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Gray v. Commercial Union Insurance Co.

Decided: November 14, 1983.

FREDERIC S. GRAY, PLAINTIFF-RESPONDENT,
v.
COMMERCIAL UNION INSURANCE COMPANY, DEFENDANT-APPELLANT



On appeal from the Superior Court of New Jersey, Law Division, Morris County.

Michels, King and Dreier. The opinion of the court was delivered by Michels, P.J.A.D.

Michels

[191 NJSuper Page 592] Pursuant to leave granted by this court, defendant Commercial Union Insurance Company (Commercial Union) appeals from an order of the Law Division that denied its motion to disqualify Robert F. Colquhoun (Colquhoun) and the firm in which he is a member from representing plaintiff Frederic S. Gray (Gray) in this matter. Commercial Union contends that Colquhoun is barred from representing Gray by DR 4-101 and DR 5-105 of the Disciplinary Rules of the Code of Professional Responsibility of the American Bar Association, operative in New Jersey by incorporation into our court rules. See R. 1:14. We agree and reverse.

Colquhoun, a member of the New Jersey bar, was retained and employed by Commercial Union from 1961 through the time of this matter. With one exception, each retention and employment involved defending Commercial Union's insureds in personal injury litigation. The one exception was a case in which Colquhoun represented Commercial Union directly in a lawsuit against another insurance company, which had sought to hold Commercial Union liable as an excess insurer. The parties dispute the extent of Colquhoun's access to Commercial Union's confidences during this period. Commercial Union's assistant house counsel maintains that Colquhoun worked regularly with company officials in its West Orange and Livingston, New Jersey offices. It is asserted that in this position Colquhoun "was privy to confidential and proprietary information of [Commercial Union], including its claims and litigation philosophy and its methods and procedures in handling and defending claims and litigation, and had access to individuals and information regarding the administration of various of defendant's business operations." Colquhoun argues to the contrary that he "was never made privy to any confidential or proprietary information of (Commercial Union)," he was "unaware that they had a claim or litigation philosophy," and that he did not receive any information "regarding the administration of various of defendant's business operations." In the late 1970's Commercial Union stopped assigning cases to Colquhoun. However, Colquhoun retained those cases still pending and was paid legal fees through 1982 by Commercial Union. At the time of the ruling here under review, Colquhoun was retained by Commercial Union only in connection with the defense of one personal injury suit which apparently is still pending on appeal.

In this action Gray, the New Jersey regional claims manager, charges that Commercial Union breached his contract of employment by engaging in a "planned and settled scheme" to deprive him and other senior employees of their future and benefits and by discharging him without cause. Gray also charges that after Employers' Liability Assurance Corporation, Ltd. merged with

Commercial Union, thereafter dominating the management of the merged companies, Commercial Union entered into a program of discrimination against all pre-merger Commercial Union employees, including him. Specifically, Gray maintains that by implementing various corporate policies relating to such areas as personal reductions, unwarranted increases in casualty reserves and demand for dismissal of persons approaching retirement age, Commercial Union embarked upon "a scheme and plan to render effective claims handling impossible [which] was utilized against original [Commercial Union] personnel to effect their elimination."

The pivotal issue posed on this appeal is under what circumstances a lawyer may represent a client whose interest is adverse to a party whom the lawyer represented in a prior litigation. The governing principles are set forth in DR 4-101, which reads:

Preservation of Confidences and Secrets of a Client.

(A) "Confidence" refers to information protected by the attorney-client privilege under applicable law, and "secret" refers to other information gained in the professional relationship that the client has requested be held inviolate or the disclosure of which would be embarrassing or would be likely to be detrimental to the client.

(B) Except as permitted by DR 4-101(C), a lawyer shall not knowingly:

(1) Reveal a confidence or secret of his client.

(2) Use a confidence or secret of his client to the disadvantage of the client.

(3) Use a confidence or secret of his client for the advantage of himself or of a third person, unless the client consents after full disclosure.

(C) A lawyer may reveal:

(1) Confidences or secrets with the consent of the client or clients affected, but only after a full disclosure to them.

(2) Confidences or secrets when permitted under Disciplinary Rules or required by law or court order.

(3) The intention of his client to commit a crime and the information necessary to prevent the crime.

(4) Confidences or secrets necessary to establish or collect his fee or to defend himself or his employees or associates against ...


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