Aff. P 3.) Grygiel had access to all BSK case files and computer files. BSK represented G.E. in two additional cases, Schwed and Abrams, which involve substantially similar claims and about which other BSK attorneys must have possessed confidential information.
The McNamee Firm argues that BSK's failure to object between January and October 1997, while BSK was still representing G.E., implicitly demonstrates that Grygiel did not possess confidential information relating to this law suit. Again, G.E. need not show that Grygiel actually possessed confidential information, only that he had access to it. See Marshall, 952 F. Supp. at 109; Hammond, 933 F. Supp. at 201.
Clearly it can reasonably be said that Grygiel had access to confidential information during the course of the prior representation which is related to the current representation. See Marshall, 952 F. Supp. at 109; Hammond, 933 F. Supp. at 201. In fact, it would be unreasonable to say that he did not have access to related confidential information.
C. The McNamee Firm
Having found that attorney Grygiel must be disqualified, the McNamee Firm must also be disqualified unless it rebuts the presumption that Grygiel has shared confidential information with other attorneys in the firm. See Marshall, 952 F. Supp. at 110. In some cases, law firms can avoid disqualification by adopting a screening method which prevents the disqualified individual attorney from imparting confidential information to other attorneys in the law firm. Marshall, 952 F. Supp. at 110. However, the McNamee Firm failed to initiate any screening method to prevent inadvertent disclosure of confidential information by Grygiel to other attorneys in the firm. Thus, the McNamee firm must be disqualified from continuing to represent plaintiffs in this matter.
The McNamee Firm urges that G.E. will not be prejudiced by permitting continued representation of plaintiffs and that plaintiffs will be significantly prejudiced should the McNamee Firm be disqualified. The McNamee Firm further argues that because BSK failed to move for disqualification between January 15, 1997, when Grygiel joined the McNamee Firm, and October 7, 1997, when BSK was replaced as G.E.'s counsel, that G.E. should now be prohibited from challenging the continued representation. This is in essence a laches argument.
Ordinarily a law firm or an attorney may not rely upon laches to insulate it from disqualification. Baird v. Hilton Hotel Corp., 771 F. Supp. 24, 28 (E.D.N.Y. 1991). In a case of extreme delay in moving for disqualification, where the circumstances are extraordinary, a motion to disqualify may be denied based upon laches. Emle Indus., Inc. v. Patentex Inc., 478 F.2d 562, 574 (2d Cir. 1973). However, even in extraordinary circumstances a motion to disqualify will be granted unless prejudice due to the delay is demonstrated, because disqualification is in the public interest where there is an ethical violation. Id. (three-year delay insufficient to invoke doctrine of laches).
The factual situation in Baird demonstrates the principles just stated. Attorney Pluchino worked for a firm defending the party seeking disqualification. 771 F. Supp. at 25. Pluchino actively participated in the defense of the defendant during discovery. Id. Pluchino then moved to a new law firm, the Katz firm, which represented the plaintiff in the same action. The Katz firm placed procedures into effect to prevent Pluchino from disclosing confidential information with other attorneys in the firm. Id. at 25-26. Some seven months later, the defendant substituted another firm. Id. at 25. An attorney at that firm noticed Pluchino's name on the Katz firm's letterhead and immediately sought disqualification. Id. The Katz firm argued, inter alia, that it should not be disqualified from the representation because of the delay in seeking disqualification. Id. at 27-28.
While recognizing that the plaintiff would suffer some prejudice by the disqualification, particularly since it was merely five days prior to trial, the court refused to apply laches. Id. at 28. The Baird Court chastised the disqualified firm for its failure to formally notify the defendant of the potential conflict. Id. Such notification, the court pointed out, would have permitted the defendant to review the record and determine if it should move for disqualification. Id. If the Katz firm had notified the defendant, the motion to disqualify would have been timely, and prejudice due to closeness to trial would not be at issue. Id.
Here approximately ten months passed between the time Grygiel moved from BSK to the McNamee Firm and the time G.E. moved to disqualify Grygiel. However, at no time did BSK, Grygiel, or the McNamee Firm ever notify G.E. of Grygiel's move and the potential conflict. Any prejudice to plaintiffs, conflicts of interest, or grounds for disqualification could have been avoided or certainly lessened if appropriate steps had been taken by the McNamee Firm at the time it was considering employing Grygiel as "of counsel."
The McNamee Firm should have notified BSK and G.E. in writing of the potential conflict before making a final decision to employ Grygiel.
It should have made full disclosure in writing of the circumstances and inquired if G.E. had any objection to the McNamee Firm continuing to represent the plaintiffs in this action if Grygiel joined the firm. If G.E. consented in writing to the continuing representation, the McNamee Firm would have had no conflict with Grygiel's former client. If G.E. objected, the McNamee Firm could have attempted to work out a formal screening procedure satisfactory to G.E. If that failed, the McNamee Firm then would have had to decide whether or not to hire Grygiel. If it still decided to employ Grygiel, at the very least a formal screening procedure should have been instituted to insulate him from revealing any confidential information and to remove any appearance of impropriety. Again, the McNamee Firm should have notified G.E. in writing of the details of the procedure. None of the above was done.
Now is not the time to beseech the court to permit the representation to continue despite a conflict of interest, while attempting to blame another firm for its own inaction. See id. at 28. Furthermore, it would be ineffective to now order some sort of insulating screening procedure, since there has been no such procedure in place for well over one year. The public interest is best served by disqualifying conflicted attorneys and law firms, and thereby avoiding the appearance of impropriety. See id.
The McNamee Firm argues that it should not be disqualified due to the substantial prejudice plaintiffs in this class action suit would suffer, citing Agent Orange for the proposition that a balancing test is appropriate in determining disqualification motions in class action law suits. The balancing test used by the Agent Orange Court, however, would be inappropriate to use in this case. First, in Agent Orange the prior representation was for all the class action plaintiffs, and the subsequent representation was for a discreet group of plaintiffs whose interests had diverged from the others'. 800 F.2d at 18. Second, the potential conflict arose only at the relief stage, in relation to a proposed settlement. Id. Third, the court has a duty to protect the interests of all class members when apprised of potential conflicts among the members of the class. Id. The Agent Orange Court recognized these special circumstances, and characterized it this way:
A motion to disqualify an attorney who has represented the entire class and who has thereafter been retained by a faction of the class to represent its interests in opposition to a proposed settlement of the action cannot be automatically granted. Rather, there must be a balancing of the interests of the various groups of class members and of the interest of the public and the court in achieving a just and expeditious resolution of the dispute.
Id. at 19. None of these distinguishing special circumstances are present in this case. Although this is a class action, the conflicted attorney represented the defendant and now is "of counsel" for the firm that represents the entire class in a substantially similar suit against the defendant. The conflict issue arose during the discovery phase of the suit, not at the relief stage. While there is a duty to protect all members of the plaintiff class in this suit, there is also a duty to preserve the integrity of the adversary process. See id. at 18. The adversary process can best be protected in this action by disqualifying the McNamee Firm.
Grygiel must be disqualified due to his prior direct representation of G.E. in matters substantially similar to this action, his former firm representing G.E. in this action at the time he was employed by them, and his access to confidential information. The McNamee Firm, which now employs Grygiel, must be disqualified from representing plaintiffs in this action, whose interests are clearly adverse to G.E. The McNamee Firm is not saved from the disqualification because it never notified G.E. of the conflict nor instituted any screening procedure to prevent Grygiel from disclosing confidential information to other members of the firm. Laches is not a defense to the disqualification, nor is prejudice to the plaintiff class.
This decision is made with great reluctance not only because of respect for the McNamee Firm, which deservedly enjoys a fine reputation in the legal community, but also because of the enormous amount of effort it has expended on behalf of the plaintiffs and the hardship its absence will cause. It is particularly distressing because the situation easily could have been avoided. However, it must be emphasized that neither the McNamee Firm nor Grygiel did anything improper. Rather, it was just the inadvertent failure to take the necessary precautions to avoid the appearance of a conflict which leaves no choice but to disqualify.
Accordingly, it is
1. defendant's motion to disqualify is GRANTED;
2. the law firm of McNamee, Lochner, Titus & Williams, P.C. is disqualified from representing the plaintiffs in this action, except with regard to any appeal of this Memorandum Decision and Order or with assisting plaintiffs retain substitute counsel;
3. all other proceedings in this action are stayed pending further order of the court.
IT IS SO ORDERED.
David N. Hurd
United States Magistrate Judge
Dated: January 22, 1998
Utica, New York.