Opinion
Civil Action No. 3:01-CV-1331-BF
May 3, 2003
MEMORANDUM OPINION AND ORDER
"Plaintiff's Motion to Disqualify," filed December 20, 2002, is before this Court. The plaintiff, Robert B. Woolley ("Woolley"), seeks to disqualify the law firm of Sopuch Arnett Higgins Gaubert from representing the defendant, Charles M. Sweeney ("Sweeney"), due to conflicts of interest. The motion is opposed. The Court held a hearing on this matter on March 28, 2003. Having considered the arguments and the evidence of the parties in connection with the pleadings, the motion to disqualify is hereby GRANTED.
I. Background
Before the Court are "Plaintiff's Motion to Disqualify," filed December 20, 2002; "Plaintiff's Brief in Support of Motion to Disqualify," filed December 20, 2002; "Appendix in Support of Plaintiff's Motion to Disqualify," filed December 20, 2002; "Response in Opposition to Plaintiff's Motion to Disqualify," filed March 10, 2003; "Appendix in Support of Response in Opposition to Plaintiff's Motion to Disqualify," filed February 21, 2003; "Supplemental Appendix in Support of Response in Opposition to Plaintiff's Motion to Disqualify," filed March 5, 2003; "Plaintiff's Reply in Support of Motion to Disqualify," filed March 17, 2003; "Appendix in Support of Plaintiff's Reply in Support of Motion to Disqualify," filed March 17, 2003; "Plaintiff's Post-Hearing Submission," filed April 4, 2003; "Defendant's Supplemental Brief in Opposition to Plaintiff's Motion to Disqualify," filed April 4, 2003; and "Appendix in Support of Defendant's Supplemental Brief in Opposition to Plaintiff's Motion to Disqualify," filed April 4, 2003.
To represent him in the instant case, Sweeney retained the law firm currently known as Sopuch Arnett Higgins Gaubert ("Sopuch Arnett"). (D.'s Br. at 5; D.'s App. at 175A.) All but one Sopuch Arnett attorney had worked at Bickel Brewer during the time that Bickel Brewer represented Woolley. (Hrg. Tr. at 25; D.'s App. at 302; P.s App. Ex. C1 at 1.) Three Sopuch Arnett attorneys had worked on the Ackerman Litigation on behalf of Woolley during their tenure at Bickel Brewer, namely Jamil N. Alibhai ("Alibhai"), Bryan J. Wick ("Wick"), and Michael L. Gaubert ("Gaubert"). (D.'s App. at 42-43, 154, 336A-G, 336H-O.)
On June 28, 2001, shortly after Sweeney had retained Sopuch Arnett to represent him in the instant case, J. Robert Arnett II ("Arnett"), a Sopuch Arnett partner, notified Woolley, through Woolley's then attorney of record Michael J. Betz ("Betz"), of Sopuch Arnett's potential or actual conflicts of interest with Woolley. (D.'s App. at 177-78; P.'s App. Ex. C at 2.) Pursuant to an inquiry by Betz, Bickel Brewer identified Alibhai, a Sopuch Arnett partner, as having worked on the Ackerman Litigation during his tenure at Bickel Brewer. (D.'s App. at 42-43, 154; P.s App. Ex. C at 2.) At this time, neither Bickel Brewer nor Sopuch Arnett identified Wick or Gaubert as having worked on the Ackerman Litigation. (P.s App. Ex. C at 3; D.'s App. at 42-43, 154-55.) Because Betz and his law firm also had potential or actual conflicts of interest with Sweeney due to Betz's former association with Bickel Brewer, Arnett and Betz agreed to discuss with their respective clients the possibility of waiving the conflicts of interest. (D.'s App. at 178; P.s App. Ex. C at 3.) The factual contentions of the parties diverge at this point. According to Sweeney, Woolley verbally agreed, through his attorneys, to waive the conflicts of interest if Sopuch Arnett screened Alibhai from this case. (D.'s Br. at 7-8; D.'s App. at 16, 183.) Sweeney further contends that Sopuch Arnett screened Alibhai from this case — at Woolley's insistence-and prepared a "Waiver of Conflicts" for Woolley's signature. (D.'s Br. at 8; D.'s App. at 148, 183, 191, 202A.) Finally, Sweeney contends that, in August 2001, Woolley declined to sign the "Waiver of Conflicts" but executed a second verbal waiver, through his attorneys, that he would not pursue the disqualification of Sopuch Arnett due to the money and effort involved. (D.'s Br. at 12-13; D's App. at 333.) Woolley, on the other hand, contends that Sopuch Arnett offered to screen Alibhai from this case in exchange for Woolley's waiver of the conflicts of interest. (P.s Br. at 6; P.'s App. Ex. C at 2.) Woolley further contends that Betz informed Sopuch Arnett that the "Waiver of Conflicts" prepared by Sopuch Arnett for Woolley's signature was too broad and that Woolley would not sign it. (P.'s Br. at 6; P.s App. Ex. C at 3-4.) Finally, Woolley contends that Betz continued his representation of Woolley believing that the screen of Alibhai would remain in place and that no other conflicts of interest existed with respect to Sopuch Arnett. (P.'s Br. at 6; P.'s App. Ex. C at 4.)
In March 2002, Sopuch Arnett subpoened Bickel Brewer's unredacted fee statements for the Ackerman Litigation. (D.'s App. at 23 8-44.) In April 2002, Bickel Brewer produced the unredacted fee statements to Sopuch Arnett without objection and without asserting any privilege. ( Id. at 47-48, 49.) Although the fee statements show that Wick, now a partner at Sopuch Arnett, worked 73.8 hours on the Ackerman Litigation during his tenure at Bickel Brewer, apparently neither Betz nor Sopuch Arnett recognized Wick's involvement in the Ackerman Litigation at that point. ( Id. at 320-21, 336H-O.) In addition to the fee statements, Sopuch Arnett subpoened the internal litigation files for the Ackerman Litigation from Bickel Brewer and from two California law firms that had provided local counsel in the Ackerman Litigation. ( Id. at 245-50, 251-56, 257-62.) All three law firms produced their entire, unredacted litigation files to Sopuch Arnett without objection and without asserting any privilege. ( Id. at 55-56.) With respect to all of the above subpoenas, the law firms concluded that Sweeney, as a former client of the law firms in the Ackerman Litigation, was entitled to the privileged and confidential material. ( Id. at 47-48, 55-56.)
Of Wick's 73.8 hours of work on the Ackerman Litigation, Wick worked 64.6 hours as a summer associate in 1996 and 9.2 hours as an associate attorney in 1997. (D's App. at 336I; D's Br. at 33 n. 33, 36-37.)
Finally, in August 2002, Sopuch Arnett served answers to interrogatories on Betz. (P.'s App. Ex. D at 1-18; D.'s App. at 293-94.) The answers, in part, criticized Bickel Brewer's work on the Ackerman Litigation, including the results obtained; asserted that Bickel Brewer's fees in the Ackerman Litigation had been unreasonable and excessive; and accused Woolley of not acting in good faith during the Ackerman Litigation. (P.'s Br. at 7-8; P.'s App. Ex. Dat 1-3, 3-6, 10-12, 13-14, 16; D.'s Br. at 16-17.) Because these answers appeared to divulge privileged and confidential information regarding the Ackerman Litigation, Betz performed another investigation into possible conflicts of interest with respect to Sopuch Arnett. (P.'s App. Ex. C at 4-5.) As a result of his investigation, Betz learned that Wick and Gaubert, both Sopuch Arnett partners, had worked on the Ackerman Litigation while at Bickel Brewer. (P.'s App. Ex. C at 4-5; D.'s App. at 169-70.) In addition to Wick's 73.8 hours of work on the Ackerman Litigation, Gaubert worked 8.8 hours on the Ackerman Litigation. (D.'s App. at 336A-G, 336H-O.) Due to the discovery of the allegedly undisclosed participation of Wick and Gaubert in the Ackerman Litigation, and due to the allegedly privileged and confidential answers to the interrogatories, Betz cancelled certain depositions and informed Sopuch Arnett that the disqualification of Sopuch Arnett was again an issue. (P.'s App. Ex. C at 5; D.'s App. at 165.) Furthermore, because he believed that he could be a witness with respect to the potential disqualification of Sopuch Arnett, Betz moved to withdraw as counsel for Woolley. (P.s App. Ex. C at 5.) On November 18, 2002, the Court granted Betz's motion to withdraw and substituted the law firm of Weil, Gotshal Manges as counsel for Woolley.
In the instant motion to disqualify, Woolley contends that the representation of Sweeney by Sopuch Arnett violates Texas Disciplinary Rules 1.09(a)(1) and 1.09(a)(3) and that these violations require the disqualification of Sopuch Arnett. (P.s Br. at 12-18, 19-21.) Sweeney, on the other hand, contends that Sopuch Arnett's representation of him does not violate Texas Disciplinary Rules 1.09(a)(1) or 1.09(a)(3) and that, even if it did, a balancing of the equities in this case weighs against the disqualification of Sopuch Arnett. (D.'s Resp. at 19-25, 30-38.)
The Court now turns to the legal standards that will guide its analysis.
II. Legal Standards
"Motions to disqualify are substantive motions affecting the rights of the parties and are determined by applying standards developed under federal law." In re Dresser Industries, Inc., 972 F.2d 540, 543 (5th Cir. 1992). In deciding a motion to disqualify in a "generic civil case," federal courts "consider the motion governed by the ethical rules announced by the national profession in . . . light of the public interest and the litigants' rights." Id. (recognizing that the Fifth Circuit's source for the ethical rules of the national profession is the American Bar Association). See also Woods v. Covington County Bank, 537 F.2d 804, 810 (5th Cir. 1976) (applying the American Bar Association's Code of Professional Responsibility). Another appropriate source of ethical rules is the state code of professional conduct. Resolution Trust Corp. v. Bright, 6 F.3d 336, 341 (5th Cir. 1993) ("[A] federal court may . . . hold attorneys accountable to the state code of professional conduct."); Dyll v. Adams, 3:94-CV-2734-D, 1997 WL 222918, at *2 (N.D. Tex. April 29, 1997) (Fitzwater, J.).
However, a finding that an ethics rule has been violated, without more, is not sufficient to support disqualification. FDIC v. United States Fire Ins. Co., 50 F.3d 1304, 1314 (5th Cir. 1995). "A court must take into account . . . the social interests at stake." Id. Specifically, a court should consider "whether a conflict has (1) the appearance of impropriety in general, or (2) a possibility that a specific impropriety will occur, and (3) the likelihood of public suspicion from the impropriety outweighs any social interests which will be served by the lawyer's continued participation in the case." Id. (quoting Dresser, 972 F.2d at 544.). See also Horaist v. Doctor's Hospital of Opelousas, 255 F.3d 261, 266 (5th Cir. 2001).
The Court now turns to the merits of the motion.
III. Analysis
As noted above, Woolley contends that the representation of Sweeney by Sopuch Arnett violates Texas Disciplinary Rules 1.09(a)(1) and 1.09(a)(3) and that these violations require the disqualification of Sopuch Arnett. (P.s Br. at 12-18, 19-21.) Sweeney, on the other hand, contends that Sopuch Arnett's representation of him does not violate Texas Disciplinary Rules 1.09(a)(1) or 1.09(a)(3) and that, even if it did, a balancing of the equities in this case weighs against the disqualification of Sopuch Arnett. (D.'s Resp. at 19-25, 30-38.)
Woolley has withdrawn his initial position that Sopuch Arnett's representation of Sweeney also violates Texas Disciplinary Rule 1.09(a)(2). (P.'s Br. at 11, 18-19; P.'s Reply at 2 n. 1.) As such, this Court need not address Rule 1.09(a)(2) or Sweeney's counter-argument that Woolley has no grounds for disqualification based upon confidential information given to Bickel Brewer. (D's Resp. at 25-30.)
Sweeney correctly argues that this Court must consider, in addition to the relevant Texas Disciplinary Rules, the ethical rules as announced by the national profession through the American Bar Association ("ABA"). See In re Dresser Industries, Inc., 972 F.2d 540, 543 (5th Cir. 1992) (recognizing that the Fifth Circuit's source for the ethical rules of the national profession is the ABA). However, because the Fifth Circuit has recognized that "ABA Rule 1.9 is identical to Texas Rule 1.09 in all important respects," In re American Airlines, Inc., 972 F.2d 605, 615 n. 2 (5th Cir. 1992), this Court need not separately analyze whether a violation of ABA Rule 1.9 has occurred. Nonetheless, the Court will consult the teachings of the ABA in analyzing the issues presented in the instant motion.
Texas Disciplinary Rules 1.09(a)(1) and 1.09(a)(3) state:
(a) Without prior consent, a lawyer who personally has formerly represented a client in a matter shall not thereafter represent another person in a matter adverse to the former client:
(1) in which such other person questions the validity of the lawyer's services or work product for the former client; or . . .
(3) if it is the same or a substantially related matter.
TEX. D.R. 1.09(a). In the instant case, in determining whether Sopuch Arnett's representation of Sweeney violates either of these disciplinary rules, it is noteworthy that Sweeney does not dispute that at least three Sopuch Arnett attorneys personally represented Woolley in the Ackerman Litigation during their tenure at Bickel Brewer. Nor does Sweeney dispute that Sopuch Arnett now represents Sweeney in a matter that is adverse to Woolley and that is substantially related to the Ackerman Litigation. However, Sweeney contends that Sopuch Arneti's representation of him does not violate either disciplinary rule because: (1) Sopuch Arnett is not attacking the validity of its services or work product with respect to Rule 1.09(a)(1); and (2) Woolley has waived all conflicts of interest with respect to Rules 1.09(a)(1) and 1.09(a)(3). (D.'s Br. at 19-25, 30-35; D.'s Supp. Br. at 6-8.) The Court will now address each of Sopuch Arnett's contentions and, if necessary, consider the social interests at stake to determine whether disqualification is appropriate in this case.
Sweeney correctly argues that Rule 1.09(a)(1) is limited to attorneys who personally represented a former client. (D.'s Supp. Br. at 6-7.) Sweeney then implies, without actually stating, that none of Sopuch Arnett's attorneys personally represented Woolley for purposes of Rule 1.09(a)(1). ( Id.) However, Sweeney does not dispute that at least three Sopuch Arnett attorneys personally represented Woolley for purposes of Rule 1.09(a)(3). Rule 1.09(a) does not distinguish between personal representation for purposes of Rule 1.09(a)(1) and personal representation for purposes of Rule 1.09(a)(3). TEX. D.R. 1.09(a). Sweeney does not explain the basis for his implicit distinction in this regard. Finally, Sweeney's own evidence establishes that Alibhai, Wick, and Gaubert, all Sopuch Arnett partners, worked on behalf of Woolley on the Ackerman Litigation during their tenure at Bickel Brewer. (D.'s App. at 42-43, 154, 336A-O.) As such, Sweeney does not seriously contend that at least three Sopuch Arnett attorneys did not personally represent Woolley in the Ackerman Litigation.
A. Texas Disciplinary Rules 1.09(a)(1) and 1.09(a)(3)
1. Services or Work Product Under Rule 1.09(a)(1)
A violation of Rule 1.09(a)(1) occurs if an attorney, on behalf of a new client, attacks the validity of the services or work product that the attorney provided to a former client. TEX. D.R. 1.09(a)(1) (emphasis added). Sweeney appears to concede, due to his total lack of argument on the subject, that Sopuch Arnett, on behalf of Sweeney, is attacking the validity of the legal services provided to Woolley by at least three Sopuch Arnett attorneys. Therefore, the Court could find a violation of Rule 1.09(a)(1) irrespective of Sweeney's work product arguments. Nonetheless, out of an abundance of caution, the Court will now address Sweeney's work product arguments. With respect to work product, Sweeney contends that: (1) Rule 1.09(a)(1) does not prohibit Sopuch Arnett from questioning the work product of Sopuch Arneti's former colleagues; (2) Rule 1.09(a)(1) does not apply to work performed by Wick as a summer associate; (3) Sopuch Arnett does not attack the validity of Bickel Brewer's settlement of the Ackerman Litigation, "only that [the work product] could have been done better and less expensively"; (4) Woolley would ultimately benefit from a successful attack on the reasonableness of Bickel Brewer's fees because he would be "entitled to recoup those losses from Bickel Brewer"; and (5) any violation of Rule 1.09(a)(1) is de minimis. (D.'s Br. at 30-35; D.'s Supp. Br. at 6-7.)
First, Sweeney contends that Rule 1.09(a)(1) does not prohibit Sopuch Arnett from questioning the work product of its former colleagues. (D.'s Supp. Br. at 6-7.) However, Sweeney ignores that Sopuch Arnett, on behalf of Sweeney, must question the work product of three of its current partners. Although Alibhai has been screened from this case, Sopuch Arnett nonetheless questions the work product of Alibhai, a partner at Sopuch Arnett who worked over 200 hours on the Ackerman Litigation during his tenure at Bickel Brewer. (D.'s App. at 42-43, 154; P.'s App. Ex. C at 2.) Sopuch Arnett also questions the work product of Wick, a partner at Sopuch Arnett who worked 9.2 hours on the Ackerman Litigation as an associate attorney during the latter part of his tenure at Bickel Brewer. (D.'s App. at 336I.) Finally, Sopuch Arnett questions the work product of Gaubert, a partner at Sopuch Arnett who worked 8.8 hours on the Ackerman Litigation during his tenure at Bickel Brewer. (D.'s App. at 336B.) All three of these attorneys contributed, even if only to a small degree, to the work product that resulted in the settlement of the Ackerman Litigation. As will be explained in greater detail below, it is of no moment that these three attorneys did not bill Woolley for all of their work on the Ackerman Litigation. Thus, the Court need not address the issue of whether Rule 1.09(a)(1) prohibits the questioning of the work product of an attorney's former colleagues.
Second, Sweeney contends that Rule 1.09(a)(1) does not apply to the 64.6 hours of work performed by Wick as a summer associate. (D.'s Br. at 30-31.) However, Sweeney ignores, as noted above, that Wick also worked 9.2 hours on the Ackerman Litigation as an associate attorney during the latter part of his tenure at Bickel Brewer. (D.'s App. at 336I.) As such, the Court need not address the issue of whether Rule 1.09(a)(1) applies to work performed by summer associates.
Third, Sweeney contends that Sopuch Arnett, on behalf of Sweeney, does not attack the validity, legality, or intended legal effect of the settlement of the Ackerman Litigation. (D.'s Supp. Br. at 7-8.) This argument is without merit. Although Sopuch Arnett does not attack the validity of the settlement as between Woolley and the Ackerman plaintiffs, Sopuch Arnett clearly attacks the validity of the settlement as between Woolley and Sweeney.
Fourth, Sweeney contends that Woolley would benefit from Sweeney's successful challenge to the reasonableness of the fees charged by Bickel Brewer during the Ackerman Litigation. (D.'s Br. at 35.) Specifically, Sweeney opines that Woolley would be able to recover funds from Bickel Brewer if Sweeney were to establish that Bickel Brewer billed Woolley an unreasonable amount of fees in the Ackerman Litigation. ( Id.) The argument is conclusory, speculative, and fails to cite to any legal authority. It also appears that the only "benefit" to Woolley would be the right to pursue additional litigation.
Finally, Sweeney contends that any violation of Rule 1.09(a)(1) is de minimis. ( Id. at 34-35.) This argument is without merit. The Court is not aware of any such thing as a "de minimis" ethics violation, and Sweeney does not cite to any authority for that proposition. In any event, as Sweeney suggests, disqualification is not appropriate for a violation of an ethics rule without first considering the social interests at stake. See FDIC v. United States Fire Ins. Co., 50 F.3d 1304, 1314 (5th Cir. 1995). Thus, any disqualification of Sopuch Arnett will not be based on a violation of Rule 1.09(a)(1) alone.
The Court concludes that Sopuch Arnett, on behalf of Sweeney, intends to attack the services and work product of its own attorneys in violation of Rule 1.09(a)(1). Specifically, the evidence establishes that Sopuch Arnett, on behalf of Sweeney, intends to attack the settlement of the Ackerman Litigation, to which at least three Sopuch Arnett attorneys contributed services and work product on behalf of Woolley. (D.'s App. at 42-43, 154, 336A-G, 336H-O; P.'s App. Ex. C at 2; P.s App. Ex. D. 1-3, 3-6, 10-12, 13-14, 16; P.'s Supp. Br. Ex. A at 5-6.)
Accordingly, the Court must now determine whether Woolley has waived the conflicts of interest described in Rules 1.09(a)(1) and 1.09(a)(3).
2. Waiver Under Rules 1.09(a)(1) and 1.09(a)(3)
Sweeney contends that Woolley has waived the conflicts of interest in this case three times. (D.'s Br. at 19-25.) According to Sweeney, the first waiver occurred in June 2001 when Woolley communicated to his attorneys that he would waive the conflicts of interest if Sopuch Arnett screened Alibhai from this case. ( Id. at 19.) Furthermore, according to Sweeney, the second waiver occurred in August 2001 when Woolley ultimately refused to sign the "Waiver of Conflicts" but informed his attorneys that he would not seek the disqualification of Sopuch Arnett. ( Id. at 19-20.) Finally, according to Sweeney, the third waiver occurred when Woolley delayed in pursuing the disqualification of Sopuch Arnett for more than one year after executing his second verbal waiver in August 2001. ( Id. at 24-25.)
It is well established that a client can consent to their former attorney's adverse representation despite conflicts of interests. MODEL RULES OF PROF'L CONDUCT R. 1.9 (1999) (requiring "consent after consultation"); TEX. GOVT' CODE ANN. T. 2, Subt. G App. A, Art. 10, § 9, Rule 1.09 (Vernon 2002) (requiring "prior consent"); RESTATEMENT (THIRD) OF THE LAW GOVERNING LAWYERS § 122 (2002) (requiring "informed consent"). See also Horaist v. Doctor's Hospital of Opelousas, 255 F.3d 261, 268 (5th Cir. 2001) (concluding that a client had waived the conflicts of interest after "full disclosure"). Such consent need not be in writing, although both the Model Rules of Professional Conduct and the Texas Rules of Professional Conduct imply that written consent is preferred. MODEL RULES OF PROF'L CONDUCT R. 1.9 (1999) (referring to a "signed" consent in the notes regarding waiver); TEX. GOV'T CODE ANN. T. 2, Subt. G App. A, Art. 10, § 9, Rule 1.06 n. 8 (Vernon 2002) (declaring that "it would be prudent for the lawyer to provide . . . at least a written summary of the considerations disclosed."). But see Lange v. Orleans Levee Dist., Nos. A. 97-987 and A. 97-988, 1997 WL 668216, at *4 (ED. La. Oct. 23, 1997) (disqualifying an attorney and his law firm despite the "apparent existence" of signed waivers). Waiver of the conflicts of interest may also be implied by the former client's delay in moving for disqualification. MODEL RULES OF PROF'L CONDUCT R. 1.9 (1999) ("A former client's delay may act as implied waiver of the conflict. . . ."); RESTATEMENT (THIRD) OF THE LAW GOVERNING LAWYERS § 122 cmt. c(i) (2002) (requiring a delay of an "unreasonable period of time" for waiver to apply). However, mere "acquiescence of a client without informed consent is tantamount to no consent at all." Selby v. Revlon Consumer Products Corp., 6 F. Supp.2d 577, 582 (N.D. Tex. 1997). Thus, for any waiver of conflicts of interest to be effective, the waiver must be made with "informed consent" based on "full disclosure." Horaist, 255 F.3d at 268; Selby, 6 F. Supp.2d at 582; TEX. GOV'T CODE ANN. T. 2, Subt. G App. A, Art. 10, § 9, Rule 1.09 n. 10 (Vernon 2002); RESTATEMENT (THIRD) OF THE LAW GOVERNING LAWYERS § 122 (2002). "Informed consent requires that the client or former client have reasonably adequate information about the material risks of such representation to that client or former client." RESTATEMENT (THIRD) OF THE LAW GOVERNING LAWYERS § 122 (2002). See also FDIC v. United States Fire Ins. Co., 50 F.3d 1304, 1314 n. 13 (5th Cir. 1995). Finally, full disclosure requires "disclosure of the circumstances, including the lawyer's intended role [on] behalf of the new client." MODEL RULES OF PROF'L CONDUCT R. 1.9 n. 12 (1999); TEX. GOV'T CODE ANN. T. 2, Subt. G App. A, Art. 10, § 9, Rule 1.09 n. 10 (Vernon 2002).
a. Less Than Full Disclosure
In the instant case, Woolley has never had the benefit of full disclosure. Although Sopuch Arnett immediately notified Woolley's counsel in June 2001 that potential or actual conflicts of interest exist, (D.'s App. at 177-78; P's App. Ex. C at 2), Sopuch Arnett did not — and has not ever disclosed any detailed information about the conflicts of interest such as would provide a meaningful basis for Woolley to give his informed consent to the conflicts of interest. Indeed, Woolley and his counsel have discovered every specific conflict of interest in this case. (D.'s App. at 42-43, 154, 169-70; P's App. Ex. C at 4-5.) Moreover, the "Waiver of Conflicts" prepared by Sopuch Arnett only purported to identify those attorneys at Sopuch Arnett who had been associated with Bickel Brewer during the time that Bickel Brewer represented Woolley in the Ackerman Litigation. (P.s App. Ex. C1 at 1.) The "Waiver of Conflicts" did not disclose that three Sopuch Arnett attorneys had actually worked on the Ackerman Litigation during their tenure at Bickel Brewer, nor did the "Waiver of Conflicts" disclose Sweeney's intended strategy of attacking the services and work product of at least three Sopuch Arnett attorneys. ( Id.) Therefore, at the time of Woolley's two alleged verbal waivers in June and August 2001, Woolley knew only that Alibhai had worked on the Ackerman Litigation during his tenure at Bickel Brewer and that seven other Sopuch Arnett attorneys had been associated with Bickel Brewer during the time that Bickel Brewer represented Woolley in the Ackerman Litigation. Woolley did not then know that Wick and Gaubert had worked on the Ackerman Litigation during their tenure at Bickel Brewer, nor did Woolley know that Sopuch Arnett, on behalf of Sweeney, intended to attack the services and work product of at least three Sopuch Arnett attorneys who had represented Woolley in the Ackerman Litigation. As such, any verbal waiver that Woolley might have executed in June and August 2001 did not constitute informed consent. Selby v. Revlon Consumer Products Corp., 6 F. Supp.2d 577, 582 (N.D. Tex. 1997) ("[A]cquiescence of a client without informed consent is tantamount to no consent at all.").
b. No Unreasonable Delay
Woolley did not unreasonably delay in urging the instant motion to disqualify and thereby waive the conflicts of interest. The evidence establishes that Woolley's counsel, in August 2002, discovered the participation of Wick and Gaubert in the Ackerman Litigation. (D.'s App. at 169-70; P.s App. Ex. C at 4-5.) The evidence also establishes that Woolley, in August 2002, first realized that Sopuch Arnett's role on behalf of Sweeney would be to attack the services and work product that Bickel Brewer had provided Woolley in the Ackerman Litigation. (P's App. Ex. C at 4-5.) Sweeney contends that Woolley should have known that Sopuch Arnett, on behalf of Sweeney, intended to attack the services and work product of Bickel Brewer because Sweeney's "Answer to Complaint and Affirmative Defenses," filed July 8, 2001, alerted Woolley to that strategy:
Plaintiff's claims against Defendant are barred by Plaintiff's fraudulent and illegal conduct. More specifically, the claims asserted by Plaintiff against Defendant are barred as a result of misrepresentations made by the Plaintiff and Plaintiff's agents and representatives to the Defendant and Defendant's representatives concerning monies allegedly owed by Defendant as a result of Plaintiff's unilateral decision to settle certain litigation.
. . .
Plaintiff has failed to mitigate his damages and consequently Plaintiff's alleged damages, if any, should be barred or reduced.
(P's Supp. Br. Ex. A at 5-6; Hrg. Tr. at 44-46.) This argument hurts, rather than helps, Sweeney's position because it admits that Sopuch Arnett knew about an additional conflict of interest with Woolley in July 2001 and that Sopuch Arnett did not disclose that additional conflict of interest to Woolley through consultation. The argument also admits that Sopuch Arnett knew about an additional conflict of interest with Woolley in July 2001 and that Sopuch Arnett failed to include that additional conflict of interest in the "Waiver of Conflicts" it had prepared for Woolley's signature. In light of Sopuch Arnett's earlier knowledge and failure to disclose the conflicts of interest, Sopuch Arnett's claim that Woolley unreasonable delayed in seeking disqualification is without merit. Woolley did not discover the additional conflicts of interest until August 2002, and Woolley's initial counsel — Betz — withdrew in November 2002. As such, the Court concludes that Woolley did not unreasonably delay in moving to disqualify in December 2002.
Having concluded that the representation of Sweeney by Sopuch Arnett violates Rules 1.09(a)(1) and 1.09(a)(3), and having concluded that Woolley has not waived those conflicts of interest, the Court must now consider the social interests at stake in deciding whether the disqualification of Sopuch Arnett is appropriate in this case. FDIC v. United States Fire Ins. Co., 50 F.3d 1304, 1314 (5th Cir. 1995).
B. Social Interests at Stake
As noted above, a finding that an ethics rule has been violated, without more, is not sufficient to support disqualification. Id. "A court must take into account . . . the social interests at stake." Id. Specifically, a court should consider "whether a conflict has (1) the appearance of impropriety in general, or (2) a possibility that a specific impropriety will occur, and (3) the likelihood of public suspicion from the impropriety outweighs any social interests which will be served by the lawyer's continued participation in the case." Id. (quoting Dresser, 972 F.2d at 544.). See also Horaist v. Doctor's Hospital of Opelousas, 255 F.3d 261, 266 (5th Cir. 2001).
1. Appearance of Impropriety
The appearance of impropriety in this case is significant. Sopuch Arnett, comprised almost entirely of former Bickel Brewer attorneys, represents Sweeney against Woolley, both former Bickel Brewer clients, in a matter that is substantially related to the subject of Bickel Brewer's former representation of Woolley. (Hrg. Tr. at 25; D.'s App. at 25-26, 29, 60-61.) Three Sopuch Arnett attorneys, all partners, worked on the substantially related matter, i.e., the Ackerman Litigation, on Woolley's behalf during their tenure at Bickel Brewer. (D.'s App. at 42-43, 154, 336A-G, 336H-O.) Although Sopuch Arnett immediately notified Woolley's counsel that actual or potential conflicts of interest exist, ( Id. at 177-78; P.s App. Ex. C at 2), Sopuch Arnett failed to disclose any meaningful information about the conflicts of interest. In each instance, Woolley and his counsel discovered the specific conflicts of interest without apparent assistance from Sopuch Arnett. (D.'s App. at 42-43, 154, 169-70; P.'s App. Ex. C at 4-5.) This is true even though Sopuch Arnett had the same or better access to the pertinent information as Woolley's counsel. Furthermore, the "Waiver of Conflicts" that Sopuch Arnett prepared for Woolley's signature in June 2001 failed to mention a specific conflict of interest known to Sopuch Arnett at that time, i.e., Sweeney's strategy of attacking the services and work product of Bickel Brewer, to which Sweeney alluded in his answer just a few days after Sopuch Arnett prepared the "Waiver of Conflicts." (P.'s App. Ex. C1 at 1; P.'s Supp. Br. Ex. A at 5-6; Hrg. Tr. at 44-46.) Finally, Sopuch Arnett persists in its representation of Sweeney despite Woolley's ultimate refusal to sign the broad waiver of "any potential or actual conflict of interest." (P.s App. Ex. C at 3-4; Ex. C1 at 1.)
Sweeney seems to argue that there is no actual impropriety in Sopuch Arnett's representation of him. (D.'s Br. at 36-37.) Without commenting further on the accuracy of this argument, the Court notes that the Fifth Circuit identifies the appearance of impropriety as one factor a court should consider in deciding whether an attorney or law firm should be disqualified. FDIC, 50 F.3d at 1314; Horaist, 255 F.3d at 266. See MODEL CODE OF PROF'L RESP. CANON 9 (1969) (articulating the "appearance of impropriety" standard); MODEL RULES OF PROF'L CONDUCT R. 1.9 n. 5, 1.10 (1999) (rejecting the "appearance of impropriety" standard for disqualification purposes but recognizing that the "avoidance of the appearance of impropriety" remains one of an attorney's "ongoing duties to a former client"). See also Howard v. Texas Dep't of Human Services, 791 S.W.2d 313, 315 (Tex.App.-Corpus Christi 1990) (holding that appearance of impropriety is established once a client shows a "prior attorney-client relationship" with an adverse attorney in a matter that is "substantially related" to the prior representation). For the reasons stated above, the Court concludes that Sopuch Arnett has failed to avoid the appearance of impropriety in its representation of Sweeney.
2. Likelihood of Public Suspicion
In similar fashion, the Court concludes that the public suspicion that would arise due to the improprieties in this case greatly outweighs the social interests that would be served by Sopuch Arnett's continued representation of Sweeney. See FDIC, 50 F.3d at 1314. At the outset, the Court notes that the violations of the ethics rules in this case, as announced by the state and national profession, are of a continuing nature and cannot be cured by any means less drastic than disqualification. See Dyll v. Adams, 3:94-CV-2734-D, 1997 WL 222918, at *2 (N.D. Tex. April 29, 1997) (Fitzwater, J.) (recognizing that disqualification is appropriate where, "[a]bsent disqualification, the ethical violation continues."). In addition, the Court is not certain that the full extent and nature of the conflicts of interest in this case have yet been discovered. Allowing Sopuch Arnett to continue in its representation of Sweeney would create a substantial risk that new conflicts of interest would be discovered at a later time, thereby further prejudicing Woolley and this case.
Sweeney contends that the prejudice to him would be "overwhelming" if Sopuch Arnett is disqualified from representing him in this case. (D.'s Br. at 37.) The Court disagrees. The trial in this case has been continued until November 2003, and the discovery and dispositive motions deadlines are still several weeks away. Moreover, in November 2002, Woolley's former counsel in this case withdrew due to the circumstances giving rise to the instant motion to disqualify. (P.s App. Ex. C at 5.) Furthermore, Sopuch Arnett could have avoided any prejudice to Sweeney by declining to represent him at the outset of this case. Finally, Sopuch Arnett's ability to zealously represent Sweeney in this case is limited by the duty of loyalty that at least three of its attorneys still owe to Woolley due to Woolley's status as a former client. MODEL RULES OF PROF'L CONDUCT R. 1.9 (1999) (commenting in the "legal background" to the rule that the duty of loyalty to a client survives the termination of the attorney-client relationship).
Three additional factors compel this Court to conclude that public suspicion of the legal profession would be heightened by Sopuch Arnett's continued representation of Sweeney. First, Sweeney has made much of the fact that all of the parties in this case possess all of the confidential information relating to the Ackerman Litigation. (D.'s Br. at 21, 22, 25, 37.) However, the Sopuch Arnett attorneys have, or are presumed to have, a much more intimate knowledge about Woolley than just the documented, confidential information relating to the Ackerman Litigation. The Sopuch Arnett attorneys know, or are presumed to know, how Woolley conducted himself during the Ackerman Litigation, including his most private, undocumented communications with his attorneys. Aside from the possible ethics violation of using this knowledge against Woolley, such knowledge gives Sopuch Arnett an unfair advantage in pursuing Sweeney's strategy of attacking Woolley's conduct in the Ackerman Litigation. MODEL RULES OF PROF'L CONDUCT R. 1.9 n. 4 (1999) (referring to improper uses of information to the detriment of a former client).
Second, Sweeney seems to argue that an attorney's professional responsibility to a former client only exists if the attorney has billed the former client for the representation. (D.'s Br. at 33 n. 141, 36.) Specifically, Sweeney implies that, because neither Wick nor Gaubert billed time to the Ackerman Litigation as licensed attorneys, neither Wick nor Gaubert should be held to their continuing professional responsibilities to Woolley. ( Id.) "[T]he existence of an attorney-client relationship does not depend upon the payment of a fee." Vinson Elkins v. Moran, 946 S.W.2d 381, 404 n. 15 (Tex.App.-Houston 1997). In the instant case, there is no dispute that an attorney-client relationship existed between Woolley and Bickel Brewer in the Ackerman Litigation. Nor is there any dispute that Wick and Gaubert both worked multiple hours for Woolley on the Ackerman Litigation during their tenure at Bickel Brewer. Thus, Wick and Gaubert owe to Woolley the ongoing duties of"confidentiality, loyalty, and avoidance of the appearance of impropriety." MODEL RULES OF PROF'L CONDUCT R. 1.10 (1999) (identifying an attorney's "ongoing duties to a former client" in the comments to the rule).
Finally, Sopuch Arnett has repeatedly relied on Woolley and his counsel to discover the specific conflicts of interest in this case. (D.'s App. at 42-43, 154, 169-70; P.'s App. Ex. C at 4-5.) In addition to the general notification to Woolley's counsel that potential or actual conflicts of interest exist with respect to Sopuch Arnett's representation of Sweeney, (D.'s App. at 177-78; P.'s App. Ex. C at 2), Sopuch Arnett owed an affirmative duty to Woolley to disclose potential conflicts of interest. E.F. Hutton Co., Inc. v. Brown, 305 F. Supp. 371, 398 (S.D. Tex. 1969) ("[T]he rule [against representing conflicting interests] requires counsel — not clients — to search out and disclose potential conflicts between clients and the facts which cause them to arise."); MODEL RULES OF PROF'L CONDUCT R. 1.9 (1999) (citing United States v. Stansfield, 874 F. Supp. 640 (M.D. Pa. 1994), for the concept that an attorney owes an affirmative duty to a former client to disclose potential conflicts of interest). Sweeney contends that Woolley's status as a sophisticated client means that Woolley can waive conflicts of interest based on general and non-explicit disclosures. (D.'s Br. at 20 (citing General Cigar Holdings, Inc. v. Altadis, S.A., 144 F. Supp.2d 1334, 1339 (S.D. Fla. 2001))). However, the Fifth Circuit requires "full disclosure" without regard to the sophistication of the client, Horaist v. Doctor's Hospital of Opelousas, 255 F.3d 261, 268 (5th Cir. 2001) (concluding that a client had waived the conflicts of interest after "full disclosure"), and the courts of this circuit do not appear to allow different levels of disclosure depending on the sophistication of the client. See, e.g., E.F. Hutton Co., Inc., 305 F. Supp. at 398 ("The rule against representing conflicting interests must of necessity be a rule of general application, for the protection of the ignorant as well as the sophisticated."). In any event, Sopuch Arnett is not permitted, as it did here, to withhold disclosure of a known conflict of interest.
As a final matter, the Court recognizes Sweeney's argument that Woolley is not prejudiced by Sopuch Arnett's representation of Sweeney. (D.'s Supp. Br. at 8-10.) The Court disagrees. In addition to the reasons discussed above, Woolley is prejudiced by the continuing concern that additional, undiscovered conflicts of interest will arise in this case. Sweeney also alleges that Woolley's motion to disqualify is nothing more than a litigation tactic to deprive Sweeney of his counsel of choice. ( Id. at 3-5.) The Court disagrees. In addition to the reasons discussed above, there is no evidence and no indication that Woolley's motion to disqualify is anything other than a good faith effort to end the prejudicial ethics violations that would continue in this case absent disqualification.
Because at least three Sopuch Arnett attorneys have conflicts of interest that preclude them from representing Sweeney in this case, the Court concludes that the entire law firm of Sopuch Arnett must be disqualified. MODEL RULES OF PROF'L CONDUCT R. 1.10 (1999) ("While lawyers are associated in a firm, none of them shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so by Rules 1.7, 1.8(c), 1.9 or 2.2.").
IV. Conclusion
For the foregoing reasons, Plaintiff's motion to disqualify is hereby GRANTED. Accordingly, the law firm of Sopuch Arnett Higgins Gaubert is hereby DISQUALIFIED from representing, or otherwise assisting or advising, the defendant, Charles M. Sweeney, in this case.
SO ORDERED.
WAIVER OF CONFLICTS
This Waiver of Conflicts is made by Robert E. Woolley ("Woolley"), on his own behalf and on behalf of any and all entities owned, in whole or in part, directly or indirectly, or controlled by Woolley ("the Woolley Entities"), as follows:RECITALS
WHEREAS, Woolley has instituted a civil action against his former business associate, Charles M. Sweeney ("Sweeney"), in the 116th Judicial Court of Dallas County, Texas, styled Robert E. Woolley, Plaintiff v. Charles M. Sweeney, Defendant, Cause No. 01-4811 (the "Lawsuit");WHEREAS, Sweeney has retained and desires to be represented in the Lawsuit by the law firm of Sopuch Nouhan Higgins Amett, L.L.P. ("SNHA");
WHEREAS, lawyers presently associated with SNHA, including John A. Sopuch III, J. Jeffrey Nouhan, Bart F. Higgins, J. Robert Arnett II, Michael L. Gaubert, Jamil N. Alibhai, Bryan J. Wick, and J. Sean Lemoine, previously were associated with the law firm of Bickel Brewer at times when Bickel Brewer represented Woolley and the Woolley Entities, and certain of the foregoing lawyers worked directly on such matters;
WHEREAS, Woolley has consulted with his own counsel, i.e., Banowsky, Betz Levine, L.L.P, regarding any potential or actual conflict of interest raised by the foregoing facts, and has received full and sufficient disclosure of the existence, nature, implications, and possible adverse consequences of such representation and the advantages involved, if any;
WAIVER
NOW, THEREFORE, Woolley, on his own behalf and on behalf of the Woolley Entities, does hereby waive any potential or actual conflict of interest arising from the representation of Sweeney by SNHA in connection with the Lawsuit; provided that Sweeney and SNHA exclude Jamil N. Alibhai from any participation in and communications regarding the Lawsuit by the procedure commonly known as a "Chinese wall."(P's App. Ex. C1 at 1.)