Opinion
600378/2010.
Decided May 6, 2011.
Ronald Herzog, Robinson Brog Leinwald Greene Genovese Gluck, P.C., New York, NY, Counsel for Hertz Herson Co. LLP.
Davidoff, Malitto Hutcher, New York, NY, Counsel for Matte and OBG.
The following documents were read on this motion:
Order to Show Cause for TRO and Preliminary Injunction......... 1. Affirmation of Chris McDonough in Support of Motion............ 2. Affidavit of Thomas Filardo in Support of Motion............... 3. Affirmation of Ronald S. Herzog in Support of Motion........... 4. Hertz, Herson Company Memorandum of Law in Support....... 5. Affirmation of Michael G. Zapson in Opposition to Motion....... 6. Affidavit of Michael Wexelbaum in Opposition to Motion......... 7. Hertz, Herson Company Reply Memorandum in Further Support 8.PRELIMINARY STATEMENT
Snow Becker Krauss P.C ("SNB"), counsel for Hertz, Herson Co., move to disqualify the firm of Davidoff, Malito Hutcher from representing defendants Oyster Bay Group, LLC ("OBG") as well as defendants Scott Matte, Neil Matte, NY Corp. and S CM Enterprises, LLC (the "Matte defendants").
BACKGROUND
Michael Wexelbaum was an employee of SNB until January 28, 2011, when he became a contract partner at Davidoff Malito. SNB represents Hertz Herson, a co-defendant of the Matte defendants, whom Davidoff Malito seeks to represent. The Matte defendants have interposed cross-claims against Hertz Herson. According to the affidavit of Thomas Filardo, Esq., an associate a SBK, he prepared a memorandum of law in support of a motion to dismiss certain cross-claims of OBG and the Matte Defendants. Because the senior attorney at the firm with whom he had been working, Ronald S. Herzog, was unavailable for medical reasons, he submitted the memorandum to Mr. Wexelbaum for review. It appears that Mr. Wexelbaum spent 3.8 hours in editing and discussing the memorandum.
Approximately one month later, Mr. Wexelbaum became a contract partner at Davidoff Malito. Thereafter, the Matte defendants sought the representation of Mr. Wexelbaum's new firm, Davidoff Malito, on this matter. Mr. Wexelbaum met with the Matte defendants to discuss their representation, and after seeing the pleadings on the case, realized that his prior firm represented an adverse party, Hertz Herson. After Hertz Herson declined to provided written, informed consent to Davidoff Malito's representation, and Davidoff Malito sought to appear on behalf of the Matte defendants, Hertz Herson interposed a motion to disqualify Davidoff Malito and Mr. Wexelbaum.
DISCUSSION
"The disqualification of an attorney is a matter that rests within the sound discretion of the court." ( Nationwide Assoc., Inc. v. Targee Street Intern. Med. Gr., P.C., 303 AD2d 728, 728 [2d Dept. 2003]). While the Rules of Professional Conduct are the starting point for a motion to disqualify on the basis of a conflict of interest, the Court of Appeals has warned that the Rules should not be applied mechanically without regard to the "significant adverse consequences [that disqualification would pose] to the client and others," ( Kassis v. Teacher's Ins. and Ann. Ass., 93 NY2d 611, 617), as well as consideration of client choice, an attorney's ability to practice, and the risk that disqualification motions may be used merely for tactical reasons ( id. at 616-17).
Indeed, a mechanical application of the Rules of Professional Conduct in this case would probably result in the disqualification of Mr. Wexelbaum and Davidoff Molito. Rules 1.9(a) and 1.10(a) of the Rules of Professional Conduct provide as follows:
Rule 1.9(b), relied upon by the movants, applies to an attorney who has not actually performed work in representation of a client, but is merely associated with the firm that has represented the client. (See Gartner Aff. at ¶¶ 53-54). The Rule thus addresses situations where an attorney's mere association with the firm, without any work on a matter, may result in imputed knowledge of client confidences such as in Cardinale v. Golinello ( 43 NY2d 288 [1977]).
1.9
(a) 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 gives informed consent, confirmed in writing.
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1.10
(a)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 Rule 1.7, 1.8 or 1.9, except as otherwise provided therein.
While "represented" is undefined, the New York State Bar Association suggested in its Ethics Opinion 723 (10/12/99) that if an attorney "work[s] on a pending matter" while associated with one firm, that firm's client becomes that attorney's "former client" (to whom he owes duties of loyalty and confidentiality) when he moves to a new firm that may perform work on the same pending matter. Under New York's case law, the result is not as clear, although Davidoff Malito admits that "[s]ome of the case law . . . could be seen as supporting an argument that where, as here, the work performed by Mr. Wexelbaum was recorded and billed to the former client . . . Mr. Wexelbaum would be determined to have personally represented' the plaintiff such as to personally disqualify Mr. Wexelbaum under Rule 1.9(a)." (Gartner Aff. at ¶ 58).
Under New York case law, a party moving to disqualify an attorney or firm because of a prior representation has an initial burden only to show "the existence of a prior attorney-client relationship between the moving party and opposing counsel, that the matters involved in both representations are substantially related, and that the interests of the present client and former client are mutually adverse." ( Nationwide Assoc., Inc. v. Targee St. Intern. Med. Gr., P.C., 303 AD2d 728 [2d Dept. 2003] and authorities therein). Additionally, the movant must make a threshold "showing of a risk that the attorney changing firms acquired any client confidences in the prior employment" (emphasis added). ( Kassis, 93 NY2d at 617). Once the movant has made the necessary showing, a presumption of disqualification arises, but this "presumption . . . may be rebutted." ( Id.) The party seeking to avoid disqualification may "disprove[] that the attorney had any opportunity to acquire confidential information in the former employment," thus removing any basis for the presumption, or it may attempt to "prove that any information acquired by the disqualified lawyer is unlikely to be significant or material in the litigation" (emphasis added). ( Id. at 617). Where a law firm successfully rebuts the presumption of disqualification because any information acquired by the disqualified lawyer is unlikely to be significant or material in the litigation, the "firm must nonetheless erect adequate screening measures to separate the disqualified lawyer and eliminate any involvement by that lawyer in the representation." ( Id. at 618).
While Tekni-Plex, Inc. v. Meyner and Landis ( 89 NY2d 123, 131 [1996]) and even Solow v. W.R. Grace Co. ( 83 NY2d 303, 313 [1994]) still speak of an "irrebuttable" presumption of disqualification, Kassis, a later case, has now made the Court of Appeal's position clear.
Beyond this framework, however, various factors have resulted in widely divergent analyzes in the decisional law. Such factors have included the size of the firm representing the prior client, relatedness of the current and prior matters, nature and extent of the prior representation, an attorney's level of responsibility and involvement on a matter, and a layman's perspective regarding impropriety. For example, the Court of Appeals has noted that its decision in Cardinale v. Golinello ( 43 NY2d 288) was greatly affected by its observation that the prior firm in which an attorney had been associated was "a small firm whose activities were characterized by an understandable informality' in which there was a constant cross-pollination' and cross current of discussion and ideas' among the employees." ( Solow v. W.R. Grace Co., 83 NY2d 303, 311 [quoting Cardinale, 43 NY2d at 292]). Therefore, in Cardinale, "it was of no moment that [the attorney to be disqualified] had never rendered legal services to [the firm's former client]" because the possibility of acquiring client confidences was too great and the appearance of impropriety might lead "laypersons . . . [to] believe that [the attorney in question] was being hired not only because of his legal talent, but also because of confidential information that he possessed." ( Solow, 83 NY2d at 311 [quoting Cardinale]).
On the other hand, the Court of Appeals determined in Solow v. W.R. Grace Co., ( 83 NY2d 303), that certain factors mitigated the concerns of Cardinale regarding the appearance of impropriety, and disqualification in the case would have unnecessarily curtailed client choice and attorneys' ability to practice. In Solow, a partner and some associates, in a firm of 372 attorneys, had formerly represented Grace for the limited purpose of preparing an expert witness, and the firm had a limited case file regarding only the witness and some scholarly articles. The partner and associates who had performed that work had left the firm when it undertook the representation of plaintiffs against Grace. While a partner (Joseph Forstadt) and one associate (Joseph Giamboi) who were arguably involved in the prior matter remained at the firm, the partner had billed no work to Grace and the associate had merely reviewed scholarly articles for a presentation. ( Id at 307). The court concluded that under these circumstances, the firm could offer proof that its remaining attorneys had acquired no client confidences that could be used against the firm's former client.
In Kassis v. Teacher's Ins. and Ann. Assoc. ( 93 NY2d 611) an attorney who conducted some depositions and had appeared for a firm client in a mediation, later joined a firm that was representing that client's adverse party on the same pending matter. The Court of Appeals concluded that given these facts, the attorney and firm to be disqualified could not rebut the "presumption of shared confidences" and that a screen to prevent the sharing of any acquired confidences with the new firm would be "inconsequential." The Court disqualified the attorney and firm in Kassis even though the attorney avowed that he had only read small parts of the firm's case file for purposes of the depositions he conducted, and that an effective screen had been erected since joining his current firm. The Court also reaffirmed the important roles of a presumption of disqualification, noting that it "reinforces an attorney's ethical obligation to avoid the appearance of impropriety," it "protects client confidences from misuse," and it "frees the former client from any anxiety that matters disclosed to an attorney will subsequently be used against it in related litigation." ( Id. at 616).
In this case, the movant, Hertz Herson, and Davidoff Malito agree that Mr. Wexelbaum performed 3.8 hours of billed work for Hertz Herson on this very same matter, and he is now attempting to represent the Matte defendants in adverse interests against Hertz Herson, with his new firm Davidoff Malito. Davidoff Malito contended at oral argument that Hertz Herson had not made the necessary showing of Mr. Wexelbaum's exposure to client confidences, suggesting that Hertz Herson submit a sealed affidavit detailing such privileged client confidences. Those client confidences are privileged and a party does not lose its privilege to such confidences when it seeks to protect those confidences by a motion to disqualify an attorney or firm that has previously represented it. Under Kassis, all a movant must show is a risk that client confidences were acquired.
Client confidences and secrets may have originally been understood to be the facts and issues discussed between a client and a lawyer. It certainly now embraces case strategy and other privileged matters arising from the attorney-client relationship — all the more so when those privileged and confidential matters regard the very same case. Mr. Wexelbaum acknowledges that any privileged attorney-work product would be a type of "client confidence" inasmuch as it is protected and confidential. (Wexelbaum Aff. at 22). Surely an attorney's side-switching does not deprive a party of the general protections of the attorney work-product doctrine and attorney-client privilege within the same case, merely because an attorney's representation involved only a few hours. This logic applies with greater force to discussions of case strategy and the merits of particular claims or defenses. Any discussion of case strategy or the merits of various claims, defenses, and other allegations, implicates a sufficiently deep and thorough knowledge of the facts of a case — deeper than would be revealed by public filings — and such knowledge will stem in part from client communications and other materials protected by the attorney-client privilege. Indeed, there is little question that Hertz Herson — the client to whom Mr. Wexelbaum owes a duty of loyalty and confidentiality — considers any information that Mr. Wexelbaum may have learned during his time on the case to be confidential, inclusive of case strategy and merits to particular claims, defenses, or other allegations.
Davidoff Malito cites Silver Chrysler Plymouth, Inc. v. Chrysler Motors Corp. ( 518 F.2d 751 [2d Cir. 1975]) to this court, for its argument that an attorney's work on purely legal issues is not "representation" under the Rules of Professional Conduct and would not expose that attorney to any "client confidences." The case is inapposite to the facts of this case, however. The analysis in the case was influenced by concerns regarding an attorney's ability to practice when an attorney's prior "representation" involved only entering on the periphery of a matter as a summer associate or very junior associate in a large law firm, for purposes of conducting very limited or inconsequential work, such as a privilege review of documents or legal research on one point of law. That Court acknowledged that "[t]his is not to say that young attorneys in large firms never become important figures in certain matters but merely to recognize that some of their work is often of a far more limited variety." ( Silver Chrysler, 518 F.2d at 757). It is not clear to what extent the same factual result would obtain under New York decisional law. In any case, Judge Weinstein, who had denied disqualification, did so not on the basis that the attorney did not "represent" the firm's client where he had been associated, but rather on the ground the all prior matters were not "substantially related" to the current matter. ( Id. at 756). The Second Circuit's review was admittedly limited to a review for abuse of discretion in Judge Weinstein's decision, and thus the Second Circuit's discussion of junior attorneys' work on purely legal matters is only dicta.
Even if this court were to apply Silver Chrysler, the facts surrounding Mr. Wexelbaum's prior work for Hertz Herson are materially different. Mr. Wexelbaum was a senior attorney at SBK at the time he performed billable work for Hertz Herson. Mr. Filardo, a junior associate, in fact went to Mr. Wexelbaum for his counsel and advice, and they discussed "background, client positions and strategy." (Filardo Aff. ¶ 13). Mr. Wexelbaum made various stylistic edits to Mr. Filardo's motion to dismiss, offered a "substantive suggestion," and may have discussed "another potential ground for dismissal" with Mr. Filardo. (Wexelbaum Aff. at ¶ 5[h]). Unlike the firm at issue in Silver Chrysler, SBK is a small firm with informal operation and where "litigation matters [are] openly discussed, frequently over lunch." (Wexelbaum Aff. at ¶ 24). Moreover, unlike Silver Chrysler, there is little concern that Mr. Wexelbaum's ability to practice will be unduly restricted because of his prior work for clients such as Hertz Herson.
Based on the foregoing, the court cannot conclude that there was no risk that Mr. Wexelbaum acquired client confidences during his work for Hertz Herson. Because there is a risk that Mr. Wexelbaum has acquired client confidences, and it is admitted that he performed work in representation of Hertz Herson and is now attempting to represent the Matte defendants in adverse interests, the rebuttable presumption of disqualification arises. The court must then ask if Davidoff Malito and Mr. Wexelbaum can rebut the presumption of disqualification while erecting an adequate screen to dispel any appearance of impropriety. The court need not reach any discussion regarding the erection of an adequate screen, since the court concludes that Mr. Wexelbaum and Davidoff Malito have not sufficiently established that it is unlikely that any client confidences that were acquired would be material or significant.
Mr. Wexelbaum states his opinion that at most he may have acquired only insignificant client confidences during his work on Hertz Herson's motion to dismiss, because the papers in their final form have been filed publicly. Distilled to its essence, Mr. Wexelbaum's proposition would remove from the realm of "client confidences" any communications, notes, summaries, drafts, and other materials of which an attorney learns while discussing and editing legal papers that are to be publicly filed. The court cannot accept this proposition. In any case, Mr. Wexelbaum admits that he not only reviewed Mr. Filardo's brief, but also had broader discussions regarding the case and particular strategies with Mr. Filardo. Case strategy and the merits of particular claims and defenses, are anything but inconsequential, particularly when we are talking about representing an adverse party on the very same case. Indeed, a client which knows that a former attorney representing it on a case has become the adversary's attorney, should have good reason for "anxiety that matters disclosed to [that] attorney will subsequently be used against it in [the very same] litigation." ( Kassis, 93 NY2d at 616). The court cannot conclude that any matters that may have been discussed regarding a very significant stage of Hertz Herson's matter — to wit, a motion to dismiss — are unlikely to be material or significant.
The court is satisfied that no other factors weigh demonstrably against the disqualification of Davidoff Malito and Mr. Waxelbaum. There is no indication that this motion was made for the purposes of gaining a tactical advantage over the co-defendants and delaying resolution of the case. Neither is there any indication that the Matte defendants and OBG would be deprived of counsel who has been their attorney for any length of time or with which they have had an established relationship. Finally, no special burden is imposed on these defendants by precluding them from hiring Davidoff Malito as their counsel, because disqualification at the point of hire would not pose any of the "significant adverse consequences" that would normally be expected from disruption of an already ongoing representation.
This court grants Hertz Herson's motion to disqualify Mr. Wexelbaum and Davidoff Malito. This constitutes the Decision and Order of the Court.