Maturi v. McLaughlin Research

2001 DNH 230

• Court: District Court, D. New Hampshire
• Decided: December 31, 2001
• Docket: CV-01-318-M
• Status: Published

Opinion

Maturi v . McLaughlin Research CV-01-318-M 12/31/01 UNITED STATES DISTRICT COURT

DISTRICT OF NEW HAMPSHIRE

Harold J. Maturi and Henry G. Maturi, Plaintiffs

v. Civil N o . 01-318-M Opinion N o . 2001 DNH 230 McLaughlin Research Corp., Defendant

O R D E R

Plaintiffs sued their former employer in a whistleblower

action, under 31 U.S.C. § 3730(b) (the False Claims Act) and RIGL

§ 28-50-1, in the United States District Court for the District

of Rhode Island. Defendant counterclaimed in five counts. Upon

recusal of the judges of that district, the undersigned was

designated to preside. Before the court is plaintiffs’ Motion to

Disqualify [Defendant’s] Counsel (document n o . 4 ) . Defendant

objects, and requests an evidentiary hearing. The request for an

evidentiary hearing is granted. However, having reviewed the

pleadings filed, it appears that some guidance as to what the

hearing will address is in order (and, indeed, counsel may

conclude a hearing is unnecessary after a l l ) . Factual Background1

On September 1 1 , 1998, Andra Kelly, defendant’s chief

executive officer and chairman of its board of directors,

discharged plaintiffs from their respective positions of

president (Harold) and Rhode Island division manager and

executive vice-president (Henry) of the defendant corporation.

(Maturi Aff. ¶ 2.) In October of 1998, or thereabouts, Harold

Maturi (“Maturi”) met with attorney Stephen Reid (“Reid”), a

partner in the law firm of Blish & Cavanagh, LLP (“Blish &

Cavanagh” or “the firm”) to discuss a potential legal claim

against defendant. (Maturi Aff. ¶ 3.)

The meeting lasted approximately one hour. (Id.) Maturi

claims, in his affidavit, to have disclosed confidential

information to Reid and to have given him various relevant

documents. (Id. ¶ 1 1 ) . 2 He also contends that Reid offered a

1 The only verified facts are those contained in Harold Maturi’s affidavit, submitted in support of plaintiffs’ motion to disqualify counsel. Defendant has submitted no statement of facts under oath, but does challenge, in its memorandum, some of the factual statements made by Maturi in his affidavit. The facts referenced in this section are presented solely for the purpose of addressing plaintiffs’ motion to disqualify counsel prior to hearing, and are not findings of fact. 2 Defendant concedes that it continues to hold, in “off-site storage,” copies of the documents that Maturi brought to his

2 legal opinion regarding his potential claims, and that the two

discussed legal strategy. (Id. ¶ 14.) Defendant counters,

albeit in a memorandum rather than an affidavit, that Maturi

disclosed no “sensitive and proprietary business and financial

information” to Reid (Def.’s O b j . at 1 0 ) , and that Reid offered

no legal advice of any sort (Def.’s O b j . at 7 ) . On at least one

occasion after the meeting, Maturi and Reid conferred by

telephone. (Maturi Aff. ¶ 15.) Finally, defendant concedes that

on two occasions after the meeting, Reid discussed plaintiffs’

case with Joseph V. Cavanagh, Jr., the managing partner of Blish

& Cavanagh. (Def.’s O b j . at 3.)

Plaintiffs eventually retained other counsel to pursue

various claims against defendant. On December 1 7 , 1999,

approximately fourteen months after Maturi’s meeting with Reid,

plaintiffs filed this suit. Defendant was initially represented

by Richard G. Galli & Associates, Incorporated (“Galli”). Among

other things, Galli accepted service and filed defendant’s answer

and counterclaim. However, Galli withdrew as defendant’s counsel

on July 1 5 , 2000. Three days earlier, on July 1 2 , Joseph V.

Cavanagh, Jr., Raymond A . Marcaccio, and Jeanne M. Scott, all of

meeting with Reid. (Def.’s O b j . at 2 n.4.)

3 Blish & Cavanagh, filed appearances as counsel for defendant.

Some ten months later, on May 2 3 , 2001, plaintiffs filed a motion

to disqualify Blish & Cavanagh from continuing as counsel for

defendant.

On July 1 7 , 2001, Judge Lagueux held a hearing on

plaintiffs’ motion to disqualify counsel. When defendant

insisted upon the need for an evidentiary hearing, Judge Lagueux

terminated the proceedings, on grounds that he would be

disqualified from presiding over an evidentiary hearing at which

he would be obligated to evaluate Reid’s credibility as a

witness. Because the other judges in the district of Rhode

Island would be similarly disqualified, the case was assigned to

this district.

Discussion

Plaintiffs move to disqualify Blish & Cavanagh on grounds

that Harold Maturi met with the firm in search of legal

representation and shared confidential information with Reid

about this very litigation, in which Blish & Cavanagh now appears

for the defendant. Defendant contends that: (1) plaintiffs never

had an attorney-client relationship with Blish & Cavanagh; (2)

4 Blish & Cavanagh has used no information obtained from plaintiffs

to their disadvantage, nor could it do s o , given the general

nature of the information provided to Reid by Maturi; and (3)

defendant would be severely prejudiced by having to retain new

counsel at this time.

According to Rule 4(d) of the Local Rules of the United

States District Court for the District of Rhode Island, “[t]he

rules of Professional Conduct of the Rhode Island Supreme Court

shall be the standard of conduct for all attorneys practicing

before this court.” Of relevance here is Rule 1.9, which

provides:

A lawyer who has formerly represented a client in a matter shall not thereafter: (a) represent another person 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 consents after consultation; or

(b) use information relating to the representation to the disadvantage of the former client except as Rule 1.6 or Rule 3.3 would permit or require with respect to a client or when the information has become generally known.

R . I . R . P R O F . CONDUCT 1.9. Application of this rule is

straightforward:

5 In order to determine whether a situation requires attorney disqualification under Rule 1.9, a court needs to determine “(i) whether there is an attorney-client relationship and (ii) if s o , whether there is a substantial relationship between the former representation and present relationship.”

Ageloff v . Noranda, Inc., 936 F . Supp. 7 2 , 75 ( D . R . I . 1996)

(interpreting R . I . R . P R O F . CONDUCT 1.9) (quoting Polyagro

Plasitcs, Inc. v . Cincinnati Milacron, Inc., 903 F . Supp. 253,

256 (D.P.R. 1995)). Finally,

In ruling upon a motion to disqualify, the court must balance two competing interests: (1) the right of a party to an attorney of his or her choosing, and (2) the protection of the integrity of the judicial process. [Polyagro Plastics, 903 F. Supp. at 2 5 6 ] . Of course, “the moving party bears the burden in a motion to disqualify.” Starlight Sugar, Inc. v . Soto, 903 F. Supp. 261, 266 (D.P.R. 1995) (citation omitted).

Howe Inv., Ltd. v . Pérez & Cía. de Puerto Rico, Inc., 96 F. Supp.

2d 106, 109 (D.P.R. 2000) (interpreting the Model Rules of

Professional Conduct of the American Bar Association).

Here, obviously, there is a substantial relationship between

Maturi’s consultation with Blish & Cavanagh and the firm’s

representation of defendant. After all, Blish & Cavanagh was

retained to defend against the identical claims that Maturi

6 discussed with Reid. The question that remains is whether

plaintiffs had an “attorney-client relationship” with Blish &

Cavanagh, which is a question of fact. See DiLuglio v .

Providence Auto Body, Inc., 755 A.2d 757, 766 (R.I. 2000) (citing

State v . Austin, 462 A.2d 359, 362 (R.I. 1983)).

Plainly, there was no express agreement between plaintiffs

and Blish & Cavanagh that established an attorney-client

relationship. But “[t]he existence of such a relationship . . .

need not be proven by express agreement; rather, the conduct of

the parties also may establish an attorney-client relationship by

implication.” DiLuglio, 755 A.2d at 766 (citing State v . Cline,

405 A.2d 1192, 1199 (R.I. 1979)); see also R.I. Depositors Econ.

Protection Corp. v . Hayes, 64 F.3d 2 2 , 27 (1st Cir. 1995) (“The

Rhode Island Supreme Court has often stated that an attorney-

client relationship . . . may be implied from [the parties’]

conduct.”). “And where the advice and assistance of the attorney

are sought and received in matters pertinent to the attorney’s

profession as a lawyer, such a relationship can still arise even

in the absence of an express agreement.” DiLuglio, 755 A.2d at

766.

7 Moreover, and perhaps more to the point in this case, “[a]

fiduciary relationship in which client confidences must be

protected may arise from a ‘preliminary consultation by a

prospective client with a view to retention of a lawyer, although

actual employment does not result.’” Howe, 96 F. Supp. at 110

(quoting Polyagro, 903 F. Supp. at 2 5 6 ) .

“A party may establish an implied attorney-client relationship if (i) the party submitted confidential information to the attorney, and (ii) the party did so with the reasonable belief that his lawyer was acting as the party’s attorney.” Polyagro, 903 F. Supp. at 256 (citations omitted). For purposes of a motion to disqualify, confidential information “is information that if revealed could put [one party] at a disadvantage or the other party at an advantage.” Id. at 258. . . . When the attorney-client relationship is explicit, the court must assume “that during the course of the former representation confidences were disclosed to the attorney bearing on the subject matter of the representation.” Kevlik v . Goldstein, 724 F.2d 844, 850 (1st Cir. 1984), quoted in Polyagro, 903 F. Supp. at 256 (internal quotation marks omitted). However, when the former relationship is an implied one, such presumption does not follow, and the court “must inquire into the substance of the information that passed between [the party and the attorney].” Polyagro, 903 F. Supp. at 257.

Howe, 96 F. Supp. 2d at 110. Finally,

to imply a contract, including one between an attorney and a client, the law requires more than an individual’s subjective, unspoken belief that the person with whom he is dealing has become his lawyer. Sheinkopf v . Stone, 927 F.2d 1259, 1260 (1st Cir. 1991)

8 Rather, if such a belief is “to form a foundation for the implication of a relationship of trust and confidence, it must be objectively reasonable under the totality of the circumstances.” Id.

R.I. Depositors Econ. Protection Corp., 64 F.3d at 27 (holding

that third-party plaintiff claiming legal malpractice had no

attorney-client relationship with attorney representing limited

partnership, in which third-party plaintiff was limited partner,

when attorney had suggested that third-party plaintiff retain

separate counsel).

Plaintiffs here contend that an attorney-client

relationship, requiring a duty of loyalty on the part of Blish &

Cavanagh, must be inferred from the interaction between Maturi

and Reid. In particular, they point to the disclosure of

confidential information by Maturi to Reid and to the legal

advice they claim Reid gave Maturi. Defendants counter that

there was no attorney-client relationship because, inter alia:

(1) at the time of his meeting with Reid, Maturi was merely

interviewing prospective counsel, and in fact consulted with

several other attorneys before deciding who to retain; (2) Reid

offered no legal advice, did not assess the strength of

plaintiffs’ claim, and did not discuss strategy; and (3)

9 plaintiffs did not raise the conflict of interest issue until

nearly a year after Blish & Cavanagh entered an appearance as

counsel for defendant. Defendant also contends that Maturi

disclosed no confidential information to Reid.

On the record before i t , the court cannot determine whether

an implied attorney-client relationship arose between plaintiffs

and Blish & Cavanagh. Because the competing interests affected

by disqualification decisions are important ones, see Howe, 96 F.

Supp. 2d at 109, and because the existence of an attorney-client

relationship is a fact-bound question, see DiLuglio, 755 A.2d at

766, an evidentiary hearing is necessary. The critical

evidentiary issue is this: Did Maturi disclose confidential

information to Reid?

The parties might find it useful to review the decision in

Polyagro Plastics, supra. In addition, defendant should be

prepared to provide the court with a complete copy of Blish &

Cavanagh’s “dummy file” related to its interaction with Maturi,

including: (1) all documents provided to Reid by Maturi; (2) any

notes that Reid (or anyone else) may have made before, during, or

after the meeting with Maturi; (3) any research that Reid (or

10 anyone else) may have conducted subsequent to the meeting with

Maturi related to the legal or factual issues raised during that

meeting; (4) any internal memoranda pertaining to Reid’s meeting

with Maturi; and (5) records of any consideration of potential

conflicts of interest arising from Blish & Cavanagh’s decision to

represent defendant in this case. If Maturi did disclose

confidential information to Reid, then Blish & Cavanagh i s , of

course, disqualified.3 If not, then its continued representation

of the defendant may be appropriate.

Finally, the court does not need to hear evidence regarding

defendant’s argument that it would be prejudiced if it had to

retain new counsel at this stage in the litigation. “Resolving

questions of conflict of interest is primarily the responsibility

3 While defendant’s memorandum of law points out various layers of insulation between Reid and the attorneys handling defendant’s case, as well as the passage of time between Reid’s meeting with Maturi and Blish & Cavanagh’s decision to represent defendant, the Rhode Island Rules of Professional Conduct would prohibit any Blish & Cavanagh attorney from representing defendant if the court were to infer an attorney-client relationship between Maturi and Reid. See R . I . R . P R O F . CONDUCT 1.10 (“While lawyers are associated in a firm, none of them shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so by Rule 1.7, 1.8(c), 1.9 or 2.2.”). In other words, there is no sort of wall, Chinese or otherwise, that would allow Blish & Cavanagh to represent defendant if Maturi disclosed confidential information to Reid.

11 of the lawyer undertaking the representation.” Comment to R . I .

R . P R O F . CONDUCT 1.7. Therefore, plaintiffs’ failure to move for

disqualification immediately upon Blish & Cavanagh’s appearance

for defendant is irrelevant. If Maturi did not disclose

confidential information to Reid, then Blish & Cavanagh is not

disqualified from representing defendant. But if Maturi did

disclose confidential information to Reid, then Blish & Cavanagh

owed both plaintiffs and defendant a duty of inquiry and a duty

to consult with plaintiffs and obtain their consent before

committing to represent defendant. See R . I . R . P R O F . CONDUCT

1.9(a). In short, it was Blish & Cavanagh’s duty and

responsibility, not plaintiffs’ obligation, to identify and

resolve conflict of interest questions arising from Maturi’s

meeting with Reid, on the one hand, and Blish & Cavanagh’s later

interest in representing defendant, on the other. While

defendant’s choice of counsel is entitled to respect, see Howe,

96 F . Supp. 2d at 109, the integrity of the judicial process

requires defendant’s right to counsel of its choice to give way

to plaintiffs’ right not to litigate against a law firm with whom

they shared confidential information.

12 Conclusion

The Clerk of Court shall schedule an evidentiary hearing on

plaintiffs’ motion to disqualify.

SO ORDERED.

Steven J. McAuliffe United States District Judge

December 3 1 , 2001

cc: Robert C . Corrente, Esq. Joseph V . Cavanagh, Jr., Esq. Clerk, United States District Court District of Rhode Island