15.09. Reading: Bowers v. The Opthalmology Group, 733 F.3d 647 (6th Cir. 2013)

Reading Guide

Preparing for the Reading:
This raises a basic (but difficult) issue when dealing with two matters which a former client claims are “substantially related.” Be sure to consider both the majority and dissenting approach and see which you find most convincing.

Issues:
– Who is the “current client” who is the “former client”?
– What is the argument that these two matters are “same” or “substantially related”? What is the argument they are not?
– When should a court rule on a motion to disqualify — before or after ruling on the merits?

Bowers v. The Ophthalmology Group

733 F.3d 647 (6th Cir. 2013)

OPINION

KAREN NELSON MOORE, Circuit Judge.

When a prior attorney-client relationship exists between a party and an opposing party’s counsel, the opposing party’s counsel must be disqualified if confidential information was shared in the prior matter and that matter is substantially related to the current one. In this appeal, we consider the meaning of “substantially related.”

Plaintiff–Appellant, Barbara Jean Bowers, M.D., is an ophthalmologist in Paducah, Kentucky. From 2002 to 2010, Bowers was a partner of The Ophthalmology Group LLP, defendant-appellee. After being expelled from the partnership in 2010, Bowers filed the instant suit, seeking relief for gender discrimination and retaliation under both Title VII of the Civil Rights Act of 1964 (“Title VII”), 42 U.S.C. § 2000e et seq., and Kentucky law. Bowers also moved to disqualify defendant’s counsel, an attorney at McMurray & Livingston PLLC (“M & L”), at the district court based on a conflict of interest: another attorney at M & L previously represented Bowers in a substantially related matter.

The district court granted summary judgment in favor of defendant because Bowers, as a former partner of The Ophthalmology Group, was not an “employee” under Title VII. As a result, the district court dismissed without prejudice Bowers’s state-law claims, declining to exercise supplemental jurisdiction. Lastly, the district court denied Bowers’s motion to disqualify M & L “as moot.” Bowers appeals those decisions of the district court and asks this court to disqualify M & L on appeal, a request that was previously denied in a single-judge order from this court. Finding that M & L’s prior representation of Bowers is substantially related to the present case, we GRANT Bowers’s motion to disqualify M & L on appeal, VACATE the district court’s grant of summary judgment, and REMAND the case for further proceedings with instructions to disqualify M & L on remand.

I. Background

Bowers joined The Ophthalmology Group as an employee in 1999. In 2002, she became one of six partners of The Ophthalmology Group after buying into the partnership and signing a partnership agreement. On November 9, 2009, Bowers tendered a resignation letter to her partners. Although Bowers did not give a date of departure, the partnership agreement required a one-year notice. On March 4, 2010, the partners voted to expel Bowers from the partnership. The following day, Bowers was given notice of her expulsion and the reason behind it: her “Chapter 7 bankruptcy and the creditors’ proceedings associated with such bankruptcy and other personal conduct … which the Partnership, in its opinion, finds detrimental to the Partners and the Partnership.” R. 7–8 (Expulsion Letter at 1) (Page ID # 114).

[Bowers filed this lawsuit alleging gender discrimination under state and federal law and wrongful termination (among other claims). The Ophthalmology group moved to dismiss the complaint alleging that, as a partner she was not entitled to bring a discrimination claim. Bowers responded that she was merely a “nominal partner” and therefore not excluded.]

On May 16, 2012, Bowers filed a motion to disqualify defendant’s counsel. R. 24 (Pl. Mot. to Disqual.) (Page ID # 1349–55). Bowers pointed to two instances where a past attorney-client relationship existed between her and defendant’s counsel, an attorney at M & L. First, another attorney at M & L represented Bowers when she attempted to establish an additional ophthalmology practice in Louisville, Kentucky in 2008. Second, M & L counseled and advised The Ophthalmology Group regarding the potential expulsion of a male partner in 2005. The Ophthalmology Group responded to Bowers’s motion to disqualify, attaching confidential documentation to support its argument that there was no conflict from the prior attorney-client relationship between M & L and Bowers. R. 29 (Def. Resp. to Pl. Mot. to Disqual.) (Page ID # 1752–1864).

In an order filed August 22, 2012, the district court … granted the motion in favor of defendant. R. 41 (D. Ct. Op. at 2, 11) (Page ID # 1968, 1977). The district court determined that “as a matter of law, Bowers was a partner in the Ophthalmology Group” and that as such, “Bowers is not entitled to bring claims under Title VII.” Id. at 10 (Page ID # 1976). … The district court also denied “as moot” Bowers’s motion to disqualify defendant’s counsel because it had granted summary judgment to defendant … Bowers timely appealed and filed a motion to disqualify defendant’s counsel on appeal. …

II. Disqualification of Defendant’s Counsel on Appeal

Bowers argues that defendant’s counsel must be disqualified on appeal because of a conflict of interest. In particular, Bowers alleges that M & L represented her in two matters that are substantially related to the present case: (1) Bowers’s attempt to establish an additional practice in Louisville and (2) The Ophthalmology Group’s potential expulsion of a male partner. We agree with Bowers that M & L must be disqualified.

[The court applied the Kentucky Rules of Professional Conduct which are the same as ABA Rule 1.9(a): “A lawyer who has formerly represented a client in a matter shall not thereafter represent another person in … a substantially related matter in which that person’s interests are materially adverse to the interests of the former client unless the former client gives informed consent, confirmed in writing.”.]

Applying this framework to M & L’s representation of Bowers in her efforts to establish an additional practice in Louisville, there is no dispute that a past attorney-client relationship between Bowers and M & L existed during that representation and that M & L acquired confidential information. Therefore, our resolution turns on whether M & L’s representation of Bowers in her attempt to establish a practice in Louisville is “substantially related” to the present case. We have not explored previously the contours of what constitutes “substantially related,” so we take this opportunity now to do so.

Complicating matters slightly is that the comments to Rule 1.9 make clear that the “former client is not required to reveal the confidential information learned by the lawyer in order to establish a substantial risk that the lawyer has confidential information to use in the subsequent matter.” MODEL RULES OF PROF’L CONDUCT R. 1.9 cmt. 3 (2011); see Restatement (Third) of the Law Governing Lawyers § 132 cmt. d(iii) (2000) (“A concern to protect a former client’s confidential information would be self-defeating if, in order to obtain its protection, the former client was required to reveal in a public proceeding the particular communication or other confidential information that could be used in the subsequent representation.”). Given this limitation, we must determine whether matters are “substantially related” while avoiding specific inquiries into the attorney’s representation of a now-adverse client.

The comments to Rule 1.9 state that “[m]atters are ‘substantially related’ … if they involve the same transaction or legal dispute or if there is otherwise a substantial risk that confidential factual information as would normally have been obtained in the prior representation would materially advance the client’s position in the subsequent matter.” MODEL RULES OF PROF’L CONDUCT at R. 1.9 cmt. 3 (emphasis added); …In a well-regarded opinion, a federal district court in Kansas explained:

In determining whether a substantial relationship exists, the court evaluates the similarities between the factual bases of the two representations. A commonality of legal claims or issues is not required. At a functional level, the inquiry is whether the attorneys were trying to acquire information vitally related to the subject matter of the pending litigation. To accomplish this inquiry, the court must be able to reconstruct the attorney’s representation of the former client, to infer what confidential information could have been imparted in that representation, and to decide whether that information has any relevance to the attorney’s representation of the current client. What confidential information could have been imparted involves considering what information and facts ought to have been or would typically be disclosed in such a relationship. Consequently, the representations are substantially related if they involve the same client and the matters or transactions in question are relevantly interconnected or reveal the client’s pattern of conduct.

Koch v. Koch Indus., 798 F. Supp. 1525, 1536 (D. Kan. 1992) …. The analyses [is]: the court must look to the general type of information that the potentially conflicted lawyer would have been exposed to in a normal or typical representation of the type that occurred with the now-adverse client. … Admittedly, this approach has its difficulties, most notably that reconstructing a representation using generalities is less exact than examining what actually happened. Nonetheless, this method presents a necessary alternative to engaging with the specific—perhaps confidential—facts surrounding a potentially conflicted attorney’s prior representation of a now-adverse client.[1] …Adopting these approaches now, we must examine whether there is a substantial risk that confidential information as would normally or typically have been obtained in M & L’s prior representation of Bowers would materially advance The Ophthalmology Group’s position in the present case.

Applying this approach, we conclude that M & L’s representation of Bowers in her attempt to establish an additional practice in Louisville is substantially related to the present case. In a normal or typical representation of this type, M & L likely would have obtained confidential information regarding Bowers’s relationship with her partners at The Ophthalmology Group. When a partner seeks to establish an additional practice separate from her partnership, it seems very likely that the partner would discuss her confidential motivations for doing so with her attorney. For example, in the present case Bowers could have disclosed to M & L that she was not establishing an additional practice because she felt powerless at The Ophthalmology Group but simply because she wanted to make more money. This would be detrimental to Bowers’s Title VII claim because she alleged that The Ophthalmology Group discriminated against her by not giving her powers that were otherwise accorded to full partners. It seems equally likely that an attorney in this type of representation would want to understand whether there could be backlash from the partnership towards her client for establishing an additional, separate practice. Imagine a scenario that could have happened in the present case in which Bowers communicates to M & L: “Who cares what my partners think, I am a full partner too, so I can do as I please.” This information would undermine Bowers’s Title VII claim, as pleaded, because it would cut against her assertion that she is merely a “nominal” partner (and therefore can avail herself of Title VII’s protections).

Given these scenarios, there is a substantial risk that confidential information as would normally or typically have been obtained in M & L’s prior representation of Bowers would materially advance The Ophthalmology Group’s position in the present case. Therefore, the matters are substantially related… For this reason, we grant Bowers’s motion to disqualify M & L from representing The Ophthalmology Group on appeal. … We remand the case to the district court for further proceedings with instructions to disqualify M & L on remand.

III. Disqualification of Defendant’s Counsel at the District Court

As this case illustrates, when counsel is disqualified, a court should not reach the other questions or motions presented to it through the disqualified counsel. Here, however, the district court first granted summary judgment in favor of The Ophthalmology Group and then dismissed Bowers’s motion to disqualify “as moot.” On appeal, The Ophthalmology Group asserts that “[t]here is nothing extraordinary about a district court denying ‘as moot’ a motion to disqualify counsel when it has decided to dismiss the underlying case.” Appellee Br. at 58. We disagree…

A district court must rule on a motion for disqualification of counsel prior to ruling on a dispositive motion because the success of a disqualification motion has the potential to change the proceedings entirely. … The reason is simple: if counsel has a conflict from previously representing the party seeking disqualification, as was alleged in the present case, there is a risk that confidential information could be used in preparing or defending the motion for summary judgment in violation of …the relevant state rules of professional conduct. In other words, a potentially conflicted counsel’s confidential information could infect the evidence presented to the district court. Therefore, a district court must reach the merits of a disqualification motion before ruling on a dispositive motion. For this reason, the district court erred in the present case by failing to rule on the merits of Bowers’s motion to disqualify defendant’s counsel prior to granting summary judgment in favor of defendant. Therefore, we vacate the district court’s summary-judgment ruling and remand the case for proceedings consistent with this opinion. Given our holding disqualifying M & L on appeal, the district court need not conduct a disqualification hearing but is, instead, instructed to disqualify M & L on remand. Defendant must obtain counsel not subject to a conflict of interest to ensure that the further proceedings are not subject to the possible taint of confidential information.

IV. Conclusion

For the reasons set forth in this opinion, we GRANT Bowers’s motion to disqualify M & L, The Ophthalmology Group’s counsel on appeal, VACATE the district court’s grant of summary judgment, and REMAND the case for further proceedings with instructions to disqualify M & L on remand.

GRIFFIN, Circuit Judge, dissenting.

I respectfully dissent. While I agree with the majority that the district court erred in failing to rule on the merits of plaintiff Bowers’s motion for disqualification of counsel prior to ruling on defendant The Ophthalmology Group’s dispositive motion, any error in this regard was harmless in light of Bowers’s failure to establish a conflict of interest—specifically, that McMurry & Livingston PLLC’s (“M & L’s”) prior and current representations are “substantially related” as required by the applicable rules of professional conduct. Because the district court did not otherwise err in determining that defendant was entitled to summary judgment as a matter of law with regard to Bowers’s Title VII claims, I would affirm.

“Motions to disqualify are viewed with disfavor and disqualification is considered a drastic measure which courts should hesitate to impose except when absolutely necessary.” Valley-Vulcan Mold Co. v. Ampco-Pittsburgh Corp., 237 B.R. 322, 337 (6th Cir. 1999) … A party seeking disqualification carries a heavy burden and must meet a high standard of proof. Id. (citation omitted). Under the [requirements of Rule 1.9(a)] …, a former client moving for disqualification must demonstrate, inter alia, that “the matters embraced within the pending suit are substantially related to the matters or causes of action wherein the attorney previously represented [the former client].” Gen. Elec. Co. v. Valeron Corp., 608 F.2d 265, 267 (6th Cir. 1979) (citation omitted). “Matters are ‘substantially related’ … if they involve the same transaction or legal dispute or if there otherwise is a substantial risk that confidential factual information as would normally have been obtained in the prior representation would materially advance the client’s position in the subsequent matter.” ABA Model Rules of Professional Conduct 1.9 cmt. 3…. “The underlying question is whether the lawyer was so involved in the matter that the subsequent representation can be justly regarded as a changing of sides in the matter in question.” ABA Model Rules of Professional Conduct 1.9 cmt. 2.

As the basis for her motion for disqualification, Bowers points to two prior instances in which M & L represented her. [The important one for us is] her attempt to establish a practice in Louisville, Kentucky in 2008. The existence of an actual past attorney-client relationship stemming from these consultations is not in dispute in this case. However, contrary to Bowers’s assertions, disqualification is not required because these matters bear no “substantial relationship” to the present Title VII action.

***

[T]he present case [is not] “substantially related” to M & L’s 2008 representation of Bowers on an individual basis in her aborted attempt to establish a practice in Louisville. Bowers sought to perform refractive surgery on a once-a-week basis in Louisville while overseeing her restaurant there, a franchise of the Mongolian Grill. In 2008, defendant’s practice manager referred Bowers to an attorney with M & L, for the purpose of creating a corporate entity known as Refractive Surgery of Louisville, PLLC. Bowers’s activities in Louisville would have no competitive effect on defendant’s medical practice in Paducah, over 200 miles away, and her proposal was made with the knowledge and consent of defendant’s partners. However, Bowers’s plans never materialized because she ultimately decided, for various reasons, including the failure of her restaurant business, not to perform medical procedures in Louisville. Bowers’s PLLC was never used, and it was administratively dissolved in 2009.

The events underlying the present litigation started in late 2009 and early 2010. On November 9, 2009, Bowers tendered a resignation letter to defendant’s partners. Although her partnership agreement required a one-year notice, she did not state when she intended to depart. Bowers allegedly began secret discussions with a direct competitor, Eyecare Associates, which had an office across the street from defendant in Paducah.

***

Unlike the majority, I simply cannot conclude that M & L’s limited 2008 transactional work for Bowers for the narrow purpose of forming a now-defunct company, with the full knowledge and consent of defendant, is substantially related to the present matter, so as to justify the disqualification of M & L in this case. The majority’s opinion is rife with speculative scenarios regarding confidential information that Bowers may have shared with M & L regarding her relationship with her partners in The Ophthalmology Group. But Bowers’s conclusory assertions that issues in the former and current representations are related and that confidences were imparted to M & L in the 2008 consultations that would unfairly advance defendant’s cause herein do not suffice to fulfill the heavy burden on Bowers to justify disqualification. M & L’s assistance in setting up a corporation, and the personal financial information imparted by Bowers that predominated this task, have little or no relationship to her current claims of discrimination and retaliation in violation of federal and state law. Bowers’s failure to establish this essential element dooms her argument that a conflict of interest exists.

For the foregoing reasons, I would affirm the district court’s judgment.

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[1] In fact, the present case illustrates an additional danger with the use of confidential information. M & L should not have attached confidential documentation regarding its representation of Bowers to The Ophthalmology Group’s reply to Bowers’s motion to disqualify counsel. At the district court, M & L asserted that the disclosure of such information was permissible:

The use of otherwise confidential file material related to Dr. Bowers is permissible pursuant to Ky. SCR Rule 3.130 [1.6(b) (3) ] (Model Rule 1.6(b) (3)) (“A lawyer may reveal information relating to the representation of a client to the extent the lawyer reasonably believes necessary … to respond to allegations in any proceeding … concerning the lawyer’s representation …”).

R.29–1 (Def. Memo in Resp. to Pl. Mot. to Disqual. at 8 n. 3) (Page ID # 1760). Contrary to what M & L argued at the district court, the commentary to Rule 1.6 makes it absolutely clear that Rule 1.6 “governs the disclosure by a lawyer of information relating to the representation of a client during the lawyer’s representation of the client” and instructs the reader to see “Rule 1.9(c) (2) for the lawyer’s duty not to reveal information relating to the lawyer’s prior representation of a former client.”… MODEL RULES OF PROF’L CONDUCT at R. 1.6 cmt. 1. Rule 1.9(c) (2) states: “A lawyer who has formerly represented a client in a matter or whose present or former firm has formerly represented a client in a matter shall not thereafter … reveal information relating to the representation except as these Rules would permit or require with respect to a client.” … MODEL RULES OF PROF’L CONDUCT at R. 1.9(c) (2). M & L has failed to identify any rule that would permit or require the disclosure of such information, and we fail to see one that would apply.