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BLUE CROSS AND BLUE SHIELD v. PHILIP MORRIS

June 18, 1999

BLUE CROSS AND BLUE SHIELD OF NEW JERSEY, ET AL. PLAINTIFFS,
v.
PHILIP MORRIS, INC., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Weinstein, Senior District Judge.

MEMORANDUM AND ORDER

I. Introduction

Two plaintiffs, Empire Blue Cross and Blue Shield (Empire) and Group Hospitalization & Medical Services d/b/a Blue Cross Blue Shield of the National Capital Area (National), move to disqualify the law firm of Winston & Strawn (the firm) from appearing for defendant, Philip Morris, Inc., in this tobacco tort case. The firm at one time represented Empire and National on unrelated matters. It had formally contracted with these two former clients not to represent Philip Morris in the instant case, but it now claims that agreement is unenforceable. The firm cross-moved for permission to represent Philip Morris.

The chances of an actual conflict are insignificant. Nevertheless, despite the lack of conflict and the strong public policy favoring unrestricted choice of counsel, the motion to disqualify is granted to avoid what many laypersons might consider a conflict of interest. This case is based on an alleged mass tort indirectly involving the welfare of millions of Blue Cross insureds. It is likely that many among them would consider the firm a turncoat. What might be acceptable in a simple one-client case is not appropriate in massive cases where it is impossible to explain to each person involved the technical points of ethics that support the lawyers' legal positions. Apparent conflicts can be decisive in such cases where ethics issues are particularly severe.

II. Facts

This suit is one of three coordinated actions brought by many Blue Cross and Blue Shield plans against the major tobacco companies for damages resulting from the medical treatment of tobacco-related diseases. Blue Cross and Blue Shield Plans across the country have tens of millions of insureds. See Blue Cross and Blue Shield of New Jersey v. Philip Morris, Inc., 36 F. Supp.2d 560 (E.D.N.Y. 1999). Suits were filed on April 29, 1998, in New York, in Chicago and in Seattle. At the time of the filing, Empire and National, two of the twenty-one plaintiffs in the New York action, were clients of the firm, which had represented Philip Morris in other tobacco litigation. Philip Morris sought to have the firm represent it in the Chicago action and to help coordinate the joint industry defense of all three actions.

Empire and National opposed the firm's involvement in the suits on the ground that it would create a conflict of interest. The firm, they contended, might use information obtained through its representation of them (albeit in matters unrelated to tobacco) against its sister Blue Cross and Blue Shield Plans involved in the Chicago and Seattle actions and might transfer work done in connection with those suits to Philip Morris' New York counsel for use against Empire and National. Philip Morris disagreed, asserting that, in any event, advance waivers of future conflicts signed by Empire and National at the time they retained the firm precluded a conflict of interest challenge to its involvement in the tobacco suits. Empire and National contended that the waivers were unenforceable.

This dispute was resolved by agreement dated June 4, 1998 (the Agreement). It provided, in essence, that Empire and National would not seek to disqualify the firm from appearing in the Chicago or Seattle actions or from participating in the coordinated industry defense of all three actions and that, in exchange, the firm would not appear in the New York action. The Agreement included no references to circumstances or time limits qualifying or restricting either party's obligations. Drafted by the firm and addressed to plaintiffs' counsel, Dewey Ballantine, it read as follows:

    On behalf of you and your clients in the
  above-captioned actions, you agree as follows:
    You and your clients in the above-captioned actions
  will not seek to disqualify Winston & Strawn, or any
  of its attorneys, from acting as counsel to Philip
  Morris in the Chicago Action or the Seattle Action in
  any multi-district or other coordinated or
  consolidated proceeding relating to the
  above-captioned actions based on the fact that
  Winston & Strawn has performed or is performing work
  for Empire and National on various specific matters
  that we contend are not substantially related to the
  above-captioned actions.
    You and your clients in the above-captioned actions
  will not seek to disqualify any other attorney or law
  firm representing any of the defendants in the
  above-captioned actions based on the fact that such
  attorney or law firm and any Winston & Strawn
  attorney representing Philip Morris in the Chicago
  Action or the Seattle Action have had or will have
  confidential communications concerning or relating to
  any or all of the above-captioned actions.
    In return, I on behalf of Winston & Strawn, agree
  as follows:
    Winston & Strawn, or any of its attorneys, shall
  not file an appearance or otherwise appear on the
  pleadings in the New York action.
    Winston & Strawn, or any of its attorneys, shall
  not direct any discovery at Empire or National, or
  participate in any questioning, at depositions,
  trial, or otherwise, of any present or former
  officers, directors, or employees of Empire or
  National.
    Winston & Strawn has established and will continue
  to maintain a screen between, on the one hand, any of
  its attorneys and employees representing Philip
  Morris in the Chicago Action, the Seattle Action, or
  any multi-district or other coordinated or
  consolidated proceeding relating to the
  above-captioned action, and any other attorneys
  representing Philip Morris in any of the three
  actions, and, on the other hand, any of its attorneys
  and employees who have performed or are performing
  work on matters for Empire and National, such that no
  confidential information of Empire and National
  received by attorneys and employees who have
  performed or are performing such work on either's
  behalf is communicated by those attorneys and
  employees to attorneys and employees representing or
  performing work on behalf of Philip Morris.

In September 1998, the firm concluded its representation of National. In March 1999, Empire terminated its relationship with the firm when the partner who had been handling Empire's work left.

Two months later, in May of 1999, the firm's New York office appeared in this New York action on behalf of Philip Morris. The following day, various firm attorneys moved for admission pro hac vice. In ...


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