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ARGONAUT INS. CO. v. HALVANON INS. CO.

December 11, 1981

ARGONAUT INSURANCE COMPANY, Plaintiff,
v.
HALVANON INSURANCE COMPANY, Defendant



The opinion of the court was delivered by: WERKER

MEMORANDUM DECISION

 WERKER, District Judge.

 This action was commenced by plaintiff Argonaut Insurance Company ("Argonaut") to satisfy several claims arising out of reinsurance certificates defendant Halvanon Insurance Company Limited ("Halvanon") issued to Argonaut. Halvanon counterclaimed for premiums and other monies allegedly due under the reinsurance certificates. Halvanon files the instant motion seeking (1) leave to serve a third-party complaint (2) an accounting by the proposed third-party defendants for all premiums and losses related to the insurance agreements between Halvanon and the proposed third-party defendants and (3) an injunction prohibiting Allan M. Rubin, Esq. from communicating with the proposed third-party defendants concerning this matter. For the reasons that follow, defendant's motion is granted in part and denied in part.

 Fed.R.Civ.P. 14(a) provides that:

 
"At any time after commencement of the action a defending party, as a third-party plaintiff, may cause a summons and complaint to be served upon a person not a party to the action who is or may be liable to him for all or part of the plaintiff's claim against him . . ."

 Rule 14(a) further provides that the third-party plaintiff must obtain leave of the court if the third-party complaint is not filed within 10 days after service of the answer. Where, as here, the court's jurisdiction is predicated upon diversity of citizenship, although the right to proceed in a third-party action is established by Rule 14, such right depends upon the existence of state created liability. General Dynamics Corporation v. Adams, 340 F.2d 271, 279 (5th Cir. 1965). By failing to refute the fact that the defendant may be entitled to indemnity by the third-party defendants for all or part of plaintiff's claim against the defendant, plaintiff concedes that the third-party complaint is within the scope of Rule 14.

 However, while recognizing that the court in the exercise of its discretion under Rule 14(a) may grant defendant leave to serve the proposed third-party complaint, Argonaut contests the granting of leave on the ground that the proposed third-party action will unduly complicate and delay this action. Specifically, plaintiff asserts that the operative facts and legal theories of the proposed third-party action are not the same as those in the main claim, and the proposed third-party defendants may not be subject to the jurisdiction of the court.

 Plaintiff's contentions are unpersuasive and defendant is hereby granted leave to serve the third-party complaint. Plaintiff cites no authority for its argument that the mere possibility that one or more of the proposed third-party defendants may not be subject to the court's jurisdiction requires denial of defendant's motion pursuant to Rule 14 for leave to serve the third-party complaint. In any event, the factual allegations of the third-party complaint are sufficient to suggest the court's jurisdiction over the third-party defendants, at least until the third-party defendants contest the court's jurisdiction and present facts to the contrary. See China Union Lines, Limited v. American Marine Underwriters Inc., 454 F. Supp. 198 (S.D.N.Y.1978).

 Moreover, Rule 14 does not require that the facts and legal issues in the third-party claim be completely identical to those in the main action. Lyons v. Marrud, Inc., 46 F.R.D. 451, 454 (S.D.N.Y.1968); Cotroneo v. Grancolombiana, Inc., 194 F. Supp. 853, 854 (E.D.N.Y.1961). The main action rests upon a reinsurance agreement between the plaintiff and the defendant. The third-party claim concerns various retrocession agreements the defendant entered into with the third-party defendants whereby they allegedly agreed to reinsure defendant fully with respect to the risks which defendant assumed by its reinsurance of plaintiff. The substantial relationship between these actions justifies granting defendant's request for leave to serve the third-party complaint upon the proposed third-party defendants. Indeed, the court believes that the salutary purpose of Rule 14 to promote judicial efficiency by eliminating circuity of actions will best be achieved by permitting the third-party action. See Wright and Miller, Federal Practice and Procedure ยงยง 1442 and 1446. *fn1"

 In view of the court's decision to permit defendant leave to serve the third-party complaint as discussed above, defendant's motion seeking disqualification of Alan Rubin, Esq. as counsel for the proposed third-party defendants is ripe for consideration by the court and is addressed below.

 The disqualification of an attorney is a serious matter which necessarily requires the court to balance the right of a party to a lawsuit to retain counsel of its choice against the need to insure the integrity of the legal proceedings. Government of India v. Cook Industries, Inc., 569 F.2d 737, 739 (2d Cir. 1978). In a recent decision reaffirming the standard governing the disqualification of an attorney because of prior representation of an adverse party in a lawsuit, the court stated:

 
"in order to justify disqualification of his former counsel a party must show that a 'substantial relationship' exists between the issues in the prior and present cases."

 Lemelson v. Synergistics Research Corp., 504 F. Supp. 1164, 1166 (1981).

 In this circuit, once it has been established that a substantial relationship exists between the two cases, there is arguably a difference of opinion whether or not the presumption that the prior representation resulted in the receipt of confidential information is rebuttable or not. Compare Government of India v. Cook Industries, Inc., 422 F. Supp. 1057, 1059-60 (S.D.N.Y. 1976), aff'd, 569 F.2d 737 (2d Cir. 1978) with Government of India v. Cook Industries Inc., 569 F.2d 737, 741 (Mansfield, J., concurring) and Lemelson v. Synergistics Research Corp., 504 F. Supp. 1164, 1167 (S.D.N.Y.1981). The disagreement, ...


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