Opinion
Case No. 98 C 1539
February 11, 1999
MEMORANDUM OPINION AND ORDER
One of the plaintiffs in this case, Thomas Moore ("Mr. Moore"), has filed a motion to disqualify Sidley Austin ("SA"), the law firm that represents the defendant, Van Hedge Fund Advisors, Inc. ("Van Hedge Fund"). This motion is before the Court pursuant to the order of referral entered on July 8, 1998. After consideration of the parties' arguments regarding the disqualification motion, the Court denies Mr. Moore's motion (doc. # 84-1).
I.
The following facts have been drawn from the parties' submissions and are relevant to the Court's disposition of this matter. The plaintiffs in this case are seven investors who allege that, during various times in 1996, they individually invested in a hedge fund known as Theta Group, L.L.C. ("Theta"), on the advice of Van Hedge Fund Advisors, Inc. ("Van Hedge Fund"), one of the defendants in this case. The Van Hedge Fund defendants have retained SA to represent them in all matters related to this action. Only one plaintiff, Mr. Moore, claims that SA should be disqualified.
Mr. Moore is a 1954 graduate of Yale University and a 1957 graduate of Harvard Law School. Following his graduation from law school, Mr. Moore practiced law until 1990 at various law firms. He was a partner at Breed, Abbott Morgan, and he is now a sole practitioner in New York City. Mr. Moore has had two contacts with SA. In the late 1970s, he had a common client with SA and worked together with SA's lawyers on that client's business. In 1981, Mr. Moore's father-in-law, Willard L. King ("Mr. King"), a resident of Chicago, died. Mr. King's will named Margaret K. Moore ("Mrs. Moore"), Mr. Moore's wife, as the executor of his estate. Shortly after Mr. King's death, the services of SA were engaged in connection with the probate of the King estate.
The parties disagree as to whether, in connection with that representation, the client of SA was Mr. Moore or, instead, Mrs. Moore. The client file maintained by SA listed Mr. Moore as the client and gave him a client code number with his initials, Moore, Thomas R. ( i.e., 64801-MTR-1001-00). Mrs. Moore never spoke or corresponded with anyone at S A; rather, Mr. Moore acted as an intermediary between SA and Mrs. Moore in communicating matters and obtaining signatures. These communications involved correspondence, which is still in the client file. Mr. Moore also provided SA with an Illinois inheritance tax return for the estate. However, according to SA, the contents of the client file (as opposed to the name on the file) show that these contacts were the extent of Mr. Moore's involvement with the SA in connection with the representation. The client documents reveal that Mrs. Moore, on the other hand, was the sole executor of the King estate, the sole trustee of the trust created under the will, and the only named beneficiary of the estate.
The affidavit of Larry D. Berning, submitted by SA in its defense, states that the tax return submitted by Mr. Moore erroneously listed him as a beneficiary of the King estate with a + life estate. A later inheritance tax notice issued by the State of Illinois reflects that Mrs. Moore was the sole beneficiary of the King estate and the tax was recomputed accordingly. See Berning Affidavit ¶ 4. Mr. Moore has not offered any evidence to counter the affidavit on this point
The King estate contained certain investments. These investments were made and maintained by Mr. King, alone, not by Mr. or Mrs. Moore. The contents of the estate, including common stocks, became a matter of public record in the probate court. These stocks were sold, and the cash proceeds were distributed to Mrs. Moore as the sole beneficiary of the estate. The King estate was closed on April 18, 1984, and Mrs. Moore was discharged as executor. SA's fees for the representation of the King estate amounted to $1,062, and were paid by the King estate. SA did not represent Mr. or Mrs. Moore after April 1984.
In October 1997, this case was filed. In an affidavit, William J. Nissen, the SA attorney "primarily responsible" for representing the Van Hedge Fund, states that SA performed a "standard conflicts check" on all plaintiffs in this case before assuming the representation of the Van Hedge Fund. (Nissen Aff. ¶¶ 1-2). Although Mr. Moore's name appeared on the conflicts report, SA "determined that no conflict precluding the new representation existed, and it assumed the representation." ( Id.). None of the attorneys working on the instant litigation had any involvement in the probate representation.
In an affidavit filed in support of his disqualification motion, Mr. Moore, a seasoned attorney, states that he did not remember that a potential conflict existed until his deposition in November 1998, when SA attorneys questioned him about the nature of his own personal investments. (Moore Aff. ¶ 2). Mr. Moore asserts that he had forgotten about SA's prior representation, but that his memory was "jogged" by SA's deposition questions, which Mr. Moore claims could only have come from the file regarding Mr. King's estate. (Moore Aff. ¶¶ 2-4). SA contends that it has provided Mr. Moore's attorney with information showing that the client file on Mr. King's estate has not been retrieved from storage since 1993 — well before this lawsuit was filed by the plaintiffs. (Bess Aff. ¶ 4, Ex. C). SA further asserts that the basis for the deposition questions put to Mr. Moore regarding his investment history were based on previously-produced notes of conversations between Mr. Moore and defendant Steven Lonsdorf of the Van Hedge Fund Advisors, which were previously produced in this lawsuit ( Id. ¶ 5, Ex. D). Neither Mr. Moore nor his attorneys attempt to link specific deposition questions to information SA allegedly obtained during the probate representation.
Mr. Moore maintains that SA should be disqualified from the representation of Van Hedge Fund as to him (but not necessarily the other plaintiffs), because SA represented him, as a client, on the probate matter involving the estate of his father-in-law, Willard L. King, during the period 1981-84, and that representation "involved matters substantially related or relevant to matters at issue in the instant case, namely the investments owned by me." (Moore Aff. ¶ 4). Mr. Moore also states that, as a result of the probate representation, SA learned "the intimate and confidential details of my finances and investments, including those assets my wife and I inherited from Mr. King." (Moore Aff. ¶ 2).
SA maintains that it should not be disqualified for several reasons. First, Mr. Moore, despite his role as a facilitator of the relationship between SA and Mrs. Moore during the King matter, was not SA's client; rather, Mrs. Moore, as the executor and sole beneficiary of the King estate was the client whom SA represented in the probate court. Mr. Moore was not an intended beneficiary of the estate because he did not directly inherit anything from it. Second, even if the prior representation included Mr. Moore, there would be no conflict because there is no substantial relationship between the two matters. Third, Mr. Moore, an attorney who is presumably aware of the possible conflicts involved in this case, has waived any possible conflict by waiting thirteen (13) months to raise this issue. Fourth, the investments of Mr. King, which Mrs. Moore inherited in cash form after the liquidation of the King estate, are a matter of public record in the probate court and therefore do not constitute confidential matters between SA and Mrs. Moore — let alone Mr. Moore. Fifth, in any event, there is no basis for disqualifying SA from the representation of the six plaintiffs other than Mr. Moore.
As Mrs. Moore's husband, Mr. Moore may have benefitted incidentally from the inheritance, but — as SA correctly argues — he was not a direct or intended beneficiary under the terms of the will.
II.
Our analysis of this motion begins with the recognition that "disqualification is 'a drastic measure which courts should hesitate to impose except when absolutely necessary.'" Owen v. Wangerin, 985 F.2d 312, 317 (7th Cir. 1993) (quoting Schiessle v. Stephens, 717 F.2d 417-419 (7th Cir. 1983)). The party moving for disqualification "bears a heavy burden of proving facts required for disqualification." Guillen v. City of Chicago, 956 F. Supp. 1416, 1421 (N.D. Ill. 1997). The court should also view motions for disqualification with "extreme caution" since such motions "can be misused as techniques of harassment." Freeman v. Chicago Musician Instrument Co., 689 F.2d 715, 722 (7th Cir. 1982).
The parties dispute whether the controlling rules of law regarding the disqualification of an attorney in this Court are Rules 1.9 and 1.10 of the Rules of Professional Conduct of the Northern District of Illinois ("NDRPC"), or Rule 1.9 of the Illinois Rules of Professional Conduct ("IRPC"). Because these two rules provide for the same standard of review, in all material respects, the dispute is not significant to our recommendation.
In GLS Development, Inc. v. Wal-Mart Stores, Inc., 3 F. Supp.2d 952 (N.D.Ill. 1998), Judge Shadur of the Northern District of Illinois opined that in a diversity case, such as this one, evidentiary determinations are federal in nature, so that if there is any "divergence" between the rules in the Northern District and those in Illinois, then the Northern District rules would prevail on the federal evidentiary issues. Id. at 969-970. In this case, there is no need to choose between the two rules.
NDRPC 1.9 states in relevant part:
Rule 1.9. Conflict of Interest: Former Client
• A lawyer who has formerly represented a client in a matter shall not thereafter 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 disclosure. * * *
NDRPC 1.10 states, in relevant part:
Rule 1.10. Imputed Disqualification: General Rule
• No lawyer associated with a firm shall represent a client when the lawyer knows or reasonably should know that another lawyer associated with that firm would be prohibited from doing so by Rules 1.7, 1.8(c) or 1.9, except as permitted by Rules 1.10(b), (c), or (d), or by Rule 1.11 or Rule 1.12.
Rule 1.7. Conflict of Interest: General Rule
• the lawyer reasonably believes the representation will not adversely affect the relationship with the other client; and
See
NDRPC 1.8(c) and the exceptions in NDRPC 1.10(b), (c), (d), and 1.11-1.12, are not applicable in this case.
• * * *
• * * *
• A disqualification prescribed by Rule 1.10 may be waived by the affected client under the conditions stated in Rule 1.7.
• * * *
See Northern District of Illinois Rules of Professional Conduct 1.9 and 1.10 (emphasis added).
IRPC 1.9 provides in relevant part:
Rule 1.9. Conflict of Interest: Former Client
• A lawyer who has formerly represented a client in a matter shall not thereafter:
• 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 disclosure; or
• use information relating to the representation to the disadvantage of the former client, unless:
• such use is permitted by Rule 1.6; or
• the information has become generally known.
See Illinois Rule of Professional Conduct 1.9 (emphasis added).
SA apparently wants to use IRPC 1.9, rather than the NDRPC 1.9 and 1.10, because — based on IRPC 1.9(a)(2)(B) — SA argues that any information in their possession which possibly could have been used "to the disadvantage of" Mr. Moore (information they do not admit using in any way during the pendency of this litigation) does not require disqualification was because it was a matter of public record in the probate court, and thus "generally known." Although the NDRPC does not contain an express "generally known" exception, the Court finds that the "generally known" exception in any event does not apply on the facts of this case. The "generally known" exception applies to the use of information relating to a prior representation, outlined in IRPC 1.9(a)(2), and not to the situation here — the representation of a person with interests materially adverse to those of the former client, which is outlined in IRPC 1.9(a)(1). Thus, reliance on the "generally known" exception could not defeat Plaintiff's motion.
The main issues in this motion are whether Mr. Moore was SA's former client and, if so, whether the former representation involving the probate of the King estate is the same or substantially related to the current representation of the Van Hedge Fund. With respect to these issues, the basic standard of the two rules, IRPC 1.9(a)(1) and NDRPC 1.9, is the same, namely, that the former representation be the "same" or "substantially related" to the current one, and, when applied in this case, resolves all disputed issues in favor of SA.
There is also the issue of waiver. The Court has some skepticism that a seasoned attorney such as Mr. Moore would not remember the prior representation by SA — and the potential conflict of interest it might raise — until after his deposition, especially given his current vigorous assertions that SA possesses confidential information about him that may be substantially related to the pending lawsuit that he has currently filed. If necessary to the outcome of this motion, the Court would be inclined to find waiver. However, we do not need to decide that question, since Mr. Moore's motion fails on the merits.
Apart from the practical concerns attendant to any possible disqualification of SA's representation of Van Hedge Fund for only one plaintiff — rather than all plaintiffs — there remains several factual bases for denying plaintiff's motion. First, Mr. Moore was not Sidley Austin's true client. Mr. Moore wants the Court to define "client" to mean the person who set up the relationship and facilitated its inner workings; but the real "client" for purposes of representation was Mrs. Moore, the executor of the King estate and the person whose interests were directly served by the relationship with SA. Our basis for drawing this conclusion is based on the simple fact that the will governing the King estate specified Mrs. Moore as the executor, the trustee and the sole beneficiary. All work done in connection with the estate was to carry out the terms of the will of Mr. King; and it was Mr. King's will that provided that Mrs. Moore — not Mr. Moore — inherit his estate. Mr. Moore likely profited from Mr. King's will, but only indirectly, by virtue of his relationship with Mrs. Moore.
Thus, Mr. Moore's relationship, if any, with Sidley Austin was limited to helping facilitate the representation of Mrs. Moore. Mr. Moore's counsel admits as much when he states "the only real function a law firm performs in the probating of an estate is to insure that the beneficiaries of an estate each receive their proper respective inheritances." (Moore Mem. 3). In this case, the only function SA performed in the King matter was to ensure that Mrs. Moore received her proper inheritance. Even if Mr. Moore enjoys an incidental benefit from the inheritance, he cannot now enjoy the status of a co-client for purposes of disqualifying SA.
Second, even if Mr. Moore could somehow be characterized as a former client of SA, which this Court finds he was not under NDRPC 1.9 and 1.10 or IRPC 1.9, Mr. Moore has not met his "heavy burden" of showing that the representation was concerning a matter that is "the same or substantially related" to this case. Mr. Moore asserts that he has met this burden because this case will involve analysis, among other things, of Mr. Moore's investment history, and that this is precisely what SA learned about in the earlier representation. (Moore Mem. 11). For the following reasons, the Court disagrees.
At the threshold, although Mr. Moore contends that SA obtained intimate knowledge about his financial and investment profile during the representation — information that has been used in this litigation, Mr. Moore's assertion is not supported by evidence in the record, and it is, thus, far too conclusory to have any merit. This is particularly true given Mr. Moore's own characterization of the representation as very limited in scope — "to ensure that beneficiaries of an estate each receive their proper respective inheritances." (Moore Aff. ¶ 3). In contrast, SA has provided documents, obtained and produced in discovery from Stephen Landis of the Van Hedge Fund, which indicate that Mr. Moore provided Mr. Landis with detailed information about his financial and investment profile during their investment consultations and/or conversations. SA claims that the deposition questions, which Mr. Moore says are based on the prior representation, were in fact based upon Mr. Landis' notes from these conversations. Particularly in light of Mr. Moore's failure to link any specific deposition questions to information from the prior representation, the Court finds this to be persuasive evidence that any deposition questions related to Mr. Moore's current financial and investment profile could have been based on the information produced in this lawsuit.
During the prior representation, SA did obtain knowledge of the contents of Mr. King's estate. However, that knowledge does not provide information which is "substantially related" to this case. Any knowledge gained by SA regarding Mr. King's investment strategies and/or the content of his investments became irrelevant once the estate was liquidated, converted to cash and distributed in cash form to Mrs. Moore. The cash that Mrs. Moore (and Mr. Moore by virtue of his relationship with her) received from the estate may have been reinvested by Mr. Moore and his wife. But SA would not have any information about those investments, since the representation ended when the King estate was closed — and Mr. Moore does not claim otherwise.
Thus, apart from the fact that the prior representation involved a probate case and this is a securities fraud lawsuit, there is the material difference that the former representation involved the assets and investments of Mr. Willard King, and this lawsuit involves — as Mr. Moore puts it — his own investment history. This twain does not meet — not even if the money that Mr. Moore used to invest is the money he and his wife inherited from Mr. King's estate. The money invested was in cash form, and as such, it provided no trail or evidence from which SA could draw any confidential information to use in the present litigation.
CONCLUSION
To summarize: Mr. Moore is not and was not SA's client at any time prior to this litigation. The fact that he had contact with SA based on SA's representation of his wife, Mrs. Moore, in a matter that concluded fifteen years ago and from which he arguably benefitted in an incidental way, does not change this result. To disqualify SA from their representation of the Van Hedge Fund with respect to Mr. Moore, the Court would need to find that it was Mr. Moore who was, in fact, the former client under the NDRPC and IRPC. The Court would also need to find a substantial relationship between this case and the probate matter. To make such a showing, Mr. Moore would need to produce evidence that he was an intended beneficiary of the King estate, and that the matters involved in that representation are substantially related to the current action. Mr. Moore has produced no evidence material to either determination. He has, therefore, not carried his "heavy burden of proving facts required for disqualification." Given that disqualification is "a drastic measure" to be imposed only when "absolutely necessary," the Court finds that Mr. Moore's motion, which is unsubstantiated by material evidence, should be denied. THEREFORE, the Court denies the motion for disqualification (doc. #84-1), filed by plaintiff, Thomas Moore.