Opinion
Civil Action No. 3:99-CV-755-H
January 18, 2000.
MEMORANDUM OPINION
Plaintiff Ikon Office Solutions, Inc., ("Ikon") has sued two former employees, Defendants Heiskell and Smith, alleging breaches of their employment, confidentiality, and non-compete agreements, among other claims. Ikon has also moved for a temporary restraining order and a preliminary injunction. In the course of abbreviated discovery before the preliminary injunction hearing, Defendants' counsel, David Tachau, disclosed a prior relationship between himself and Ikon. Under Kentucky Rules of Professional Conduct 1.9 and 1.10, Plaintiff now moves to disqualify Tachau and his law firm based on that prior relationship.
Any motion to disqualify counsel is necessarily fact-intensive, so the Court will first outline the circumstances of Tachau's former representation and its connection to the case at bar. On February 13, 1996, Miller Company, Inc., a direct competitor of Ikon, sued Donna Profumo, a former Miller employee then working for Copy Corporation, a predecessor to Ikon. The suit alleged that, in the course of leaving her job with Miller and starting at Ikon, Profumo breached a confidentiality agreement between Miller and her and disclosed information owned by Miller in violation of the Kentucky Trade Secret Act. The suit sought an injunction. Ikon retained Tachau to represent Profumo and paid all of Tachau's legal fees. Some Ikon personnel had communications with Tachau regarding trial strategy. On June 6, 1997, Miller settled the claims. Ikon was never a party to the lawsuit. It is unknown whether Miller received consideration for the settlement or, if so, who paid it. The settlement did release Ikon and its employees and managers from any claim by Miller concerning Profumo's employment.
For clarity, the Court will simply refer to Copy Corporation as Ikon.
The current lawsuit involves two former Ikon employees now working for Danka Office Imaging ("Danka"). Each Defendant signed non-compete and confidentiality agreements with Ikon at some point during his employment. Heiskell and Smith quit Ikon and started at Danka in August and September of 1999, respectively. Ikon claims that the Defendants are violating their agreements by working for a direct competitor and that they have misappropriated confidential customer and supplier information, as well as business and financial documents. Tachau represents both Heiskell and Smith. Ikon argues that, because of his prior representation in the Profumo litigation, he should be disqualified from representing individuals in the current matter on account of a conflict of interest with a past client.
There is no claim against Danka.
The Kentucky Rules of Professional Conduct were largely borrowed or adopted from the American Bar Association's 1983 Model Rules of Professional Conduct, and speak to this situation. See generally Eugene R. Gaetke, Kentucky's New Rules of Professional Conduct for Lawyers, 78 Ky. L.J. 767 (1989-90):
A lawyer who has formerly represented a client in a matter shall not thereafter:
(a) 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
(b) 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 of the Supreme Court 3.130, Rule of Professional Conduct 1.9, Ky. Rules Ann. (Michie 2000).
Plaintiff's motion also seeks a disqualification for Tachau's entire firm under Rule 1.10(a). That rule merely imputes to the firm any disqualification of an individual attorney under Rule 1.9, so it language and interpretation do not affect the Court's analysis.
Because Plaintiff produced no evidence that Tachau has used any confidential client information received from Ikon in representing Heiskell and Smith, there is no argument that Rule 1.9(b) applies. Accordingly, the Court will evaluate Plaintiff's argument under Rule 1.9(a). At the outset, the Court agrees with Plaintiff that the three-part test designed in Dana Corp. v. Blue Cross Blue Shield Mut. of Northern Ohio, 900 F.2d 882, 889 (6th Cir. 1990), is based on the Ohio professional responsibility rules, not those of Kentucky. Therefore, Rule 1.9(a) does not require that Tachau acquired confidential information from Ikon in the course of the Profumo litigation. The necessary elements are that he and Ikon stood in an attorney-client relationship and that the Profumo matter and the current case are substantially related. See Health Maintenance Org. Ass'n of Ky., Inc. v. Nichols, 964 F. Supp. 230, 234-236 (E.D. Ky. 1997).
Of course, the fact that acquisition of confidential information is not an element of a Rule 1.9(a) violation does not make client confidences irrelevant to the inquiry. Client confidences are part and parcel of the attorney-client relationship, and their presence would go a long way to establishing that such a relationship did exist between Tachau and Ikon. See Lovell v. Winchester, 941 S.W.2d 466, 468 (Ky. 1997) ("Courts have found that the [attorney-client] relationship is created as a result of the client's reasonable belief or expectation that the lawyer is undertaking the representation . . . The key element in making such a determination is whether confidential information has been disclosed to the lawyer."). At any rate, Rule 1.9(b) prohibits only the use of confidential information, not its possession.
Whether Tachau and Ikon had an attorney-client relationship is a difficult question. Ikon paid for Profumo's defense, and its interests and Profumo's were generally aligned. However, Ikon was never a party in the case. Its interests might have diverged from Profumo's had the case gone forward. Though Tachau did consult Ikon managers on some aspects of his trial strategy, Plaintiff specifies no actual confidences shared between them. There seems no doubt that Tachau owed his professional allegiance to Profumo rather than to Ikon. This seems to fall short of an attorney-client relationship. In any event, the Court need not rely solely on this analysis to decide the motion.
The Profumo matter and the current matter do not seem to be substantially related. Although the type of legal problem is very similar, the Profumo case involved the contracts and policies of Miller, not those of Ikon. Even if Tachau had consulted with Ikon managers on the Profumo case's substantive issues, those discussions would concern Miller's contracts, not Ikon's. In the present case, Ikon is on the completely opposite side of the alleged legal questions, and the individuals involved are wholly distinct. The comments to the Rules make clear that matters of the same type are not necessarily in substantial relation:
. . . a lawyer who recurrently handled a type of problem for a former client is not precluded from later representing another client in a wholly distinct problem of that type even though the subsequent representation involves a position adverse to the prior client.
Rule of the Supreme Court 3.130, Rule of Professional Conduct 1.9 cmt. 2, Ky. Rules Ann. (Michie 2000); see also Nichols, 964 F. Supp. at 235. Here, the legal issues are similar, but the underlying matters at stake are unrelated.
The Court recognizes that Kentucky's Supreme Court recently acknowledged that "the appearance of impropriety is still as useful guide for ethical decisions," even though its own rule fails to use appearances as a standard. Lovell, 941 S.W.2d at 468. But that decision involved an attorney consulting one party to a case, refusing the representation, and then representing the opposing party is the exact same lawsuit. See id. at 467. There was no question that the matters were substantially related; indeed, they were identical. In the present case, the matters are unrelated, so there is no appearance of impropriety.
Finally, the Court has thoroughly examined Defendants' allegations of a violation of Rule 11 of the Federal Rules of Civil Procedure. Though ultimately not meritorious, the motion for disqualification presented a well-considered and reasonable argument. The motion does make assertions that Tachau has breached ethical rules. Understandably, no attorney wants to be the target of such a motion or the kinds of charges contained in it. However, that is not reason enough, by itself, to support a Rule 11 counter-attack. The memorandum supporting the motion sticks to the known facts, avoids personal attack, and generally deals with a sensitive subject in a professional manner. The Court's only suggestion is that counsel could have opted for discussions with Tachau and a little more investigation before firing off a demand for Tachau's withdrawal.
The Court will enter an order consistent with this Memorandum Opinion.
ORDER
Plaintiff moved to disqualify Defendants' counsel. Being otherwise sufficiently advised,IT IS HEREBY ORDERED that Plaintiff's motion is DENIED.
IT IS FURTHER ORDERED that Defendants' requests for financial sanctions and censure are also DENIED.
Defendants' motion for leave to file a sur-reply is moot.