Zalewski et al v. Shelroc Homes, LLC et al
Filing
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DECISION and ORDER. The parties are directed to file dates and times that they may be available to participate in a telephone conference for the purpose of establishing an evidentiary hearing concerning the Defendants' 20 Motion to Disqualify. The Court anticipates the parties' prompt attention to this Decision and Order. Signed by Magistrate Judge Randolph F. Treece on 1/31/2012. (dpk)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
JAMES E. ZALEWSKI, DRAFTICS, LTD.,
Plaintiff,
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Civ. No. 1:11-CV-1159
(GLS/RFT)
SHELROC HOMES, LLC,
CAPITAL FRAMING, INC., and
JOSEPH M. CLARK,
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Defendants.
RANDOLPH F. TREECE
United States Magistrate Judge
DECISION and ORDER
Presently before this Court is Defendants’ Motion to Disqualify Lee Palmateer,
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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.
I. BACKGROUND
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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.
A. Case No. 1:10-CV-876
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
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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
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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
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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,
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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.
B. Lee Palmateer, Esq.
With the assistance of Philip Miller, Esq., the Defendants embarked upon
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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
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in which they shared confidential and privileged information and discussed
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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,
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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 ¶ 3.1 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
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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
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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
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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
Out of an abundance of caution, the Defendants did not initially shared with the Court the
actual conversation between Clark, Miller, and Palmateer for fear that doing so could inadvertently
waive the attorney-client privilege by doing so. Case No. 1:11-CV-1159, Dkt. No. 20-3, Joseph M.
Clark Decl., dated Nov. 16, 2011, at ¶ 6.
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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
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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
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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 prejudice against our Defendants, Dkt. No. 143,
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which was granted by Judge Sharpe, Dkt. No. 144; concurrently, Plaintiffs
commenced our current action.2
C. Case No. 1:11-CV-1159
Shortly thereafter, several dispositive motions were filed against the third amended
complaint by the remaining defendants in the original action. Case No. 1:10-cv-876, Dkt. Nos. 146,
149, 151, 156, 158-60.
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The allegations rendered against the Defendants in the prior case’s third
amended complaint are repeated nearly verbatim in our Complaint. Case No. 1:11CV-1159, Dkt. No. 1, Compl., dated Sept. 27, 2011. Unsurprisingly, the Defendants
contend that the new allegations are based upon information Defendants discussed in
confidence with Palmateer during “their prospective attorney-client relationship.” In
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response to the Complaint, Defendants filed an Answer with Counterclaim. Dkt. No.
11, Answer, dated Oct. 28, 2011. After holding a Conference on November 8, 2011,
this Court issued an Order granting Defendants permission to file this Motion to
Disqualify and further stayed all proceedings pending a decision on the Motion.3 Dkt.
No. 18, Text Order, dated Nov. 8, 2011.
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II. APPLICABLE LAW
Defendants’ central theme in filing this Motion is that they had entered into a
prospective attorney-client relationship with Palmateer when they discussed details
about their defense in the earlier, related lawsuit initiated by the Plaintiffs. As noted
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above, the Defendants assert that Palmateer “now represents Plaintiffs on virtually
identical claims against the Defendants.” Dkt. No. 20-1, Defs.’ Mem. of Law at p. 2.
Defendants argue that Palmateer should be disqualified from representing the
In Case No. 1:10-CV-876, on December 22, 2011, Judge Sharpe’s Chamber issued a Text
Notice “stay[ing] its decision in light of the pending motion to disqualify plaintiffs counsel . . . in
the related case, Zalewski v. Shelroc Homes, LLC, 11-cv-1159.”
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Plaintiffs based upon his receipt of privileged, confidential communication from them
during an attorney-client relationship, albeit brief, that occurred prior to the
commencement of the present lawsuit. They exclaim that Palmateer’s possession of
this sensitive and relevant information, which was shared with him in confidence, will
visit substantial harm upon them and deliver an unfair advantage to Plaintiffs.
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Although Palmateer agrees that he met with Clark and Miller and that a conversation
ensued regarding outstanding litigation, he vehemently disputes the content and ambit
of those discussions. In his view, no confidential information was conveyed to him,
and the information that was shared would not cause substantial harm to the
Defendants.
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A motion to disqualify an attorney is within the broad discretion of the court.
Purgess v. Sharrock, 33 F.3d 134, 144 (2d Cir. 1994); Cheng v. GAF Corp., 631 F.2d
1052, 1055 (2d Cir.), (noting that a court’s ruling will not be overturned absent an
abuse of discretion determination), judgment vacated on other grounds, 450 U.S. 903
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(1981). Since disqualification may impose a serious impact on a party’s right to an
attorney of his choice, it should only be imposed when continued representation may
pose a significant risk of taint upon the trial. Glueck v. Jonathan Logan, Inc., 653
F.2d 746, 748 (2d Cir. 1981). The objective of a disqualification rule is to “preserve
the integrity of the adversary process.” In re Agent Orange Prod. Liab. Litig., 800
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F.2d 14, 18 (2d Cir. 1986) (quoting Bd. of Educ. of the City of New York v. Nyquist,
590 F.2d 1241, 1246 (2d Cir. 1979)). Generally speaking, motions to disqualify are
viewed with disfavor and the party seeking disqualification must meet a high standard
of proof before disqualification will be granted. Evans v. Artek Sys. Corp., 715 F.2d
788, 791 (2d Cir. 1983) (observing that there is “a particularly trenchant reason for
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requiring a high standard of proof”); Human Elec., Inc. v. Emerson Radio Corp., 375
F. Supp. 2d 102, 105 (N.D.N.Y. 2004); United States v. Salvagno, 2003 WL
21939629, at *5 (N.D.N.Y. Mar. 4, 2003).
In deciding a motion to disqualify, courts often seek guidance from the
American Bar Association (ABA) and state disciplinary rules, though “such rules
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merely provide general guidance and not every violation of a disciplinary rule will
necessarily lead to disqualification.” Hempstead Video, Inc. v. Inc. Vill. of Valley
Stream, 409 F.3d 127, 132-33 (2d Cir. 2005) (citing Bd. of Educ. v. Nyquist, 590 F.2d
at 1246). We must always remember that the standard of professional conduct in
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federal courts is a matter of federal law. Shabbir v. Pakistan Int’l Airlines, 443 F.
Supp. 2d 299, 305 (E.D.N.Y. 2005) (citing In re Snyder, 472 U.S. 634, 645 n. 6
(1985) (“Federal courts admit and suspend attorneys as an exercise of their inherent
power; the standards imposed are a matter of federal law.”). Accordingly, federal
courts are guided but not bound by the State’s Code of Professional Conduct, and yet
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courts look to the Code, and in some instances even seek guidance from state common
law, in determining disqualification motions. In that respect, the Court notes that New
York adopted the Model Rules of Professional Conduct, effective April 1, 2009. The
Model Rules, in most respects, do not differ significantly from the previous standards
set forth in the Model Code of Professional Responsibility.4
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New York Code of Professional Conduct Rule 1.18 provides in pertinent part
the following:
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a) A person who discusses with a lawyer the possibility of forming a
client-lawyer relationship with respect to a matter is a “prospective
client.” (b) Even when no client-lawyer relationship ensues, a lawyer
who has had discussions with a prospective client shall not use or reveal
information learned in the consultation, except as Rule 1.9 would permit
with respect to information of a former client. (c) A lawyer subject to
paragraph (b) shall not represent a client with interests materially adverse
to those of a prospective client in the same or a substantially related
matter if the lawyer received information from the prospective client that
could be significantly harmful to that person in the matter, except as
provided in paragraph (d). . . . (d) When the lawyer has received
disqualifying information as defined in paragraph (c), representation is
permissible if: (1) both the affected client and the prospective client have
given informed consent, confirmed in writing; or (2) the lawyer who
received the information took reasonable measures to avoid exposure to
more disqualifying information than was reasonably necessary to
determine whether to represent the prospective client . . .
N.Y. COMP. CODES R. & REGS. tit. 22, §1200.
Defendants assert that at the time they shared confidential information with
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For a comparison of the two standards, see Roy Simon, Comparing the New NY Rules of Professional
Conduct To the NY Code of Professional Responsibility, available at www.nysba.org.
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Palmateer concerning the facts and issues prevalent in the earlier, related litigation,
they were a prospective client of Palmateer. Because of their legal status as a
prospective client, as well as noting further that they do not give their consent for
Palmateer to serve as Plaintiffs’ Counsel, Defendants contend that Palmateer should
not be allowed to continue the representation of a client with interests materially
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adverse to those of the Defendants in the same or substantially related matter because
he received information from them that could be significantly harmful to them.
Palmateer denies that the Defendants provided him with confidential information and,
moreover, states that the information provided would not cause Defendants any harm
or create an unfair advantage for the Plaintiffs.
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When this Motion and Plaintiffs’ Opposition thereto were initially filed with
the Court, the parties revealed only broad elements of their discussion, which made
it difficult for the Court to discern whether indeed the discussion would constitute an
attorney-client communication and whether revelation of that discussion would be
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materially adverse to the Defendants and cause them significant harm. See supra note
1. Hoping that greater disclosure of the content of the February 16, 2011 discussion
would aid this Court in better comprehending the actual content and nature of their
dialogue, the Court directed the parties to file under seal the actual conversation. See
Dkt. Nos. 31-36.
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Notwithstanding the disclosure, Palmateer still challenges the confidential
nature of the conversation, disputes the accuracy of Defendants’ version of the
discussion, and minimizes the materially adverse impact and substantial harm to the
Defendants by interjecting other facts and factors into the equation. If Defendants’
version of the events and conversation is true, particularly as it may relate to the
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discussing of settlement strategy, it is very likely that the Defendants would prevail
on the Motion. Conversely, if Palmateer’s rendering of the discussion and Plaintiffs’
interpretation of its significance in light of Rule 1.18 is accepted, it may appear that
Palmateer could triumph over the Motion. Nonetheless, both versions cannot be true.
The parties’ significantly conflicting views on what actually occurred and what
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was said exposes a troubling divergence of fact and opinion that cannot be overcome
without further fact finding. See Miness v. Ahuja, 713 F. Supp. 2d 161, 166 (E.D.N.Y.
2010). Accordingly, the parties are directed to file dates and times that they may be
available to participate in a telephone conference for the purpose of establishing an
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evidentiary hearing concerning the Defendants’ Motion to Disqualify. The Court
anticipates the parties’ prompt attention to this Decision and Order.
IT IS SO ORDERED.
January 31, 2012
Albany, New York
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