the plans for a ruling on their eligibility is almost nonesensesical. The prohibited and complained of behavior was defendants' acts for "'the purpose of interfering with the attainment of any right to which such participant may become entitled,' regardless of whether the interference is successful and regardless of whether the participant would actually have received the benefits absent the interference." Zipf, 799 F.2d at 893 (emphasis in original). Thus it is irrelevant to the claim whether or not the plans administrator would now declare them eligible. The motions to dismiss Count IV are denied.
II. The Motion to Disqualify Plaintiffs' Counsel
During the period the parties undertook the massive briefing that preceded these motions it became apparent that plaintiffs' counsel, the firm of Kronish, Lieb, Weiner & Hellman, also represents the interests of the Union and the union trustees insofar as they are embroiled in this litigation. Defendants contend that this state of affairs presents plaintiffs' counsel with potential, if not actual, conflicts of interests among its three clients. We agree.
For example, counsel was initially introduced by a union trustee at the first trustees meeting it attended, and was identified as representing the Union. Kronish, Lieb has subsequently responded to defendant's discovery requests on behalf of the Union and at least one union trustee, Eugene Bennett, who is also Secretary-Treasurer of the Union. See Kronish letter of December 9, 1991, hereby made part of the record of this case.
Such multiple representation may result in a variety of conflicts among the clients. For example, as we suggested at the summary judgment hearing, plaintiffs may well have claims against the Union for failing to stop defendants' scheme until it had been defrauding them and the Funds for nearly a decade. Tr. at 39-40. And, as defendants argue in their memorandum of law, plaintiffs may well have claims against the union trustees for breach of fiduciary duty if it transpires that they too improperly failed to act to stop defendants' prohibited acts. Or, with respect to discovery, plaintiffs' counsel may become aware of inculpating facts that pit one of its clients against another. Or defendants may bring an impleader indemnification action against the Union, alleging, for example, that it acquiesced in the plan. While none of these scenarios strike us, at this point in the litigation, as particularly likely, they are nonetheless possibilities worthy of concern.
Canon 5 of the Code of Professional Responsibility directs lawyers to "exercise independent professional judgment on behalf of a client." Ethical considerations 5-1 and 5-14 elaborate on this in a useful way:
The professional judgment of a lawyer should be exercised . . . solely for the benefit of his client and free from compromising influences and loyalties. . . . The interests of other clients . . . should [not] be permitted to dilute his loyalty to his client.
Maintaining the independence of professional judgment required of a lawyer precludes his . . . continuation of employment that will adversely affect his judgment on behalf of or dilute his loyalty to a client. This problem arises whenever a lawyer is asked to represent two or more clients who may have differing interests, whether such interests be conflicting, inconsistent, diverse, or otherwise discordant.
Canon 9 instructs lawyers to "avoid even the appearance of professional impropriety." We believe that Kronish's multiple representation implicates these canons.
The circumstances of this firm's representation of related clients are strikingly similar to those in Chateau de Ville Productions v. Tams-Witmark Music (S.D.N.Y. 1979) 474 F. Supp. 223 (Duffy, J.). The court was there faced with a plaintiffs' counsel who represented the parent company of one of the named plaintiffs. That parent had entered into a contract between it and the defendant that created a co-conspirator relationship between them, even though such was not charged. Id. at 225. Judge Duffy observed that "disqualification will be required unless the attorney can show 'that there will be no actual or apparent conflict in loyalties or diminution in the vigor of his representation.'" Id. at 225 (quoting Cinema 5 Ltd. v. Cinerama (2d Cir. 1976) 528 F.2d 1384, 1387. Taking into account the Second Circuit's "cautious approach to questions of disqualification" because of its potential use as a litigation tool, the court nevertheless disqualified counsel from representing the parent company.
The possibility that plaintiffs may have claims against another of its counsel's clients makes the risk of Kronish, Lieb's continuing to represent all three simply too likely to lead to a conflict of interest, or, as class counsel, an unacceptable appearance of impropriety. However, we recognize that a great deal of work has already gone into the pleadings and discovery already undertaken in this action, and appreciate Kronish, Lieb's intimate knowledge of the facts and law pertaining to plaintiffs' claims and its very competent representation of them thus far. To order plaintiffs to find new counsel at this point in the proceedings would, we believe, greatly prejudice them. Too, Kronish, Lieb prior to this action was not counsel for either the Union or the union trustees but were retained solely to prosecute this action. Levine Aff. at P3. We therefore follow their request that, in the event of their being disqualified from simultaneously representing plaintiffs, the Union, and the union trustees, they be permitted to continue to represent plaintiffs alone. Such an outcome will not prejudice defendants, and we accordingly grant their motions to disqualify plaintiffs' counsel on those terms.
Mallah's motion to dismiss Count II of the complaint is granted; the remainder of their motion and the nominal defendants' motion in its entirety are denied. The motions to disqualify Kronish, Lieb from simultaneously representing plaintiffs, the Union, and the Union trustees are granted as specified above. We reserve judgment on the motions for class certification and for joinder of the Union until Kronish, Lieb, plaintiffs, the Union, and the Union trustees have resolved the issue of who will represent whom. Kronish, Lieb is instructed to inform us of such resolution so that oral argument on the remaining motions can be scheduled within two weeks thereafter.
New York, New York
March 5, 1992
WHITMAN KNAPP, U.S.D.J.