Net-Brunet et al v. Private Equity Solutions, LLC

Filing 16

OPINION AND ORDER. The 7 Motion to Disqualify Counsel is DENIED. Signed by Judge Raul M. Arias-Marxuach on 11/26/2024. (nat)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
JUAN ANTONIO NET-BRUNET, MARTA
COSTAS-LATONI,
and
CONJUGAL
PARTNERSHIP NET-COSTAS
Plaintiffs,

CIV. NO. 24-1368 (RAM)

v.
PRIVATE EQUITY SOLUTIONS, LLC,
Defendant.

OPINION AND ORDER
RAÚL M. ARIAS-MARXUACH, United States District Judge
Pending
Solutions,

before

LLC’s

the

Court

(“Defendant”

or

is

Defendant

“PES”)

Motion

Private
to

Equity

Disqualify

Counsel for Plaintiffs (“Motion to Disqualify”). (Docket No. 7).
For the following reasons, the Court DENIES Defendant’s Motion to
Disqualify.
I.
On

August

16,

2024,

BACKGROUND
Plaintiff

Juan

Antonio

Net-Brunet

(“Plaintiff” or “Mr. Net”)1 filed a Complaint against Defendant
for breach of contract, fraud in the inducement, and unjust
enrichment. (Docket No. 1). In essence, Plaintiff claims that PES
materially breached its obligation to pay him, a third-party
beneficiary, for dividends on preferred shares he owned in BEEWEE

1

Net is joined in the Complaint by Marta Costas Latoni and their conjugal
partnership. (Docket No. 1 ¶ 1). For ease of reference, the Court uses the term
Plaintiff to refer to Net specifically and to refer to his position, which is
shared with his co-plaintiffs.

Civil No. 24-1368 (RAM)

2

Solutions Corp. (“BEEWEE”), pursuant to agreements from 2010 and
2015. Id. As a preliminary note, Plaintiff refers to Ferdinand
Ruaño

as

the

principal

of

PES

and

includes

him

in

factual

allegations common to all claims. Id. ¶ 19; see id. ¶¶ 6-42.
According to the Complaint, in July 2010, PES entered into a
“warehousing” purchase agreement for certain assets of BEEWEE,
providing that PES would retain the residual resulting from the
transaction

as

a

reserve

to

pay

preferred

shareholders

and

creditors. Id. ¶¶ 20-21. In February 2015, Mr. Net and PES entered
into an agreement to transfer corporate shares – wherein Mr. Net
agreed to sell PES his common shares while retaining his preferred
shares. Id. ¶¶ 22-24. Plaintiff alleges that while PES continued
to pay interest payments to other preferred shareholders of BEEWEEE
as an acquired obligation under the agreements, PES has repeatedly
delayed and failed to make payments to Mr. Net. Id. ¶¶ 27-37.
Therefore,

Plaintiff

asserts

that

PES

is

liable

for

materially breaching its obligation to pay Net for his preferred
shares of BEEWEE as agreed. Id. ¶¶ 43-46. Furthermore, Plaintiff
alleges PES induced him into entering and executing the purchase
sale of certain assets of BEEWEE by making material representations
and

false

assurances

that

PES

would

honor

the

terms

of

its

agreement with preferred shareholders – including payment for
shares and payment of dividends on those shares. Id. ¶¶ 47-57.

Civil No. 24-1368 (RAM)

3

Lastly, Plaintiff claims Defendant was unjustly enriched since PES
continues to retain a conferred monetary benefit without properly
compensating Mr. Net. Id. ¶¶ 58-65.
Subsequently,

on

October

21,

2024,

Defendant

filed

the

pending Motion to Disqualify. (Docket No. 7). Defendant moves to
disqualify Plaintiff’s attorney, Jane Becker Whitaker (“Becker”),
on the grounds that there is a “clear conflict of interest that
jeopardizes the fairness and impartiality of these proceedings” if
Becker is permitted to continue as an attorney in this case. Id.
¶ 1. Defendant asserts that Becker was a member of a law firm
(“BGM”) that represented Mr. Net, PES, and Ruaño at the times when
Mr. Net and PES entered into the two contracts from which the
Complaint arises in 2010 and 2015. Id. ¶¶ 4 and 27. Additionally,
Defendant contends Becker authorized an affidavit that involved
PES while acting as a notary public. Id. As such, Defendant claims
that Becker obtained access to intimate confidential information
whilst in those positions, which is now being used to the benefit
of Plaintiff to prejudice Defendant. Id. ¶¶ 5 and 28-29.
Plaintiff

filed

an

Opposition

to

Motion

to

Disqualify

(“Opposition”), asserting that Becker never had an attorney-client
relationship with PES and that her work as a notary public involved
no assumption of responsibility for the content of any documents
before her. (Docket No. 15). Moreover, Plaintiff asserts that PES

Civil No. 24-1368 (RAM)

4

fails to allege a single confidence exchanged in its Motion to
Disqualify, much less any materially relevant information used by
Becker. Id. at 3-4. Furthermore, Plaintiff maintains there was no
scope to Becker’s former representation to even compare to the
present case because there was no former representation period.
Id.
II.

APPLICABLE LAW

Rule 1.9(a) of the American Bar Association Model Rules of
Professional Conduct (“Model Rules”) provides:
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.
MODEL RULES OF PROF’L CONDUCT R. 1.9(a) (2024). “The purpose of this
disqualification rule is to prevent confidential information, from
a prior representation, from being used for the benefit of another
client who is now the adversary of the prior client.” Reyes Canada
v. Rey Hernandez, 193 F. Supp. 2d 409, 411 (D.P.R. 2002). Model
Rule 1.7(a) also prohibits legal representation if it “involves a
concurrent conflict of interest[,]” i.e., if “the representation
of one client will be directly adverse to another client.” MODEL
RULES OF PROF’L CONDUCT R. 1.7(a)(1) (2024).

Civil No. 24-1368 (RAM)
The

First

Circuit

5
has

held

that

when

a

party

seeks

disqualification of an attorney due to a conflict of interest,
“the relevant inquiry is whether the subject matter of the two
representations is ‘substantially related’; could the attorney
have obtained confidential information in the first suit that would
have been relevant to the second.” Borges v. Our Lady of the Sea
Corp., 935 F.2d 436, 439–40 (1st Cir. 1991) (quoting Analytica,
Inc. v. NPD Rsch., Inc., 708 F.2d 1263, 1266 (7th Cir.1983)). See
also Estrada v. Cabrera, 632 F. Supp. 1174, 1175 (D.P.R. 1986)
(quoting La Salle Nat’l Bank v. Cnty. of Lake, 703 F.2d 252, 255
(7th Cir. 1983)) (“The basic question which the district court
faces in considering a motion praying for disqualification is
‘whether it could reasonably be said that during the former
representation

the

attorney

might

have

acquired

information

related to the subject matter of the subsequent representation’”).
Under the substantially related test:
[T]he first step is to factually reconstruct
the scope of the prior representation. Second,
the Court must determine whether it is
reasonable to infer that the information
allegedly given, would have been provided to
an attorney involved in the representation of
those
matters.
Lastly,
the
court
must
determine whether that information is relevant
to the issues raised in the litigation pending
against the former client.
Reyes Canada, 193 F. Supp. 2d at 411–12 (citations omitted).

Civil No. 24-1368 (RAM)

6

The moving party bears the burden of establishing the facts
required for disqualification. Estrada, 632 F. Supp. at 1175
(citing Evans v. Artek Sys. Corp, 715 F.2d 788, 794 (2d Cir. 1983).
“For

this

purpose,

naked

claims

that

the

attorney

received

confidential information from his prior (and now adverse) client
do not suffice.” Velazquez-Velez v. Molina-Rodriguez, 235 F. Supp.
3d 358, 361–62 (D.P.R. 2017). See also Estrada, 632 F. Supp. at
1175 (“To disqualify a party’s chosen attorney is a serious matter
which

could

not

be

supported

by

the

mere

possibility

of

a

conflict”). Instead, “the moving party must allege the type and
nature

of

the

confidences

that

were

exchanged

in

the

prior

litigation that should subsequently disqualify the attorney in the
latter representation.” Starlight Sugar Inc. v. Soto, 903 F. Supp.
261, 265 (D.P.R. 1995) (emphasis added). Thus, simply asserting
“that

confidential

representation

will

information

was

not

to

suffice

exchanged
create

the

in

a

prior

‘irrebuttable

presumption’ of shared confidences that is so frequently spoken of
in this area of the law.” Id.; see also Reyes Canada, 193 F. Supp.
2d at 411 (noting that motions to disqualify should be approached
with cautious scrutiny because they are often used for strategic
purposes).

Civil No. 24-1368 (RAM)

7
III. DISCUSSION

In

the

Motion

to

Disqualify,

Defendant

identifies

two

instances involving Becker that allegedly constitute conflicts of
interest:

(1)

Becker

was

a

legal

advisor

for

the

firm

that

represented Plaintiff, while they represented Ruaño and PES to
execute the incorporation of PES in Puerto Rico and “in the advice
of its business activities”; and (2) Becker served as a notary
public

“to

authorize

a

corporate

resolution

in

response

to

agreements” executed between Mr. Net, PES, and Ruaño. (Docket No.
7 ¶ 27). Accordingly, Defendant states that “it must be assumed
that, acting in that capacity, attorney Becker obtained access to
intimate and confidential information that she can utilize to
advance the interests of plaintiffs.” Id. at 28. Furthermore,
Defendant maintains that the subject matter of “Becker’s former
and

current

representation

is

substantially

related,

if

not

considered the same.” Id.
A. Scope of BGM-relations
Defendant fails to provide sufficient information to fully
reconstruct the scope of the alleged previous legal representation
and the extent to which, if any, Becker was involved in the
incorporation of PES and initial agreements in purchasing BEEWEE.
According to the Motion to Disqualify, in June 2010, Ruaño
retained BGM as counsel to incorporate PES in Puerto Rico. (Docket

Civil No. 24-1368 (RAM)

8

No. 7 ¶ 12). In a letter BGM sent in October 2012 to Ruaño and PES
to memorialize the organization, Becker was listed as a BGM advisor
on the letterhead. Id. ¶ 13. In May 2013, BGM sent a letter to
Ruaño regarding a transaction involving Puerto Rico’s Property
Registry, wherein Becker was again listed as a BGM advisor on the
letterhead. Id. ¶ 14. Defendant avers that this is enough to create
a conflict of interest, yet Defendant

fails to identify any

specific confidential information that counsel allegedly obtained
from them. It is uncontested that the firm’s letterhead has Becker
listed under the heading labeled “Advisors,” but no explanation is
given as to what this title entails.
By contrast, Becker avers that she has no duty of loyalty to
PES because she never met with anyone from PES to discuss legal
matters, never appeared in a case on its behalf, “nor did she
negotiate any matter for the company or attend any meeting where
company matters were discussed.” Id. at 1-2. To the extent she
appears on the firm’s letterhead, Becker explains it was due to
her occasional work as a co-counsel while she rented office space
from the firm. Id. at 2-3. To further hit home this argument,
Plaintiff points to Defendant not recognizing Becker prior to
“discovering” her “involvement” upon receiving files from BGM in
preparation for the present litigation. Id. at 4

Civil No. 24-1368 (RAM)
Defendant’s

allegations

9
as

to

the

“nature

and

type

of

confidences that were exchanged” remain too broad to satisfy their
burden. Starlight Sugar Inc., 903 F. Supp. at 265. Defendants fail
to show how Becker’s role as an “advisor” equates to being a member
of the BGM firm with access to work which may have involved PES
matters. Additionally, Defendant’s own admission that it first
discovered Becker’s connection to BGM upon receiving discovery
materials in 2024 further supports Becker’s proffer that she never
previously handled any matters in connection with Ruaño or PES.
(See Docket No. 7 ¶¶ 16-17). Defendant’s allegations that Becker,
in her role as a BGM advisor, obtained confidential information
that could be used to PES’s detriment in the case at bar are naked
assertions that lack specifics.
B. Scope of Notary-relations
According to Defendant, on June 3, 2016, Becker, whilst acting
as a notary, authenticated the signatures of Mr. Net and another
BEEWEE officer “in a corporate resolution where, among other
things, reference was made to the agreement of February 25, 2015,
whereby PES PR, acquired the totality of NET’s common stock owned
by Net in Beewee.” (Docket No. 7 ¶ 15). Defendant points to Canon
38 of the Puerto Rico Code of Ethics to assert that attorneys must
avoid “the mere appearance of unethical or improper professional
conduct.” Id. ¶ 24. Furthermore, Defendant argues that Rule 5 of

Civil No. 24-1368 (RAM)

10

the Notarial Regulations of Puerto Rico requires that “a notary
who authorizes a document is prohibited from subsequently acting
as an attorney for one of the authorizing parties to enforce, in
contentious litigation, the obligations undertaken by any other
authorizing party in the document executed before them.” Id. at 5.
In

Opposition,

Plaintiff

highlights

that

Rule

5

of

the

Notarial Regulation also provides in relevant part that “a notary
can act as an attorney in the same matter when the notary only
legitimated the authenticity of signatures, and in the litigation
neither the signatures nor the document where those signatures
appear is the principal object of the claim.” (Docket No. 15 at
5).

Plaintiff

maintains

that

this

is

the

present

case.

Id.

Plaintiff asserts that notarizing the document in question solely
entailed assuring that the person identified in the document was
said individual appearing on the date and place indicated. Id. at
2. Thus, Becker did not give faith as to the transaction set forth
or assume responsibility for the content of the document. Id. And
since the present case does not regard an issue as to the validity
of the signatures, the document is peripheral to Plaintiff’s claim
against PES – meaning Becker’s work as a notary public does not
preclude her from serving as legal representation in this case.
Id.

Civil No. 24-1368 (RAM)
While

a

“[n]otary

11
is

prevented

from

representing

as

an

advocate a client in contentious litigation,” paragraph 5 of Puerto
Rico Notarial Regulations, Rule 5 states:
[t]he Notary shall also be able to act as an
advocate on the same matter when before the
litigation the Notary merely certified the
authenticity of signatures, and in the
litigation neither the signatures nor the
document in which they appear are the
principal object of the complaint.
Rivera v. Periodicos Todo Bayamon, No. CIV. 93-2123 (DRD), 1997 WL
43202 at *5-6 (D.P.R. Jan. 23, 1997). The comments to Rule 5
further elaborate the distinction, noting that “an attorney may
not notarize answers to interrogatories and then act as an advocate
in the same cases because the attorney usually is substantially
responsible for the specific language used in drafting the document
in question, and because the attorney’s signature is normally the
only one on such documents.” Id. at *6. In such instances the
notarization

is

contrast,

attorney-notary

an

comparable

to

a

claim

of

veracity.

may

take

sworn

Id.

testimony

“In

at

a

deposition and otherwise authenticate signatures because in such
situations the attorney is merely certifying that the declarant
made the declarations in question.” Id.
The document
situation,

where

at issue here is comparable to the latter
Becker

was

merely

present

to

authenticate

signatures and certify identities. She did not make any claim as

Civil No. 24-1368 (RAM)

12

to the veracity of the corporate resolution’s contents, nor is the
authenticity of the signatures on said document the subject of the
present litigation.

Furthermore, Defendant has failed to show how

Becker’s role in the notarization of the affidavit equates to
receiving confidential, adverse information.
The scope of the three-page document that Becker notarized is
limited to a general overview of major events in BEEWEE’s corporate
timeline, since BEEWEE was originally registered in 2003 through
to the signing of the certificate of corporate resolution on June
3, 2016. (Docket Nos. 7-7 and 11-4). The only reference to any of
the agreements Defendant states are relevant to the Complaint is
that “[o]n February 25, 2015, PRIVATE EQUITY SOLUTIONS, a limited
liability corporation (LLC) organized and existing under the laws
of Puerto Rico, acquired the totality of the common shares in
circulation belonging to Juan A. Net Brunnet.” Id. The present
case before the Court pertains to a dispute over the preferred
shares in BEEWEE owned by Mr. Net, unrelated to any of the
resolutions and content within the notarized affidavit.
Accordingly, Defendant failed to show more than the mere
possibility of a conflict of interest.2

2

However, the Court notes that it is not analyzing the facts at hand under the
Puerto Rico Canons of Professional Ethics, which impose different, more
stringent, requirements than the Model Rules.

Civil No. 24-1368 (RAM)

13
IV.

For

the

foregoing

CONCLUSION

reasons,

the

Court

DENIES

Defendant’s

Motion to Disqualify Counsel for Plaintiffs at Docket No. 7.
IT IS SO ORDERED.
In San Juan, Puerto Rico, this 26th day of November 2024.
s/Raúl M. Arias-Marxuach_________
UNITED STATES DISTRICT JUDGE