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Twenty-First Century Rail Corp. v. New Jersey Transit Corp., N.J., No. A-101, 5/7/12.
Key Holding: Representing a party adverse to a former client in the same matter is flatly forbidden unless the former client gives written consent.
Potential Impact: Almost completely closes any escape hatch in New Jersey for lawyers to switch sides in the same dispute.
The ethics rule on former-client conflicts flatly forbids lawyers to represent a party adverse to a former client in the same matter without the former client's written consent, regardless of whether key confidences would have been revealed in the earlier representation, the New Jersey Supreme Court declared May 7 (Twenty-First Century Rail Corp. v. New Jersey Transit Corp., N.J., No. A-101, 5/7/12).
In an opinion by Justice Helen E. Hoens, the court made clear that when a lawyer has previously represented a client in a matter and later represents the client's adversary in the same matter, the conflict is not analyzed under the two-part test announced in Atlantic City v. Trupos, 992 A.2d 762, 26 Law. Man. Prof. Conduct 282 (N.J. 2010), for evaluating whether matters are substantially related.
The plain language of Rule 1.9 make clear, Hoens said, that if the prior and the subsequent matters are essentially the same, the representation is prohibited absent the former client's informed consent, confirmed in writing.
Applying its ruling, the court disqualified a law firm that had advised a client in a dispute over delays on a construction project from subsequently representing an adverse party in litigation over the delays.
The disqualification dispute before the court involves Peckar & Abramson, which bills itself as “one of the nation's leading construction law firms.”
In 2004, Peckar & Abramson partner Bruce Meller was consulted by the Frontier-Kemper/Shea/Bemo Joint Venture (FKSB) about its rights and obligations as a contractor on the “N30 Project” to construct an underground train station in Weehawken, N.J.
FKSB had contracted to do some aspects of the project and was concerned about the allocation of responsibility for delays that were impeding completion of its work. Peckar & Abramson provided FKSB with an opinion letter and billed it for approximately 20 hours of work.
Later FKSB and the prime contractor on the project, Twenty-First Century Rail Corp., sued PB Americas Inc., which served as the project engineer and was responsible for project design and engineering. The complaint alleged that PB Americas was responsible for the construction delays on the N30 Project because of defective project design and slow responses to requests for corrections.
PB Americas retained Peckar & Abramson to represent it; FKSB objected and moved to disqualify the firm. The trial court denied the motion. The intermediate appellate court affirmed, concluding that the prior and current matters were not substantially related under the framework the supreme court crafted in Trupos.
The supreme court reversed, concluding that Peckar & Abramson must be disqualified from representing PB Americas in this litigation because it was now representing a party adverse to its former client, FKSB, in the same matter without the former client's written consent.
New Jersey Rule of Professional Conduct 1.9(a) provides: “A lawyer who has represented a client in a matter shall not thereafter represent another client in the same or a substantially related matter in which that client's interests are materially adverse to the interests of the former client unless the former client gives informed consent confirmed in writing.”
In Trupos, the court held that for purposes of applying Rule 1.9(a), matters are substantially related if (1) the lawyer for whom disqualification is sought received confidential information from the former client that can be used against that client in the subsequent representation of a party adverse to the client, or (2) facts relevant to the prior representation are relevant and material to the subsequent representation.
Applying that test, the court in Trupos reversed an order that disqualified a law firm from handling a group of tax appeals against a municipality. The record did not show that the firm obtained useful and relevant information in its earlier representation of the city in other tax appeals, or that the facts of the prior representation were relevant or material to the current representation, the court found.
The trial and appellate courts here analyzed Peckar & Abramson's alleged conflict under the two-part test devised in Trupos, but the supreme court held that this case called for a “markedly different analytical starting point.”
Instead of applying the Trupos test, the court started from the premise that Rule 1.9(a) plainly precludes subsequent representation adverse to a former client in the same matter without the former client's written consent. Accordingly, “if the prior and the subsequent matters are indeed the same, the representation, absent written consent of the former client, is prohibited,” the court said.
The Trupos test was designed, Hoens explained, for determining the similarity between two representations that are not the same but at most are substantially related. In a situation where the two matters are the same, it is not necessary to conduct an inquiry into whether the matters are substantially related, nor is it necessary to consider whether client confidences were communicated to the lawyer, the court made clear.
Reviewing the record, the court had no trouble concluding that the previous and current matters were the same. Both involved the same discrete phase of a construction project, the same contracts, the same parties, and the same dispute, it explained.
That it is the same dispute is apparent, the court found, from the language of the law firm's 2004 opinion letter, which discussed a threat of litigation relating to delays in the N30 project, a theory upon which that litigation would proceed against FKSB, and “design and constructability issues” as a factor in the delays.
That phrase clearly refers to PB Americas, which was responsible for project design, and “makes plain that counsel was aware of and considered the adverse positions of FKSB, the lawyer's now-former client, and PB Americas, the subsequent and current client,” the court stated.
Hoens said that in considering whether the present litigation is the same dispute, “we need not focus, as we did in Trupos and as the appellate panel did in this matter, on whether in the context of seeking the advice from counsel, FKSB revealed confidences, because disqualification, if the matter is indeed the same, does not turn on the identification of any particular confidence having been revealed.”
The inquiry concerning confidentiality is needed, as in Trupos, only when the matters are not the same and the court is charged with the task of determining whether they are substantially related, the court explained.
As other evidence demonstrating that the matters were the same, the court pointed out that in his certification opposing disqualification, Meller noted that he advised his new client, PB Americas, about the former representation and the work he had performed for FKSB in 2004.
But that was not his obligation under Rule 1.9(a), the court said. Instead, having realized that he had previously represented the client's adversary in the same matter, Meller was obligated to reach out to former client FKSB and affirmatively seek that client's permission before undertaking the new representation. Not having done so, the firm must be disqualified, the court concluded.
Patricia A. Millett of Akin Gump Strauss Hauer & Feld in Washington, D.C., argued for FKSB. Bruce D. Meller of Peckar & Abramson, River Edge, N.J., argued for PB Americas.
Full text at http://op.bna.com/mopc.nsf/r?Open=kswn-8u3s8c.
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