Kapothanasis v. Kapothanasis

• Court: Superior Court of Maine
• Decided: August 1, 2022
• Docket: CUMcv-21-97
• Status: Unpublished

Opinion

STATE OF MAINE SUPERIOR COURT CUMBERLAND, ss. CIVIL ACTION DOCKETNO. CV-21-097 ../

) PAUL KAPOTHANASIS, et. al. ) ) Plaintiffs ) ) ) V. ) ORDER ON DEFENDANT'S ) MOTION FOR RECONSIDERATION ) CHRISTO KAPOTHANASIS ) ) Defendant ) ) ) )

Before the Court is Defendant Christo Kaptohanasis' Motion for Reconsideration of this

Court's order denying Plaintiffs Paul Kapothanasis and Prompto Companies' (collectively

"Plaintiffs") Motion to Disqualify. See Order on Plaintiffs' Motion to Disqualify, No. CV-21­

079, (May 9th, 2022). Despite the Court's ruling being in their favor, the Defendant asks the

Court to reconsider its finding that its counsel, Bernstein, Shur, Sawyer and Nelson violated

Maine Rule of Professional Conduct ("M.R. Prof. Conduct") 1.9. For the reasons set forth herein,

the Motion is DENIED.

INTRODUCTION

Disqualification of counsel is a sanction intended to punish egregious and severe ethical

violations - it is not an automatic occurrence. The Law Court has recognized this, fashioning a

1 two-pronged analytical approach to deciding disqualification motions. See Morin v. Me. Educ.

Ass ·n, 2010 ME 36, ,r 9,993 A.2d 1097. When an attorney or their firm has committed an ethical

violation, it does not always result in disqualification.

The record in this case evidences the existence of a tumultuous relationship between

brothers - and business partners - which was exacerbated by the tragic deaths of three family

members who were also shareholders of the Prompto Companies. Since early 2019, when family

members Charlie, Effie, and Tasso passed, the already intense conflict between Paul and Christo

has become more hostile. This Court hopes, with an arbitration proceeding occurring soon, that

this Order provides the parties with a path towards resolution.

In this Order, the Court denies Christa's Motion for Reconsideration, reaffirming the

Court's findings that (1) Christa's counsel violated Rule 1.9; and (2) his counsel is not

disqualified. As is discussed in greater detail below, the Court also finds that a decision by

Bernstein to continue to engage in representation of Christo does not constitute an ongoing

ethical violation. Bernstein's Rule 1.9 violation occurred at the time they chose to represent

Christo without Paul's consent. The corrective measures instituted by Bernstein since then have

avoided their 1.9 violation from causing Paul any actual harm of a continuing nature.

FACTUAL BACKGROUND

The factual background underlying the instant Motion is more fully set forth in this

Court's order dated May 9th, 2022. The brief, relevant facts are as follows:

On May 9th, 2022, this Court issued an order denying the Plaintiffs' Motion for

Disqualification of Bernstein, Shur, Sawyer, and Nelson ("Bernstein") as counsel for Defendant

Christo Kapothanasis ("Christo"). In their Motion, the Plaintiffs charged Bernstein with violating

three Maine Rules of Professional Conduct ("M.R. Prof. Conduct"): 1.7, 1.9 and 3.7.

2 The Court declined to find a violation of Rules 1.7 and 3.7 but did determine that Rule

1.9. had been violated. Relevant to the Rule 1.9 analysis were three prior engagements that

Bernstein had with Paul: A 2017 conversation with Bernstein Attorney John Carpenter

("Carpenter"), a 2019 conversation with Bernstein Attorney David Solely, and a 2020

conversation with Bernstein Attorney George Burns. The 2017 conversation with Carpenter

bore heaviest on the Court's analysis and was subject to very different recollections by the

parties. Attorney Carpenter could not recall any conversation at the meeting concerning Christo

while Paul Kapothanasis seemed to remember Christo being the primary topic of discussion.

In deciding the Plaintiffs' Motion, this Court engaged in the two step analysis fashioned

by the Law Court for disqualification motions in Morin, 2010 ME 36, ,i 9, 993 A.2d 1097. After

a comprehensive and thorough review of the parties' filings, the Court determined that (1)

Bernstein violated M.R. Prof. Conduct 1.9, and (2) that continued representation of Christo by

Bernstein would cause Paul Kapothanasis no actual prejudice. Because the Court did not find

actual prejudice resulting from Bernstein's violation, it denied the motion for disqualification

In essence, the Court's order declining disqualification sought to strike a difficult balance

- reaffirming the ethical canons central to the legal profession, while, at the same time,

allowing legal representation to proceed where such representation would not be actually

prejudicial to the opposing party. Put another way, the Court's order sought to highlight the

ethically violative inception of Bernstein's representation while acknowledging that a sanction

disqualifying counsel would serve no practical purpose from a deterrent or retributive

perspective.

After the order issued, Paul's Counsel, Pierce Atwood ("Pierce") sent a letter to Bernstein

which requested, in light of this Court's order, that Bernstein "withdraw from" representation of

3 Christo. (Def. Mot. Recons. Ex. 1.) In suppmt of their request, Pierce asserted that Bernstein's

continued representation of Christo is an ethical violation which is "continuing in nature" and

that continued representation of Christo would "constitute further violations." (Def. Mot.

Recons. Ex. 1.)

Frustrated with Pierce's continued legal offensive, Bernstein filed the instant Motion for

Reconsideration on May 27th, 2022. Pierce filed an opposition on June 17th, and Bernstein

replied on June 29th. The Motion for Reconsideration, now fully briefed, awaits a decision.

LEGAL STANDARD

"Motions for reconsideration of an order shall not be filed unless required to bring to the

court's attention an error, omission, or new material that could not previously have been

presented." M.R. Civ. P. 7(b)(5). Rule 7(b)(5) is intended to deter disappointed litigants from

seeking "to reargue points that were or could have been presented to the court on the underlying

motion." Shaw v. Shaw, 2003 ME 153, ,i 8, 839 A.2d 714. The Rule gives the court "more

leeway" when responding to motions that are frequently brought to relitigate fully presented and

decided issues. Ten Voters ofCity ofBiddeford v. City ofBiddeford, 2003 ME 59, ,i 11, 822 A.2d

1196.

DISCUSSION

Christo' s Motion for Reconsideration draws the Court's attention to one section of its

May 9th order. Specifically, it requests that the Court reconsider its determination that Bernstein

violated M.R. Prof. Conduct Rule 1.9. Christo maintains that the Court committed an error when

it determined that there was enough record evidence to support a finding that Bernstein

affirmatively violated Rule 1.9. He also contends that the Court's Rule 1.9 finding and its

4 determination that no actual prejudice would result from. continued representation, are

inconsistent.

Christo's Motion, Paul's opposition, and Christa's reply force this Court to closely

examine two components of its disqualification order and consider its implications. Accordingly,

the Court first addresses M.R. Prof. Conduct l.10(a)(2), next it considers Christa's Rule 1.9

arguments, and finally, the Court addresses Paul's assertion that continued representation of

Christo by Bernstein constitutes a conflict that is continuing in nature.

I. M.R. Prof. Conduct 1.10(a)(2)

The Court initially recognizes that it did indeed make an error when it referenced a

potential procedure for curing conflict imputation under Rule 1.10(a)(2). The text of that rule

only applies where a violation of Rule 1.9 arises out of a disqualified lawyer's '"association with

a prior firm." M.R. Prof. Conduct l.10(a)(2). None of the ethically violative conduct charged

here arose out of a Bernstein Attorney's association with a prior law firm. Accordingly, the

Court now determines Rule 1.1 O(a)(2) is inapplicable. 1

II. Rule 1.9

The heart of Christa's reconsideration request lies in this Court's finding that Bernstein

affirmatively violated Rule 1.9. Christo claims the Comi made an error by determining that the

record supported such a finding. Mindful that M.R. Civ. P. 7(b)(5) Motions do not offer litigants

an opportunity to reargue issues that have been fully decided, the Court addresses Christo's more

specific claims of error- and Paul's opposition to those claims -in tum.

1 Rule l .10(a)(2) did not affect the Court's disqualification analysis in a substantive manner. Accordingly, this

reconsideration does not alter the Court's ultimate conclusions. The Court finds it prudent to correct its error nonetheless.

5 Christo specifically challenges the Court's finding that Paul's prior engagements with

Attorney Carpenter presented a "substantial risk" that "confidential factual information" was

obtained in the prior representation which would "materially advance" Christo' s position in the

current matter. He also alleges that a finding that the two representations are substantially related

is inconsistent with the Court's holding that no actual prejudice would result from continued

representation.

A. Record Support for a Finding that Bernstein Violated Rule 1.9

This Court's disqualification order found that Bernstein had violated M.R. Prof. Conduct

1.9 which provides, in pertinent part:

(a) A lawyer who has formerly represented a client in a matter shall not thereafter represent another 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 the informed consent, confirmed in writing

(d) matters 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.

M.R. Prof. Conduct l.9(a), (d) (emphasis added).

Christo chiefly argues that the Court erred in finding a Rule 1.9 violation because the

portions of Paul's second affidavit - which focused, in detail, on his 2017 conversation with

Attorney Carpenter - that contained allegations of Christo' s workplace misconduct, were not

confidential.

In 2020, the Plaintiffs retained Verrill to conduct an independent investigation of

"allegations of harassment and creation of a hostile work environment concerning Christo

Kapothanasis." (Def.'s Mot. Recons. Ex. 2.) Verrill's report was attached to the Plaintiffs'

6 complaint as Exhibit 6, and fully disclosed to Christo. Thus, Christo contends, none of the

information disclosed in the 2017 meeting with Attorney Carpenter, which is also contained in

the 2020 Report, is confidential.

To support this assignment of error, the Defendant provides a table comparing the

allegations levied in Verrill' s report to the recitation of Christo' s problematic workplace

behavior contained in Paul's second affidavit. Essentially, Christo says that because the content

of Paul's conversations with Attorney Carpenter were also captured in Verrill' s report - which

is no longer confidential pursuant to its attachment as an exhibit to the complaint - Paul's

second affidavit cannot support a finding that Bernstein violated Rule 1.9.

In opposition, the Plaintiffs contend that while Paul's affidavit does contain some

allegations similar to those in the disclosed Verrill report, it also contains other relevant

information that was not addressed during the investigation. Particularly, the Plaintiffs' point to

Paul's conversation with Attorney Carpenter about potential strategies for dealing with Christo

and his problematic behavior, including (1) removal from Prompto's Board of Directors; and (2)

addition of directors to the Board to dilute Christo' s voting share. (PL' s Resp. Def.' s Mot.

Recons. 4-5). They also point to Paul's allegation that he shared extensive information regarding

Prompto' s corporate structure and operations, as well as a roster of directors and officers for each

of the four Prompto companies. (Pl.'s Resp. Def.'s Mot. Recons. 5). Accordingly, the parties

fight extensively over whether the information allegedly disclosed to Attorney Carpenter in 2017

by Paul constitutes "confidential factual information."

For matters to be substantially related, M.R. Prof. Conduct 1.9(d) does not require that

confidential factual information actually be shared which may be used to advance a client's

position. It instead requires there to be a substantial risk that such information as would normally

7 have been obtained in [Bernstein'sJ prior representation could be used to advance the current

client's legal position.

Here, what happened in that 2017 meeting with Attorney Carpenter is not entirely clear.

There appears to be three sides to the story of this business-related engagement: Paul

Kapothanasis', Bernstein's, and the truth. Paul Kapothanasis appears to remember every detail of

his 2017 conversation with Attorney Carpenter, while Carpenter "does not recall" any discussion

pertaining to Christo. Whatever that middle ground of truth is, the record evidence before the

Court on the Motion for Disqualification and the evidence presented now on reconsideration

suggest that, at the time ofBernstein's decision to take Christo on as a client, there was a

"substantial risk" that "confidential factual information as would normally have been obtained in

the prior representation" could be used to "materially advance" Christo' s position. M.R. Prof.

Conduct 1.9 (emphasis added).

In the normal course of representation, Attorney Carpenter likely would have gained

valuable information about Paul's opinions of Christo, Paul's business dealings with him, and

the makeup of the Prompto Companies business organization. Christo tries to lessen the

significance of what was potentially learned by Attorney Carpenter, by saying that none of these

things constitute "factual information." (Def.'s Reply Pl.'s Opp. Mot. Recons. 4.) However, Rule

1.9 does not contemplate such a narrow definition of that term.

Contrary to Christo' s assertions, Maine's own rules do not limit the scope of confidential

information to specific types of facts. Even knowledge of a former client's unrelated "financial

difficulties" or "a client's ability to weather the stress of litigation" can serve as knowledge

which may make representation of an individual adverse to a former client inappropriate. See

Adam v. Macdonald Page & Co., 644 A.2d 461,464 (Me. 1994); M.R. Prof. Conduct 1.9

8 reporter's notes. Thus, the standard is low. And, even though Attorney Carpenter cannot recall

any conversation with Paul about Christo, the depth of Paul and Attorney Carpenter's 2017

conversation - as suggested by Paul's second affidavit and other record evidence - created a

substantial risk that Attorney Carpenter observed and/or perceived information which could be

used to advance Christo's position in this current matter. Bernstein cannot eviscerate the

existence of this risk by chipping away at Paul's allegations regarding what was discussed.

Any time that any seasoned attorney has a chance, through multiple engagements, to

observe, listen, and provide advice to a client, there is a risk presented that they will learn

something that will be substantively or strategically advantageous in a later suit involving the

subject matter of those prior conversations.

This is especially the case where, as here, the allegations in the Plaintiffs' complaint

reference conduct that could have - and likely was - shared during the 2017 meeting. Either

specifically, or by reference, all the counts remaining against Christo include factual allegations

which predate Bernstein's 2017 engagement with Paul. Thus, at the time Bernstein entered their

appearance, there was a substantial risk that multiple types of information obtained by Attorney

Carpenter, in the 2017 discussion, could be used to aid Christo's defense.

In 2017, Paul sought legal advice from Bernstein regarding how to deal with Christo' s

problematic workplace behavior. He spoke with Attorney Carpenter about Christo's issues and

discussed various ways in which he could remove him as a director or change the corporate

structure to resolve these problems. Nearly four years later, in June of 2021, Bernstein entered

their appearance for Christo, the client Bernstein Attorneys had previously advised Paul how to

oust or dilute. On this set of facts, it is axiomatic that Bernstein should have either turned Christo

9 away or obtained consent from Paul before entering their appearance. They did neither ­

violating Rule 1.9.

In their Motion for Reconsideration, Christo also urges the Court to assume an ethical

violation instead of making an affirmative finding that one has occurred. By altering its finding

in this way, Christo claims his counsel will not need to withdraw.

In support of his request, Christo cites Doe v. Reg'/ School Unit No. 21, in which the

Federal Court for the District of Maine declined to find an affirmative ethical violation where the

attorney subject to the disqualification motion had previously spent over 140 billable hours on

the same case with the opposing law firm. No. 2:11-cv-25-DBH, 2013 U.S. Dist. LEXIS 16700

(Feb. 7, 2013). The Court finds this case distinguishable for several reasons. Chief among them

is that, in Doe, the Court's analysis under 1.9 tumed on whether an attorney-client relationship

existed between the client and the attorney in question. The Court never reached whether the

subject matter of the litigation was substantially related and, in fact, suggested that had an

attorney-client relationship been clearly established, the existence of an ethical violation was a

"close" call. Id. at* 34. Moreover, the Court does not see a section of the Doe order in which an

ethical violation is assumed, instead the Doe Court refused to decide the issue. Id.

The more analogous - and persuasive - case, as noted in this Court's prior order, is

Poor v. Lindell, No. BCD-CV-18-27, 2019 Me. Bus. & Consumer LEXIS 40, at** 20-21 (Dec.

9, 2019). There, the court found a violation of the Rules, but still declined to disqualify the

violative firm as counsel. Thus, the Motion to Disqualify was denied and the litigation continued,

with the same firm acting as counsel moving forward.

B. Inconsistency of Substantial Relation and Actual Prejudice Findings

10 Christo next challenges the Court's Rule 1.9 decision on the premise that a finding that

the prior and current representations were "substantially related" is inconsistent with a finding

that Bernstein's continued representation would not result in actual prejudice to Paul. The Court

sees no inconsistency.

As discussed above, a substantial relation between the prior representation and the

current one is defined as one where 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." M.R. Prof. Conduct 1.9(d). The Court

determined that Bernstein's prior engagement regarding general business matters, and Christo's

potential ouster, met this criterion

The second prong of the disqualification analysis places the burden on the movant to

make a showing that continued representation by the attorney who committed an ethical

violation results in "actual prejudice." Morin, 2010 ME 36, ,r 10,993 A.2d 1097. That is, the

moving party must "point to the specific, identifiable harm she will suffer in the litigation by

opposing counsel's continued representation." Id.

In this Court's disqualification order, it found that Paul had failed to make such a

showing. He did not point to specific, identifiable, ways in which Bernstein could use

information obtained in its prior conversations with Paul to win their case. He pointed to no

smoking gun, no harmful credibility information, and no otherwise relevant and confidential

information which Christo' s counsel could utilize to defeat Paul. Thus, the court determined that

disqualification was not an appropriate sanction.

The amalgamation of this Court's Rule 1.9 and actual prejudice findings is this: There is

a substantial relationship between Bernstein's prior engagement with Paul and this current one,

11 created by the risk that confidential information learned by Bernstein previously, would be used

to advance Christo' s legal position. At the same time, Paul - the disqualification movant - did

not make a showing that Bernstein's continued representation of Christo would result in actual

prejudice - that is, specific, identifiable, harm.

III. Bernstein's Continued Representation

In response to the Court's disqualification order, Pierce sent a letter to Bernstein again

requesting that Bernstein withdraw from representation. In relevant part, the letter stated:

Though the Court declined to disqualify Bernstein Shur on a narrow finding that the conflict of interest does not create actual prejudice to Paul K or the Prompto Companies, nothing in the Order removes the firm's obligation to comply with the Rules of Professional Conduct going forward. As I first informed you by letter dated June 17th, 2021, my clients object to Bernstein Shur's representation of Christo in these matters. Those objections remain in effect. Accordingly, Bernstein Shur' s conflict of interest is continuing in nature, and ongoing representation of Christo would constitute further violations.

(Pl.'s Mot. Recons. Ex. I.) The Court takes issue with two specific components of Pierce's

interpretation of the disqualification order. First, the finding that Paul failed to show that actual

prejudice would result from Bernstein's continued representation of Christo was not "narrow."

Instead, the finding makes up one half of the disqualification standard developed in the Law

Court's disqualification jurisprudence. For a number of reasons - chiefly policy concerns ­

disqualification is not an appropriate sanction unless actual prejudice can be shown. The actual

prejudice requirement helps prevent frivolous and abusive use of the disqualification motion. See

Morin, 2010 ME 36, ,r 10,993 A.2d 1097 ("Indeed, to allow disqualification with proof of

anything less than such actual prejudice would be to invite movants to employ this "obvious

vehicle for abuse.")

The Court also disagrees with Paul's characterization of Bernstein's 1.9 violation as one

which is "continuing in nature." The ethical violation, imputed firmwide, occurred when

12 Bernstein did not seek Paul's consent prior to engaging in representation of Christo. A violation

of a duty to a former client (Rule 1.9) occurs when the attorney enters their appearance. Because

of the risk that confidential information will be used by the violating attorney, that attorney may

not continue to represent the client. However, in the case of a law firm, the analysis is different.

If, after the initial violation of the rule, the firm timely screens all prior involved attorneys out of

the case, and institutes corrective action, then the violation may not require a disqualification

sanction.

Again, the text of Maine's Model Rules of Professional Conduct refutes Paul's position:

To disqualify a lawyer based upon a claim of a conflict-of-interest, a court must also decide whether disqualification of a lawyer is a proper sanction to remedy a violation of the Rules of Professional Conduct. Courts must balance the public's interest in the integrity of the judicial process with a client's interest in picking his or her own lawyer.

M. R. Prof. Conduct 1.9 Reporter's notes. A Rule 1.9 violation does not mandate removal of an

attorney or a law firm from the operative case. It instead, is but one part of the disqualification

analysis.

Bernstein's violation of Rule 1.9 was set in time. When the firm decided to enter their

appearance on Christo' s behalf on June 18th, 2021, without Paul's consent, they violated their

duty to a former client. However, in response to Pierce's first letter requesting withdrawal, and

subsequent motion for disqualification, Bernstein took the necessary corrective measures to

ensure that its violation of Christo going forward will not prejudice Paul.

Bernstein's 1.9 violation has not offended this Court or its process. While entry into this

case without Paul's consent was a misjudgment that offers a tail of caution for Bernstein and

other firms going forward, Christo' s autonomy in choosing his own counsel carries the day.

Bernstein is not disqualified as Christo' s counsel, and their continued representation of Christo

13 does not constitute an ongoing violation. That is this Court's interpretation of its own order

the only one that matters.

CONCLUSION

This order reaffirms the Court's prior order. Bernstein committed a violation of M.R.

Prof. Conduct 1.9 when it chose, without Paul's consent, to enter its appearance for Christo.

However, that violation results in no actual prejudice to Paul should Bernstein continue to

represent Christo. Accordingly, the Court does not impose disqualification as a sanction, nor

does it issue any other discipline for Bernstein's Rule 1.9 violation.

Bernstein can continue representation of Christo without fear of retribution for further

violations of Rule 1.9. The Comi is satisfied with the screening procedures instituted by

Bernstein and believes that Bernstein attorneys Jack Woodcock and Paul McDonald can continue

to represent Christo in a manner not prejudicial to Paul.

Entry is:

Defendant's Motion for Reconsideration is Denied.

The clerk is directed to incorporate this order into the docket by reference pursuant to M.R. Civ.

P. 79(a).

Dated:

Justice, Maine Superior Court