Medgyesy v. Medgyesy et al

Filing 82

AMENDED MEMORANDUM Opinion and Order Signed by the Honorable Jeffrey Cole on 6/17/2013:Mailed notice(jms, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHER DISTRICT OF ILLINOIS
EASTERN DIVISION
JOHN P. MEDGYESY, individually
and in his capacity as trustee for
JPM FAMILY TRUSTS,
Plaintiff,
v.
ERMA S. MEDGYESY, individually
and in her capacity as co-trustee of
the LSM Children Trust, et al.,
Defendant.

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Case No. 12 C 9708

Magistrate Judge Cole

AMENDED MEMORANDUM OPINION AND ORDER
A.
Attorney Nicola Tancredi represents the plaintiffs in this matter. The defendants have come
forward with evidence in the form of several emails from Mr. Tancredi that they claim shows he
formerly provided legal services for the defendants in a related case. The defendants now ask that
he be disqualified from representing the plaintiffs.1
This case is a family squabble – apparently a bitter one involving the Oscar Mayer heirs –
over the distribution of assets from a number of commingled trusts. On the one side, there is the
plaintiff, John P. Medgyesy, acting as trustee for the “family trusts”; on the other side there is the

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Although neither side raises the issue, the threshold question involves the extent of my authority to
resolve this motion. That is, is this a motion that I can “hear and determine” under 28 U.S.C. §636(b)(1)(A)
and Rule 72(a), or am I limited to issuing a Report and Recommendation under §636(b)(1)(B) and Rule
72(b)? On the issue generally of what constitutes each kind of matter, see Cleversafe, Inc. v. Amplidata, Inc.,
287 F.R.D. 424 (N.D.Ill. 2012). The cases are uniform in holding that a motion to disqualify counsel is a
nondispositive matter. See Hutchinson v. Pfeil, 105 F.3d 562, 565 (10th Cir. 1997); Fish v. Hennessy, 2012
WL 3643829, 1 (N.D.Ill. 2012); Advanced Mfg. Technologies, Inc. v. Motorola, Inc., 2002 WL 1446953 (D.
Ariz. 2002); Affeldt v. Carr, 628 F. Supp. 1097, 1101 (N.D. Ohio 1985).

defendant, Erma Medgyesy, acting as trustee for the “LSM Children Trust.” Mr. Tancredi, along
with Giovanni Cicione, is currently representing the plaintiff. On March 8, 2013, the attorneys for
both sides received a letter from another lawyer, Christopher Sheean, informing them that Mr.
Tancredi had been engaged on behalf of both John P. and Erma Medgyesy – as well as other
defendants here, including Laura Medgyesy and Laszlo S. Medgyesy – in a prior case regarding the
trusts. Mr. Sheean included several pieces of correspondence he had received “from Mr. Tancredi
during the time that he was engaged by [Mr. Sheean’s] firm in this matter . . . .” (Plaintiff’s Exs.,
Dkt. # 31-1, page 2).
The correspondence consists of a number of Mr. Tancredi’s own emails on which appear
the familiar legend, “Attorney work product” and some of which bore the email address of Mr.
Tancredi’s law office: “From: Nicola S. Tancredi <[e-mail]>”. (Plaintiff’s Exs.,
Dkt. # 31-1, page 3, 6, 12, 13). One email indicated Mr. Tancredi wanted to review the pleadings
in the case and discuss strategy. In it, he recommended removal of the trustee “given [his] multiple
breaches of fiduciary duty.” (Plaintiff’s Exs., Dkt. # 31-1, page 4). Another set up a meeting to
discuss a plan about going forward with the case. (Plaintiff’s Exs., Dkt. # 31-1, page 5). In another,
after Mr. Tancredi expressed eagerness to become involved in the case:
There are some aspects that might be potentially worthwhile from a practice area
expertise standpoint in seeing how this case plays out. I am open to investing a
certain amount of time for the value of seeing how the case plays out. . . . Like a
surgeon who hears of an interesting operation, I would at least like a window into
this one.
(Plaintiff’s Exs., Dkt. # 31-1, page 12)(Emphasis supplied). The email is signed “Best regards, Law
Offices of Nicola S. Tancredi.” It, like every other email from Mr. Tancredi, was designated
“Attorney work product.”

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In a curious bit of lawyering, the plaintiff first moves to strike the defendant’s motion to
disqualify because it is not supported by competent evidence. That argument is mystifying since
Mr. Tancredi’s own affidavit attached to the motion to strike admits that he sent the emails while
he was working with Mr. Sheean’s firm on the earlier Medgyesy trust case. (Defendant’s Ex.,
Tancredi Aff., ¶ 8). Mr. Tancredi’s affidavit authenticates the emails and makes them competent
evidence even at a trial. See Rule 901(b)(1), Federal Rules of Evidence. The plaintiff’s fallback
position is that, although Mr. Tancredi worked on the case with Mr. Sheean, he did so in his capacity
as a fraud examiner, asset locator, and management consultant – not as an attorney. (Tancredi Aff.,
¶ 6).
There are two glaring flaws in the contention. First, if he was not acting as an attorney, why
designate every communication“attorney work product,” and why use his attorney email address.
There is no explanation for the designation, and the claim that the multiple uses of his law office
email address were “inadvertent ministerial administrative errors” is conclusory, and I need not
accept it. (Tancredi Aff., ¶8). Mr. Tancredi makes no attempt to explain who made the supposed
errors or how they were made. He does not say who authored the emails, and he does not claim that
he was not the author. And if, as it seems, he was the author, his claim of inadvertent administrative
errors is implausible.
Second, there is no principled argument as to why the admitted disclosure to him by Mr.
Sheean regarding the “contents of the database” – which included “financial and transactional
records concerning various Medgyesey family trusts” (Tancredi Aff., ¶6) – ought not preclude his
current representation. He does not explain why he ought to be allowed to continue in a position
where there is at least an appearance that he could use what he learned against those who reposed

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trust in him in the belief that whatever he saw or learned would be maintained in confidence.
.
It is a curious argument that if one obtains access to confidential information, he is free
thereafter to use it against the person from whom he learned it simply because he was not then but
will now be acting as a lawyer..2
Mr. Tancredi’s argument seeks to avoid this pitfall by contending that while he knows that
he was briefed on how to operate the trust database, he cannot recall whether he actually examined
the data base or any confidential information. (Tancredi Aff., ¶6). But that claim is not persuasive.
Mr. Tancredi’s own emails reflect his eagerness to be involved in the case, and given that eagerness
coupled with the various recommendations he actually made, such as that the trustee be immediately
removed “given [what Mr. Tancredi concluded were] multiple breaches of fiduciary duty,” it is a
reasonable, if not ineluctable inference, that he accessed the database and utilized its confidential
contents, which he admits included “financial and transactional records concerning various
Medgyesey family trusts.” (Tancredi Aff., ¶6). Mr. Tancredi makes no claim that the “financial and
transactional records” of the trusts in the database were not confidential. Obviously, they are.
B.
Considering whether to disqualify an attorney presents a difficult balancing act. On the one
hand, there is prerogative of a party to proceed with counsel of his choice. Owen v. Wangerin, 985
F.2d 312, 317 (7th Cir. 1993); Schiessle v. Stephens, 717 F.2d 417, 419-20 (7th Cir.1983). On the
other, there is the court's duty “to safeguard the sacrosanct privacy of the attorney-client

2

Even if it were conceded that Mr. Tancredi was not a lawyer, he would still be barred under
familiar and basic principles of the law of Agency from representing the plaintiffs in this case.
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relationship,” Cromley v. Board of Educ. of Lockport Tp. High School Dist. 205, 17 F.3d 1059,
1066 (7th Cir. 1994), and the transcendent goal of maintaining the public trust in the propriety of
legal proceedings.
“Where an attorney represents a party in a matter in which the adverse party is that attorney's
former client, the attorney will be disqualified if the subject matter of the two representations are
‘substantially related.’” Westinghouse Elec. Corp. v. Gulf Oil. Corp., 588 F.2d 221, 223 (7th
Cir.1978). First, however, the question is whether there was an attorney-client relationship at all –
a relationship Mr. Tancredi denies. But the emails show that that denial is not credible. For
example, on January 7, 2009 after recommending the removal of the trustee, Mr. Tancredi explains
the legal consequences and advantages of the removal of the trustee and opines that a petition for
immediate removal of the trustee is appropriate “to protect further injury to beneficiary assets.”
Next, it must be determined whether it is reasonable to infer that the confidential information
allegedly given would have been given to a lawyer representing a client in those matters. Third, it
must be determined whether that information is relevant to the issues raised in the litigation pending
against the former client. LaSalle Nat. Bank v. Lake County, 703 F.2d 252, 255-56 (7th Cir. 1983).
The emails show that Mr. Tancredi was brought in to assist Mr. Sheean on the previous
Medgyesy trust case. They show that he was involved in the analysis of legal questions like fraud
and breach of fiduciary duty, and was a party to discussions regarding litigation strategy. There may
have been no formalized attorney-client relationship, but there doesn’t have to be. See Westinghouse
Elec. Corp. v. Kerr–McGee Corp., 580 F.2d 1311, 1319–20 (7th Cir.1978); Herbes v. Graham, 180
Ill.App.3d 692, 699, 536 N.E.2d 164, 167 (2nd Dist. 1989). What the emails show is that Mr.
Tancredi was doing work that he, himself, deemed legal, as evidenced by his use of the “attorney

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work product” label on his emails.
Further, it is reasonable to infer that he had access to confidential information. He said he
reviewed documents, which were clearly confidential, and the evidence taken as a whole shows that
he had access to the confidential information in the database. Whether he accessed it really does not
matter. It is the access that counts. See infra at 8.
Information regarding the family trusts – the subject matter of the prior case – is clearly
relevant to this case. The defendant does not suggest that it isn’t or that the matters are not
substantially related. As such, the defendant doesn’t even have to show that Mr. Tancredi’s received
confidential information. LaSalle Nat. Bank v. Lake County, 703 F.2d 252, 255 (7th Cir. 1983). See
infra at 8.
This situation, at the very least, gives the appearance of impropriety, and an attorney may
be disqualified for the appearance of impropriety. Cromley, 17 F.3d at 1066. In order to disqualify
an attorney on the basis of an appearance of impropriety, the movant need not prove actual
wrongdoing, but must prove that (1) there exists a reasonable possibility that some specifically
identifiable impropriety did, in fact, occur, and (2) the likelihood of public suspicion or obloquy
outweighs the social interests that will be served by the attorney's continued participation in the case.
United States v. Gayle, 406 Fed.Appx. 352, 364 (11th Cir. 2010).
Allowing Mr. Tancredi to participate further in this case would result in an appearance of
impropriety. If Mr. Tancredi were, indeed, acting not as a lawyer but as a fraud specialist or in some
other capacity as he claims, he certainly created a very different impression. Sending emails from
his law office address and labeling them attorney work product – which he does not explain at all
– not only undermine his characterization of the work he did as non-legal, but created precisely the

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opposite impression than the one he now claims reflects reality. To allow him to continue in the face
of this evidence would be to excuse the rather obvious appearance of impropriety.
C.
The plaintiff also argues that the defendant has waived any objection to Mr. Tancredi’s
participation in this case by waiting too long to act. According to Mr. Tancredi, he informed defense
counsel on January 4, 2013, that he had what he tendentiously described as a preliminary discussion
about working for Mr. Sheean as a fraud examiner in the previous case. (Tancredi Aff., ¶ 11).
Citing several cases that state that waiting between six and a half months to two years is too long,
the plaintiff points out that the defendant filed the motion to disqualify on March 14, 2013. That’s
a bit more than nine weeks – not six and a half months and certainly not two years. Moreover,
defendant’s counsel affirms that Mr. Tancredi actually informed him of his involvement with the
previous case around February 25th. (Blonder Aff., ¶¶ 3-4). And, defendant’s counsel did not learn
of the full extent of Mr. Tancredi’s involvement until Mr. Sheean sent his letter and accompanying
emails. Mr. Tancredi had withheld from his explanation of events the fact that he had discussions
about strategy and/or reviewed documents. That involvement went beyond what could be
characterized as the “preliminary discussions” he revealed to defendant’s counsel. There can be no
waiver found here. The same goes for the plaintiff’s estoppel argument. There was no unreasonable
delay here and no prejudice resulting from reasonable reliance on claimed inaction by the defendant.
Once defendant’s counsel had the necessary information, he acted in a timely manner.
D.
Regrettably, disqualification motions have become common tools in litigation, often being
used for purely strategic purposes and to harass. See Richardson-Merrell, Inc. v. Koller, 472 U.S.

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424, 436 (1985); Freeman v. Chi. Musical Instrument Co., 689 F.2d 715, 722 (7th Cir.1982);
Allegaert v. Perot, 565 F.2d 246, 251 (2d Cir. 1977); Woods v. Covington County Bank, 537 F.2d
804, 813 (5th Cir. 1976). Thus, motions for disqualification are not favored and should not be
casually granted. Melamed v. ITT Cont'l Baking Co., 592 F.2d 290, 295 (6th Cir. 1979); Fred
Weber, Inc. v. Shell Oil Co., 566 F.2d 602, 609 (8th Cir.), cert. denied, 436 U.S. 905 (1977); Panduit
Corp. v. All States Plastic MFG. Co., 744 F.2d 1564, 1576-77 (Fed. Cir. 1984).
But the evidence in this case shows that this is not a motion designed to harass or to gain a
tactical advantage. Rather, there is just too much that isn’t right and doesn’t look right. The
technical prerequisites for the motion have been satisfied. First, the cases are clearly related.
Second, the evidence shows that Mr. Tancredi had access to confidential information. He reviewed
documents and had every incentive to go into the database that housed very significant and
confidential information. Indeed, Mr. Tancredi, in his affidavit, offers no explanation for how he
could have concluded that there were “multiple breaches of fiduciary duty” by the trustee if he did
not have access to confidential information.
Indeed, he concluded that the breaches were so obvious and numerous that “immediatel
removal [of the trustee] should be easy.” This recommendation could not have been made
responsibly without that access to the very confidential information he now claims he does not know
whether he saw or not. And finally, that claim of lack of recall is unpersuasive since the event
occurred not long, long ago, but within the past three years.
In any event, as noted earlier, once a substantial relationship is found, it is irrebutably
presumed that the individual had access to confidential information, and that mandates
disqualification. See NovoTerapeutisk Laboratorium A/S v. Baxter Travenol Laboratories, Inc., 607

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F.2d 186, 192 (7th Cir. 1979); Exterior Systems, Inc. v. Noble Composites, Inc., 175 F.Supp.2d 1112,
1116 (N.D.Ind.2001).3
Mr. Tancredi insists he wasn’t acting as an attorney, but he was certainly discussing legal
matters according to his emails; those emails came from his law office and bore the statement
“Attorney work product.” He says the law office address on the emails was a mistake, but he was
the author of the emails, and he has no explanation (reasonable or otherwise) for why he would
characterize his communication as attorney work product if they were not, and if he thought he was
not acting as an attorney. Finally, when he informed defendant’s counsel about his involvement in
the previous case, his explanation was under-inclusive.4 In light of the evidence, disqualification
is appropriate. Disqualification will ensure not only the reality but the appearance of propriety,
maintenance of the public trust, and safeguard the privacy of the attorney-client relationship.
D.
Moreover, although plaintiff complains that he will be prejudiced by having to hire new
counsel, he does not say how. He has another attorney from another law firm. This case has barely
gotten started. It has bounced from Massachusetts state court, to federal court in Massachusetts, to
this court in December 2012. Mr. Tancredi only came aboard in January. The only substantive filing
from the plaintiff has been an answer to the defendant’s counterclaim. Other than that, all the
plaintiff has done is file motions for extensions of time. Discovery began a month ago. Mr.
Tancredi’s disqualification will not prejudice the plaintiff.

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Illinois law with respect to ethical matters now govern in this court. Tomasian v. CD Peacock, Inc., 2012
WL 2590493, 12 (N.D.Ill. 2012).
4

According to his own affidavit, Mr. Tancredi gave no indication that he reviewed documents or
discussed strategy.

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CONCLUSION

Defendant’s Motion to Disqualify Plaintiff’s attorney [31] is granted.

ENTERED:____________________________________
UNITED STATES MAGISTRATE JUDGE
DATE: 6/17/13

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