Guirola de David et al v. Alaron Trading Corporation et al
Filing
233
Memorandum Opinion and Order signed by the Honorable Robert W. Gettleman on 10/11/2012: Mailed notice (gds)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
PAULINA GUIROLA DE DAVID,
CORPORACION DE FIANZAS, CONFIANZA
S.A., CARLO MAURO-RHODIO GUZMAN,
JESUS ALBERTO QUIROA MONTEPEQUE
ASESORES REGIONALES, S.A., DE C.V.,
CORPORACION DE INVERSIONES EN
OPCIONES Y FUTUROS, S.A., ESBA S.A.,
JOSE MIGUEL GAITAN ALVAREZ,
RICARDO RAMON MAZARIEGOS
CATELLANOS AND MARIA VIRGINIA
GAITAN DE MAZARIEGOS, JULIO
ROBERTO PINEDA AVILA, FRANCISCO
JAVIER PAZ PINEDA, JUAN FERNANDO
PEREZ MARROQUIN, DIDIER PATRICK
WURSTER, ALFREDO PRADANOS
VALDIZAN, ALBA MARIA MARLENNE
MEANY VALERIO DE HAGE AND NORMA
LISSETTE HERNANDEZ SANCHEZ,
SAMUEL ANTONIO CHARUCO
SAGASTUME, CORPORACION INTEGRAL
DE INVERSIONES, S.A.,
Plaintiffs,
v.
ALARON TRADING CORPORATION d/b/a
ALARON LATIN AMERICA, ALBERTO
ALVAREZ, JOSE (“PEPE”) ORTEGA,
ALBERTO TARAFA, yet undetermined
principals and yet undetermined persons,
Defendants.
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No. 10 CV 3502
Judge Robert W. Gettleman
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MEMORANDUM OPINION AND ORDER
On January 17, 2012, defendant Alaron Trading Corporation (“Alaron”) and its codefendants filed a motion to disqualify plaintiffs’ original counsel, J.B. Grossman (“Grossman”).
Alaron alleged that in 2006, one of its employees, George de Marcilla, met with Grossman and
shared confidential information for the purpose of securing legal advice. Four years later,
plaintiffs– represented by Grossman– filed the instant suit. On April 23, 2012, the court granted
Alaron’s motion and disqualified Grossman as plaintiffs’ attorney, finding that Grossman had
violated his ethical obligations under ABA Rule 1.18(a) by representing a client whose interests
were materially adverse to a prospective client. Alaron has now moved for sanctions against
plaintiffs for the actions of their previous counsel, seeking either to dismiss the action, compel
plaintiffs to re-file their complaint, or restrict plaintiffs’ access to previous counsel’s work
product. Alaron has also moved this court to reconsider its July 27, 2012 order denying Rule 11
sanctions against plaintiff Paulina Guirola de David (“de David”). For the reasons stated below,
both motions are denied.
A.
Motion for Sanctions for the Actions of Plaintiffs’ Previous Counsel
Plaintiffs’ original counsel, Grossman, committed an ethical violation by representing
plaintiffs in a case filed against his potential client. As a result of this violation, the court
imposed the appropriate sanction on the appropriate party: Grossman has been disqualified from
serving as plaintiffs’ counsel. The court rejects the contention that this entire action should be
dismissed, or that plaintiffs should be forced to re-allege the claims in their complaint (which is
tantamount to a dismissal without prejudice) due to the conduct of their previous counsel.
Based on the testimony during the disqualification hearing, the only information that de
Marcilla gave Grossman in their 2006 meeting that could be classified as confidential was the
fact that defendant was concerned about being subject to U.S. jurisdiction and violating U.S. law
by making certain guarantees about returns on investment. That information is totally irrelevant
to plaintiffs’ claims. Although the information could be relevant to Alaron’s knowledge that such
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guarantees were being made, at the time the suit was filed plaintiffs knew what guarantees had
been made to them, and current counsel didn’t need the de Marcilla – Grossman communication
to learn that.
To prohibit plaintiffs or their current lawyer from using anything de Marcilla told
Grossman would unnecessarily suppress evidence and would be unworkable going forward. It
would no doubt spawn recurring discovery disputes any time defendant could tie any evidence to
those disclosures. It would also effectively punish plaintiffs for Grossman’s unethical conduct,
which did not involve any of the plaintiffs and occurred years before they filed suit.
Further, the court’s order disqualifying Grossman was entered on April 23, 2012.
Plaintiffs were then allowed to obtain new counsel and no stay of discovery was ordered.
Defendant did not move to restrict plaintiffs’ substitute counsel from viewing or using
Grossman’s work product until August 25, 2012. In cases where parties have successfully
argued for restricted access to or use of work product from a disqualified attorney, the moving
parties made timely motions as soon as substitute opposing counsel sought to obtain access to
the records in question. See, e.g., Wagner v. Lehman Bros. Kuhn Loeb, Inc., 683 F. Supp. 189,
191 (N.D. Ill. 1987); In re George, 28 S.W.3d 511, 513 (Tex. 2000). The court in In Re George
specifically noted that the issue of work product restrictions becomes ripe as soon as counsel is
disqualified. In re George, 28 S.W.3d at 513. By waiting four months from the date of that order
(and one month after new counsel appeared) to file their motion for sanctions limiting access to
Grossman’s work product, defendant has made it virtually impossible to place any meaningful
limit on the evidence and discovery materials that may be used by plaintiffs or their new counsel,
even if the court were to impose such sanctions.
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For the reasons stated above, the motion for sanctions (Doc. 202) is denied.
B.
Motion for Reconsideration of Rule 11 Ruling
On April 2, 2012, defendant filed a Rule 11 motion asking the court to impose sanctions
on plaintiff de David for allegedly submitting a knowingly false pleading. On July 27, 2012, the
court denied the motion, in part because defendant had failed to comply with the safe harbor
provision of Rule 11(c)(2), which requires the movant to serve the opposing party at least
twenty-one days before filing a motion for sanctions with the court. Defendant now asks the
court to reconsider this ruling.
The motion to reconsider filed on August 25, 2012 (Doc. 206), focused only on the safe
harbor compliance issue. Defendant states that it did comply with the safe harbor provision of
Rule 11 by notifying plaintiffs’ counsel twenty-four days before filing the original Rule 11
motion with the court. Because defendant’s compliance with the safe harbor provision was not
mentioned in the original Rule 11 motion, only in the notice of motion, however, the court was
unaware that defendant had complied.
To further support its motion to reconsider, defendant has attempted to raise other
grounds besides safe harbor compliance in its reply memorandum. The failure to mention any of
these additional grounds in the initial motion to reconsider, however, results in the waiver of
these arguments. See Citizens Against Ruining The Env't v. E.P.A., 535 F.3d 670, 675 (7th Cir.
2008) (“It is improper for a party to raise new arguments in a reply because it does not give an
adversary adequate opportunity to respond.”). Moreover, the safe harbor compliance issue was
only one of many reasons for the court’s denial of the motion for Rule 11 sanctions, including
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the court’s preference to decide whether such sanctions would be appropriate after the case is
litigated on the merits.
For these reasons, defendant’s motion to reconsider (Doc. 206) is denied.
CONCLUSION
For the reasons stated above, defendant’s motion for sanctions (Doc. 202) and motion to
reconsider (Doc. 206) are denied.
ENTER:
October 11, 2012
__________________________________________
Robert W. Gettleman
United States District Judge
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