Vanderbilt Univ. v. Scholastic, Inc.
Vanderbilt Univ. v. Scholastic, Inc.
Opinion of the Court
*832Before the Court is a Report and Recommendation ("R & R") from the Magistrate Judge (Doc. No. 67) concerning Vanderbilt University's ("Vanderbilt") Motion to Disqualify Neal & Harwell, PLC ("Neal & Harwell") from the representation of Defendant Ted S. Hasselbring (Doc. No. 49). Hasselbring has timely filed objections (Doc. Nos. 69, 70), Vanderbilt has responded (Doc. No. 73), and Neal & Harwell has replied (Doc. No. 76).
I. Legal Standard
As an initial matter, the parties appear to have been flummoxed because the Magistrate Judge issued the underlying decision a report and recommendation rather than an order. This was likely an oversight by the Magistrate Judge. Pursuant to the Court's initial referral, it is within the purview of the Magistrate Judge to decide non-dispositive motions in this case. (Doc. No. 9); L.Civ.R. 16.01. A motion to disqualify is a non-dispositive motion. See, e.g., Munson Hardisty, LLC v. Legacy Pointe Apartments, LLC, No. 3:15-CV-4547-TAV-HBG,
"When a district judge reviews a magistrate judge's resolution of a non-dispositive matter, it is not a de novo review, as it is in relation to a magistrate judge's recommendation as to a dispositive matter." Inhalation Plastics, Inc. v. Medex Cardio-Pulmonary, Inc., No. 2:07-cv-116,
Here, Neal & Harwell does not object to any of the factual findings of the R & R.
II. Discussion
A. Background
The agreed-upon facts are straightforward. Mr. Arrin Richards is an attorney who until late 2017 worked in the Office of the General Counsel at Vanderbilt. In that capacity, he was familiar with, and involved in, Vanderbilt's investigation and negotiations, as well as its legal strategies and positions regarding the license agreement which is the subject matter of this litigation. Mr. Richards participated in issues related to Defendant Hasselbring, including preparation for an in-person interview.
In September 2017, Mr. Richards applied for a position with Neal & Harwell. He interviewed and was offered a position with the firm. Mr. Richards accepted the offer and began working with Neal & Harwell on January 2, 2018. At the time Mr. Richards accepted employment with Neal & Harwell, the instant lawsuit had not been filed. On January 16, 2018, the Complaint was filed and Hasselbring received an email from Vanderbilt attaching a courtesy copy. Until that time, Hasselbring had not attempted to contact or retain counsel in connection with the matter. Based on his personal knowledge of attorney Aubrey Harwell and the recommendations of others, Hasselbring sought representation from Neal & Harwell. On January 18, 2018, Hasselbring contacted Harwell about representation.
Pursuant to Neal & Harwell's policies and practices, an email was circulated to determine if any of the attorneys within the firm had a conflict with Hasselbring's representation. Mr. Richards responded regarding his familiarity with the matter and indicated that he should be screened from all information related to the representation. The conflict was confirmed and the firm implemented certain screening procedures. Both Mr. Richards and Mr. Harwell have filed sworn declarations (a) indicating that no confidential or privileged information was disclosed involving Vanderbilt's investigation or any other information related to Mr. Richards' previous representation of Vanderbilt in this or any other matter, and (b) stating their understanding and intention to abide by the firm's screening procedures.
After agreeing to represent Hasselbring, Neal & Harwell promptly notified counsel for Vanderbilt of Mr. Richards' conflict of interest and their screening procedures. After being advised by Neal & Harwell that Mr. Richards joined the firm prior to the filing of this action, and being unwilling to waive any conflict, Vanderbilt filed its Motion to Disqualify Neal & Harwell *834pursuant to Tennessee Supreme Court Rule 8, RPC 1.10. Vanderbilt does not contend that there has been any actual violation of attorney confidences by Mr. Richards.
B. Relevant Rules
Tennessee Supreme Court Rule 8, Rule of Professional Conduct 1.10 addresses the issue of "imputed disqualification" concerning the movement of lawyers between firms. It speaks to whether any lawyers associated with the new firm are allowed to represent a client if the Rules of Professional Conduct prevent one of the firm members from doing so alone. In particular, Rule 1.10(c) states:
Except with respect to paragraph (d) below, if a lawyer is personally disqualified from representing a person with interests adverse to a client of a law firm with which the lawyer was formerly associated, other lawyers currently associated in a firm with the personally disqualified lawyer may nonetheless represent the person if both the personally disqualified lawyer and the lawyers who will represent the person on behalf of the firm act reasonably to:
(1) Identify that the personally disqualified lawyer is prohibited from participating in the representation of the current client; and
(2) Determine that no lawyer representing the current client has acquired any information from the personally disqualified lawyer that is material to the current matter and is protected by RPC 1.9(c); and
(3) Promptly implement screening procedures to effectively prevent the flow of information about the matter between the personally disqualified lawyer and the other lawyers in the firm; and
(4) Advise the former client in writing of the circumstances that warranted the implementation of the screening procedures required by this rule and of the actions that have been taken to comply with this rule.
RPC 1.10(c). However, Rule 1.10(d) states:
The procedures set forth in paragraph (c) may not be used to avoid imputed disqualification of the firm, if:
(1) The disqualified lawyer was substantially involved in the representation of a former client; and
(2) The lawyer's representation of the former client was in connection with an adjudicative proceeding that is directly adverse to the interests of a current client of the firm; and
(3) The proceeding between the firm's current client and the lawyer's former client is still pending at the time the lawyer changes firms.
Rule 1.10(d). As the Magistrate Judge correctly explained, Rule 1.10(d) essentially provides a condition precedent that, if met, prevents a law firm from relying on the provisions of Rule 1.10(c), particularly the screening mechanism, to avoid a potential conflict of interest.
C. The Magistrate Judge's Decision
Before the Magistrate Judge, both sides agreed that Mr. Richards himself is disqualified from representing Hasselbring in this matter. The issue was whether that disqualification must be imputed to all attorneys of Neal & Harwell, or whether the firm's screening efforts were sufficient to avoid imputed disqualification. The Magistrate Judge acknowledged considerations of, on the one hand, allowing reasonable choice of legal counsel and, other the other hand, "reasonably assuring the principle of loyalty to the prior client is not compromised and that confidential information related to the representation will not be utilized against the client." (Doc. No. 67 at *8355-6 (citing RPC 1.10 cmt. 5).) The Magistrate Judge, with the agreement of the parties, identified that the key provision at issue was Rule 1.10(d)(3). But he rejected Neal & Harwell's argument that Rule 1.10(d) does not apply unless the hiring firm was already representing a client in a proceeding adverse to the conflicted attorney's former client. (Id. at 7.) Rather, the Magistrate Judge concluded, the "chief concern" appeared to be whether the conflicted attorney was "substantially involved" in the matters that are the subject of the instant litigation "irrespective of whether the new firm was involved in that litigation prior or subsequent to the conflicted attorney's hiring by the new firm." Id. at 7-8. The Magistrate Judge therefore rejected Neal & Harwell's argument that this case was not "pending" when Mr. Richards changed firms and therefore Rule 1.10(d) is inapplicable, in favor of Vanderbilt's argument that "the existence of an actual lawsuit is not a condition precedent to the application of the rule but rather, whether the disqualified lawyer was substantially involved in the representation of the former client in the subject matter of the current litigation." Id. at 8. Accordingly, the Magistrate Judge concluded that Neal & Harwell should be disqualified pursuant to Rule 1.10(d).
C. Objections and Discussion
Neal & Harwell objects to the Magistrate Judge's conclusion that it should be disqualified, arguing that, under Rule 1.10(d), this matter was not "pending" two weeks before the complaint was filed, when Mr. Richards left Vanderbilt and joined Neal & Harwell. (Doc. No. 69.) Neal & Harwell asserts that (1) Rule 1.10(d) is unambiguous; (2) this matter was not "pending" when Mr. Richards joined Neal & Harwell; (3) the Magistrate Judge's analysis should have stopped there under relevant law; and (4) the Magistrate Judge's alternate, policy-based reasoning was incorrect. Because the Court agrees with the first three points, it need not reach the fourth.
The rules governing practice and procedure in the courts of Tennessee have "the force and effect of law," Crosslin v. Alsup,
The Tennessee Supreme Court has explicitly held that "a lawsuit becomes 'pending' when the complaint is filed." See West v. Vought Aircraft Indus., Inc.,
*836Miller, et al., 4 FED. PRAC. & PROC. CIV. § 1052 - 1053 (4th ed. 2018). While Tennessee Supreme Court Rule 8 (the Rules of Professional Conduct) does not explicitly define "pending," Tennessee Supreme Court Rule 10 (the Code of Judicial Conduct)
Furthermore, as Hasselbring's expert Brian Faughnan has cogently explained, the Tennessee Supreme Court has in other circumstances utilized alternative terms such as "contemplated" or "potential" when it has intended for a Rule of Professional Conduct to apply outside of the context of an already-filed action. (See Doc. No. 70-2 at ¶¶ 24-30 (citing RPC 1.8(e) ("in connection with pending or contemplated litigation") (emphasis added); RPC 3.4, cmt. 2 ("a pending proceeding or one whose commencement can be foreseen") (emphasis added); RPC 5.5(c) & cmt. 12 ("pending or potential proceedings") (emphasis added); RPC 8.5, cmt. 4 (contrasting "conduct relating to a proceeding pending before a tribunal" with "conduct in anticipation of a proceeding not yet pending before a tribunal") ). It is apparent that the Tennessee Supreme Court knows well how to craft rules regarding not-yet-filed cases and filed cases, and Rule 1.10(d) governs only filed - i.e., "pending" - cases. Federal courts have therefore applied Rule 1.10(d) in situations where complaints had actually been filed before the attorney switched firms. See, e.g., Munson Hardisty, LLC,
State v. Smith,
The case of O'Rourke v. O'Rourke, No. M2006-01071-COA-R3-CV,
Vanderbilt has offered little else by the way of support for its understanding of the plain meaning of "pending." Vanderbilt's expert, Winston Evans, does not advance Vanderbilt's position on the meaning of "pending" at all. (See Doc. No. 73-1.) Vanderbilt suggests a non-legal source, the Oxford English Dictionary ("OED"), but it is of no assistance. The main definition of "pending" offered by the OED is "awaiting decision or settlement," with the sample usage of "nine cases were still pending. " See en.oxforddictionaries.com/definition/pending (emphasis added) (last accessed July 19, 2018). Only an alternate definition is "about to happen; imminent."
Vanderbilt has also cited several cases involving Tennessee's Open Matters Act. However, those cases do not supplant the Tennessee Supreme Court's pronouncement as to when litigation becomes "pending." For example, one of the cases Vanderbilt cites - Putnam Cty. Educ. Ass'n v. Putnam Cty. Comm'n,
*838Finally, Vanderbilt has not explained how its definition of "pending" could even be measured. That is, how could it be determined, for imputation purposes, when a proceeding really became "impending"? A definition without any quantifiable meaning is no definition at all; the "narrow exception" of Rule 1.10(d) could swallow Rule 1.10(c) whole.
Vanderbilt also makes extended argument about the commentary to the Rules of Professional Conduct. However, "the text of each Rule is authoritative." Tenn. Sup. Ct. R. 8, Preamble and Scope ¶ 23. Regardless, Vanderbilt's argument concerning the commentary is mostly aimed at policy and purpose (as it was before the Magistrate Judge); regarding the plain meaning of "pending," it is not much more than a gloss. Vanderbilt highlights commentary that states Rule 1.10 "restates the rule of law established by Clinard v. Blackwood,
The Court is not applying abnormally "strict construction," as Vanderbilt suggests, but adherence to the unambiguous plain meaning of "pending." The Court recognizes the Magistrate Judge's desire to give life to the policy concerns of Clinard and its progeny. However, it was contrary to law for the Magistrate Judge to rely on "the purposes behind the rule" where the plain meaning was sufficient. (Doc. No. 67 at 9.) Vanderbilt contends that the Court's understanding of Rule 1.10(d) explained herein would have "absurd results" - namely, that an attorney could be substantially involved in a matter until shortly before a complaint was filed and then switch to a firm representing an adverse party without consequence. But this would essentially elevate the exception of Rule 1.10(d) over the general rule, which provides for screening procedures, and it cannot be the case for two reasons. First, there would be consequences - specifically, the attorney who switched firms shortly before a complaint was filed would be "out of the game," disqualified from participating in the litigation, or sharing information with anyone else was involved in it, by Rule 1.10(c). Second, this position assumes that the attorney who "switched sides" would seek to violate the screen and participate in the litigation behind the scenes with the participation of his new colleagues. However, under the Rules of Professional Conduct, attorneys are expected to honor their oaths and follow their ethical obligations, and firms are expected to properly implement and adhere to their ethical screens. Vanderbilt's position would undermine the ethical screen process without justification in law.
The Court realizes, as did the Magistrate Judge, that litigation does not occur in a vacuum, and that the Rules of Professional Conduct, to some degree, concern *839themselves with the perceptions of the public. The Court further acknowledges that plain meaning of Rule 1.10(d)(3) may result in some "perception of an unfair game." (Id. ) And it may even appear somewhat unseemly for Neal & Harwell to have accepted the representation of Hasselbring given its recent hire of Mr. Richards. Nevertheless, based upon Rule 1.10(d), the Court disagrees with the conclusion that "the existence of an actual lawsuit is not a condition precedent to the application of the rule." (Id. at 8.) Rule 1.10(d) is a narrow exception, and the Court finds that all of the unambiguous requirements of Rule 1.10(d) have not been met when: (1) Mr. Richards began working at Neal & Harwell on January 2, 2018; (2) the Complaint was filed on January 16, 2018; and (3) Neal & Harwell was first contacted about representing Hasselbring on January 18, 2018.
Accordingly, Neal & Harwell's Objections are SUSTAINED and the R & R (Doc. No. 67) is SET ASIDE . Given that there are no other allegations of malfeasance (i.e., Mr. Richards' personal conflict was promptly disclosed, no confidential information has been shared by Mr. Richards, and a satisfactory screen has been implemented), and that Vanderbilt does not contend there has been any actual violation of attorney confidences by Mr. Richards, the Motion to Disqualify Neal & Harwell from the Representation of Defendant Hasselbring (Doc. No. 49) is DENIED . The Joint Motion for Leave to File Under Seal (Doc. No. 37) is GRANTED and the Motion for Leave to File Document Under Seal (Doc. No. 56) is GRANTED . The Court will consider the Partial Motion to Dismiss in due course.
IT IS SO ORDERED.
Neal & Harwell cites to L.Civ.R. 72.03, which provides that the Court may refer non-dispositive motions for a report and recommendation, and also cites to cases in which district courts referred a motion to disqualify to a magistrate judge for a report and recommendation, and then considered the resulting report and recommendation de novo. (Doc. No. 76 at 15-16.) However, a referral for a report and recommendation did not occur here, and Neal & Harwell is not entitled to de novo review under Rule 72(b).
This negates any need to consider the question of the Court receiving further factual evidence.
"[C]ourts regularly consider opinions offered by legal ethics experts in deciding motions to disqualify counsel." Howard v. Wilkes & McHugh, P.A., No. 06-2833 Ml/P,
The Tennessee Supreme Court has explained that the Rules of Professional Conduct and the Code of Judicial Conduct should each be understood in light of each other. Hancock,
Notably, the additional terms sometimes used by the Rules of Professional Conduct - contemplated, potential, anticipated - are the opposite of the additional term "in progress" used in the statute at issue in Smith. Vanderbilt's proposed understanding of "pending" would therefore make language in the other Rules of Professional Conduct cited above by Mr. Faughan redundant. For example, under Vanderbilt's understanding of "pending," the reference in Rule 5.5(c) & cmt. 12 to "pending or potential proceedings" would mean "potential or existing or potential proceedings" - a nonsensical result.
Neither does Analytica, Inc. v. NPD Research, Inc.,
Reference
- Full Case Name
- VANDERBILT UNIVERSITY v. SCHOLASTIC, INC.
- Cited By
- 9 cases
- Status
- Published