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Injunctions

        Almost all conflict of interest decisions involve one litigant moving to disqualify another litigant's lawyer in a proceeding.  The existence of a proceeding means there is a tribunal to enforce the conflicts rules in that proceeding.  Suppose, however, that there is no proceeding and no tribunal before whom a client or a former client can make a motion.  Example: a company bidding for a government contract learns that a law firm that does only its tax work is representing another client bidding for the same government contract.  Only one of the parties can win the contract.  That may be "direct adversity" within the meaning of Rule 1.7(a).  How can the first client prevent the law firm from representing the bidding competitor?

        Cmt. f to § 121 of the Restatement provides as follows:

For matters not before a tribunal where disqualification can be sought, an injunction against a lawyer's further participation in the matter is a comparable remedy (§ 6, cmt. c).

        See, too, cmt. d to § 55 of the Restatement.  The Reporter's Note to cmt. d cites the following cases where injunction was the approved remedy for a conflict: State ex rel. Bryant v. Ellis, 724 P.2d 811 (Ore. 1986); and Maritrans GP, Inc. v. Pepper, Hamilton & Scheetz, 602 A.2d 1277 (Pa. 1992).

        Tekni-Plex, Inc. v. Tang, 674 N.E.2d 663 (N.Y. 1996), actually involved a proceeding.  It was an arbitration, but the arbitrator did not believe that he had the authority to disqualify counsel for a conflict.  So, the aggrieved party brought an injunction action against the offending lawyer and succeeded in getting the injunction.  Another injunction case brought because of an arbitration is Dyntel Corp. v. Ebner, 120 F.3d 488 (4th Cir. 1997).  The court appeared to have accepted injunction as an appropriate remedy, but affirmed the case's dismissal because of improper forum and other reasons.  But, the court was so irked at the plaintiff for having brought the action in the district it did and for the seemingly harassing nature of the action, its reasoning was a bit confusing.

        Munich Re America, Inc. v. American Re Co., 500 F. Supp. 2d 272 (S.D.N.Y. 2007).  Reinsurance Co. (“Re. Co.”) brought an arbitration against Insurance Co (“Ins. Co.”).  The parties could not agree on an umpire.  Plus, Re. Co. asked that Ins. Co.’s law firm withdraw because of a former-client conflict.  When the law firm refused to withdraw, Re. Co. filed an action in state court to disqualify the law firm.  Ins. Co. filed this action to get the court to appoint an umpire.  Because of the pending state court action to disqualify, the court, in this opinion, denied the request for appointment of an umpire and dismissed the petition.  The court said that in New York arbitrations are not appropriate proceeding for resolving counsel conflicts and that going to court (the state court proceeding) was the appropriate remedy.

        In the following cases the court rejected injunctive relief on the basis that the relief would more appropriately be granted in another tribunal or jurisdiction: Airgas, Inc. v. Cravath, Swaine & Moore, 2010 U.S. Dist. LEXIS 15120  (E.D. Pa. Feb. 22, 2010) (granting “brief stay”); Liberty Mut. Ins. Co. v. Pietragallo, Bosick & Gordon, 1995 U.S. Dist. LEXIS 12516 (E.D. Pa. Aug. 28, 1995); Airbus S.A.S. v. Wilmer Cutler Pickering Hale & Dorr, LLP, No 06-4261 (Super. Ct. D.C. Jan. 10, 2007); Camden Iron & Metal, Inc. v. Klehr, Harrison, Harvey, Branzberg & Ellers, LLP, 894 N.J. Super. LEXIS 86 (N.J. Super. March 27, 2006).

        In Pfizer, Inc. v. Stryker Corp., 256 F. Supp. 2d 224 (S.D.N.Y. 2003), plaintiff was using two firms for this case; one was of-record, the other was not. The firm that was not of-record had been representing the defendant in two product liability cases while assisting plaintiff in this case.  Because the firm was not of-record, the defendant did not make a motion to disqualify.  Instead, it made a "motion for order enjoining" the plaintiff from using the law firm.  The court denied the motion (see discussion under "Current Client" just above), but not because of the unusual procedure ("motion for order enjoining").

        Benasra v. Mitchell, Silberberg & Knupp, 116 Cal. Rptr. 2d 644 (Cal. App. 2002).  The plaintiffs in this action (hereinafter, “Benasra”) are parties to an AAA arbitration proceeding.  In the arbitration proceeding, Benasra moved to have Mitchell, Silberberg disqualified as counsel for the opposing party.  The arbitration panel denied the motion to disqualify.  Benrasa then brought this action to, among other things, have Mitchell, Silberg enjoined from representing the other side in the arbitration.  The trial court ruled that the arbitration panel’s denial of the motion to disqualify precluded Benrasa from raising the issue in court.  The appellate court reversed.  The court said the issue fell within the California Supreme Court’s holding in Vandenberg v. Superior Court, 982 P.2d 229 (Cal. 1999).  There the court held that preclusion principles do not necessarily prevent parties to private arbitration from later raising issues in court that had been decided in the arbitration. We are further informed that the following California cases, which we have not read, allowed an injunction proceeding, or something akin to it: Wutchumma Water v. Failey, 216 Cal. 564 (1932); Meehan v. Hopps, 45 Cal. 2d 213 (1955); Grove v. Grove Valve, 213 Cal. App. 2d 646 (1963). 

        Morrison Knudsen Corp. v. Hancock, Rothert & Bunshoft, 81 Cal. Rptr. 2d 425 (Cal. App. 1999);  McKesson Information Solutions, Inc. v. Duane Morris LLP, No. 2006CV121110 (Super. Ct. Fulton Co. Ga. Nov. 8, 2006); (injunction granted; no dispute about propriety of injunction remedy); Citizens United Recip. Exch. v. Kurtz, 2013 N.J. Super. Unpub. LEXIS 1880 (N.J. App. Div. July 22, 2013).

        DHR International, Inc. v. Winston and Strawn, 807 N.E.2d 1094 (Ill. App. 2004); and Lear Corp. v. Butzel Long, PC, 2006 Mich. App. LEXIS 1697 (Mich. App. May 18, 2006) (injunction not granted; no dispute about propriety of injunction remedy).


        Morgan Stanley Loses Bid to Enjoin Lawyer, New York Law Journal, December 19, 2002.  This article is about a New York Supreme Court judge who refused to enjoin a lawyer from taking on cases against Morgan Stanley.  It was a former client situation, and the court felt the matters were not substantially related.  Evidently, the court did not question the appropriateness of an injunction remedy in a conflict-of-interest situation.


       Canada.  In Richmond Taxi Co. Holdings Ltd. v. Robbins, 2007 BCSC 1680 (CanLII) (B.C. S. Ct. Nov. 20, 2007), the court issued an injunction against a conflict in another proceeding.

        Treatise.  Hazard, Hodes, & Jarvis § 10.11.

Declaratory Judgment

        Paduano & Weintraub LLP v. Wachovia Securities, 185 F. Supp. 2d 330 (S.D.N.Y. 2002).  The plaintiff law firm (hereinafter, “Paduano”) represents Prudential in an arbitration against Wachovia.  Wachovia’s counsel has been seeking to have Paduano disqualified in the arbitration.  Paduano brought this action in New York state court for a declaratory judgment holding that it has no conflict in the arbitration.  Wachovia removed the state court action to the district court, and the only issue decided in this opinion was whether the district court had jurisdiction.  The court held that it did not.  The reason for including the case here is to illustrate yet another strategy for resolving allegations of conflict of interest – in this case, a suit for declaratory judgment.

        Air Products & Chemicals, Inc. v. Airgas, Inc., No. 5249-CC (Del. Chancery March 5, 2010); Vinewood Capital, LLC v. Dar Al-Maal Al-Islami Trust, 2010 U.S. Dist. LEXIS 30358 (N.D. Tex. March 25, 2010).  In these opinions the courts did grant motions for declaration that a law firm did not have a conflict.

        In  Falk v. Chittenden, 2008 N.Y. LEXIS 1822 (N.Y. June 26, 2008), parties brought declaratory judgment action to establish a conflict of interest.  Hearing officer in police disciplinary proceeding did not believe he had authority to entertain a motion to disqualify.

        Lineberry v. Riley Farm Property Owners Assoc., 2005 Ark. App. LEXIS 804 (Ark. App. Nov. 9, 2005).  Very difficult decision to grasp because majority opinion not published.  But, in the case a law firm made a motion for declaration that it should not be disqualified.  One cannot tell whether the majority approved of the remedy.

        Mahaffey & Assocs. PLC v. Angus Petroleum Corp., 2013 Cal. App. Unpub. LEXIS 6103 (Cal. App. Aug. 27, 2013).  Law Firm has represented Client 1 in a matter.  Law Firm decided to represent Client 2 in a matter adverse to former Client 1.  Client 2 is in Chapter 11 bankruptcy, but the bankruptcy court has not given Law Firm permission to represent Client 2.  Law Firm has brought a declaratory judgment action asking the California court to rule that Law Firm would not have a conflict in representing Client 2 vs. Client 1.  The trial court ruled that a declaratory judgment would not be appropriate.  In this opinion the appellate court affirmed.  The court based its ruling primarily on the California declaratory judgment statute, which requires a "real dispute" between the parties.  The problem, it would seem, was that the relationship between Client 2 and Law Firm was not far enough along, and until the bankruptcy court gave Law Firm permission to proceed, there was nothing to argue about.  We suppose the result might have been different if Client 2 and Law Firm were, in all respects, ready to proceed against Client 1.

Motion to Prevent Disqualification

        In re Malden Mills Industries, Inc., 275 B.R. 670 (D. Mass. 2002).  This case involved a fire.  The plaintiffs hired Dr. Zalosh as an expert.  Dr. Zalosh hired Chillworth Technologies to conduct some “blind” and “standardized” testing.  Defendants hired as an expert Dr. Ebadat, a vice president of Chillworth.  Plaintiffs raised this “conflict” with defendants.  The defendants moved for an order preventing disqualification of Dr. Ebadat.  The court granted the motion, holding that confidentiality was key.  The plaintiffs made no showing that Dr. Ebadat had, or conveyed to defendants, any confidences of plaintiffs.  The court stressed that Chillworth had been hired by Zalosh and not by the plaintiffs or plaintiffs’ lawyers and that Chillworth had no understanding that it was working for plaintiffs.  The court did not comment on the unusual procedure of moving to avoid disqualification.

       Atofina Chemicals, Inc. v. Jci Jones Chemicals, Inc., 2002 U.S. Dist. LEXIS 13970 (E.D. Pa. July 10, 2002).  The Miami office of Hunton & Williams (H&W) began handling a variety of matters for the defendant in June 2000.  In December 2000 the plaintiff hired the Raleigh office of H&W to handle a personnel lawsuit.  In June 2001 H&W began representing defendant in this case.  H&W discovered the conflict in January 2002 and advised both parties.  It offered to withdraw from representing the plaintiff in the personnel case and reimburse the plaintiff for the cost of doing so, or to remain in the case with plaintiff’s consent.  H&W also erected a screen between the Raleigh lawyers and the Miami lawyers.  It then filed a motion with the court asking the court "to determine whether H&W should be disqualified in this case" (and suggesting that disqualification would not be appropriate).

        The plaintiff responded with a motion to disqualify.  The court denied the motion, but said that H&W would have to withdraw from representing the plaintiff in the personnel matter.  Among the reasons for denying the motion to disqualify were: (1) the Miami and Raleigh matters were completely unrelated; (2) there had been no exchange of information between the Miami and Raleigh offices about either matter, and the firm had erected a screen; (3) the plaintiff would have to change counsel in any event, and H&W had offered to pay the cost of doing so; and (4) the totality of burdens would be less if H&W were allowed to remain in the case.


        Seeking Court's "Guidance" before Conflict Became an Issue in the Case.  Eberle Design, Inc. v. Reno A & E, 354 F. Supp. 2d 1093 (D. Ariz. 2005).  Frowned upon by magistrate judge in Foxworth v. Barnhart, 2008 U.S. Dist. LEXIS 28669 (E.D.N.Y. April 8, 2008).

        Preemptory motion failed because ruling granting it was an "advisory opinion."  Bright v. Superior Court, 2002 Cal. App. Unpub. LEXIS 9809 (Cal. App. October 22, 2002).  The defendant’s law firm (“Firm A”) wanted to hire an associate away from the plaintiff’s law firm.  Firm A was concerned that doing so would disqualify it in this case.  It agreed with the associate that the hiring would be contingent on the court making a finding of no disqualification.  Firm A firm moved for such a finding.  Based upon a showing that the associate had no knowledge of this case, the trial court granted the motion.  On appeal, the appellate court ruled that because the hiring had not yet taken place, the trial court’s ruling was an “advisory opinion” and, therefore, must be reversed.

        In re Sunbum5 Enterprises, LLC, 2011 U.S. Dist. LEXIS 113295 (M.D. Fla. Sept. 30, 2011).  A party moved for a finding of no conflict.  The motion ultimately failed on the merits, not on the procedure.


Motion to Intervene to Disqualify

        In the following cases the court allowed a non-party to intervene in a lawsuit in order to make a motion to disqualify:  Celgard, LLC v. LG Chem, LTD, Nos. 2014-1675, -1733, -1806 (Fed. Cir. Dec. 10, 2014); Commercial Development Co. v. Abitibi-Consolidated Inc., 2007 U.S. Dist. LEXIS 86147 (W.D. Wash. Nov. 15, 2007); Cole Mech. Corp. v. Nat’l Grange Mut. Ins. Co., 2007 U.S. Dist. LEXIS 66584 (S.D.N.Y. Sept. 7, 2007); Emmis Operating Co. v. CBS Radio, Inc., 480 F. Supp. 2d 1111 (S.D. Ind. 2007); and GATX/Airlog Co. v. Evergreen Int'l Airlines, Inc., 8 F. Supp. 2d 1182 (N.D. Cal. 1998).

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