DOLORES BALABAN v. PHILIP MORRIS USA, INC. and R.J. REYNOLDS TOBACCO, CO. , 240 So. 3d 896 ( 2018 )

DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
FOURTH DISTRICT
DOLORES BALABAN,
Petitioner,
v.
PHILIP MORRIS USA INC. and R.J. REYNOLDS TOBACCO COMPANY,
Respondents.
No. 4D17-2479
[April 18, 2018]
Petition for writ of certiorari to the Circuit Court for the Seventeenth
Judicial Circuit, Broward County; John J. Murphy, III, Judge; L.T. Case
No. 14-24204(19).
Juan P. Bauta, II, and James L. Ferraro of The Ferraro Law Firm,
Miami, for petitioner.
Frances Daphne O’Connor and Geoffrey J. Michael of Arnold & Porter
Kaye Scholer LLP, Washington, D.C., for respondent Philip Morris USA Inc.
Jason T. Burnette of Jones Day, Atlanta, GA, for respondent R.J.
Reynolds Tobacco Company.
ON MOTIONS FOR REHEARING AND MOTION FOR CLARIFICATION
PER CURIAM.
We grant respondents’ motions for rehearing. We further vacate our
order denying petitioner’s motion for clarification and grant that motion.
As a result, we are withdrawing our original opinion and substituting the
following opinion.
Dolores Balaban seeks certiorari review of a trial court order granting
a motion to disqualify the Ferraro Law Firm (“the Ferraro firm”) from
representing her in a pending civil action against Philip Morris USA, Inc.
(PM USA) and R.J. Reynolds Tobacco Company (RJR). Certiorari lies to
review this order granting disqualification. See Philip Morris USA Inc. v.
Caro, 207 So. 3d 944, 949 (Fla. 4th DCA 2016).
The trial court granted the motion based on this Court’s recent decision
in Caro, where we quashed a trial court order denying PM USA’s motion to
disqualify the Ferraro firm and its attorney Paulo Lima (“Attorney Lima”).
Id. at 951. However, the circumstances in this case distinguish it from
Caro and compel an expanded analysis, potentially including application
of a different provision of the Rules Regulating the Florida Bar. The trial
court departed from the essential requirements of law in finding Caro
dispositive, in failing to hold an evidentiary hearing to make the required
findings of fact, and in failing to rule on the issue of RJR’s standing to join
in the motion to disqualify. We thus grant the petition, quash the trial
court’s order, and return the case to the trial court for further proceedings
consistent with this opinion.
Briefly stated, petitioner sued PM USA, RJR, and other defendants in
2014 in one of many Engle-progeny 1 cases involving cigarette smokers who
suffered injury or died. PM USA moved to disqualify Attorney Lima and
the Ferraro firm from representing petitioner, alleging that Attorney Lima
had previously represented PM USA while employed by Hunton &
Williams, LLP (“the Hunton firm”) from 2005-15. The motion to disqualify
included allegations that Attorney Lima billed more than 1,500 hours on
PM USA matters including more than 1,300 hours defending PM USA in
smoking and health litigation while working at the Hunton firm, with
nearly 375 hours spent specifically on Engle tobacco-related issues. PM
USA also alleged Attorney Lima had access to PM USA’s litigation
databases and had reviewed its internal documents, including those that
were highly confidential and privileged. PM USA therefore claimed
Attorney Lima and the Ferraro firm had an impermissible conflict of
interest precluding representation of petitioner as the plaintiff in this case
against it. RJR joined in the motion.
The motion cited Rule Regulating The Florida Bar 4-1.10(b) on
imputation of conflicts of interest, which provides as follows:
(b) Former Clients of Newly Associated Lawyer. When a
lawyer becomes associated with a firm, the firm may not
knowingly represent a person in the same or a substantially
related matter in which that lawyer, or a firm with which the
lawyer was associated, had previously represented a client
whose interests are materially adverse to that person and
about whom the lawyer had acquired information protected
by rules 4-1.6 and 4-1.9(b) and (c) that is material to the
matter.
1 Engle v. Liggett Grp., Inc., 945 So. 2d 1246 (Fla. 2006).
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Petitioner pointed out in her opposition to this motion that Attorney Lima
had terminated his nearly two-year employment with the Ferraro firm
shortly before the motion to disqualify was heard in this case. She argued
that this event distinguished the facts in this case from those in Caro. In
Caro, this Court concluded that Attorney Lima’s “extensive prior
representation of PM [USA] in defending and strategizing about Engle
progeny cases” while with the Hunton firm was “substantially related to at
least some of the issues” in Caro’s lawsuit against PM USA. Caro, 207 So.
3d at 949. We applied Rule 4-1.10(b) and concluded that the movant, PM
USA, had demonstrated that Attorney Lima had “actual knowledge of
material confidential information.” Id. at 950. We then ruled that the
plaintiff’s attorney in that case had not met the burden to prove that
Attorney Lima had not actually acquired such information, and the trial
court was directed to grant PM USA’s motion for disqualification of the
Ferraro firm. Id. at 950–51.
In the instant case, Petitioner argued that because Attorney Lima was
no longer associated with the Ferraro firm at the time the motion to
disqualify was heard, this was no longer a case involving a former client of
a newly associated lawyer. Rather, the case now involved the client of a
formerly associated lawyer and therefore Rule 4-1.10(c) controlled. That
Rule provides as follows:
(c) Representing Interests Adverse to Clients of Formerly
Associated Lawyer. When a lawyer has terminated an
association with a firm, the firm is not prohibited from
thereafter representing a person with interests materially
adverse to those of a client represented by the formerly
associated lawyer unless:
(1) the matter is the same or substantially related to that in
which the formerly associated lawyer represented the client;
and
(2) any lawyer remaining in the firm has information protected
by rules 4-1.6 and 4-1.9(b) and (c) that is material to the
matter.
R. Regulating Fla. Bar. 4-1.10(c). Petitioner contended that the Ferraro
firm could not be disqualified under this Rule unless the firm had PM
USA’s or RJR’s confidential, material information. She presented
deposition testimony and affidavits stating that no confidential
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information from Attorney Lima’s previous work at the Hunton firm had
been provided to any lawyer or other employee of the Ferraro firm.
PM USA pointed out that Attorney Lima was employed by the Ferraro
firm for approximately two years after leaving the Hunton firm, including
nearly a full year after PM USA had filed its motion to disqualify. PM USA
argued that if a law firm could hire a conflicted lawyer and allow that
lawyer to work on cases while the lawyer’s disqualification was being
litigated, and only terminated the lawyer after the latter’s disqualification
in another case, that would constitute an improper evasion of the Rules
Regulating The Florida Bar and would create the appearance of
impropriety.
Petitioner also argued that RJR lacked standing to join in PM USA’s
motion to disqualify because it had no privity with Attorney Lima or the
Ferraro firm. RJR countered that its “joint defense” relationship with PM
USA conferred standing, and alleged that Attorney Lima had access to
RJR’s confidential information while he was an associate at the Hunton
firm. In support of its position, RJR cited State Farm Mutual Automobile
Insurance Co. v. K.A.W., which recognized that “someone other than the
client may request disqualification” where a conflict of interest “is such as
clearly to call in question the fair or efficient administration of justice.”
575 So. 2d 630, 632 (Fla. 1991) (quoting R. Regulating Fla. Bar 4-1.7 cmt.).
The trial court held a non-evidentiary hearing on the motion to
disqualify and concluded that Caro required it to grant the motion to
disqualify the law firm in this case. In its written order, the court expressly
rejected petitioner’s argument that Caro no longer controlled because
Attorney Lima had left the Ferraro firm. The court failed to address
whether RJR had standing to join in PM USA’s motion.
Orders on motions to disqualify are reviewed for abuse of discretion.
Florida courts have held that disqualification of counsel “is an
extraordinary remedy and should only be resorted to sparingly.” Manning
v. Cooper, 981 So. 2d 668, 670 (Fla. 4th DCA 2008) (quoting Alexander v.
Tandem Staffing Sols., Inc., 881 So. 2d 607, 608 (Fla. 4th DCA 2004)); see
also Vick v. Bailey, 777 So. 2d 1005, 1007 (Fla. 2d DCA 2000). “It is well
settled that disqualification of a party’s chosen counsel is (1) a harsh and
drastic remedy, (2) should be resorted to sparingly, and (3) must find its
basis in counsel’s violation of some rule of law or breach of the Code of
Professional Responsibility resulting in an unfair advantage.” Kusch v.
Ballard, 645 So. 2d 1035, 1040 (Fla. 4th DCA 1994) (Stevenson, J.,
concurring in part and dissenting in part) (citing Gen. Accident Ins. Co. v.
Borg-Warner Acceptance Corp., 483 So. 2d 505 (Fla. 4th DCA 1986)).
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While we recognize that imposing the remedy of disqualification may
“abrogate important societal rights, such as the right of a party to his
counsel of choice and an attorney’s right to freely practice her profession,”
FDIC v. U.S. Fire Ins. Co., 50 F.3d 1304, 1314 (5th Cir. 1995), courts
should not hesitate to disqualify an attorney where the circumstances
justify such a severe remedy. “Disqualification, where appropriate,
ensures that the case is well presented in court, that confidential
information of present or former clients is not misused, and that a client’s
substantial interest in a client’s loyalty is protected.” RESTATEMENT (THIRD)
OF THE LAW GOVERNING LAWYERS § 6 cmt. i (2000).
We agree with petitioner that Caro, standing alone, is not dispositive
because that case involved a request to disqualify an attorney still
employed at the firm. Since Attorney Lima is no longer employed at the
Ferraro firm, we need not decide whether the findings made by the trial
court in Caro apply here to impose per se disqualification of the law firm
under Rule 4-1.9. Because motions to disqualify must be decided on their
own facts and circumstances, a court must take care to balance the
interest of protecting the integrity of the judicial process against the right
of a party to have the counsel of its choice. Although there may be certain
judicially established facts from Caro that are applicable in the
consideration of this matter, it is nonetheless the duty of the trial judge to
consider them, along with other relevant facts, for the purpose of making
appropriate findings and satisfying due process requirements. See Akrey
v. Kindred Nursing Ctrs. E., L.L.C., 837 So. 2d 1142, 1146 (Fla. 2d DCA
2003) (quashing disqualification order where “the trial court departed from
the essential requirements of law by reaching its conclusion without
conducting an evidentiary hearing” (quoting Simon DeBartolo Grp., Inc. v.
Bratley, 741 So. 2d 1254, 1254 (Fla. 1st DCA 1999))).
An evidentiary hearing is required in this case to examine the matters
dealt with by Attorney Lima during his tenure at the Ferraro firm and the
depth of his involvement. Disqualification of the Ferraro firm under Rule
4-1.10(b) would be appropriate should the trial court find that Attorney
Lima had significant involvement with Engle-progeny litigation/appeals
while with the Ferraro firm and that he remained employed by the firm
once it knew or should have known of the potential for disqualification.
The Rules Regulating The Florida Bar, in general, indicate that the firm
(not merely the attorney) should be disqualified from representing a client
in a matter after the firm is put on notice of a conflict (as described in the
Rules) involving the attorney and the opposing party. The Rules expressly
consider both the attorney and law firm to be one and the same in terms
of imputing disqualification. See R. Regulating Fla. Bar 4-1.10 cmt. (“Such
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situations can be considered from the premise that a firm of lawyers is
essentially 1 lawyer for purposes of the rules governing loyalty to the client
or from the premise that each lawyer is vicariously bound by the obligation
of loyalty owed by each lawyer with whom the lawyer is associated.”).
On the other hand, in a situation where the conflicted attorney had
little or no involvement with the matter or matters that created the conflict,
had little contact with other firm attorneys working on them, and was then
terminated shortly after the conflict came to the attention of the firm, Rule
4-1.10(b), standing alone, would not require the firm’s disqualification
from the ongoing case. See Nissan Motor Corp. in U.S.A. v. Orozco, 595 So.
2d 240, 241 (Fla. 4th DCA 1992) (remanding for application of Rule 4-
1.10(c) and noting that the conflicted attorney had little involvement with
the matter at issue at his new firm and the new firm terminated the
conflicted lawyer “[a]s a result of the filing of the disqualification motion”).2
If the trial court on remand determines that the instant case is similar to
Nissan and that Attorney Lima had little involvement with tobacco
litigation beyond defending against disqualification motions during his
tenure at the Ferraro firm, then the trial court must turn its attention to
Rule 4-1.10(c) and make the appropriate inquiry and factual findings
under that portion of the Rule.
Therefore, we grant the petition for writ of certiorari, quash the order
granting disqualification, and return the case to the trial court for further
proceedings consistent with this opinion. On remand, the trial court shall
also address the issue of whether RJR has standing to join in PM USA’s
motion to disqualify.
DAMOORGIAN, FORST and KLINGENSMITH, JJ., concur.
* * *
2 Nissan is distinguishable from the instant case, as the attorney in Nissan
“handled rather routine and perfunctory assignments as a junior associate” and
“never acquired confidential and other protected information during his former
employment.” Nissan Motor Corp., 595 So. 2d at 241 (quoting the trial court’s
order in that case).
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