Opinion
606301/96.
Decided September 25, 2000.
Third-party defendant, Jarstan Environmental, Inc., moves for an order disqualifying Clausen Miller, PC ("Clausen"), the law firm representing defendant Consolidated Edison Company, Inc. ("Con Ed"). Jarstan also requests an award of sanctions and that the matters, described below, be referred to the appropriate Disciplinary Committee for further investigation.
Background
Plaintiff, Ogden Allied Abatement Decontamination Services, Inc., brings this action for damages in connection with asbestos abatement work that it performed for Con Ed. Con Ed counterclaimed for breach of contract, breach of express warranties and negligence, in connection with a fire at one of its boilers that allegedly caused property damage in excess of $10 million. Ogden thereupon commenced a third-party action against Jarstan, a subcontractor on the abatement job, for contribution and indemnification. Con Ed then asserted cross claims (denominated "counterclaims") against Jarstan for breach of contract and negligence. Con Ed brought a further "counterclaim" for breach of express warranties, but mistakenly named Ogden instead of Jarstan as defendant.
On a prior motion, the court denied Jarstan's motion to dismiss Con Ed's cross claims for breach of contract and negligence and granted Con Ed's cross motion for leave to amend its cross claim for breach of express warranties.
Jarstan nows seeks an order disqualifying Con Ed's counsel.
The law firm of Nicoletti Gonson Bielat, LLP ("NGB") represents Jarstan. NGB's former associate, Adam T. Newman, Esq., was the attorney with responsibility for day-to-day management of the action, under a partner's supervision prior to the termination of his employment with NGB in June 2000.
The Clausen law firm represents Con Ed.
Jay S. Bielat, Esq., a member of NGB, asserts that on June 4, 1999, the Clausen firm hired Newman as an associate, knowing full well that he handled this matter for NGB. June 9, 2000 was Newman's last day as an associate at NGB. Newman left NGB with the intent of working as an associate at Clausen beginning on June 19, 2000.
Bielat avers that Newman was NGB's sole attorney assigned to the action other than himself, and, for more than one and one half years, Newman was actively involved in all phases of the litigation, including communicating with Jarstan and potential witnesses, participating in document discovery, and appearing on Jarstan's behalf at nineteen depositions. Moreover, Newman was solely responsible for the maintenance of the files. Hence, Newman acquired knowledge of confidential information concerning Jarstan's defense. Moreover, in another action, Rubiera v. YMCA of Brooklyn, Supreme Court, Bronx County, Index No. 8615/99, Newman, on behalf of NGB, represented LM Builders while Clausen represents a third-party defendant, Calvert Insurance Co. Jarstan argues that Clausen must be disqualified in this action from representing Con Ed because of the existence of a conflict of interest.
Clausen contends that the motion should be denied because Newman is not, nor has he ever been, its employee. Clausen concedes that Newman was offered employment by it, but that the offer was rescinded prior to commencement of his employment with Clausen. Clausen contends that the only attorneys responsible for handling this action for it are James Hoey, Esq. and Robert Stern, Esq. and neither of them ever discussed the action with Newman other than as adversaries. Tyler Jay Lory, Esq. is the member of Clausen, responsible for the New York office's General Liability Practice Department and he had interviewed Newman.
Lory submitted an affidavit stating as follows: His first contact with Newman was in the Rubiera action pending in Bronx County. He was impressed with Newman's handling of the matter and he inquired as to whether Newman would be interested in interviewing with Clausen, i.e. in becoming employed by Clausen. In May 2000, Lory interviewed Newman at Clausen's offices. No one else was present and they did not discuss the merits or substance of any action or matter being handled by Lory, Clausen, or Newman. Lory was impressed at the interview and asked Newman to return to meet some of Clausen's other shareholders and directors, which he did. Shortly thereafter, Clausen offered Newman a position. One day before Newman was to begin working for Clausen, it withdrew its offer of employment to him. Clausen argues that since Newman has never been employed by it, and Lory never discussed the merits or substance of this action with Newman, the application for disqualification should be denied because there is no conflict of interest.
The Order to Show Cause herein was signed on June 20, 2000. By letter dated June 21, 2000, Clausen informed Newman that because of the Order to Show Cause, "we must withdraw our firm's offer of employment."
Disqualification
On a disqualification motion, the court must balance the interests of a client desirous of retaining an attorney of its choice ( Greene v. Greene, 47 NY2d 447) against the interests of the opposing litigant to be free from risks of opposition by a lawyer once privy to that litigants' confidences ( Cardinale v. Golinello, 43 NY2d 288). Disqualification of a law firm during litigation implicates the ethics of the profession as well as the litigants' substantive rights and it may have significant adverse consequences to the client and others ( SS Hotel Ventures Ltd. Partnership v. 777 S.H. Corp., 69 NY2d 437). The party seeking disqualification bears the burden on the motion ( SS Hotel Ventures Ltd. Partnership v. 777 S.H. Corp., supra). Jarstan has not met its burden.
In seeking to disqualify Clausen, Jarstan relies on DR 5-108 of the Code of Professional Responsibility, which provides, in part:
(a) * * * a lawyer who has represented a client in a matter shall not, without the consent of the former client after full disclosure:
(1) Thereafter represent another person in the same or a substantially related matter in which that person's interest are materially adverse to the interests of the former client. . . .
(2) Use any confidences or secrets of the former client * * *.
Attorneys owe a continuing duty to former clients not to reveal confidences learned in the course of their professional relationship. Thus, a lawyer may not represent a client in a matter and thereafter represent another client with interests materially adverse to the interests of the former client in the same or a substantially related matter ( Kassis v. Teachers Ins. Ann. Assoc., 93 NY2d 611).
[T]he rule of imputed disqualification reinforces an attorney's ethical obligation to avoid the appearance of impropriety. Furthermore, it protects client confidences from misuse in substantially related and adverse litigation; frees the former client from any anxiety that matters disclosed to an attorney will subsequently be used against it in related litigation; and provides a clear and readily administered test, thereby encouraging self-enforcement among members of the legal profession. ( id.).
In short, disqualification is warranted when circumstances show a reasonable probability that an attorney acquired confidential information of matters likely to be in issue in an action ( Clairmont v. Kessler, 269 AD2d 168 [1st Dept 2000]), and then seeks to represent a client's or former client's adversary.
Here, Newman never actually began employment with Clausen. If he had, then DR 5-108 would be directly implicated and, arguably, disqualification would be warranted ( Kassis v. Teachers Ins. Ann. Assoc., supra). In the absence of Clausen's actually employing Newman, directly or indirectly, disqualification is not warranted since it would harm not only Clausen but, more importantly, its client — Con Ed.
Jarstan contends that Clausen's rescission of its employment offer to Newman demonstrates its acknowledgment that it would be unable to rebut the presumption that the entire firm must be disqualified upon Newman's employment. However, this assertion is irrelevant because Newman never commenced employment with Clausen and, therefore, there is no presumption of disqualification ( cf. Kassis v. Teacher's Ins. Annu. Assoc., supra). The further argument Jarstan will incur expense in that a new attorney will be required to become familiar with the action is also irrelevant since Newman had the right to terminate his association with Jarstan, and could have done so at any time. If he had, Jarstan would have had to reassign the matter.
Furthermore, Jarstan has not shown a reasonable probability that confidential information was disclosed ( Green v. Greene, 47 NY2d 447, supra). The attorneys who interviewed Newman submitted affidavits stating that they did not acquire any information about this litigation. Jarstan, which has the burden on this motion, did not submit any persuasive evidence establishing the contrary, and indeed probably could not since it was not privy to those conversations.
Jarstan's assertion that Lory admitted "discussing confidential information with Mr. Newman in the Rubiera case" is not supported by the record. In his opposition affidavit, Lory stated that at no time during any of his contacts with Newman did he discuss the merits or substance of any past, pending, or future case being handled by him or Clausen, except for the Rubiera case. Even if it could be shown that the substantive discussion in that case was improper in that it was not done as adversaries, the appropriate forum for disqualification would be in that action. The revealing of one client's confidences in one action has no bearing on another client's motion for disqualification in another action.
Sanctions
Jarstan contends that if disqualification is not ordered, at least sanctions are warranted because Clausen continued conducting discovery in this action with Newman as an adversary even though it was, at the same time, interviewing, and subsequently extended an employment offer to, Newman. Specifically, Clausen was in the process of interviewing Newman, and five of its employees or partners met with Newman, during the month of May, 2000, while at the same time dealing with Newman as an adversary in this action. Thus, depositions were scheduled by Newman, on behalf of Jarstan, with Clausen for a date shortly after Newman eventually left Jarstan. Newman apparently made the decision as to the dates on which depositions were scheduled.
The court denies the application for sanctions. The reason for denial is that in the end, Newman did not become employed by Clausen, and Jarstan has not shown how its client was prejudiced by Clausen's actions. This is so, especially since Newman could have left Jarstan's employ in any event. Further, to grant sanctions at this time would lead to further hearings including the amount of sanctions, which would delay the progress of the action. It is to the client's benefit that the action proceed to disposition without the further detour of a mini-trial relating to sanctions.
Newman participated in some depositions after he had first been contacted by Clausen. If, after reviewing the transcripts of the depositions, Jarstan is of the opinion that Newman for any reason failed to adequately cover an area in his questioning, it may have the witness' deposition reopened as to said area. If that becomes necessary, the cost of the added deposition, including the fees of the attorneys attending at the deposition, shall be borne by Clausen.
The court notes that Clausen's conduct in the circumstances was below the standards of professional behavior expected from members of the bar. It was improper for Clausen to approach Newman and even suggest to him that it might consider him for employment. It was also improper for Clausen to continue litigating this action with Newman representing its adversary, knowing that Newman was preparing to join its firm. Clausen conducted employment interviews with Newman during May 2000. In that month, six depositions were conducted and, in each one, Newman appeared on Jarstan's behalf. He did so apparently with Clausen's acquiescence, even though he was interviewing to join the firm. Once Newman and Clausen began even preliminary employment discussions, their continuation of the litigation as adversaries was wrong.
Our adversarial system of justice is founded in part on the trust that adversaries necessarily repose in each other — as members of the bar. Conduct such as described herein weakens that trust and the civil justice system in which we all function. The public, the members of the bar and the judiciary expect, and are entitled, to have counsel act with a higher degree of ethical conduct than that demonstrated by Clausen in this matter.
Accordingly, it is
ORDERED that the motion is denied; and it is further
ORDERED that the stay of discovery is lifted.