ENJOINING
CONFLICTS (AND OTHER NON-TRADITIONAL REMEDIES)
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Injunctions
Almost all conflict of interest decisions involve one litigant moving to
disqualify another litigant's lawyer in a proceeding. The existence
of a proceeding means there is a tribunal to enforce the conflicts rules
in that proceeding. Suppose, however, that there is no proceeding
and no tribunal before whom a client or a former client can make a
motion. Example: a company bidding for a government contract
learns that a law firm that does only its tax work is representing another
client bidding for the same government contract. Only one of the
parties can win the contract. That may be "direct
adversity" within the meaning of Rule 1.7(a). How can the first
client prevent the law firm from representing the bidding competitor?
Cmt. f to § 121 of the
Restatement provides as follows:
For matters not before a tribunal where
disqualification can be sought, an injunction against a lawyer's further
participation in the matter is a comparable remedy (§ 6, cmt. c).
See,
too, cmt. d to § 55 of the Restatement. The
Reporter's Note to cmt. d cites the following cases where
injunction was the approved remedy for a conflict: State ex rel. Bryant
v. Ellis, 724 P.2d 811 (Ore. 1986); and Maritrans GP, Inc. v.
Pepper, Hamilton & Scheetz, 602 A.2d 1277 (Pa. 1992).
Tekni-Plex,
Inc. v. Tang, 674 N.E.2d 663 (N.Y. 1996), actually involved a
proceeding. It was an arbitration, but the arbitrator did not
believe that he had the authority to disqualify counsel for a
conflict. So, the aggrieved party brought an injunction action
against the offending lawyer and succeeded in getting the
injunction. Another injunction case brought because of an
arbitration is Dyntel Corp. v. Ebner, 120 F.3d 488 (4th Cir.
1977). The court appeared to have accepted injunction as an
appropriate remedy, but affirmed the case's dismissal because of improper
forum and other reasons. But, the court was so irked at the
plaintiff for having brought the action in the district it did and for the
seemingly harassing nature of the action, its reasoning was a bit
confusing.
Munich
Re America, Inc. v. American Re Co., 500 F. Supp. 2d 272
(S.D.N.Y. 2007). Reinsurance
Co. (“Re. Co.”) brought an arbitration against Insurance Co (“Ins.
Co.”). The parties could
not agree on an umpire. Plus,
Re. Co. asked that Ins. Co.’s law firm withdraw because of a
former-client conflict. When
the law firm refused to withdraw, Re. Co. filed an action in state court
to disqualify the law firm. Ins.
Co. filed this action to get the court to appoint an umpire.
Because of the pending state court action to disqualify, the court,
in this opinion, denied the request for appointment of an umpire and
dismissed the petition. The
court said that in New York arbitrations are not appropriate proceeding
for resolving counsel conflicts and that going to court (the state court
proceeding) was the appropriate remedy.
In
Pfizer, Inc. v. Stryker Corp., 256 F. Supp. 2d 224 (S.D.N.Y.
2003), plaintiff was using two firms for this case; one was
of-record, the other was not. The firm that was not of-record had been
representing the defendant in two product liability cases while assisting
plaintiff in this case. Because the firm was not of-record, the
defendant did not make a motion to disqualify. Instead, it made a
"motion for order enjoining" the plaintiff from using the law
firm. The court denied the motion (see discussion under
"Current Client" just above), but not because of the unusual
procedure ("motion for order enjoining").
Benasra
v. Mitchell, Silberberg & Knupp, 116 Cal. Rptr. 2d 644 (Cal.
App. 2002). The plaintiffs in
this action (hereinafter, “Benasra”) are parties to an AAA arbitration
proceeding. In the
arbitration proceeding, Benasra moved to have Mitchell, Silberberg
disqualified as counsel for the opposing party.
The arbitration panel denied the motion to disqualify.
Benrasa then brought this action to, among other things, have
Mitchell, Silberg enjoined from representing the other side in the
arbitration. The trial court ruled that the arbitration panel’s denial
of the motion to disqualify precluded Benrasa from raising the issue in
court. The appellate court
reversed. The court said the
issue fell within the California Supreme Court’s holding in Vandenberg
v. Superior Court, 982 P.2d 229 (Cal. 1999). There the court held that preclusion principles do not
necessarily prevent parties to private arbitration from later raising
issues in court that had been decided in the arbitration.
Morrison
Knudsen Corp. v. Hancock, Rothert & Bunshoft, 81 Cal. Rptr. 2d 425 (Cal. App. 1999); McKesson Information Solutions, Inc. v. Duane Morris LLP, No.
2006CV121110 (Super. Ct. Fulton Co. Ga. Nov. 8, 2006); (injunction
granted; no dispute about propriety of injunction remedy).
DHR International, Inc. v.
Winston and Strawn, 807 N.E.2d 1094 (Ill. App. 2004); and Lear Corp. v. Butzel Long, PC, 2006 Mich. App. LEXIS 1697 (Mich.
App. May 18, 2006) (injunction not granted; no dispute about propriety of injunction remedy).
In Jackson Nat. Life Ins. Co. v. Reiter, Circuit
Court of Cook County, Ill., 99 CH 10890 (Oct. 31, 2000), a trial judge
denied an injunction where a claim of conflict of interest was made.
The court's ruling was based upon a law firm's having set up an effective
screen. The appropriateness of an injunction action seems to have
been assumed by all. The case is described in the November 11, 2000,
Law.com. To go to the article, click here.
Morgan Stanley Loses Bid to Enjoin Lawyer, New York Law Journal,
December 19, 2002. This
article is about a New York Supreme Court judge who refused to enjoin a
lawyer from taking on cases against Morgan Stanley.
It was a former client situation, and the court felt the matters
were not substantially related. Evidently,
the court did not question the appropriateness of an injunction remedy in
a conflict-of-interest situation.
Canada.
In Richmond Taxi Co. Holdings Ltd. v. Robbins, 2007 BCSC
1680 (CanLII) (B.C. S. Ct. Nov. 20, 2007), the court issued an
injunction against a conflict in another proceeding.
Treatise.
Hazard & Hodes § 10.11.
Declaratory Judgment
Paduano
& Weintraub LLP v. Wachovia Securities, 185 F. Supp. 2d 330 (S.D.N.Y. 2002). The
plaintiff law firm (hereinafter, “Paduano”) represents Prudential in
an arbitration against Wachovia. Wachovia’s
counsel has been seeking to have Paduano disqualified in the arbitration.
Paduano brought this action in New York state court for a
declaratory judgment holding that it has no conflict in the arbitration.
Wachovia removed the state court action to the district court, and
the only issue decided in this opinion was whether the district court had
jurisdiction. The court held that it did not.
The reason for including the case here is to illustrate yet another
strategy for resolving allegations of conflict of interest – in this
case, a suit for declaratory judgment.
Lineberry v. Riley Farm
Property Owners Assoc., 2005 Ark. App. LEXIS 804 (Ark. App. Nov. 9,
2005). Very difficult decision to grasp because majority opinion not
published. But, in the case a law firm made a motion for declaration
that it should not be disqualified. One cannot tell whether the
majority approved of the remedy.
Motion to Prevent Disqualification
In re Malden Mills Industries,
Inc., 275 B.R. 670 (D. Mass. 2002).
This case involved a fire. The
plaintiffs hired Dr. Zalosh as an expert.
Dr. Zalosh hired Chillworth Technologies to conduct some
“blind” and “standardized” testing.
Defendants hired as an expert Dr. Ebadat, a vice president of
Chillworth. Plaintiffs raised
this “conflict” with defendants.
The defendants moved for an order preventing disqualification of
Dr. Ebadat. The court granted
the motion, holding that confidentiality was key.
The plaintiffs made no showing that Dr. Ebadat had, or conveyed to
defendants, any confidences of plaintiffs.
The court stressed that Chillworth had been hired by Zalosh and not
by the plaintiffs or plaintiffs’ lawyers and that Chillworth had no
understanding that it was working for plaintiffs. The court did not
comment on the unusual procedure of moving to avoid disqualification.
Atofina Chemicals, Inc. v. Jci Jones Chemicals, Inc., 2002 U.S. Dist. LEXIS 13970 (E.D. Pa. July 10,
2002). The Miami office of
Hunton & Williams (H&W) began handling a variety of matters for
the defendant in June 2000. In
December 2000 the plaintiff hired the Raleigh office of H&W to handle
a personnel lawsuit. In June
2001 H&W began representing defendant in this case.
H&W discovered the conflict in January 2002 and advised both
parties. It offered to
withdraw from representing the plaintiff in the personnel case and
reimburse the plaintiff for the cost of doing so, or to remain in the case
with plaintiff’s consent. H&W
also erected a screen between the Raleigh lawyers and the Miami lawyers.
It then filed a motion with the court asking the court "to
determine whether H&W should be disqualified in this case" (and
suggesting that disqualification would not be appropriate).
The plaintiff responded with a motion to disqualify.
The court denied the motion, but said that H&W would have to
withdraw from representing the plaintiff in the personnel matter.
Among the reasons for denying the motion to disqualify were: (1)
the Miami and Raleigh matters were completely unrelated; (2) there had
been no exchange of information between the Miami and Raleigh offices
about either matter, and the firm had erected a screen; (3) the plaintiff
would have to change counsel in any event, and H&W had offered to pay
the cost of doing so; and (4) the totality of burdens would be less if
H&W were allowed to remain in the case.
"Motion to Qualify." Engineered Products Co. v. Donaldson Co., 290
F. Supp. 2d 974 (N.D. Iowa 2003). A party, anticipating a motion to disqualify its lawyer,
filed a "motion to qualify" its lawyer. The court denied
the motion on the merits, but did not question the procedural soundness of
such a motion.
Seeking Court's "Guidance" before Conflict Became an Issue in
the Case. Eberle Design, Inc. v. Reno A & E, 354 F. Supp. 2d 1093 (D. Ariz.
2005). Frowned upon by magistrate judge in Foxworth
v. Barnhart, 2008 U.S. Dist. LEXIS 28669 (E.D.N.Y. April 8, 2008).
Preemptory motion failed
because ruling granting it was an "advisory opinion." Bright v. Superior Court, 2002 Cal. App. Unpub. LEXIS 9809 (Cal.
App. October 22, 2002). The
defendant’s law firm (“Firm A”) wanted to hire an associate away
from the plaintiff’s law firm. Firm
A was concerned that doing so would disqualify it in this case.
It agreed with the associate that the hiring would be contingent on
the court making a finding of no disqualification.
Firm A firm moved for such a finding.
Based upon a showing that the associate had no knowledge of this
case, the trial court granted the motion.
On appeal, the appellate court ruled that because the hiring had
not yet taken place, the trial court’s ruling was an “advisory
opinion” and, therefore, must be reversed.
Motion to Intervene to Disqualify
In the following cases the court allowed a non-party to intervene in a
lawsuit in order to make a motion to disqualify: Commercial Development
Co. v. Abitibi-Consolidated Inc., 2007 U.S. Dist. LEXIS 86147 (W.D. Wash. Nov. 15,
2007); Cole Mech. Corp. v.
Nat’l Grange Mut. Ins. Co., 2007 U.S. Dist. LEXIS 66584 (S.D.N.Y.
Sept. 7, 2007); Emmis Operating Co. v. CBS Radio, Inc., 480 F.
Supp. 2d 1111 (S.D. Ind. 2007); and GATX/Airlog Co. v. Evergreen Int'l
Airlines, Inc., 8 F. Supp. 2d 1182 (N.D. Cal. 1998).
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