The opinion of the court was delivered by: Randolph F. Treece United States Magistrate Judge
Presently before this Court is Defendants' Motion to Disqualify Lee Palmateer, Esq., as Plaintiffs' Counsel. Dkt. No. 20, Defs.' Mot. to Disqualify, dated Nov. 18, 2011. The Plaintiffs vigorously oppose Defendants' Motion, Dkt. No. 25, to which the Defendants have filed a Reply thereto, Dkt. No. 26. For the reasons stated below, this Court finds that an evidentiary hearing is in order.
The Court presumes the parties' familiarity with the facts and the issues of this litigation and, more particularly, the gravamen of this Motion. Nonetheless, for the limited purpose of this Decision and Order, the Court will state an abridged version of the facts.
On July 16, 2010, the Plaintiffs initiated a copyright infringement action, pursuant to 17 U.S.C. § 501, et seq., against approximately eighty parties, including the Defendants named in this action. Case No. 1:10-CV-876, Dkt. No. 1, Compl. The basic gist of that infringement action alleges that Plaintiffs are builders and designers specializing in architectural and flooring planning designs of residential homes. They accuse the Defendants, as well as numerous others, of violating their exclusive copyrights in the architectural designs of resident homes, i.e., designated as DRA 216a and DRA 217, and accordingly these numerous defendants' conduct constitutes an infringement of those copyrights. At the time Plaintiffs commenced this action, they were represented by Nancy Baum Delain, Esq., while the Defendants' insurer, Scottsdale Insurance Company, undertook their defense, and provided representation through the Goldberg Segalla Law Firm, Christopher J. Belter, Esq., of Counsel.
As that litigation progressed over the following several months, Plaintiffs amended that complaint twice in order to reduce the number of parties and to narrow the allegations. See Dkt. Nos. 11, Am. Compl., dated Aug. 18, 2010, 60, Second Am. Compl., dated Oct. 27, 2010. Because of the more narrowly defined allegations in the second amended complaint, the Defendants' insurer withdrew its defense and Defendants' Counsel moved to withdraw. See Dkt. No. 95, Sealed Mot. to Withdraw, dated Jan. 13, 2011. The Court granted the withdrawal motion and gave the Defendants thirty days to retain new counsel. Dkt. No. 99, Sealed Order, dated Feb. 3, 2011.
With the assistance of Philip Miller, Esq., the Defendants embarked upon securing new counsel. Several attorneys were contacted but only two were interviewed. Attorney Palmateer was interviewed first by Defendant Joseph Clark and Attorney Miller on February 16, 2011, at Miller's law office. Again for the purpose of this Motion, the Court will sparingly detail the salient facts in order to frame the issues. Clark and Miller aver that they met with Palmateer for nearly ninety minutes in which they shared confidential and privileged information and discussed a detailed analysis of the overall case including the subject drawings Mr. Zalewski was using to support his claims and the architectural drawings of the allegedly infringing home built by Shelroc and Capital Framing. Mr. Clark walked Mr. Palmateer through various aspects of both drawings, comparing and contrasting elements of both. Mr. Palmateer was actively involved in the discussion, asking questions and offering his opinions and advice.
Case No. 1:11-CV-1159, Dkt. No. 20-4, Philip Miller, Esq., Decl., dated Nov. 15, 2011, at ¶ 17.
Clark and Miller represent that the candid conversations were not one-sided but that Palmateer offered his opinion and advice on a range of related subject matters. Id. at ¶ 17; Dkt. No. 20-3, Joseph M. Clark Decl., dated Nov. 16, 2011, at ¶ 9. Additionally, Clark and Miller declare that their discussion with Palmateer included terms such as what Defendants might be willing to offer to settle the litigation, including amounts. Miller Decl., at ¶ 19; Clark Decl., at ¶ 3.*fn1 Contrariwise, Palmateer refutes that either Clark or Miller shared privileged communication with him and he vehemently denies that the Defendants shared terms of settlement with him: "Our discussions did not even remotely approach 'detailed,' and neither Messrs. Clark nor Miller disclosed confidential information to me. . . . While they inquired as to my thoughts on settlement and I offered preliminary observations, they did not disclose to me their strategy or amenability to settlement." Dkt. No. 25-3, Lee Palmatter, Esq., Decl., dated Dec. 9, 2011, at ¶¶ 12-13. Notwithstanding Clark's and Miller's extensive meeting with Palmateer, they decided not to retain him and hired, instead, the law firm of Harris Beach, James R. Muldoon, Esq. of Counsel. Miller Decl., at ¶ 22.
On August 2, 2011, the Honorable Gary L. Sharpe, now Chief District Court Judge, issued a memorandum-decision and order dismissing the second amended complaint for failing to meet the pleading requirements under FED. R. CIV. P. 8, granting Plaintiffs leave to file a third amended complaint, and extending to the defendants an opportunity to renew or supplement their motions should a third amended complaint be filed timely. Case No. 1:10-CV-876, Dkt. No. 133, Mem.-Dec. & Order. Approximately two weeks thereafter, on August 18, 2011, Attorney Delain filed a letter-motion seeking to withdraw as Plaintiffs' Counsel, Dkt. No. 135, and Attorney Palmateer filed a notice of appearance on behalf of the Plaintiffs, Dkt. No. 134. See also Dkt. No. 136, Order, dated Aug. 19, 2011. Until this point, Palmateer had not represented the Plaintiffs on any matter or in any manner.
On September 1, 2011, Plaintiffs filed the third amended complaint wherein the Defendants above, among others, remained as parties. Dkt. No. 138, Third Am. Compl., Count VI, ¶¶ 169-92. The Defendants complained that this third amended complaint contained new factual allegations that described information Defendants disclosed in confidence to Palmateer. According to the Defendants, Muldoon contacted Palmateer about this conflict and may have asked him to withdraw as counsel. Rather than withdraw from that litigation, on September 27, 2011, Plaintiffs filed a voluntary dismissal without ...