Sun Life Assurance Company of Canada v. WSFS, FSB ( 2019 )

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
SUN LIFE ASSURANCE COMPANY
OF CANADA
Plaintiff,
Vv.
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WILMINGTON SAVINGS FUND SOCIETY, )
FSB, Solely as Securities Intermediary )
Defendant. )
) C.A. No. N18C-08-074
) PRW CCLD
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)
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)
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WILMINGTON SAVINGS FUND SOCIETY,
FSB, Solely as Securities Intermediary
Counterclaim-Plaintiff,
Vv.
SUN LIFE ASSURANCE COMPANY
OF CANADA
Counterclaim-Defendant.
Submitted: September 20, 2019
Decided: December 19, 2019
MEMORANDUM OPINION AND ORDER
Upon Defendant/Counterclaim-Plaintiff’s Motion to Disqualify,
GRANTED.
Simon E. Fraser, Esquire and Thomas Francella, Esquire, Cozen O’Connor,
Wilmington, Delaware, Attorneys for Plaintiff and Counterclaim-Defendant.
Steven L. Caponi, Esquire and Matthew B. Goeller, Esquire, K&L Gates LLP,
Wilmington, Delaware, Attorneys for Defendant and Counterclaim-Plaintiff.
WALLACE, J.
Plaintiff Sun Life Assurance Company of Canada issued a life insurance
policy in the amount of $6 million to Gordon Bartelstein in May 2007 (the “Policy”).
The current beneficiary of the policy is EP Legacy Trust C (“EPL Trust”), whose
beneficiary in turn is 2018 Life Settlement LP, previously known as Ocean Gate Life
Settlement Program LP. Wilmington Savings Fund Society, FSB (“WSFS”) is
securities intermediary for the beneficiaries.
This suit is Sun Life’s attempt to obtain a judicial finding that the Policy is
void as a stranger-oriented life insurance (“STOLI”’)' wager on Bartelstein’s life
procured for investors lacking any insurable interest therein. | WSFS’s
counterclaims: (1) assert that the Policy was procured for Bartelstein’s wife and
validly assigned; (2) demand payment of the face policy benefits; and, (3) seek
recovery for unfair trade practices and other related causes of action.
The instant Motion to Disqualify concerns prior representation by Sun
Life’s current counsel, Cozen O’Connor (“Cozen”’) of Ocean Gate on matters
allegedly related to the Policy. *
: Some identify STOLI as “stranger-originated life insurance.” E.g. United States v.
Carpenter, 190 F. Supp. 3d 260, 264 (D. Conn. 2016); Wells Fargo Bank, N.A. v. Pruco Life Ins.
Co., 200 So. 3d 1202, 1203 (Fla. 2016). The Court accords here with United States v. Binday in
terming the Policy stranger-oriented—recognizing that the concept also covers circumstances
where an individual insures his or her own life at the behest of investors, to whom the policy and
payments are later assigned. 804 F.3d 558, 565-66 (2nd Cir. 2015).
2 Sun Life has also filed a separate motion (D.I. 116) seeking limited discovery into whether
the EPL Trust still owns the Policy and other alleged STOLI policies, and asking for the Court to
delay a decision until the completion of that discovery. Because the Court is granting relief under
FB =
I. APPLICABLE LEGAL STANDARDS
The Court has the power to disqualify counsel for a conflict of interest it finds
violates the Delaware Lawyers’ Rules of Professional Conduct (the “Delaware
Conduct Rules”).? But “disqualification of counsel is an extreme remedy that should
be employed only when necessary to ensure the fairness of the litigation process.”4
And disqualification motions are generally disfavored because they are too often
filed for tactical reasons.°
A motion to disqualify counsel must be grounded on clear and convincing
evidence establishing a violation of the Delaware Conduct Rules.® Evidence is clear
and convincing when it produces an abiding conviction that the truth of the
this Motion for the reasons explained further in this Opinion and Order, and because certain of
those reasons have to do with evidence of Cozen’s earlier involvement that will still be relevant in
WSFS’s defense no matter who is the ultimate beneficiary is, Sun Life’s request for limited
discovery is DENIED as moot.
3 Acierno v. Hayward, 2004 WL 1517134, at *4 (Del. Ch. July 1, 2004).
4 Fernandez v. St. Francis Hosp., Inc., 2009 WL 2393713, at *5 (Del. Super. Ct. Aug. 3,
2009).
> Acierno, 2004 WL 1517134, at *4; Harper v. Beacon Air, Inc., 2017 WL 838224, at *3
(Del. Super. Mar. 2, 2017).
6 Dunlap v. State Farm Fire and Cas. Co. Disqualification of Counsel, 2008 WL 2415043,
*1 (Del. 2008).
contentions is highly probable.’ This standard is more exacting than a mere
preponderance, but less than beyond a reasonable doubt.*
It is rare for a Delaware court to deny a party’s engagement of its chosen
counsel.? The conflict found before doing so must be “so extreme that it calls into
question the fairness” of the proceeding.’ Only potential unfairness towards a party
can necessitate disqualification as opposed to a less extreme remedy.'! Divining
such unfairness requires “painstaking analysis of the facts.”!? And then the interests
of fairness and of the right to chosen counsel must be weighed with “cautious
scrutiny” before disqualifying counsel.'?
i In re Bailey, 821 A.2d 851, 863 (Del. 2003).
a Matter of Rowe, 566 A.2d 1001, 1006 (Del. Jud. 1989).
a Avacus Partners, L.P. v. Brian, 1990 WL 27538, n.7 (Del. Ch. Mar. 9, 1990).
ie Appeal of Infotechnology, 582 A.2d 215, 221 (Del. 1990); Dunlap, 2008 WL 2415043, at
* | (citing Unanue v. Unanue, 2004 WL 602096, at *2 n.17 (Del. Ch. Mar. 25, 2004) (“Vague and
unsupported allegations are insufficient to meet this [disqualification] standard.”)).
7 Matter of the Estate of Waters, 647 A.2d 1091, 1095-96 (Del. 1994).
7 Satellite Fininacial Planning Corp. v. First Nat. Bank of Wilmington, 652 F. Supp. 1281,
1283 (D. Del. 1987) (internal quotations and citations omitted); Avacus Partners, L.P. v. Brian,
1990 WL 27538, at *4 n.7 (Del. Ch. Mar. 9, 1990) (“[{C]ontext must matter.”).
13 Satellite Fininacial, 652 F. Supp. at 1283 (internal quotations and citations omitted); see
also United States v. Miller, 624 F.2d 1198, 1202 (3d Cir. 1980) (Observing that while a “[trial]
court’s power to disqualify derives from its inherent power to supervise the professional conduct
of attorneys appearing before it” and such court “has wide discretion in framing its sanctions to be
just and fair to all parties involved, . . . the court should disqualify an attorney only when it
determines, on the facts of the particular case, that disqualification is an appropriate means of
enforcing the applicable disciplinary rule.”) (internal citations and quotations omitted).
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Il. FACTUAL AND PROCEDURAL BACKGROUND
A. CONCURRENT LITIGATION AND WSFS’S WAIVER.
Cozen is WSFS’s longstanding outside counsel and currently manages an
ongoing matter for WSFS involving life insurance trusts (“Concurrent Litigation’)."4
Just two days after Sun Life filed the original Complaint, WSFS learned that Cozen
was representing Sun Life in this action.'!° Given the apparent incipient conflict of
interest, WSFS contacted Cozen insisting that Cozen withdraw from representing
Sun Life.!®
Following negotiations, the parties reached an agreement memorialized in a
letter signed in August 2018 by John Olson of and on behalf of WSFS, and Jeff
Cedrone of and on behalf of Sun Life (the “Conflict Agreement”).!’ The Conflict
Agreement included Sun Life’s assurance that “[Sun Life] is not pursuing in any
manner, and will not be pursuing in any manner, any claim(s) against [WSFS] for
any money judgment or affirmative monetary relief.”'* Reciprocally, WSFS agreed
4 Aff. of Olsen § 2, Ex. A.
. Id. § 2.
- Id. 43.
uy? Id. Ex. A.
18 Id.
that “there is no disabling conflict and [WSFS] will not claim or contend that Cozen
O’Connor should be disqualified.”!?
B. COZEN’S PREVIOUS RELATED REPRESENTATION OF OCEAN GATE.
The alleged conflict of interest underlying the instant Motion to Disqualify
Counsel arises not from the Concurrent Litigation, but from Cozen’s prior
representation of Ocean Gate.?? Ocean Gate has since been renamed 2018 Life
Settlement LP, but is the same entity and the current beneficiary of the EPL Trust
and thus the ultimate beneficiary of the Policy.”!
Ocean Gate managed investment portfolios that included life insurance
assets.22, Ocean Gate’s investment model involved acting through an aggregator to
purchase beneficiary rights to an array of existing life insurance policies for which
3
it had no prior contact with the insured, trustee, or beneficiary.27 Ocean Gate
contends in this suit that it became the ultimate owner of the beneficial interest in
Z Id.
as Aff. of Kiefer 4 6.
21 Td
22 Id. at 5.
23 Id.
the Policy through this process.** The California Public Employees’ Retirement
System (“CalPERS”) is the majority owner and secured creditor of Ocean Gate.”°
In order to perform due diligence when considering a 2010 loan to Ocean
Gate, CalPERS and Ocean Gate retained Cozen as special regulatory counsel to
evaluate the validity and enforceability of the life insurance policies in Ocean Gate’s
investment plan under the laws of various states.*° Ocean Gate and CalPERS
disclosed confidential information to Cozen in order to permit Cozen to fully analyze
the legal status of these assets.’
Cozen prepared at least five opinion letters (collectively, the “Opinion
Letters”) discussing, among other things, (i) the facts about Ocean Gate’s proposed
investment program, (ii) pertinent state insurance law principles such as insurable
interest, transfer of insurance assets, and the contestability of life insurance policies,
and (iii) existence of an insurable interest and the potential to collect death benefits
a Aff. of Kiefer 4] 2-4.
25 Id. 9 7, 8.
a Id. 4 10.
a Id. 11.
under those policies.2* The Opinion Letters provided analysis under the laws of
Florida, California, New Jersey, New York, and Delaware.”?
WSEFS advised Cozen of the newly-discovered Sun Life conflict of interest as
to the prior matter in December 2018 and requested Cozen voluntarily withdraw.*°
Cozen refused, claiming that the Conflict Agreement waived any conflict of
interest.3! Cozen also noted that “in the event WSFS fails to abide by [the Conflict
Agreement], Sun Life would obviously be unconstrained by the agreement and free
to pursue claims directly against WSFS.”°?
C. COZEN’S ETHICS SCREEN.
Three days after WSFS revealed the alleged conflict, Cozen instituted a
“computer lock-out” preventing Cozen attorneys representing Sun Life in this case
(the “Sun Life Team’) from accessing all files related to Cozen’s previous work with
Ocean Gate.”*? Additionally, all physical files related to the previous work were
1.34
collected and delivered to Cozen’s Conflicts Counse Cozen also promptly
28 Id. J 13.
ces Id. 9 12, 14, Ex. A.
» Id. Ex. F.
31 Td.
=2 Aff. of Foresta, Ex. H.
33 Aff. of Fox ¥ 10.
34 Td.
prepared and circulated a formal ethics screen (the “Ethics Screen”).*> The Ethics
Screen prohibits the Sun Life Team from accessing files and discussing confidential
information related to the previous work with Ocean Gate, and is enforced through
a disciplinary system whose sanctions can include dismissal.°° The Court has
absolutely no doubt that Cozen’s attorneys have fully complied with the Ethics
Screen.?”
II. DISCUSSION
A. COZEN’S REPRESENTATION OF SUN LIFE HERE IMPLICATES
ITS DUTY OF LOYALTY TO A FORMER CLIENT.
Delaware Conduct Rule 1.9 explains and governs attorneys’ duties to former
clients:
A lawyer who has formerly represented a client in a matter shall not
thereafter 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 gives informed
consent, confirmed in writing.*®
Therefore, to show that an opposing counsel’s current representation would
run afoul of Rule 1.9, the moving party must show that “(1) the lawyer had an
7 Id. $11.
36 Td.
7 Aff. of Miller. { 31.
38 Del. Lawyers’ R. Prof’] Conduct 1.9(a) (2019).
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attorney-client relationship with the former client; (2) the present client’s matter is
the same or substantially related to the first client’s matter; (3) the interests of the
second client must be materially adverse to the former client; and (4) the former
client must not have consented to the representation after consultation.”°? WSFS
presents sufficient evidence demonstrating that Cozen’s representation of Sunlife
meets all four criteria.
1. The parties agree that Cozen represented Ocean Gate.
Cozen admits it had an attorney-client relationship with Ocean Gate.*? So,
while the parties dispute whether Cozen represented CalPERS on this matter as well,
that need not be resolved. The prior Ocean Gate representation alone satisfies the
first Rule 1.9 element.
2. The present action is substantially related to Cozen’s previous work for
Ocean Gate.
Matters are substantially related under Delaware Conduct Rule 1.9 “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
39 Bowden v. Kmart Corp., 1999 WL 743308, at *1 (Del. Super. Ct. July 1, 1999) (citing
Nemours Foundation y. Gilbane, Aetna, Federal Ins. Co., 632 F.Supp 418, 422 (D. Del 1986)).
ia Aff. of Fox 5.
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the prior representation would materially advance the client’s position in the
subsequent matter.”*!
Cozen’s extensive investigation into the procedures Ocean Gate and the
aggregators followed in acquiring life insurance contracts are closely related to how
Ocean Gate behaved in acquiring the Policy. Sun Life alleges that when Bertelstein
obtained the Policy in 2007, he misrepresented his wealth and income at the specific
behest of the investors with whom he had contracted to secretly assign the Policy
without informing Sun Life.** Cozen’s inquiry into Ocean Gate’s practices in 2010
thus potentially uncovered conduct that informs the truth or falsity of the allegations
in this suit, constituting the same matter and not merely a similar one.
3. Sun Life has materially adverse interests to its former client.
Though Ocean Gate has undergone several name changes, the entity has not
been dissolved, nor has any other legal event severed the continuity of its existence
and interests.*2 Because Ocean Gate, under its new name, is the beneficiary of the
policy Sun Life seeks to void, Sun Life’s interests are directly adverse.
7 Del. Lawyers’ R. Prof?! Conduct 1.9, cmt. 3 (2019).
2 Aff. of Miller 4 25.
2 Aff of Fox 9 15, 16.
“4 Aff. of Kiefer { 9.
-ll-
4. No purported consent from WSFS relieves Cozen of its
Delaware Conduct Rule 1.9 obligations.
The Conflict Agreement is a contract, and as such the first and most important
interpretive source is its text.° The parties disagree as to the scope of conflicts
disclaimed by the text. Sun Life urges a broader reading, denying all conflicts
known and unknown. Even assuming Sun Life’s broader reading is correct, the
Conflict Agreement does not relieve the Court of its duty to ensure the fairness of
the litigation process in this case and the appropriateness of counsel’s representation
under Delaware’s rules.
The Delaware Conduct Rules’ prohibition against conflicts with past clients
recognizes an exception only for informed consent in writing from the former client,
not the later adverse party.“© WSFS may be the now-adverse party, but Ocean Gate
is the former client here. So it is hardly clear that WSFS was empowered to provide
the consent needed. But that does not settle the further question Cozen has raised:
Whether the Conflict Agreement bars WSFS from filing a motion to disqualify
Cozen, or what position WSFS can take on any such motion?
45 See Rhone-Poulenc Basic Chemicals Co. v. Am. Motorists Ins. Co., 616 A.2d 1192, 1196
(Del. 1992) (“clear and unambiguous language in an agreement will be given its ordinary and usual
meaning”).
& Del. Lawyers’ R. Prof’] Conduct 1.9 (2019).
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Granted, the Conflict Agreement language might support a broad reading
requiring WSFS to refrain from filing such a motion and opposing one should others
raise them.*”7 But, when appropriate, the Court has the authority to consider
disqualification sua sponte.*® Had WSFS merely brought the later-discovered (i.e.,
post-Conflict Agreement) disqualification concern to the Court’s attention, the Court
would have had the parties provide the necessary background of the concern WSFS
had uncovered and brief the disqualification issue. The vehicle by which this
concern arrived to the Court, therefore, is of little moment. But the Court should, at
least, address whether WSFS now has a contractual obligation under the Conflict
Agreement to resist Cozen’s disqualification.
Each counsel before this Court is not only “a representative of clients” but
also “an officer in the legal system” and when potential conflicts between these
responsibilities arise they “must be resolved through the exercise of sensitive
professional and moral judgment guided by the basic principles underlying the
[Delaware Conduct] Rules.”*”? These include transparency and forthrightness to the
- See Aff. of Olsen, Ex. A (“WSFS. .. will not claim or contend that Cozen O’Connor should
be disqualified from representing Sun Life with respect to the litigation concerning the policy at
issue.”).
48 See Dunlap v. State Farm Fire and Cas. Co. Disqualification of Counsel, 2008 WL
2415043, *1 (Del. May 6, 2008) (where trial court to disqualifies an attorney sua sponte it must
do so via issuance of a written opinion or ruling on the record amenable to appellate review).
2 Del. Lawyers’ R. Prof?! Conduct, pmbl. § 1, 9 (2019) (“In the nature of law practice, []
conflicting responsibilities are encountered.”’).
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Court, independence of counsel’s professional judgment, and a duty to aid in
°° These principles
securing observance of professional duties required by others.
would be contravened if a contract could bind parties and their counsel to take a
particular position on an ethical dilemma before the facts or even existence of the
dilemma were known to them. The Court therefore declines to read such a repugnant
intent into the Conflict Agreement.
B. GIVEN THE UNIQUE FACTS PRESENTED, THE FAIRNESS OF THE LITIGATION
PROCESS IN THIS SPECIFIC CASE CANNOT BE ENSURED IF COZEN IS
PERMITTED TO CONTINUE ITS REPRESENTATION OF SUN LIFE.
Even after showing a conflict under Delaware Conduct Rule 1.9, that conflict
does not merit disqualification absent the additional showing that it would, if
permitted, “prejudice the fairness of the proceedings”! as to WSFS.*” WSFS argues
confidential disclosures from Ocean Gate give Cozen an unfair advantage.”
Additionally, it points to the possibility of the Opinion Letters being evidence
brought before the jury.’
%0 See generally Del. Lawyers’ R. Prof?! Conduct 3.3 (2019) (requiring candor to the Court);
id., pmbl. { 12 (“A lawyer should also aid in securing the[ ] observance [of the Delaware Conduct
Rules] by other lawyers. Neglect of these responsibilities compromises the independence of the
profession and the public interest it serves.”’).
s! Appeal of Infotechnology, 582 A.2d 215, 221 (Del. 1990).
a Matter of the Estate of Waters, 647 A.2d 1091, 1095-96 (Del. 1994).
= WSES Br., at 28.
== Id. at 29 n. 7.
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Sun Life in response argues that no confidential disclosures from Ocean Gate
materially affect the present action,’ and Cozen’s Ethics Screen prevents any risk
of prejudice.°°
Both of these responses address only the first of WSFS’s arguments. Cozen
implemented an Ethics Screen—to which the Court has no doubt it has strictly
adhered—immediately upon learning of the connection with the prior matter.°’ The
Court credits that no confidential information entrusted to Cozen in the course of its
representation of Ocean Gate has been misused, and that the safeguards Cozen has
implemented are more than adequate to prevent any future misuse and ensure WSFS
will not be prejudiced by confidential disclosures from the earlier representation.
Cozen’s screen, however, does nothing to safeguard the proceedings from
prejudice that may come from Cozen’s Opinion Letters being important sources of
evidence in WSFS’s case.
Cozen interviewed Ocean Gate’s principals about the investment program.*®
To create the Opinion Letters, Cozen received and considered internal transaction
%S Sun Life Br., at 16.
7 Id. at 19.
» Aff. of Miller §§ 28-31.
7 Aff. of Kiefer 4 11.
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documents related to the program.*? Cozen considered the actual conduct Ocean
Gate and its affiliates undertook in procuring policies. Even if the procurement of
the Policy itself was not discussed, when Cozen interviewed Ocean Gate personnel
and collected information on their general behavior, that constitutes strong evidence
which a fact finder can consider in determining how Ocean Gate behaved in the
specific instance of acquiring the Policy.”
The Opinion Letters, and the testimony of the attorneys who produced them,
at this albeit early stage of the litigation appear to be relevant evidence that WSFS
will likely seek admission of at trial. The credibility of the Cozen attorney-authors
would potentially be a question before the jury submitted by a party whose opponent
EY Id.
= Florida Opinion Letter 3-5 (““We [Cozen] have been advised of the following facts by the
Purchaser [Ocean Gate] and nothing in our Interview with the Aggregator [Dearborn Capital
Partners, LLC] was inconsistent therewith ... . [A]t no point prior to or during the procurement of
the Policy did the Purchaser, the Aggregator, the Agent, or any of the Purchaser’s, Aggregator’s
or Agent’s affiliates, officers, directors, employees, agents or representatives: (i) enter into any
agreement, or make any offer to enter into any agreement, whether oral, written or otherwise, to
Purchase the Policy or any interest in the Trust from any party, including but not limited to the
Insured, Trustee, or Initial Beneficiary, or any representative or agent of the Insured, Trustee, or
Initial Beneficiary or (ii) purchase or offer to purchase the Policy or any interest in the Trust from
any party, including but not limited to the Insured, Trustee, or Initial Beneficiary, or any
representative or agent of the Insured, Trustee, or Initial Beneficiary. At no point prior to or during
the procurement of the Policy did the Purchaser, the Aggregator or any of the Purchaser’s or
Aggregator’s affiliates, officers, directors, employees, agents or representatives have any contact
with the Insured, Trustee or Initial Beneficiary, or any affiliates, officers, directors, employees,
agents or representatives thereof.”).
= See Delaware Rule of Evidence 406 (“Evidence of a person's habit or an organization's
routine practice may be admitted to prove that on a particular occasion the person or organization
acted in accordance with the habit or routine practice”).
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is represented by Cozen itself. Irrespective of the circumspection of Cozen’s
attorneys in this case, this alignment has the potential for great prejudice to WSFS.
Because disqualification is only called for when a party in the current case is
prejudiced, it is infrequently appropriate to remediate conflicts under Delaware
Conduct Rule 1.9.% However, the “specter of switching sides” is a key evil
Delaware Conduct Rule 1.9 is intended to prevent, and that specter is sharpened by
the likelihood of the prior representation coming before a jury.® If it is the jury that
watches this unfold, there are two possible views it may take: (1) that Cozen has
greater credibility now because it is owning up to any possible lapse in its earlier
advice on this issue—advantage Sun Life; or (2) that Cozen will argue whichever
side of the same question its current client will pay for—advantage WSFS. Either
is intolerable and avoidable.
Even if the jurors could be personally shielded from knowledge that Sun
Life’s attorneys are also with Cozen, there is an appearance of duplicity that the
Rules guard against.* Where the public’s confidence in the administration of justice
7 See Manning v. Vellardita, 2012 1072233, *3-4 (Del. Ch. Mar. 28, 2012).
7 See EON Corp. IP Holdings LLC v. Flo TV Inc., 2012 WL 4364244, *5 (D. Del. Sept. 24,
2012) (Specter of “switching sides” is attenuated by time elapsed between representations, but
magnified when prior attorneys or materials would come before the jury, and even when the jury
itself can be shielded “would give rise to the perception by the general public that the rules are
designed to avoid.”).
oF Id.
=l7'=
is implicated, disqualification may be appropriate to avoid “even the appearance of
impropriety.”©
C. POSSIBLE INCONVENIENCE TO SUN LIFE.
The Court must next consider the inconvenience of disqualification to Sun
Life. Disqualification most greatly prejudices counsel’s current client when that
counsel has represented the client on similar cases in the past and if disqualification
would result in significant cost or delay.° However, disqualification is less
prejudicial when it is raised early in the litigation.°’
To be sure, Cozen’s disqualification would impact Sun Life—but not
significantly. Cozen’s Sun Life Team has represented Sun Life generally for twenty
years and on STOLI matters for ten years.** But at argument Cozen was forthright:
the current members of the Sun Life Team joined the firm in 2018 or later, and
= IBM v. Levin, 579 F.2d 271, 283 (3rd Cir. 1978).
ES See Elonex LP. Holdings, Ltd. v. Apple Computer, Inc., 142 F. Supp. 2d 579, 584 (D. Del.
2001) (rejecting disqualification of client’s longstanding counsel which had extensive familiarity
with the factual and legal issues of the complex case through thousands of hours billed and through
representing the client on twenty-one related cases).
ei See Intellectual Ventures I LLC v. Checkpoint Software Technologies Ltd., 2011 WL
2692968, *14 (D. Del. Jun. 22, 2011) (timing favors disqualification early in litigation, before a
trial date is set); End of Road Tr. v. Terex Corp., 2002 WL 242464, *3 (D. Del. Feb. 20, 2002)
(rejecting disqualification when trial is imminent and disqualification would thus impose
substantial delay and expense).
7 Sun Life Br., at 3.
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Cozen’s local counsel joined in 2015. Cozen is undoubtedly familiar with the
factual and legal issues of this case, but the matters are not so technical as to prevent
another firm from quickly familiarizing itself. Moreover, the motion arises in the
early stages of litigation.””
Cozen urges the Court to deny disqualification by analogy to Dollar Tree, Inc.
v. Dollar Express LLC.” In that case, a law firm advised consultants on a
corporation’s dividend issuance, then later represented the corporation’s suppliers
against the corporation in a suit that prominently featured an attack on the legality
of the dividend.” The non-party consultants sought disqualification since the firm
would be required to discredit work on which it had advised.” That work, however,
was produced by the consultants with the advice of the law firm, rather than being a
product of the law firm directly.” The distinction is important, and goes directly to
the specific appearance of duplicity which concerns the Court here.
6° Hr’g. Tr. at 12.
70 In a letter sent by Cozen on behalf of Sun Life, a Cozen attorney noted that WSFS brought
up the issue and requested withdrawal on December 7, only 17 days after filing the Answer to the
Complaint. Foresta Aff., Ex. F.
7 Dollar Tree, Inc. v. Dollar Express LLC, 2017 WL 5624298 (Del. Ch. Nov. 21, 2007).
2 Id. at*1.
73 Id
7” See Id. at *3 (“this action would require [the firm] to discredit the same work on which it
advised [the consultants]”).
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Overall, the balance of factors calls for Cozen’s disqualification in this
particular case. Disqualification inevitably imposes costs and delays, but the
prejudice to WSFS—made more severe by the appearance of impropriety—
outweighs the inconvenience to Sun Life. Even if Cozen’s Ethics Screen completely
prevents the disclosure of restricted information—and the Court does not, for a
moment, doubt Cozen’s representations to that effect—the specter of Cozen
“switching sides” is unacceptable. As a result, Delaware Conduct Rule 1.9 and the
Court’s duty to ensure fairness in this litigation requires disqualification.
IV. CONCLUSION
Cozen’s conflict with the Concurrent Litigation does not disqualify it because
WSFES validly waived that conflict in exchange for Sun Life’s assurances in the
Conflict Agreement, which remain fully in force.
But the Court must conclude under the specific facts presented here that Cozen
cannot, consistent with the Delaware Lawyers’ Rules of Professional Conduct,
represent Sun Life in this matter due to their past representation of Ocean Gate. Sun
Life’s position is adverse to Ocean Gate’s, and the matters are intimately connected.
So much so, that Sun Life’s attorneys, Cozen, will likely be forced to confront
Cozen’s own prior work product. Despite Cozen’s prompt and sound efforts to
safeguard Ocean Gate’s confidence, and without fault to Cozen attorneys’ diligence,
integrity, or professionalism, the Court cannot countenance such an eventuality.
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There should be no mistake; the Court here has no doubt each attorney and
firm has behaved honorably and forthrightly throughout their representation—past
and present—of the parties involved in this litigation. But the Court likewise has no
doubt that this case presents a unique alignment of facts and factors which requires
employ of the extreme and rare remedy of disqualification of counsel to ensure the
fairness of the litigation process.
WSFS’s motion to disqualify counsel is therefore GRANTED.
IT IS SO ORDERED.
Paul R. Wallace, Judge
Original to Prothonotary
cc: All Counsel via File and Serve
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