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INA UNDERWRITERS INS. CO. v. NALIBOTSKY

September 14, 1984

INA UNDERWRITERS INSURANCE COMPANY
v.
Philip NALIBOTSKY, et al., v. M.C.M. INSULATION, INC., et al.



The opinion of the court was delivered by: POLLAK

 LOUIS H. POLLAK, District Judge.

 I.

 In this action, plaintiff INA Underwriters Insurance Company ("INAU") alleges that defendants, certain homebuilders and related individuals and entities, constructed homes within the Lafayette Estates housing development which contained a variety of defects. The homes in question were warranted by the National Homeowner's Warranty Program for which INAU is the insurer. As a result, INAU paid for repairs to these homes. INAU now seeks to recover those payments from defendants.

 During the three years which have elapsed since the filing of the complaint in this action, a large number of documents have been filed with this court but little forward progress has occurred until recently. A preliminary discovery period which ended in late May 1984 resulted in the elimination of a number of superfluous third party defendants. At a conference on June 18, 1984, a final discovery schedule was established which will result in submission of final pretrial memoranda from all parties early in l985. Three days before the conference was to be held, defendant Philip Nalibotsky filed with this court a motion to disqualify Wolf, Block, Schorr and Solis-Cohen ("Wolf, Block") as counsel for plaintiff. The parties to this motion have submitted numerous briefs on the legal issues presented and affidavits directed to the factual issues raised by the motion. In addition, when it became apparent that further factual development was necessary to allow a proper evaluation of the motion, an evidentiary hearing was held on August 20 and 21. At that time, defendant James Kravitz and the corporate entities names as original defendants in this action joined in the motion to disqualify.

 The pending motion argues that Robert Boote, Esq. -- the Wolf, Block partner handling INAU's law suit -- and his firm should be disqualified from further representation of INAU because some years ago when the Lafayette Estates development was under construction, Mr. Nalibotsky retained Daniel Cohen, Esq., one of Wolf, Block's labor specialists, to deal with two episodes of picketing at the construction site. *fn1"

 The motion to disqualify was not supported by affidavits or other evidence. The motion and supporting memorandum focused on work done by Mr. Cohen to bring about a prompt cessation of picketing conducted by the Building Trades Committee in the fall of 1976. The targets of the picketing were nonunion subcontractors at the Lafayette Estates development.

 Plaintiff's memorandum in opposition to the motion was timely filed. That memorandum was supported by affidavits from both Mr. Boote and Mr. Cohen which stated that Mr. Cohen had represented Mr. Nalibotsky and some of his corporations both in 1976 and 1979. *fn2" At the time Mr. Boote was preparing to file this action on behalf of INAU, a conflict-of-interest check within the firm revealed this prior representation. After consultation with Mr. Boote and Mr. Cohen, the then chairperson of Wolf, Block's conflict-of-interest committee, the late Louis Goffman, Esq., determined that the prior and current representations were sufficiently unrelated so as to permit Mr. Boote to continue his current representation of INAU.

 Defendants' reply brief was supported by an affidavit from Mr. Nalibotsky. In that affidavit he stated that the 1976 representation by Mr. Cohen "continued beyond 1976, and directly involved this project in 1978." Nalibotsky affidavit at para. 18. At the hearing on the motion both Mr. Nalibotsky and Mr. Cohen testified that the 1976 representation ended in November 1976 and that the threat of picketing at Lafayette Estates in 1978 caused Mr. Nalibotsky again to seek assistance from Mr. Cohen. The 1978 representation began in May and ended in June of that same year. *fn3"

 It is the responsibility of this court to supervise the conduct of members of its bar. In furtherance of this responsibility, this court has adopted standards for professional conduct in its local rules of civil procedure and enforces those standards through appropriate proceedings. E.D.Pa.R.Civ.P. 14. Rule 14(IV) of the local rules of civil procedure states:

 
The Code of Professional Responsibility adopted by this court is the Code of Professional Responsibility adopted by the Supreme Court of Pennsylvania as amended from time to time by that state court, except as otherwise provided by specific Rule of this court after consideration of comments by representatives of bar associations within the state.

 Pennsylvania Canon 4 and the Ethical Considerations and Disciplinary Rules thereunder are designed to protect from disclosure the confidences and secrets which a client reveals to his attorney. In particular, Ethical Consideration 4-5 as adopted by the Pennsylvania Supreme Court states:

 Also, Ethical Consideration 4-6 reads, in pertinent part:

 
The obligation of a lawyer to preserve the confidences and secrets of his client continues after the termination of his employment.

 Defendants contend that, under the circumstances, Mr. Cohen could not now represent INAU in the present action due to his prior representation of currently adverse parties, Mr. Nalibotsky and his related corporations. And since, as defendants further contend, because the disqualification of one member of a firm mandates the disqualification of all members of the firm, Mr. Boote cannot continue to represent INAU in the action against Mr. Nalibotsky. D.R. 5-105(D).

 (1) Laches

 As a preliminary matter, plaintiff argues that the motion to disqualify should be denied pursuant to the equitable doctrine of laches. In support of this position, plaintiff suggests that Mr. Nalibotsky has been or should have been aware of Wolf, Block's involvement in this litigation ever since the commencement of this action in 1981 and most assuredly became aware of it during the course of recent settlement negotiations involving plaintiff and Mr. Nalibotsky.

 It is generally established that laches is not a bar to a motion to disqualify since a court's supervision of the ethical conduct of attorneys practicing before it is designed to protect the public interest and not merely the interest of the particular moving party. E.g., Emle Industries, Inc. v. Glen Raven Mills, Inc., 478 F.2d 562, 574 (2d Cir.1973); Government of India v. Cook Industries, Inc., 422 F. Supp. 1057 (S.D.N.Y.1976); Koehring Company v. Manitowoc Company, 418 F. Supp. 1133 (E.D.Wis.1976); Empire Linotype School, Inc. v. United States, 143 F. Supp. 627 (S.D.N.Y.1956). However, some courts have found delay in the filing of a motion to disqualify to be relevant to the resolution of such a motion. In particular, delay may bar the presentation of a motion to disqualify if that delay reflects an attempt by the moving party to use the disqualification issue merely to gain a tactical advantage. E.g., Arkansas v. Dean Foods Products Company, 605 F.2d 380 (8th Cir.1979); Redd v. Shell Oil Company, 518 F.2d 311 (10th Cir.1975); United States v. Newman, 534 F. Supp. 1113 (S.D.N.Y.1982). In addition, it has been suggested that potential prejudice to other parties to the litigation, particularly the party whose counsel may be disqualified, may be considered in the disqualification analysis. E.g., Arkansas v. Dean Foods Products Company, 605 F.2d 380 (8th Cir.1979); Kramer v. Scientific Control Corporation, 534 F.2d 1085 (3d Cir.1976).

 In the present case, plaintiff has suggested in its response to the motion to disqualify that this motion was presented merely to avoid certain discovery which was scheduled to occur in the near future -- specifically, the deposition of Mr. Nalibotsky by plaintiff's counsel. Plaintiff has also suggested that the fact that the motion was not made until settlement negotiations between plaintiff and Mr. Nalibotsky had broken down casts doubt upon defendants' good faith in filing this motion.

 Plaintiff also asserts that a change of counsel at this late date would cause it severe prejudice and substantially delay the likely trial date of this action. Obviously, a change in counsel after almost three years of proceedings in a case in which the official files alone contain over four hundred and fifty documents would impose on plaintiff a substantial added burden for attorney's fees, since new counsel would have to devote much time to becoming familiar with matters that current counsel have long since mastered. Such a change of counsel would also require suspension of pretrial activities until plaintiff's new counsel could competently represent his client's interests. However, the expense and inconvenience are not so substantial as to outweigh the public interest in assuring that members of the bar live up to their professional ethical obligations. Emle Industries, supra, 487 F.2d at 574. Accordingly, were I to conclude that Wolf, Block's current representation of INAU against Mr. Nalibotsky contravenes the ethical standards which must be observed by practitioners in this court, I would have to direct Wolf, Block to withdraw from this litigation. On the other hand, when a substantial amount of time and effort have already been expended by the counsel who may be disqualified and disqualification would impose a concomitant burden on the current client, it is particularly important for the court carefully to sift through the facts and law surrounding the motion to disqualify to assure that any determination that disqualification is warranted is a correct one.

 (2) Waiver

 Plaintiff also suggests that Mr. Nalibotsky's delay in asserting the disqualification issue supports a finding that the objection has been waived. A number of courts have found waiver to be a valid basis for denial of a motion to disqualify. E.g., Trust Corp. of Montana v. Piper Aircraft Corp., 701 F.2d 85 (9th Cir.1983); Arkansas v. Dean Foods Products Company, 605 F.2d 380 (8th Cir.1979); Central Milk Producers Cooperative v. Sentry Food Stores, Inc., 573 F.2d 988 (8th Cir.1978); In Re Yarn ...


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