Opinion
2011-368209/C
07-30-2014
In the Matter of the Estate of Hyman Kaufman, Deceased.
Damianos Markou, Esq. (for respondent, Kenneth Kaufman) Moritt Hock & Hamroff, LLP Howard Meyers, Esq.(for respondent, Merrill Lynch) Meyers Meyers & Tonachio, LLP James M. Wicks, Esq. (for petitioner, Allen M. Kaufman) Farrell & Fritz, P.C. Donald Novick, Esq. (co-counsel for Allen Kaufman) Novick & Associates
Damianos Markou, Esq. (for respondent, Kenneth Kaufman)
Moritt Hock & Hamroff, LLP
Howard Meyers, Esq.(for respondent, Merrill Lynch)
Meyers Meyers & Tonachio, LLP
James M. Wicks, Esq. (for petitioner, Allen M. Kaufman)
Farrell & Fritz, P.C.
Donald Novick, Esq. (co-counsel for Allen Kaufman)
Novick & Associates
Edward W. McCarty III, J.
In these proceedings concerning the estate of Hyman Kaufman, the motion to renew and reargue is granted and upon reargument the court confirms its prior decision (40 Misc 3d 1234 [A] [2013]), which granted a motion to disqualify counsel.
These proceedings involve disputes between Kenneth Kaufman and Allen Kaufman executors/beneficiaries of the estate of their father Hyman Kaufman. In its prior decision, the court granted the motion of Kenneth Kaufman to disqualify the firm of Farrell Fritz, P.C., on the grounds that he had previously consulted with the firm and thereafter the firm represented his adversary, Allen Kaufman. In the decision, the court concluded that Kenneth Kaufman was a prior client who communicated significant confidential information to the firm. The motion to disqualify Farrell Fritz was granted, pursuant to Rule 1.9 of the New York Rules of Professional Conduct (22 NYCRR 1200.0 et seq).
The applicable rule, however, is Rule 1.18 pertaining to prospective clients, as there was never a formal attorney-client relationship between Farrell Fritz and Kenneth Kaufman.
In October 2011, two attorneys from Farrell Fritz, Michael Stafford and Frank Santoro met with Kenneth Kaufman. It is undisputed that the subject of the consultation related to the administration of the estate of Hyman Kaufman. Kenneth Kaufman delivered documents (whichwere returned) and exchanged e-mails with counsel. There was a subsequent meeting on October 6, 2011. The firm was not retained by Kenneth Kaufman and no file was opened. In February 2013, Farrell Fritz attorney John Morken met with Allen Kaufman, an engagement letter was signed and the firm commenced representation in connection with a petition to revoke letters testamentary which had been issued to Kenneth Kaufman. A conflicts check performed by Farrell Fritz was negative, as no file had been opened after the consultation with Kenneth. On May 6, 2013, Henry Klosowski, attorney for Kenneth Kaufman, informed Morken of the prior consultation with Farrell Fritz and Kenneth Kaufman then made this motion to disqualify. Morken states and it is undisputed that he was previously unaware of the consultation as it was never entered into the firm's computer. Kenneth Kaufman alleges that in the first months after the petition was filed, he did not realize that Morken was associated with the same firm as Stafford and Santoro.
Rule 1.18 was promulgated, in part, in response to the practice of consulting an attorney for the purpose of disqualifying the attorney from representing an adversary. The rule limits the protection afforded a prospective client as opposed to a former client (Restatement [Third] of the Law Governing Lawyers, sec 15, Comment [1] [b]). Rule 1.18 provides in part:
"(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."
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.
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 firm acts promptly and reasonably to notify, as appropriate, lawyers and nonlawyer personnel within the firm that the personally disqualified lawyer is prohibited from participating in the representation of the current client; (ii) the firm implements effective screening procedures to prevent the flow of information about the matter between the disqualified lawyer and the others in the firm; (iii) the disqualified lawyer is apportioned no part of the fee therefrom; and (iv) written notice is promptly given to the prospective client; and(3) a reasonable lawyer would conclude that the law firm will be able to provide competent and diligent representation in the matter, (e) A person who: (1) communicates information unilaterally to a lawyer, without any reasonable expectation that the lawyer is willing to discuss the possibility of forming a client- lawyer relationship; or (2) communicates with a lawyer for the purpose of disqualifying the lawyer from handling a materially adverse representation on the same or a substantially related matter, is not a prospective client with the meaning of paragraph (a).
Under Rule 1.18 the threshold for disqualification is raised. In circumstances involving a former client, the standard is whether the information conveyed is significant or material (Town of Oyster Bay v 55 Motor Ave. Co., LLC, 109 AD3d 549 [2d Dept 2013]). Under Rule 1.18, disqualification is required only where the information is significantly harmful. Where the information is significantly harmful, the conflict affecting the participating attorney is imputed to other lawyers in the firm (Rule 1.18 [c]).
The description of the initial consultation with Kenneth Kaufman, coupled with the production of documents and exchange of e-mails which contained confidential information, gives rise to a reasonable inference that the information conveyed was significantly harmful (Zalewski v Shelroc Homes, LLC, 856 F Supp 2d 426 [NDNY 2012]).
Rule 1.18 [c] provides for the imputation of knowledge to other attorneys in the firm. Allen Kaufman attempts to overcome the presumption by the submission of the affidavits of Santoro and Stafford which state that they did not communicate confidential information. In addition, the " non-consulting" attorneys have provided affidavits stating that they did not receive information concerning the estate.
Allen Kaufman challenges the accuracy of the affidavits. In particular, there is a vigorous dispute as to whether a discussion of "John" in an e-mail refers to a member of Farrell Fritz or another firm.
In Arista Records LLC v Lime Group LLC (2011WL 672254 [SDNY]), there was a delay in implementing a formal screen around an attorney who possessed confidential information acquired at his previous employment. The attorney's affidavit stated that confidential information was not disclosed to attorneys in the current firm. The motion to disqualify was denied, primarily on the grounds that the affidavit was not disputed. Here, where the affidavits are disputed, they cannot be accepted as conclusive proof that Santoro and Stafford were the only attorneys who received confidential information.
Rule 1.18 requires that the knowledge of the client's confidences be imputed to the other attorneys in the firm unless effective screening procedures were implemented, as provided in subdivision [d] [2] [ii]. These procedures are generally referred to as a "Chinese wall." The effectiveness of the screen is customarily determined without a hearing.
Among the factors to be considered in determining the effectiveness of a Chinese wall arethe frequency of communications between attorneys and access to records {NYC Eth. Op. 2013-1 [2013]).
A Chinese wall is intended to be pre-emptive. Therefore, timeliness is the pre-dominant factor in determining its effectiveness (Decora, Inc. v DW Wallcovering, Inc., 899 F Supp 132 [SDNY1995]; Papanuicolaou v Chase Manhattan Bank, N.A.,720 F Supp 1080 [SDNY1989]).
Ideally, a screen should be erected when the firm accepts a case which presents an ethical problem (LaSalle Nat. Bank v Lake County, 703 F2d 252 [7th Cir. 1983]).
In this case, the failure of the conflicts check to reveal the first consultation resulted in the representation of Allen Kaufman without any checks in place. It appears that the firm made a serious attempt to construct a screen immediately upon learning of the conflict. However, a screen must foreclose the possibility of disclosures. In March 2013, when the screen was constructed, the opportunity for the dissemination of information had already been extant for approximately two and a half years.
In addition, between February 2013, when Farrell Fritz was retained, and May 2013, when the prior consultation was revealed, the attorneys in the firm were not forewarned to avoid discussion of the Kaufman estate. During this period, none of the attorneys in the firm, including Santoro and Stafford, were aware of the impending conflict and there was no impediment to the free disclosure of information.
In assessing the effectiveness of a screen, consideration is given to the size and structure of the firm. It is expected that attorneys in a small firm are likely to exchange confidences and ideas about pending cases (see Kassis v Teacher's Ins. and Annuity Assn., 93 NY2d 611 [ 1999]; Solow vW.R. Grace & Co., 83 NY2d 303 [1994]). Here, it is not the size of the firm as a whole, which is relevant. The initial consultation and subsequent representation involved attorneys within a single department, thus increasing the likelihood of communications concerning the estate.
In this case, all of the attorneys had the opportunity to access the e-mails, prior to the construction of the screen (Poma v Ipek, 27 Misc 3d 1206 [A] [Sup. Ct, New York County 2010]). In addition, the effectiveness of the screen was undermined by the transfer of the e- mails to general counsel. The information necessary to defend the motion to disqualify should have been extracted and then forwarded.
Further, the fact that the e-mails continued between the attorneys and the prospective client suggest that the initial consultation was not limited in its scope, as required by Rule 1.18
A former prospective client is entitled to freedom of apprehension and to certainty that his interests will not be prejudiced by disclosure of confidential information (Nationwide Associates, Inc. v Tar gee Street Internal Medicine, P.C, 303 AD2d 728 [2d Dept 2003]); P.C. Forest Park Associates Ltd. Partnership v Kraus, 175 AD2d 60 [1st Dept 1991]).
For the foregoing reasons, the court adheres to its original conclusion.
This is the decision and order of the court.