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New Employer’s Old Counsel Represents Old Employer in Raiding Dispute: Santander Securities LLC v. Gamache
Posted on Categories Business & Employment, Court DecisionsTags , ,

By David C. Franceski, Jr.

*Absent a substantial question regarding an attorney’s honesty, trustworthiness or fitness, a non-client should not have standing to disqualify an opponent’s counsel. **A former client’s negotiation methods, litigation strategy or “litigation playbook” do not constitute confidential information warranting disqualification.

Santander Securities LLC vs. Gamache, No. 17-317 (E.D. Pa., 4/3/17).

A Counsel in Demand

Defendant, a former financial advisor sued by the Santander plaintiffs for misappropriating confidential and proprietary customer information, moved to disqualify plaintiffs’ counsel on the grounds that (1) the firm had previously represented defendant’s new employer, Citizens, in similar restrictive covenant litigation against Citizens’ own former employees, including at least ten (10) FINRA non-competition arbitrations, and (2) the firm is presently representing plaintiffs in a FINRA arbitration against Citizens over the information defendant allegedly misappropriated and the customers he allegedly solicited.

Shaky Standing

The Court does not decide the standing issue. First, neither party explicitly raised the issue, and plaintiff, therefore, may have waived it. That said, there is a split of authority among the federal courts on the issue, and the majority of courts in the Third Circuit have found a non-client does have standing to seek opposing counsel’s disqualification because attorneys are generally authorized to report ethical violations. Nevertheless, the Court concludes that defendant’s standing on the facts of this case “is questionable at best.” Defendant does not contend that plaintiffs’ counsel ever represented him, or in its prior representation of Citizens, acted adversely to plaintiffs, and defendant does not raise any question respecting the honesty, trustworthiness or fitness of plaintiffs’ counsel that would implicate the policy behind reporting ethical violations. Further, Pennsylvania’s Rules of Professional Conduct require that such reports be made to the “appropriate professional authority,” and that authority is not the Court. For both prudential and constitutional reasons, therefore, the Court “would be inclined to deny” a non-client defendant standing to make the motion.

An Insubstantial Relationship Saves Counsel from Disqualification

But even assuming standing, the Court would deny the motion, because disqualification requires that defendant show (1) a past attorney-client relationship which was adverse to the subsequent client, (2) involving a substantially related subject, (3) from which a member of the firm acquired knowledge of confidential information from or concerning the former client, actually or by operation of law, he cannot prevail in this action. Under Pennsylvania law, matters are substantially related if they involve the same transaction or dispute, or there is otherwise a substantial risk that confidential information from the prior representation would materially advance the current client’s position in the subsequent matter. Neither is the case here. Because plaintiffs’ counsel had been terminated over a year before defendant joined Citizens, it could not have learned anything about defendant, his conduct or his communications with Citizens, and neither this action nor plaintiffs’ claims against Citizens in arbitration are related to counsel’s prior representation of Citizens. General knowledge of a client’s policies, practices, litigation or settlement strategy does not warrant disqualification.

(D. Franceski: Though the opinion does not say so, the Court may well have been influenced by the fact that while Citizens was, according to the Court, “irate” over the role of its former counsel in representing Claimant Santander in the unfair competition arbitration claim, it did not make a similar motion in the arbitration. At least the opinion makes no mention of a similar effort in that action.)

(SLC Ref. No. 2017-18-04)

NOTICE: The court decision synopsis published above represents an abbreviated description of the actual decision and is re-printed here for its educational value. The author's effort is to report concisely the substance of the decision or a selected portion of the decision; commentary or analysis is generally reserved for the italicized section at the bottom of the summary. Subscribers to SAC's Online Litigation Alert (SOLA), from which this synopsis is excerpted, have immediate access to the full decision, in addition to the synopsis.

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