Opinion
No. CV 03 0475408 S
February 9, 2004
MEMORANDUM OF DECISION RE DEFENDANT'S MOTION TO DISQUALIFY #113
On May 28, 2003, the plaintiffs, Richard Penna and Richard Tortora, through their attorney, Mark Bergamo, of the Marcus Law Firm, filed an amended complaint against the defendants, Stuart Margolis, an attorney, and the law firm of Berdon, Young Margolis, P.C., alleging that the defendants did not adequately represent the plaintiffs in the underlying foreclosure suit against the plaintiffs by Webster Bank and subsequent assignees of Webster Bank. The plaintiffs retained new counsel, the Marcus Law Firm, to remedy the alleged malpractice. The defendants seek to disqualify Edward Marcus and the Marcus Law Firm from representing the plaintiffs in this matter.
It is noted that all of the pleadings and filings on behalf of the plaintiffs in this case have been filed by Mark Bergamo, an attorney with the Marcus Law Firm, not Edward Marcus. The plaintiffs have acknowledged, however, in paragraph five of each of their affidavits dated September 10, 2003 that Edward Marcus is representing them in this matter.
The underlying action involves a foreclosure suit brought by Webster Bank against the plaintiffs in June 1996. Webster Bank v. Penna, Superior Court, judicial district of New Haven, Docket No. CV 96 0399743. Webster Bank allegedly foreclosed on a note and mortgage, which were secured by the plaintiffs' property located at 102 Blake Street in New Haven, Connecticut. The defendants had been representing the plaintiffs in various matters, including the financing of the 102 Blake Street property, since September 1988. The plaintiffs engaged the legal services of the defendants to represent them in the foreclosure suit by Webster Bank. As part of its representation, "the [d]efendants were to negotiate a settlement of any remaining debt left after the foreclosure of the property and were to advise the [p]laintiffs in the course of the foreclosure." (Plaintiffs' Amended [Revised] Complaint, ¶ 9.)
In September 1996, the note and mortgage allegedly were purchased by and assigned to the Wilshire Credit Corporation. Wilshire allegedly requested financial information and a proposal of settlement from the defendants in January 1997. The plaintiffs allege that the defendants never submitted a proposal to Wilshire in 1997. A judgment of strict foreclosure allegedly was entered by the court and Wilshire allegedly filed its motion for deficiency judgment against the plaintiffs in June 1997. In September 1998, the court granted an order awarding Wilshire a deficiency judgment against the plaintiffs. In February 2001, the defendants submitted a proposal on behalf of the plaintiffs to Wilshire to settle all claims for a sum of $30,000, which Wilshire rejected. In May and June 2001, judgment liens allegedly were filed against properties owned by the plaintiffs and in June of that year, Wilshire allegedly obtained a weekly order of payments against the plaintiffs in the amount of $35 per week.
Wilshire assigned the judgment and the judgment liens to Rosedale Development Associates, LLC in June 2001. Rosedale subsequently instituted a foreclosure action of a judgment lien held against property owned by the plaintiff Penna, located at 2456 Whitney Avenue in Hamden, Connecticut, in November 2001. In January 2002, the plaintiffs allegedly discharged the services of the defendants and retained the Marcus Law Firm to represent the plaintiffs in the judgment lien foreclosure action brought by Rosedale and to negotiate a settlement of the judgment liens. The Marcus Law Finn allegedly reached a settlement with Rosedale on behalf of the plaintiffs in June 2002.
In the present action, the plaintiffs allege in their complaint that the "[d]efendants failed to exercise the skill and learning commonly applied under all the circumstances by an average and prudent member of the profession that would have prevented the occurrence of injuries to the [p]laintiffs . . ." (Plaintiffs' Amended [Revised] Complaint, ¶ 51.) Specifically, the plaintiffs allege that the defendants failed to advise the plaintiffs with reasonable and diligent efforts to fully pay the debt and to solicit the disclosure of information from the plaintiffs in order to negotiate the settlement of the debt. Furthermore, they allege that the defendants failed to limit the foreclosure remedy to that of only an order of weekly payments and not subject the plaintiffs to further foreclosure proceedings on other properties.
The defendants filed an answer and three special defenses on August 4, 2003. The first special defense alleges comparative responsibility on the part of the plaintiffs. The second special defense alleges that the plaintiffs' claims are precluded or mitigated by the doctrine of laches and/or the doctrine of unclean hands. The third special defense alleges that the plaintiffs' claims are precluded or mitigated by the plaintiffs' failure to mitigate those damages alleged in the complaint.
On August 6, 2003, the defendants filed a motion to disqualify Marcus and the Marcus Law Firm on the ground that a material conflict of interest exists because Marcus and other members of the Marcus Law Firm will be necessary witnesses in the present legal malpractice claim. The defendants argue that Marcus and the Marcus Law Firm represented the plaintiffs in the underlying suit that gives rise to this claim at the same time the defendants were representing the plaintiffs. They argue that the Marcus Law Firm was first consulted by the plaintiffs in mid-1999, two and a half years before the plaintiffs allegedly discharged the defendants, in an effort to refinance other properties to resolve the deficiency. Furthermore, the defendants argue that because this case is in its infancy, the plaintiffs would not be burdened if their counsel were disqualified. Rather, the defendants argue that they would be burdened if they were not permitted to subpoena Marcus and other members of the Marcus Law Firm. In support of their motion, the defendants submit a memorandum of law and cite to rules 1.7, 1.10 and 3.7 of the Rules of Professional Conduct.
On August 27, 2003, the plaintiffs filed a memorandum of law in opposition to the defendants' motion to disqualify, arguing that the involvement in the deficiency judgment and in the judgment liens prior to January 2002 by Marcus and the Marcus Law Firm was limited and that testimony from Marcus or from any other member of the Marcus Law Firm is unnecessary. They argue that there is no relevant testimony required from Marcus that cannot be received from another source. They argue that the work done for the plaintiffs in 1999 by the Marcus Law Firm was the negotiation of an escrow account involving the refinancing of certain property owned by Penna for the purpose of paying an unrelated first mortgage held by Webster Bank and irrelevant to the issue in the current claim. Moreover, the plaintiffs assert that the refinancing of the property was done by an attorney named Brian Stone, who is no longer a member of the Marcus Law Firm. The plaintiffs further argue that they are entitled to counsel of their choice and that they would suffer hardship if they were forced to retain new counsel at this point in the proceedings. The plaintiffs submit their sworn affidavits in support of their memorandum in opposition to the defendants' motion to disqualify.
On September 8, 2003, the defendants filed a reply to the plaintiffs' memorandum of law in opposition to the defendants' motion to disqualify, along with two exhibits: (1) a letter from Penna to Margolis; and (2) a copy of Penna's sworn affidavit. On September 11, 2003, the plaintiffs filed a response to the defendants' reply, along with additional affidavits from each of the plaintiffs. The court heard oral argument on October 27, 2003.
"The trial court has the authority to regulate the conduct of attorneys and has a duty to enforce the standards of conduct regarding attorneys . . . The trial court has broad discretion to determine whether there exists a conflict of interest that would warrant disqualification of an attorney." (Citations omitted.) Bergeron v. Mackler, 225 Conn. 391, 397, 623 A.2d 489 (1993). "In disqualification matters, however, [the court] 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 defendant's interest in protecting confidential information; (2) the plaintiffs' interest in freely selecting counsel of their choice; and (3) the public's interest in the scrupulous administration of justice." (Citations omitted; internal quotation marks omitted.) Id., 397-98. "A party moving for disqualification of an opponent's counsel must meet a high standard of proof." (Internal quotation marks omitted.) Chaiklin v. Bacon, Superior Court, judicial district of Hartford, Docket No. CV 99 0590439 (June 30, 2000, Rubinow, J.).
The defendants cite to rule 3.7 of the Rules of Professional Conduct for the proposition that Marcus should be disqualified because he will be a necessary witness in the present claim. Rule 3.7 provides: "(a) A lawyer shall not act as advocate at a trial in which the lawyer is likely to be a necessary witness except where: (1) The testimony relates to an uncontested issue; (2) The testimony relates to the nature and value of legal services rendered in the case; or (3) Disqualification of the lawyer would work substantial hardship on the client. (b) A lawyer may act as advocate in a trial in which another lawyer in the lawyer's firm is likely to be called as a witness unless precluded from doing so by Rule 1.7 or Rule 1.9."
"The Connecticut Supreme Court has interpreted [r]ule 3.7 to require an attorney to withdraw `if he . . . reasonably foresees that he will be called as a witness to testify on a material matter.'" (Emphasis in original.) Talcott Mountain Science Center for Student Involvement, Inc. v. Abington Ltd Partnership, Superior Court, complex litigation docket at Waterbury, Docket No. X01 CV 95 0152121 (June 28, 2002, Hodgson, J.) ( 32 Conn. L. Rptr. 420, 421), quoting State v. Crespo, 246 Conn. 665, 684-85 n. 14, 718 A.2d 925 (1998), cert. denied, 525 U.S. 1125, 119 S.Ct. 911, 142 L.Ed.2d 909 (1999). "An attorney is not absolutely prohibited from testifying on behalf of a client, but should only do so when the testimony concerns a formal matter, or the need for the testimony arises from an exigency not reasonably foreseeable . . . Where, however, an attorney does not withdraw, a court exercising its supervisory power can . . . disqualify the attorney." (Citations omitted; internal quotation marks omitted.) Enquire Printing Publishing Co. v. O'Reilly, 193 Conn. 370, 376, 477 A.2d 648 (1984).
"[W]hether a witness `ought' to testify is not alone determined by the fact that he has relevant knowledge or was involved in the transaction at issue. Disqualification may be required only when it is likely that the testimony to be given by the witness is necessary. Testimony may be relevant and even highly useful but still not strictly necessary. A finding of necessity takes into account such factors as the significance of the matters, weight of the testimony and availability of other evidence." (Internal quotation marks omitted.) Roosevelt Building Product Co. v. Morin Corp., Superior Court, judicial district of Litchfield, Docket No. CV 00 0083595 (September 4, 2001, Cremins, J.) ( 30 Conn. L. Rptr. 331).
The defendants argue that Marcus will be a necessary witness to the present legal malpractice claim because Penna consulted Marcus and the Marcus Law Firm in 1999 regarding the establishment of an escrow agreement with People's Bank, arguably aimed at securing a loan to refinance certain properties for the purpose of satisfying the underlying deficiency judgment. At that time, the defendants still represented the plaintiffs. The defendants submit Penna's own affidavit in support of their contention that all negotiations for resolving the deficiency judgment through the escrow account were conducted by the Marcus Law Firm. Furthermore, the defendants argue that the plaintiffs retained the services of Marcus and the Marcus Law Firm to rectify the alleged malpractice of the defendants. Accordingly, the defendants argue that testimony will be needed from members of the Marcus Law Firm to discuss, among other items, the loan, the escrow account, the negotiations with People's Bank, their efforts to ensure that the deficiency judgment was secured, any potential admissions by the plaintiffs and what efforts the Marcus Law Firm undertook to coordinate its representation of the plaintiffs with the defendants, who were also representing the plaintiffs at the same time. The defendants argue that responses to these issues and additional discovery will be crucial to the establishment of their defenses, such as the failure to mitigate, comparative responsibility and whether to implead other parties as third-party defendants, namely the Marcus Law Firm.
The plaintiffs argue that testimony from Marcus or from any current member of the Marcus Law Firm is unnecessary. They argue that the Marcus Law Firm's involvement in the 1999 escrow account negotiation with People's Bank was limited and that the loan from People's Bank was unrelated to the underlying action. They argue that there is no relevant testimony required from Marcus that cannot be obtained from another source, namely Stone, a former member of the Marcus Law Firm, who allegedly worked as the primary attorney in the negotiation with People's Bank. Furthermore, the plaintiffs state in their affidavits dated September 10, 2003 that disqualification of their counsel would work a substantial hardship to their case.
It is likely that Marcus will be a necessary witness in this case. Penna avers in his affidavit dated August 20, 2003, that he refinanced certain property in 1999 to pay a mortgage held by Webster Bank, which was unrelated to the underlying deficiency action. He further avers that Marcus introduced him to a loan representative at People's Bank to secure a loan to pay the mortgage and Stone, a member of the Marcus Law Firm at the time, prepared and reviewed all of the documents to secure the loan from People's Bank. Penna also avers that People's Bank discovered the deficiency judgment, which is the subject of the underlying action, against his credit record and in order to close on the loan, the Marcus Law Firm negotiated an escrow agreement whereby People's Bank held certain monies to pay the deficiency judgment.
Based on the course of dealings between Penna and Marcus and the Marcus Law Firm in 1999, it is reasonably foreseeable that the defendants' defenses on contested issues such as comparative responsibility and the failure to mitigate will necessitate testimony from Marcus, who initiated Penna's meeting with the loan representative and, subsequently, may or may not have assisted in the negotiation of the escrow agreement after learning of Penna's deficiency judgment, which is the subject of the underlying action. It is likely that the defendants will need to subpoena Marcus regarding his firsthand knowledge of the plaintiffs' deficiency judgment, his involvement in the escrow account negotiations with People's Bank, whether the escrow did eventuate in the satisfaction of the deficiency judgment and whether Marcus sought to coordinate the Marcus Law Firm's representation of the plaintiffs with the defendants to resolve the underlying deficiency judgment and to mitigate the plaintiffs' damages. These issues are relevant to the defendants' defenses. Accordingly, it is reasonable to conclude that Marcus will be called as a necessary witness in the present legal malpractice claim regarding his role in the underlying deficiency action. The defendants have met their "high standard of proof"; Chaiklin v. Bacon, supra. Superior Court, Docket No. CV 99 0590439; and that Marcus should be disqualified under rule 3.7(a).
The exceptions to rule 3.7(a) of the Rules of Professional Conduct do not apply to this case because (1) the testimony of Marcus relates to a contested issue, (2) the testimony does not relate to the nature and value of legal services rendered in the case and (3) the disqualification of Marcus would not work substantial hardship on the client, which will be discussed below.
The defendants cite to rules 1.7 and 1.10 of the Rules of Professional Conduct in support of their argument that a material conflict of interest exists because Marcus will be a necessary witness, and that the Marcus Law Firm should be disqualified as a result. The defendants argue that because Marcus's representation of his clients will be adversely affected by his professional responsibility to the court and to the defendants if he testifies as a witness about the underlying foreclosure action, Marcus must be disqualified. The defendants further argue that under rule 1.10(a), the Marcus Law Firm should be disqualified under the principle of imputed disqualification.
Rule 1.7(b) of the Rules of Professional Conduct provides: "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 . . ."
Rule 1.10(a) of the Rules of Professional Conduct provides: "While lawyers are associated in a firm, none of them shall knowingly represent a client when any one of them practicing would be prohibited from doing so by Rules 1.7, 1.8(c), 1.9, or 2.2."
The plaintiffs argue that the defendants' use of rule 1.7 is misdirected and that the rule does not apply to the facts of this case because rule 1.7 pertains to the relationship between the client and its counsel. Accordingly, the plaintiffs argue that rule 1.10(a) has no applicability because the rule only applies when there is a prohibition under rules 1.7, 1.8(c), 1.9, or 2.2, which arguably is not the case here. Furthermore, the plaintiffs emphasize that the work related to the negotiation of an escrow account involving the refinancing of Penna's property was done by Stone, who is no longer a member of the Marcus Law Firm and is available to testify. The plaintiffs argue that because rules 1.7 and 1.10 do not apply, there is no conflict of interest and there is no need to disqualify Marcus or the Marcus Law Firm.
Rule 1.8(c) of the Rules of Professional Conduct provides: "A lawyer shall not prepare an instrument giving the lawyer or a person related to the lawyer as parent, child, sibling, or spouse any substantial gift from a client, including a testamentary gift, except where the client is related to the donee."
Rule 1.9 of the Rules of Professional Conduct provides: "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 (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 2.2 of the Rules of Professional Conduct concerns the role of a lawyer acting as an intermediary between clients.
In Beckenstein Enterprises v. Smith, Superior Court, complex litigation docket at Tolland, Docket No. X07 CV 02 0080437 (March 28, 2003, Sferrazza, J.) ( 34 Conn. L. Rptr. 459), the court denied the plaintiffs' motion to disqualify certain defendants' counsel based on the counsel's previous representation of some of the plaintiffs and another defendant. The movants argued that rules 1.7, 1.9, 1.10, and 3.7 prohibited the representation. Beckenstein Enterprises v. Smith, supra, 459. The court, addressing the applicability of rule 1.7, stated that "[a]lthough the movants cite Rule of Professional Conduct 1.7, that rule applies to conflicts of interest between two present clients and is, therefore, inapplicable to the current circumstances." (Emphasis in original.) Id., 459-60.
Rule 1.7 does not apply to the present case. The commentary to rule 1.7 states: "Subsection (a) prohibits representation of opposing parties in litigation. Simultaneous representation of parties whose interests in litigation may conflict, such as coplaintiffs or codefendants, is governed by subsection (b)." As to subsection (a), the Marcus Law Firm does not represent the opposing parties in this litigation. Similarly, under subsection (b), the Marcus Law Firm is not simultaneously representing parties on the same side of the litigation whose interests may conflict. The defendants rely on the "third person" language of subsection (b), arguing that Marcus and the Marcus Law Firm owe a duly to the court and to the defendants, as third persons, to testify, and that this duty will adversely affect their representation of the plaintiffs. This argument is unfounded because Marcus and the Marcus Law Firm do not have a duty to testify. Furthermore, the plaintiffs submit their affidavits dated September 10, 2003, stating that they would prefer that the Marcus Law Firm continue its representation of them. "Rule 1.7(b) cannot be used as a vehicle to water down the liberalization of the rules regarding continued representation of a client even though [a] firm member may be a witness." Johnston v. Casey, Superior Court, judicial district of New London, Docket No. CV 00 0557021 (April 25, 2002, Corradino, J.) ( 32 Conn. L. Rptr. 74, 76).
In Johnston, the court, Corradino, J., denied the plaintiff's motion to disqualify the law firm representing the defendant estate and estate fiduciary in a suit brought by the plaintiff caretaker of the decedent. Johnston v. Casey, supra, 32 Conn. L. Rptr. 74. The motion to disqualify was based on two grounds: (1) the plaintiff intended to call an attorney from the firm as a witness; and (2) the attorney's representation of the estate fiduciary in the pending matter was adverse to the interest of the decedent on a matter substantially related to present action. Id. The court held that rule 1.9 was not violated because the prior representation by the attorney was not substantially related to the matters in the instant action. Id., 75. Furthermore, the court held that rule 1.7(a) had no application in this case and that rule 1.7(b) was misapplied. Id., 76. Rule 3.7(b) could not be used to disqualify the entire firm in Johnston. Id.
Rules 3.7 and 1.10 do not bar the Marcus Law Firm from representing the plaintiffs. Subsection (b) of rule 32 provides that "[a] lawyer may act as advocate in a trial in which another lawyer in the lawyer's firm is likely to be called as a witness unless precluded from doing so by [r]ule 1.7 or [r]ule 1.9." It is not "mandatory for a lawyer, upon discovering she must testify on behalf of a client, to seek the services of another attorney and withdraw from the case. If either the lawyer-advocate or the lawyer-witness (both of the same law firm) has a conflict of interest pursuant to rule 1.7 (General Conflict) or rule 1.9 (Former Client) the lawyer-advocate may be precluded from the representation under rule 1.10. However, absent those specific conflict situations, even if a lawyer called to testify, another lawyer from the firm may now try the case." (Internal quotation marks omitted.) Johnston v. Casey, supra, 32 Conn. L. Rptr. 75. Furthermore, the court must bear in mind the plaintiffs' "right freely to choose [their] counsel." (Citation omitted; internal quotation marks omitted.) Bergeron v. Mackler, supra, 225 Conn. 397-98.
In the present case, the disqualification of Marcus under rule 3.7(a) should not in turn disqualify the Marcus Law Firm under subsection (b). It has been submitted that rule 1.7 is not applicable to this case for the reasons stated above and that rules 1.8(c), 1.9, and 2.2 do not apply to this case. Consequently, under rule 1.10(a), the principle of imputed disqualification cannot be used to disqualify the Marcus Law Firm. It should be noted that the plaintiffs argue in their memoranda and Penna states in his affidavit dated August 20, 2003, that attorney Stone handled the refinancing of Penna's property in 1999 and the closing of the loan from People's Bank while Stone was a member of the Marcus Law Firm. The plaintiffs argue that because Stone is no longer affiliated with the Marcus Law Firm he is therefore available to testify in the present case regarding the issues that the defendants have stated in their motion to disqualify.
As a final matter, the proposed disqualification of Marcus will not work a substantial hardship to the plaintiffs under rule 3.7(a)(3). The case is in the early stages of litigation and no discovery has occurred as of the date of oral argument. The motion to disqualify Marcus and the Marcus Law Firm was filed just five months after the action was commenced by service of process. Despite the plaintiffs' affidavits dated September 10, 2003, another attorney would have sufficient time to become familiar with the case before trial. Another attorney, namely Bergamo, has become familiar with the case because he has filed all of the pleadings with the court. The hardship to the plaintiffs is minimal, at best. Command Electric, Inc., v. Manousos, Superior Court, judicial district of Hartford, Docket No. CV 96 0560381 (April 14, 1997, Aurigemma, J.) ( 19 Conn. L. Rptr. 294) (the court found that the hardship to the defendant was minimal because the motion to disqualify was filed within three months after the return date and the case was less than one year old).
For the foregoing reasons, the court grants the defendants' motion to disqualify Marcus from his representation of the plaintiffs in the present legal malpractice action. It is reasonably probable that Marcus will be called as a necessary witness in this litigation and under rule 3.7(a), he should be disqualified.
The defendants' motion to disqualify the Marcus Law Firm from its representation of the plaintiffs in the present case is denied. Rule 3.7(b) allows other members of a disqualified lawyer's firm to continue its representation unless precluded by rules 1.7 or 1.9, which are inapplicable to this case. There is insufficient evidence of any necessity for the defendants to call any other members of the Marcus Law Firm as witnesses in this case.
Howard F. Zoarski Judge Trial Referee.