National Credit Union Administration Board v. RBS Securities, Inc. et al

Filing 74

OPINION AND ORDER: On March 3, 2014, plaintiff moved for an order granting leave for Richard M. Elias to appear as counsel on behalf of plaintiff in this action. Defendants ("RBS") have not submitted any opposition to the motion. For the reasons set forth in this Opinion and Order, the motion is granted. (Signed by Judge Denise L. Cote on 3/27/2014) (gr)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
----------------------------------------X
NATIONAL CREDIT UNION ADMINISTRATION
:
BOARD, as Liquidating Agent of
:
Southwest Corporate Federal Credit
:
Union and Members United Corporate
:
Federal Credit Union,
:
:
Plaintiff,
:
-v:
:
RBS SECURITIES, INC., formerly known
:
as Greenwich Capital Markets, Inc. and :
RBS ACCEPTANCE, INC., formerly known
:
as Greenwich Capital Acceptance, Inc., :
:
:
Defendants.
:
----------------------------------------X

13 Civ. 6726 (DLC)

OPINION AND ORDER

APPEARANCES
For the Plaintiff:
Fredrick R. Kessler, David H. Wollmuth, Steven S. Fitzgerald,
and Ryan A. Kane
Wollmuth Maher & Deutsch LLP
500 Fifth Avenue, 12th Floor
New York, NY 10010
George A. Zelcs
Korein Tillery LLC
205 North Michigan Avenue, Suite 1950
Chicago, IL 60601
Stephen M. Tillery, Greg G. Gutzler, Peter H. Rachman, and
Robert L. King
Korein Tillery LLC
505 North Seventh Street, Suite 3600
St. Louis, MO 63101
David Fredrick, Wan J. Kim, Gregory G. Rapawy, and Andrew C.
Shen
Kellogg, Huber, Hansen, Todd, Evans & Figel, P.L.L.C.
Sumner Square, 1615 M Street, N.W., Suite 400
Washington, DC 20036

For the Defendants:
David Ian Horowitz, Michael Courtney Keats
Kirkland & Ellis LLP
601 Lexington Avenue
New York, NY 10022
Robert Alexander Pilmer
Kirkland & Ellis LLP
333 South Hope Street
Los Angeles, CA 90071

DENISE COTE, District Judge
On March 3, 2014, plaintiff moved for an order granting
leave for Richard M. Elias (“Elias”) to appear as counsel on
behalf of plaintiff in this action.

Defendants (“RBS”) have not

submitted any opposition to the motion.

For the following

reasons, the motion is granted.

BACKGROUND
Plaintiff’s motion seeks a ruling that Elias should not be
disqualified from this matter due to his prior government
experience as an Assistant United States Attorney in the Eastern
District of California, during which he investigated JPMorgan
Chase & Co. and affiliated entities (“JPMorgan”) for possible
violations of the Financial Institutions Reform, Recovery, and
Enforcement Act in connection with JPMorgan’s issuing,
underwriting, and sale of certain residential mortgage-backed
securities (“RMBS”).

Elias has since left that U.S. Attorney’s

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Office and intends to join the firm of Korein Tillery, which
represents plaintiff in this matter.
Elias has submitted a declaration stating as follows.
During his time at the U.S. Attorney’s Office, Elias did not
investigate deals in which JPMorgan, Bear Stearns Companies,
Inc. (“Bear Stearns”), or Washington Mutual, Inc. (“WaMu”) was
an underwriter for RMBS issued by RBS.

Elias was not involved

in any investigation related to RBS; he was not exposed to any
information regarding RMBS issued by RBS; and he did not attend
any meetings or conferences in which documents regarding RBS
were discussed.

The central repository of documents concerning

RMBS to which Elias had access did not contain information
regarding RMBS issued by RBS.
In January 2014, Elias left the U.S. Attorney’s Office to
join the St. Louis office of Korein Tillery.

After consulting

with ethics experts, Korein Tillery decided to screen Elias from
matters concerning JPMorgan, Morgan Stanley, and Merrill Lynch.
In a letter of January 22, Korein Tillery informed counsel for
RBS of Elias’s background and that it intended to assign Elias
to its matters involving RBS.

In correspondence in early

February, counsel for RBS invoked New York Rule of Professional
Conduct 1.11(c) (“Rule 1.11(c)”) and expressed concern that
Elias may have acquired confidential information that could be
used to RBS’s material disadvantage in private litigation.

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Despite further communication, counsel for RBS reserved its
right to seek appropriate relief at a later time.
On March 3, plaintiff moved for an order granting Elias
leave to appear in this matter.

An Order of March 5 stated that

any opposition to the motion must be served by March 21, 2014.
No opposition was filed as of that date, and thus the motion is
fully submitted.

DISCUSSION
“The authority of federal courts to disqualify attorneys
derives from their inherent power to preserve the integrity of
the adversary process.”

Hempstead Video, Inc. v. Inc. Vill. of

Valley Stream, 409 F.3d 127, 132 (2d Cir. 2005) (citation
omitted).

“In deciding whether to disqualify an attorney, a

district court must balance a client’s right freely to choose
his counsel against the need to maintain the highest standards
of the profession.”

GSI Commerce Solutions, Inc. v. BabyCenter,

L.L.C., 618 F.3d 204, 209 (2d Cir. 2010) (citation omitted).
Motions to disqualify counsel are subject to strict
scrutiny because of their potential to be used for tactical
purposes.

Murray v. Metropolitan Life Ins. Co., 583 F.3d 173,

178 (2d Cir. 2009).

“[E]ven when made in the best of faith,

such motions inevitably cause delay” in the litigation.
Educ. v. Nyquist, 590 F.2d 1241, 1246 (2d Cir. 1979).
Second Circuit has explained:
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Bd. of
As the

[D]isqualification has been ordered only in
essentially two kinds of cases: (1) where an
attorney’s conflict of interests . . . undermines the
court’s confidence in the vigor of the attorney’s
representation of his client, or more commonly (2)
where the attorney is at least potentially in a
position to use privileged information concerning the
other side through prior representation.
Bobal v. Rensselaer Polytechnic Inst., 916 F.2d 759, 764–65 (2d
Cir. 1990) (quoting Nyquist, 590 F.2d at 1246).
“[D]isqualification is warranted only if an attorney’s conduct
tends to taint the underlying trial.”

GSI, 618 F.3d at 209

(citation omitted).
Although “decisions on disqualification motions often
benefit from guidance offered by the American Bar Association
(ABA) and state disciplinary rules, such rules merely provide
general guidance and not every violation of a disciplinary rule
will necessarily lead to disqualification.”
Inc., 409 F.3d at 132 (citation omitted).

Hempstead Video,
Federal courts

adjudicating questions involving the ethics of attorneys look to
the local rules of professional conduct for guidance.

See,

e.g., id. at 133 (relying on a previous version of the New York
attorney professional conduct rules); Silver Chrysler Plymouth,
Inc. v. Chrysler Motors Corp., 518 F.2d 751, 753 (2d Cir. 1975)
(same); Pierce & Weiss, LLP v. Subrogation Partners LLC, 701
F. Supp. 2d 245, 255–56 (E.D.N.Y. 2010) (relying on the current
New York Rules of Professional Conduct in adjudicating an
attorney disqualification motion).
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Although RBS has not filed an opposition to the motion, its
February correspondence with counsel for plaintiff invoked New
York Rule 1.11(c).

Rule 1.11(c) addresses the conflict-of-

interest question arising from prior government service, and
thus can provide guidance here.

See, e.g., Silver Chrysler

Plymouth, Inc., 518 F.2d at 753 (“A starting point is of
necessity the Code of Professional Responsibility.”).

Rule

1.11(c) provides in relevant part:
Except as law may otherwise expressly provide, a
lawyer having information that the lawyer knows is
confidential government information about a person,
acquired when the lawyer was a public officer or
employee, may not represent a private client whose
interests are adverse to that person in a matter in
which the information could be used to the material
disadvantage of that person. As used in this Rule,
the term “confidential government information” means
information that has been obtained under governmental
authority and that, at the time this Rule is applied,
the government is prohibited by law from disclosing to
the public or has a legal privilege not to disclose,
and that is not otherwise available to the public.
N.Y. Rules of Prof’l Conduct § 1.11(c).

Because the parties

have each relied upon the New York rules in addressing this
issue, this Opinion will assume that those rules may be relied
upon to give guidance here.
Elias is granted leave to appear in this matter.

Based on

Elias’s declaration, the contents of which are undisputed, he
had no involvement with RMBS issued by RBS, and thus he has no
information that he knows is “confidential government
information” about RBS.

Accordingly, by the logic of Rule
6

1.11(c), he is not seeking to represent the plaintiff “in a
matter in which the information could be used to the material
disadvantage of [RBS].”

For the same reasons, Elias is not

“potentially in a position to use privileged information
concerning the other side through prior representation,” Bobal,
916 F.2d at 764–65 (citation omitted), and there is no plausible
risk that Elias’s conduct could “taint the underlying trial.”
GSI, 618 F.3d at 209 (citation omitted).

Finally, by failing to

oppose the present motion, RBS has waived any challenge to
Elias’s representation of plaintiff.

CONCLUSION
Plaintiff’s March 3, 2014 motion is granted.

SO ORDERED:
Dated:

New York, New York
March 27, 2014
__________________________________
DENISE COTE
United States District Judge

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