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FRONTLINE COMMUNICATIONS INT. v. SPRINT COMM. CO.

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,
V.
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

OPINION

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 relationship among them and hid the fact that they were resellers of telecommunications services.

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 commissions.

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 Commission ("EEOC").

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.

BACKGROUND

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 be fixed.

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 "your lawyer."

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?

A: 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 companies.
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. ...


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