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VOICENET COMMUNICATIONS, INC. v. PAPPERT

United States District Court, E.D. Pennsylvania


April 5, 2004.

VOICENET COMMUNICATIONS, INC., et al.
v.
GERALD J. PAPPERT, et al

The opinion of the court was delivered by: MARY A. McLAUGHLIN, District Judge

MEMORANDUM AND ORDER

Voicenet Communications, Inc. and a related entity, Omni Telecom, Inc., have filed a complaint and request for a preliminary injunction against various defendants, including the Bucks County District Attorney and two detectives with the Bucks County District Attorney's Office ("the Bucks County defendants").*fn1 The plaintiffs allege that the defendants violated their constitutional rights to free speech and due process of law. The alleged violations arise out of the execution of a search warrant on Voicenet's premises and the seizure of certain computer equipment.

  Ballard Spahr Ingersoll and Andrews, LLP ("Ballard Spahr") entered an appearance for the Bucks County defendants. The plaintiffs have moved to disqualify Ballard Spahr. They allege that Voicenet is a current client of Ballard Spahr and that Ballard Spahr may not represent the Bucks County defendants who are directly adverse to Voicenet in this litigation. In the alternative, they argue that even if Voicenet is a former client of Ballard Spahr, the law firm must be disqualified because this matter is substantially related to the work done by Ballard Spahr for Voicenet. Ballard Spahr has opposed the motion, arguing that Voicenet is not a current client of the firm and that the prior work it did for Voicenet is not substantially related to this litigation.

  Rule 1.7(a) of the Pennsylvania Rules of Professional Conduct provides:

(a) A lawyer shall not represent a client if the representation of that client will be directly adverse to another client, unless:
(1) the lawyer reasonably believes the representation will not adversely affect the relationship with the other client; and
(2) each client consents after consultation.
If Voicenet is a current client of Ballard, this rule prohibits Ballard's representation of the Bucks County defendants. The Court must decide whether Voicenet is a current client of Ballard. The basis of the motion is that Richard Jaffe, a partner in Ballard Spahr's Business and Finance Department, had represented Voicenet in connection with certain financings of Voicenet. Mr. Jaffe first came into contact with Voicenet in September 2000 when he was a partner at the Mesirov law firm. In 2000, he represented an individual investor in Voicenet. He thereafter represented Voicenet in raising capital for a possible initial public offering ("IPO"). Mr. Jaffe introduced Voicenet to potential investors and investment bankers.

  Sometime between 2000 and April 2002 (the affidavit of Mr. Jaffe is not precise on this point), Mr. Jaffe left the Mesirov firm and went to Schnader Harrison Segal & Lewis LLP. On April 30, 2002, he left Schnader for the Ballard Spahr firm. Mr. Jaffe was assisted in his representation of Voicenet by Raymond Walheim, an associate at Schnader and then at Ballard Spahr.

  During the months of June 2002 through August of 2002, Mr. Jaffe billed two hours for services rendered to Voicenet. Mr. Jaffe sent the last bill to Voicenet in September 2002 for 30 minutes work on August 15, 2002. No one at Ballard Spahr billed for services rendered to Voicenet since August 15, 2002. There was no contact between Mr. Jaffe or Mr. Walheim with Voicenet between at least December 2002 and March of 2004.

  The affidavits submitted by both sides are consistent in describing a contact between Mr. Jaffe and Voicenet in March 2004. Mr. Jaffe states that a few weeks ago, an investment banker contacted him to ask if he was aware if Voicenet was interested in trying another capital venture. Mr. Jaffe stated that he had had no contact with Voicenet but would call them to see if the investment banker could call them. Mr. Jaffe then telephoned someone at Voicenet and passed along the information that an investment banker was interested in speaking with Voicenet. According to the affidavit from the Voicenet representative, the investment banker called Voicenet telling them that he would like to set up a meeting.

  Voicenet also submitted to the Court Unanimous Consents in Lieu of the Annual Meeting of Shareholders and the Board of Directors of Voicenet, dated December 30, 2002 and December 30, 2003, authorizing the officers of the corporation to retain the services of three law firms, including Ballard Spahr "as they deem appropriate."

  The Court concludes from a review of all the materials submitted by the parties in connection with the motion to disqualify that Voicenet is not a current client of Ballard Spahr. Mr. Jaffe was retained for a specific transaction on which he worked during the years 2000, 2001, and 2002. He did only two hours of work for Voicenet after going to Ballard Spahr in May 2002. There was no contact at all between Mr. Jaffe and Voicenet from sometime in 2002 until March 2004. It appears that Voicenet ceased being a client of Ballard Spahr in August 2002 when the last hours were billed to it.

  The call in March by Mr. Jaffee to Voicenet does not change that conclusion. That call may certainly have led to more work for Mr. Jaffe if Voicenet, after talking with the investment banker, decided to go forward with a transaction. But the call, itself, did not trigger a new representation. It was not even initiated by Mr. Jaffe. The investment banker called him and Mr. Jaffe then called Voicenet. The fact that Mr. Jaffe did not bill Voicenet for the call supports this conclusion. The Uniform Consents do not change the result. They simply authorize Voicenet officers to retain Ballard Spahr, among other law firms, if they deem it appropriate.

  Because the Court finds that Voicenet is a former client of Ballard Spahr, it must evaluate the plaintiffs' motion under Rule 1.9 of the Pennsylvania Rules of Professional Conduct:

A lawyer who has formerly represented a client in a matter shall not thereafter:
(a) represent another person in the same or a substantially related matter in which that person's interests are materially adverse to the interests of the former client unless the former client consents after a full disclosure of the circumstances and consultation; or
  (b) use information relating to the representation to the disadvantage of the former client except as Rule 1.6 would permit with respect to a client or when the information has become generally known. The question that the Court must answer is whether the prior representation of Voicenet is substantially related to the present case. The Court finds that it was not. The present case involves civil rights claims by Voicenet arising out of the seizure by law enforcement of certain information and equipment relating to Omni Telecom, Inc.'s Quikvue service. Both Mr. Jaffe and Mr. Walheim have stated in their declarations that they have no knowledge of the Quikvue service. They state that at the time they were providing services to Voicenet, Voicenet's technology was primarily a telephone internet technology called Voice Over IP. Mr. Jaffe and Mr. Walheim did receive certain information from the financial work they performed for Voicenet in 2000 and 2001, and that Mr. Jaffe performed in 2002. However, it does appear and Mr. Jaffe declares that that work is outdated and there is no relation to the Quikvue service or Voicenet's financial status in 2004.

  In addition, counsel has represented that no information regarding Voicenet has been disclosed to any other attorney at Ballard Spahr. Mr. Jaffe and Mr. Walheim have been effectively screened from the present representation.

  An appropriate order follows. ORDER

  AND NOW, this ___ day of April, 2004, upon consideration of Plaintiffs' oral motion to disqualify counsel made in open Court on March 29, 2004, Memorandum of Law in Support of Motion to Disqualify Defendants' Counsel (Docket No. 6), Response of Bucks Country Defendants to Plaintiff's Motion to Disqualify Counsel for Bucks County Defendants, Plaintiff's Reply to Defendant's Memorandum in Opposition to Motion to Disqualify Defendants' Counsel, and Sur-Reply of Bucks County Defendants to Plaintiff's Reply to Bucks County Defendants' Response to Plaintiff's Motion to Disqualify Counsel, it is hereby ORDERED and DECREED that said motion is DENIED.

  ORDER

  AND NOW, this ___ day of ___, 2004, in consideration of the Plaintiff's Motion to receive Reply under seal, IT IS HEREBY ORDERED that the Motion is granted and PLAINTIFF'S REPLY TO DEFENDANT'S MEMORANDUM IN OPPOSITION TO MOTION TO DISQUALIFY DEFENDANTS' COUNSEL with attachments shall be filed by the Clerk under seal.

  MOTION TO FILE PLEADING UNDER SEAL

  Plaintiff, Voicenet Communications, Inc., by its undersigned Counsel and for the reasons that are more fully set forth in Plaintiff's Reply hereby moves that this Honorable Court direct that Plaintiff's REPLY TO DEFENDANT'S MEMORANDUM IN OPPOSITION TO MOTION TO DISQUALIFY DEFENDANTS' COUNSEL and the attachments thereto, be filed by the Clerk under seal. In support thereof, plaintiff avers as follows:

  1. Plaintiff's Reply to Defendant's Memorandum in Opposition to Motion to Disqualify Defendants' Counsel and the Exhibits thereto contain confidential proprietary information of Plaintiff.

  2. Defendant' Counsel has heretofore disclosed information to the Defendants and others which Plaintiff claims is confidential.

  3. Disclosure of the contents of Plaintiff's Reply and the Exhibits thereto information to Defendants will substantially prejudice Plaintiff in this case

  4. Disclosure of the proprietary business information of Plaintiff will prejudice Plaintiff in its ongoing business dealings.

  5. This Honorable Court enjoys discretion to direct that a filing be made under seal, where there is a likelihood that the release of information contained therein will substantially prejudice a party. Such is the case here.

  Wherefore, Plaintiff respectfully requests that the Court direct that Plaintiff's REPLY TO DEFENDANT'S MEMORANDUM IN OPPOSITION TO MOTION TO DISQUALIFY DEFENDANTS' COUNSEL and the attachments thereto, be filed by the Clerk under seal and further that Defendants' Counsel be directed not to divulge the information set forth in the attachments to any party.


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