Opinion
Case No. 18-24070-GLT Adv. No. 19-02134-GLT
03-27-2020
IN RE: ONEJET, INC., Debtor. Woody Partners, et al., Plaintiffs, v. Matthew R. Maguire, et al., Defendants.
Robert O Lampl, Esq., James R. Cooney, Esq., David L. Fuchs, Esq., Ryan J. Cooney, Esq., Robert O Lampl Law Office, Pittsburgh, PA Attorneys for the Plaintiffs Patrick K. Cavanaugh, Esq., Zachary N. Gordon, Esq., Del Sole Cavanaugh Stroyd LLC, Pittsburgh, PA, Attorneys for Robert Lewis
Robert O Lampl, Esq., James R. Cooney, Esq., David L. Fuchs, Esq., Ryan J. Cooney, Esq., Robert O Lampl Law Office, Pittsburgh, PA Attorneys for the Plaintiffs
Patrick K. Cavanaugh, Esq., Zachary N. Gordon, Esq., Del Sole Cavanaugh Stroyd LLC, Pittsburgh, PA, Attorneys for Robert Lewis
Related to Dkt. Nos. 101, 166
MEMORANDUM OPINION
GREGORY L. TADDONIO, UNITED STATES BANKRUPTCY JUDGE
Knowing that the Robert O Lampl Law Office (the "Lampl Firm") was preparing a lawsuit on behalf of a group of jilted investors in OneJet, Inc., a defunct regional airline, Robert Lewis, a fellow investor, provided the Lampl Firm with non-public information about his knowledge and investigation into OneJet during a 30-minute telephone call. Although Lewis was viewed as a prospective client by the Lampl Firm, he did not retain the firm and has now been named as a co-defendant in the very same investor litigation. Feeling betrayed, Lewis argues that the Lampl Firm must be disqualified from pursuing a claim against him under Rule 1.18 of the Pennsylvania Rules of Professional Conduct given the plaintiffs' materially adverse interests and the significantly harmful information shared during the call. The plaintiffs oppose disqualification, denying that the information provided was confidential, privileged, or significantly harmful. After conducting an evidentiary hearing on the matter, the Court finds that disqualification is unwarranted because Lewis failed to show that any of the shared information is significantly harmful.
The Pennsylvania Rules of Professional Conduct ("RPC") are codified at 204 Pa. Code § 81.1 et seq .
See Motion to Disqualify Counsel , Dkt. No. 101.
See Response to Motion to Disqualify Counsel , Dkt. No. 166 and Brief in Opposition to Motion to Disqualify Counsel ("Brief in Opposition"), Dkt. No. 165.
I. BACKGROUND
OneJet allegedly provided air transportation services between Pittsburgh and eight other cities, with Matthew R. Maguire serving as its chief executive officer. By August 2018, OneJet unexpectedly shuttered its business operations, leaving many searching for answers in the aftermath. Several creditors commenced an involuntary bankruptcy proceeding against OneJet, thereby prompting this Court to enter an order for relief under chapter 7 of the Bankruptcy Code on November 13, 2018. A chapter 7 trustee is currently liquidating OneJet's assets for the benefit of the bankruptcy estate.
See Complaint in Civil Action (the "Complaint"), Dkt. No. 1 at ¶ 17; Amended Complaint, Dkt. No. 216 at ¶23.
See Statement of Financial Affairs , Case No. 18-24070, Dkt. No. 60 at 85.
See Amended Complaint at ¶¶ 100-102. As the pleadings in this case have not yet closed, the Court is unable to ascertain the extent to which the averments in the Amended Complaint are uncontested. The Court assumes the background averments in ¶¶ 100-102 to be true solely for the purpose of the Motion to Disqualify Counsel .
See Case No. 18-24070-GLT.
Unless expressly stated otherwise, all references to "Bankruptcy Code" or to specific sections shall be to the Bankruptcy Reform Act of 1978, as amended by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA"), Pub. L. No. 109-8, 119 Stat. 23, 11 U.S.C. § 101, et seq . All references to "Bankruptcy Rule" shall be to the Federal Rules of Bankruptcy Procedure.
See Case No. 18-24070-GLT, Dkt. No. 27.
Many investors seeking to recoup their lost OneJet investments ultimately retained the Lampl Firm to pursue remedies against Maguire, his father Patrick Maguire, as well as those who marketed and sold the securities. One of those investors, Mark Aloe, appears to have led the charge to connect the Lampl Firm to other investors. He and the Lampl Firm were eager to bring additional investors into the fold to, among other things, foster the exchange of relevant information and share the burden of the anticipated litigation expenses. To facilitate these discussions, the Lampl Firm maintained a group email communication among the interested OneJet investors (the "Distribution List").
See Ex. 4.
Id.
Lewis, the Vice Chairman of the Allegheny County Airport Authority (the "Airport Authority") Board of Directors, was among the OneJet investors invited to join the contemplated lawsuit. Prior to OneJet's collapse, he directed his personal chief financial officer, Brandon Otis, to investigate the company's financials after Lewis failed to receive "financial results." Otis is a certified public accountant, certified fraud examiner, and can boast of several accreditations in business valuation and financial forensics. Over several months, Otis engaged in a series of communications and meetings with both Matthew Maguire and OneJet's chief financial officer to obtain clarity on the company's operations. His actions mirrored similar efforts undertaken by Christina Cassotis who was also pursuing financial information on behalf of the Airport Authority. During his investigation, Otis compiled a "timeline" of events detailing his efforts to obtain financial information from OneJet and the Maguires.
Declaration of Robert Lewis , Dkt. No. 101-2 ("Lewis Decl.") at ¶¶ 4-6.
Transcript of October 22, 2019 Hearing("Trans.") at 14:16-20.
Trans. at 9:17-22. Otis has also served as an expert witness in over 20 different cases. See Ex. 1.
Trans. at 26:1-8; 36:7-9.
Trans. at 26:17-21.
Trans. at 14:13-20; 26:1-8; 36:4-9.
The existence of Otis' investigation and timeline was not a secret. In an email introducing the Lampl Firm to Lewis and Otis, Aloe specifically identified Otis as having "a timeline and other documents that could be helpful in our lawsuit (that is my understanding)." Robert Kunkel, an associate at the Lampl Firm, served as the point person for the investigatory aspect of the OneJet case, reaching out to prospective clients and gathering documents and information. Eager for more information, Kunkel immediately contacted Lewis and Otis. He also added them to the Distribution List so they could receive periodic updates about developments in the potential OneJet investor lawsuit.
Ex. 2 at 2; see also Stipulation of Facts ("Stipulation"), Dkt. No. 207 at ¶ 6; Lewis Decl. , Dkt. No. 101-2 at ¶ 7.
Trans. at 42:16-20.
Stipulation , Dkt. No. 207 at ¶ 7; see also Ex. 2.
Stipulation , Dkt. No. 207 at ¶ 8; see also Ex. 2.
After a series of scheduling emails, Kunkel and Otis had a phone call on October 1, 2018 (the "Call"). Lewis authorized Otis to speak to Kunkel for two reasons. First, he was acquainted with many investors represented by the Lampl Firm and wanted to assist them with the litigation by sharing information. Second, Lewis wanted Otis to assess whether the Lampl Firm or another attorney should be hired to pursue his own claims involving OneJet.
See Trans. at 12. Otis claims he actually had three reasons for the call, but two of them are virtually identical ("First of all, Robert Lewis had made a commitment that he would assist with the lawsuit, second that he had a number of acquaintances, people he was friendly with that he wanted to generally assist with the lawsuit.") Trans. at 12:12-17; see also Lewis Decl. , Dkt. 101-2 at ¶¶ 11, 14.
Trans. at 12:12-17; Lewis Decl. , Dkt. No. 101-2 at ¶ 16.
Trans. at 12:17-20. Lewis previously contacted another lawyer, Attorney Bob Blumling, but as of October 1, 2018, had made no decision on whether he wished to proceed with any action. Trans. at 13:2-5; 27:14-16; see also Lewis Decl. , Dkt. No. 101-2 at ¶ 23.
The Call lasted 20 to 30 minutes. It was apparent to Otis that Kunkel was searching for "information relative to the Maguires' business activity, financial results, past investigations and the significant work" done by Lewis and Otis to track it all down. In his publicly filed declaration, Otis identified the discussion topics as follows:
Trans. at 31, 46.
Trans. at 13:15-19.
• Robert Lewis's acquisition of OneJet equity interests;
• Inquiries into OneJet financial positions;
• Follow up inquiries into OneJet operations and financial results;
• Meetings between [Otis] and Matthew Maguire;
• Meetings between Board of the Allegheny County Airport Authority ("Airport Board") members and Matthew Maguire;
• Meetings between Airport employees and Matthew Maguire;
• A timeline of [Otis'] investigation of the operations of OneJet during 2018;
• Requests for copies of documents obtained from Matthew Maguire;
• Detail regarding email and text exchanges with Matthew Maguire;
• Information regarding a letter of inquiry and demand by Attorney McGrievy; and
• A request for actual copies of documents.
Declaration of Brandon Otis ("Otis Decl."), Dkt. No. 101-3 at ¶ 15. See also Trans. at 14-24.
Otis testified that he did not take notes during the Call, but instead prepared detailed notes in advance based on the timeline which he relayed to Kunkel. Despite a willingness to talk, Otis refused to provide copies of the documents referenced during the Call, citing a lack of permission from Lewis and suggested that they "might need a formal request or subpoena" before releasing anything to the Lampl Firm. The response surprised Kunkel, who up to that point had encountered no resistance from OneJet investors to his document requests.
Trans. at 25:23-25; 26:1-8; 36:2-15. The Court notes that it is possible that Otis meant that the timeline itself was his notes, but for current purposes that is a distinction without a difference. Either way, the import is that Otis described the timeline during the Call.
Trans. at 27:4-10.
Trans. at 46:23-47:2 ("Up 'til that point, everyone I had talked to was eager to give us any documentation that they had. When I asked Brandon, who I had been told had a good timeline and other documents, he said that they weren't sharing any documents without a subpoena and that was memorable.").
Shortly after the Call ended, Kunkel summarized the discussion in an email sent to other Lampl Firm attorneys working on the investor lawsuit. Although Otis testified that the email is factually confused in several respects, it is still contemporaneous evidence of Kunkel's impression of the Call. Based on his use of bold type in the email, Kunkel believed Otis' revelation that "OneJet never had a standing board of directors" was the most important takeaway. Kunkel also explained that Otis would "not provide any documents to anyone without a subpoena" until Lewis decided on legal representation. Nothing in the email suggests that the Call altered the Lampl Firm's perception that Lewis was a potential plaintiff and client. To the contrary, Lewis and Otis continued to receive communications between the Lampl Firm and the Distribution List and were invited to participate in a conference call on October 24, 2018. Lewis and Otis did not respond to any of the emails, nor did they ever provide the Lampl Firm with any documents. The Lampl Firm ultimately removed Lewis and Otis from the Distribution List and had no further communications with them after October 23, 2018.
Ex. A; Trans. at 53:8-13.
Trans. at 32-33.
Ex. A.
Id.
In fairness, Kunkel testified that Otis' mention of a subpoena "changed how [he] looked at those parties," Trans. at 48:5-11, and likely prompted how Lewis "went from a client to potential target." Trans. at 55:1-5. The Court has little doubt that Otis' initial refusal to share documents without the need for a subpoena contributed to Lewis' transition from potential client to defendant. That said, Kunkel's email makes clear that immediately following the Call he did not view the refusal suspiciously, but as an understandable component of Lewis' search for counsel. See Ex. A.
Stipulation , Dkt. No. 207 at ¶¶ 11, 13-14.
Id. at ¶ 12.
Id. at ¶ 10.
Id. at ¶¶ 10, 12, 14-15.
Months later, the plaintiffs eventually sued Lewis, the Maguires, and several others allegedly involved in the sale of OneJet securities in the Court of Common Pleas of Allegheny County, Pennsylvania (the "State Court"), alleging violations of the Pennsylvania Securities Act and asserting common law claims for negligent misrepresentation and aiding and abetting violations of state securities laws. Lewis is generally alleged to have materially aided the Maguires' alleged violations of state securities laws. It is beyond dispute that the Complaint contains allegations consistent with the information about OneJet supplied by Otis. The plaintiffs also alleged that Lewis was a member of the OneJet Board of Directors, which contradicts Otis' statement to Kunkel that OneJet never appointed any directors.
Id. at ¶ 1.
See Complaint , Dkt. No. 1 at ¶¶ 123-29.
Complaint , Dkt. No. 1 at ¶ 7; see also Amended Complaint , Dkt. No. 216 at ¶ 13.
Trans. at 15:17-20; 22:2-13, 22-25.
Lewis was unaware that the Lampl Firm intended to pursue a claim against him until he was served with the Complaint in December 2018. After receipt, he retained counsel and sent a letter to the Lampl Firm demanding that it either dismiss him as a defendant or withdraw as counsel due to their established prospective client relationship in this matter. Attorney Ryan Cooney rejected the demand on behalf of the Lampl Firm, contending that only "general background information" had been exchanged and that no material information was provided that would support a claim against Lewis.
See Lewis Decl. , Dkt. No. 101-2 at ¶ 26.
Letter , Dkt. No. 101-4 at 2.
Letter , Dkt. No. 101-5 at 1. Attorney Cooney also posited that the conversation was not protected because Otis informed Kunkel during the Call that Lewis had already engaged separate legal counsel. Id. The Court notes that this assertion is not consistent with Kunkel's contemporaneous email. See Ex. A.
While this dispute was festering, the State Court action was removed to the United States District Court for the Western District of Pennsylvania. The plaintiffs lost their bid to remand the case to the State Court and, in light of OneJet's pending chapter 7 case, the District Court transferred the civil action to this Court for further disposition.
Stipulation , Dkt. No. 207 at ¶ 2.
See Opinion and Order dated June 19, 2019, Dkt. No. 48; Stipulation , Dkt. No. 207 at ¶ 3.
After an initial volley of motions to dismiss, the Court ordered the plaintiffs to file an amended complaint to cure several deficiencies in the Complaint . An Amended Complaint was filed on October 28, 2019 and asserts three claims against Lewis: violations of Sections 501 and 503 of the Pennsylvania Securities Act and aiding and abetting liability under common law principles. According to the Amended Complaint , Lewis allegedly played a "key role" soliciting investors for OneJet and stands accused of making material misrepresentations during a time when he knew OneJet was not financially viable. The plaintiffs also claim that Lewis's involvement was an incentive for others to invest because he allegedly personally guaranteed a OneJet loan from the Allegheny County Regional Development Authority and used his position on the Airport Authority Board to steer a favorable grant to OneJet. The plaintiffs contend that the Airport Authority's action was touted as an "approval" of OneJet's operations and served as a marketing tool to attract additional investment. Each of the defendants, including Lewis, moved to dismiss the Amended Complaint , and those matters are currently under consideration by the Court.
Dkt. No. 201.
Amended Complaint , Dkt. No. 216 at Counts V-VII.
Id. at ¶¶ 41(7)(g), (44)(u), (53)(b), (54)(b), 72, 156, and 166. Among other things, Lewis is accused of leading a "private investment syndicate" as of May 2017. Id. at ¶ 72(c).
Id. at ¶¶ 34, 37, 153-54.
Id. at ¶ 35.
Concurrent with his original motion to dismiss, Lewis moved to disqualify the Lampl Firm citing RPC 1.18, which the plaintiffs opposed. The Court conducted a one-day evidentiary hearing where both Otis and Kunkel testified, and 11 exhibits were introduced into evidence. With the evidentiary record now closed, and the Amended Complaint having since been filed, this matter is now ripe for adjudication.
There is no question that the Motion to Disqualify Counsel is timely given that the District Court previously issued an order staying all matters in this proceeding, which this Court lifted on July 24, 2019. See Dkt. Nos. 32, 85.
II. JURISDICTION
This case was referred to the Court through an Opinion and Order issued by United States District Judge Marilyn J. Horan on June 19, 2019 upon a finding that it is "related to" a case arising under title 11 of the United States Code. As a "related to" proceeding, this Court has authority to exercise jurisdiction over the subject matter and the parties under 28 U.S.C. §§ 157(a), (c), 1334, and the Order of Reference entered by the United States District Court for the Western District of Pennsylvania on October 16, 1984. Moreover, the Motion to Disqualify Counsel implicates the Court's inherent authority to regulate the conduct of attorneys appearing before it.
Opinion and Order , Dkt. No. 48.
In re Snyder, 472 U.S. 634, 643, 105 S.Ct. 2874, 86 L.Ed.2d 504 (1985) ; Fellheimer, Eichen & Braverman, P.C. v. Charter Technologies, Inc., 57 F.3d 1215, 1224 (3d Cir. 1995).
III. POSITIONS OF THE PARTIES
A. Lewis
By virtue of the Lampl Firm's solicitations and their communication with Otis, Lewis argues that he is a "prospective client" under Rule 1.18(a) of the RPC. As such, he maintains that the Lampl Firm owes him a duty under Rule 1.18 of the RPC not to use or reveal significantly harmful information obtained from the Call against him. To this point, Otis testified that several factual allegations in the Complaint come from the "non-public information about OneJet's operations, activities of OneJet's executive-level staff, investigations into Matthew Maguire by Mr. Lewis and [Otis] on behalf of Mr. Lewis, and actions the Airport Board considered and took regarding OneJet," that were discussed during the Call. Lewis asserts that the plaintiffs could have only learned that information from Otis, and that it is significantly harmful to him because it exposes his investigations into OneJet and establishes when Lewis gained knowledge of certain facts. In other words, "the exact substance about which his agent communicated with the Lampl Firm" are the same facts needed for Lewis "[t]o defend against those allegations." Lewis also posits that any information Otis gave to the Lampl Firm that is harmful to his co-defendants is necessarily harmful to him due to the assertion of aiding and abetting liability. Because Lewis has never given informed consent to the Lampl Firm's representation of the plaintiffs, he urges that they must be disqualified from pursuing claims against him in the same or substantially related matters.
Brief in Support of Motion to Disqualify Counsel , Dkt. No. 101-1 at 7.
Otis Decl. , Dkt. No. 101-3 at ¶ 16.
See, e.g., Trans. at 18, 20-24.
Brief in Support of Motion to Disqualify Counsel , Dkt. No. 101-1 at 7.
Motion to Disqualify Counsel , Dkt. No. 101 at 4.
Trans. at 69:21-70:2.
Motion to Disqualify Counsel , Dkt. No. 101 at 10, citing Rule 1.18(d)(1) (authorizing representation of an adversary if the prospective client has given informed consent). An additional exception exists under Rule 1.18(d)(2), but Lewis contends that the three required elements are not present here and the Lampl Firm does not appear to challenge his conclusion.
B. The Plaintiffs
The plaintiffs concede that Lewis was a prospective client of the Lampl Firm, but deny that disqualification is warranted. In the first instance, they emphasize that disqualification places an exceptionally high burden on the movant. From there, they argue that neither Lewis nor Otis supplied any confidential or privileged information that could be harmful to Lewis. The plaintiffs assert they had other sources who also provided financial information about OneJet, and note that Lewis did not provide evidence that Otis was the only possible source of such information. Finally, they characterize Lewis' concern that supplying harmful information about his co-defendants could lead to co-defendant liability as a "bootstrap" argument outside the protection of Rule 1.18.
Trans. at 39:1-3; 56:10-18.
Response , Dkt. No. 166 at ¶ 17.
Brief in Opposition , Dkt. No. 165 at 3; Response , Dkt. No. 166 at ¶¶ 4-5, 9.
Trans. at 70:6-17.
Id. at 70:25-71:5.
IV. DISCUSSION
Attorneys appearing in this Court must adhere to the RPC and are subject to appropriate discipline for any transgressions. A court is empowered to disqualify an attorney only when it determines that "disqualification is an appropriate means of enforcing the applicable disciplinary rule." The party seeking disqualification bears the burden of producing clear evidence to show that the representation is impermissible. The burden is an exceptionally heavy one as motions to disqualify are viewed with disfavor within our Circuit because of the potential for abuse as a litigation tactic. Disqualification is commonly viewed as a "draconian measure" and an "extreme sanction" that should be used only when "absolutely necessary." Pennsylvania state courts have similarly taken a dim view of disqualification, ruling that disqualification can remediate a violation of the RPC only when there is no other way to ensure a fair trial for the parties. That said, "any doubts as to the existence of a violation of the rules should be resolved in favor of disqualification."
See W.PA.LBR 9010-1(d) (providing that "the Local Rules of the United States District Court for the Western District of Pennsylvania as amended from time to time shall apply as to discipline of attorneys."); W.PA. LR 83.3(A)(2) (adopting the RPC for regulation of attorney conduct in the District Court).
U.S. v. Miller, 624 F.2d 1198, 1201 (3d Cir. 1980) ; Danielsen v. Pennsylvania Coll. of Tech., No. 4:13-CV-02927, 2014 WL 5088226, at *1 (M.D. Pa. Oct. 9, 2014).
Jordan v. Philadelphia Hous. Auth., 337 F. Supp. 2d 666, 672 (E.D. Pa. 2004) (citing In re Rite Aid Corp. Sec. Litig., 139 F. Supp. 2d 649, 656 (E.D. Pa. 2001) and Tiversa Holding Corp. v. LabMD, Inc., No. CIV.A. 13-1296, 2013 WL 6796538, at *2 (W.D. Pa. Dec. 20, 2013) ).
See Wise v. Washington Cty., No. CIV.A. 10-1677, 2013 WL 5674460, at * 3 (W.D. Pa. Oct. 17, 2013) (citing Wolf, Block, Schorr & Solis-Cohen LLP, No. CIV.A. 05-6038, 2006 WL 680915, *1 (E.D. Pa. Mar. 9, 2006) ).
E.E.O.C. v. Hora, Inc., 239 F. App'x. 728, 731 (3d Cir. 2007).
Tiversa Holding Corp. v. LabMD, Inc., 2013 WL 6796538, at *2 ("Imposition of such a ‘drastic measure’ is only permitted when ‘absolutely necessary.’ "); Shade v. Great Lakes Dredge and Dock Co., 72 F. Supp. 2d 518, 520 (E.D. Pa. 1999) (disqualification is an "extreme sanction" that "should not be imposed lightly.").
See, e.g., Sutch v. Roxborough Memorial Hospital, 151 A.3d 241, 254-55 (Pa. Super. 2017) ("disqualification of counsel is a serious remedy that the court should use only when due process so requires."); Vertical Resources, Inc. v. Bramlett, 837 A.2d 1193, 1201 (Pa. Super. 2003) (citing (disqualification for a violation of the RPC "is severely limited and can be exercised only when both another remedy for the violation is not available and it is essential to ensure that the party seeking disqualification receives the fair trial that due process requires."); McCarthy v. Southeastern Pennsylvania Transportation Authority, 772 A.2d 987, 991 (Pa. Super. 2001) (counsel can be disqualified for violations of the RPC to ensure the parties receive the fair trial which due process requires)).
Int'l Business Mach. Corp. v. Levin, 579 F.2d 271, 283 (3d Cir. 1978) ; Brennan v. Independence Blue Cross, 949 F. Supp. 305, 307 (E.D. Pa. 1996) ; Rite Aid Corp., 139 F.Supp. 2d at 656.
When undertaking a disqualification analysis, the United States Court of Appeals for the Third Circuit demands consideration of the competing interests involved, weighing the need to maintain the highest professional standards against a clients' right to freely choose their counsel and the flexibility for attorneys to practice without excessive restrictions. Because the review requires an intensive factual analysis, it is best understood on a case-by-case basis.
See Jackson v. Rohm & Haas Co., 366 F. App'x. 342, 347 (3d Cir. 2010) (quoting Miller, 624 F.2d at 1201 ).
Under the RPC, a lawyer owes certain fundamental obligations even when a consultation does not blossom into a full-fledged engagement. A "prospective client" is "a person who consults with a lawyer about the possibility of forming a client-lawyer relationship with respect to a matter[.]" During an initial consultation, the prospective client often provides information about a legal matter to assist the lawyer in determining whether to undertake the representation and whether any conflicts of interest exist. Consultations of this sort are typically limited in time and scope, and may be offered under "no obligation" so that both lawyer and non-lawyer are free to walk away without any entanglements. If a client-lawyer relationship does not materialize, the lawyer still owes limited duties to the prospective client, though far less than those afforded to actual clients. First, Rule 1.18(b) prohibits the lawyer's use of information learned from the prospective client that may be significantly harmful to that person. Second, Rule 1.18(c) prohibits lawyers who have received significantly harmful information from a prospective client from representing someone with materially adverse interests in the same or a substantially related matter. Notably, the exchange of harmful information is not, by itself, disqualifying. It must be significantly harmful.
Pa. R.P.C. 1.18(a).
See Cmt. 3 to Pa. R.P.C. 1.18.
See Cmt. 1 to Pa. R.P.C. 1.18.
Id. As the New Jersey Supreme Court recognized with respect to its version of the professional rules of conduct, Rule 1.18 "seeks a delicate balance between a client's right to protect communications made in the context of a consultation precedent to the actual retention of a lawyer, and the lawyer's right to be free to represent clients without being unduly restricted by the yoke of short-lived consultations that do not ripen into an attorney-client relationship." O Builders & Assocs., Inc. v. Yuna Corp. of NJ, 206 N.J. 109, 19 A.3d 966, 968 (2011).
Pa. R.P.C. 1.18(b) ("Even when no client-lawyer relationship ensues, a lawyer who has learned information from a prospective client shall not use or reveal information which may be significantly harmful to that person except as Rule 1.9 would permit with respect to information of a former client.").
Pa. R.P.C. 1.18(c) ("A lawyer ... shall not represent a client with interests materially adverse to those of a prospective client in the same or a substantially related matter if the lawyer learned information from the prospective client that could be significantly harmful to that person in the matter, except as provided in paragraph (d). If a lawyer is disqualified from representation under this paragraph, no lawyer in a firm with which that lawyer is associated may knowingly undertake or continue representation in such a matter, except as provided in paragraph (d).").
Sershen v. Cholish, No. CIV.A. 3:07-CV-1011, 2009 WL 3332993, at *1 (M.D. Pa. Oct. 15, 2009) ("Significantly harmful information is a necessary prerequisite to disqualification under Rule 1.18.").
To avoid disqualification, a lawyer can take preventive measures by conditioning the consultation upon the prospective client's informed consent that any information disclosed during the session will not restrict the lawyer from undertaking other representation. After the fact, a lawyer may also be released from the restrictions of Rule 1.18(c) with either the informed consent of the affected parties or by screening off the disqualified lawyer as directed by Rule 1.18(d).
Cmt. 5 to Pa. R.P.C. 1.18.
Pa. R.P.C. 1.18(d).
Here, the parties agree Lewis was a prospective client of the Lampl Firm and that a lawyer-client relationship never formed between them. Because Lewis does not consent the Lampl Firm's representation of the plaintiffs, who are materially adverse to him, and the Lampl Firm has not suggested that it implemented any sort of internal screening, the Court need not consider whether the exceptions within Rule 1.18(d) apply. Thus, the question of disqualification hinges on whether the Lampl Firm learned information from Otis that is significantly harmful to Lewis.
The phrase "significantly harmful" information is not defined by the RPC or the associated comments. Nor have the cases which apply the term under Pennsylvania law expounded on its meaning. In other jurisdictions, lawyers are deemed to possess "significantly harmful" information when they acquire intimate knowledge of the prospective client's views and impressions of the litigation that could not have been obtained elsewhere. This may include a party's assessment of its own claims and risk tolerance, its settlement authority, and its strategic vision to manage any litigation. Mere conclusory statements of harmfulness are not enough to substantiate a party's burden.
Zalewski v. Shelroc Homes, LLC, 856 F. Supp. 2d 426, 436 (N.D.N.Y. 2012).
See Benevida Foods, LLC v. Advance Magazine Publishers Inc., No. 15CV2729, 2016 WL 3453342, at 2 (S.D.N.Y. June 15, 2016).
See Zalewski, 856 F. Supp. 2d at 435 ("knowing beforehand a party's bottom line, even if it changes over time, on settlement could be ruinous for that particular party. Possessing all of these cards can serve as an unfair advantage in the process and could ultimately control the great stakes ahead.").
Miness v. Ahuja, 762 F. Supp. 2d 465, 481 (E.D.N.Y. 2010).
Tiversa, 2013 WL 6796538, at * 2.
To properly frame the issue, it is important to recognize that the information supplied by Otis is simply factual and does not consist of personal observations or strategic impressions. Lewis repeatedly characterizes it as "non-public," and the Court agrees to the extent that the material in question is not publicly posted or readily accessible. But "non-public" is not necessarily synonymous with confidential or privileged. Even information that is not generally available to the public can be discovered. This point is crucial because it is well-established that information cannot be significantly harmful to the prospectively client if: (1) it can be procured from an alternate source; or (2) it is substantially likely to be revealed during discovery.
See, e.g., DOCA Co. v. Westinghouse Elec. Co., LLC, No. 04-1951, 2012 WL 5877580, at *3 (W.D. Pa. Nov. 20, 2012) (the exchange of documents protected by the attorney-client privilege during an initial consultation several years earlier were not significantly harmful when the attorney does not recall receiving them, discovery had closed, or they were disclosed through other means); In re Estate of Rothberg, No. 2391 EDA 2014, 2015 WL 6954970, at *3 (Pa. Super. Ct. June 26, 2015) (finding disqualification unnecessary based upon lawyer's account that information provided by prospective client was either a matter of public record, discoverable on the internet, or would have been known to the adversary).
See Hora, 239 F. App'x at 731 (to the extent communications were improper, they are not prejudicial when the information obtained was disclosed during discovery); Bell v. Cumberland Cty., 2012 WL 1900570, at *8 (D.N.J. May 23, 2012) (disqualification was not warranted because the information divulged, albeit personal and sensitive, was publicly known or would be revealed during discovery).
Perhaps the best way to evaluate the qualitative harm to Lewis is to consider what the plaintiffs knew and what they would have done had the Call not occurred. By September 27, 2018, the plaintiffs intended to sue the Maguires and those involved in the sale of the securities. Critically, it is also now certain that they would have sued Lewis as well. Indeed, the plaintiffs apparently have reason to allege that Lewis was a member of OneJet's board of directors and that he used his position on the Airport Authority to influence investors and aid the Maguires. This information did not come from Otis, which means it must have emanated from somewhere else. In any event, the result is that the named defendants, including Lewis, were all known targets for discovery.
See Ex. 4.
Next, the Court must consider what information was substantially likely to be discovered. This essentially requires the Court to examine the topics that would have likely been explored given what the plaintiffs knew and would learn. Obviously, OneJet's finances and activities are central to the plaintiffs' claim that they had been misled by Maguire. As a result, the same information Otis compiled through his investigation would inevitably come out during the discovery process one way or another. Of course, one possible avenue was Otis—the plaintiffs knew that Otis had investigated OneJet's financials and had a timeline because Lewis shared that with Mark Aloe before Otis spoke to Kunkel. Thus, irrespective of the Call, the plaintiffs naturally would have sought information from Lewis and Otis about the investigation, the timeline, OneJet's finances and activities, and what Lewis knew about these subjects and when. Although the answers are vital to his defense, Lewis would have no basis to withhold the information. Accordingly, the information provided by Otis to the Lampl Firm is not significantly harmful.
In his testimony, Otis himself undercut the idea that he was the only source of this information by acknowledging that other investors and the Airport Authority engaged in concurrent investigations. Trans. at 26:17-21.
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That all said, there is also a much simpler explanation for why the information provided to the Lampl Firm is not significantly harmful. Lewis insists, and the plaintiffs concede, that he was a prospective client of the Lampl Firm. Yet Lewis, and by extension Otis, was also a cooperating background witness. Otis testified that he was authorized to speak to Kunkel in part because Lewis wanted to assist the investors with whom he was acquainted with their lawsuit. As such, Lewis intended that plaintiffs would use the information he supplied. From that perspective, it is arguable that the information Otis provided did not advance a prospective client relationship, but was freely disclosed to aid the Lampl Firm in its fact finding efforts. This interpretation is innately logical because even if Lewis was entertaining the retention of the Lampl Firm, he knew that they already represented other investors who intended to bring suit. This would also be consistent with Otis' willingness to discuss OneJet and his reluctance to provide any documents. Accordingly, the information cannot be significantly harmful within the meaning of Rule 1.18 because it was given without reservation or restriction outside a prospective attorney consultation.
V. CONCLUSION
In light of the above, the Court finds that Lewis has not sustained his burden of showing that the Lampl Firm learned significantly harmful information as a result of their prospective client relationship. Absent discernible prejudice, the Motion to Disqualify Counsel must be denied. This opinion constitutes the Court's findings of fact and conclusions of law in accordance with Fed. R. Bankr. P. 7052. The Court will issue a separate order consistent with this opinion.
ENTERED at Pittsburgh, Pennsylvania.
ORDER
These matters came before the Court upon the Motion to Disqualify Counsel [Dkt. No. 101] filed by Robert Lewis and the Response to Motion to Disqualify Counsel [Dkt. No. 166] filed by the plaintiffs. In accordance with the Memorandum Opinion of even date, it is hereby ORDERED , ADJUDGED , and DECREED that:
1. The Motion to Disqualify Counsel is DENIED .