In the recent case, Zalewski v. Shelroc Homes, LLC 1:11-CV-1159 (N.D.N.Y. 3/6/12), the U.S. District Court for the Northern District of New York grappled with the issue whether to disqualify plaintiffs’ attorney, Lee Palmateer, because he had once been interviewed by defendants with a view to representing them in the identical or substantially similar action. The court concluded that Mr. Palmateer in fact had to be disqualified from representing plaintiffs in the action.
The court noted that motions to disqualify are only decided after painstaking analysis of facts and precise application of legal precedent. In Zalewski, plaintiffs initiated a copyright infringement action against eighty defendants. Plaintiffs were designers and builders of specialty architectural and floor planning designs. They accused defendants of violating their exclusive copyrights to architectural designs of residential and colonial style homes. During the course of the litigation defendants were forced to find a new attorney after their original defense counsel withdrew his representation. One of the attorneys defendants interviewed with a view to replacing outgoing counsel was Palmateer. Before Palmateer had the sit-down meeting with defendant and another of defendants’ attorneys, that attorney spoke to Palmateer in a telephone conversation in which he shared with Palmateer the case docket number to help him prepare for the face-to-face meeting. At the sit-down meeting Palmateer discussed with that defendants’ attorney the pending litigation in general terms including its procedural history, the terms of engagement and defendants’ amenability to settlement as well as settlement strategy. After the defendant arrived at that meeting the conversation continued for another hour. Defendants claimed that they shared confidential, privileged information, including detailed analysis of the overall case and that they analyzed the evidence of the alleged copyright infringement. According to defendants, Palmateer was actively involved in the discussion and freely offered his advice and asked questions. According to defendants they discussed what defendants might be willing to offer to settle the case.
Palmateer denies that defendants made him privy to privileged communications or that defendants shared with him settlement terms. He claims that there was no discussion of settlement strategy or defendants’ amenability to settlement. According to Palmateer, he just offered defendants his preliminary observations on settlement.
Palmateer did agree that they met for one hour and that they discussed the nature of the case as well as its procedural history, and the factual allegations against defendants. Palmateer provided defendants with his preliminary observations but claims that he learned nothing that could be harmful to defendants’ case.
After the meeting, defendants decided not to hire Palmateer and instead retained another firm.
Some time thereafter, plaintiffs’ counsel withdrew and plaintiffs retained Palmateer as their new counsel. Palmateer had not previously represented plaintiffs in connection with any matter. Shortly after Palmateer’s retention by plaintiffs, plaintiffs filed another amended complaint. According to defendants, the amended complaint made new allegations that plaintiffs could only have learned from Palmateer’s confidential communications that he had with defendants at their defendants’ meeting. These allegations were not contained in any previous version of the complaint. Defendants responded by instituting new counter-claims against the plaintiffs.
In their motion to disqualify, defendants claimed that they entered into a prospective attorney-client relationship with Palmateer when they discussed the various issues at their meeting. They also argued that Palmateer received privileged confidential communication from their brief attorney-client relationship and that Palmateer used this information in plaintiffs’ new amended complaint. Defendants assert that they will be harmed by the information that Palmateer gleaned at their meeting and that he will use the information he gleaned to plaintiffs’ advantage. Palmateer, not surprisingly, denies these allegations. He claims that defendants did not divulge any privileged communications and that the conversation at their meeting consisted of very general discussions regarding the nature of the case.
Courts possess broad discretion to disqualify attorneys. Attorneys are disqualified when there is a serious risk that the trial will be tainted. This consideration has to be balanced against the competing, but equally important, right of a party to choose its own representation. The bottom line is that the court needs to preserve the integrity of the adversarial process. The party seeking disqualification must meet a high standard of proof. Although the standards for professional conduct in federal courts is a matter of federal law, the rules of the American Bar Association, state disciplinary rules and state common law may be consulted for guidance.
As such, the court turned for guidance to the New York Code of Professional Conduct, and specifically Rule 1.18 which states that:
a) A person who discusses with a lawyer the possibility of forming a client-lawyer relationship with respect to a matter is a “prospective client.” (b) Even when no client-lawyer relationship ensues, a lawyer who has had discussions with a prospective client shall not use or reveal information learned in the consultation, except as Rule 1.9 would permit with respect to information of a former client. (c) A lawyer subject to paragraph (b) shall not represent a client with interests materially adverse to those of a prospective client in the same or a substantially related matter if the lawyer received information from the prospective client that could be significantly harmful to that person in the matter, except as provided in paragraph (d)….(d) When the lawyer has received disqualifying information as defined in paragraph (c), representation is permissible if: (1) both the affected client and the prospective client have given informed consent, confirmed in writing; or (2) the lawyer who received the information took reasonable measures to avoid exposure to more disqualifying information than was reasonably necessary to determine whether to represent the prospective client….
Defendants contend that at the time of their meeting with Palmateer, they were his prospective clients, and they never consented to his subsequently becoming plaintiffs’ counsel. At that meeting, according to defendants, he received information harmful to their interests if divulged. Therefore, he cannot continue to represent a party (defendants) with interests materially adverse to his clients’ in the same or substantially the same matter.
Palmateer denies receiving such confidential information. He also denies defendants’ characterization of events and opines that the information divulged at their meeting would not adversely impact or materially harm their position because he only received preliminary and inconsequential information.
The court reasoned that under Rule 1.18, it must determine: (1) whether defendants were Palmateer’s prospective client; (2) whether privileged information was shared with a lawyer; (3) whether the attorney’s current client has interests materially adverse to the prospective client in the same or substantially the same matter; and (4) whether disclosure of that information could be significantly harmful to the prospective client.
A party who discusses with a lawyer the “possibility of forming a client-lawyer relation with respect to a matter is a prospective client.” according to Rule 1.18(a). The court concluded that defendants were Palmateer’s prospective client. In fact, plaintiffs did not really challenge the claim that defendants were Palmateer’s prospective client under the construct of Rule 1.18. Defendants were interviewing attorneys to determine which one to retain for the lawsuit. Palmateer knew this before and during meeting. Palmateer prepared for the meeting, reviewed the case docket, presented defendants with a proposed retainer agreement and discussed the cost of litigation with them.
Also undisputed was the fact that Palmateer’s current clients’ interests (i.e. the plaintiffs) are materially adverse to defendants’ interests in the same or substantially the same matter.
The major bone of contention is the nature of the information defendants divulged to Palmateer at their meeting and whether that information is significantly harmful to defendants if Palmateer continues to represent their adversary, i.e. the plaintiffs.
The court asserted that defendants’ imposition of counter-claims after their meeting with Palmateer-which counter-claims were based upon information discussed with Palmateer at their meeting- turns Palmateer into a witness-advocate. It is impossible for someone to be both the attorney in a case as well as a witness. The two positions are conflicting and untenable. Palmateer would either be called as a witness by defendants to prosecute their counter-claims or by plaintiffs to defend the counter-claims. Such a result would taint the litigation and harm the integrity of the adversarial process. Furthermore, even if Palmateer only received defendants’ general impressions about the litigation at their meeting, that is enough to taint the judicial process and give the plaintiffs an unfair advantage in the litigation. Hence, the court did not need to resolve the factual dispute between Palmateer and defendants about whether he received sensitive, privileged information at the meeting or not.
Since any doubts about disqualification should be resolved in favor of disqualification ( Hull v. Celanese, 513 F.2d 568, 571 (2d Cir 1975), the court granted defendants’ motion to disqualify Palmateer, and in so doing, contended that it preserved the integrity of the adversarial process.