RANDOLPH F. TREECE, United States Magistrate Judge.
Presently before this Court is Defendants' Motion to Disqualify Lee Palmateer, Esq., as Plaintiffs' Counsel. Dkt. No. 20, Defs.' Mot. to Disqualify, dated Nov. 18, 2011.
A disqualification motion is a "fact-intensive endeavor." Miness v. Ahuja, 762 F.Supp.2d 465, 478 (E.D.N.Y.2010) (citing, inter alia, Bd. of Educ. of City of New York v. Nyquist, 590 F.2d 1241, 1246 (2d Cir.1979), admonishing that a decision to disqualify "can be reached only after a painstaking analysis of the facts and precise application of precedent"). After reviewing
After hearing from the parties during a Telephone Conference which was held on February 2, 2012, and after further research, the Court retreated from holding an evidentiary hearing and, in its stead, oral arguments were heard on February 15, 2012. Upon the conclusion of that Hearing, the Court reserved its decision and advised the parties that it would revisit the entire record.
On July 16, 2010, the Plaintiffs initiated a copyright infringement action, pursuant to 17 U.S.C. § 501 et seq., against approximately eighty parties, including the Defendants named in this action. Case No. 1:10-CV-876, Dkt. No. 1, compl. The basic gist of that infringement action alleges that Plaintiffs are builders and designers specializing in architectural and floor planning designs of residential homes. They accuse the Defendants, as well as numerous others, of violating their exclusive copyrights in the architectural designs of residential and colonial styles homes. More specifically, this action alleges that our Defendants infringed upon Plaintiffs' copyrighted drawings designated as DRA217 when they constructed a house at 4186 Albany Street, Albany, New York. Id. at ¶¶ 105-110(r), & 111-129 (Third Cause of Action). At the time Plaintiffs commenced this action, they were represented by Nancy Baum Delain, Esq., while the Defendants' insurer, Scottsdale Insurance Company, undertook their defense and provided representation through the Goldberg Segalla Law Firm, Christopher J. Belter, Esq., of Counsel.
As that litigation progressed over the following several months, stipulations of dismissal with prejudice were submitted to the Court which were converted into orders, sizably reducing the number of defendants to exclusively builders. See Dkt. Nos. 45-62, 64, 67, & 68. Further, Plaintiffs amended their complaint twice in order to narrow the allegations. See Dkt. Nos. 11, am. compl., dated Aug. 18, 2010, 60, second am. compl., dated Oct. 27, 2010 (Count Four, paragraphs 80-98, specifically refer to our Defendants). Because of the more narrowly defined allegations in the second amended complaint, the Defendants' insurer withdrew its defense and moved to withdraw. See Dkt. No. 95,
With the assistance of Philip Miller, Esq., the Defendants embarked upon securing new counsel. See generally Case No. 1:11-CV-1159, Dkt. Nos. 20-3, Joseph M. Clark's Decl., dated Nov. 16, 2011, & 20-4, Philip Miller, Esq., Decl., dated Nov. 15, 2011. Several attorneys were contacted but only two were interviewed. Attorney Palmateer was interviewed first by Defendant Joseph Clark and Attorney Miller on February 16, 2011, at Miller's law office. Prior to the Palmateer meeting, Attorney Miller conversed with Attorney Palmateer over the phone, and, in order for Palmateer to be prepared for their meeting, shared with him the case docket number of the pending litigation. Miller Decl., at ¶¶ 9-10. On February 16, 2011, Clark and Miller met with Palmateer at Miller's office. Id. at ¶ 13. Before Clark arrived, Miller and Palmateer discussed generally for approximately twenty minutes the pending litigation, including the procedural history, terms of engagement, and the Defendants' amenability to settlement and their settlement strategy. Id. at ¶ 15. Pursuant to both Clark's and Miller's averments, when Clark arrived, the conversation continued for another sixty minutes or so in which they, particularly Clark, shared confidential and privileged information that encompassed
Miller Decl., at ¶ 17; Clark Decl., at ¶ 3. Clark and Miller represent that the candid conversations were not one-sided and that Palmateer offered his opinion and advice on a range of related subject matters. Miller at ¶ 17; Clark Decl., at ¶ 9. Additionally, Clark and Miller declare that their discussion with Palmateer included terms such as what Defendants might be willing to offer to settle the litigation, including amounts. Miller Decl., at ¶ 19; Clark Decl., at ¶ 3.
Contrariwise, Palmateer refutes that either Clark or Miller shared privileged communication with him and he vehemently denies that the Defendants shared terms of settlement with him: "Our discussions did not even remotely approach `detailed,' and neither Messrs. Clark nor Miller disclosed confidential information to me.... While they inquired as to my thoughts on settlement and I offered preliminary observations, they did not disclose to me their strategy or amenability to settlement." Dkt. No. 25-3, Lee Palmateer, Esq., Decl., at ¶¶ 12-13. Palmateer confirms that he met with Clark and Miller for at least sixty minutes, discussed the nature and procedural history of the pending case, the factual allegations against Clark to which he gave "preliminary observations," and yet asserts that he
On August 2, 2011, the Honorable Gary L. Sharpe, now Chief United States District Judge, issued a memorandum-decision and order dismissing the second amended complaint for failing to meet the pleading requirements under FED. R. CIV. P. 8, granting Plaintiffs leave to file a third amended complaint, and extending to the defendants an opportunity to renew or supplement their motions should a third amended complaint be filed timely. Case No. 1:10-CV-876, Dkt. No. 133, mem.-dec. & order. Approximately two weeks thereafter, on August 18, 2011, Attorney Delain filed a letter-motion seeking to withdraw as Plaintiffs' Counsel, Dkt. No. 135, and Attorney Palmateer filed a notice of appearance on behalf of the Plaintiffs, Dkt. No. 134. See also Dkt. No. 136, order, dated Aug. 19, 2011. Until this point, Palmateer had not represented the Plaintiffs on any matter nor in any manner.
On September 1, 2011, Plaintiffs filed the third amended complaint wherein the Defendants above, among others, remained as parties. Dkt. No. 138, third am. compl., Count VI, ¶¶ 169-92. The Defendants complained that this third amended complaint contained new factual allegations that included information Defendants had disclosed in confidence to Palmateer and had not appeared in previous iterations of the complaint. Such information includes the role of Clark Realty, LLC, in the purchase of lot and eventual sale of the house located at 4186 Albany Street and that building plans prepared by David Hopper were acquired as a part of the purchase of this lot. Case No. 1:11-CV-1159, Miller Decl., at ¶ 36.
According to the Defendants, immediately after the third amended complaint was filed, Defendants' current Attorney, James Muldoon, contacted Palmateer about a conflict regarding his representation of Plaintiffs and may have asked him to withdraw as counsel. Dkt. No. 20-21, James Muldoon, Esq., Decl., dated Nov. 18, 2011, at ¶¶ 8-10. Disagreeing that there is a conflict and refusing to withdraw from that litigation, instead, on September 27, 2011, Plaintiffs filed a voluntary dismissal without prejudice against our Defendants, Case No. 1:10-CV-876, Dkt. No. 143, which was granted by Judge Sharpe, Dkt. No. 144; concurrently, Plaintiffs commenced our current action.
The allegations rendered against the Defendants in the prior case's third amended complaint are repeated nearly verbatim in our Complaint. Case No. 1:11-CV-1159, Dkt. No. 1, Compl., dated Sept. 27, 2011. Unsurprisingly, the Defendants contend that the new allegations are based upon information Defendants discussed in confidence with Palmateer during "their prospective attorney-client relationship." In response to the Complaint, Defendants filed an Answer with Counterclaims. Dkt. No. 11, Answer, dated Oct. 28, 2011. Essentially, the Defendants are attempting to turn the tables and assert that it is the Plaintiffs who infringed their
After holding a Conference on November 8, 2011, this Court issued an Order granting Defendants permission to file this Motion to Disqualify and further stayed all proceedings pending a decision on the Motion.
Defendants' central theme in filing this Motion is that they had entered into a prospective attorney-client relationship with Palmateer when they discussed details about their defense in the earlier, related lawsuit initiated by the Plaintiffs. As noted above, the Defendants assert that Palmateer "now represents Plaintiffs on virtually identical claims against the Defendants." Dkt. No. 20-1, Defs.' Mem. of Law at p. 2. Defendants argue that Palmateer should be disqualified from representing the Plaintiffs based upon his receipt of privileged, confidential communication from them during an attorney-client relationship, albeit brief, that occurred prior to the commencement of the present lawsuit. They exclaim that Palmateer's possession of this sensitive and relevant information, which was shared with him in confidence, will visit substantial harm upon them and deliver an unfair advantage to Plaintiffs. See generally Dkt. Nos. 20-1, Defs.' Mem. of Law, & 26, Defs.' Reply Mem. of Law. Although Palmateer agrees that he met with Clark and Miller and that a conversation ensued regarding pending litigation, he vehemently disputes the content and ambit of those discussions. In his view, no confidential information was conveyed to him, and the information that was shared would not cause substantial harm to the Defendants. See generally, Dkt. No. 25, Pls.' Mem. of Law.
A motion to disqualify an attorney is within the broad discretion of the court. Purgess v. Sharrock, 33 F.3d 134, 144 (2d Cir.1994); Cheng v. GAF Corp., 631 F.2d 1052, 1055 (2d Cir.1980) (noting that a court's ruling will not be overturned absent an abuse of discretion determination), judgment vacated on other grounds, 450 U.S. 903, 101 S.Ct. 1338, 67 L.Ed.2d 327 (1981). Since disqualification may impose a serious impact on a party's right to an attorney of his choice, it should only be imposed when continued representation may pose a significant risk of taint upon the trial. Glueck v. Jonathan Logan, Inc., 653 F.2d 746, 748 (2d Cir.1981). The objective of a disqualification rule is to "preserve the integrity of the adversary process." In re Agent Orange Prod. Liab. Litig., 800 F.2d 14, 18 (2d Cir.1986) (quoting Bd. of Educ. of the City of New York v. Nyquist, 590 F.2d 1241, 1246 (2d Cir. 1979)). Generally speaking, motions to disqualify are viewed with disfavor and the party seeking disqualification must meet a high standard of proof before disqualification will be granted. Evans v. Artek Sys.
In deciding a motion to disqualify, courts often seek guidance from the American Bar Association (ABA) and state disciplinary rules, though "such rules merely provide general guidance and not every violation of a disciplinary rule will necessarily lead to disqualification." Hempstead Video, Inc. v. Inc. Vill. of Valley Stream, 409 F.3d 127, 132-33 (2d Cir.2005) (citing Bd. of Educ. v. Nyquist, 590 F.2d at 1246). We must always remember that the standard of professional conduct in federal courts is a matter of federal law. Shabbir v. Pakistan Int'l Airlines, 443 F.Supp.2d 299, 305 (E.D.N.Y.2005) (citing In re Snyder, 472 U.S. 634, 645 n. 6, 105 S.Ct. 2874, 86 L.Ed.2d 504 (1985) ("Federal courts admit and suspend attorneys as an exercise of their inherent power; the standards imposed are a matter of federal law.")). Accordingly, federal courts are guided, but not bound, by the State's Code of Professional Conduct, and yet courts look to the Code, and in some instances even seek guidance from state common law, in determining disqualification motions. In that respect, the Court notes that New York adopted the Model Rules of Professional Conduct, effective April 1, 2009. The Model Rules, in most respects, do not differ significantly from the previous standards set forth in the Model Code of Professional Responsibility.
New York Code of Professional Conduct Rule 1.18 provides in pertinent part the following:
N.Y. COMP.CODES R. & REGS. tit. 22, § 1200.
Defendants assert that at the time they shared confidential information with Palmateer concerning the facts and issues
The fundamental elements of Rule 1.18 to which this Court must contend with are (1) the existence of a prospective client, (2) the sharing of information with a lawyer, (3) whether the lawyer's current client has interests materially adverse to the prospective client in the same or substantially related matter, and, (4) disclosure of that information could be significantly harmful to the prospective client. For the most part, only a combination of two of the above mentioned elements has rendered this analysis toilsome.
A party who discusses with a lawyer the "possibility of forming a client-lawyer relation with respect to a matter is a prospective client." Rule 1.18(a). Plaintiffs do not seriously challenge the proposition that the Defendants were prospective clients within the construct of this Rule. Both Clark and Miller aver that they were interviewing lawyers with the anticipation of retaining one of them to serve as their counsel in the litigation Zalweski et. al. v. T.P. Builders, Inc., et al., 10-CV-876, and Palmateer was advised of their expectation before and during the February 16, 2011 meeting. Palmateer had prepared for that meeting, reviewed the case docket, presented Clark and Miller with a proposed retainer agreement, and discussed the cost of litigation with them. Thus, this element is not dispute. It is also patently obvious that Palmateer's current clients' interests as the Plaintiffs are materially adverse to those of the Defendants in the same or substantially related matter. The Court's principal travail has been over the nature of the information disseminated to Palmateer by Clark and Miller and whether their revelations would be significantly harmful to the Defendants.
Clark and Miller interchangeably proffer to the Court that they discussed in detail the nature and procedural aspects of the original litigation, their theories of defense, and litigation strategies. With regard to the theory of their defense, they state that they pointed out each distinction between the Plaintiffs' and their architectural designs to Palmateer in debunking that there was any infringement, expostulated on the strength and weaknesses of the claims and their defenses thereto, and further extrapolated upon their views on a settlement strategy. In Defendants' considered view, that discussion was nothing short of an attorney-client privileged communication and they expected Palmateer to keep their discussions privileged and confidential, without fearing that someday such would ever be revealed or recited against them. It was much to their surprise when Palmateer filed a notice of appearance on behalf of the Plaintiffs in the previous case and much to their chagrin when the third amended complaint
Dkt. No. 1, Compl. at ¶ 23.
Id. at ¶ 27.
Reading these and other facts recited in the third amended complaint and our current Complaint have heightened Defendants' concern that other details of their discussion would consequently be used against them in this litigation; realizing that the Plaintiffs' Counsel knows the Defendants' theories, impressions, and strategies, Defendants feel that they have been placed at a substantial disadvantage. Particularly, Clark and Miler aver that they unveiled to Palmateer what they would be willing to settle for and the reasons why, and for Palmateer to possess such knowledge while representing Plaintiffs taints the integrity of this legal process.
Palmateer gainsays all of the Defendants' representations in the strongest terms. He couches the discussion as basic and introductory with no confidential information, including settlement strategies, being disclosed to him nor did he learn anything of any consequence that could conceivably cause any significant harm to the Defendants. In addition to disavowing the occurrence and denigrating the importance of the discussion with Clark and Miller, he pinpoints that much what was added into the third amended complaint and our Complaint was already gleaned from public records, the case docket, original complaint, and through Zalewski's independent investigation and efforts. See Dkt. No. 25-1, James E. Zalewski Decl., dated Dec. 9, 2011, at ¶¶ 7-11. Palmateer further notes that Defendants publicly revealed aspects as to the lack of similarity between the two respective designs and floor plans when, on May 2, 2011, they filed a reply memorandum in support of their motion to dismiss in the original case, see 1:10-CV-875, Dkt. No. 131,
The Plaintiffs draw the Court's attention to a precedent from the District of New Jersey which has analogous components to our discussion. In ADP, Inc. v. PMJ Enters., LLC, 2007 WL 836658 (D.N.J. Mar. 14, 2007), the plaintiff moved to disqualify defendant's law firm. Sudha Kantor, a principal of the plaintiff, spoke, albeit briefly, with a partner of the law firm, Edward Kiel, to represent them in a
Other than finding that plaintiff and Kiel's firm had a prospective client relationship, the Honorable Ronald Hedges, United Stated Magistrate Judge, determined that all of the other factors weighed against granting the motion to disqualify. Judge Hedges found discussions regarding the nature of the business, the history of the dispute, the anticipation of a counterclaim, and, because settlement had been ongoing, settlement strategy not confidential and thus did not constitute significantly harmful information. Id. at *5. While this Court finds persuasive Judge Hedges's view that records that are already public and the history of the dispute are not confidential and thus would not pose any significant harm, this Court departs from the court's analysis when extended to settlement strategies, especially when the issue for us is not that Defendants are interested in settlement or have commenced engaging in such discussion, but the potential exposure of the specifics of their strategy in reaching an agreement. This Court also extends this departure to the notion of discussing strengths and weaknesses of anticipatory counterclaims.
Palmateer's vehement refutation that, at no time, did Clark or Miller disclose their settlement strategy, and, moreover, that Clark's and Miller's asseverations are contrived, initially gave this Court considerable pause on the substantial issue of significant harm. Judging the credibility of the particular affiants was difficult as well. Additionally, Palmateer exclaims that he did not share any of their communications with his current client, which Zalewski affirms. Palmateer wants this Court to also understand that settlement is an evolutionary and fluid process so that a party's stance at one moment is not controlling nor critical at another stage of the litigation, thus rather insignificant under Rule 1.18. Yet, the turning point for the Court is not the accuracy of what was previously demanded or offered or even a possible misrepresentation of the settlement history, but rather Clark's and Miller's averments that they shared with Palmateer what they would consider to be a reasonable settlement, solicited his views on what would be a reasonable settlement, and gave the reasons why they were prepared to move settlement in a particular direction. The impact of this exposure may be prospective but, contrary to Palmateer's perspective as to settlement implications, knowing another party's undisclosed settlement strategy is significant in any event. The Court agrees that there is always posturing during settlement, but knowing beforehand a party's bottom line, even if it changes over time, on settlement could be ruinous for that particular party. Possessing all of these cards can serve as an unfair advantage in the process and could ultimately control the great stakes ahead.
Probably more disquieting is that Defendants have gone on the offensive and filed a Counterclaim against the Plaintiffs alleging copyright misuse, abuse of process and unfair competition. Dkt. No. 11, Defs.' Answer with Counterclaims at ¶¶ 112-29 (Third Counterclaim). At the heart of this
Key to this decision is that the Court must maintain the integrity of the adversary process. It would be an unfair disadvantage for Defendants to be confronted by an attorney whom they believe possesses intimate knowledge of their views and impressions of this litigation, even though that attorney professes that he has no knowledge nor recalls any, and, if he did, he would not need it or use it in a way to either alarm or harm Defendants. Ehrich v. Binghamton City Sch. Dist., 210 F.R.D. 17, 24 (N.D.N.Y.2002) (quoting Bd. of Ed. of the City of New York v. Nyquist, 590 F.2d 1241, 1246 (2d Cir.1979) for the proposition that disqualification is warranted "where an attorney is potentially in a position to unfairly advantage his current client through the use of privileged information"). Receiving Defendants' thoughts on the differences between the designs and the strengths and weaknesses of the parties' respective positions would generate an unfair opportunity to rebut Defendants during the course of this litigation. Just having Defendants' opinions and impression of even public documents and facts would establish privileged communication and if revealed, in any form or fashion, would constitute significant harm. Bank Hapoalim B.M. v. WestLB AG, 82 A.D.3d 433, 918 N.Y.S.2d 49 (N.Y.App.Div. 1st Dep't 2001) (finding that the "defendants' description of the matters, coupled with the circumstances surrounding the meeting, give rise to a reasonable inference that confidences were revealed"). Notwithstanding
When in doubt on a motion such as this, the Second Circuit urges courts to lean in favor of disqualification. Hull v. Celanese, 513 F.2d at 571. This Court did not take this task lightly when balancing Plaintiffs' right to the counsel of their choosing against "the need to maintain the highest standard of profession."
Accordingly, it is hereby