QST v . OHM CV-98-572-M 09/27/00 UNITED STATES DISTRICT COURT
DISTRICT OF NEW HAMPSHIRE
QST Environmental, Inc., f/k/a Environmental Science & Engineering, Inc., Plaintiff
v. Civil N o . 98-572-M Opinion N o . 2000 DNH 202 OHM Remediation Services Corp.; National Union Fire Insurance Company of Pittsburgh, PA; and United National Insurance Company, Defendants
O R D E R
Defendant National Union Fire Insurance Company (“National
Union”) moves to disqualify James C . Wheat, Esq., from serving as
plaintiff’s (“ESE’s”) counsel in this case. It advances two
grounds for the motion, but provides little support for either.
First, National Union says Wheat previously represented it in
connection with an underlying personal injury suit, so cannot now
represent ESE with regard to this claim against National Union, a
claim that arises from National Union’s handling of the
underlying suit in which Wheat supposedly represented i t .
Second, National Union says Wheat will be a necessary fact witness in the case and so cannot continue to represent ESE
consistently with the applicable Code of Professional
Responsibility. ESE and Wheat object, pointing out that he never
had an attorney-client relationship with National Union in the
underlying litigation, and is not a necessary fact witness.
The burden of persuasion is on National Union, and it has
not met that burden. A cursory reading of the pleadings might
suggest the existence of material factual disputes, but a more
studied reading of National Union’s motion and memoranda suggests
that no relevant facts are actually in dispute, and little basis
exists for its suggestion that Wheat served as National Union’s
attorney.
National Union never says outright that it entered into an
attorney-client relationship with Wheat; never says it retained
Wheat to represent its interests; does not say it sought out
Wheat’s advice with respect to its involvement in the underlying
Shoemaker litigation; does not claim it ever met with Wheat; does
not claim it relied on advice given it by Wheat, or even that
Wheat ever provided legal advice to it regarding any matter.
What it does say is undoubtedly intended to give the impression
2 that an attorney-client relationship existed. But that amorphous
impression is not good enough, particularly since courts are
aware that “disqualification motions can be tactical in nature,
designed to harass opposing counsel, and have, therefore, kept in
mind that ‘the purpose of the Rules can be subverted when they
are invoked by opposing parties as procedural weapons.’” Kevlik
v . Goldstein, 724 F.2d 8 4 4 , 848 (1st Cir. 1984) (citation
omitted). Accordingly, healthy skepticism is appropriate and a
clear statement of the bases for such motions is required.
The standards applicable to disqualifying counsel based upon
conflicts of interest arising from subsequent representation are
reasonably clear. See Sullivan County Regional Refuse Disposal
District v . Town of Acworth, 141 N.H. 479 (1996); Pearson v .
First NH Mortgage Corporation, 200 F.3d 30 (1st Cir. 1999).
“First, there must have been a valid attorney-client relationship
between the attorney and the former client.” Sullivan County,
141 N.H. at 481 (citing Cole v . Ruidoso Mun. Schools, 434 F.3d
1373, 1384 (10th Cir. 1994)). Here, National Union says little
more on that point than that Wheat represented ESE in the
underlying litigation; that ESE’s insurer, Illinois National
3 Insurance Company, provided coverage to ESE; that National Union
shares a parent company with Illinois National (the relationship
is described as a “family,” with American International Group
(“AIG”) apparently providing the familial umbrella under which
Illinois National and National Union are situate as “members” 1 );
that National Union “approved” Wheat’s continuing representation
of ESE, and contributed money to Illinois National to help ESE
cover Wheat’s fees, because National Union was contractually
obligated to “provide a defense” and extend coverage to ESE under
an indemnity agreement entered into by its own insured, OHMRS;
that Wheat made periodic reports to ESE’s own insurance carrier,
Illinois National, which in turn “conferred with National Union
regarding the Shoemaker case” (the implication is that ESE’s
insurer may have shared ESE’s client confidences with National
Union and somehow that potential impropriety converted ESE’s
legal counsel into legal counsel for National Union as well);
and, that an employee of another company in the “AIG family,”
1 One cannot help wondering whether the familial relationship would be described as cozily if the issue were whether the subsidiaries’ corporate veils ought to be pierced and the entire family held legally responsible for each member’s discrete liabilities.
4 Timothy Kelly, was of the opinion that Wheat had “an ethical
responsibility to protect the interests of both AIG companies,
National Union and Illinois National, as well as ESE in the
Shoemaker litigation.”
None of those facts, alone or taken together, supports the
notion that Attorney Wheat represented National Union, or that
National Union ever reasonably thought Attorney Wheat was acting
as its counsel, or even ever thought that it had retained
Attorney Wheat to represent ESE (the time line would suggest
otherwise).
Moreover, it is not even clear from National Union’s
pleadings what, precisely, it is claiming. Does it mean to
suggest that it is not an independent corporation? That there is
an identity of interest and control between Illinois National and
National Union sufficient to render them one entity? That the
“AIG family of companies” comprises one business identity such
that representation of Illinois National is tantamount to
representation of every “member” of the “family?” That Wheat
actually met with National Union, obtained information relevant
to the underlying litigation, provided advice and counsel to
5 National Union, and National Union reasonably believed that Wheat
was acting as its legal counsel in connection with the Shoemaker
litigation? That by performing its contractual obligation to
provide ESE with a defense and coverage pursuant to OHMRS’
indemnity obligation, and by placing its imprimatur on Wheat’s
continued representation of ESE for purposes of indemnification
of counsel fees, National Union somehow became Wheat’s client, or
somehow acted to disqualify Wheat from fully representing ESE’s
interests in the underlying litigation and in this litigation
(which follows directly from the underlying litigation)? If s o ,
the pleadings do not do the job.
The other three Acworth tests do not require discussion at
this point, since the motion and supporting papers do not
adequately address the first test: Was there an attorney-client
relationship between Attorney Wheat and National Union in
connection with the underlying Shoemaker litigation?
Perhaps National Union seriously claims there was (though it did
not challenge Wheat’s affidavit in opposition to the motion in
its reply memorandum).
6 As to the second ground, that Wheat is likely to be a
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QST v . OHM CV-98-572-M 09/27/00 UNITED STATES DISTRICT COURT
DISTRICT OF NEW HAMPSHIRE
QST Environmental, Inc., f/k/a Environmental Science & Engineering, Inc., Plaintiff
v. Civil N o . 98-572-M Opinion N o . 2000 DNH 202 OHM Remediation Services Corp.; National Union Fire Insurance Company of Pittsburgh, PA; and United National Insurance Company, Defendants
O R D E R
Defendant National Union Fire Insurance Company (“National
Union”) moves to disqualify James C . Wheat, Esq., from serving as
plaintiff’s (“ESE’s”) counsel in this case. It advances two
grounds for the motion, but provides little support for either.
First, National Union says Wheat previously represented it in
connection with an underlying personal injury suit, so cannot now
represent ESE with regard to this claim against National Union, a
claim that arises from National Union’s handling of the
underlying suit in which Wheat supposedly represented i t .
Second, National Union says Wheat will be a necessary fact witness in the case and so cannot continue to represent ESE
consistently with the applicable Code of Professional
Responsibility. ESE and Wheat object, pointing out that he never
had an attorney-client relationship with National Union in the
underlying litigation, and is not a necessary fact witness.
The burden of persuasion is on National Union, and it has
not met that burden. A cursory reading of the pleadings might
suggest the existence of material factual disputes, but a more
studied reading of National Union’s motion and memoranda suggests
that no relevant facts are actually in dispute, and little basis
exists for its suggestion that Wheat served as National Union’s
attorney.
National Union never says outright that it entered into an
attorney-client relationship with Wheat; never says it retained
Wheat to represent its interests; does not say it sought out
Wheat’s advice with respect to its involvement in the underlying
Shoemaker litigation; does not claim it ever met with Wheat; does
not claim it relied on advice given it by Wheat, or even that
Wheat ever provided legal advice to it regarding any matter.
What it does say is undoubtedly intended to give the impression
2 that an attorney-client relationship existed. But that amorphous
impression is not good enough, particularly since courts are
aware that “disqualification motions can be tactical in nature,
designed to harass opposing counsel, and have, therefore, kept in
mind that ‘the purpose of the Rules can be subverted when they
are invoked by opposing parties as procedural weapons.’” Kevlik
v . Goldstein, 724 F.2d 8 4 4 , 848 (1st Cir. 1984) (citation
omitted). Accordingly, healthy skepticism is appropriate and a
clear statement of the bases for such motions is required.
The standards applicable to disqualifying counsel based upon
conflicts of interest arising from subsequent representation are
reasonably clear. See Sullivan County Regional Refuse Disposal
District v . Town of Acworth, 141 N.H. 479 (1996); Pearson v .
First NH Mortgage Corporation, 200 F.3d 30 (1st Cir. 1999).
“First, there must have been a valid attorney-client relationship
between the attorney and the former client.” Sullivan County,
141 N.H. at 481 (citing Cole v . Ruidoso Mun. Schools, 434 F.3d
1373, 1384 (10th Cir. 1994)). Here, National Union says little
more on that point than that Wheat represented ESE in the
underlying litigation; that ESE’s insurer, Illinois National
3 Insurance Company, provided coverage to ESE; that National Union
shares a parent company with Illinois National (the relationship
is described as a “family,” with American International Group
(“AIG”) apparently providing the familial umbrella under which
Illinois National and National Union are situate as “members” 1 );
that National Union “approved” Wheat’s continuing representation
of ESE, and contributed money to Illinois National to help ESE
cover Wheat’s fees, because National Union was contractually
obligated to “provide a defense” and extend coverage to ESE under
an indemnity agreement entered into by its own insured, OHMRS;
that Wheat made periodic reports to ESE’s own insurance carrier,
Illinois National, which in turn “conferred with National Union
regarding the Shoemaker case” (the implication is that ESE’s
insurer may have shared ESE’s client confidences with National
Union and somehow that potential impropriety converted ESE’s
legal counsel into legal counsel for National Union as well);
and, that an employee of another company in the “AIG family,”
1 One cannot help wondering whether the familial relationship would be described as cozily if the issue were whether the subsidiaries’ corporate veils ought to be pierced and the entire family held legally responsible for each member’s discrete liabilities.
4 Timothy Kelly, was of the opinion that Wheat had “an ethical
responsibility to protect the interests of both AIG companies,
National Union and Illinois National, as well as ESE in the
Shoemaker litigation.”
None of those facts, alone or taken together, supports the
notion that Attorney Wheat represented National Union, or that
National Union ever reasonably thought Attorney Wheat was acting
as its counsel, or even ever thought that it had retained
Attorney Wheat to represent ESE (the time line would suggest
otherwise).
Moreover, it is not even clear from National Union’s
pleadings what, precisely, it is claiming. Does it mean to
suggest that it is not an independent corporation? That there is
an identity of interest and control between Illinois National and
National Union sufficient to render them one entity? That the
“AIG family of companies” comprises one business identity such
that representation of Illinois National is tantamount to
representation of every “member” of the “family?” That Wheat
actually met with National Union, obtained information relevant
to the underlying litigation, provided advice and counsel to
5 National Union, and National Union reasonably believed that Wheat
was acting as its legal counsel in connection with the Shoemaker
litigation? That by performing its contractual obligation to
provide ESE with a defense and coverage pursuant to OHMRS’
indemnity obligation, and by placing its imprimatur on Wheat’s
continued representation of ESE for purposes of indemnification
of counsel fees, National Union somehow became Wheat’s client, or
somehow acted to disqualify Wheat from fully representing ESE’s
interests in the underlying litigation and in this litigation
(which follows directly from the underlying litigation)? If s o ,
the pleadings do not do the job.
The other three Acworth tests do not require discussion at
this point, since the motion and supporting papers do not
adequately address the first test: Was there an attorney-client
relationship between Attorney Wheat and National Union in
connection with the underlying Shoemaker litigation?
Perhaps National Union seriously claims there was (though it did
not challenge Wheat’s affidavit in opposition to the motion in
its reply memorandum).
6 As to the second ground, that Wheat is likely to be a
necessary fact witness in the case, National Union has also
failed to meet its burden of persuasion. Vague allusions to
Wheat’s possible value as a witness are inadequate. If the
motion is refiled, National Union shall state with some
reasonable degree of precision: 1 ) What substantive testimony
Wheat is expected to give; 2 ) How that testimony is relevant to a
material factual issue in dispute; 3 ) Why that evidence cannot be
obtained as effectively from some other source besides Wheat; and
4 ) What legal theory of defense the anticipated testimony will
tend to support.
CONCLUSION
Facts relevant to National Union’s motion have not been
adequately disclosed and the court cannot guess at what the facts
are, or for that matter what the precise claim i s . Accordingly,
the motion to disqualify Attorney Wheat is denied at this
juncture, without prejudice to refiling an adequately supported
motion that addresses the issues raised in this order,
particularly detailing the facts supporting the apparent claim
7 that Wheat entered into an attorney-client relationship with
National Union, including those facts tending to establish that
National Union reasonably believed such a relationship existed,
as well as pertinent facts relevant to the claim that Attorney
Wheat will be a necessary fact witness.
SO ORDERED.
Steven J. McAuliffe United States District Judge September 2 7 , 2000
cc: James C . Wheat, Esq. Gordon A . Rehnborg, Jr., Esq. Margaret H . Nelson, Esq.