PATRICIA A. SULLIVAN, Magistrate Judge.
R.I. Rules of Professional Conduct, Preamble ¶ 9.
This wise precept, established by the Rhode Island Supreme Court as a guide for attorneys in discharging their competing responsibilities, supplies the motif that recurs throughout the unfortunate tale told in this report and recommendation. Pending before the Court is the motion of Defendants Brady Sullivan Harris Mill, LLC, and Brady Sullivan Properties, LLC, ("Brady Sullivan") seeking a permanent injunction.
The pending motion is based on Brady Sullivan's well-founded assertion that Attorneys Coloian and Calabro accepted as clients two of its former employees, an engagement fraught with undisclosed and unresolved conflicts of interests, as a result of which the Attorneys came into possession of Brady Sullivan's contractually protected confidential information, attorney-client information and related attorney work product (collectively, "Confidential Information") without authorization or consent in violation of Brady Sullivan's legal rights. Having acted promptly and worked aggressively to stuff the genie back in the bottle, Brady Sullivan now seeks to bring the matter to a close for good with a permanent injunction banning Plaintiffs and Attorneys Coloian and Calabro from using, reviewing, discussing, communicating and/or forwarding the Confidential Information to anyone (including successor counsel) and prohibiting Attorneys Coloian and Calabro from receiving or otherwise participating in any attorneys' fees associated with the Cases.
The Court's task in resolving the motion is eased by the absence of any dispute over the remedy: Plaintiffs (acting through their new counsel) and Attorneys Coloian and Calabro agree that Brady Sullivan may have the requested relief. The sticking point is whether the Court will issue the permanent injunction based a reasoned decision that includes findings of fact based on violations of the Rhode Island Rules of Professional Conduct, particularly R.I. Rules 1.7, 4.3 and 4.4(a).
The motion arises from events that occurred mostly in March 2018, which may be briefly summarized.
As a condition of their employment with Brady Sullivan, both of the former employees signed confidentiality agreements barring them from, inter alia, disclosing certain information related to Brady Sullivan's products or services. At least one of them, Rahn, was privy to extensive confidential attorney-client communications directly related to the issues in the Cases and related matters pertaining to other tenants and former tenants of Brady Sullivan. While still employed at Brady Sullivan, Rahn surreptitiously printed, copied on thumb drives or CDs and/or emailed to her home email account Brady Sullivan documents that included substantial quantities of Brady Sullivan's confidential attorney-client information. Shortly after the Cases were filed by Attorneys Coloian and Calabro, the former employees abruptly resigned from Brady Sullivan and immediately engaged Attorneys Coloian and Calabro to represent them in connection with matters pertaining to Brady Sullivan. Attorneys Coloian and Calabro undertook this engagement and provided legal advice to the former employees despite the obvious conflict between the interests of the former employees and their existing clients, Plaintiffs and other tenants or former tenants of Brady Sullivan contemplating or already in litigation against it.
Over several days in March 2018, having formed an attorney-client relationship with the former employees, Attorneys Coloian and Calabro obtained information from Basabe and Rahn. They accepted documents from Rahn that she had secretly taken while employed at Brady Sullivan. Among these documents were many clearly reflecting Brady Sullivan's attorney-client communications. Attorneys Coloian and Calabro reviewed at least a handful of these documents, which constituted bulls-eye attorney-client communications between Brady Sullivan and its counsel regarding matters directly pertaining to the Cases and related matters.
There is no evidence that Attorneys Coloian and Calabro advised Basabe or Rahn about the jeopardy posed to them by breaching the confidentiality agreements or any duty of loyalty they might owe to their former employer. There is no evidence that Attorneys Coloian and Calabro advised Rahn about the jeopardy posed to her by her actions in taking and making a wholesale disclosure of Brady Sullivan's attorney-client information to the attorneys for the parties opposing it in litigation. There is no evidence that Attorneys Coloian and Calabro instructed either Rahn or Basabe not to disclose Brady Sullivan Confidential Information or took any steps to avoid an unwarranted intrusion into Brady Sullivan's privileged relationships. There is no evidence that Attorneys Coloian and Calabro advised or obtained a written waiver from Basabe or Rahn regarding limitations on the Attorneys' ability to represent the former employees in light of the Attorneys' concurrent representation of Plaintiffs and their other tenant clients. Relatedly, Attorneys Coloian and Calabro did not advise or obtain a written waiver from Plaintiffs or any of their other tenant clients on their acceptance of a materially limiting competing engagement. Instead, despite the conflicts, in derogation of their duty to Basabe and Rahn and likely animated by the competing duty owed to Plaintiffs and the other tenant clients, the Attorneys communicated with the former employees without regard to the confidentiality of the information being provided, and accepted documents from Rahn that they knew Rahn had taken from Brady Sullivan during her employment, among which they found (and accessed) Brady Sullivan's purloined attorney-client information.
Beginning on March 5, 2018, Brady Sullivan was alerted to the possibility of the breach through comments Attorney Coloian made to one of its attorneys. After further investigation, it promptly sued the former employees, Basabe and Rahn, in a separate action filed on March 15, 2018, and removed to this Court on March 22, 2018.
Because the Confidential Information taken by Rahn had been delivered in various electronic formats and in hard copy, the Court's April 12, 2018, Order included specific requirements to ensure its return. This triggered a flurry of collateral activity in 18-133, as Brady Sullivan worked diligently to recover all of the Confidential Information. However, through no fault of Basabe, Rahn or Attorneys Coloian and Calabro, all of whom cooperated in good faith to comply with the Court's April 12, 2018, Order, this effort was not entirely successful. Most recently, at the hearing of February 28, 2019, it was revealed that two thumb drives containing thousands of documents taken by Rahn appear to be irretrievably lost. Transcript Feb. 28, 2019, at 24, 26, 34 (18-133 ECF No. 69).
Returning to the Cases, on April 13, 2018, based on R.I. Rules 4.4(a) and 1.7(a), Brady Sullivan moved to disqualify Attorneys Coloian and Calabro from representing Plaintiffs; the motion was supported by the depositions of Rahn and Basabe and the affidavits of one of Brady Sullivan's attorneys and its Information Technology ("IT") Manager. Following a hearing at which both parties declined the Court's offer to hear testimony, the Court scheduled the motion to disqualify for a bench decision to be delivered on July 25, 2018; this date was extended to September 25, 2018, at the request of the parties. Less than one week before the bench decision, Attorneys Coloian and Calabro filed notices of their withdrawals and substitute counsel entered for Plaintiffs. At the September 25 hearing, the Court found that the motion to disqualify had become moot but that serious issues remained to be resolved. To allow Brady Sullivan time to consider its options and with no objection from Plaintiffs, the Court entered a non-disclosure order barring Attorneys Coloian and Calabro from using or forwarding any of the Confidential Information to successor counsel or any other person, with a deadline of October 25, 2018, for Brady Sullivan to file a motion seeking an injunction or sanctions for permanent relief.
On October 25, 2018, the current motion was filed. As directed by the Court, Brady Sullivan supplemented the motion with proposed findings of fact and conclusions of law. In response, Plaintiffs and Attorneys Coloian and Calabro made clear that they did not object to entry of the permanent injunction sought by Brady Sullivan. However, Attorneys Coloian and Calabro objected vigorously to the Court's issuance of a reasoned decision, arguing that there is no Article III case or controversy because Brady Sullivan's injury is speculative and hypothetical and that the motion amounts to an improper interference with the contractual agreement between Attorneys Coloian and Calabro and their former clients, Plaintiffs and the other tenants and former tenants. The Court offered the parties the opportunity to have an evidentiary hearing; Attorneys Coloian and Calabro declined, while Brady Sullivan reserved the right to present testimony on any material fact as to which the Court was inclined to sustain an objection asserted by Attorneys Coloian and Calabro. For the reasons stated infra, no evidentiary hearing was deemed necessary.
"[T]he district court has the duty and responsibility of supervising the conduct of attorneys who appear before it."
"An injunction is an exercise of a court's equitable authority, to be ordered only after taking into account all of the circumstances that bear on the need for prospective relief."
Rule 65 of the Federal Rules of Civil Procedure governs the issuance of injunctions.
When a motion for an injunction is referred to a magistrate judge under the Federal Magistrates Act, 28 U.S.C. § 631, et seq., the magistrate judge must address it through the issuance of a report and recommendation.
Based on the foregoing, it is clear that Fed. R. Civ. P. 65(d)(1)(A-C) and 28 U.S.C. § 636(b)(1)(A-C) require more than the undeveloped statement that Attorneys Coloian and Calabro came into possession of Confidential Information and that Brady Sullivan has proffered enough to meet the legal standard for an injunction. Such a truncated approach would not adequately "state the reasons why [the injunction should be] issued." Fed. R. Civ. P. 65(d)(1)(A);
The Rhode Island Rules of Professional Conduct implicated by the motion may be briefly summarized.
First, R.I. Rule 1.7(a), titled, "Conflict of interest: Current clients," governs conflicts of interest and provides that "a lawyer shall not represent a client if the representation involves a concurrent conflict of interest." A conflict is presented not only when there is direct adversity, but also if the concurrent representation of a client gives rise to a significant risk that the representation of another client will materially limit the lawyer's ability to represent either or both clients.
The most significant of the Rules implicated by the events in issue is R.I. Rule 4.4, titled, "Respect for rights of third persons." Subsection (a) of R.I. Rule 4.4 provides:
The Rhode Island Rules of Professional Conduct permit a lawyer to communicate with the former employee of a represented party-opponent. R.I. Rule 4.2, comment [7]. However, the relevant comment warns that such communications must be done with due regard for R.I. Rule 4.4(a). R.I. Rule 4.2, comment [7] ("In communicating with a current or former constituent of an organization, a lawyer must not use methods of obtaining evidence that violate the legal rights of the organization.") (citing R.I. Rule 4.4). The comment to R.I. Rule 4.4 echoes this caution, providing that the lawyer may not willfully disregard the rights of a third party, such as the former employer of a witness, including the right to be free from "unwarranted intrusions into privileged relationships, such as the client-lawyer relationship."
While Rhode Island courts have not interpreted R.I. Rule 4.4(a), at the time of the initial adoption of the Rules, it was noted that the Rules of Professional Conduct should be read consistently with the American Bar Association ("ABA") Model Rules of Professional Conduct, "unless there was a good reason for not doing so."
In summary, while there is no barrier to an attorney interviewing or developing evidence from the former employee of a party-opponent, it is a clear violation of R.I. Rule 1.7(a) for an attorney to form an attorney-client relationship with the former employee of a party-opponent without carefully considering and appropriately addressing all conflicts of interest, including all limitations on the attorneys' ability to simultaneously represent a litigant and the former employee of the party opposing the litigant. It also is a clear violation of R.I. Rule 4.3 for an attorney to give any legal advice to an unrepresented former employee of an opposing party if there is a reasonable possibility of a conflict arising from the attorney's existing attorney-client relationship with the litigant opposing the former employer. And if an attorney communicates with the former employee of an opposing party, R.I. Rule 4.4(a) mandates that the attorney undertaking such communications has an affirmative duty to proceed with due care to ensure that the former employee does not inadvertently or intentionally disclose privileged attorney-client or other confidential information in violation of the legal rights of the opposing party.
The proposed factual findings that follow are drawn from an array of sources. I relied on the facts proposed by Brady Sullivan, ECF No. 65-2 ("BS Proposed Facts ¶ __"), focusing on those to which Attorneys Coloian and Calabro did not interpose any objection, apart from their vague assertion that all of the Brady Sullivan facts lack the support of sufficient evidence.
It is important to note that none of the attorneys involved in these matters testified, leaving me to rely instead on their representations made in filings and during hearings; relatedly, I relied on transcripts of the testimony of Basabe and Rahn and did not hear them live. This approach to the issues was partly informed by my reluctance to put an officer of the court in the witness box. I also was mindful of the need to avoid placing Brady Sullivan's attorney-client confidences at further risk of disclosure. In any event, no party or attorney asked for an evidentiary hearing.
My proposed findings of fact and related conclusions of law
1. After the Cases were filed by Attorneys Coloian and Calabro in the Rhode Island Superior Court on January 25, 2018, and removed to this Court, two management-level employees of Brady Sullivan (Basabe, the Maintenance Manager, and Rahn, the Property Manager) abruptly resigned on March 2 and 7, 2018, respectively. Basabe Dep. at 12; Rahn Dep. at 47-49; BS Proposed Facts ¶¶ 6, 11, 13, 33, 37.
2. Prior to their resignations, both of the former employees had interacted with Brady Sullivan's attorneys in connection with the Cases and/or related matters. Basabe Dep. at 145-46, 156-62; Rahn Dep. at 44-46, 81-82, 122-23. Both of the former employees understood that these communications with Brady Sullivan's attorneys were protected by the attorney-client privilege. Basabe Dep. at 158, 167, 171-72; Rahn Dep. at 123-24. During her employment, Rahn was specifically advised that any communications with Brady Sullivan's counsel were confidential at its discretion. Rahn Dep. at 131-33. At least as to Rahn, the privileged communications to which she was privy referenced Brady Sullivan's litigation strategy for the Cases and related matters. Transcript June 27, 2018, at 7 (in camera review).
3. As a condition of their employment with Brady Sullivan, both of the former employees had signed confidentiality agreements barring, inter alia, the disclosure of certain confidential information related to Brady Sullivan's products or services; the agreement defined "confidential information" as any business data or information not generally known outside the company.
4. Upon resigning, the former employees immediately engaged Attorneys Coloian and Calabro to represent them in connection with matters pertaining to Brady Sullivan. Basabe Dep. at 176-78; Rahn Dep. at 47-48; BS Proposed Facts ¶¶ 32-33, 37-38. At the time of these engagements, Attorneys Coloian and Calabro were actively engaged to represent Plaintiffs and other tenants or former tenants of Brady Sullivan contemplating or already in litigation against it. BS Proposed Facts ¶¶ 26-27, 29; Transcript June 27, 2018, at 84-85, 108.
5. In violation of R.I. Rule 1.7(a) and R.I. Rule 4.3, Attorneys Coloian and Calabro undertook the engagements to represent, and provided legal advice to, the former employees despite conflicts between the interests of the former employees and the concurrent clients of Attorneys Coloian and Calabro, Plaintiffs and the other tenant clients. These conflicts created a significant risk that the representation of the former employees would be materially limited by Attorneys Coloian and Calabro's representation of Plaintiffs and their other tenant clients,
6. Notwithstanding the requirements of R.I. Rule 1.7(b)(4), Attorneys Coloian and Calabro did not obtain written informed consent from the former employees to the limitations on the Attorneys' ability to represent the former employees in light of the Attorneys' concurrent representation of Plaintiffs and their other tenant clients.
7. After they were engaged to represent him, and aware that he was a former employee of Brady Sullivan, Attorneys Coloian and Calabro met with and obtained information from Basabe. Basabe Dep. at 15, 176, 181-86. While the content of those oral communications is not known,
8. During their communications with Basabe, who was relying on them to advise him, Attorneys Coloian and Calabro acted with disregard for the legal rights of Brady Sullivan, particularly its right to unwarranted intrusion into privileged communications, such as the client-lawyer relationship. This conduct violated R.I. Rule 4.4(a).
9. During her employment with Brady Sullivan as its Property Manager, Rahn was privy to Brady Sullivan's privileged attorney-client communications and attorney work product (including litigation strategy) directly related to the matters in issue in the Cases.
10. After they had formed an attorney-client relationship with Rahn, and knowing that she had just resigned as Property Manager of Brady Sullivan, a party opponent, Attorneys Coloian and Calabro met with Rahn twice and obtained information from her. Rahn Dep. at 28. While the content of the oral communications that she had with the Attorneys is unknown,
11. Because Rahn understood that Attorneys Coloian and Calabro, whom she had engaged to act as her attorneys, had requested that she provide them with all of the documents that she had surreptitiously taken during her employment with Brady Sullivan,
12. While most of the material provided by Rahn was not read or accessed, Attorneys Coloian and Calabro read at least some of Brady Sullivan's privileged attorney-client information contained in the documents provided by Rahn. Transcript June 27, 2018, at 87, 99-100, 102; BS Proposed Facts ¶¶ 50-51;
13. Based on their review of at least some of Brady Sullivan's privileged attorney-client information contained in the documents provided by Rahn, Attorneys Coloian and Calabro notified Brady Sullivan that they had received Brady Sullivan's purloined attorney-client and attorney work product information.
14. Attorneys Coloian and Calabro accepted from Rahn the Brady Sullivan documents she had taken during the period of her employment in disregard for whether those documents constituted evidence taken in violation of the legal rights of Brady Sullivan and in disregard for whether any of the documents contained Brady Sullivan's privileged attorney-client communications and attorney work product taken in violation of Brady Sullivan's legal right to unwarranted intrusions into its privileged relationships. Attorneys Coloian and Calabro accepted these materials, knowing that Rahn relied on them as her attorneys to advise her, knowing that the material had been taken by Rahn during the course of her employment and — after they reviewed the first set — knowing that the material included documents that constituted Brady Sullivan's privileged attorney-client communications and work product.
15. By engaging in the conduct described in Paragraphs 10 and 12 to 14, supra, Attorneys Coloian and Calabro used a method of obtaining evidence that was in disregard for, and in violation of, the legal rights of Brady Sullivan, amounting to an unwarranted intrusion into Brady Sullivan's privileged relationships, all contrary to the obligations imposed by R.I. Rule 4.4(a). Transcript June 27, 2018, at 6-7, 101; Transcript Dec. 21, 2018, at 5, 11.
16. While it is not known what information was discussed when Attorneys Coloian and Calabro engaged in oral communications with Basabe and Rahn, and while the Attorneys reviewed only a few documents protected by Brady Sullivan's attorney-client privilege, what the Attorneys did see and hear is enough to give rise to a continuing risk of further dissemination of the Confidential Information, including attorney-client communications and attorney work product.
17. Through no fault of Basabe, Rahn or Attorneys Coloian and Calabro, all of whom acted in good faith to comply with the Court's April 12, 2018, Order, the effort to recover all of the Confidential Information was not entirely successful, in that two thumb drives containing thousands of documents taken by Rahn appear to have been irretrievably lost. Transcript Feb. 28, 2019, at 36-37. This loss exacerbates the continuing risk of further dissemination of the Confidential Information, including the attorney-client communications and attorney work product.
18. Because of the nature of the Confidential Information, particularly the attorney-client communications and attorney work product, and because the Cases and related matters continue as ongoing litigation and/or disputes likely to lead to litigation, further dissemination of the Confidential Information will irreparably harm Brady Sullivan.
19. Brady Sullivan is also subject to ongoing harm of "nagging suspicion" to the extent that Attorneys Coloian and Calabro retain the right to seek attorneys' fees or to assert an attorney's lien in connection with the Cases, which would give rise to a financial incentive or motivation to assist successor counsel by disclosing any Confidential Information that they learned as a result of their representation of Basabe and Rahn.
20. An Order barring Attorneys Coloian and Calabro from receiving or participating in attorneys' fees
21. Brady Sullivan acted promptly upon learning of the breach of its legal rights.
22. Brady Sullivan has inadequate remedies at law due to the nature of the Confidential Information, particularly the attorney-client communications and attorney work product. C+C Proposed Facts ¶ 5.
23. Plaintiffs and Attorneys Coloian and Calabro agree that Brady Sullivan is entitled to the permanent injunction requested in the motion. C+C Proposed Facts ¶ 8; Transcript Dec. 21, 2018, at 18-19, 30-31. Neither Plaintiffs nor Attorneys Coloian and Calabro argued or presented any evidence establishing that any of them would be harmed or prejudiced by the issuance of the permanent injunction requested in the motion.
24. In light of the nature of the harm to Brady Sullivan (¶¶ 18-19, supra) and the lack of harm to Plaintiffs and Attorneys Coloian and Calabro (¶¶ 20, 23, supra), the balance of the equities favors the relief requested by Brady Sullivan.
25. Granting the relief requested by Brady Sullivan would be in the public interest in that the permanent injunction reduces and potentially eliminates the ongoing risk that further proceedings in the Cases would be tainted by the use of evidence procured in violation of R.I. Rule 4.4(a).
26. Brady Sullivan continues to have a legally cognizable interest in the outcome of this motion because there is an ongoing risk of disclosure of its Confidential Information, particularly its attorney-client confidences.
"[T]aking into account all of the circumstances that bear on the need for prospective relief," I find that the law entitles Brady Sullivan to a permanent injunction in this case.
Until further Order of the Court, it is hereby ordered that:
Based on the foregoing analysis, I recommend that Brady Sullivan's motion for a protective order and other relief (ECF No. 65), construed as a motion for a permanent injunction, be granted and that the Court enter a permanent injunction as set forth above.
Any objection to this report and recommendation must be specific and must be served and filed with the Clerk of the Court within fourteen (14) days after its service on the objecting party.