Energy Intelligence Group, Inc. et al v. Cowen and Company, LLC
MEMORANDUM AND ORDER: granting 81 Motion to Disqualify Counsel. For the foregoing reasons, defendant's motion to disqualify Powley Gibson, ECF No. 81 is granted. SO ORDERED. Attorney Robert L. Powley; Darren Wagner Shield; Stephen Matthew Ankrom and James Martin Gibson terminated. (Signed by Judge Naomi Reice Buchwald on 7/15/2016) (ama)
industry newsletters that they produce, seek to hold Cowen liable
for two categories of copyright infringement related to alleged
First, EIG contends that Cowen is liable for alleged copyright
infringement by Dahlman Rose & Company, LLC (“Dahlman”), a boutique
company in early 2013.1
Second, EIG seeks to hold Cowen liable
for Cowen’s own allegedly infringing conduct subsequent to its
acquisition of Dahlman.
In support of the motion to disqualify, Iveta Hlinka, Cowen’s
Control Room and Research Compliance Manger since February 2011,
has sworn that in response to the EIG suit, Cowen sought legal
advice with respect to its copyright policies and practices.
of Iveta Hlinka (“Hlinka Aff.”) ¶ 5–6.
After interviewing several
firms, in May of 2015, Cowen selected Keith Sharkin and Clark
Lackert, two partners of the law firm of Reed Smith LLP (“Reed
Smith”), id. ¶ 6, to develop a “corporate copyright policy for use
by Cowen, as well as related training materials and sessions for
Id. ¶ 11 (quotation marks omitted).
affirms that over the course of their engagement, Sharkin and
Cross-motions for partial summary judgment on the issue of Cowen’s
successor liability for Dahlman’s alleged copyright infringement are also
pending before the Court. We resolve those motions in a separate Memorandum
and Order filed today.
business practices and use of copyrighted materials in general, as
well as facts related to this case in particular.
Hlinka asserts that the following took place:
A May 7, 2015 meeting in which Cowen representatives and
Sharkin and Lackert “discussed the background of the EIG
case and our desire to update Cowen’s copyright policy
and develop employee training procedures that would
assist us in addressing any copyright issues we may have
in the future.” Hlinka Aff. ¶ 8.
A June 2015 meeting in which Cowen provided Sharkin and
Lackert “additional background information regarding
Cowen’s copyright policies and procedures, including
confidential information pertaining to Cowen’s business
The Sharkin-Lackert Team requested that
Cowen provide a complete list of all of Cowen’s past and
publications. Cowen provided that list to Reed Smith
shortly thereafter.” Id. ¶ 11.
An August 24, 2015 meeting, during which Cowen
representatives and Sharkin and Lackert “discussed
certain facts related to the EIG case. As in previous
information related to Cowen’s business practices.” Id.
A September 2015 meeting during which Robert Fagin, Head
of Cowen’s Equity Research Division who was deposed in
connection with this action, and others met with Sharkin
and Lackert “to discuss copyright law related to the
Division’s publications. During that meeting, Mr. Fagin
and his colleagues discussed sensitive and confidential
information related to Cowen’s publication practices.”
Id. ¶ 13.
A January 12, 2016 meeting attended by Mr. Fagin and
others in the Equity Research Division, during which
“Mr. Fagin and his colleagues discussed Cowen’s
confidential publishing practices and copyright policies
at length and in detail with the Sharkin-Lackert Team.”
Id. ¶ 15.
Hlinka concludes that “I, along with other Cowen employees, have
discussed all of the copyright practices and policies that were
developing Cowen’s defenses in this action.”
Id. ¶ 16.
Sharkin responds by declaration that “[o]ther than being sent
a copy of the complaint after our first meeting, I was not given
any other materials or pleadings related to the EIG case.”
of Keith E. Sharkin (“Sharkin Decl.”) ¶ 5.
He explains that he
was never advised that the copyright policy he was tasked with
creating was for use in the EIG case, and that his understanding
was that the policy was solely for “future use.”
Id. ¶ 6.
further asserts that “[e]xcept during the initial interview with
Cowen in May where we were told that a copyright case was pending,
I do not recall any substantive discussions about the EIG case,”
nor “was [I] . . . even made aware of who was representing Cowen
in the EIG case. . . .”
Id. ¶ 8.
See also id. ¶ 11 (“While I
participated in all but one meeting with Cowen . . . [t]o the best
of my recollection, none of the form and content or topics dealt
with the EIG case or any EIG publication.”); id. ¶ 12 (“I do not
recall being provided with nor am I aware of any ‘sensitive and
confidential information’ pertaining to Cowen and its business
practices or that was in any way related to the EIG case aside
from the publicly filed complaint.”); id. (“I do not recall
substantively discussing the EIG litigation with Robert Fagin, nor
litigation.”); id. ¶ 13 (“I was not a party to or otherwise aware
of any conversations between Cowen and their litigation counsel in
Sharkin left Reed Smith in February 2016 and joined Powley
Gibson as a partner on March 1, 2016.
Sharkin Decl. ¶¶ 1, 9.
March 24, 2016, Cowen’s litigation counsel received a letter from
Powley Gibson stating that Sharkin had joined the firm as of March
Decl. of Demian A. Ordway (“Ordway Decl.”) Ex. 1.
the first that Cowen learned that Sharkin was no longer at Reed
Smith. Hlinka Aff. ¶ 17. The March 24 letter stated that Sharkin’s
previous engagement was “entirely unrelated to the subject matter
of the pending litigation between Energy Intelligence Group and
Ordway Decl. Ex. 1.
However, the letter continued, “out
of an abundance of caution,” Sharkin would not participate in this
case, and Powley Gibson had instituted an “ethical wall” around
Mr. Sharkin with respect to this case.
Powley Gibson explains that the ethical wall included: (1) a
March 1, 2016, memo informing the entire office of the ethical
screen and instructing that no one was to discuss the case with
Sharkin or copy him on any communications related to the case; (2)
an instruction to Sharkin not to discuss any work Reed Smith did
for Cowen; (3) physical segregation of case files from other files
in the office, marked to indicate they are part of an ethical
screen and stored in a locked filing cabinet to which Sharkin does
not have access; (4) configuration of Powley Gibson’s computer
systems so that Sharkin cannot access electronic files related to
the Cowen litigation.
Pls.’ Mem. of Law in Opp’n to Def. Cowen
and Co.’s Mot. to Disqualify 17.
Thus, Powley Gibson asserts,
Sharkin has had no involvement whatsoever in this particular
litigation between EIG and Cowen.
Id. at 18.
However, Sharkin is listed as EIG’s attorney of record in a
similar copyright infringement action against a different party.
See Energy Intel. Grp., Inc. v. Credit Agricole Corp. and Inv.
Bank, No. 16 Civ. 2155 (RJS) (S.D.N.Y.).
With respect to that
case, Sharkin wrote to the Court on June 22, 2016, stating:
[C]ontrary to defendant’s statement, I am not actively
litigating copyright claims for EIG. While I am listed
as an attorney of record in one other case, my role was
limited to a review of the complaint before it was filed
and not substantive in any manner. I have had no contact
with the client or been involved in any other cases for
Ltr. of June 22, 2016, at 1.
Cowen filed its motion to disqualify Powley Gibson on May 11,
Given that oral argument on the pending summary judgment
motions had been previously scheduled for mid-June, we ordered
In a telephone conference of May 19,
2016, we ordered full briefing of the disqualification motion, and
also directed that Powley Gibson not argue the summary judgment
motions, given that the outcome of the disqualification motion was
Oral argument on both the cross-motions for partial
summary judgment and this disqualification motion was held on June
During oral argument, after the Court posed questions
regarding what he was told by Cowen, EIG’s counsel proposed: “I
think we have to have an in camera review.”
19, June 14, 2016.
Oral Arg. Tr. (“Tr.”)
Cowen’s counsel readily agreed to provide an
affidavit, and the Court made clear that it would be an in camera
and sealed submission.
Accordingly, on June 21, we received
a supplemental ex parte affidavit from Hlinka for in camera review,
which describes in more detail Cowen’s reasons for retaining Reed
subsequently denied Powley Gibson’s request, made in a letter dated
June 20, that Sharkin himself be able to review and respond to the
in camera submission. Finally, by letter dated July 8, 2016, Cowen
stated that it had no objection to our use of Exhibit 3 to the
Supplemental Affidavit of Iveta Hlinka (“Hlinka Suppl. Aff.”) in
this Memorandum and Order.
On the summary judgment motions, plaintiffs were represented at oral
argument by the law firm of Smith Gambrell & Russell, LLP (“Smith Gambrell”),
which, since May of 2015, has been co-counsel for EIG in this matter.
A. Governing Law
A motion to disqualify an attorney is committed to the
Cromwell, 922 F.2d 60, 72–73 (2d Cir. 1990).
Such motions are
generally disfavored given their potential abuse for tactical
purposes and because disqualification undermines a party’s right
to employ counsel of its choice.
See Scantek Med., Inc. v.
Sabella, 693 F. Supp. 2d 235, 238 (S.D.N.Y. 2008).
inevitably cause delay and expense that are not productive in
resolving the litigation.
In deciding the motion, the Court
endeavors “to balance a client’s right freely to choose his counsel
profession.” Hempstead Video, Inc. v. Inc. Vill. of Valley Stream,
In cases of successive representation, the Second Circuit has
held that an attorney may be disqualified if:
(1) the moving party is a former client of the adverse
(2) there is a substantial relationship between the
subject matter of the counsel’s prior representation of
the moving party and the issues in the present lawsuit;
(3) the attorney whose disqualification is sought had
access to, or was likely to have had access to, relevant
privileged information in the
representation of the client.
Id. at 133 (quoting Evans v. Artek Sys. Corp., 715 F.2d 788, 791
(2d Cir. 1983)); see also N.Y. R. Prof’l Conduct 1.9(a) (“A lawyer
who has formerly represented a client in a matter shall not
thereafter represent another person in the same or a substantially
related matter in which that person’s interests are materially
adverse to the interests of the former client unless the former
client gives informed consent, confirmed in writing.”).
“An attorney’s conflicts are ordinarily imputed to his firm
based on the presumption that ‘associated’ attorneys share client
confidences.” Hempstead Video, 409 F.3d at 133; see N.Y. R. Prof’l
Conduct 1.10(a) (“While lawyers are associated in a firm, none of
them shall knowingly represent a client when any one of them
practicing alone would be prohibited from doing so . . . .”).
However, this presumption of confidence-sharing within a firm may
Hempstead Video, 409 F.3d at 133.
One way to rebut
the presumption is to demonstrate “a timely and effective ethical
attorneys in the firm in connection with the case for which the
conflict is alleged.”
Am. Int’l Grp., Inc. v. Bank of Am. Corp.,
827 F. Supp. 2d 341, 346 (S.D.N.Y. 2011) (internal quotation marks
Yet among small law firms, sufficient ethical screens
are difficult, if not impossible, to maintain.
See Filippi v.
Elmont Union Free Sch. Dist. Bd. of Educ., 722 F. Supp. 2d 295,
307-08 (E.D.N.Y. 2010) (“Although the presumption that client
confidences are shared within a firm may certainly be rebutted,
the presumption is much stronger within a small firm than a large
It is possible that the circumstances of a small firm may
be such that a court will not be able to determine whether the
prevent disclosure.”); Mitchell v. Metro. Life Ins. Co., No. 01
CIV. 2112 (WHP), 2002 WL 441194, at *9 (S.D.N.Y. Mar. 21, 2002)
(“The Second Circuit has expressed consistent skepticism about
screening as a remedy for conflicts of interest and declared that
such procedures ultimately must be rejected if they are subject to
doubt. . . .
Courts have only approved screening procedures in
the limited circumstances where a conflicted attorney possesses
information unlikely to be material to the current action and has
no contact with the department conducting the current litigation,
which typically occurs only in the context of a large firm.”).
It is undisputed that Cowen is Sharkin’s former client.
therefore consider (1) whether Sharkin’s prior engagement for
Cowen and the instant suit are substantially related and (2)
whether Sharkin had or was likely to have had access to privileged
information in the course of his work for Cowen.
We then consider
whether the ethical wall Powley Gibson imposed is sufficient to
rebut the presumption of confidence sharing within the firm.
1. Substantial Relationship
The substantial relationship between the two representations
is readily apparent as a matter of sequence, logic, and affidavit
representations share common material factual issues.”
Palisades Collection, LLC, No. 15-CV-7673 (JMF), 2016 WL 1448859,
at *3 (S.D.N.Y. Apr. 12, 2016) (emphasis in original) (internal
quotation marks omitted). Here, there are three indisputable facts
that, in and of themselves, are sufficient to reach the conclusion
that there is a substantial relationship between this litigation
and the retention of Sharkin and his then-firm Reed Smith.
it is indisputable that the retention followed the filing of this
Second, it is undisputed that Cowen provided Sharkin with
a copy of the complaint in this case at the outset of the
representation (or perhaps even earlier).
Third, Sharkin’s co-
counsel on the Cowen representation, after an early meeting and
following their retention, sent this email to Hlinka on June 19,
2015, with a copy to Sharkin:
We are pleased that you have chosen us to work on this
important project. We will start the preparatory work
immediately and look forward to working with you and
. . . .
As far as contacting your current outside counsel on the
copyright litigation, please send us the contact
information, and also kindly advise them that we will be
Hlinka Suppl. Aff. Ex. 3.
Cf. Sharkin Decl. ¶ 8 (“I was not even
made aware of who was representing Cowen in the EIG case since I
was not provided any other pleadings in the case.”).
In these circumstances, Powley Gibson’s argument that these
two representations were untethered cannot be accepted.
additional record evidence to support the conclusion that there is
a substantial relationship between the two matters.
is in the form of two affidavits from Iveta Hlinka, Control Room
and Research Compliance Manager for Cowen since February of 2011.
One affidavit, sworn to on May 11, 2016, is publicly docketed, and
the other was submitted in camera.
Based on the sequence and the
transmittal of EIG’s complaint to Reed Smith, as well as the
logical and strategical reasons to conduct a review of Cowen’s
copyright policies and practices, this Court did not have a need
for a supplemental in camera affidavit, but saw no reason to object
In this regard, the Court appreciates Sharkin’s frustration at not having
access to this additional affidavit. However, the affidavit was drafted based
on the Court’s assurance that it would be received in camera and thus not
available to plaintiffs. The Powley Gibson firm has the Court’s assurance that
its inability to respond has had no impact on the Court’s decision as the in
substantial relationship between the two representations.
in this regard, Sharkin’s repeated point that he “had no role in
the EIG case and was never asked to comment or opine on any aspect
of it,” Sharkin Decl. ¶ 6, responds to an argument that was never
Cowen has not suggested that Sharkin was hired as “co-
counsel” on the EIG case.
In sum, there is simply no doubt that the EIG lawsuit caused
Cowen’s retention of Reed Smith and that the two matters share
common material factual issues.
2. Access to Privileged Information
Sharkin’s affidavit stresses that the copyright policy that
he was engaged to formulate was strictly limited to future use and
not to address past issues. Sharkin Decl. ¶¶ 6–7. This assertion,
disqualification standard, is also relevant to the question of
whether Sharkin had access to, or was likely to have had access
to, privileged information in the course of his work for Cowen.
The Second Circuit has explained that
in order to grant a disqualification motion, a court
should not require proof that an attorney actually had
access to or received privileged information while
representing the client in a prior case.
requirement would put the former client to the Hobson’s
choice of either having to disclose his privileged
information in order to disqualify his former attorney
camera submission was simply confirmatory of the conclusion the Court had
reached prior to its receipt.
or having to refrain from the disqualification motion
Gov’t of India v. Cook Indus., Inc., 569 F.2d 737, 740 (2d Cir.
Even apart from Cowen’s sworn statements that Sharkin was in
policy must be created in the context of an existing practice.
such, it is difficult for the Court to conceive that a competent
intellectual property lawyer would not learn about a client’s past
and current practices, information which could very well contain
harmful admissions, in the process of formulating a going forward
Based on the record before us, we have no hesitancy reaching
the conclusion that Sharkin had “access to or received privileged
himself is disqualified from participating in this litigation.
Thus, we turn to the issue of whether Powley Gibson is likewise
3. Imputation and the Ethical Wall
knowledge of the former client’s confidences or secrets.”
Tech. Corp. v. N.Y. Stock Exch., Inc., 325 F. Supp. 2d 270, 278
EIG’s ethical wall is insufficient to rebut the presumption
First, EIG is a very small firm consisting of four
partners and about ten other attorneys in a single office, which
by its nature imperils an ethical screen.
See Cheng v. GAF Corp.,
631 F.2d 1052, 1058 (2d Cir. 1980) (disqualifying 35-attorney
firm), vacated on jurisdictional grounds, 450 U.S. 903 (1981);4
Filippi, 722 F. Supp. 2d at 307-08 (E.D.N.Y. 2010) (disqualifying
six-attorney firm); Crudele v. N.Y.C. Police Dep't, Nos. 97 Civ.
6687 (RCC), 97 Civ. 7366 (WHP), 97 Civ. 9515 (JSR), 97 Civ. 9516
(disqualifying 15-attorney firm); Decora Inc. v. DW Wallcovering,
Inc., 899 F. Supp. 132, 141 (S.D.N.Y. 1995) (disqualifying 44attorney firm); Yaretsky v. Blum, 525 F. Supp. 24, 29–30 (S.D.N.Y.
1981) (disqualifying approximately 30-attorney firm).
Sharkin is representing EIG in another substantially similar case.
See Energy Intel. Grp., No. 16 Civ. 2155 (RJS) (S.D.N.Y.).
these reasons, we conclude that Powley Gibson has not sufficiently
rebutted the presumption of imputed conflict.
Even though the vacated decision in Cheng is not binding precedent,
courts have since relied on its reasoning. See Hempstead Video, 409 F.3d 138
n.5; Marshall v. State of N.Y. Div. of State Police, 952 F. Supp. 103, 112
(N.D.N.Y. 1997) (disqualifying 15-member firm); Baird v. Hilton Hotel Corp.,
771 F. Supp. 24, 25, 27 (E.D.N.Y. 1991) (disqualifying nine-member firm).
Beyond finding that the established caselaw easily supports
our conclusion that Powley Gibson has not rebutted the presumption
of imputed conflict, there are additional facts in the record that
cause us concern and counsel against finding an ethical screen
We start with the fact that Sharkin did not
inform Cowen before he joined Powley Gibson that he was doing so,
despite the fact that Sharkin and Powley Gibson knew of both
Thereafter, Powley Gibson waited more
than three weeks to inform Cowen.
We are also deeply troubled by
Powley Gibson’s position at oral argument that Sharkin could
represent EIG in this very case.
suggestion in his letter of June 22, 2016, that “contrary to
defendant’s statement, I am not actively litigating copyright
claims for EIG,” when he acknowledges reviewing the complaint in
16 Civ. 2155 (RJS) (S.D.N.Y.) and is listed as attorney of record
on the docket sheet, can hardly give the Court confidence that the
Powley Gibson firm and its members are sufficiently sensitive to
We reject Powley Gibson’s suggestion at oral argument that Sharkin was
somehow ethically restricted from speaking to Cowen because he was moving firms.
In this context, the opposite is true.
Sharkin was not seeking to
recruit Cowen as a client at Powley Gibson, but instead moving to a firm in an
adverse position against Cowen, and he could have approached Cowen for a
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