Commercial Division Blog

Posted: January 14, 2015 / Categories Commercial, Law Firms and Professional Ethics

Prospective Client Who Consults Attorney who Ultimately Represents Adverse Party Must Show Harm to Disqualify Counsel

On January 8, 2015, the First Department issued a decision in Mayers v. Stone Castle Partners, LLC, 2015 NY Slip Op. 00295, reversing an order disqualify litigation counsel.

In Mayers, Matthew R. Mayers (a defendant in one action and the plaintiff in another), moved to disqualify Quinn Emanuel Urquhart & Sullivan, LLP as counsel for his opponent in those actions, Stone Castle Partners, LLC, because before Stone Castle Quinn Emanuel, Mayers and a Quinn Emanuel lawyer spoke about Quinn Emanuel representing Mayers in a related lawsuit.

The First Department reversed the disqualification, explaining:

A movant seeking disqualification of an opponent's counsel bears a heavy burden. A party has a right to be represented by counsel of its choice, and any restrictions on that right must be carefully scrutinized. This right is to be balanced against a potential client's right to have confidential disclosures made to a prospective attorney subject to the protections afforded by an attorney's fiduciary obligation to keep confidential information secret. Courts should also examine whether a motion to disqualify, made during ongoing litigation, is made for tactical purposes, such as to delay litigation and deprive an opponent of quality representation. The decision of whether to grant a motion to disqualify rests in the discretion of the motion court.

Issues relating to the prospective client relationship based on events that occurred after April 2009 are governed by Rule 1.18 of the Rules of Professional Conduct (22 NYCRR 1200.0), rather than the repealed DR 5-108 (22 NYCRR 1200.27). Cases from this Court addressing conduct that occurred prior to the April 2009 enactment of the new rules are not controlling here.

The former Code of Professional Responsibility did not have a specific rule that governed disclosures during a prospective client consultation. Rule 1.18 of the Rules of Professional Conduct fills that void. It provides:

(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 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). If a lawyer is disqualified from representation under this paragraph, no lawyer in a firm with which that lawyer is associated may knowingly undertake or continue representation in such a matter, except as provided in paragraph (d)" (emphasis added).

Thus, where a prospective client consults an attorney who ultimately represents a party adverse to the prospective client in matters that are substantially related to the consultation, the prospective client is entitled to obtain the attorney's disqualification only if it is shown that the information related in the consultation could be significantly harmful to him or her in the same or substantially related matter.

. . . [D]isqualification is not warranted because the conveyed information did not have the potential to be significantly harmful to Mayers in the matter from which he seeks to disqualify counsel.

(Internal quotations and citations omitted) (emphasis added).