Dental Health Assocs. South Jersey, P.A. v. RRI Gibbsboro, LLC, ___ N.J. Super. ___ (App. Div. 2022). Trial court decisions disqualifying counsel are often cited as the type of ruling that merits an interlocutory appeal, since a disqualification cannot be undone after a final judgment. This opinion by Judge Mawla today illustrates why disqualifications often merit leave to appeal.
Plaintiffs had purchased from non-parties to this case certain dental practices, their patient records, and dental equipment. The sellers also assigned leases to plaintiffs, including a lease on property in Clementon, NJ that is the subject of this case. That property was operated by defendants. “Following the agreement’s execution, plaintiffs alleged defendants locked them out of the Clementon office, wrongfully converted the equipment and patient records, and sought an injunction prohibiting defendants from blocking access to the premises.”
Shortly after filing their case in 2020, plaintiffs retained new counsel: Kerri E. Chewning of Archer & Greiner, P.C. (“Archer”). Archer filed two Amended Complaints. In the Introduction section of those pleadings, plaintiffs referred to a 2015 New York litigation involving two individuals, Todd and Scott Singer, who were also defendants in today’s case. Plaintiffs alleged that that New York litigation was “strikingly similar” to the present case. Defendants denied that allegation in their Answer and Counterclaim.
In the New York case, the Singers were represented by Anthony D. Dougherty, who was then with a firm called Tarter, Krinsky & Drogin, LLP. Dougherty represented the Singers in that case from December 2015 through September 17, when the New York case settled.
Dougherty joined Archer, as a partner, in January 2021. He and Chewning worked in different offices, had not met, and did not communicate about the present case. Defendants demanded that Archer withdraw from the case, as Dougherty’s involvement in the New York case required Archer’s disqualification. Chewning referred the matter to Archer’s general counsel, and Archer screened Dougherty from this case.
Defendants moved to disqualify Archer. They asserted that Dougherty had “knowledge of the trial strategy and defenses in the New York matter and ‘obtained confidential information about the Singer [d]efendants and . . . the defenses . . . they now assert in the pending matter.'” Defendants also contended that plaintiffs’ allegation that the present case was “strikingly similar” to the New York case “necessarily established” that the cases were “substantially related” for conflict purposes under Rule of Professional Conduct 1.9, which makes “substantially related” a key aspect of a disqualification motion.
The Law Division granted disqualification under Rule of Professional Conduct 1.10(b) because “Dougherty would possess confidential information relating to the New York litigation upon which plaintiffs here rely upon [sic] to the detriment of defendant[s].” That court also “judicially estopped” plaintiffs from “distanc[ing] themselves” from the allegation that the two cases were “strikingly similar.”
Plaintiffs appealed, and today the Appellate Division reversed. Judge Mawla observed that “[d]isqualification of counsel is a harsh discretionary remedy which must be used sparingly” and requires a “painstaking analysis of the facts.” The panel engaged in de novo review and found that the Law Division had erred.
Plaintiffs argued that the Law Division should have applied the two-part test of Trupos v. Atlantic City, 201 N.J. 447 (2010). Judge Mawla quoted that test from Trupos as stating that matters are “substantially related” if “(1) the lawyer for whom disqualification is sought received confidential information from the former client that can be used against that client in the subsequent representation of parties adverse to the former client, or (2) facts relevant to the prior representation are both relevant and material to the subsequent representation.”
Judge Mawla found that defendants had not satisfied those standards. “To demonstrate a lawyer received confidential information from the prior relationship, the client must make more than ‘bald and unsubstantiated assertions’ that the lawyer disclosed ‘business, financial and legal information'” (quoting O Builders & Assocs., Inc. v. Yuna Corp. of N.J., 206 N.J. 109, 129 (2011)). Defendants did not offer specifics, and the Law Division did not explain what any confidential information that Dougherty had was, or what, if anything, he shared with Chewning.
Defendants fared no better on the second prong of Trupos. “In this regard, the judge did not address the fact the New York case and this case concern different parties, subject matter, causes of action, and law, which would undermine the notion the matters are substantially related.”
Finally, Judge Mawla addressed estoppel issues. Judicial estoppel, cited by the Law Division, was inapplicable “because the doctrine applies when a party takes inconsistent positions in separate proceedings.” Plaintiffs were not party to the New York action, so they did not take any inconsistent position.
To the extent that defendants were actually relying on equitable estoppel, that argument did not avail either. Equitable estoppel requires reliance on the opposing party’s conduct, to the detriment of the relying party. Judge Mawla found no such thing. “This case was in the initial pleadings stage and the record does not support the conclusion the allegations in the complaint induced reliance by or caused defendants to change their position to their detriment requiring the imposition of equitable estoppel to prevent an injustice. Defendants’ denial of the [“strikingly similar”] allegations in paragraph ten of the complaint would be consistent with their defense.”
Accordingly, the panel remanded the matter for further fact-finding. Judge Mawla stated that if the Law Division “finds there are insufficient facts to make a determination, he should order discovery and if necessary, hold a plenary hearing to develop the record before deciding the disqualification motion.”