Kassis v. Teacher's Insurance & Annuity Ass'n

243 A.D.2d 191, 678 N.Y.S.2d 32, 674 N.Y.2d 313, 1998 N.Y. App. Div. LEXIS 6968

• Court: Appellate Division of the Supreme Court of the State of New York
• Decided: June 16, 1998
• Status: Published

Opinions

OPINION OF THE COURT

Sullivan, J. P.

The IAS Court’s denial of plaintiffs’ motion to disqualify the law firm of Thurm & Heller, the attorneys for defendants and third-party plaintiffs, Teacher’s Insurance and Annuity Association and Cauldwell-Wingate Company, Inc., should be affirmed. We are persuaded that disqualification is unnecessary, given the steps undertaken by Thurm & Heller, a firm comprised of 26 lawyers, 12 partners and 14 associates, to create a “Chinese Wall” around its associate, Charles Martin Arnold, a young lawyer one year out of law school, formerly employed by Weg & Myers, attorneys for the plaintiff Henry Kassis. Moreover, at this late stage of the litigation, the delay inherent in disqualifying Thurm & Heller, which has represented Teacher’s and Cauldwell from the commencement of this action over five years ago, would be highly prejudicial to all of the parties except Kassis, whose interests in stalling the trial of this action, currently on the Trial Calendar, in order to comply with the IAS Court’s discovery directives are served by disqualification and its attendant delay. All of the parties, except Kassis and his coplaintiff, North River Insurance Company, oppose disqualification.

The action is for property damage allegedly sustained by Kassis as a result of the construction of a building adjoining and in the vicinity of a building he owns at 141 E. 45th Street in New York City. Substituted as Kassis’s counsel, Weg & Myers entered the case almost two years after its commencement. From the outset, Joshua Mallín, a Weg & Myers partner, was in charge of the case and conducted most of the discovery. Mr. Arnold, admitted to the Bar on January 31, 1996, was the associate who, under Mallín, undertook certain responsibilities in the Kassis matter. As Arnold describes it, he functioned as Mallin’s personal calendar clerk. While, as noted, Mallín conducted most of the depositions and personally determined the litigation strategy, Arnold participated in five depositions, four of which involved either nonparties (a property damage expert retained by the coplaintiff, North River, Kassis’s subrogee, and a member of the structural engineering firm hired by Teacher’s and Cauldwell before construction began) or other defendants (a defendant and third-party defendant and an employee of another defendant and third-party defendant). Preparation of these depositions would involve document review and inquiry of the witnesses as to their role and involvement in the matter giving rise to the claim. The fifth was the continued deposition of an employee of the coplaintiff, North River, which, on the basis of its experts’ opinions clearly disputing Kassis’s claims of damage, had initially denied the claim. Weg & Myers also represents North River. All that was required of Arnold to represent North River at the taking of its deposition was a review of its file, previously furnished in discovery. Thus, Arnold’s involvement in the case was confined to specific assignments; he never read most of the documents within the file. As he states, he never had any independent authority in the case.

During a discussion in early February 1997, Arnold told Roula Theofanis, the partner in charge of this litigation for Thurm & Heller, that he was leaving Weg & Myers. Theofanis suggested that he fax his resume to Thurm & Heller, which, at the time, was interviewing associates with one to three years’ experience. After an interview, Thurm & Heller hired Arnold, who began his employment as a junior associate on March 3, 1997. At both his interview and upon the commencement of his new employment, Arnold was instructed that he would not be permitted to touch the Kassis file or to discuss the matter with anyone at Thurm & Heller.

Earlier, by letter dated February 20, 1997, Mallín had written requesting that Thurm & Heller detail “the safeguards and precautions, i.e., the erection of a Chinese Wall, which your firm will institute to ensure that Mr. Arnold will have no contact * * * or involvement in the above-referenced litigation.” By letter of February 27, 1997, Theofanis’s response outlined the following precautions that Thurm & Heller would take to assure that Arnold was in no way involved in this matter:

“1. The entire file which presently consists of 15 redwells will be kept in my office in lieu of our general filing area.

“2. Mr. Arnold’s office will be at a substantial distance from my office.

“3. Mr. Arnold upon commencement of his employment with the firm on March 3, 1997 will be instructed not to touch the Kassis file nor to discuss the Kassis matter with any partner, associate or staff member of the firm.

“4. There will be no meetings, conferences or discussions in the presence of Mr. Arnold concerning the Kassis’ litigation.

“5. All future associates who may work on the Kassis matter with me in preparation for trial will be instructed not to discuss this file with Mr. Arnold.”

In accordance with this advice, the entire Thurm & Heller file was moved from the general file area to Theofanis’s office. Arnold was assigned an office, “almost an entire city block away,” on a side of the building opposite Theofanis’s office. When Mallín appeared at Thurm & Heller’s office for a deposition, Theofanis showed him how the precautions in her February 27, 1997 letter were being implemented. At no time did Mallín voice any objection to the proposed safeguards or indicate that they were inadequate. Nor did he express any hesitation in proceeding with the scheduled deposition. Notwithstanding, Mallín, by order to show cause, moved on March 6, 1997 to disqualify Thurm & Heller. The IAS Court denied the motion, citing Arnold’s limited involvement in the case, Mallin’s failure to suggest any deficiencies in the precautions undertaken by Thurm & Heller (which the court found adequate to assure Arnold’s noninvolvement in the case), and the prejudice to Teacher’s and Cauldwell if Thurm & Heller were disqualified.

Disqualification of a lawyer or law firm representing a party will be granted where it is shown that a prior attorney-client relationship existed between the moving party and the attorney or law firm sought to be disqualified and that the former and current representation by the attorney or law firm are both adverse and substantially related. (Solow v Grace & Co., 83 NY2d 303, 308.) The purpose of the rule is to protect client confidences and secrets and avoid the appearance of impropriety. (Supra, at 308-309; see also, Cardinale v Golinello, 43 NY2d 288.)

In Solow, however, the Court of Appeals also recognized that a per se disqualification rule in such circumstances would conflict with public policy in at least two respects, viz., it would impinge upon a client’s right to be represented by counsel of his choice and restrict an attorney’s ability to practice his or her profession. (83 NY2d, supra, at 310.) The Court also recognized that disqualification because of successive representations could present “significant hardships when the chosen attorney is disqualified.” (Supra, at 310.) Furthermore, the Court noted, “[M]otions to disqualify are frequently used as an offensive tactic, inflicting hardship on the current client and delay upon the courts by forcing disqualification even though the client’s attorney is ignorant of any confidences of the prior client. Such motions result in a loss of time and money, even if they are eventually denied.* * * [S]uch disqualification motions may be used frivolously as a litigation tactic when there is no real concern that a confidence has been abused.” (Supra, at 310; see, S & S Hotel Ventures Ltd. Partnership v 777 S. H. Corp., 69 NY2d 437, 443; Saftler v Government Empls. Ins. Co., 95 AD2d 54, 60.)

We disagree with the dissent’s characterization of Thurm & Heller as more analogous to the law firm involved in Cardinale v Golinello (43 NY2d 288, supra) than that involved in Solow v Grace (83 NY2d 303, supra). While Thurm & Heller has only 26 attorneys as compared to the 372-attorney Stroock firm in Solow, the hallmark of the law firm involved in Cardinale—its “informality,” the “ ‘constant cross-pollination going on’ and [the] ‘cross current of discussion and ideas’ among all attorneys on all matters which the firm handled” (Cardinale v Golinello, supra, at 292)—is, in light of the screening mechanisms, altogether absent here. Similarly, Thurm & Heller’s screening mechanisms avoid Cardinale’s problems of separate offices that are not physically isolated and a conference room and all firm files that are open and available to all lawyers. (Supra.)

Recognizing the competing interests raised by a motion to disqualify a law firm under circumstances similar to those present here, Federal courts have recognized that screening devices can be effective to protect client confidences. The challenged law firm must prove, inter alia, that the former client’s confidences have not been shared with others at the law firm and that the firm has established screening mechanisms effectively to insulate against any future disclosure of confidences by the quarantined attorney to the firm. (See, e.g., Manning v Waring, Cox, James, Sklar & Allen, 849 F2d 222, 225-226 [6th Cir]; see also, Comment, Federal Courts and Attorney Disqualification Motions: A Realistic Approach to Conflicts of Interest, 62 Wash L Rev 863 [1987].)

The dissent, citing Cheng v GAF Corp.1 (631 F2d 1052, 1058, vacated on other grounds 450 US 903), is concerned with the “continuing danger” that the disqualified attorney may unintentionally transmit information gained from the prior relationship. In our view, the carefully constructed safeguards employed by Thurm & Heller eliminate any such “danger”. (See, Cromley v Board Of Educ., 17 F3d 1059, 1065-1066 [7th Cir], cert denied 513 US 816.)

In the instant case, as noted, Thurm & Heller has represented Teacher’s and Cauldwell for over five years in this litigation. The firm has engaged in an extensive investigation and conducted discovery. Theofanis, a Thurm & Heller partner, conducted the initial depositions of Kassis in 1993, prior to his retention of Weg & Myers on October 27, 1994. She has been the primary attorney responsible for the matter since approximately September 1995. She has also, in her handling of the case, which, from a file perspective, consists of 15 large redwell folders, investigated Kassis’s past and present activities with a view towards impeaching his credibility.

In such circumstances, and in light of the implementation of a Chinese Wall, disqualification of Thurm & Heller would provide an undue advantage to Kassis. New counsel would face a daunting and time-consuming task in absorbing the extensive discovery and investigation that has been undertaken. Thus, a lengthy delay is a distinct prospect in this case, with which Thurm & Heller has lived for five years and which is now on the Trial Calendar. A substitution of counsel would also impose upon Teacher’s and Cauldwell a significant financial hardship.

Moreover, absent from the record is any indication of a specific confidence that was disclosed to Arnold.² What the record does show is the extent of the precautions taken by Thurm & Heller on its hiring of Arnold to implement a Chinese Wall around him. He was instructed not to discuss the case with anyone. The Kassis files were to be inaccessible to him. His office was far removed from Theofanis’s office, where the files would be maintained. In addition, Arnold has sworn that he has never discussed Kassis’s case with anyone at Thurm & Heller. Furthermore, when, in response to Mallin’s request that she indicate the safeguards that would be undertaken for “the erection of a Chinese wall”, Theofanis, seven days later, detailed the protective measures that would be taken, Mallín offered no objection. Indeed, there is no explanation or suggestion as to why these measures are inadequate to isolate Arnold from the file and any discussion of the case in a firm consisting of 26 lawyers. In such circumstances, the motion to disqualify, which followed receipt of Theofanis’s letter outlining the precautionary steps her firm would undertake to isolate Arnold from the case, was, for all that appears, an obvious litigation ploy calculated to give Kassis an unwarranted advantage.

Nor is there any reason to question the integrity of Arnold, who, as an officer of the court, has represented, under penalty of perjury, that no client confidences have been or would be disclosed. There is, of course, a similar presumption of integrity with respect to Theofanis’s sworn statement regarding the steps Thurm & Heller have taken to assure that Arnold will have no involvement in this matter and her “unequivocal [ ] represent [ation] that * * * Arnold’s employment at Thurm & Heller will in no way prejudice any party herein.”

Accordingly, the order of the Supreme Court, New York County (Alfred Toker, J.H.O.), entered on or about April 17, 1997, denying the motion to disqualify Thurm & Heller, should be affirmed, without costs or disbursements.

1 . While, as the dissent notes, the firm in Cheng consisted of 35 attorneys, only 21 were employed in the same office as the tainted attorney.

2 . While the dissent refers to Arnold’s opportunity to “size up plaintiff himself, assess some vulnerabilities and perhaps plaintiffs personal style and goals and thereby assess what is substantive and what is bluster,” these are not “client confidences” protected by the attorney-client privilege; the privilege extends only to communications made in professional confidence, not to everything the attorney learns in the course of his employment. (See, People v Cook, 82 Misc 2d 875, 876; 8 Wigmore, Evidence § 2311 [McNaughton rev 1961].)