Tradewinds Airlines Inc. v. Soros et al

Filing 42

OPINION AND ORDER #97508: For the reasons above, the disqualification motion isdenied. This action remains stayed until C-S Aviation's motion to vacate the default judgment is resolved in North Carolina state court. So Ordered (Signed by Judge John F. Keenan on 5/12/09) (js) Modified on 5/13/2009 (mro).

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK -----------------------------------X TRADEWINDS AIRLINES, INC., : Plaintiff, -againstGEORGE SOROS and PURNENDU CHATTERJEE, : : : No. 08 Civ. 5901 (JFK) OPINION & ORDER

: Defendants. -----------------------------------X

For Plaintiff TradeWinds Airlines, Inc.: Violet Elizabeth Grayson, Esq. 270 Ninth Avenue San Francisco, CA 9418

For Defendant George Soros: Raymond Fitzgerald, Esq. David J. McCarthy, Esq. Butler, Fitzgerald, Fiveson & McCarthy 36 West 44th Street, Suite 816 New York, NY 10036

JOHN F. KEENAN, United States District Judge

JOHN F. KEENAN, United States District Judge:

I. INTRODUCTION Plaintiff TradeWinds Airlines, Inc. ("TradeWinds"),

holds a $54.87 million default judgment in North Carolina state court against C-S Aviation Services, Inc. ("C-S Aviation"). It

brings this action to pierce the corporate veil of C-S Aviation and recover egos, the default judgment George from the company's and alleged Purnendu

alter

defendants

Soros

("Soros")

Chatterjee ("Chatterjee"). This action currently is stayed pending a motion by C-S Aviation in North Carolina state court to vacate the

judgment. See Tradewinds Airlines, Inc. v. Soros, No. 08 Civ. 5901 (JFK), 2009 WL 435298 (S.D.N.Y. Feb. 23, 2009). has been partially lifted for the Id. purpose at *4. of The stay the

resolving

instant disqualification motion.

Soros moves to

disqualify plaintiff's attorney, Violet Elizabeth Grayson, Esq. ("Grayson"), on the grounds that her participation in this case violates a protective order and a settlement agreement she

signed during a prior veil-piercing action against Soros and Chatterjee. For the reasons below, the motion is DENIED.

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II. BACKGROUND A. The Prior Veil-Piercing Action From 2001 until 2003, Grayson represented a company called Jet Star Enterprises ("Jet Star") against C-S Aviation and another defendant in a breach of contract action ("Jet Star I"). See Jet Star Enters. v. CS Aviation Services, No. 1:01-cv6590 (DAB) (S.D.N.Y. filed July 19, 2001). Ultimately, Jet Star

obtained a default judgment against C-S Aviation in the amount of $3,432,867. In 2005, Grayson brought a second action on behalf of Jet Star ("Jet Star II"), naming Soros, Chatterjee, and six other parties as defendants. See Jet Star Enters. v. Soros, No. 1:05-cv-6585 (HB) (S.D.N.Y. filed July 20, 2005). claims Jet Star asserted was one to pierce C-S Among the Aviation's

corporate veil and hold Soros and Chatterjee personally liable for the default judgment obtained in Jet Star I. The case was

assigned to United States District Judge Harold Baer, Jr. All parties to Jet Star II and their counsel executed a Stipulation and Protective Order Governing the Use of

Confidential Material (the "Protective Order"), which was "so ordered" by the Order court. 1 provided (See Fitzgerald Aff. Ex. F.) The

Protective
1

that

"Litigation

Materials"--defined

A protective order also was entered in Jet Star I. That order contained terms substantially equivalent to the one entered in Jet Star II and will not be discussed separately.

-2-

broadly

to

include to

anything "be used

produced by the

during parties

or

derived for

from the

discovery--were

solely

prosecution and defense of [Jet Star II], and not for any other purpose." designate Materials (Id. as ¶¶ 1-2.) The order any permitted any party to

"confidential" trade 3.)

"non-public" or

Litigation

containing (Id. ¶

secrets Litigation

commercially-sensitive designated as

information.

Materials

confidential could not be disclosed to third parties. (Id. ¶ 4.) If filed with the Court, they were supposed to be filed under seal unless otherwise agreed. (Id. ¶ 11.) The Protective Order further provided that, after the conclusion of Jet Star II, all Litigation Materials were to be destroyed or returned to the party that produced them. (Id. at ¶ 12.) However, counsel could retain copies of all deposition work product, and papers filed with the Court.

transcripts, (Id.)

The provisions of the Protective Order were to continue

in force without end "insofar as they restrict the disclosure and use of Confidential Litigation Material." (Id. at ¶ 6.) In spring 2006, after the close of discovery, all

remaining defendants moved for summary judgment. his motion papers publicly on PACER/ECF, that

Soros filed numerous as

attaching were

exhibits

and

deposition

transcripts

marked

confidential. (See Docket Entry Nos. 63-83, 98-100, Jet Star

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Enters. v. Soros, No. 1:05-cv-6585 (HB) (S.D.N.Y.).

Grayson

electronically filed Jet Star's opposing memorandum of law and Rule 56.1 statement and sent a hard copy of the exhibits to Judge Baer's chambers. (Id. Nos. 93-94, 102; Grayson Sur-Reply Decl. ¶ 2.) The opposition papers contained many confidential Neither party

materials. (Fitzgerald Reply Aff. ¶¶ 5-6, Ex. P.) sought to have its papers filed under seal.

On August 9, 2006, Judge Baer issued an opinion and order (the "Jet Star II Opinion") granting defendants summary judgment on all claims except the veil-piercing claim against Soros and Chatterjee. See Jet Star Enters. v. Soros, No. 1:05cv-6585 (HB), 2006 WL 2270375 (S.D.N.Y. Aug. 9, 2006). The

opinion contains a detailed summary of the evidence produced in discovery that, the court found, "suffice[d] to create triable issues of fact regarding whether Soros and Chatterjee operated CS Aviation as an alter ego." Id. at *7. Trial of the veil-

piercing claim was scheduled to begin on September 11, 2006. On or about August 22, 2006, the parties and their counsel entered into a Settlement and Confidentiality Agreement, (the "Settlement Agreement"). (Fitzgerald Aff. Ex. G.) the parties settled the veil-piercing claim. In it,

They and their

counsel agreed to keep confidential "the existence, provisions and substance of this Agreement, and the claims for relief

sought against Mr. Soros and/or Dr. Chatterjee and the bases or

-4-

asserted bases therefore," and not to disclose that information "to any person or entity for any purpose." (Id. ¶ 3.A.) The

Settlement Agreement further provided that the parties and their attorneys "may disclose the fact that this action has been

settled (but may not disclose the terms hereof) and state in substance that such person is not at liberty to disclose the terms of the agreement." (Id. ¶ 3.B(i).) If plaintiff or its

counsel breached these confidentiality provisions, the breaching party would have to repay the portion of the settlement received by it or her. (Id. ¶ 3.C.) The agreement contained no

restriction on Grayson's ability to represent clients in future litigation against Soros or Chatterjee. On August 29, 2006, Judge Baer signed and filed an order stating that "the matter has been settled," "the parties have executed a stipulation of discontinuance," and that the "stipulation has been filed under seal." (See Docket Entry No.

106, Jet Star Enters. v. Soros, Chaterjee et al., No. 1:05-cv6585 (HB) (S.D.N.Y. filed Aug. 29, 2006)). After the settlement of Jet Star II, Grayson claims to have destroyed all Litigation Materials produced during

discovery, but retained in the basement of her home copies of deposition transcripts, attorney work product, and papers filed with the Court, all in conformity with the Protective Order.

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B.

The Instant Action On June 27, 2008, TradeWinds obtained a $54.87 million

default judgment against C-S Aviation in North Carolina state court. 2 TradeWinds was represented in North Carolina by the law About had ten

firm of Tuggle Duggins & Meschan ("Tuggle Duggins"). weeks earlier, on April 10, 2008, TradeWinds

retained

Grayson for the purpose of commencing the instant action to pierce C-S Aviation's corporate veil and hold Soros and

Chatterjee liable for the default judgment. (See Fitzgerald Aff. Ex. J.) The retainer agreement resulted from negotiations

between her and Tuggle Duggins. Grayson has "unique

The agreement acknowledges that because she "previously

expertise"

represented another airline in a Southern District of New York action to pierce the corporate veil of C-S Aviation to reach Soros and Chaterjee." (Id. at 2.) Her contingency fee is 25% of

whatever portion of the $54.87 million judgment TradeWinds can
Further information about the North Carolina case and C-S Aviation's pending motion to vacate the default judgment is provided in a prior decision. See TradeWinds Airlines, 2009 WL 435298, at *1-2. Recently, the judge presiding over the North Carolina case, the Honorable Ben F. Tennille, issued a decision finding that extraordinary circumstances likely will require the judgment to be set aside, but reserving decision on the matter. See Deutsche Bank Trust Co. Americas v. Tradewinds Airlines, Inc., No. 03 CVS 12215, 2009 WL 1154861, at ¶ 6 (N.C. Super. Ct. Apr. 29, 2009). Judge Tennille identified certain unscrupulous behavior by TradeWinds in pursuit of the default judgment. Id. ¶¶ 72-73. That behavior is not relevant to the instant motion. The sole basis for this motion is Grayson's alleged violation of her confidentiality obligations arising from the Jet Star litigation.
2

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recover in this action. (Id. at 1.) Grayson commenced this action on June 30, 2008. She

affirms in a declaration that, "In preparing [the] Complaint, in preparing all subsequent papers in this case, and in otherwise conducting the business of this case, I have made no use of any confidential Litigation, documents and have produced relied to me during upon the the Jet Star

exclusively

extensive

documentation which is a matter of record." (Grayson Decl. ¶ 16.) Soros is represented by the same law firm that represented

him in Jet Star II. A went into short time after It this case two commenced, TradeWinds first in

bankruptcy.

filed

applications,

Chapter 11 and then in Chapter 7, for the bankruptcy court to approve Grayson's retention in the instant case. (Fitzgerald

Aff. Exs. K, N.)

In the applications, TradeWinds disclosed that

Grayson had "previously successfully litigated" Jet Star II, had "unique knowledge of the facts which resulted in the successful prosecution" of that case, and had concluded her representation of plaintiff in that case with a "favorable settlement." support of the applications, Grayson filed a In

declaration

attesting to her "prior unique experience with litigation in the [Southern District of New York] to pierce the [c]orporate veil of C-S [Aviation] to reach its principals." (Fitzgerald Aff. Ex. -7-

K ¶ 17.)

The bankruptcy court approved the applications. On February Grayson as 2, 2009, counsel Soros on filed the this motion that to her

disqualify

grounds

representation of plaintiff violates the Protective Order and the Settlement Agreement. on April 9, 2009. III. DISCUSSION A. General Legal Standards Federal courts have inherent authority to disqualify attorneys in pending litigation when necessary to "`preserve the integrity of the adversary process.'" Hempstead Video, Inc. v. Vill. of Valley Stream, 409 F.3d 127, 132 (2d Cir. 2005) Oral argument on the motion was heard

(quoting Bd. of Educ. v. Nyquist, 590 F.2d 1241, 1246 (2d Cir. 1979)). are "Motions to disqualify are generally not favored. tactically motivated; they cause delay and They add

often

expense; they disrupt attorney-client relationships sometimes of long standing; in short, they tend to derail the efficient

progress of litigation." Felix v. Balkin, 49 F. Supp. 2d 260, 267 (S.D.N.Y. 1999) (internal citation omitted). The decision

to disqualify is committed to the sound discretion of the trial court. Cresswell v. Sullivan & Cromwell, 92 F.2d 60, 72 (2d Cir. 1990). The exercise of that discretion requires a balancing of

a party's "right freely to choose his counsel" against "the need -8-

to maintain the highest standards of the profession." Hempstead Video, 409 F.3d at 132 (quoting Gov't of India v. Cook Indus., Inc., 569 F.2d 737, 739 (2d Cir. 1978). The balance struck in the Second Circuit reflects a "restrained approach that focuses primarily on preserving the integrity of the trial process." Armstrong v. McAlpin, 625 F.2d 433, 444 (2d Cir. 1980), rev'd on other grounds, 449 U.S. 1106 (1981); see also Bottaro v. Hatton Assocs., 680 F.2d 895,

896 (2d Cir. 1982).

Disqualification is appropriate only if the

attorney's misconduct "tends to `taint the underlying trial' by affecting his or her presentation of the case." Nyquist, 590 F.2d at 1246 (quoting W.T. Grant Co. v. Haines, 531 F.2d 671, 678 (2d Cir. 1976)). "The business of the court is to dispose

of litigation and not to act as a general overseer of the ethics of those who practice here unless the questioned behavior taints the trial of the cause before it." W.T. Grant, 531 F.2d at 677; Nyquist, 590 F.2d at 1246. Consistent with a restrained approach, and with "rare exceptions," courts in the Second Circuit have recognized only two situations in which an attorney's misconduct will taint the trial. Nyquist, or his 590 F.2d at 1246. The first is where the with

attorney

firm

concurrently

represents

parties

adverse interests, undermining the undivided loyalty required by Canon 5 of the New York Code of Professional Responsibility (the

-9-

"New York Code"). 3 Id.; Cinema 5 Ltd. v. Cinerama, Inc., 528 F.2d 1384 (2d Cir. 1976); Fund of Funds, Ltd. v. Arthur Andersen & Co., 567 F.2d 225 (2d Cir. 1977); Med. Diagnostic Imaging, PLLC v. CareCore Nat'l, LLC, 542 F. Supp. 2d 296, 306 (S.D.N.Y.

2008).

The second, more common situation is where the attorney

is in a position to use in litigation against a former client relevant, privileged information obtained during the prior

representation, in violation of the attorney's duty to protect client confidences under Canon 4. Nyquist, 590 F.2d at 1246; Evans v. Artek Sys. Corp., 715 F.2d 788, 791 (2d Cir. 1983); Cheng v. GAF Corp., 631 F.2d 1052, 1059 (2d Cir. 1980), vacated on other grounds, 450 U.S. 903, (1981); Hull v. Celanese Corp., 513 F.2d 568, Inc., 571 (2d Cir. 1975); Emle Industries, Cir. Inc. v.

Patentex,

478

F.2d

562

570-71

(2d

1973);

Med.

Diagnostic Imaging, 542 F. Supp. 2d at 306.

In that situation,

disqualification is appropriate if "(1) the moving party is a former client of the adverse party's counsel; (2) there is a substantial counsel's issues
3

relationship

between of

the the

subject moving the

matter party

of and

the the

prior the

representation present lawsuit;

in

and

(3)

attorney

whose

On April 1, 2009, while this motion was pending, the New York Rules of Professional Conduct (the "New York Rules") took effect, replacing the New York Code. The Court refers to the New York Code because it applied at the time of the conduct at issue. Neither side contends that application of the new rules would affect the outcome of this motion.

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disqualification is sought had access to, or was likely to have had access to, the relevant privileged information in the course of his prior representation of the client." Evans, 715 F.2d at 791. Outside of these two situations, courts "have shown considerable reluctance to disqualify attorneys despite

misgivings about the attorney's conduct." Nyquist, 590 F.2d at 1246 (citing W.T. Grant Co., 531 F.2d 671; Ceramco, Inc. v. Lee Pharms., 510 F.2d 268 (2d Cir. 1975)). may create an for appearance of That the representation generally Circuit simply is has too

impropriety The Second

insufficient cautioned

disqualification. "appearance of

that

the

impropriety

is

slender a reed on which to rest a disqualification order except in the rarest cases." Nyquist, 590 F.2d at 1247; Armstrong, 625 F.2d 433, 446 (2d Cir. 1980) (stating that "there may be unusual situations where the `appearance of impropriety' alone is

sufficient to warrant disqualification"). In addition, "the Second Circuit requires a high

standard of proof on the part of the party seeking to disqualify an opposing party's counsel." Kubin v. Miller, 801 F. Supp. Cook Indus., 569 F.2d at

1101, 1113 (S.D.N.Y. 1992) (citing

739); see also Evans, 715 F.2d at 791; Occidental Hotels Mgmt. B.V. v. Westbrook Allegro L.L.C., 440 F. Supp. 2d 303, 309

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(S.D.N.Y. 2006); Paramount Commc'ns, Inc. v. Donaghy, 858 F. Supp. 391, 394 (S.D.N.Y. 1994). B. Analysis At the outset, it should be noted that neither of the two recognized disqualification situations is present in this case. No concurrent counsel representation into of another her client loyalty by to

plaintiff's plaintiff. and was

calls

question

Soros is not a former client of plaintiff's counsel never in a position to have divulged privileged

information to her. 4 Nevertheless, disqualification may be appropriate if the misconduct alleged here taints this proceeding or creates an exceptional
4

appearance

of

impropriety.

Soros

claims

that

Soros cites Hull v. Celanese Corp., 513 F.2d 568 (2d Cir. 1975), for the proposition that "the Second Circuit has acknowledged that there are other circumstances [outside the two recognized situations] when disqualification is appropriate." (Soros Reply at 1.) Hull was a "novel" case where the plaintiff's law firm sought to join as a new plaintiff a former member of defendant's corporate legal staff, who "had been active in the defense of this very action." 513 F.2d at 569. The Second Circuit noted that the case presented a "divergence from the more usual situation of the lawyer switching sides to represent an interest adverse to his initial representation." Id. at 569. The court likened the case's "unusual fact pattern" to the situation where an attorney himself switches sides because the plaintiff's law firm was in a position to use privileged information In known to its new client against the defendant. See id at 572. affirming the disqualification order, the Court of Appeals concluded that "the scope of this opinion must, of necessity, be confined to the facts presented and not read as a broad-brush approach to Contrary to defendant's suggestion, Hull is disqualification." Id. not a watershed to a more freewheeling disqualification analysis.

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Grayson has violated the Protective Order and the Settlement Agreement through disclosures she allegedly made (1) in

connection with her retention by TradeWinds; (2) in the original and amended complaints in this action; and (3) in TradeWinds's applications to the bankruptcy court to approve her retention. In addition, he alleges (4) certain prospective violations of these agreements that would occur if she continued to represent plaintiff in this action. (1) Disclosures in Connection with Retention learned about the existence of the North

Grayson

Carolina action during discovery in Jet Star II.

Approximately

two years later, TradeWinds retained her to try to pierce C-S Aviation's corporate veil and hold Soros and Chatterjee liable for the North Carolina default judgment. According to Soros,

"[a] reasonable inference to be drawn" from these facts "is that Grayson directly or indirectly disclosed to TradeWinds

information she was obligated . . . to maintain in confidence and not to disclose and not to use" outside of Jet Star II. (Soros Mem. at 8.) Soros cannot satisfy his high standard of proof merely by drawing a "reasonable inference" of misconduct, or with vague speculation declaration, about Grayson prohibited affirms disclosures. that she did not In a sworn any

disclose

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Confidential Duggins.

Litigation also

Materials that

to

TradeWinds from

or

Tuggle Duggins

She

swears

lawyers

Tuggle

approached her and already were aware of the veil-piercing claim asserted in Jet Star II and the fact that she had served as plaintiff's counsel, information that was a matter of public record. account. In his reply brief, Soros complains that Grayson has failed to produce affidavits from anyone at TradeWinds or Tuggle Duggins to corroborate Grayson (Oral The her self-serving that 16.) would she account. could At oral such is for Soros presents no evidence to counter this plausible

argument, affidavits. sufficient.

represented Arg. Tr. at

produce

This

representation a demand

affidavits

prompt

depositions or a hearing, effectively "transform[ing this Court] `into the grievance committee of the Bar Association, which is certainly not [its] function.'" In re Osage Exploration Co., 104 F.R.D. 45, 48-49 (S.D.N.Y. 1984) (quoting Lefrak v. Arabian Soros

American Oil Co., 527 F.2d 1136, 1141 (2d Cir. 1975)).

has failed to establish any prohibited disclosures in connection with Grayson's retention in this case. (2) Disclosures in the Original and Amended Complaints Soros argues that the complaints filed in this case (a) use Litigation Materials in violation of the Protective

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Order and (b) disclose the nature and bases of the Jet Star II veil-piercing claim in violation of the Settlement Agreement. (a) Use of Litigation Materials The Materials Protective be Order by provides the that "All solely Litigation for the

shall

used

parties

prosecution and defense of [Jet Star II], and not for any other purpose." Soros does not dispute Grayson's claim that she

relied exclusively on public court filings from Jet Star II-- the summary judgment motion papers and, especially, Judge Baer's

detailed opinion resolving that motion--to draft all papers she has filed in this action. Rather, Soros claimed in his opening

brief that "[t]here is no provision in any of the applicable agreements and orders that permits Grayson to disclose or use information if the information is contained in a court file or is otherwise a matter of public record." (Soros Mem. 23.) In

his reply brief, he qualifies this assertion by conceding that, "Clearly, if information . . . became public through no fault of Grayson, such proscriptions [on its use] would not apply."

(Soros Reply Mem. at 8 n.3.)

Nevertheless, he asserts that "it

was Grayson who made public much of the information she used in preparing the complaint in this action" by failing to file her summary judgment opposition papers under seal. (Id. at 8; Soros 2nd Aff. Ex. P.)

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In

fact,

most

of

the

information

contained

in

the

original and amended complaints in this action can be found in the Jet Star II Opinion. through no fault of Because that information became public the Protective Order does not

Grayson,

restrict her from using it.

Soros has not parsed the complaints

to identify shreds of information not derived from the Jet Star II Opinion, nor will the Court. filed his motion papers in Jet In addition, Soros himself Star II publicly, attaching He the any or

volumes of Litigation Materials stamped as "confidential." did not object papers use of when Grayson seal. likewise Soros has failed not in to file

opposition prohibited

under

established the original

Litigation

Materials

amended complaints. (b) Disclosure of the Veil-Piercing Claim In the Settlement Agreement, Grayson promised to keep confidential "the existence, provisions and substance of [the] Agreement, and the claims for relief sought against Mr. Soros . . . and the bases or asserted bases therefore." The original

and amended complaints she filed in this case recite the fact that "Jet Star Enterprises brought suit in the Southern District seeking to, to inter reach alia, pierce the corporate and veil of C-S This

[Aviation] disclosure

defendants violates

Soros

Chatterjee."

plainly

her

confidentiality

obligations

under the Settlement Agreement.

In addition, because the veil-

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piercing

claim

here

is

premised

upon

the

same

factual

allegations at issue in Jet Star II, the complaint discloses the "bases or the asserted bases" of the Jet Star II claim, in violation of the Settlement Agreement. Even so, Soros does not explain how the improper The

disclosures in the complaints affect or taint this case.

Second Circuit has stated that "the institution of suit . . . does not constitute the kind of prejudice to an adversary from which this court can or should give relief." Ceramco, 510 F.2d at 271 (holding that attorney's improper phone call to adversary to obtain information about proper venue v. for suit did Inc., not 232

warrant

disqualification);

Fisher

Studio

Loew's

F.2d 199, 204 (2d Cir. 1956) (holding that improper solicitation was not a ground for disqualification). Presumably, had Grayson

declined to file the veil-piercing claim on TradeWinds's behalf, another attorney would have filed it, and the case would proceed just the same. Therefore, her disclosures of the Jet Star II

claim in the original and amended complaints do not present grounds for disqualification. (3) Disclosures in the Bankruptcy Applications In bankruptcy support of TradeWinds's submitted a applications declaration to the

court,

Grayson

disclosing

that she had "prior unique experience with litigation in the [Southern District of New York] to pierce the [c]orporate veil

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of C-S [Aviation] to reach its principals." Jet Star II appears to violate her

This reference to under the

obligation

Settlement Agreement to keep the claim asserted in that case confidential. violation does For the same taint reasons this above, action however, or this

not

warrant

disqualification. (4) Prospective Violations Soros's main argument is that prospective violations by Grayson "will taint this action and subvert the integrity of the judicial process in an increasingly material way the longer she is permitted to serve as [plaintiff's] counsel." (Soros Mem. at 14.) Specifically, he asserts that she will use confidential

information (a) originally produced in Jet Star II subject to the Protective Order and (b) about the Jet Star II settlement. (a) Re-discovery of Information does not dispute Grayson's except claim for that she

Soros destroyed all

Litigation

Materials

deposition

transcripts, attorney work product, and papers filed with the court, in compliance with the Protective Order. Rather, he

claims that she "is unable to eliminate from her mind and to refrain from using in this action the information she learned from Litigation Materials and Confidential Litigation Materials she obtained in prior actions." (Soros Mem. at 14.)

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Essentially,

he

objects

to

her

re-using

Litigation

Materials

that he will have to produce again in this case. At least one court has rejected such a "strained

reading of the word `use' in [a] protective order" because it would "turn[] any protective that order is barring future use of and

confidential

information

independently

relevant

discoverable in a subsequent action into a restriction on an attorney's right to practice law." Hu-Friedy Mfg. Co., Inc. v. Gen. Elec. Co., No. 99 Civ. 0762, 1999 WL 528545, at *2 (N.D. Ill. July 19, 1999). signatories from The Protective Order does not restrict its in future litigation that would In re

engaging

involve overlapping discovery.

The case Soros cites,

Peters, 543 F. Supp. 2d 326, 334-35 (S.D.N.Y. 2008), does not support such an interpretation. There, the attorney violated a

protective order by taking deposition transcripts from one case and filing them as an exhibit in another. Id. was not independently produced in the other case. Even assuming that Grayson's re-discovery of The information

information originally produced in Jet Star II would violate the Protective Order, such a violation would not warrant her

disqualification from this case.

Soros argues in his brief that

her prior access to confidential information disclosed under the Protective Order necessarily gives TradeWinds an unfair

advantage and taints this case.

He compares the situation to

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that

where

an

attorney

is

in

a

position

to

use

privileged

information against a former client in litigation related to the prior representation. privileged attorney's information prior This is not to analogy subject relevant is to but inapt because An

discovery.

access

non-discoverable

information gives her an unfair advantage in litigation against a former client. By contrast, any attorney representing

plaintiff in this case would have access to the information at issue through discovery. See Hu-Friedy Mfg., 1999 WL 528545, at *2 (concluding that plaintiff's counsel "has no unfair advantage in this action due to [her] previous exposure to the

confidential information" because "the information [defendant] seeks to prevent [plaintiff's counsel] from using is relevant to this case, and any reasonably competent attorney would routinely obtain it in discovery"); see also Med. Diagnostic Imaging, 542 F. Supp. 2d at 315 (concluding that "only access to client

communications . . . threatens the integrity of the current litigation [and] warrants disqualification"; disqualification is not warranted "[i]f a party is capable of securing confidential information by means other than through prior representation"); DeVittorio v. Hall, No. 07 Civ. 0812 (WCC), 2007 WL 4372872, at *10 (S.D.N.Y. Dec. 12, 2007) (finding that counsel's exposure to adversary's information, obtained during prior attorney-client relationship, did not create unfair advantage warranting

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disqualification, information presumably is be

in

part in

because the Gen.

"to

the

extent it

that would v.

relevant

present Am.

action

discoverable");

Commc'ns

Corps.

Rumpf, No. 83 Civ. 2308, 1989 WL 101926, at *4 (S.D.N.Y. Aug. 29, 1989) (declining to disqualify where information shared with attorney "was not necessarily the sort of information that would have been undiscoverable during discovery or even during

depositions"). At oral argument, Soros clarified that the real unfair advantage is the "head start" that Grayson's prior access gives plaintiff in this case. (Oral Arg. Tr. at 9.) However, the

court filings in Jet Star II are a treasure trove of information concerning Aviation. Soros's They alleged would alter any ego relationship for with C-S a

give

attorney

plaintiff

substantial and perfectly appropriate head start in this case. Grayson's reliance on public information available to anyone

else creates no unfair advantage.

Soros points to no evidence

produced in Jet Star II that remains secret and could be used by Grayson to the unfair benefit of plaintiff. that [plaintiff's attorney] has a tactical "The bare assertion advantage in the

litigation of the suit based on the knowledge gained in the prior suit is unconvincing." First Impressions Design & Mgmt., Inc. v. All That Style Interiors, Inc., 122 F. Supp. 2d 1352, 1354 (S.D. Fla. 2000). "While disqualification is clearly

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punitive

insofar

as

[plaintiff]

and

its

.

.

.

counsel

are

concerned, its benefit to [defendant] is indeed questionable". W.T. Grant Co., 531 F.2d at 677 (refusing to disqualify

plaintiff's law firm after it improperly interviewed defendant without counsel, because the law firm was "already independently in possession of documentary evidence which provided . . . the basis for the complaint" and "the transcript of [plaintiff's] interview [has become] a public record"). The cases relied upon by Soros do not support his argument that an attorney's prior access to public or

discoverable information creates an unfair advantage.

In two of

the cases, disqualification was premised on an employee of a party switching sides and taking with him privileged and/or nondiscoverable confidential information. See Hull v. Celanese

Corp., 513 F.2d 568 (2d Cir. 1975) (attorney disqualified for seeking to join as new plaintiff a former member of defendant's corporate legal staff, who "had been active in the defense of this very action"); Cargill Inc. v. Budine, No. CV-F-07-349, 2007 WL 1813762, at *11 (E.D. Cal. June 22, 2007) (attorney disqualified for hiring defendant's former executive, who had "participated in privileged communications" and had "access to confidential information not normally available to them through normal discovery means"). In the other two, disqualification

was based upon the appearance of impropriety alone, with no

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finding of taint. Rentclub, Inc. v. Transamerica Rental Fin. Corp., 811 F. Supp. 651, 655 (M.D. Fla. 1992), aff'd, 43 F.2d 1439 (11th Cir. 1995); Butler v. Biocore, 348 F.3d 1163 (10th Cir. 2003). The mere appearance of impropriety presents

grounds for disqualification in this circuit only "in the rarest of cases." Nyquist, 590 F.2d at 1247; see also European Cmty. v. RJR Nabisco, Inc., 134 F. Supp. 2d 297, 304 n.7 (E.D.N.Y. 2001) (noting that "the disqualification standard adopted by the

Second Circuit stands in pronounced contrast to the standard adopted in certain other jurisdictions"). Grayson's re-

discovery of information originally produced in Jet Star II, in arguable violation of the Protective Order, does not present one of those cases. Soros protective orders protests undermine that the "violations free flow of of discovery in

information

discovery and engender discovery disputes." (Soros Reply Mem. at 2.) Yet he acknowledges that the grievance committee of this

Court routinely handles such matters. See, e.g., In re Peters, 543 F. Supp. for, 2d at 334-35 alia, (imposing of interim a suspension on

attorney

inter

violation

protective

order).

"[A] federal court should not disqualify an attorney on ethical grounds from representing a party in a pending lawsuit in the absence of a reasonable basis for believing that his or her unprofessional conduct may affect the outcome. . . . Otherwise

- 23 -

conventional

disciplinary

machinery

should

be

used."

Nyquist, 590 F.2d at 1248 (Mansfield, J., concurring). (b) Use of Settlement Information The Settlement Agreement requires that its "existence, provisions and substance" be kept confidential and prohibits the disclosure of this information "to any person or entity for any purpose." The agreement does not restrict Grayson from

representing other clients against Soros in future cases arising from the same facts at issue in Jet Star II. Relying on Bassman

v. Fleet Bank, 279 A.D. 2d 280 (N.Y. App. Div. 2001), Soros urges that such a restriction be read into the agreement. argument is that Grayson necessarily would use The

confidential

information about the Jet Star II settlement in this action, and that such use is equivalent to disclosing the information to her new client. The Court declines to interpret a standard

confidentiality provision as an implied restriction on counsel's ability to represent other clients, especially as such a

restrictive covenant would itself violate ethical rules. 5

There

See N.Y. Disciplinary Rule 2-108(B) ("In connection with the settlement of a controversy or suit, a lawyer shall not enter into an agreement that restricts the right of a lawyer to practice law."); N.Y State Bar Assoc. Ethics Opinion No. 00-730 (July 27, 2000) (stating that "confidentiality provisions that . . . prohibit the parties and their lawyers from disclosing the terms of a settlement are common and do not violate DR-2-108(B)" but would violate the rule "if their practical effect is to restrict the lawyer from undertaking future representations"); ABA Model Rule 5.6(b) ("A lawyer shall not participate in offering or making an agreement in which a restriction on the lawyer's right to practice is part of the settlement of a

5

- 24 -

is no reason why Grayson cannot represent TradeWinds without disclosing the terms of the Jet Star II settlement. But even assuming that the Grayson remedy were to breach in her the

confidentiality

obligations,

specified

Settlement Agreement is disgorgement of the settlement funds she received, not disqualification. should follow Soros's rests in contention part on that an

disqualification

large

overbroad reading of Blue Cross and Blue Shield of New Jersey v. Philip Morris, Inc., 53 F. Supp. 2d 338, 342 (E.D.N.Y. 1999) (Weinstein, J.). In that case, the defendant Phillip Morris

consented to an agreement disqualifying its counsel from the action. Id. at 344. Essential to the court's enforcement of the

disqualification agreement was the fact that it "resembled a
controversy between private parties."); ABA Formal Opinion No. 00-417 (stating that "Rule 5.6(b) does not proscribe a lawyer from agreeing not to reveal information about the facts of the particular matter or the terms of its settlement," but does proscribe prohibitions on the attorney's future use of information learned during the settled case); Hu-Friedy Mfg., 1999 WL 528545, at *2 (refusing to interpret agreement as restriction on future use of information because that would be "contrary to the policy of Rule 5.6(b)"); see also Stephen Gillers & Richard W. Painter, Free the Lawyers, A Pr