The opinion of the court was delivered by: Robert P. Patterson, Jr., District Judge.
These are identical actions alleging misrepresentations and
omissions in violation of § 10(b) of the Securities Exchange
Act of 1934, 15 U.S.C. § 78j(b) and Rule 10b-5 promulgated
thereunder, violation of the Racketeer Influenced and Corrupt
Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq., and
common law fraud in connection with the sale of cooperative
apartments to plaintiffs. Defendants Real Estate Investment
Group ("REIG"), Martin Ender ("Ender"), Max R. Weiss ("Weiss"),
Stanley Want ("Want") and Kenneth Pelsinger ("Pelsinger") move
to disqualify plaintiffs' attorneys on the ground that they
have breached confidences and otherwise engaged in improper
conduct in prosecuting this action in violation of the Code of
Professional Responsibility ("the Code"). For the reasons set
forth below, defendants' motions are granted.
Sometime prior to August 1988, defendants Weiss, Ender, Want
and Simon Milne ("Milne") formed a New Jersey corporation known
as Real Estate Investment Group, Inc. ("REIG"). REIG purchased
eighteen cooperative apartments located in West New York, New
Jersey from 6209-15 Boulevard East Corporation ("6209").
Defendants Eric and Joan Kaufman ("the Kaufman defendants"),
both principals in 6209, were the co-op sponsors from whom the
apartments were purchased. After their purchase, REIG offered
the apartments for sale to investors.
Weiss has served as Joseph Liu's ("Liu") and Jenny and Samson
Lum's personal accountant since 1984. Liu Aff. ¶ 3; Lum Aff. ¶
3.*fn1 Weiss has served as plaintiffs Pablo Poblete's
("Poblete") personal accountant since at least 1989. Poblete
Aff. ¶ 3. In August 1988 Weiss recommended that plaintiffs
invest in the cooperative apartments REIG had purchased. Liu
Aff. ¶¶ 3-6. Weiss allegedly also recommended plaintiffs to
Kenneth Pelsinger ("Pelsinger"), an attorney, who ultimately
acted as plaintiffs' mortgage broker and represented
plaintiffs at their closings. Liu Aff. ¶¶ 13, 15. Plaintiffs
purchased two apartment*fn2 apiece, allegedly sight unseen,
and closed in March 1989. Liu Aff. ¶¶ 8, 12, 16.
In mid-1989 or early spring 1990, plaintiffs contacted Weiss
to express dissatisfaction with aspects of their purchase and
to inquire as to how they might be relieved from its
obligations. Weiss Aff. ¶ 7; Liu Aff. ¶ 20. Plaintiffs allege
that the maintenance fees were higher than originally quoted to
them and that "major renovations" were necessary. Liu ¶¶ 12,
19. Plaintiffs claim Weiss blamed the misrepresentations on the
Kaufman defendants and also expressed dissatisfaction with his
former associates Ender and Want. Liu Aff. ¶¶ 20, 25.
Because Weiss had in the past referred clients to the law
firm of Realmuto and D'Alessio ("R & D"), Weiss Aff. ¶ 9 n. 5,
he contacted R & D on plaintiffs' behalf. Weiss claims he also
sought to explore avenues for bringing an action on behalf of
himself and REIG against the Kaufman defendants, 6209 and
another entity, Creative Capital Group. Id. ¶¶ 3(b), 9.
A series of discussions ensued involving Weiss, R & D,
plaintiffs and various defendants. The first meeting was held
April 2, 1990 at the law offices of R & D. Weiss, Richard
Realmuto ("Realmuto"), Matthew D'Alessio ("D'Alessio") and all
four plaintiffs attended. Weiss claims the discussion that day
centered on the possibility of plaintiffs voiding their
mortgages and potential claims against them by the bank which
held the mortgages. Weiss Aff. ¶¶ 10-11. Weiss claims he also
raised questions regarding actions by the Kaufman defendants in
the sale of apartments to REIG. Id.
Weiss claims he disclosed his potential conflict of interest
to Realmuto and D'Alessio up front but that he received
assurances that any information he provided would be kept
confidential*fn3 and that he would not be named as a defendant
in any future action by plaintiffs. Weiss Aff. ¶¶ 9, 13, 14.
Realmuto and D'Alessio deny ever having given Weiss any such
assurances. Realmuto Aff. ¶ 8; D'Alessio Aff. ¶ 8. Realmuto
claims that after reviewing the matter, he advised Weiss that
Weiss was subject to a lawsuit but that Weiss insisted on
continuing to be involved in the meetings based on "his
obligation and duty as the longtime accountant" for plaintiffs.
Realmuto Aff. ¶¶ 9, 10.
After the April 2, 1990 meeting Weiss provided R & D with
documents, allegedly at the attorneys' request, including
plaintiffs' sales contracts, REIG's underlying contract with
6209, the prospectus, assignment agreements, amendments of the
offering and copies of loan documents. Weiss Aff. ¶ 13.
On May 7, 1990 Realmuto and D'Alessio held a second meeting
involving Weiss and the plaintiffs. Weiss claims they further
discussed plaintiffs' mortgages and actions taken by the
Kaufman defendants. Weiss Aff. ¶ 13.
On May 17, 1990 R & D held a third and final meeting attended
by Weiss, Pelsinger, Ender and Want. Weiss claims that at this
meeting he explained the "inside nature" of the transactions
from the defendants' viewpoint. Weiss Aff. ¶ 15. Realmuto then
informed Pelsinger, Ender, Want and Weiss that plaintiffs would
file suit against them if no settlement could be reached.
Realmuto Aff. ¶ 16.
In November 1990 plaintiffs filed separate complaints
alleging that defendants knowingly made false and misleading
statements and omissions to plaintiffs concerning the co-op
investments, that together defendants engaged in a pattern of
racketeering activity and that defendants devised a fraudulent
scheme to deprive plaintiffs of their property by inducing them
purchase the cooperative apartments.*fn4 Plaintiffs seek
compensatory and punitive damages.
On April 17, 1991 defendants REIG, Ender, Weiss, Want and
Pelsinger moved to disqualify Realmuto & D'Alessio pursuant to
Canons 4 and 9 of the Code of Professional Responsibility. ...