The Estate of Francis P. Kennedy v. Stuart A. , 447 N.J. Super. 444 ( 2016 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-5397-15T4
THE ESTATE OF FRANCIS P. KENNEDY;
THE FRANCIS P. KENNEDY IRREVOCABLE
TRUST AGREEMENT; THE FRANCIS P.
APPROVED FOR PUBLICATION
KENNEDY IRREVOCABLE TRUST AGREEMENT
II; THE FRANCIS P. KENNEDY IRREVOCABLE November 4, 2016
TRUST AGREEMENT III; FRANCIS P.
KENNEDY QUALIFIED PERSONAL RESIDENCE APPELLATE DIVISION
INTEREST TRUST; THE LOUIS KENNEDY 2002
IRREVOCABLE TRUST F/B/O LOUIS KENNEDY;
THE PATRICIA KENNEDY 2002 IRREVOCABLE
TRUST F/B/O PATRICIA KENNEDY; THE
CHERYL KENNEDY 2002 IRREVOCABLE TRUST
F/B/O CHERYL KENNEDY; and THE DONALD
KENNEDY IRREVOCABLE TRUST F/B/O DONALD
KENNEDY,
Plaintiffs-Appellants,
v.
STUART A. ROSENBLATT, C.P.A.; WISS &
COMPANY, LLP; ESTATE OF JOEL
SHOOBE, ESQ.; ROBERT D. BORTECK, ESQ.;
BORTECK, SANDERS & TORZEWSKI, LLP;
ROBERT S. FINK, ESQ.; and KOSTELANETZ
& FINK, LLP,
Defendants-Respondents.
____________________________________
IN THE MATTER OF RIKER DANZIG SCHERER
HYLAND & PERRETTI, LLP,
Appellants.
_____________________________________
Argued October 5, 2016 – Decided November 4, 2016
Before Judges Sabatino, Nugent and Currier.
On appeal from an interlocutory order of
Superior Court of New Jersey, Law Division,
Essex County, Docket No. L-1921-16.
John M. Loalbo argued the cause for
appellants (Riker Danzig Scherer Hyland &
Perretti, LLP, attorneys; Mr. Loalbo, of
counsel; Mr. Loalbo, Stephen J. Pagano, and
Stephen M. Turner, on the briefs).
Anthony J. Sylvester argued the cause for
respondent Estate of Joel Shoobe (Sherman,
Wells, Sylvester & Stamelman, LLP,
attorneys; Mr. Sylvester and Anthony
Velanziano, on the briefs).
The opinion of the court was delivered by
NUGENT, J.A.D.
This interlocutory appeal involves a delicate and difficult
conflict-of-interest issue that arose after plaintiffs'
attorney, who had filed and dismissed the underlying
professional negligence action while at Weiner Lesniak, LLP,
recommenced the action after joining Riker, Danzig, Scherer,
Hyland & Perretti, LLP ("Riker"), the firm that had defended the
Estate of Joel Shoobe, Esq. ("the Estate") in the previous
action. Meanwhile, the attorneys who had defended the Estate
while at Riker had left Riker and joined a new firm, taking with
them the Estate's paper file but leaving electronically stored
documents ("the electronic file" or the "electronic documents"),
including a privileged memorandum outlining the defense. When
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Riker recommenced the action on behalf of plaintiffs, the Estate
moved to disqualify Riker, asserting a conflict of interest.
The trial court granted the Estate's motion. On leave
granted, plaintiffs and Riker appealed. Having considered the
parties' arguments in light of applicable legal principles, and
having further considered certain amendments to the Rules of
Professional Conduct ("RPCs") and related Official Comments that
became effective after the trial court's decision, we vacate the
order disqualifying Riker, but do so conditionally, as will be
discussed infra.1
The background facts leading up to the disqualification
dispute are largely undisputed. On October 11, 2013, plaintiffs
Estate of Francis P. Kennedy and the eight trusts commenced a
professional negligence action against defendants.2 The
1
Following our grant of leave to file this interlocutory
appeal, the trial court dismissed the action in its entirety on
an unrelated basis. Plaintiffs filed a motion in this court
challenging the jurisdictional propriety of the trial court's
action. We denied the motion without prejudice. As prescribed,
infra, plaintiffs may, within thirty days of this decision, file
a notice of appeal from the trial court's final order.
2
Plaintiffs labeled the three causes of action they asserted
against each defendant as negligent performance of services,
breach of the covenant of good faith and fair dealing, and
breach of contract. Regardless of these labels, the action, in
substance, is a professional negligence action. Defendant
Rosenblatt is a CPA, defendant Wiss & Company, LLP is an
accounting firm, and the remaining defendants are the estate of
(continued)
3 A-5397-15T4
complaint was filed by John M. Loalbo, Esquire, then a member of
Weiner Lesniak, LLP. The Estate retained Riker to defend it.
Anthony J. Sylvester, then a Riker attorney, filed an answer and
undertook the Estate's defense.
On January 27, 2014, a Riker attorney prepared an "Initial
Case Analysis" ("the Analysis"), which was placed both in
Riker's paper file and in Riker's electronic document management
system. According to Sylvester, the Analysis was "a detailed
case assessment and strategy memorand[um]," which was sent to
the client.
On July 11, 2014, nine months after the complaint was
filed, Sylvester and several other attorneys handling the
Estate's defense left Riker and joined the new firm of Sherman
Wells Sylvester and Stamelman ("Sherman Wells"), taking with
them the Estate's paper file. Riker withdrew as the Estate's
counsel, Sherman Wells substituted in, and the parties filed a
(continued)
a former lawyer, lawyers, and their present or former law firms.
See Charles A. Manganaro Consulting Eng'rs, Inc. v. Carneys
Point Twp. Sewerage Auth., 344 N.J. Super. 343, 349 (App. Div.
2001) (explaining that a counterclaim plaintiff could not avoid
the affidavit of merit statute, N.J.S.A. 2A:53A-26 to -29, by
labeling the counterclaim as a claim for breach of contract,
when the allegations in the counterclaim were that the
counterclaim defendant deviated from the standard of care
exercised in similar situations by the professionals practicing
in the field).
4 A-5397-15T4
substitution of counsel form with the court on July 14, 2014.
The following month, on August 27, 2014, the action was
dismissed by way of a consent order, without prejudice, for
reasons not relevant to this appeal. On September 15, 2014,
less than a month after the action was dismissed, Loalbo,
plaintiffs' attorney, left Weiner Lesniak, LLP and joined Riker.
Nineteen months after dismissing the action, on March 23,
2016, plaintiffs, through Loalbo, now at Riker, commenced the
current action by filing a complaint, alleging essentially the
same causes of action that had been alleged in the previous
complaint. On April 11, 2016, Sylvester, now at Sherman Wells,
contacted Riker concerning the conflict of interest. The next
day, Riker established an internal "ethical wall" to prevent
Loalbo and his staff from accessing the Estate's electronic file
stored in the firm's electronic management database. Riker had
until then taken no action to prevent the firm's personnel from
being able to access the Estate's electronic files.
In addition to establishing the so-called ethical wall, the
same day, April 12, 2016, a senior attorney at Riker, assisted
by IT personnel, reviewed some part of the electronic file to
determine, among other things, whether anyone at Riker had ever
accessed any of the Estate's electronic documents. The senior
attorney determined from that review that no attorney, other
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than those who left Riker and joined Sherman Wells, had accessed
the electronic documents.3
The following month, on May 25, 2016, the Estate filed a
motion to disqualify Riker as plaintiffs' counsel. On June 10,
2016, the trial court granted the motion, concluding the RPCs
mandated this result. The court noted the Analysis was
protected information, and until walled off by IT personnel, it
had been available to all Riker attorneys. In addition, the
document had apparently been viewed, at least to some extent, by
the Riker senior attorney.
Riker filed a motion for leave to appeal from the
implementing disqualification order. We granted the motion.
Although we did not stay the order, we have permitted Riker to
3
The actions of the senior attorney and IT personnel were
established on the disqualification motion record through
Loalbo's certification, which was incompetent with respect to
the document access issues, because it was not based on his
first-hand knowledge. R. 1:6-6 ("If a motion is based on facts
not appearing of record or not judicially noticeable, the court
may hear it on affidavits made on personal knowledge, setting
forth only facts which are admissible in evidence to which the
affiant is competent to testify . . . ."). We address this
deficiency, infra. On appeal, Riker also attempted to
supplement the appellate record with a second supplemental
certification from Loalbo that had not been filed with the trial
court. The Estate objected and moved to strike the second
supplemental certification. In view of our disposition of this
appeal, we deem the issue moot, and deny the motion on that
basis.
6 A-5397-15T4
represent plaintiffs on the present appeal solely with respect
to the disqualification issues.
We turn to the parties' appellate arguments and our role in
reviewing the trial court's order. A trial court's
"determination of whether counsel should be disqualified is, as
an issue of law, subject to de novo plenary appellate review."
City of Atlantic City v. Trupos, 201 N.J. 447, 463 (2010)
(citing J.G. Ries & Sons, Inc. v. Spectraserv, Inc., 384 N.J.
Super. 216, 222 (App. Div. 2006)). When reviewing such a
determination, we must "'balance competing interests, weighing
the need to maintain the highest standards of the profession
against a client’s right freely to choose his counsel.'" Id. at
462 (quoting Dewey v. R.J. Reynolds Tobacco Co., 109 N.J. 201,
218 (1988)). As part of the balancing process, we recognize "'a
person's right to retain counsel of his or her choice is limited
in that there is no right to demand to be represented by an
attorney disqualified because of an ethical requirement.'"
Ibid. (quoting Dewey, supra, 109 N.J. at 218). Therefore,
"'[i]f there be any doubt as to the propriety of an attorney's
representation of a client, such doubt must be resolved in favor
of disqualification.'" Herbert v. Haytaian, 292 N.J. Super.
426, 438-39 (App. Div. 1996) (alterations in original)
(citation omitted).
7 A-5397-15T4
Situations such as the one before us, involving a lawyer
terminating an association with a firm, are subject to RPC
1.10(b), which states:
[w]hen a lawyer has terminated an
association with a firm, the firm is not
prohibited from thereafter representing a
person with interests materially adverse to
those of a client represented by the
formerly associated lawyer and not currently
represented by the firm, unless: (1) the
matter is the same or substantially related
to that in which the formerly associated
lawyer represented the client; and (2) any
lawyer remaining in the firm has information
protected by RPC 1.6 and RPC 1.9(c) that is
material to the matter.
Here, Sylvester and other lawyers terminated their
association with Riker and continued to represent the Estate.
Riker now represents plaintiffs. Under the conflicts standards
expressed in RPC 1.10(b), Riker is not disqualified unless both
subsections (1) and (2) apply. The parties do not dispute the
applicability of subsection (1), namely, the previous and
current actions are the same or substantially related, nor do
they dispute the Estate's electronic file contains protected
material. Rather, they dispute the applicability of subsection
(2), that is, whether, after Sylvester and the others left, "any
lawyer remaining in the firm has [the] information" that is
protected and material to the matter (emphasis added).
Plaintiffs and Riker argue the phrase "has information" means
8 A-5397-15T4
"has actual knowledge"; the Estate argues the phrase "has
information" means "has access to"; and, alternatively, once a
Riker senior partner actually accessed the analysis, he "had
information" within the meaning of RPC 1.10(b)(2).
We conclude with respect to the electronic file that
interpreting the phrase "has information" to mean "has actual
knowledge or has accessed the electronic file" — subject to the
narrow exception discussed infra concerning the process of
investigating whether a conflict exists — serves the purpose of
the RPCs and strikes the proper balance between the "need to
maintain the highest standards of the profession [and] a
client’s right freely to choose his counsel." Trupos, supra,
201 N.J. at 462.
The highest standards of the profession involved when this
situation occurs are the maintenance of client confidentiality
and the need to ensure that protected client information is not
used to the detriment of a former client. "[T]he principle of
attorney-client confidentiality imposes the inviolability of a
sacred trust upon the attorney." State v. Land, 73 N.J. 24, 30
(1977). The RPCs gird that principle by "generally forbid[ding]
disclosure of client information, without the client's consent,
unless one of the exceptions to the rule[s are] available." In
re Advisory Opinion No. 544, 103 N.J. 399, 407 (1986). The RPCs
9 A-5397-15T4
also underscore the principle that an attorney may not use
information obtained from a client to the detriment of that
client. See, e.g., RPC 1.9(c)(1) ("A lawyer who has formerly
represented a client in a matter . . . shall not thereafter: . .
. use information relating to the representation to the
disadvantage of the former client . . . ."); RPC 1.10(c)(1)
("When a lawyer becomes associated with a firm, no lawyer
associated in the firm shall knowingly represent a person in a
matter in which that lawyer is disqualified under RPC 1.9
unless: (1) the matter does not involve a proceeding in which
the personally disqualified lawyer had primary responsibility;
(2) the personally disqualified lawyer is timely screened from
any participation in the matter and is apportioned no part of
the fee therefrom; and (3) written notice is promptly given to
any affected former client to enable it to ascertain compliance
with the provisions of this Rule.").
It is self-evident that an attorney cannot violate the
sacred trust imposed by the principle of attorney-client
confidentiality if the attorney has not represented the client,
has not obtained information concerning the client or the
client's matter, and has not accessed the client's file. Under
such circumstances, the balance between the need to maintain the
highest standards of the profession on the one hand, and a
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client’s right freely to choose counsel on the other, must be
struck in favor of a client’s right freely to choose counsel.
There is no danger in such situations of the highest standards
of the profession being compromised, and there is consequently
no reason to restrict the right of clients to freely choose
their attorneys.
That brings us to the Estate's argument that Riker should
be disqualified because a senior attorney accessed the Estate's
electronic file. This argument in turn implicates several other
issues: why did the senior attorney access the electronic file,
what exactly did the senior attorney access, and why were
protected electronic documents not deleted? The answers to
these questions and the ensuing analysis is compounded by the
absence of certifications from the senior attorney and the IT
personnel who assisted in accessing the electronic file.
The parties do not appear to dispute the purpose of the
Riker senior attorney's investigation, namely, to determine
whether a conflict existed; nor do they appear to dispute that
IT personnel were capable of determining when the electronic
file had been accessed and by whom. If the Riker senior
attorney merely accessed metadata associated with the file,
solely to determine if any lawyer other than Sylvester and those
who left with him had accessed the file, then RPC 1.10(b) did
11 A-5397-15T4
not require Riker's disqualification.4 If the senior attorney
accessed the content of the Analysis or any other protected
information, then the trial judge properly disqualified Riker.
Accessing metadata that merely discloses who has accessed an
electronic file does not result in an attorney having
"information protected by RPC 1.6 and RPC 1.9(c) that is
material to the matter." RPC 1.10(b)(2).
Additionally, if the Riker senior attorney accessed only
enough information in the electronic file to determine whether a
conflict existed — such as viewing only the title of a document
— and then accessed the metadata to see if any other attorney
had accessed the file, Riker would not have been disqualified.
Merely determining whether an electronic file contains protected
information, as distinguished from reviewing the content of the
information, does not result in an attorney having protected
information proscribed by RPC 1.10(b)(2). Although accessing a
file in other instances results in the imputation of proscribed
knowledge, we do not interpret RPC 1.10(b) as prohibiting an
4
See RPC 1.0 (p) (effective Sept. 1, 2016) (defining
"metadata" as "embedded information in electronic documents that
is generally hidden from view in a printed copy of a document .
. . . Metadata may reflect such information as the author of a
document, the date or dates on which the document was revised,
tracked revisions to the document, and comments inserted in the
margins").
12 A-5397-15T4
attorney from reviewing non-substantive information to determine
whether a conflict exists, a determination attorneys are
required to undertake, particularly where, as here, a former
client makes an allegation of a disqualifying conflict. See
also RPC 1.9 (regarding former clients). Adherence to these
ethical principles is particularly important in the current
legal market, in which lawyers and clients more frequently
rotate from law firm to law firm than they had in the past.
Recent amendments and commentary to RPC 1.6 lend support to
our decision. RPC 1.10(b) refers to information "protected by
RPC 1.6 and RPC 1.9." RPC 1.6(d), adopted August 1, 2016,
effective September 1, 2016, authorizes a lawyer to reveal
information relating to a client "to the extent the lawyer
reasonably believes necessary: . . . (5) to detect and resolve
conflicts of interest arising from the lawyer's change of
employment . . . but only if the revealed information would not
compromise the attorney-client privilege or otherwise prejudice
the client." RPC 1.6(d)(5) further provides that "[a]ny
information so disclosed may be used or further disclosed only
to the extent necessary to detect and resolve conflicts of
interest." The Official Comment to new RPC 1.6(d)(5) states in
pertinent part:
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Paragraph (d)(5) recognizes that
lawyers in different firms may need to
disclose limited information to each other
to detect and resolve conflicts of interest,
such as when a lawyer is considering an
association with another firm . . . . Under
these circumstances, lawyers and law firms
are permitted to disclose limited
information, but only once substantive
discussions regarding the new relationship
have occurred. Any such disclosure should
ordinarily include no more than the identity
of the persons and entities involved in a
matter, a brief summary of the general
issues involved, and information about
whether the matter has terminated. Even
this limited information, however, should be
disclosed only to the extent reasonably
necessary to detect and resolve conflicts of
interest that might arise from the possible
new relationship. Moreover, the disclosure
of any information is prohibited if it would
compromise the attorney-client privilege or
otherwise prejudice the client . . . . Any
information disclosed pursuant to paragraph
(d)(5) may be used or further disclosed only
to the extent necessary to detect and
resolve conflicts of interest.
[Pressler & Verniero, Current N.J. Court
Rules, Official Comment on RPC 1.6 (2016).]5
In fairness to counsel, we are mindful these provisions did
not exist when Riker internally reviewed the conflict issue in
5
We also note that new subsection (f) of RPC 1.6 does not
address an outgoing attorney's duties to reasonably assure his
or her former firm will safeguard access to electronically
stored information and what assurances should be made to clients
affected by the transition. At oral argument on appeal counsel
agreed this is a worthwhile subject to refer to the Advisory
Committee on Professional Ethics.
14 A-5397-15T4
April 2016. Nonetheless, these provisions inform our decision.
Here, the Riker senior attorney needed to access the Estate's
electronic file to determine whether any Riker attorney who
remained after Sylvester left the firm had accessed the file,
and possibly to determine from a review of the document titles
whether any documents were protected. Reviewing anything more
than the metadata concerning when the file was accessed, and
perhaps a title to a document, would have unreasonably exceeded
the need to determine the existence of a conflict. In such
case, there would certainly be a doubt under RPC 1.10(b) as to
the propriety of Riker's continuing representation of
plaintiffs, and that doubt would be resolved in favor of
disqualification. Herbert, supra, 292 N.J. Super. at 438-39.
That brings into focus Riker's procedural non-compliance with
Rule 1:6-6, which hinders our informed resolution of the access
issue.
"It bears emphasizing that '[a]ffidavits by attorneys of
facts not based on their personal knowledge but related to them
. . . constitute objectionable hearsay.'" Mazur v. Crane's Mill
Nursing Home, 441 N.J. Super. 168, 179-80 (App. Div. 2015)
(first alteration in original) (quoting Pressler & Verniero,
supra, Official Comment on Rule 1:6-6). For that reason, "Rule
1:6-6 and its implicit prohibition – explicit in the rule's
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comments – against attorneys filing certifications not based on
firsthand knowledge serve a salient purpose. Attorneys should
comply with the rule and the trial courts should enforce it."
Id. at 181.
Here, according to Loalbo's certification on the motion
record, "a senior attorney at [Riker] was asked to review the
law on disqualification and the facts surrounding this matter,
including a review of the electronic information possessed by
Riker, and whether or not anyone at Riker . . . other than the
Sylvester Group, had accessed such information." In a footnote
to that sentence, Loalbo noted: "Specifically, in conjunction
with [Riker's] IT department, the senior attorney tasked with
reviewing the information regarding conflicts was able to check
the time stamps of when each protected document was last checked
out by an attorney at Riker . . . ." Although the Estate
apparently did not object to the admission on the motion record
of this hearsay evidence, the Estate interpreted this portion of
Loalbo's certification as an acknowledgment that the Riker
partner reviewed the substantive content of the Analysis, as the
Estate so asserted in a brief in opposition to plaintiffs'
motion for leave to appeal.
Had this lawsuit not been dismissed in its entirety by the
trial court following our grant of leave to file this
16 A-5397-15T4
interlocutory appeal, we would simply remand the matter, permit
the parties to supplement the record, and direct the trial court
to resolve the matter in a manner consistent with this opinion,
conducting a hearing if necessary. The dismissal creates a
dilemma. Plaintiffs intend to appeal the dismissal but need to
know whether Riker can file the appeal. When the appeal is
filed, the trial court will be divested of jurisdiction, absent
an order of this court partially remanding jurisdiction to the
trial court on discrete matters. To solve this dilemma, we
order the following course of action.
First, Riker may file a notice of appeal of the dismissal
order within thirty days of this opinion. The time for other
filings in connection with that appeal shall be suspended until
the disqualification issues are resolved. Second, concerning
the possible conflict implicated by RPC 1.10(b), within twenty
days of the date of this opinion, Riker shall serve and file
with the trial court certifications from the senior attorney who
accessed the electronic file and at least one IT person who
assisted. The certifications shall generally describe the
information that was accessed and explicitly state whether the
content of any protected information was accessed, including the
Analysis. The certifications shall also state whether the
protected information can be deleted, and if so, why it has not
17 A-5397-15T4
been deleted; if not, why not. Lastly, the certifications shall
address how those who accessed the file avoided reviewing the
content of protected information.
In addition, Riker shall arrange to again access the
Estate's electronic file, within thirty days, but in the
presence of Sylvester and Sylvester's designated IT person, to
determine whether anyone has accessed the file since Sylvester
left Riker, other than the senior attorney who attempted to
determine the existence of a conflict. The result of this joint
exercise, if it confirms Riker's representations, will
presumably provide some assurance to the Estate that no Riker
attorney has confidential information material to the
substantive issues in the underlying litigation. If the
protected information can be deleted, it should be deleted,
unless for some reason Sylvester does not already have it. We
expect the parties will agree as to what will be deleted, and
urge them to do so. Absent agreement on deletion, the trial
court shall resolve the issue.
If this process reveals that the Riker senior attorney
actually reviewed the substantive content of confidential
information, such as the substantive content of the Analysis,
then the matter shall be remanded to the trial court for the
limited purpose of reinstating the disqualification order. On
18 A-5397-15T4
the other hand, if there remains a bona fide factual dispute
about this issue, the matter shall be remanded to the trial
court for the limited purpose of conducting a hearing, if
necessary, and disposing of the dispute.
The trial court's June 10, 2016 disqualification order is
consequently vacated subject to the terms and conditions we have
specified. The matter is remanded for proceedings consistent
with this opinion. We do not retain jurisdiction.
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