complaint alleged that the defendants are liable for breach of contract, breach of the covenant of good faith and fair dealing, and violations of the Connecticut Unfair Trade Practices Act (CUTPA). The plaintiff seeks compensatory and punitive damages and attorneys fees.
After the plaintiff was terminated as developer, the defendants sought a replacement developer and met with Nitkin on a few occasions to assess whether his company might fill this role. Nitkin decided to hire legal counsel to negotiate the terms of an agreement with the defendants and left a message with Attorney Oland of Bingham McCutchen for that purpose. Attorney Oland arranged a meeting with Nitkin and Nitkin's in-house counsel, Attorney Jeffrey Ullman.
Attorney Oland was the partner at Bingham McCutchen's Hartford office in charge of its property section. At the time of Nitkin's message, Attorney Oland was aware that Attorney Dombroff represented the plaintiff, the ousted developer, concerning the same project. Oland spoke to Dombroff about this circumstance, and they perceived no ethical impediment in representing, simultaneously, the new developer and the former developer who was contesting the validity of its termination. Attorney Dombroff was concerned, however, that the firm's present client, the plaintiff, might be upset if Nitkin's company were to use the plaintiff's plan of development for the project. Attorneys Oland and Dombroff concurred that Bingham McCutchen would only accept Nitkin's company as a client if his development strategy was divorced from the plaintiff's plans.
At around 11 a.m. on April 21, 2005, Nitkin and Attorney Ullman arrived at Bingham McCutchen, and Attorney Oland explained that his firm represented the plaintiff, a former developer on the project, and the proviso noted above. Nitkin assured Attorney Oland that he had no intention to utilize the plaintiff's development scheme. Attorney Oland never informed Nitkin and Attorney Ullman that Bingham McCutchen had filed this lawsuit against the defendants, the parties with whom Nitkin wished to reach a development agreement.
The testimony as to the duration and substance of this meeting at Bingham McCutchen was conflicting. The court finds that the meeting lasted between one and two hours. The discussion included topics concerning the manner in which the defendants solicited Nitkin's interest in the project, the financial condition of Nitkin's company, what modifications to the existing plans were contemplated, environmental issues, community concerns regarding the project, time constraints, Bingham McCutchen's experience in this field, and Attorney Oland's proposed approach to representing Nitkin's company. Also, the financial structure to be employed under the potential agreement with the defendants, the expected tax agreements with the city of Hartford, and the estimated costs of completing the project were mentioned.
Attorney Oland never requested a waiver of possible conflict of interest in representing both the plaintiff and Nitkin's interests from Nitkin nor the plaintiff before or during the April 21, 2005, interview because he felt no conflict existed. Attorney Oland also believed that no attorney-client duty of confidentiality or loyalty arose regarding the matters discussed at the interview.
It should be noted that Bingham McCutchen did not represent the plaintiff in negotiating the earlier development contract which is the subject of this litigation.
The next day, April 22, 2005, Nitkin and Attorney Ullman met with representatives of the defendants and mentioned the possibility that Bingham McCutchen would represent Nitkin. The defendants' staff informed Nitkin that Bingham McCutchen could not act as Nitkin's counsel in that endeavor because that law firm represented the plaintiff in a lawsuit against the defendants concerning the very same development project. This was the first time Nitkin and Attorney Ullman learned of this litigation.
Armed with this knowledge, Nitkin sent an email to Attorney Oland to inform him that his firm was out of the running. Attorney Oland phoned Nitkin and asked him to reconsider this decision. Nitkin declined and retained another law firm to handle the legal work surrounding the project.
Motion to Quash
On August 8, 2005, Nitkin was served with a subpoena, issued by Bingham McCutchen, to appear for deposition on behalf of the plaintiff. On August 11, 2005, Nitkin moved to quash the subpoena on the basis that Bingham McCutchen cannot examine him in an adversarial setting because of duties owed to him by that office by virtue of the April 21, 2005 interview. The court agrees that Bingham McCutchen is disqualified from deposing Nitkin in this case.
"Disqualification of counsel is a remedy that serves to `enforce the lawyer's duty of absolute fidelity and to guard against the danger of inadvertent use of confidential information.'" Bergeron v. Mackler, 225 Conn. 391, 397 (1993); American Heritage Agency, Inc. v. Gelinas, 62 Conn.App. 711, 725 (2001). The competing interests in play in a motion to disqualify are (1) the former client's interest in protecting confidential information; (2) the present client's interest in protecting counsel of its choice; and (3) the public's interest in the scrupulous administration of justice. Bergeron v. Mackler, supra, 398. Courts must be mindful that time and money may be lost if an attorney is disqualified. Id. Consequently, in disqualification matters the court must be solicitous of the client's right freely to choose counsel. American Heritage Agency, Inc. v. Gelinas, supra.
Rule of Professional Conduct 1.9 governs conflicts arising among present and former representations. Section (1) of Rule 1.9 forbids an attorney from representing a new client "in the same or a substantially related" matter adverse to the interests of a former client without that former client's consent. Section (2) bars the use of "information relating to the [new] representation to the disadvantage of the former client." Thus, Section (1) of Rule 1.9 is limited to those situations where the former and current clients are involved in the same or a substantially related matter. Section (2), however, has no such limitation.
Under Section (1) of Rule 1.9, the relationship between the issues of the earlier and later matters must be "patently clear" and essentially the same. Bergeron v. Mackler, supra, 398-99. The burden is on the movant to demonstrate such a relationship. Rate Corporation, Inc. v. Longo, Superior Court, Stamford J.D., d.n. CV01-186574 (October 30, 2002), Lewis, J.T.R. [ 33 Conn. L. Rptr. 329] Once such a relationship is found to exist, the possession of damaging confidential information is presumed. Bergeron v. Mackler, supra, 399.
Rule of Professional Conduct 1.7(b) states:
A lawyer shall not represent a client if the representation of that client may be materially limited by lawyer's responsibilities to another client or to a third person, or by the lawyer's own interest, unless:
(1) the lawyer reasonably believes the representation will not be adversely affected; and
(2) the client consents after consultation. When representation of multiple clients in a single matter is undertaken, the consultation shall include explanation of the implications of the common representation and the advantages and risks involved.
If Nitkin's preliminary interview had ripened into an attorney-client relationship with Bingham McCutchen, unquestionably attorneys from that firm would be disqualified from deposing or otherwise examining Nitkin at any hearing or trial pertaining to this case. The development project for which Nitkin sought legal advice concerns the same project site which is the subject of this lawsuit which Bingham McCutchen commenced on behalf of the plaintiff.
Under Rule of Professional Conduct 1.10(a), the knowledge of Attorney Dombroff is imputable to Attorney Oland and vice versa. This collective knowledge is imputed to all lawyers at Bingham McCutchen. This means that when Oland received Nitkin's request for a preliminary meeting to discuss the possibility of retaining Bingham McCutchen with respect to working out an agreement with the defendants to develop the site in question, he was charged with knowing that the litigation section in his firm had filed this lawsuit on behalf of the plaintiff, the former developer of the site, against the defendants and that the complaint of their client alleged that the plaintiff was improperly removed as developer because of the obstructionist activities of the defendants and an intentional withholding of cooperation.
Nitkin sought to take advantage, through Bingham McCutchen's legal assistance, of a business opportunity which the plaintiff, again through Bingham McCutchen, asserts should never have existed but for the defendants' breach of contract and the covenant of good faith and fair dealing and violations of CUTPA. The attorneys at Bingham McCutchen ought to have known that Nitkin, under these circumstances, would likely be an important and adversarial witness with respect to defendants' willingness to accommodate changes, their level of cooperation, available financing, tax considerations, cost analyses, and time constraints regarding the project. Nitkin's testimony is likely to have relevance as to the feasibility or nonfeasability of the plaintiff's plans, the presence or absence of bad faith, and whether a practice was deceptive or unfair.
Indeed, it can be assumed that Bingham McCutchen wishes to depose Nitkin to explore these very topics among others. A claim of a breach of the covenant of good faith and fair dealing focuses on a defendant's discretionary application or interpretation of contract provisions. Celentano v. Oaks Condominium Assoc., 265 Conn. 579, 617 (2003). A breach of the covenant is behavior motivated by dishonest purpose and bad faith. Barber v. Jacobs, 58 Conn.App. 330, 338 (2000).
Attorneys Oland and Dombroff discussed the scheduled meeting with Nitkin beforehand, mulled over the ethical implications of representing both the plaintiff and Nitkin, and concluded that there was no problem in representing both the new suitor and the jilted developer concerning the object of their attention, i.e. a housing and retail district development agreement with the defendants. It should have been obvious that the subject matter of Bingham McCutchen's representation of the plaintiff and the object of Nitkin's need for legal counsel were substantially related and adverse. To represent both the plaintiff and Nitkin under these inimical circumstances created a conflict of interest and division of loyalty requiring disqualification under Rules 1.7 and 1.9 unless both the plaintiff and Nitkin consented to this dual representation after informed consultation.
The issue then becomes whether these ethical considerations and implications mandate the same outcome with respect to a mere prospective client, such as Nitkin. It has been held that a fiduciary relationship exists during a preliminary consultation between a lawyer and a potential client even when no actual employment results. Westinghouse Electric Corp. v. Kerr-McGee Corp., 580 F.2d 1311, 1319 (7th Cir. 1978).
On September 13, 1990, the American Bar Association issued Formal Opinion 90-358 which indicates that "[i]nformation imparted to a lawyer by a would-be client seeking legal representation is protected from revelations or use under Model Rule 1.6 even though the lawyer does not undertake representation of or perform legal work for the would-be client."
In G. Hazard, Jr. and W. Hodes, The Law of Lawyering, (3d Ed.), the authors devote § 2.3 to "Duties to Prospective Clients" and state, at p. 2-7, "Although the Model Rules as promulgated in 1983 did not deal explicitly with prospective clients, there was unanimous agreement that some of the basic duties owed to clients are also owed to prospective clients during the period of uncertainty." These commentators also note that "in 2002 a new Rule 1.18 was added to the Model Rules, making these understandings explicit."
ABA Model Rule of Professional Conduct 1.18(a) defines a "prospective client" as one "who discusses with a lawyer the possibility of forming a client-lawyer relationship with respect to a matter." Subsections (b) and (c) apply the same rules of confidentiality and loyalty toward clients to prospective clients "if the lawyer received information from the prospective client that could be significantly harmful," to the prospective client. Subsection (d) sets forth exceptions to disqualification if 1) both the affected client and the prospective client give informed consent in writing, or 2) the lawyer took reasonable measures to avoid receiving more disqualifying information than was necessary to determine whether representation of the prospective client was ethically possible and a meaningful quarantine of that lawyer's information was established by the law firm promptly and with written notice.
Comment 6 to Model Rule 1.18 reiterates that a law firm is prohibited from continuing to represent a former client based on information gleaned from discussion with a prospective client regarding the same or a substantially related matter only if the prospective client's information "could be significantly harmful if used in the matter."
The Restatement (Third), the Law Governing Lawyers, § 15 (2000), proffers similar rules and recommended procedures with respect to prospective clients as those contained in Model Rule 1.18 to the extent that disqualification is unnecessary unless the prospective client's information "could be significantly harmful to the prospective client in the matter" and that a quarantine can be established. Thus, the Restatement position and Model Rule 1.18 differ from that of ABA Opinion 90-358 in that that opinion appears to mandate disqualification by virtue of the equating of prospective clients with actual clients. "When the information imparted by the would-be client is critical to the representation of an existing or new client in the same or related matter, however, the lawyer must withdraw or decline the representation unless a waiver of confidentiality has been obtained from the would-be client." ABA Opinion 90-358.
There is at least one Connecticut trial court decision which has applied the Restatement/Model Rule 1.18 approach. In Beckenstein v. Lichtenstein, Superior Court, Waterbury CLD, d.n. X06-CV03-183486 (August 11, 2004), Alander, J., ( 37 Conn. L. Rptr. 627) the court employed the Model Rule 1.18 position and found no need to disqualify counsel.
This court also utilizes the Model Rule 1.18 and Restatement approach. The preface to the Connecticut Rules of Professional Conduct indicates that our rules were adapted, with revisions, from the ABA Model Rules of 1986. Model Rule 1.18 was incorporated into the Model Rules in 2002, and the Connecticut rules of practice have yet to address the adoption of Model Rule 1.18 or any other rule regarding prospective clients. Of note, that preface to our rules admonishes that the "Rules do not, however, exhaust the moral and ethical considerations that should inform and guide a lawyer, but simply provide a framework for the ethical practice of law."
In Beckenstein v. Lichtenstein, supra, the trial court determined that the interviewing attorney took reasonable and timely steps to avoid exposure of confidential information garnered from the prospective client by limiting the initial interview to identifying the various individuals and entities involved in the potential litigation. Once a possible conflict was identified, the attorney promptly curtailed the discussion with the prospective client and declined representation. Next, the attorney's law firm quickly erected a quarantine surrounding that attorney to eliminate any danger that confidential information might flow, intentionally or otherwise, to other members of the firm. Also, the law firm gave timely and adequate written notice to the prospective client regarding the quarantine. In sum, the attorney and his law firm comported with the letter and spirit of Model Rule 1.18.
None of these timely prophylactic efforts were made by plaintiff's counsel in the present case. Attorney Oland recognized the specter of conflict before meeting with Nitkin. He broached the topic with Attorney Dombroff who was litigating this lawsuit for the plaintiff against the defendants regarding the very same development project for which Nitkin was seeking legal counsel. The nature of this lawsuit made Nitkin's relationship with the defendants and his preliminary conversations with them significant from an evidentiary standpoint and placed Nitkin in an adversarial position with respect to the plaintiff even though he is not a defendant in this case.
In the absence of informed, written waivers by the plaintiff and Nitkin, Attorneys Oland and Dombroff were obliged to inform Nitkin at that time that no representation by their firm was possible. No interview on April 21, 2005, ought to have occurred. Bingham McCutchen failed to engage in prompt action to avoid exposure to the information which Nitkin provided at that interview. Instead, Attorney Oland attempted to convince Nitkin to retain Bingham McCutchen. No quarantine was established by Bingham McCutchen nor was written notice of such action sent to Nitkin until after Nitkin filed this motion to quash.
Conducting a third-party deposition of a former client is unethical because it is likely 1.) to pit the duty of loyalty to one client against the duty to another, and 2) risks breaking the duty of confidentiality to the deponent. Selby v. Revlon Consumer Products Corp., 6 F.Sup.2d 577, 581 (N.D. Texas 1997), citing ABA Formal Opinion 92-367 (1992). That court quashed a subpoena to take a deposition. Id., 582. The rules of ethical conduct recognize that "an attorney who cross-examines former clients inherently encounters divided loyalties." U.S. v. Moscony, 927 F2d 742, 750 (3rd Cir. 1991); Banner v. City of Flint, 136 F.Sup.2d 678, 682 (E.D.Mich. 2000).
The plaintiff argues that, even if it were improper for Bingham McCutchen to conduct a deposition of Nitkin, quarantine would suffice to avoid breaking any duty of confidentiality or loyalty. The court agrees that Bingham McCutchen can remain as counsel for the plaintiff, but the court holds that it is insufficient for that firm to enact a quarantine belatedly. Had a quarantine been imposed shortly after the April 21, 2005 interview, perhaps an internal quarantine would have been effective. As mentioned above, both Model Rule 1.18 and the Restatement condone such screening as long as it is constructed reasonably quickly.
Once Attorney Oland received the information from Nitkin, as recounted earlier, it is presumed that all members of his firm possess that knowledge. Therefore, the court will permit plaintiff's counsel to construct an external screen by using outside counsel to conduct any deposition or examination of Nitkin at any hearing or a trial as long as that outside counsel has no access to Attorney Oland or any other Bingham McCutchen staff regarding the information Nitkin discussed with Attorney Oland. The motion to quash is granted subject to reissuance of the subpoena, if desired, by outside counsel.
Motion to Disqualify
Before the court decides the defendants' motion to disqualify Bingham McCutchen from any further representation of the plaintiff, the court must address the threshold question of whether the defendants have standing to raise ethical issues arising from the interview of Nitkin by Attorney Oland on April 21, 2005. The court holds that the defendants lack such standing.
The general principle is that one party has no standing to vindicate another party's rights. Delio v. Earth Garden Florist, Inc., 28 Conn.App. 73, 79 (1992). In the context of our Rules of Professional Conduct, the "scope" section preceding the enumerated Rules warns that the "fact that a Rule is a just basis for a lawyer's self-assessment, or for sanctioning a lawyer under the administration of a disciplinary authority, does not imply that an antagonist in a collateral proceeding or transaction has standing to seek enforcement of the Rule." The scope section also observes that "the purpose of the Rules can be subverted when they are invoked by opposing parties as procedural weapons." Additionally, the commentary to Rule 1.7 cautions that motions to disqualify "can be misused as a technique of harassment."
The defendants make no claim that the new developer, whoever that might have been, was immune from deposition by the plaintiff. Nitkin would have been accessible for deposition by Bingham McCutchen but for the April 21, 2005 interview. Instead, the defendants argue that, because the defendants' employees and officials discussed proprietary matters with Nitkin before April 21, 2005, and because Bingham McCutchen learned of these matters as a result of the interview which never should have occurred, Bingham McCutchen should be barred from continuing to represent the plaintiff. Otherwise, they contend, Bingham McCutchen will gain an advantage from its own impropriety, and this disadvantage to the defendants confers upon them standing to move for disqualification. The court rejects this argument.
If the defendant conveyed to Nitkin proprietary information which they wish to keep confidential, they could have asked Nitkin to execute a confidentiality agreement to that effect. Such an agreement was never sought. Bingham McCutchen owes no duty of confidentiality to the defendants, and, in the absence of an agreement, neither does Nitkin. Therefore the defendants lack standing to complain about Bingham McCutchen's breach of ethical responsibility to Nitkin.
The defendants' motion to disqualify is denied.