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Reilly v. Computer Associates Long-Term Disability Plan

March 30, 2006

MAUREEN REILLY PLAINTIFF,
v.
COMPUTER ASSOCIATES LONG-TERM DISABILITY PLAN, COMPUTER ASSOCIATES, AS PLAN ADMINISTRATOR, UNUM LIFE INS. CO. OF AMERICA, FIRST UNUM LIFE INS. CO., GENEX SERVICES, INC., UNUM PROVIDENT CORP., COMPUTER ASSOCIATES LIFE INSURANCE PLAN AND RELIASTAR LIFE INS. CO. OF NEW YORK DEFENDANTS.



The opinion of the court was delivered by: Trager, J

MEMORANDUM AND ORDER

Defendants, First Unum Life Insurance Company, UnumProviden Corporation, and Unum Life Insurance Company of America (collectively "defendants" or "Unum") bring a motion to disqualify Maureen Reilly's ("Reilly" or "plaintiff") counsel, the law firm of Binder & Binder P.C. ("Binder & Binder") and Peter J. Heck ("Heck"). Defendants bring their motion in response to Binder & Binder's hiring of Heck. Immediately before joining Binder & Binder in August 2004, Heck had been a partner at Del Mauro, DiGiaimo, Knepper & Heck ("DDKH"), where he had worked on behalf of Unum in numerous matters. Heck left Binder & Binder, after being there five months, in January 2005, but defendants still maintain that Binder & Binder should be disqualified due to its brief association with him. Defendants' motion is denied.

Background

In August 2002, after she was notified by Unum that her short-term disability plan benefits were being terminated, Reilly retained Binder & Binder to appeal the denial. (DeHaan Aff. at 18.) The present motion stems from an action she filed in November 2004 pursuant to that retention. In her complaint Reilly claims, inter alia, that Unum denied her claim for long-term disability because as both the decision-maker and the party responsible for payment Unum was operating under a conflict of interest. (Pl. Compl. at ¶ 151.) She claims that this conflict of interest regularly lead to valid claims being denied by Unum. Id. at ¶ 169. In addition to the restoration of her benefits, Reilly also requests a permanent injunction ordering, first, that Unum be replaced as the insurer and administrator of Computer Associates Long-Term Disability Plan and, second, requiring Unum to alter its claims-handling procedures to eliminate this conflict of interest. Id. at ¶ 170.

DDKH hired Heck in 1998 as an associate and he was made a partner in the firm in 2002. (Def. Ex. E at 3.) Between when Heck joined DDKH in 1998 and when he left the firm in 2004 Heck billed over 9,600 hours representing Unum in various matters.

Id. at 4. During this time Heck had significant access to Unum's documents and personnel. Id. at 3. Heck spoke regularly with Unum's in-house counsel, discussing among other things Unum's practices, case strategies and settlement negotiation tactics.

Id. at 7. In 2003 Heck attended Unum's "outside counsel meeting" in which Unum employees gave presentations concerning strategies to handle broad-based claims being asserted against Unum. Id. at 9. Heck also had access to Unum's "legal extranet system," which allowed him to freely access large amounts of privileged information. (Def. Ex. I at 1-3.)

In June 2004 Heck gave DDKH sixty days' notice that he was resigning his Partnership. (Heck Aff. at 8.) During this period DDKH screened Heck from all cases in which he was not actively involved. Id. Shortly after leaving DDKH, Heck joined Binder & Binder's Wane, New Jersey office, beginning work on August 30, 2004. (DeHaan Aff. at 2.) Heck worked in Binder & Binder's Long-term Disability ("LTD") Department, but Heck was the only member of the LTD Department working in New Jersey. According to an affidavit submitted by the firm's senior member, Harry Binder, the rest of the LTD Department worked out of the firm's Ronkonkoma, New York office. (Binder Aff. at 5.)

When Heck joined Binder & Binder, in addition to working on other matters, he was assigned to represent three clients in matters against Unum companies. Those matters were: Battagliola v. National Life of Vermont, No. 03 Civ. 8558 (S.D.N.Y. filed Oct. 30, 2003) (Peck, Mag. J.), Denisi v. CNF Transportation LTD Plan, No. 04 Civ. 2379 (D.N.J. filed May 19, 2004) (Kugler, J.), and Lott v. Morgan Stanley Dean Witter & Co. Long-Term Disability Plan, No. 03 Civ. 9235 (S.D.N.Y. filed Nov. 20, 2003) (Bear, J.). Even though all these actions were filed while Heck still worked at DDKH, he denies ever working on, or having knowledge concerning any of the matters prior to starting at Binder & Binder. (Heck Aff. at 11.) In two of these cases, though, Heck and Binder & Binder were both ultimately disqualified. Battagliola v. Nat'l Life of Vt., No. 03 Civ. 8558, 2005 WL 101353 (S.D.N.Y. Jan. 19, 2005) later modified No. 03 Civ. 8558 (S.D.N.Y. Jan. 26, 2005) (Peck, Mag. J.) (reversing original opinion after the court learned that Heck had taken part in the drafting of a motion for summary judgment); Lott v. Morgan Stanley Dean Witter & Co. LTD Plan, No. 03 Civ. 9235, 2004 WL 2980193 (S.D.N.Y. Dec. 23, 2004) (Bear, J.). In the third case, after initially disqualifying Binder & Binder on an unopposed motion, the district court in Denisi reconsidered and vacated that order, holding that any disqualification motion was better decided after the parties completed a claims reassessment process. Denisi v. CNF Transp. LTD Plan, No. 04 Civ. 2379 (D.N.J. March 24, 2005) (Kugler, J.).*fn1

Binder & Binder contends that Heck had no knowledge of or substantive involvement in any other cases the firm has against Unum, including the present matter.*fn2 When the firm first hired Heck, Harry Binder specifically admonished him that he was not to discuss his prior representations with anyone in the firm. (Binder Aff. at 2.) The firm claims that at the end of September 2004, after one of Heck's former partners raised the disqualification issue in Denisi, it began screening Heck from all Unum matters, other than those listed above. (DeHaan Aff. at 3.) To screen Heck, Binder & Binder significantly restricted his access to the physical and computer files concerning all matters involving his former clients. Id. The firm also instructed its members to not discuss any of these matters with Heck. (Binder Aff. at 5.)

Due to the disqualification motions his continued employment was causing, on January 13, 2005 Heck tendered Binder & Binder a thirty-day notice of resignation. (Binder Aff. at 6.) On January 20, 2005 the firm informed Heck that he would continue to receive his salary through the end of the thirty-day period, but that he was not to return to the Binder & Binder offices. Id.

Discussion

(1)

Disqualification Principles Disqualifying a party's counsel is a "drastic measure" that requires the balancing of two important considerations. A.V. by Versace, Inc. v. Gianni Versace, S.p.A., 160 F. Supp. 2d 657, 662-63 (S.D.N.Y. 2001). On the one side is the deference the system gives a party in selecting counsel of their choice, and on the other side is the need for the profession to maintain the highest degree of fiduciary and professional standards. Hempstead Video, Inc. v. Inc. Vill. of Valley Stream, 409 F.3d 127, 132 (2d Cir. 2005) (Leval, J.); Evans v. Artek Sys. Corp., 715 F.2d 788, 791 (2d Cir. 1983) (Mansfield, J.). Disqualification of an attorney imposes a substantial transaction cost on a party. The affected party incurs the costs associated with finding a new attorney who must then become familiar with the matter. Gov't of India v. Cook Indus., 569 F.2d 737, 739 (2d Cir. 1978); Siemens Energy & Automation, Inc. v. Coleman Elec. Supply Co., Inc., No. ...


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