analysis by using the incorrect irrebuttable presumption of shared confidences as the premise for determining that the public would perceive impropriety in the continued representation by all defense counsel. Defendants argue that the general public is "not interested in legal presumptions, they are interested in facts." Certain Defendants' Memorandum of Law in Support of Appeal, at 27.
Essex argues that Skadden's membership in the Joint Defense Agreement creates, on its face, an appearance of impropriety regardless of any actual transmission of confidences. Essex therefore argues that the Magistrate Judge's finding that an ordinary citizen would find defense counsel's continued representation improper was not clearly erroneous.
In holding that an ordinary citizen would find an appearance of impropriety in defense counsel's continued representation, the Magistrate Judge relied on an irrebuttable presumption that Skadden shared confidences solely by virtue of its participation in the Joint Defense Agreement. The Magistrate Judge's ruling was not the product of a careful examination of all relevant facts and circumstances, as required by RPC 1.9(b) and controlling New Jersey case law. The Magistrate expressly declined to inquire as to the nature and extent of any disclosures made by Skadden to other defense counsel. Such a refusal prevented the Magistrate Judge from being sufficiently acquainted with the material facts to be able to ascertain whether any citizen would find an appearance of impropriety. The Court has already found that the Magistrate Judge's refusal to consider defendants' affidavits denying disclosure of confidences was contrary to law. The Court will not compound that error by endorsing the Magistrate Judge's appearance of impropriety analysis, which suffers from the same lack of factual foundation. Accordingly, the Court finds that the Magistrate Judge's application of the appearance of impropriety doctrine without considering all relevant facts was contrary to law. The Magistrate Judge's disqualification order will be reversed on this basis as well.
Balancing of Hardships
Because disqualification of counsel during pending litigation renders a grave disservice to the affected client, courts must closely scrutinize the facts and precisely apply precedent to avoid injustice. See Dewey, 109 N.J. 201 at 221, 536 A.2d 243; Reardon, 83 N.J. at 469. In so doing, the court must balance the hardships to the client whose lawyer is sought to be disqualified against the potential harm to the adversary should the attorney be permitted to proceed. Carlyle Towers, 944 F. Supp. at 345 ("[A] delicate balance must be maintained between 'the sacrosanct privacy of the attorney-client relationship...and the prerogative of a party to proceed with counsel of its choice.'"). In addition, the court must consider its obligation to preserve high professional standards and the integrity of the proceedings. Dewey, 109 N.J. at 218; Steel v. General Motors Corp., 912 F. Supp. 724, 745 (D.N.J. 1995); Carlyle Towers, 944 F. Supp. at 345.
Defendants argue that the Magistrate Judge failed to consider the hardship to the defendants and the practical effect of disqualification on the administration of justice. Defendants argue that even assuming, arguendo, that an actual conflict exists, the hardship to the defendants substantially outweighs any potential harm to Essex if defense counsel were permitted to proceed. Defendants further argue that disqualification of all defense counsel will have a chilling effect on the formation of joint defense groups, without serving any legitimate purpose.
Essex argues that the Magistrate Judge's consideration of the relative hardships to the parties was not clearly erroneous or contrary to law. Essex contends that the burden imposed on Essex and the threat to the integrity of the legal profession posed by defense counsel's continued representation far surpass any hardship to defendants.
The Court's review of the Magistrate Judge's May 23, 1997 Opinion and Order shows that the Magistrate Judge failed to even address the relative hardships imposed by disqualification. Nonetheless, in its Memorandum of Law in Opposition to Defendants' Appeal, Essex boldly writes:
As was evident in the May 23, 1997 decision, this delay [imposed by disqualification] and the imposition of finding new counsel was weighed against and contrasted with allowing all the defense attorneys to continue to represent their carriers.
Memorandum of Law in Opposition to Defendants' Appeal, at 20. The Court is disappointed by Essex's misrepresentation of the contents of the Magistrate Judge's opinion. Nowhere in the May 23, 1997 opinion (or order) did the Magistrate Judge ever mention the hardship his decision would impose on any party or the effect of his ruling on the integrity of the bar. The Court finds that the Magistrate Judge's failure to balance the relative hardships was contrary to law. Accordingly, the Magistrate Judge's disqualification order will be reversed on this basis as well.
For the foregoing reasons, the Magistrate Judge's May 23, 1997 Order disqualifying defense counsel will be reversed. A hearing will be conducted to ascertain the material facts surrounding Skadden's participation in the joint defense consortium and to determine to what extent, if any, confidential information which was shared between Essex and Skadden was communicated to other defense counsel. The decision as to whether, and to what extent, any documents should be reviewed in camera is left to the discretion of the Magistrate Judge. An appropriate Order accompanies this Opinion.
Dated: January 28, 1998
John C. Lifland
U.S. District Judge
LIFLAND, District Judge
For the reasons set forth in the accompanying Opinion, IT IS on this 28th day of January 1998 ORDERED that the Order of the Magistrate Judge dated May 23, 1997 is reversed. The matter will proceed to a hearing. The decision as to whether, and to what extent, any documents should be reviewed in camera is left to the discretion of the Magistrate Judge.
John C. Lifland
U.S. District Judge