Pasquariello Electric Corp. v. John Diana et al. (2012)

MEMORANDUM OF DECISION RE DEFENDANT'S MOTION TO DISQUALIFY

I. Facts

In the case before the court, the plaintiff, Pasquariello Electric Corporation, has filed a four-count complaint against the defendants, John Diana, Richard Rivera and Onsite Electric, LLC alleging the following facts.   Rivera and Diana were employed by the plaintiff beginning in December 2001 and June 1997 respectfully.   In June 2006, Diana entered into a contract with the plaintiff that promoted Diana to vice president of Pasquariello Estimating Operations.   As part of the agreement, Diana received an increased salary and his employment status shifted to a five-year term that automatically renewed.   In exchange for these benefits, Diana agreed to “certain confidentiality, non-competition and non-solicitation provisions” contained in his new employment contract, and he agreed to provide the plaintiff with thirty days notice before terminating his contract.

On June 27, 2012, Rivera was laid off from his employment at the plaintiff corporation.   That same day, Diana quit without giving the requisite thirty-day notification pursuant to his employment contract.   On February 9, 2012, Diana and Rivera formed their own electrical company, OnSite Electric.   The complaint alleges in Count One that Diana and Rivera used privileged information to solicit business from former and current clients belonging to the plaintiff.   Count Two alleges breach of contract against Diana in relation to a $25,000 loan that Diana has failed and refused to repay.   In the remaining counts of the complaint, the plaintiff alleges that Diana, Rivera and OnSite Electric violated the Connecticut Uniform Trade Secrets Act and the Connecticut Unfair Trade Practices Act.

The defendant, John Diana, moves this court to disqualify the appearance of the plaintiff's law firm of Yamin & Grant in this action on the grounds that the firm has acquired confidential information through its previous representations of the defendant.   The plaintiff filed a memorandum of law in opposition to the defendant's motion to disqualify.   An evidentiary hearing on this matter was held on May 31, 2012.

II. Law

It is well settled that “[t]he trial court has the authority to regulate the conduct of attorneys and has a duty to enforce the standards of conduct regarding attorneys.”  (Internal quotation marks omitted.)  Daniels v. Alander, 268 Conn. 320, 329, 844 A.2d 182 (2004).  “The trial court has broad discretion to determine whether there exists a conflict of interest that would warrant disqualification of an attorney ․ Disqualification of counsel is a remedy that serves to enforce the lawyer's duty of absolute fidelity and to guard against the danger of inadvertent use of confidential information ․ In disqualification matters, however, we must be solicitous of a client's right freely to choose his counsel ․ mindful of the fact that a client whose attorney is disqualified may suffer the loss of time and money in finding new counsel and may lose the benefit of its longtime counsel's specialized knowledge of its operations ․ The competing interests at stake in the motion to disqualify, therefore, are:  (1) the defendant's interest in protecting confidential information;  (2) the [plaintiff's] interest in freely selecting counsel of their choice;  and (3) the public's interest in the scrupulous administration of justice.”  (Citations omitted;  internal quotation marks omitted.)  Bergeron v. Mackler, 225 Conn. 391, 397–98, 623 A.2d 489 (1993).

“In view of the strong public policy favoring a party's right to select its own counsel, the law places the burden of showing that disqualification is required upon the moving party ․ A party moving for disqualification of an opponent's counsel must meet a high standard of proof ․ [B]efore permitting a party to disqualify an attorney the moving party bears the burden of proving facts which indicate disqualification is necessary.”  (Citations omitted;  internal quotation marks omitted.)   Pendergrast v. Waterbury Fire Dept., Superior Court, judicial district of Waterbury, Docket No. CV 09 5011960 (July 22, 2009, Brunetti, J.).  “[T]he burden of proving the basic facts of the prior representation, its actual scope, i.e., what legal work was done, for whom, on what timetable, and the like, rests on the party seeking disqualification.   In doing so, the moving party need not introduce evidence as to the particular confidences he claims to have imparted to the attorney because that would result in the ‘revelation of the very information the [rule] is designed to protect.’  Goldenberg v. Corporate Air, Inc., 189 Conn. 504, 512, 457 A.2d 296 (1983).”  Klein v. Bristol Hospital, 50 Conn.Sup. 160, 166, 915 A.2d 942 (2006).  “Absent supporting evidence and case law, simply making reference to rule 1.9 of the Rules of Professional Conduct is not enough to find that the disqualification ․ is necessary.”  Pendergrast v. Waterbury Fire Dept., supra, Superior Court, Docket No. CV 09 5011960.

III. Discussion

In the present case, the defendant Diana argues that Rules 1.9 and 1.10 of the Connecticut Rules of Professional Conduct prohibits plaintiff's counsel from engaging in this action because other individual members of the firm represented the defendant in prior matters.¹  The defendant further claims that through these prior representations the law firm of Yamin & Grant has gained confidential information regarding the defendant's finances and private matters concerning his family that will result in an unfair advantage to the plaintiff in this case.

In response, the plaintiff maintains that counsel should not be disqualified because the prior representations are not substantially related to the present case and denies that the firm obtained any such confidential information resulting in an advantage and that even if it had obtained confidential information, the firm has already taken appropriate steps and has properly quarantined all pertinent records.   Counsel also represents that the firm has taken steps to ensure that prior counsel within the firm who represented the defendant will be sequestered from talking about those prior representations with the attorneys handling this matter.   Additionally, counsel for the plaintiff maintains that the attorneys and staff members who were involved in the previous representations are not involved in the present matter.

The plaintiff also argues that its current counsel, Eric M. Grant, has been the plaintiff's legal representative for over twelve years in a variety of contract, corporate governance and litigation matters and as a result he has developed “a comprehensive knowledge of Pasquariello's business and industry practices, including it's employment and customer solicitation practices” all of which are highly relevant to the case at hand.

Rule 1.9 of the Connecticut Rules of Professional Conduct, which is entitled “Duties to Former Clients,” provides in relevant part:  “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 ․”

In 2007, the Rules of Professional Conduct were amended to include a definition for the term “substantially related.” ²  According to the official comments, “[m]atters are ‘substantially related’ for purposes of this Rule if they involve the same transaction or legal dispute or if there otherwise is a substantial risk that confidential factual information as would normally have been obtained in the prior representation would materially advance the client's position in the subsequent matter ․ Information that has been disclosed to the public or to other parties adverse to the former client ordinarily will not be disqualifying.   Information acquired in a prior representation may have been rendered obsolete by the passage of time, a circumstance that may be relevant in determining whether two representations are substantially related ․ A former client is not required to reveal the confidential information learned by the lawyer in order to establish a substantial risk that the lawyer has confidential information to use in the subsequent matter.   A conclusion about the possession of such information may be based on the nature of the services the lawyer provided the former client and information that would in ordinary practice be learned by a lawyer providing such services.”  Rules of Professional Conduct, 1.9, comment.   Although “the Restatement has adopted this expansive interpretation ․ it has not yet been embraced at the appellate level in this state.”  (Citation omitted.)   Maclay v. JJ Salzman, LLC, Superior Court, judicial district of Norwalk at Stamford, Docket No. CV 10 6007323 (July 21, 2011, Mottolese, J.T.R.) (52 Conn. L. Rptr. 296, 298).

At the May 31, 2012 hearing, the parties agreed that the issue in this case is not whether counsel is representing the plaintiff in the matter involving the same transaction or legal dispute;  but rather, whether there is “a substantial risk that confidential factual information as would normally have been obtained in the prior representation would materially advance the client's position in the subsequent matter.”  Rules of Professional Conduct, 1.9, comment.

Therefore, the issue before this court is whether a substantial risk exists that the confidential factual information that may have been obtained by the law firm Yamin & Grant in the course of its prior representation of the defendant would materially advance the plaintiff's prosecution of the present action.

At the May 31, 2012 hearing, the defendant relied primarily on the allegation that he submitted financial information in regards to the 2004 closings of two properties and the 2009 representation of the defendant for the refinance of his home mortgage.³  During Diana's testimony, however, he was unable to offer any specifics as to what information he gave to his attorneys and he admitted that he could not recall if the attorney asked him to provide any financial documents.   Further, Diana did not have any specific knowledge as to whether the law firm is currently in possession of any of his financial information.

This court is well aware that the possession of confidential information could place a party at a severe disadvantage in a lawsuit.   In the present case, however, the mere allegation that the plaintiff's counsel possesses such information without further proof is insufficient to overcome the substantial burden necessary to disqualify the plaintiff's representation.

Although it is true that “a conclusion about the possession of such information may be based on the nature of the services the lawyer provided the former client and information that would normally be learned by a lawyer providing such services”;  (emphasis added) Rules of Professional Conduct, 1.9, comment;  the court is not persuaded that the law firm provided any services to the plaintiff that would entail the disclosure of any confidential information.   The plaintiff's counsel represented the defendant in routine legal matters, none of which would involve the disclosure of confidential information that could materially affect the current lawsuit.   Undoubtedly, the counsel for the plaintiff acquired some minor details regarding the defendant's financial situation as a result of its prior representation;  however, “[g]eneral knowledge of a former client's financial situation is insufficient to disqualify counsel.”  Beckenstein Enterprises v. Smith, Superior Court, complex litigation docket at Tolland, Docket No. X07, CV 010080437 (March 28, 2003, Sferrazza, J.) (34 Conn. L. Rptr. 459, 460);  see also Cadle Co. v. Ginsberg, 70 Conn.App. 748, 771–72, 802 A.2d 137 (2002) (“[w]e conclude that court did not abuse its discretion in denying the defendant's motion absent specific evidence as to the financial information disclosed in the malpractice case and its likely effect on the present trial”).

The defendant asserts that the law firm representing the plaintiff had access to his personal finances and that as a result of this access, it will know how much money the defendant has to defend himself from a lawsuit and “how much it would hurt his family financially to incur substantial legal fees.”   Furthermore, the defendant asserts that the law firm's access to his personal information will inform the plaintiff's counsel as to how much it would “financially hurt [the defendant's] family if he was forced to not practice his profession in Connecticut.”

The defendant relies on the holding of O'Neill v. DiBlasi, Superior Court, judicial district of Waterbury, Docket No. 097174 (July 20, 1994, Sullivan, J.) [12 Conn. L. Rptr. 89] (9 C.S.C.R. 839), to support his contention that the opposing counsel's possession of the defendant's financial records should result in disqualification.   In O'Neill, the plaintiff brought suit against the defendant for professional malpractice.  Id. The defendant had previously been represented by the plaintiff's counsel for two years, during which time the plaintiff's counsel provided estate planning for the defendant and prepared a will.  Id. The defendant presented testimony that he had retained 60% of the assets of which the plaintiff's counsel had knowledge.  Id. The court held that the plaintiff's knowledge of these assets may allow the plaintiff to satisfy a “judgment from individual assets of [the defendant].   Knowledge of some of these assets could be obtained by the plaintiffs from the fact of their attorney's ․ prior representation of the defendant.”  Id., 840.

In O'Neill, the counsel representing the plaintiff had an in depth knowledge of the defendant's financial situation through its previous representation of the defendant in estate planning and in preparing a will.   In the present case, the defendant has failed to present the court with any evidence that would suggest that the plaintiff's counsel had the sort of in depth knowledge that was found in O'Neill.   Instead, the defendant has merely alluded to the fact that the plaintiff's counsel may be in possession of some of his financial information including his assets and liabilities.   This is in stark contrast to the representation the counsel provided in O'Neill, which necessarily would have involved a detailed review of financial documents and possessions in order to determine how those assets should be distributed upon the death of the client.

In this case, the defendant has simply failed to meet his burden of demonstrating that the law firm possessed any specific financial information that would “materially advance the [plaintiff's] position.”  Rules of Professional Conduct, 1.9, comment.

Even if the court were to determine that individual attorneys from the firm representing the plaintiff should be disqualified pursuant to the Rules of Professional Conduct 1.9, the disqualification of the entire firm would still be inappropriate.   The Rules of Professional Conduct 1.10 provides in relevant part that “[w]hile 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 ․” This idea, often referred to as imputed disqualification, “gives effect to the principle of loyalty to the client as it applies to lawyers who practice in a law firm.   Such situations can be considered from the premise that a firm of lawyers is essentially one lawyer for purposes of the rules governing loyalty to the client, or from the premise that each lawyer is vicariously bound by the obligation of loyalty owed by each lawyer with whom the lawyer is associated.”  Rules of Professional Conduct, 1.10, comment.

“[W]here previous representation may be pervasive and lengthy, quarantine of the record and attorneys who may have obtained confidential information can eliminate the need to employ the drastic measure of disqualification ․ If the risk of disclosure can be negated by an effective quarantine, the fact that other attorneys in [the] firm may have acquired potentially damaging knowledge as a result of that firm's past representation of the movants would pose no ethical impediment to present representation of the defendants who have chosen to retain [the firm].”   Draper v. Danbury Healthy Systems, Inc., Superior Court, complex litigation docket at Waterbury, Docket No. X10 CV 08 5008854 (March 20, 2009, Scholl, J.) (47 Conn. L. Reptr. 500, 503).  “Although the Model Rules of Professional Conduct adopted by the American Bar Association do not permit firms to avoid disqualification by erecting screens or isolation walls, at least where the ․ attorney has actual knowledge of prior client confidences, state and federal courts have denied motions to disqualify law firms that would have been granted, were it not for the timely erection of ethics screens ․ That trend has been exemplified in several Connecticut cases.”  (Citation omitted;  internal quotation marks omitted.)  Klein v. Bristol Hospital, supra, 50 Conn.Sup. 167.   See Beckenstein Enterprises v. Smith, supra, 34 Conn. L. Rptr. 459;  Beckenstein Enterprises–Prestige Park, LLC v. Lichtenstein, Superior Court, complex litigation docket at Waterbury, Docket No. X06 CV 03 0183486 (August 11, 2004, Alander, J.) (37 Conn. L. Rptr. 627);  Horch v. United of Omaha Life Ins. Co., Superior Court, judicial district of New Haven, Docket No. CV 98 0415821 (July 2, 1999, Devlin, J.) (25 Conn. L. Rptr. 18);  Rivera v. Chicago Pneumatic Tool Co., Superior Court, judicial district of New London, Docket No. 516364 (August 5, 1991, Teller, J.) [4 Conn. L. Rptr. 394] (6 C.S.C.R. 786).

In support of its contention that the plaintiff's counsel should not be disqualified, the plaintiff submitted the affidavits and/or testimony from the three attorneys, George Mowad, Jaclyn Koachman and Joseph Yamin, who were involved with the representation.   Mowad avers that in 2004 he represented the defendant's son in one matter, and the defendant and his wife in the purchase of one home and the sale of another piece of property, and was assisted in these matters briefly by Attorney Pasquale Salvatore.   Mowad asserts that the defendant did not disclose any confidential information and that he is not involved in the present matter.   Similarly, Attorney Koachman stated that in 2009 she represented the defendant in a refinance of his property but that she did not receive any confidential information nor is she currently involved in this litigation.⁴  Finally, the affidavit of Attorney Yamin provides that he was designated as the former agent for service of process for the defendant's now defunct corporation.   Yamin states he has not received any confidential information nor is he involved in the current litigation.

IV. Conclusion

This court, having carefully reviewed and weighed the evidence according to the applicable standards of law, having scrutinized and evaluated the demeanor and credibility of the parties and the witnesses, and having considered the parties' arguments and memorandum of law as well as the affidavits submitted by counsel, the court finds the defendant has failed to support his allegations that the firm of Yamin & Grant obtained confidential financial information that would be used to give the plaintiff an unfair advantage in the litigation at hand.

Further, the court finds that plaintiff's counsel has taken steps to ensure that the members of the firm who previously represented the defendant are sequestered from participating in the present litigation and has taken the necessary peremptory steps to sufficiently erect an ethics screen preventing disclosure of any prior files from being used in the case at hand.

Accordingly, the defendant's Motion to Disqualify the appearance of Yamin & Grant is hereby denied.

BY THE COURT

Denise D. Markle, Judge

FOOTNOTES

FN1. Specifically, Mr. Diana claims prior representations included the representation of his minor son in either the year 2003 or 2004, the formation of a corporation for the business of “Crusty's Bread Bowl Inc.” in 2004, and the purchase and sale of the defendant's residence in 2004.   Diana also asserts that he used the law firm of Yamin & Grant in the refinancing the defendant's home mortgage on in 2009 and 2011..  FN1. Specifically, Mr. Diana claims prior representations included the representation of his minor son in either the year 2003 or 2004, the formation of a corporation for the business of “Crusty's Bread Bowl Inc.” in 2004, and the purchase and sale of the defendant's residence in 2004.   Diana also asserts that he used the law firm of Yamin & Grant in the refinancing the defendant's home mortgage on in 2009 and 2011.

FN2. Prior to this date, the Rules of Professional Conduct offered no definition for the phrase “substantially related.”.  FN2. Prior to this date, the Rules of Professional Conduct offered no definition for the phrase “substantially related.”

FN3. The defendant also testified that the plaintiff's counsel “may have” represented him during a 2011 refinancing.   The defendant provided no documentation of this representation;  instead, he relies on the assumption that because he contacted a broker or bank about refinancing, that entity would have used his previous attorney.   The law firm of Yamin & Grant has no record of this alleged representation..  FN3. The defendant also testified that the plaintiff's counsel “may have” represented him during a 2011 refinancing.   The defendant provided no documentation of this representation;  instead, he relies on the assumption that because he contacted a broker or bank about refinancing, that entity would have used his previous attorney.   The law firm of Yamin & Grant has no record of this alleged representation.

FN4. At the May 31, 2012 hearing, Koachman admitted to writing a cease and desist letter prior to the commencement of this lawsuit.   Since that time, she has not been involved in this litigation..  FN4. At the May 31, 2012 hearing, Koachman admitted to writing a cease and desist letter prior to the commencement of this lawsuit.   Since that time, she has not been involved in this litigation.

Markle, Denise D., J.