Summary
In Beckenstein Enterprises-Prestige Park, LLC v. Lichtenstein, supra, 37 Conn.L.Rptr. 627, the court denied a motion to disqualify, under similar circumstances, where the law firm took appropriate steps to protect any information revealed from the prospective client in the consultation.
Summary of this case from Beckford v. CasavecchiaOpinion
No. X06-CV03-0183486 S
August 11, 2004
MEMORANDUM OF DECISION
The plaintiffs have moved to disqualify the law firm representing the defendant David Lichtenstein and his related business entities on the grounds that an attorney in the law firm received confidential information concerning the subject matter of this action when a representative of the plaintiffs contacted the attorney about possible representation in this matter. Lichtenstein maintains that the motion should be denied because the contacted attorney took appropriate measures to avoid exposure to disqualifying information when speaking with the plaintiffs' representative; the attorney has been timely screened from participation in this matter; and he will draw no part of the fee received in this matter. I find, based on the limited nature of the initial contact and the subsequent steps taken by the law firm representing Lichtenstein to sequester the exposed attorney, that disqualification of the law firm is not required by the ethical rules governing attorney conduct.
The six defendants in this action are David Lichtenstein and five business entities allegedly owned or controlled by him. For simplicity, I will henceforth refer to the defendants as David Lichtenstein.
The following undisputed facts have been established by affidavit. The plaintiffs in this action are various business entities which are part of numerous closely-held and family-owned corporations, partnerships and limited liability corporations known as "Beckenstein Enterprises." In this action, the plaintiffs claim that Lichtenstein and various entities that he controls acted in conceit, with an employee of Beckenstein Enterprises to wrongfully purchase properties from Beckenstein Enterprises at substantially below market value.
Beckenstein Enterprises was controlled by Robert Beckenstein until his death in June 2000. Roz-Lyn Beckenstein (Beckenstein), who is the widow of Robert Beckenstein, is the Successor Trustee of an inter vivos trust established by her husband and the Managing Member of the Three for the Road, LLC, the successor-in-interest to Beckenstein Enterprises. Prior to the initiation of the subject lawsuit, Roz-Lyn Beckenstein conducted a CT Page 11232-kg number of initial consultations with attorneys with the intention of retaining counsel to commence litigation against various individuals and entities involved in the sale of real estate previously held by Beckenstein Enterprises.
On December 26, 2002, Beckenstein and Attorney James F. Byrne, who is outside counsel for Beckenstein Enterprises, telephoned Attorney Ira Grudberg of the law firm of Jacobs, Grudberg, Belt Dow to determine whether he would be available to represent her and Beckenstein Enterprises in the contemplated litigation. At the outset of the conversation, Beckenstein listed for Grudberg the numerous entities and individuals involved in the various controversies so that Grudberg could determine whether he or his law firm had any conflict of interest. Grudberg responded that no conflict existed for the disclosed individuals and entities. Beckenstein and Byrne proceeded to share with Grudberg the plaintiffs' potential causes of action, the possible defenses to those claims and the relative merits of each. These discussions included details concerning possible litigation against David Lichtenstein and various entities controlled by him. Toward the end of their conversation, Bernstein and Byrne discussed with Grudberg potential claims Beckenstein Enterprises was considering bringing against the law firm of Reid and Reige, P.C. with respect to its representation of Beckenstein Enterprises. At that point, Grudberg informed Beckenstein and Byrne that he would be unable to represent Beckenstein or Beckenstein Enterprises because of his relationship with Reid and Reige, P.C. and the call ended. The telephone conversation between Beckenstein, Byrne and Grudberg lasted approximately 25 minutes.
Beckenstein subsequently filed the subject action against Lichtenstein and another action against Reid and Reige, P.C. In October 2003, Attorney David Belt of Jacobs, Grudberg, Belt Dow was asked to represent Lichtenstein and his business entities in the subject litigation. Belt filed his appearance for these defendants on November 20, 2003. On May 7, 2004, the plaintiffs filed the subject motion to disqualify Belt and the law firm of Jacobs, Grudberg, Belt Dow from representing the defendants in the instant proceedings.
The plaintiffs assert that the disqualification of counsel is required by Rules 1.6, 1.7, 1.9, and 1.10 of the Rules of Professional Conduct. The plaintiffs contend that an attorney-client relationship between Beckenstein and Grudberg arose out of their initial telephone consultation on December 26, 2003 and Grudberg is accordingly prohibited by the ethical rules from disclosing confidential information without Beckenstein's consent (Rule 1.6); representing a client in a matter directly adverse to another client (Rule 1.7); or representing a CT Page 11232-kh client in the same or substantially related matter adverse to the interests of a former client (Rule 1.9). The plaintiffs further maintain that, since Grudberg is prohibited from representing the defendants, his entire law is similarly prohibited pursuant to Rule 1.10. I conclude that Attorney Belt and Jacobs, Grudberg, Belt Dow will be able to represent Lichtenstein without violating Rule 1.6 and that the remaining Rules of Professional Conduct cited by the plaintiffs do not apply because Grudberg did not enter into an attorney-client relationship with Beckenstein as a result of their single telephone conversation on December 26, 2003. I further conclude that Belt's representation of Lichtenstein will not transgress additional ethical rules recognized by the ABA Model Rules of Professional Conduct and the Restatement of The Law Governing Lawyers which govern a lawyer's duties to a prospective client.
Rule 1.6 of the Rules of Professional Conduct provides as follows:
Rule 1.6. Confidentiality of Information
(a) A lawyer shall not reveal information relating to representation of a client unless the client consents after consultation, except for disclosures that are impliedly authorized in order to carry out the representation, and except as stated in subsections (a), (b), (c), and (d).
(b) A lawyer shall reveal such information to the extent the lawyer reasonably believes necessary to prevent the client from committing a criminal act that the lawyer believes is likely to result in death or substantial bodily harm.
(c) A lawyer may reveal such information to the extent the lawyer reasonably believes necessary to:
(1) Prevent the client from committing a criminal act that the lawyer believes is likely to result in substantial injury to the financial interest or property of another;
(2) Rectify the consequence of a client's criminal or fraudulent act in the commission of which the lawyer's services had been used.
(d) A lawyer may reveal such information to establish a claim or defense on behalf of the lawyer in a controversy between the lawyer and the client, to establish a defense to a criminal charge or civil claim against the lawyer based upon conduct in which the client was involved, or to respond to allegations in any proceeding concerning the lawyer's CT Page 11232-kn representation of the client.
Rule 1.7 of the Rules of Professional Conduct provides as follows:
Rule 1.7. Conflict of Interest: General Rule
(a) A lawyer shall not represent a client if the representation of that client will be directly adverse to another client, unless:
(1) The lawyer reasonably believes the representation will not adversely affect the relationship with the other client; and
(2) Each client consents after consultation.
(b) A lawyer shall not represent a client if the representation of that client may be materially limited by the lawyer's responsibilities to another client or to a third person, or by the lawyer's own interests, 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.
Rule 1.9 of the Rules of Professional Conduct provide as follows:
Rule 1.9. Conflict of Interest: Former Client
A lawyer who has formerly represented a client in a matter shall not thereafter:
(1) Represent another person in the same or a substantially related matter in which that person's interests are materially adverse to the interests of the former client unless the former client consents after consultation; or CT Page 11232-ko
(2) Use information relating to the representation to the disadvantage of the former client except as Rule 1.6 would permit with respect to a client or when the information has become generally known.
Rule 1.10 of the Rules of Professional Conduct provide as follows:
Rule 1.10. Imputed Disqualification: General Rule
(a) While lawyers are associated in a firm, none of them shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so by Rules 1.7, 1.8(c), 1.9 or 2.2.
(b) When a lawyer becomes associated with a firm, the firm may not knowingly represent a person in the same or a substantially related matter in which that lawyer, or a firm with which the lawyer was associated, had previously represented a client whose interests are materially adverse to that person and about whom the lawyer had acquired information protected by Rules 1.6 and 1.9(2) that is material to the matter.
(c) When a lawyer has terminated an association with a firm, the firm is not prohibited from thereafter representing a person with interests materially adverse to those of a client represented by the formerly associated lawyer unless:
(1) The matter is the same or substantially related to that in which the formerly associated lawyer represented the client; and
(2) Any lawyer remaining in the firm has information protected by Rules 1.6 and 1.9(2) that is material to the matter.
(d) A disqualification prescribed by this Rule may be waived by the affected client under the conditions stated in Rule 1.7.
At the outset, it is important to note that the issue of attorney disqualification involves valid interests on both sides of the question. "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. In disqualification matters, however, we must be solicitous of a client's right freely to choose his counsel; mindful of the fact that a client whose attorney is disqualified may suffer the loss of time and money in finding new counsel and may lose the benefit of its longtime counsel's specialized knowledge of its operations. The competing interests at stake in the motion to disqualify, therefore, are: (1) the [plaintiff's] interest in protecting confidential information; (2) the [defendant's] interest in freely selecting counsel of [her] choice; and (3) the public's interest in the scrupulous administration of justice. (Citations and internal quotation marks omitted.) American Heritage Agency, Inc. v. Gelinas, 62 Conn.App. 711, 725 (2001).
Turning to the specific rules which the plaintiff's claim mandate disqualification of defendants' counsel, Rule 1.6 of the Rules of Professional Conduct requires an attorney to preserve the confidential communications and information of a client. This ethical obligation does not require the establishment of an attorney-client relationship but "may attach when the lawyer agrees to consider whether a client-lawyer relationship shall be established." See section entitled "Scope" in the introductory materials to the Rules of Professional Conduct. See also Restatement (Third), The Law Governing Lawyers, § 15(1)(a), (2003) which recognizes a lawyer's duty not to use or disclose confidential information received from a prospective client.
Here, there is no claim that Grudberg has revealed or intends to reveal CT Page 11232-ki confidential information received during his telephone conversation with Beckenstein. Grudberg submitted an uncontradicted affidavit that he does not recall the substance of the telephone conversation with Beckenstein and Byrne concerning the dispute with Lichtenstein and he has not disclosed to anyone in his law firm the substance of that conversation. Both Grudberg and Belt affirmed that Grudberg has not and will not participate in any way in the representation of Lichtenstein in this litigation and Grudberg will not discuss the litigation with others at the firm. In light of these sworn statements, there is no possibility that Grudberg will disclose confidential communications that he received from Beckenstein and disqualification of his law firm is not necessary to preserve the confidentiality of those communications.
The plaintiffs also contend that the Jacobs, Grudberg, Belt Dow law firm should be disqualified because of Grudberg's conflict of interest. Section (a) of Rule 1.10 of the Rules of Professional Conduct provides that "While lawyers are associated in a firm, none of them shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so by Rules 1.7 . . . [or] 1.9 . . ." Rule 1.7 regulates conflicts of interest between current clients of the lawyer, while Rule 1.9 involves conflicts of interests between a current client and a former client. Rule 1.7 and Rule 1.9 both require for the imposition of their ethical obligations on a lawyer that there be a current or previous attorney-client relationship which is being affected by the disclosure or the representation. Each of these ethical rules presupposes that the lawyer has or had an attorney-client relationship with the person or entity which the rules seek to protect.
The law looks primarily to the manifest intentions of the parties to determine whether they have entered into a client-lawyer relationship. G. Hazard W. Hodes, The Law of Lawyering (3d Ed. 2004) § 2.5. "An attorney-client relationship is established when the advice and assistance of the attorney is sought and received in matters pertinent to his profession." Somma v. Gracey, 15 Conn.App. 371, 379 (1988).
In this case, Grudberg never entered into an attorney-client relationship with Beckenstein. The entire 25-minute conversation concerned whether Grudberg would agree to be hired to represent Bernstein in the contemplated litigation. Grudberg never agreed to do so. In fact, he expressly told Beckenstein that he would be unable to assist her. There is also no claim that Grudberg provided any legal advice to Beckenstein during the discussion or took any action on her behalf as a result of the telephone call. Although Beckenstein states in her affidavit that she considered her telephone conversation with Grudberg to have been "directly incident to the establishment of a formal CT Page 11232-kj attorney-client relationship," the statement is conclusory and is not supported by the facts contained in her affidavit. There is no evidence to suggest that Beckenstein and Grudberg mutually agreed or intended to enter into a client-lawyer relationship. Accordingly, Rules 1.7 and 1.9 simply do not apply to the facts here.
Although Grudberg's conduct does not implicate the precise Rules of Professional Conduct cited by the plaintiffs, it does implicate other ethical rules governing the conduct of lawyers. The ABA Model Rules of Professional Conduct and the Restatement of the Law, The Law Governing Lawyers, contain prescripts concerning the duties of an attorney to a prospective client. While these prescripts have not been expressly adopted in Connecticut, they may appropriately serve as guides to the resolution of the issues before this court. See Preface to the Rules of Professional Conduct which provide that "These Rules do not . . . exhaust the moral and ethical considerations that should inform and guide a lawyer . . ." and Pavone v. West, 82 Conn.App. 623, 631 (2004). See also American Heritage Agency, Inc. v. Gelinas, 62 Conn.App. 711, 724 (2001) ("The Superior Court has inherent and statutory authority to regulate the conduct of attorneys who are officers of the court").
Rule 1.18 of the ABA Model Rules of Professional Conduct, which was adopted by the ABA House of Delegates in 2002, prohibits a lawyer who has received information from a prospective client that could be significantly harmful to that person shall not represent a client with interests materially adverse to those of the prospective client in the same or a substantially related matter. Model Rule 1.18(c). If the lawyer is disqualified from representation, so is his entire law firm. Id. Model Rule 1.18 recognizes two exceptions to its prohibition on representation. The first exception, that of informed consent by the prospective client, is not at issue here. The second exception provides that representation of a client with interests adverse to the prospective client is permissible if (1) the lawyer who received the information took reasonable measures to avoid exposure to more disqualifying information than was reasonably necessary to determine whether to represent the prospective client; (2) the 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 the prospective client. Model Rule 1.18(d).
Rule 1.18 provides as follows: CT Page 11232-kp
1.18: Duties to Prospective Client
(a) A person who discusses with a lawyer the possibility of forming a client-lawyer relationship with respect to a matter is a prospective client.
(b) Even when no client-lawyer relationship ensues, a lawyer who has had discussions with a prospective client shall not use or reveal information learned in the consultation, except as Rule 1.9 would permit with respect to information of a former client.
(c) A lawyer subject to paragraph (b) 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 received 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).
(d) When the lawyer has received disqualifying information as defined in paragraph (c), representation is permissible if:
(1) both the affected client and the prospective client have given informed consent, confirmed in writing, or:
(2) the lawyer who received the information took reasonable measures to avoid exposure to more disqualifying information than was reasonably necessary to determine whether to represent the prospective client; and
(i) the disqualified lawyer is timely screened from any participation in the matter and is apportioned no part of the fee therefrom; and
(ii) written notice is promptly given to the CT Page 11232-kq prospective client.
The Restatement of the Law Governing Lawyers recognizes similar obligations of a lawyer with respect to a prospective client. It prohibits a lawyer and his law firm from representing a client whose interests are adverse to those of a former prospective client in the same or substantially related matter when the lawyer has received confidential CT Page 11232-kk information from the prospective client that could be significantly harmful to the prospective client in the matter. Restatement (Third), The Law Governing Lawyers, § 15(2) (2003). Like the Model Rules, the Restatement also acknowledges exceptions to its rule of disqualification. The pertinent exception allows for representation if (1) the lawyer takes reasonable steps to avoid exposure to confidential information other than information appropriate to determine whether to represent the prospective client; and (2) the lawyer is screened in accordance with § 124(2)(b) and (c) of the Restatement. Id. Section 124(2)(b) and (c) require screening measures adequate to eliminate participation by the lawyer in the representation and timely and adequate notice of the screening to all affected clients.
Section 15 of the Restatement of the Law Governing Lawyer provides:
§ 15. A Lawyers Duties To A Prospective Client
(1) When a person discusses with a lawyer the possibility of their forming a client-lawyer relationship for a matter and no such relationship ensues, the lawyer must:
(a) not subsequently use or disclose confidential information learned in the consultation, except to the extent permitted with respect to confidential information of a client or former client as stated in §§ 61-67;
(b) protect the person's property in the lawyer's custody as stated in §§ 44-46; and
(c) use reasonable care to the extent the lawyer provides the person legal services.
(2) A lawyer subject to Subsection (1) may not represent a client whose interests are materially adverse to those of a former prospective client in the same or a substantially related matter when the lawyer or another lawyer whose disqualification is imputed to the lawyer under §§ 123 and 124 has received from the prospective client confidential information that could be significantly harmful to the prospective client in the matter, except that such a representation is permissible if:
(a)(i) any personally prohibited lawyer takes reasonable steps to avoid exposure to confidential information other than information appropriate to determine whether to represent the prospective client, and (ii) such lawyer is screened as stated in § 124(2)(b) and (c); or
(b) both the affected client and the prospective client give informed consent to the representation under the limitations and conditions provided in § CT Page 11232-kr 122.
Section 124 provides in relevant part:
§ 124. Removing Imputation
(1) Imputation specified in § 123 does not restrict an affiliated lawyer when the affiliation between the affiliated lawyer and the personally prohibited lawyer that required the imputation has been terminated, and no material confidential information of the client, relevant to the matter, has been communicated by the personally prohibited lawyer to the affiliated lawyer or that lawyer's firm.
(2) Imputation specified in § 123 does not restrict an affiliated lawyer with respect to a former-client conflict under § 132, when there is no substantial risk that confidential information of the former client will be used with material adverse effect on the former client because:
(a) any confidential client information communicated to the personally prohibited lawyer is unlikely to be significant in the subsequent matter;
(b) the personally prohibited lawyer is subject to screening measures adequate to eliminate participation by that lawyer in the representation; and
(c) timely and adequate notice of the screening has been provided to all affected clients.
Based upon the facts of this case, neither the ABA Model Rules nor the Restatement of The Law Governing Lawyers requires the disqualification of the Jacobs, Grudberg, Belt Dow law firm from representing Lichtenstein in this matter. Although Grudberg received potentially harmful confidential information from Beckenstein during their telephone conversation, Grudberg and his law firm have taken the steps necessary to both preserve the confidentiality of that information and allow for the firm's representation of an adversary.
First, in accordance with the ethical rules governing his duties to a prospective client, Grudberg took reasonable steps to avoid exposure to confidential information other than information appropriate to determine whether to represent Beckenstein and Beckenstein Enterprises. Their telephone conversation dealt initially with identifying the various individuals and entities involved in the potential litigation to enable Grudberg to determine whether he or his firm had a conflict of interest. Only then, did Beckenstein and Byrne discuss the merits of their legal claims and possible defenses. When Beckenstein and Byrne did eventually disclose the plaintiffs' intention to initiate additional legal action against the law firm of Reid and Reige, P.C., Grudberg promptly stated that he could not represent them due to his relationship with the law firm and the telephone conversation ended. Grudberg did everything that could be expected of him to avoid learning confidential information beyond that necessary to decide if representation was appropriate.
Second, Grudberg has been timely and effectively screened from participation in Belt's representation of Lichtenstein in this matter. As soon as the issue of disqualification was brought to Belt's attention, Belt promptly sent a memo to all attorneys and employees of the law firm instructing them that they are prohibited from discussing this action or its subject matter with Grudberg. It was also agreed that Grudberg would not participate in any way in the litigation. Finally, no confidential CT Page 11232-kl information has been conveyed by Grudberg to anyone else in the firm and, in light of his present lack of memory, he possesses no confidential information to convey. He does not recall the substance of his conversation with Beckenstein and Byrne and he kept no notes of the conversation. In light of these facts, there is no danger of the confidential information initially acquired by Grudberg being used against the plaintiffs in this action.
The imposition of the screening mechanism was also timely under the circumstances of this case. Belt upon first being contacted by Lichtenstein about representing him circulated a memo to all attorneys at the law firm notifying them of that fact and inquiring of any potential conflicts of interest. Given Grudberg's inability to recall his discussion with Beckenstein, he did not identify the potential conflict to Belt. As soon as Belt was notified by plaintiffs' counsel of Grudberg's discussion with Beckenstein, he promptly screened Grudberg from participation in the representation of Lichtenstein.
In accordance with the requirements of Rule 1.18 of the ABA Model Rules, Jacobs, Grudberg, Belt Dow has also taken steps to insure that Grudberg is apportioned no part of the fee gained from the firm's representation of Lichtenstein in this matter. Grudberg and his law firm have agreed that none of the fees received by the firm in connection with this litigation will be rendered to him.
The Restatement of The Law Governing Lawyers does not prohibit the disqualified lawyer from receiving any part of the fee resulting from the representation of a client adverse to the prospective client. See § 15.
Finally, Belt has given timely and adequate written notice to Beckenstein of the screening of Grudberg from participation in this case. The Comment to Rule 1.18 of the Model Rules states that "Notice, including a general description of the subject matter about which the lawyer was consulted, and of the screening procedures employed, generally should be given as soon as practicable after the need for screening becomes apparent." Belt was first notified of his law firm's potential conflict through a letter dated March 29, 2004 from plaintiffs' counsel. Belt promptly investigated the matter within his firm and replied to plaintiffs' counsel in a letter dated April 29, 2004. In the letter, Belt outlined Grudberg's memory of his telephone conversation with Beckenstein and Byrne. He further stated that Grudberg would be screened from any participation in the representation of Lichtenstein and no one in the firm would discuss the litigation with Grudberg. I find this letter to satisfy the notice mandate of the ethical rules. It sufficiently conveys the nature of Beckenstein's consultation with Grudberg and the subsequent screening that will be imposed on him by the firm. It was also a timely response to the plaintiffs' broaching of the issue with Belt. In light of Grudberg's lack of memory of his conversation with Beckenstein, it was understandable that Belt did not independently raise the issue with the CT Page 11232-km plaintiffs.
In light of the above, the plaintiffs' motion to disqualify the defendants' attorney is hereby denied.