Solow v. W. R. Grace & Co.

OPINION OF THE COURT

Stroock & Stroock & Lavan represent plaintiffs in this action to recover damages for asbestos contamination resulting from the use of fireproofing materials manufactured by defendant W. R. Grace & Co. Stroock had previously defended Grace in an action entitled City of Enterprise v Grace & Co. (Cir Ct, Coffee County, Ala, Civ No. 85-87), which also involved the contamination of a premises by asbestos. Thus, Grace moved to disqualify the Stroock firm from participating in the present action and the issue is whether it is entitled to that relief.

The courts below disagreed on the question. Supreme Court held that there was a substantial relationship between the issues in the current litigation and those in City of Enterprise,

A lawyer may not both appear for and oppose a client on substantially related matters when the client’s interests are adverse (see, Greene v Greene, 47 NY2d 447 , 451). Thus, a single practitioner who had previously represented defendant in this matter, would be disqualified from representing plaintiff. The rule has been extended to provide that if one attorney in a firm is disqualified from representing a client, then all attorneys in the firm are disqualified (Cardinale v Golinello, supra). This is so because there is an irrebuttable presumption of shared confidences among attorneys employed by the firm which forecloses the firm from representing others in the future in substantially related matters.

The rule fully implements attorneys’ fiduciary duties of loyalty and confidentiality to the client and their ethical obligation to avoid the appearance of impropriety. In the case before us, however, the attorney who represented Grace in the prior matter, one of 372 attorneys employed by Stroock, left the firm well before it was retained in this litigation. In these circumstances, Stroock contends that the strict enforcement of the irrebuttable presumption rule gives too much weight to those ethical concerns and unduly impairs related policy objectives involving the right of clients to select counsel of their choice and favoring the mobility of attorneys. It maintains that it should be able to avoid disqualification by demonstrating that the remaining attorneys have no knowledge of the client’s prior matter; that the client’s confidences and secrets, if any there were, left with the departing partner. For the reasons which follow, we conclude Stroock is correct. We, therefore, reverse the order of the Appellate Division and answer the certified question in the negative.

The retention of Stroock in City of Enterprise was made, on Grace’s behalf, by the Boston law firm of Goodwin, Procter & Hoar, counsel defending Grace nationally in asbestos matters. The Goodwin firm hired Stroock for the limited purpose of preparing Dr. Seaton, an independent expert retained by Grace, for deposition and possible testimony. Ms. Billauer, assisted by a first-year associate and several paralegals, was responsible for the matter and reported to Stroock partners Jay Mayesh and Joseph Forstadt. She and the associate and paralegals who assisted her have all left Stroock. While Mr. Forstadt remains and is expected to play a major role in Stroock’s current representation of plaintiffs, Supreme Court found that his role in the City of Enterprise litigation was negligible. Indeed, billing records show that neither Mr. Mayesh nor Mr. Forstadt billed any time to Grace on the matter. Joseph Giamboi, a Stroock first-year associate at the time of the Enterprise litigation, billed 30 minutes to Grace. Mr. Giamboi stated in his affidavit that he had been involved in planning a presentation on asbestos at the time and, for that purpose, he had reviewed copies of published articles concerning the subject which were in the City of Enterprise files. He denies having reviewed any confidential information concerning Grace or its expert. However, like Mr. Forstadt, Mr. Giamboi is actively involved in the current litigation and is scheduled to depose several Grace experts.

A Stroock associate who reviewed the files relating to the City of Enterprise matter, stated in the moving papers that they contained only published articles about asbestos and contained no confidential or proprietary information concerning Grace. Ms. Billauer also swore that her representation of Grace while at Stroock consisted solely of drafting a hypothet

In denying Grace’s motion, Supreme Court reasoned that while the presumption of knowledge among attorneys in a firm is irrebuttable so long as the attorney who worked on the prior matter remains at a firm, the presumption that those remaining are aware of client confidences in cases they themselves did not handle is rebuttable after the affected attorney leaves and that Stroock had sufficiently rebutted it in this case. The Appellate Division, in reversing, believed that the possibility that client confidences had been shared could not be discounted, and that, absent client consent, Stroock should be disqualified.

A party seeking to disqualify an attorney or a law firm, must establish (1) the existence of a prior attorney-client relationship and (2) that the former and current representations are both adverse and substantially related (Cardinale, supra, at 295-296 ; see also, T. C. Theatre Corp. v Warner Bros. Pictures, 113 F Supp 265 , 268, rearg denied 125 F Supp 233 ; Developments in the Law, Conflicts of Interest in the Legal Profession, 94 Harv L Rev 1244 , 1318 ["Conflicts of Interest”]). Assuming that the former client has satisfied that burden, what effect are courts to give the presumption of disqualification under the present circumstances: is the issue concluded or may the client’s former law firm rebut the presumption?

Analysis begins with examining the purposes of the rule. The irrebuttable presumption is employed to fully protect client confidences and secrets, to offer a clear test which is easy to administer and to avoid an appearance of impropriety on the part of the attorney or the law firm.

Second, the rule avoids the "appearance of impropriety” on the part of the attorney or the law firm. Whether a conflict actually exists could be determined by a hearing but the rule requires disqualification even when there may not, in fact, be any conflict of interest so that any suggestion of impropriety is avoided (see, Cardinale, 43 NY2d, at 296 ; Code of Professional Responsibility Canon 9; Conflicts of Interest, op. cit., at 1358-1359; Note, Attorney Disqualification: The Case for an Irrebuttable Presumption Rebutted, 44 Alb L Rev 645 , 649-650). An irrebuttable presumption of disqualification is favored over a hearing because it avoids the danger that an inquiry may destroy the very confidences sought to be protected (see, NCK Org. v Bregman, 542 F2d 128 , 134-135; Conflicts of Interest, op. cit., at 1329).

Finally, the rule provides a test which, because of the ease of its application, becomes a strong aid in self enforcement among members of the legal profession.

Thus, this per se rule of disqualification protects all of the ethical concerns implicated by successive representations. It does so, however, at a substantial cost to current clients, to the public-at-large and to the legal profession. It is unnecessarily preclusive because it disqualifies all members of a law firm indiscriminately, whether or not they share knowledge of former client’s confidences and secrets. As a result the rule

In Cardinale, a partner in Halperin, Somers & Goldstick, P. C., had represented defendant Golinello in connection with the purchase of corporate capital stock. After the transaction had been completed, attorney Charles Schiller joined the Halperin firm. The firm continued to represent defendant after Schiller’s arrival, but Schiller did not render legal services on Golinello’s behalf. Schiller subsequently left the Halperin firm and became associated with the law firm of King & King. Thereafter, plaintiffs retained the King firm in connection with claims against Golinello and members of the Halperin firm arising out of the earlier stock purchase. Upon learning that Schiller had been retained by the King firm to handle the matter, defendant Golinello moved to disqualify both the King firm and Schiller.

We began our analysis by noting that Halperin was "a small firm whose activities were characterized by an understandable informality” in which "there was a 'constant cross-pollination’ ” and " 'cross current of discussion and ideas’ ” among the employees (Cardinale, supra, at 292 ). Given that atmosphere, we believed Schiller had likely become aware of confidential information concerning Golinello while with Halperin. Indeed, it was of "no moment” that Schiller had never rendered legal services to Golinello, we said, because, by being an attorney associated with Golinello’s attorney, the possibility was simply too great that he had wittingly or unwittingly acquired confidential information concerning Golinello. We also expressed concern over the appearance of impropriety, for if Schiller were allowed to represent plaintiffs in the current action, laypersons might well believe that he was being hired not only because of his legal talent, but also because of confidential information that he possessed.

We concluded, therefore, that Schiller was properly disqualified from the current litigation. No inquiry was required: disqualification arose "simply from the fact that the lawyer, or the firm with which [the lawyer] was then associated, represented the former client in matters related to the subject matter of the second representation” (Cardinale, supra, at

Our holding in Cardinale reflected the prevailing understanding that the duty of loyalty owed to a former client and the avoidance of even an appearance of impropriety are so important that any harm associated with disqualification was minimal when compared with furthering those goals (see generally, T. C. Theatre Corp., supra; Note, Federal Courts and Attorney Disqualification Motions: A Realistic Approach to Conflicts of Interest, 62 Wash L Rev 863 , 875-876). Our determination did not rest on the size of the firm or the number of lawyers it employed, although those factors were relevant. It was based upon our recognition that in firms such as Halperin attorneys are so intimately acquainted with all the work in the office that they can be expected to share client confidences and ideas about how to handle client problems as a matter of course (Cardinale, at 292; see also, Conflicts of Interest, op. cit, at 1355). Thus, we found unpersuasive Federal decisions dealing with law firms of a different type and rejected them without discussion.

One of those Federal decisions was Silver Chrysler Plymouth v Chrysler Motors Corp. (supra). It involved a firm of quite different makeup and practice. In Silver Chrysler, attorney Schreiber was associated with the Hammond law firm, which was representing Silver Chrysler in its action against Chrysler. Schreiber had previously been associated with the firm of Kelley, Drye & Warren, which had represented Chrysler for many years. Upon learning that Schreiber had worked on several Chrysler matters while at Kelley Drye, Chrysler moved to disqualify him and his new firm.

The Second Circuit began its analysis, as this Court had in Cardinale, by reviewing the type of firm involved and the nature of its work. At the time Kelley Drye, unlike the Halperin firm in Cardinale, was a firm of some 80 lawyers segregated into different departments. The court reasoned from this that it would be "absurd” to assume that upon entry into the firm an attorney, by "osmosis,” became aware of every client of the firm and shared in all of the client confidences and secrets which the firm, as a whole, possessed. Because of this the Second Circuit held that the presumption of disqualification should be a rebuttable one; quite simply, it

V.

As these decisions illustrate, any fair rule of disqualification should consider the circumstances of the prior representation. If an attorney has represented a client in an earlier matter and then attempts to represent another in a substantially related matter which is adverse to the interests of the former client, the presumption of disqualification is irrebuttable. Thus, if Ms. Billauer had attempted to represent plaintiffs in their current action against Grace, she would be disqualified from doing so and the imputation of shared confidences with her partners might be so obvious from the facts that her new firm would also be disqualified as a matter of law (see, Cardinale v Golinello, supra).

In this matter, however, Stroock seeks to represent plaintiffs and Ms. Billauer, who handled the Grace matter while at Stroock, has moved to another firm. Under these circumstances the ethical considerations which support a per se disqualification rule have considerably less force and may be overridden by competing policy concerns. In this situation the court must presume that the rights of the former client are jeopardized by Stroock’s subsequent representation of plaintiffs, but Stroock should be allowed to rebut that presumption by facts establishing that the firm’s remaining attorneys possess no confidences or secrets of the former client. That procedure does no violence to our existing rules. In firms characterized by the informality exhibited by the Halperin firm in Cardinale, disqualification will be imposed as a matter of law without a hearing. If the firm can demonstrate prima facie that there is no reasonable possibility that any of its other attorneys acquired confidential information concerning the client, a hearing should be held after which the court may determine that disqualification may be unnecessary. The evidence must be sufficient, however, to establish that the former client’s interests are fully protected and to overcome any suggestion of impropriety.

Accordingly, the order of the Appellate Division should be reversed, with costs, defendant’s motion to disqualify the law firm of Stroock & Stroock & Lavan from representing plaintiffs in this action denied, and the certified question answered in the negative.

Chief Judge Kaye and Judges Bellacosa, Smith, Levine and Ciparick concur; Judge Titone taking no part.

Order reversed, etc.