Case discussion on disqualification of former mediator's firm
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FIELDS-D'ARPINO v. RESTAURANT ASSOCIATES, (S.D.N.Y. 1999)

39 F. Supp.2d 412

Shari FIELDS-D'ARPINO, Plaintiff, v. RESTAURANT ASSOCIATES, INC. and Maureen

Hunt, Defendants.

No. 98 Civ. 7902(WHP).

United States District Court, S.D. New York.

March 24, 1999.

West Page 413

Thomas S. Rosenthal, Law Offices of Thomas S. Rosenthal, New
York City, for Plaintiff.

Richard Schaeffer, Dornbush Mensch, Mandelstam & Schaeffer,
LLP, New York City, for Defendants.

MEMORANDUM AND ORDER

PAULEY, District Judge.

This action involves claims of gender and pregnancy
discrimination in violation of Title VII of the Civil Rights Act
of 1964, 42 U.S.C. ?2000e et seq., N.Y. Human Rights Law ?
296 and Title 8 of the Administrative Code of the City of New
York. By letter memorandum dated January 15, 1999, plaintiff
Shari Fields-D'Arpino seeks an order disqualifying the law firm
of Dornbush Mensch Mandelstam & Schaeffer, LLP (the "Dornbush
firm") from serving as counsel for defendants Restaurant
Associates, Inc. and Maureen Hunt in this action. By letter
memorandum dated January 22, 1999, defendants argue that
disqualification of the Dornbush firm is unwarranted. Unless
otherwise noted, the following facts are undisputed.

In January 1997, defendant Restaurant Associates promoted
plaintiff to the position of Director of Recruitment for the
company's Human Resources Department. On or about February 3,
1998, plaintiff wrote a memorandum to Lawrence B. Jones, Esq.,
in-house counsel for Restaurant Associates, advising him that
plaintiffs supervisor, Maureen Hunt, was treating her unfairly.
The plaintiff contends that the memorandum, which is not before
the Court, stated her belief that Ms. Hunt was treating her
differently because of plaintiffs pregnancy.

After Mr. Jones received plaintiffs memorandum, he contacted
the Dornbush firm, outside counsel for Restaurant Associates,
and spoke with Richard Schaeffer, Esq., a member of the firm.
Mr. Schaeffer arranged to have another attorney at the firm,
Cody Fitzsimmons, Esq., meet with the parties in an effort to
resolve the dispute. Mr. Fitzsimmons contacted plaintiff and
invited her to attend a meeting at
West Page 414
his offices for this purpose. Plaintiff agreed.

The meeting occurred on February 5, 1998. Plaintiff was aware
that the Dornbush firm served as Restaurant Associates' outside
counsel, and she asked Mr. Fitzsimmons if Wendy Fields, Esq.,
her aunt and a partner in the Washington D.C. law firm of Katten
Muchin & Zavis, could participate in the meeting via speaker
phone. Mr. Fitzsimmons agreed. The meeting lasted between two
and three hours. Ms. Hunt did not attend; only the plaintiff,
Mr. Fitzsimmons and a paralegal from the Dornbush firm were
physically present at the meeting.

Although the record is unclear, it appears that plaintiff
filed an administrative charge of discrimination with the EEOC
at some point subsequent to the February 5, 1998 meeting. By
letter dated April 15, 1998, the Dornbush firm advised the EEOC
that it represented Restaurant Associates in the matter. The
letter submission to the EEOC refers to the February 5 meeting
and states in relevant part:

[O]n Thursday, February 5, 1998 and Friday,
February 6, 1998, respectively, RA [Restaurant
Associates] arranged for Ms. Fields-D'Arpino and
Ms. Hunt, at their discretion, to meet separately
with [Restaurant Associates'] outside counsel as a
neutral third party in an additional effort to
resolve their differences.

. . . Ms. Fields-D'Arpino recounted her version
of the disagreements that she had with Ms. Hunt on
January 29 and 30, 1998, noting that prior to those
dates she loved her job and enjoyed working with
Ms. Hunt. Specifically, consistent with her letter
to Mr. Jones of February 3, 1998 (which Wendy
Fields, Esq. indicated that she assisted Ms.
Fields-D'Arpino in writing), Ms. Fields-D'Arpino in
no way stated or even implied during the meeting
that she believed that she was being discriminated
against or mistreated as a result of her pregnancy.

Pl.'s Letter Mem. at 2-3. The letter was apparently signed by
Mr. Schaeffer.[fn1] Plaintiff states, and defendants do not
dispute, that Mr. Schaeffer's letter repeatedly characterizes
his firm's role at the meeting as that of "neutral, third
party." Pl.'s Letter Mem. at 3n.1. In their letter memorandum to
the Court dated January 22, 1999, defendants state that they
"intend to call Mr. Fitzsimmons as a witness at trial so that he
may testify as to the purpose and content of the February 5,
1998 meeting." Def.s' Letter Mem. at 2.

Discussion

Plaintiff argues that the Dornbush firm must be disqualified
as counsel of record for defendants in this action based on EC
5-20, which provides:

A lawyer is often asked to serve as an impartial
arbitrator or mediator in matters which involve
present or former clients. The lawyer may serve in
either capacity if he first discloses such present or
former relationships. A lawyer who has undertaken to
act as an impartial arbitrator or mediator should not
thereafter represent in the dispute any of the
parties involved.

N.Y. Code of Professional Responsibility EC 5-20 (McKinney's
1999) (emphasis added). Plaintiff also relies on Cannon 9 of the
New York Code, which provides that a "lawyer should avoid even
the appearance of professional impropriety", and DR 1-102A(4),
which states that a lawyer shall not "engage in conduct
involving . . . deceit, or misrepresentation." In this regard,
plaintiff argues that she was lured into disclosing confidences
to the Dornbush firm because it held itself out as a "neutral"
mediator.[fn2]
West Page 415

Defendants dispute that Mr. Fitzsimmons acted as an impartial
mediator as contemplated by EC 5-20 because "his neutral role in
attempting to resolve Plaintiffs concerns was much less formal."
Def.s' Letter Mem. at 3. In addition, defendants argue that
since Mr. Fitzsimmons has voluntarily withdrawn from
representing defendants in this action, disqualification of the
entire Dornbush firm is unwarranted. Defendants also point out
that plaintiff was represented by her own counsel at the
February 5 meeting. Finally, defendants submit that the Dornbush
firm never misrepresented to plaintiff either its "identity or
□ intentions." Defs.' Letter Mem. at 4-5.

Notwithstanding that the Dornbush firm did not conceal or
misrepresent its relationship with Restaurant Associates, the
record is clear that the firm held itself out to plaintiff as an
impartial mediator for purposes of conducting the February 5
meeting. The Court rejects defendants' argument that EC 5-20 is
inapplicable because the firm's role in the mediation effort was
"informal." EC 520 does not draw such a distinction and the
Court declines to do so. Mediation is inherently an informal
approach to dispute resolution that lacks the exacting
procedural rules of the judicial process.

As mentioned above, Mr. Fitzsimmons has voluntarily withdrawn
from representing defendants in this action. See Defs.' Letter
Mem. at 3. That decision was well advised since his continued
representation of Restaurant Associates is squarely proscribed
by EC 5-20. The only remaining question for this Court to
determine is whether disqualification of the Dornbush firm is
warranted.

Motions to disqualify counsel are generally viewed with
disfavor because "disqualification has an immediate adverse
effect on the client by separating him from counsel of his
choice, and [because] disqualification motions are often
interposed' for tactical reasons." Board of Educ. v. Nyquist,
590 F.2d 1241, 1246 (2d Cir. 1979). "[A] court's ultimate
objective in weighing disqualification questions is to ensure
that the balance of presentations in a litigation will not be
tainted by improper disclosures . . . Courts have been directed
to take a `restrained approach that focuses primarily on
preserving the integrity of the trial process.'" Huntington v.
Great Western Resources, Inc., 655 F. Supp. 565, 571 (S.D.N.Y.
1987 (Sand, J.) (citations omitted). A party seeking
disqualification must meet a high standard of proof before
disqualification will be granted. See Evans v. Artek Sys.
Corp., 715 F.2d 788, 791 (2d Cir. 1983).[fn3]

Although no case law exists involving disqualification of a
law firm under EC 5-20, a number of cases are instructive.
Plaintiff relies primarily on Heelan v. Lockwood, 143 A.D.2d 881,
533 N.Y.S.2d 560 (2d Dep't 1988), where an attorney held
himself out as a "neutral mediator to all the parties" in
pre-litigation settlement discussions. Heelan,
533 N.Y.S.2d at 561. The attorney also represented in a letter containing the
terms of a proposed settlement agreement that he would step
aside if the negotiations did not bear fruit. Later, when
settlement discussions proved futile, the attorney reneged on
his promise and accepted employment as trial counsel for one of
the parties.

The Appellate Division, Second Department held that the
attorney and his law firm should be disqualified. While the
West Page 416
court did not mention EC 5-20, it ruled that "[s]ince counsel
admittedly participated in numerous conversations with Heelan
and represented that his involvement would be limited to
settlement negotiations, his subsequent acceptance of employment
with the respondents after the commencement of litigation
creates, under these circumstances, an appearance of impropriety
which necessitates his withdrawal from the case." Heelan,
533 N.Y.S.2d at 562.

Defendants attempt to distinguish Heelan by arguing that the
Dornbush firm made no misrepresentations to plaintiff. However,
an affirmative misrepresentation is not necessary to trigger EC
5-20, nor is it a prerequisite to a finding of "an appearance of
impropriety." Defendants' argument, in essence, is that it never
promised plaintiff or her counsel that it would not represent
the defendants if litigation ensued. Under the circumstances,
where the Dornbush firm held itself out to plaintiff and her
counsel as a neutral, third-party mediator, that distinction
rings hollow.

Two other courts have also disqualified law firms when one of
the firm's attorneys previously served as a mediator in the
litigated matter. In Poly Software International, Inc. v. Su,
880 F. Supp. 1487 (Utah 1995), two opposing parties had
previously agreed to mediate a copyright action against them
involving software products that they were marketing. The
mediation was successful and the action settled. In the
subsequent Poly Software action those same two parties had
become adversaries, and the mediator-attorney from the earlier
matter sought to represent one of them. The copyright
infringement claims asserted in Poly Software involved the
same software that had been the subject of the mediated action.

Drawing on applicable State disciplinary rules,[fn4] the
district court disqualified both the attorney and his law firm,
holding that "[w]here a mediator has received confidential
information in the course of mediation, that mediator should not
thereafter represent anyone in connection with the same or a
substantially factually related matter unless all parties to the
mediation proceeding consent after disclosure." Poly Software,
880 F. Supp. at 1494. In distilling the appropriate ethical rule,
the court cogently observed:

[T]he mediator is not merely charged with being
impartial, but with receiving and preserving
confidences in much the same manner as the client's
attorney. In fact, the success of mediation depends
largely on the willingness of the parties to freely
disclose their intentions, desires, and the strengths
and weaknesses of their case; and upon the ability of
the mediator to maintain a neutral position while
carefully preserving the confidences that have been
revealed.

. . .

If parties to mediation know that their mediator
could someday be an attorney on the opposing side in
a substantially related matter, they will be
discouraged from freely disclosing their position in
the mediation, which may severely diminish the
opportunity for settlement.

Poly Software, 880 F. Supp. at 1494. The court held that the
attorney's role as a mediator gave him an "unfair advantage"
that tainted the litigation and imputed his disqualification to
the members of his law firm.[fn5] Id. at 1495.
West Page 417

More recently, in McKenzie Constr. v. St. Croix Storage
Corp., 961 F. Supp. 857 (Vi. 1997), the court disqualified both
an attorney and her law firm under similar circumstances. The
court rejected the firm's argument that it had created a "cone
of silence" around the attorney in question, and found that the
firm's disqualification was "necessary to safeguard the
integrity of the ongoing litigation and to eliminate the threat
that the proceedings w[ould] be tainted." McKenzie,
961 F. Supp. at 862.

Two additional cases, Schwed v. General Electric Co.,
990 F. Supp. 113 (N.D.N.Y. 1998), and Marshall v. State of New York
Div. of State Police, 952 F. Supp. 103 (N.D.N.Y. 1997), are also
instructive and warrant brief discussion. In both cases, law
firms were disqualified because one of their attorneys had
access to privileged information during a prior representation
of an adverse party. The courts noted that under DR 5-105(D), a
presumption arises that privileged information and confidences
will be shared with other attorneys within a law firm. See
Marshall, 952 F. Supp. at 110. Although that presumption is
rebuttable, see Cheng v. GAF Corp., 631 F.2d 1052, 1056 (2d
Cir. 1980), vacated on other grounds, 450 U.S. 903,
101 S.Ct. 1338, 67 L.Ed.2d 327 (1981); Marshall 952 F. Supp. at 110-11,
the firms in Schwed and Marshall failed to avoid
disqualification because neither one implemented effective
screening procedures. Such procedures must be closely
scrutinized and ultimately rejected if they are subject to
doubt. See Marshall, 952 F. Supp. at 111-12 (collecting cases).

The Dornbush firm has not even attempted to implement
screening procedures that would prevent its attorney-mediator,
Mr. Fitzsimmons, from sharing confidential information disclosed
by the plaintiff during the mediation with other attorneys in
the firm. On the contrary, in the administrative proceeding
before the EEOC, the Dornbush firm attempted to exploit what Mr.
Fitzsimmons learned during the mediation in order to rebut
plaintiff's charge of discrimination. Even more troubling, the
Dornbush firm intends to use Mr. Fitzsimmons as a witness at
trial with respect to the purpose and content of the mediation.
See supra, p. 4. The Court will not permit the Dornbush firm
to continue down this path. Under these circumstances, the Court
finds that the presence of the Dornbush firm in this action
perpetuates an unacceptable appearance of impropriety and raises
the spectre that the litigation will be tainted by one side's
"unfair advantage." Cheng, 631 F.2d at 1059.

Conclusion

With the heavy caseloads shouldered today by federal and State
courts alike, mediation provides a vital alternative to
litigation. The benefits of mediation include its
cost-effectiveness, speed and adaptability. Successful
mediation, however, depends upon the perception and existence of
mutual fairness throughout the mediation process. In this
regard, courts have implicitly recognized that maintaining
expectations of confidentiality is critical. See Bernard v.
Galen Group, Inc., 901 F. Supp. 778, 782-84 (S.D.N.Y. 1995)
(sanctioning attorney for intentionally disclosing to the court
settlement offers made in mediation proceeding); Cohen v.
Empire Blue Cross & Blue Shield, 178 F.R.D. 385 (E.D.N.Y. 1998)
(sanctioning attorney for violating confidentiality provisions
of court-annexed mediation program).

Congress' view on the importance of alternative dispute
resolution, and the need for confidentiality, is equally clear.
The Alternative Dispute Resolution Act of 1998 requires each
federal district court to
West Page 418
authorize, by local rule, the use of alternative dispute
resolution processes in all civil actions. See
28 U.S.C. ?651. The Act requires that ADR processes be confidential and
prohibits disclosure of confidential dispute resolution
communications, though it does not make mediation communications
privileged. See 28 U.S.C. ?652(d).

In instances where public confidence in the Bar would be
undermined, "even an appearance of impropriety requires prompt
remedial action by the court." Emle Industries, Inc. v.
Patentex, Inc., 478 F.2d 562, 565 (2d Cir. 1973). In light of
the foregoing cases and strong public policy favoring mediation,
the Court finds that the appropriate remedial action to be taken
here is disqualification of the Dornbush firm. Accordingly,
plaintiff's motion is granted and the Dornbush firm is
disqualified from representing the defendants in this action.

Further, the Dornbush firm, including its employees, agents
and members, is prohibited from discussing or revealing any
information to the defendants or their counsel concerning the
mediation it conducted with the plaintiff. In addition, neither
Mr. Fitzsimmons nor any other attorney at the Dornbush firm will
be permitted to testify concerning the mediation at any trial of
this action. Finally, the parties are precluded from initiating
any discovery with respect to the mediation. These prophylactic
measures are necessary to level the playing field in this action
and ensure that plaintiffs claims will be fairly adjudicated.

SO ORDERED:

[fn1] Neither party submitted a copy of the April 15, 1998 letter to the EEOC in connection with the instant application. However, defendants do not dispute plaintiff's account of its contents.


[fn2] These ethical provisions are not binding on federal courts in New York. See Conigliaro v. Horace Mann School, 1997 WL 189058, *2 n. 1 (S.D.N.Y. Apr. 17, 1997). When ruling on a disqualification motion, courts in this circuit have considered both the New York Code of Professional Responsibility as well as the pronouncements of the American Bar Association. See Kubin v. Miller, 801 F. Supp. 1101, 1113-14 (S.D.N.Y. 1992); Adler & Shepard v. Script Systems, Inc., 1992 WL 51499, at *2 (Mar. 9, 1992).


[fn3] That being said, the Court notes that the disruption and delay attendant to displacing an attorney of record is mitigated here because discovery has not begun.


[fn4] The district court cited Utah Prof. Conduct Rule 1.12(a), which provides that "a lawyer shall not represent anyone in connection with a matter in which the lawyer participated personally and substantially as a judge or other adjudicative officer, arbitrator or law clerk to such a person, unless all parties to the proceeding consent after disclosure."


[fn5] In doing so, the court relied on Utah Prof. Conduct Rule 1.10(a), which states: "While lawyers are associated in a firm, none of them shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so by Rule 1.7, 1.8(c), 1.9 or 2.2." See Poly Software, 880 F. Supp. at 1495. The enumerated provisions concern an attorney's receipt of confidential information. This rule is quite similar to N.Y. Jud. Law ?DR 5-105(D), which provides: "While lawyers are associated in a law firm, none of them shall knowingly accept or continue employment when any one of them practicing alone would be prohibited from doing so under DR 5-101(A), DR 5-105(A), (B) or (C), DR 5-108, or DR 9-101(B) except as provided therein."






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