T. LEVY ASSOCIATES, INC. v. KAPLAN et al
MEMORANDUM AND/OR OPINION. SIGNED BY HONORABLE MARK A. KEARNEY ON 12/22/2016. 12/22/2016 ENTERED AND COPIES E-MAILED.(sg, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
T. LEVY ASSOCIATES, INC.
MICHAEL R. KAPLAN, et al.
December 22, 2016
The complexity of our economic model often requires businesspersons hire experienced
lawyers to counsel them in a wide variety of business and personal matters. Providing advice on
one issue does not preclude the lawyer from ever opposing the businessperson on an entirely
unrelated issue. Clients are entitled to a lawyer of their choosing and often there is a limited
number of qualified lawyers to ably assist businesspersons. Otherwise, talented and sought-after
attorneys would be penalized for their skill.
The Rules of Professional Conduct prohibit a
lawyer from representing a client in a matter substantially related to her earlier representation of
the new client's adversary.
This Rule allows clients to retain a chosen lawyer so long as the
lawyer did not gain client confidences from a former client whom she is now suing. When, as
here, earlier clients are uncomfortable with being sued in a business torts case by an adversary
with a law firm with whom they may have once hired in unrelated estate, landlord-tenant or
collection matters, the earlier clients must adduce sufficient evidence of a disqualifying client
confidence and the present representation is substantially related to the earlier representation.
Allegations are not enough. Absent the requisite evidence, we deny the earlier clients' motion to
disqualify opposing counsel in the accompanying Order.
T. Levy Associates sued its former employee Michael R. Kaplan, his wife Nina Kaplan,
and Ms. Kaplan's retail business BLC Beauty, Inc. for embezzlement, misuse of T. Levy funds
to pay BLC Beauty's rent, and diversion of T. Levy's customer sales to BLC Beauty sales. 1 T.
Levy also alleges Mr. Kaplan and Deyvid DeMelo conspired to destroy data on T. Levy's
computer to cover up their conspiracy. 2
The Kaplans, Mr. DeMelo, and BLC Beauty ("Defendants") now move to disqualify T.
Levy's counsel Spector, Gadon & Rosen, P.C. ("Spector Gadon") under Pennsylvania Rules of
Professional Conduct 1.9 and 1.10.
Defendants allege Michael H. Cross, Esquire represented
the Kaplans when preparing their estate planning documents before he joined Spector Gadon in
1996. Defendants also allege Attorney Cross represented BLC Beauty in litigation against its
landlord Princeton Forrestal Village.
Defendants allege Barry S. Brownstein, Esquire
represented Ms. Kaplan and BLC Beauty in litigation as a member of Spector Gadon.
Defendants' cursory motion alleges one area Spector Gadon might have acquired "confidential
Attorney Cross might have acquired "confidential information" regarding the
Kaplans' personal financial information while preparing their estate planning documents.
Defendants do not allege what confidential information, if any, Attorney Cross or Attorney
Brownstein acquired through the representations of Ms. Kaplan and BLC Beauty.
T. Levy counters with Attorney Cross' sworn declaration he does not recall providing
estate planning legal services to the Kaplans and does not prepare wills and trusts. 3 He also
declares he joined Spector Gadon in 1996. 4
To counter suspicions arising from Attorney Cross and Spector Gadon's alleged earlier
representation of BLC Beauty, Inc., T. Levy attaches a complaint in PF Village LLC v. T Levy
Associates Inc. and argues Spector Gadon represented T. Levy in the litigation, not BLC
Spector Gadon further argues BLC Beauty is a Pennsylvania entity who never rented
property in Princeton and the now-defunct New Jersey entity BLC Beauty is the entity who may
have rented property. 6 Finally, Spector Gadon states Attorney Brownstein, not Attorney Cross,
is counsel of record against PF Village, Inc. 7
Regarding Attorney Brownstein's alleged prior representation of Ms. Kaplan and BLC
Beauty, Spector Gadon assumes it "is apparently a collection action in which Spector Gadon
attorney John T. Asher, III, represented T. Levy Associates as an intervening plaintiff in an
action against Beauty Business Group. " 8
Defendants adduce no evidence of shared confidences
or any substantial relationship between these alleged limited representations in estate, collection
and landlord tenant matters and this business torts dispute between a business owner and its
former manager and alleged co-conspirators.
Pennsylvania Rule of Professional Conduct l.9(b), which applies under Local Rule
83.6(IV)(B), prevents an attorney from representing a client against a party the attorney
previously represented and the attorney gained confidential information he could use to his
former client's disadvantage. Disqualification is proper under Rule 1.9 "[i]f the client in the
prior representation might have imparted confidential information to his lawyer to aid the lawyer
in dealing with particular issues, and if issues arise in the second suit which would permit the use
of such confidences against the original client, the substantial relationship test is met, and
disqualification is required .... " 9
The party seeking disqualification has the burden proving: "(l) that a past attorney/client
relationship existed which was adverse to a subsequent representation by the law firm of the
other client; (2) that the subject matter of the relationship was substantially related; (3) that a
member of the law firm, as attorney for the adverse party, acquired knowledge of confidential
information from or concerning the former client, actually or by operation of law." 10 "The party
seeking to disqualify opposing counsel must make a clear showing that continued representation
would be impermissible and that disqualification is 'necessary.' Vague and unsupported
allegations are insufficient to meet this burden." 11
1. Attorney Cross' earlier representation of the Kaplans.
The Kaplans allege Spector Gadon, through Attorney Cross, "might have acquired"
confidential personal financial information when he prepared their estate planning documents.
The Kaplans allege Attorney Cross represented them before he joined Spector Gadon. Attorney
Cross, an officer of this Court, swore he joined Spector Gadon in 1996 and he did not recall and
could not locate any information showing he represented the Kaplans before 1996.
Assuming Attorney Cross did represent the Kaplans before 1996 in preparing estate
planning documents, the Kaplans fail to meet their burden to show Attorney Cross' knowledge
of their pre-1996 personal finances could be used to their disadvantage. Explanatory Comment 3
to Pa. R.C.P. Rule 1.9 instructs "information acquired in a prior representation may have been
rendered obsolete by the passage of time." T. Levy alleges between 2008-2016 the Kaplans
embezzled, committed fraud, committed conversion, and destroyed incriminating data.
Kaplans do not explain, and we cannot see, how their personal financial status before 1996 could
be used by Spector Gadon to their disadvantage today. Any confidential pre-1996 personal
financial information Attorney Cross might have acquired over nineteen years ago is now
"rendered obsolete." By contrast, this case involves conduct which, with a most liberal reading,
occurred beginning in 2008 when Michael Kaplan took over day to day management ofT. Levy.
The Kaplans do not make a "clear showing" how Attorney Cross' hypothetical
knowledge of their personal finances in or before 1996 could be used to their disadvantage. 12
2. Spector Gadon's earlier representation of BLC Beauty and Ms. Kaplan.
BLC Beauty alleges Spector Gadon represented BLC Beauty in litigation against its
landlord Princeton Forrestal Village.
Ms. Kaplan and BLC Beauty allege Spector Gadon
represented Ms. Kaplan and BLC Beauty "in litigation." 13 Spector Gadon swears it participated
in both actions as counsel to its present client T. Levy and neither BLC Beauty nor Ms. Kaplan
were parties to the litigation.
Even if we assume Ms. Kaplan and BLC Beauty's allegations of an attorney client
relationship with Spector Gadon are true, they still do not allege how the prior representation is
substantially similar to this case nor do they allege factual confidential information Spector
Gadon might have acquired during the earlier representation.
We are left with nothing but
suspicion absent factual support. 14 Ms. Kaplan and BLC Beauty's "[v]ague and unsupported
allegations are insufficient to meet [their] burden" and we do not disqualify Spector Gadon as
counsel under Rule 1.9. 15
We deny Defendants' motion to disqualify Spector Gadon because they do not come
close to meeting their burden to warrant disqualification under Pa. R.P.C. 1.9. Absent evidence,
this case does not present a close call where we could find possible sharing of confidential
information related to any possible issue in this business torts case.
ECF Doc. No. 1at11-12.
ECF Doc. No. 1 at 16.
ECF Doc. No. 27-1at2.
ECF Doc. No. 27-1 at 6-7. BLC Beauty is not named or mentioned in the complaint.
ECF Doc. No. 27-1 at 3. This New Jersey complaint distinguishes between the New Jersey
BLC Beauty and the Pennsylvania corporation BLC Beauty who is the defendant. ECF Doc. No.
1 at 4 n.1.
ECF Doc. No. 27-2 at 2.
Realco Servs., Inc. v. Holt, 479 F. Supp. 867, 871-72 (E.D. Pa. 1979).
Estate of Pew, 655 A.2d 521, 545-546 (Pa. Super. 1994)(internal citations omitted).
Cipressi v. Bristol Borough, No. 10-1584, 2012 WL 606687 at *2 (E.D.Pa. Feb. 27,
20l2)(citing Cohen v. Oasin, 844 F. Supp. 1065, 1067 (E.D.Pa. 1994) and Commercial Credit
Loans, Inc. v. Martin, 590 F. Supp. 328, 335-36 (E.D.Pa. 1984)).
Cipressi, 2012 WL 606687 at *2 (internal citations omitted).
ECF Doc. No. 26.
Nothing in today's Order precludes Defendants from renewing their Motion should they obtain
an evidentiary basis.
Cipressi, 2012 WL 606687 at *2 (internal citations omitted).
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