United States District Court, Southern District of New York
November 21, 2002
FRONTLINE COMMUNICATIONS INTERNATIONAL, INC., ACME CONSOLIDATED, INC., CARIBE DIRECT, INC., EMKAY HOLDING MANAGEMENT, INC., BELLROSE GEM CORPORATION AND INTERNATIONAL TELNET, INC., PLAINTIFFS,
SPRINT COMMUNICATIONS COMPANY L.P., DEFENDANT AND THIRD PARTY PLAINTIFF, V. MELVIN COOPER, DAVID BERSSON, NORMAN BERSSON, EARL G. THOMPSON, ERIK GARDINER, AND JOHN MILLWOOD THIRD PARTY DEFENDANTS.
The opinion of the court was delivered by: Miriam Goldman Cedarbaum, United States District Judge
This consolidated action originally involved a contract dispute between
the plaintiff telecommunications companies and defendant Sprint
Communications Company, L.P. ("Sprint"). Plaintiffs alleged that Sprint
was attempting to add a surcharge to their bill despite the fact that
their contracts contained fixed rates. Over the course of the
litigation, Sprint brought claims against several third-party
defendants, mostly officers of the plaintiff companies, alleging that
they had fraudulently induced Sprint to enter into the contracts.
Specifically, Sprint alleged that plaintiff companies concealed the
among them and hid the fact that they were resellers of telecommunications
On February 14, 2002, Sprint filed an amended third-party complaint and
impleaded its former employee, John Millwood. For the first time,
Sprint alleged that the employee who had signed the contracts at issue
on its behalf had improperly assisted plaintiff companies to obtain lower
rates by concealing the nature of their businesses and the relationship
among them. The amended third-party complaint alleges that Millwood
assisted plaintiffs in return for bribes and the promise of higher
Plaintiffs and all third party defendants except Millwood have settled
with Sprint. The only claims now remaining in the case are Sprint's
third-party claims against Millwood. Millwood has counterclaimed for
discrimination, alleging that Sprint asserted third-party claims against
him in retaliation for his complaint to the Equal Employment Opportunity
Millwood has now moved to disqualify the firm of Anderson Kill &
Olick, P.C. ("AKO") from representing Sprint in this action. Millwood
asserts that AKO represented or purported to represent him in this
litigation prior to the filing of the third-party claims against him,
and that AKO is now barred from suing its former client. For the
reasons that follow, Millwood's motion is denied.
On June 3, 2002, I held an evidentiary hearing on the motion. Jordan
Siev and Steven Cooper of AKO and Millwood testified at the hearing. Most
of the testimony concerned the nature of Siev's relationship with
Millwood prior to November 26, 2001 when plaintiffs last deposed
Millwood. After hearing and observing the three witnesses, evaluating
their credibility and weighing the evidence, I make the following
findings of fact.
In early October, Lee Lauridsen, an in-house attorney for Sprint, spoke
to Millwood concerning Frontline's lawsuit against Sprint. On October
11, 2001, Millwood participated in a telephone conference with Lauridsen
and Siev. During that conference, Lauridsen introduced Siev to Millwood
as Sprint's outside counsel. The telephone call was essentially a
"fact-finding" conference in which Siev asked various questions regarding
the contracts and Millwood's contacts with the plaintiffs. A similar,
more detailed fact-finding telephone conference took place between
Millwood and Siev on October 19. On both occasions, Millwood stated that
the plaintiffs never told him that they were resellers. Millwood also
stated on both occasions that he understood the rates in the contracts to
Plaintiffs first deposed Millwood on October 23. On the morning of the
23rd, Millwood went to Siev's office to prepare for the deposition. Siev
told him "just to relax, it's no big deal." He told him that the
plaintiffs would ask a lot of questions but that Siev was going to prepare
him for it. Siev also stated that he would be with Millwood during the
deposition. During preparation, Millwood told Siev that he had never been
deposed before, after which Siev explained to him "some particulars of
the deposition." As part of the preparation, Siev also showed Millwood a
video about the deposition process, which made several references to
At the deposition, the following exchange took place:
Q: Good afternoon, Mr. Millwood. Would you please
state your full name?
A. John Millwood.
Q: And you are accompanied here with your attorney,
Mr. Jordan Siev; is that correct?
On October 25, 2001, Caribe and Bellrose, two of the plaintiffs in this
consolidated action, filed a complaint in the New York County Supreme
Court. The complaint named both Sprint and Millwood as defendants. On
October 26, 2001, Sprint removed the Caribe and Bellrose action to this
court. In connection with the removal, Siev submitted an affidavit in
support of subject matter jurisdiction. Siev stated in the affidavit that
"I am a member of the Firm of Anderson Kill & Olick, P.C., counsel
for defendants Sprint Communications Company, L.P. ("Sprint") and John
Millwood ("Millwood") . . . ." Neither Siev nor anyone else at AKO
informed Millwood either of the removal of the action or of the
affidavit. Siev filed the affidavit on behalf of Millwood solely for the
purpose of getting him dismissed from the case. I granted AKO's motion to
dismiss Millwood on the ground that he was fraudulently joined for the
sole purpose of defeating diversity jurisdiction.
On November 1, 2001, Steven Cooper had a conversation with an in-house
attorney for Sprint concerning allegations made by Kim Henry, a former
employee of Sprint. Cooper was told that Henry had filed a claim of
discrimination against Sprint. On November 2, 2001, Cooper received a
copy of a letter sent to Sprint by Henry's lawyer. The letter, dated
August 30, 2001, summarized Henry's claims against Sprint, and also
alleged certain conduct by Millwood:
In or about late February or early March 2001, Henry
discovered that her Branch Manager, John Millwood,
unlawfully falsified sales and company records. More
specifically, two (2) of Henry's accounts, Frontline
Communications ("Frontline") [one of the plaintiff
companies] and Skoland/IX2 ("Skoland") were ordering
additional service, i.e. add-on accounts. Millwood was
avoiding paying Henry commission fees she was entitled
to by creating fictitious company names and documents
and setting up add-on accounts under these shill
In order to avoid paying commissions to Henry, Millwood
used fictitious corporate names, which were shill
companies, to establish new accounts. Although the
company names were different than Frontline, the
service was actually being provided to Frontline.
Cooper testified that Sprint's law department told him that Sprint had
determined Henry's allegations not to be credible. Cooper was told that
Millwood had filed a "corrective action" against Henry prior to her
termination, and that Henry was terminated for credit card abuse. Cooper
did not credit Henry's claims and did not discuss them with Millwood.
On November 7, Sprint gave notice to Millwood that he would be
terminated. Millwood continued to work at Sprint until November 16.
On November 15, Millwood had a meeting with two employees of Sprint's
"in-house corporate security," who told him that two other individuals,
Baptiste and Louis Santana, said that they had told Millwood that
Frontline was a reseller. The corporate security employees also questioned
Millwood regarding his handling of the Frontline accounts. Millwood told
them that "you sound like I should have a lawyer." They told Millwood
that he only needed a lawyer if he had something to hide, to which
Millwood responded that he had nothing to hide and that he therefore
did not require an attorney.
On November 16 or 17, Cooper was approached by a "confidential
informant." This informant told Cooper that there were
"at least half a
dozen people at Sprint who were involved with these plaintiffs, some of
whom may have been paid off by them." The informant mentioned Millwood as
one of the individuals at Sprint who was involved with the plaintiffs,
but did not tell Cooper any specific acts of wrongdoing by Millwood.
Siev next communicated with Millwood on November 20, the date of
Millwood's second deposition. Siev and Millwood discussed how Millwood
was introduced to the plaintiffs and the circumstances surrounding the
signing of the contracts. During the discussion, Millwood told Siev that
Sprint had terminated his employment. Siev had already learned of this
fact approximately a week or two prior to November 20. Siev also knew
before the deposition that Sprint was conducting an internal
investigation with regard to the plaintiffs, and that Millwood had been
interviewed as part of that investigation.
During his discussion with Siev, Millwood communicated his concerns
that the corporate security people "had questioned me so, you know,
pretty much like interrogation." According to Millwood, Siev responded
"don't worry about it" and stated that "I'm right there for you, we're a
team, so . . . I'm not sure why they even did that."
At the deposition on November 20, Millwood testified that he had been
fired by Sprint. Frontline's attorney, Joel Van Over, attempted to
question Millwood about the circumstances surrounding his termination.
Siev objected to the extent that the questioning touched upon Sprint's
investigation of the plaintiffs in this case, stating that the results
of that investigation were protected by the work-product privilege. The
following exchange took place:
MR. TAGUE [attorney for International Telnet, a
former plaintiff in this case]: . . . I think it's
problematic that now he's continuing with this
deposition and you are counseling him and advising him
that he cannot answer specific questions with respect
to conversations he had not with Sprint lawyers but
with his immediate superior, Ms. Jordan. So I think
MR. SIEV: The work product rules are very clear
that it does not have to be a lawyer that does the
communicating, and the privilege is not — and the
privilege for work product and attorney-client are not
Mr. Millwood's, they're Sprint's, and I'm asserting
them on behalf of Sprint.
We can sit here and debate it for an hour or call
the Judge, I'm happy to do either one, or you can
MS. VAN OVER: All right.
Q. Mr. Millwood, does Mr. Siev here represent you
MR. SIEV: Objection to the form.
Immediately following that exchange, Millwood testified that he
received an email from Sprint's Compensation department regarding
commissions for two of his accounts, the Touchstone and Eiffel accounts.
Millwood testified that he interpreted the email as stating that whether
he received any commission for these accounts depended on the outcome of
this action. Van Over then stated that "I think you two have a blatant
conflict of interest. I don't think you should be sitting here
representing this witness." Upon being asked by Siev for the reason for
her statement, she responded: "The witness has just testified that he
received an e-mail from Sprint saying that his compensation is dependent
on the outcome of this litigation in some fashion. That puts you into a
conflict of interest." Siev testified credibly
at the hearing that he did
not know of the existence of this email prior to the deposition.
During a subsequent break, Siev and Millwood had a discussion off the
record. Siev explained to Millwood that AKO did not believe a conflict
existed, but that because it was a "serious matter," Millwood should not
proceed with the deposition but should instead obtain separate counsel.
Following that break, Siev and Millwood made the following statements:
MR. SIEV: As I have just told counsel off the
record, Ms. Van Over has made a very serious allegation
during the course of the brief proceedings we've had
here today that she perceives that there's a conflict
While neither I nor my firm nor Sprint believe
that is the case, rather than moving forward, we
advised Mr. Millwood that we don't believe there is a
conflict, yet the Plaintiffs have raised that
possibility and as such he should obtain independent
counsel of his choosing as opposed to potentially
having any of his rights compromised; and Mr. Millwood
is certainly free to speak for himself, but he has
advised me as he has counsel here off the record that
he seeks to do that and seeks to terminate the
Mr. Millwood, do you want to state your decision
for the record?
THE WITNESS: I mean, I was informed that it would
be in my best interest to seek counsel before I answer
any more questions.
I don't necessarily object to answering any
questions, I just don't want to do anything that is
really not in the best interest of myself.
Van Over then asked Millwood whether this was the first time anyone had
told him he had a right to consult independent counsel. Siev instructed
Millwood not to answer a question because of "potential attorney-client
implications for Sprint."
Van Over and Siev then had this exchange:
MS. VAN OVER: Is it your position you have an
attorney-client relationship with Mr. Millwood?
MR. SIEV: As we sit here right this second?
MS. VAN OVER: Yes, now.
MR. SIEV: Previously?
MS. VAN OVER: Now, right now.
MR. SIEV: As we sit here right now you've raised
the possibility of a conflict; so given that, I can't
move forward and say that I represent him without him
seeking independent counsel.
MS. VAN OVER: It seems to me if you have never
before right now told him that he is entitled to get
independent counsel or you are telling him that he
can't answer that question, that has nothing do [sic]
with privilege, that has to do with Mr. Millwood's
rights as an individual separate and apart from Sprint,
and I'm entitled to an answer to that question; and I
would like to call the Judge now if you are instructing
him not to answer.
Millwood and Siev briefly conferred off the record, after which Siev
continued to assert attorney-client privilege "on behalf of the company."
Millwood stated that he would continue to answer questions at the
deposition because "I'd rather deal with whatever can be dealt with right
The final deposition of Mr. Millwood took place on November 26. At that
deposition, Millwood testified that Siev was not his personal lawyer.
Following the deposition, Siev did not have any further conversations
with Millwood. In January 2002, Millwood obtained independent counsel. On
February 14, Sprint filed an answer,
amended counterclaims, and amended
third-party claims naming Millwood as a third-party defendant. The claims
asserted against Millwood are for misrepresentation, conspiracy to
defraud, negligent misrepresentation, negligence, and breach of fiduciary
duty. The factual allegations in paragraph 57 of the third-party
complaint are similar to the allegations contained in Kim Henry's earlier
Millwood . . . created false documents and records,
including contracts, that were designed for the purpose
of creating the false appearance that the Plaintiffs
were and are independent companies with their own
independent business plans and desire to purchase
services from Sprint as general business customers. In
fact . . . Plaintiffs and other affiliates had no
independent need or desire to purchase traffic from
Sprint other than to serve as hidden "fronts" for
Millwood argues that AKO should be disqualified from continuing to
represent Sprint in this litigation because AKO attorneys failed to
explain the risks of joint representation to Millwood or advise him to
obtain independent counsel after they became aware of a conflict of
interest between Millwood and Sprint. Even if AKO violated its ethical
obligations to Millwood, that conduct did not prejudice Millwood's
defense in this case, and therefore does not require disqualification.
The evidence presented by the parties demonstrates that as early as
November 2, 2001, AKO possessed information of a possible conflict of
interest between Sprint and Millwood. The Kim Henry letter contained
allegations that Millwood had disguised the nature of the relationship
between Frontline and Bellrose, two of the plaintiff companies. Henry
also alleged that service supposedly going to Bellrose was in fact being
provided to Frontline. Although Sprint had not yet taken an adversarial
position against Millwood, the parties' filings demonstrated that a key
issue in the case would be the circumstances in which the plaintiffs
obtained such favorable contractual rates. When Sprint eventually filed
its third-party claims against Millwood in February 2002, its allegations
were remarkably similar to Henry's allegations.
Furthermore, Henry's allegations were bolstered by conversations
between Siev and a confidential informant on November 16 or 17 of 2001.
This confidential informant told Siev that Millwood was one of a number
of Sprint employees who were possibly being "paid off" by the plaintiff
companies. AKO did not inform Millwood of Henry's letter or of the
confidential informant's allegations. Nor did AKO inform Millwood of the
implications of joint representation prior to the November 20
deposition. Millwood argues that once it possessed information of a
possible conflict of interest, AKO had an ethical obligation to inform him
of the circumstances giving rise to that conflict and to advise him to
consult an independent lawyer.
The question of whether AKO committed an ethical violation should be
referred to the Grievance Committee. However, the issue on this motion is
whether AKO should be precluded from acting as counsel for Sprint in this
case, not whether the attorneys should be disciplined. Federal courts
have the power "to disqualify counsel where necessary to preserve the
integrity of the adversary process in actions before them." Board of
Educ. v. Nyquist, 590 F.2d 1241, 1249 (2d Cir. 1979). However, a federal
court must use great care in exercising this power. As the Second Circuit
has noted, "disqualification motions are often interposed for tactical
reasons, and even when made in the best of faith, such motions inevitably
cause delay." Evans v. Artek Sys. Corp., 715 F.2d 788, 791-92 (2d Cir.
1983). In disqualifying an attorney, the court is overriding a party's
important right to be represented by counsel of its own choosing. Id. at
For these reasons, the Second Circuit has emphasized that a court
should not disqualify a lawyer based on impropriety alone, but should do
so only "when an attorney's conduct tends to taint the underlying trial."
Nyquist, 590 F.2d at 1246. See also Russell-Stanley Holdings, Inc. v.
Buonanno, 210 F. Supp.2d 395, 397 (S.D.N.Y. 2002). Specifically, "it must
be shown that the attorney was in a position where he could have received
information which his former client might reasonably have assumed the
attorney would withhold from his present client." Allegaert v. Perot,
565 F.2d 246, 250 (2d Cir. 1976). See also Evans, 715 F.2d at 791.
Assuming that AKO represented Millwood, it represented him jointly with
Sprint, his employer. When an attorney represents an employer and an
employee jointly, the employee cannot reasonably expect the attorney to
keep any information from the employer. Kempner v. Oppenheimer &
Co., Inc., 662 F. Supp. 1271, 1277 (S.D.N.Y. 1987). See also Rocchigiani
v. World Boxing Council, 82 F. Supp.2d 182, 187-88 (S.D.N.Y. 2000) (joint
representation of boxer and his promoter). Moreover, Millwood testified
that he did not want or expect Siev to keep anything he told him from
Sprint. Millwood also testified that he believed that AKO represented him
in his capacity as an employee of Sprint, that AKO was "only talking to
me because of Sprint," and that for the purposes of this lawsuit, he
"didn't see [himself] as separate from Sprint."
Millwood does not point to any actual prejudice. He argues that I
should disqualify AKO regardless of prejudice. Specifically, he argues
that AKO should be disqualified for failing to explain to him the
implications of common representation. Millwood relies primarily on Felix
v. Batkin, 49 F. Supp.2d 260 (S.D.N.Y. 1999), a case in which counsel for
movant's employer was disqualified even though the movant had no
expectation of confidentiality vis-a-vis her employer.
The long-established rule in this Circuit is that a court should not
disqualify an attorney in the absence of trial taint. "The business of
the court is to dispose of litigation and not to act as a general
overseer of the ethics of those who practice here unless the questioned
behavior taints the trial of the cause before it." W.T. Grant Co. v.
Haines, 531 F.2d 671, 677 (2d Cir. 1976). Since Millwood had no
expectation of confidentiality as against Sprint, he did not disclose to
AKO any information that would prejudice him in this case. The Second
Circuit has clearly and repeatedly held that a violation of the Code of
Professional Responsibility should result in disqualification only when
the violation taints the integrity of the proceeding before the court.
Nyquist, 591 F.2d at 1246; Haines, 531 F.2d at 677; Lefrak v. Arabian
American Oil Co., 527 F.2d 1136, 1139-40 (2d Cir. 1975); see also
Universal City Studios, Inc. v. Reimerdes, 98 F. Supp.2d 449, 455-56
For the foregoing reasons, Millwood's motion to disqualify AKO is
denied. Millwood's counsel is directed to report AKO to the Grievance
Committee for the First Judicial Department of New York and the Grievance
Committee of this Court.
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