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Mody v. Quiznos Franchise Co.

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION
Jul 18, 2012
DOCKET NO. A-2260-11T1 (App. Div. Jul. 18, 2012)

Opinion

DOCKET NO. A-2260-11T1

07-18-2012

MEENA MODY, as Executrix of the Estate of Jasvant Mody, and MUKESH MODY, Plaintiffs-Respondents, v. THE QUIZNOS FRANCHISE COMPANY, THE QUIZNO'S FRANCHISE COMPANY, LLC, f/k/a THE QUIZNO'S CORPORATION, QUIZNO'S FRANCHISING, LLC, QUIZNO'S FRANCHISING II, LLC, QFA ROYALTIES, LLC, THE QUIZNO'S MASTER, LLC, LARRY HILL, JOHN BARRY, and ELI CHEDIAK, Defendants-Appellants.

Leonard H. MacPhee (Perkins Coie, LLP) argued the cause for appellants (Ansa Assuncao, LLP and Mr. MacPhee, attorneys; Steven F. Gooby and Mr. MacPhee, on the brief). Justin M. Klein argued the cause for respondents (Marks & Klein LLP, attorneys; Mr. Klein, of counsel and on the brief; Kevin M. Eppinger, on the brief).


NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

QFA ROYALTIES, LLC, THE QUIZNO'S MASTER, LLC,

Before Judges Sapp-Peterson and Ostrer.

On appeal from the Superior Court of New

Jersey, Law Division, Middlesex County,

Docket No. L-3633-11.

Leonard H. MacPhee (Perkins Coie, LLP)

argued the cause for appellants (Ansa

Assuncao, LLP and Mr. MacPhee, attorneys;

Steven F. Gooby and Mr. MacPhee, on the

brief).

Justin M. Klein argued the cause for

respondents (Marks & Klein LLP, attorneys;

Mr. Klein, of counsel and on the brief;

Kevin M. Eppinger, on the brief).
PER CURIAM

By leave granted, defendants, The Quiznos Franchise Company, The Quizno's Franchise Company, LLC, f/k/a The Quizno's Corporation, Quizno's Franchising, LLC, Quizno's Franchising II, LLC, QFA Royalties, LLC, The Quizno's Master, LLC, Larry Hill, John Barry, and Eli Chediak (collectively "defendants"), appeal from the trial court order denying their motion, pursuant to Rules 1.9 and 1.10 of the Rules of Professional Conduct (RPC), to disqualify the law firm, Marks & Klein, LLP ("M&K"), from representing plaintiffs, Meena Mody, as executrix of the estate of Jasvant Mody, and Mukesh Mody. We reverse.

M&K has represented franchisees of Quiznos, a restaurant chain, for more than seven years. In 2006 and 2007, M&K filed four complaints against Quiznos related to claims by current and former Quiznos operators. The litigation involved allegations related to Quiznos' business model, system, and pre-sale disclosures. During the course of the litigation, M&K sought class certification. The proposed class included all former and current Quiznos franchisees as well as "franchisees who signed franchise agreements but never operated a restaurant." The parties eventually reached a global settlement that resulted in the four complaints being consolidated and a class certified, by agreement, for settlement purposes. On August 13, 2010, the court granted M&K's motion to approve the settlement, and final judgment was entered. Plaintiffs in the present matter, although representatives of the class that was certified, opted out of the class.

The firms Cheng Cohen, LLC, and Perkins Coie, LLP, were counsel for Quiznos during this prior litigation. Andrew Bleiman was an associate at Cheng Cohen during the litigation and was one of the attorneys involved. Within months of the settlement, Bleiman left Cheng Cohen and joined M&K. On May 12, 2011, M&K commenced the underlying action on behalf of plaintiffs. The complaint raises allegations similar to those in the settled matter and included as defendants the same Quiznos defendants named in the settled action.

In a letter to plaintiffs' counsel, Justin M. Klein, dated June 29, 2011, Quiznos' attorney, Leonard H. MacPhee, raised the issue of Bleiman's prior representation of Quiznos-related entities. The letter, in relevant part, stated:

We understand that Marks & Klein, LLP recently hired Andrew Bleiman as the Managing Attorney of its Illinois office. As you know, at his former firm, Mr. Bleiman represented various Quiznos-related entities in litigation relating to franchise disputes, including those raised by your firm in, among other cases, the Siemer,
Brunet and Westerfield cases, which obviously raised substantially similar claims and issues as those alleged in the Mody case your firm recently filed.
. . . .
. . . As part of Mr. Bleiman's representation of Quiznos[,] he was entrusted with confidential, proprietary, attorney-client and work product privileged documents and information, including litigation strategies and defense theories utilized to defend against claims such as those asserted by Mody.
In light of the conflicts of interest described above, Quiznos demands that Marks & Klein, LLP immediately cease further representation of Mody in this matter.

M&K did not voluntarily withdraw. In lieu of filing an answer, defendants, on August 5, 2011, moved to dismiss the complaint, which motion was denied by the court. Thereafter, on September 29, 2011, defendants filed their motion to disqualify M&K.

In ruling on defendants' motion, the motion judge found the underlying matter and the settled matters were substantially related. The judge noted the "similarity in the drafting of the complaints themselves are substantial" and that "Bleiman has represented Quiznos in matters that are nearly identical to the instant action[.]" The judge also found it "clear that Mr. Bleiman acquired information protected by RPC 1.6" and "was entrusted with confidential information, proprietary attorney/client and work product privileged documents and information." The judge thus concluded that all the requirements for Bleiman's personal disqualification pursuant to RPC 1.9 had been met.

Turning to the issue of M&K's disqualification, the judge next found that although Bleiman was substantially involved in the prior litigation, he was "not persuaded that [Bleiman] had primary responsibility in the prior matter." He therefore considered whether there had been compliance with the requirements of screening pursuant to RPC 1.10 and found that M&K complied in part, leading him to conclude: "While the notice in this matter could have been more prompt[] and detailed, I'm satisfied that there is substantial compliance. And any delay or lack of detail was not unduly prejudicial and does not warrant the sanction of disqualification. I'm also persuaded that Mr. Bleiman has been screened." Based upon these findings, the judge denied defendants' motion to disqualify M&K. The present appeal followed.

On appeal, defendants raise the following points:

POINT IV
LEGAL ARGUMENT
B. BLEIMAN ADMITTEDLY HAS AN IMPERMISSIBLE CONFLICT PURSUANT TO RPC 1.9(a) & (b).
C. THE ORDER DENYING DISQUALIFICATION OF M&K IS INCONSISTENT WITH RPC 1.10.
1. MR. BLEIMAN WAS AN ATTORNEY WITH PRIMARY RESPONSIBILITY AND THEREFORE M&K IS DISQUALIFIED AND SCREENING UNDER RPC 1.10 IS UNAVAILABLE.
2. EVEN IF SCREENING PROCEDURES UNDER RPC 1.10 HAD BEEN AVAILABLE TO M&K, M&K FAILED TO COMPLY WITH THOSE PROCEDURES AND WOULD THEREFORE STILL BE DISQUALIFIED.
a. M&K FAILED [TO] PROPERLY . . . SCREEN MR. BLEIMAN.
b. M&K FAILED TO PROVIDE PROMPT AND ADEQUATE WRITTEN NOTICE TO QUIZNOS AS REQUIRED BY RPC 1.10(c)(3).

Points I, II and III are titled "Preliminary Statement," "Concise Procedural History," and "Concise Statement of Relevant Facts" respectively.

Subheading "A" under Point IV is titled "Legal Standards" and subheadings "1" and "2" under "A" are titled "Standard of Appellate Review" and "Standards for the Disqualification of Counsel."
--------

We begin our discussion by recognizing that "[d]isqualification of counsel is a harsh discretionary remedy which must be used sparingly." Cavallaro v. Jamco Prop. Mgmt., 334 N.J. Super. 557, 572 (App. Div. 2000). It thus requires a court to "balance competing interests, weighing the need to maintain the highest standards of the profession against a client's right freely to choose his counsel." Dewey v. R.J. Reynolds Tobacco Co., 109 N.J. 201, 218 (1988) (internal quotations and citations omitted). Nonetheless, "New Jersey strictly construes RPC 1.9. Consequently, '[i]f there be any doubt as to the propriety of an attorney's representation of a client, such doubt must be resolved in favor of disqualification.'" Herbert v. Haytaian, 292 N.J. Super. 426, 438-39 (App. Div. 1996) (quoting Reardon v. Marlayne, Inc., 83 N.J. 460, 471 (1980)).

Whether the motion judge properly denied defendants' disqualification motion invokes our de novo plenary review in light of the fact that a decision on such a motion is made as a matter of law. City of Atlantic City v. Trupos, 201 N.J. 447, 463 (2010). The decision requires that we "recognize and . . . consider that 'a person's right to retain counsel of his or her choice is limited in that there is no right to demand to be represented by an attorney disqualified because of an ethical requirement.'" Twenty-First Century Rail Corp. v. N.J. Transit Corp. , _ N.J. _, _ (2012) (slip op. at 23) (quoting Dewey, supra, 109 N.J. at 218). A client may, however, be granted an exception from the consequences of such a conflict where the requirements of RPC 1.10 apply and have been met. The portions of RPC 1.10 relevant to our discussion provide:

(c) When a lawyer becomes associated with a firm, no lawyer associated in the firm shall knowingly represent a person in a matter in which that lawyer is disqualified under RPC 1.9 unless:
(1) the matter does not involve a proceeding in which the personally disqualified lawyer had primary responsibility;
(2) the personally disqualified lawyer is timely screened from any participation in the matter and is apportioned no part of the fee therefrom; and
(3) written notice is promptly given to any affected former client to enable it to ascertain compliance with the provisions of this Rule.
. . . .
(f) Any law firm that enters a screening arrangement, as provided by this Rule, shall establish appropriate written procedures to insure that: (1) all attorneys and other personnel in the law firm screen the personally disqualified attorney from any participation in the matter, (2) the screened attorney acknowledges the obligation to remain screened and takes action to insure the same, and (3) the screened attorney is apportioned no part of the fee therefrom.

RPC 1.0 sets forth definitions of terminology referenced throughout the RPCs. "Primary responsibility" is defined as: "actual participation in the management and direction of the matter at the policy-making level or responsibility at the operational level as manifested by the continuous day-to-day responsibility for litigation or transaction decisions." RPC 1.0(h).

Plaintiffs have not cross-appealed the motion judge's finding that a clear conflict of interest pursuant to RPC 1.9(a) and (b) was created as a result of Bleiman's prior representation of Quiznos while employed by Cheng Cohen and his current association with M&K. Therefore, we confine our discussion to the motion judge's finding that Bleiman was not an attorney with primary responsibility and that he had been properly screened.

In the certification submitted in support of defendants' motion, Fredric A. Cohen, defendants' counsel, stated that the defense team in the prior litigation consisted of several lawyers from two firms: Cheng Cohen and Perkins Coie, with the three lawyers most actively involved being MacPhee, Bleiman, and himself. He described the nature of Bleiman's responsibilities as follows:

6. Mr. Bleiman had extensive involvement in the litigation and eventual settlement of the Brunet, Siemer, Westerfield, and Bonanno cases. He participated in the preparation of written discovery propounded to plaintiffs and of Quiznos' responses to plaintiffs' discovery requests. He worked with Quiznos' personnel to prepare those requests and responses. He reviewed Quiznos['] documents for
responsiveness, confidentiality, and privilege.
7. Mr. Bleiman took approximately [eighteen] depositions of named plaintiffs in the cases, and was one of the lawyers who prepared the outline developed and utilized for those and other depositions taken in the cases.
8. Mr. Bleiman conducted legal research and wrote briefs relating to a variety of legal issues involved in the cases or in support of or opposition to motions filed in the cases.
9. Mr. Bleiman participated in conversations with me, Mr. MacPhee, and our clients about the merits of the claims asserted in the cases, the likelihood of success of various litigation strategies or tactics, our clients' potential exposure to the claims asserted against them, and the viability of defenses. He also was tasked with preparing estimated budgets for defense costs in the cases.
10. Mr. Bleiman participated in meetings and discussions concerning our clients' settlement position and strategy, and he attended the mediation session in the summer of 2009 that resulted in the eventual class settlement. Mr. Bleiman was a primary drafter of the settlement documents from the defense side, and conferred with our clients and interfaced with [p]laintiffs' counsel in negotiating and drafting the class action settlement documents. He also dealt directly with the third party administrator in implementing the settlement.
11. As counsel for Quiznos, Mr. Bleiman had regular access to confidential and
privileged documents and information, including litigation strategies and defense theories that were utilized to prepare our clients' defenses to the claims asserted in the cases.
12. According to our billing records, Mr. Bleiman billed 952.1 hours in connection with the Brunet, Siemer, Westerfield, and Bonanno cases, and a total of 1631.6 hours representing Quiznos and affiliates in various matters.

Bleiman, in his certification submitted in opposition to the disqualification motion, did not dispute Cohen's characterization of his involvement in the litigation. Rather, he focused upon the fact that he "never had the direct authority to implement policy-making decisions on behalf of . . . [d]efendants that affected the overall course of the Quiznos litigation." In addition, he stated "most day-to-day decisions [he] was involved in had to be first approved by Fredric Cohen, Leonard MacPhee, or representatives of the Quiznos' legal department[.]"

Nothing in the definition of "primary responsibility," however, requires "direct authority to implement policy decisions." It merely requires actual participation in the management and direction of the matter at the policy-making level. Bleiman does not dispute that he worked directly with Cohen and MacPhee, who clearly functioned at the policy-making level throughout the litigation. Moreover, given the nature of his participation in pre-trial discovery and settlement negotiations, all evidenced by the more than 952 billable hours charged to Quiznos between 2006 and 2007, this participation was consistent with "continuous day-to-day responsibility for litigation . . . decisions." RPC 1.0(h). As such, the motion judge erred, as a matter of law, when he concluded Bleiman was not an attorney with primary responsibility within the meaning of RPC 1.0(h).

In view of our conclusion that Bleiman was an attorney with primary responsibility in the prior litigation, it is unnecessary to discuss whether the motion judge erred in concluding Bleiman was properly screened. Suffice it to say, however, the motion judge's finding that he was properly screened is not supported by the record.

The 2004 amendments to the RPCs permit a law firm to represent a client notwithstanding a conflict of interest created by one of its attorney's prior representation of a former client, as long as the lawyer was an attorney without primary responsibility in the prior matter, the attorney has been properly screened, and written notice has been provided to the former client. Proper screening under the RPC requires establishing "appropriate written procedures." RPC 1.10(f).

M&K acknowledges that it was representing plaintiffs before Bleiman joined the firm. Nonetheless, it is undisputed that it developed no written screening procedures either before or after Bleiman joined the firm. The screening procedure it adopted was oral. Nor did M&K provide written notice to Quiznos as required by RPC 1.10(c)(3). RPC 1.0(o) states: "'written' denotes a tangible or electronic record of a communication or representation, including handwriting, typewriting, printing, photostating, photography, audio or videorecording and e-mail."

The clear and unambiguous language of the terms contained in RPC 1.0(h) and (o) leave no room for the conclusion that an oral screening constitutes proper screening, as the motion judge found. Moreover, to be compliant, the screening must not only be in writing, but it must also be "timely." RPC 1.10(c)(2). Because M&K was already representing plaintiffs when Bleiman joined the team, it is inexplicable that written procedures were not established at the outset. Thus, even if Bleiman had not been an attorney with primary responsibility in the prior litigation, disqualification for non-compliance with the RPC's screening procedures was an additional basis upon which to have granted defendants' motion.

Finally, we find no merit to plaintiffs' contention that defendants waived their right to seek disqualification of M&K because they first filed a motion to dismiss. Plaintiffs raise this argument for the first time in this appeal and we therefore decline to address it, Neider v. Royal Indem. Ins. Co. 62 N.J. 229, 234 (1973), other than to note that had defendants' motion been granted, the issue of Bleiman's conflict of interest may have been moot.

Reversed and remanded for the entry of an order disqualifying M&K from further representation of plaintiffs.

I hereby certify that the foregoing is a true copy of the original on file in my office.

CLERK OF THE APPELLATE DIVISION


Summaries of

Mody v. Quiznos Franchise Co.

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION
Jul 18, 2012
DOCKET NO. A-2260-11T1 (App. Div. Jul. 18, 2012)
Case details for

Mody v. Quiznos Franchise Co.

Case Details

Full title:MEENA MODY, as Executrix of the Estate of Jasvant Mody, and MUKESH MODY…

Court:SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION

Date published: Jul 18, 2012

Citations

DOCKET NO. A-2260-11T1 (App. Div. Jul. 18, 2012)

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