Gallagher v. Hayden

6 Mass. L. Rptr. 140
CourtMassachusetts Superior Court
DecidedOctober 9, 1996
DocketNo. 960413
StatusPublished

This text of 6 Mass. L. Rptr. 140 (Gallagher v. Hayden) is published on Counsel Stack Legal Research, covering Massachusetts Superior Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Gallagher v. Hayden, 6 Mass. L. Rptr. 140 (Mass. Ct. App. 1996).

Opinion

Toomey, J.

Plaintiff Arthur J. Gallagher & Co. (“Gallagher”) brought this action seeking injunctive relief against a former employee and his new employer to enforce non-solicitation agreements and prevent disclosure of confidential and proprietary business information. The matter is presently before the court on plaintiffs motion to disqualify defendants’ counsel. For reasons set forth below, the motion is denied.

[141]*141BACKGROUND

On August 31, 1993, John J. Hayden (“Hayden”), Robert P. Powers (“Powers”) and Paul H. Barry (“Barry”), principal stockholders of Stark, Johnson & Stinson, Inc. (“SJS”), an insurance agency, soldSJS’s assets to Gallagher, an insurance brokerage and agency with an office in Westborough, Massachusetts. As part of the transaction, Hayden, Powers and Barry entered into an “Agreement and Plan of Reorganization” (hereinafter referred to as “Acquisition Agreement”) with Gallagher and subsequently became the buyer’s employees. On August 31, 1993, Hayden signed an employment agreement with Gallagher (“Employment Agreement”). Both the Acquisition and Employment Agreements contained non-competition provisions which restricted the ability of the sellers from soliciting Gallagher customers in the event that they left Gallagher’s employment.

During negotiations for the purchase of SJS, which commenced in 1992 and continued until the sale in 1993, attorney David A. Bakst (“Bakst”) of the law firm Morrison, Mahoney & Miller (“MMM”) represented SJS and Hayden, Powers and Barry.

On December 28, 1994, Powers purchased a portion of Gallagher’s business involving the personal insurance lines for individual customers. Thereafter, Powers formed his own insurance agency through which he conducted this newly purchased personal insurance business.

On June 2, 1995, Hayden and Gallagher agreed that Hayden would resign as an employee of Gallagher. On July 6, 1995, the terms of Hayden’s resignation were reduced to a written agreement (hereinafter referred to as the “Resignation Agreement”). The Resignation Agreement included a provision in which Hayden agreed that if contacted by Gallagher customers, he would encourage individual personal insurance customers to stay with Powers. On September 30, 1995, Hayden ceased employment with Gallagher. Hayden subsequently joined Braley & Wellington Insurance Agency (“B&W j located in Worcester, Massachusetts.

While Hayden was negotiating with Gallagher about his resignation from that company, Bakst rendered legal advice to Hayden, reviewed documents relating to his resignation, and discussed the terms of that resignation with representatives of Gallagher, including Daniel Penni, Area President, and Carl Fasig, in-house counsel for Gallagher. After the execution of Hayden’s Resignation Agreement with Gallagher in 1995, Gallagher retained MMM to assist it in the creation of a risk retention group, which involved creating a corporation through the preparation of legal documents and obtaining approval from the Massachusetts Division of Insurance (hereinafter referred to as the “Regulatory Matters”). The legal work performed by MMM on these Regulatory Matters was completed by December 1995. Since December 1995, MMM has not rendered any legal services to Gallagher.

On February 23, 1996, Gallagher filed suit against Hayden and B&W, claiming that Hayden and B&W solicited insurance business in violation of the Acquisition Agreement, the Employment Agreement, and the Resignation Agreement and alleging that Hayden breached an implied covenant of good faith and fair dealing, misappropriated business opportunities, committed fraud, interfered with Gallagher’s advantageous and contractual relationships, and violated M.G.L.c. 93A. The suit also asserted that Hayden and B&W misappropriated Gallagher’s trade secrets and confidential information and were unjustly enriched by their actions. Defendants filed a third-party claim against Powers alleging that Powers and Gallagher conspired together to use the instant litigation as means to restrain Hayden and B&W from competing fairly for insurance business. At the time of suit, Barry was employed as Area Senior Vice President with Gallagher. MMM is representing Hayden and B&W, the defendants in the instant action.

DISCUSSION

Simultaneous Representation

Plaintiff contends that MMM currently represents plaintiff in connection with ongoing Regulatory Matters while, at the same time, MMM represents the defendants in the instant case. That simultaneous representation, plaintiff maintains, is violative of the Canons of Ethics.

Disciplinary Rule 5-105(B), appearing in S.J.C. Rule 3:07, 382 Mass. 781 (1981), does prohibit an attorney from acting on behalf of a client in one action and simultaneously acting against that client in a second action. “A lawyer shall not continue multiple employment... if it would be likely to involve him in representing differing interests, except to the extent permitted under DR 5-105(C).”2 Concurrent representation even on unrelated matters constitutes conflict. “Acting for a client in one action and against the same client in another action constitutes ‘representing differing interests’ within the meaning of DR 5-105(B).’’ McCourt Co., Inc. v. FPC Properties, Inc., 386 Mass. 145, 146 (1982). Those precepts have not, however, been breached at bar.

MMM completed legal work for Gallagher on the Regulatory Matters in December 1995. Since December 1995, MMM has not rendered any legal services to Gallagher. Plaintiff filed the instant complaint in February 23, 1996. Accordingly, disqualification is not warranted on the basis of simultaneous representation because MMM completed its regulatory work for plaintiff prior to commencement of this action.

Successive Representation

The disqualification of an attorney from continued representation is a measure “that courts have invoked in appropriate circumstances to prevent improper [142]*142disclosure of clients’ confidences, or to ameliorate the effects of such disclosures where they have occurred.” Masiello v. Perini Corp., 394 Mass. 842, 848 (1985) quoting Realco Servs., Inc. v. Holt, 479 F.Supp. 867, 871 (E.D. Pa. 1979). Disqualification of counsel, “as a prophylactic device for protecting the attorney-client relationship, is a drastic measure which courts should hesitate to impose except when absolutely necessary.” Id., quoting Freeman v. Chicago Musical Instrument Co., 689 F.2d 715, 721 (7th Cir. 1982).

In deciding plaintiffs motion to disqualify MMM, the court must focus on Canons 4 and 9 of the Canons of Ethics and Disciplinary Rules, SJC Rule 3:07, 382 Mass. 778 (1981), which currently govern members of the Massachusetts Bar. Disciplinary Rule 4-101, entitled “Preservation of Confidences and Secrets of a Client,” prohibits the knowing disclosure or misuse of a client’s confidence or secret. Misuse of a client’s confidence or secret includes the use of that information to the disadvantage of the client. DR 4-101 (B)(2). A confidence is “information protected by the attorney-client privilege under applicable law.” DR 4-101(A). A secret is “other information gained in the professional relationship that the client has requested be held inviolate or the disclosure of which would be embarrassing or would be likely to be detrimental to the client.” Id.

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Related

Alfred B. Freeman v. Chicago Musical Instrument Co.
689 F.2d 715 (Seventh Circuit, 1982)
Serody v. Serody
474 N.E.2d 1171 (Massachusetts Appeals Court, 1985)
McCourt Co., Inc. v. FPC Properties, Inc.
434 N.E.2d 1234 (Massachusetts Supreme Judicial Court, 1982)
Masiello v. Perini Corp.
477 N.E.2d 1020 (Massachusetts Supreme Judicial Court, 1985)
Wellman v. Willis
509 N.E.2d 1185 (Massachusetts Supreme Judicial Court, 1987)
Borman v. Borman
393 N.E.2d 847 (Massachusetts Supreme Judicial Court, 1979)
Bays v. Theran
639 N.E.2d 720 (Massachusetts Supreme Judicial Court, 1994)
Realco Services, Inc. v. Holt
479 F. Supp. 867 (E.D. Pennsylvania, 1979)

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Bluebook (online)
6 Mass. L. Rptr. 140, Counsel Stack Legal Research, https://law.counselstack.com/opinion/gallagher-v-hayden-masssuperct-1996.