O Builders & Associates, Inc. v. Yuna Corp., 206 N.J. 109 (2011). In 2004, the Supreme Court adopted Rule of Professional Conduct 1.18. As it relates to the case decided today, that Rule deals with a lawyer’s ability to represent a former “prospective client,” that is, someone “who discusses with a lawyer the possibility of forming a client-lawyer relationship with respect to a matter” but ultimately does not do so. Under RPC 1.18, a lawyer may not represent a client “with interests materially adverse to those of a former prospective client in the same or a substantially related matter if the lawyer received information from the former prospective client that could be significantly harmful to that person in the matter,” except under certain circumstances not present in this case.
Until today, no Supreme Court case had interpreted RPC 1.18. In this case, a 4-3 majority of the Court, in an opinion written by Justice Rivera-Soto and joined in by Chief Justice Rabner and Justices LaVecchia and Hoens, upheld the decision of the two lower courts that disqualification of counsel was not warranted under the circumstances. The dissenting opinion, by Judge Stern with the concurrence of Justices Long and Albin, did not contend that counsel should have been disqualified. Rather, the dissenters believed that a decision on the issue should have been made only after an evidentiary hearing, rather than on the papers.
Justice Rivera-Soto laid out some of the key guiding principles under RPC 1.18, based on the “plain language” of that Rule. The Court also borrowed heavily from the law applicable to RPC 1.9, which deals with disqualification of counsel based on confidential communications with a former client. In that regard, the Court drew on its decision in City of Atlantic City v. Trupos, 201 N.J. 447 (2010).
The two key concepts under RPC 1.18 are that “the matter of the consultation and the matter then adverse must be ‘the same or substantially related,’ and the information the lawyer received during the consultation must be ‘signifcantly harmful’ to the former prospective client in the now adverse matter” (emphasis in original). Justice Rivera-Soto adopted the Trupos definition of “substantially related,” which turns on whether the lawyer “received confidential information from the former client that can be used against that client” in the subsequent case, or whether “facts relevant to the prior representation are both relevant and material to the subsequent representation.” “Significantly harmful” means not merely “detrimental in general to the former prospective client” but “prejudicial in fact to the former prospective client within the confines of the specific matter in which disqualification is sought, a determination that is exquisitely fact-specific and -sensitive.”
The movant for disqualification under RPC 1.18 bears the initial burden of showing that he or she consulted with the lawyer and that “the present litigation is materially adverse to the former [prospective] client.” If that burden is met, the lawyer then has the burden to show that the matters discussed with the former prospective client are not “the same or … substantially related” to the present case. The burden of persuasion on all elements of RPC 1.18, however, remains with the movant. Finally, “a motion for disqualification under RPC 1.18 should ordinarily be decided on the affidavits and documentary evidence submitted, and an evidentiary hearing should be held only when the court cannot with confidence decide the basis of the information contained in those papers ….”
On the facts here, the majority opinion seems correct, though the case was close. The movant’s papers were rather vague. Since, as Justice Rivera-Soto observed, “[d]isqualification of counsel is a harsh discretionary remedy which must be used sparingly,” the fact that the movant’s papers left doubts weighed against disqualification, and the presumption against an evidentiary hearing was difficult to overcome.
One other note of interest to appellate practitioners. In typically detail-oriented fashion, Justice Rivera-Soto noted a procedural error. The movant for disqualification, after losing at the trial level, had sought and obtained leave to appeal to the Appellate Division. When that court affirmed, the movant filed a petition for certification with the Supreme Court. In fact, under Rule 2:2-5, since the Appellate Division’s decision was made on leave granted, the application to the Supreme Court should have been a motion for leave to appeal, not a petition for certification. Thus, the movant’s use of the petition for certification, and the Court’s grant of that petition, were in error. The error was corrected by vacating the grant of the petition, treating the petition as an application for leave to appeal, and granting that application.