The opinion of the court was delivered by: Robert B. Kugler United States Magistrate Judge
HONORABLE JOSEPH H. RODRIGUEZ
KUGLER, United States Magistrate Judge
Presently before the Court are two motions. Plaintiffs' motion to disqualify Kimberly D. Sutton, Esquire, and the law firm of Obermayer, Rebmann, Maxwell & Hippel, LLP, ("Obermayer") from representing Defendants Gregory Saputelli, Esquire, and Gregory D. Saputelli & Associates, P.A., (collectively the "Saputelli Defendants"). In response to Plaintiffs' motion to disqualify the Saputelli Defendants' attorneys, the Saputelli Defendants filed a letter brief and a cross- motions seeking sanctions pursuant to Fed. R. Civ. P. 11. Plaintiffs opposed Defendants' motion seeking sanctions.
For the reasons discussed below, Plaintiffs' motion to disqualify the Saputelli Defendants attorneys is granted; and the Saputelli Defendants' cross-motion for an order imposing sanctions against Plaintiffs' counsel pursuant to Fed. R. Civ. P. 11 is denied.
Background and Procedural History
In their second amended complaint, Plaintiffs Ronald Cantor, Edward Cantor, Leroy Kean and Cantor, Cantor & Kean allege that Defendants Martin Ettin, Esquire, and Davis, Reberkenny & Abromowitz (collectively the "Ettin Defendants"), and the Saputelli Defendants committed legal malpractice in connection with the purchase of land in Mays Landing, New Jersey, the conversion of apartments on the land into condominiums, and the lease-back of a vacant portion of the land to Plaintiffs. *fn1
The transactions giving rise to this action began over 20 years ago in 1977 when the Plaintiffs purchased approximately 15 acres of land in Mays Landing, New Jersey, which contained an apartment complex known as the "Hadley Woods Apartments." At the time they purchased the property, Plaintiffs intended to convert the existing apartments into condominium units and develop the remaining nine acres of vacant land. Plaintiffs retained Gregory Saputelli to prepare the necessary documents to convert the apartment complex into condominiums and to represent them generally in the conversion process. At some point, however, Plaintiffs learned that they would be unable to develop the vacant portion of the land because they could not obtain the requisite sewer permits from the Township of Hamilton.
In order to retain the option of developing the vacant portion of the land while still converting the existing apartments into condominiums, Plaintiffs entered into a lease agreement with the newly formed condominium association, Sandpiper, whereby Plaintiffs leased- back from Sandpiper the vacant portion of the land. To that end, Plaintiffs retained Martin Ettin to draft a lease agreement between Plaintiffs and Sandpiper. Plaintiffs later assigned their rights and obligations under the lease to the Philadelphia College of the Arts.
The terms of that lease agreement later became the subject of a state court action brought by Sandpiper against Plaintiffs in the Superior Court of New Jersey, Atlantic County, seeking increased rent payments. Gregory Saputelli, who represented Plaintiffs in the underlying real estate transactions, and Kimberly Sutton of the law firm Obermayer, Rebmann, Maxwell & Hippel represented Plaintiffs in that state court action. On May 23, 1997, the Honorable Marvin N. Rimm granted in part Sandpiper's motion for summary judgment and found that Plaintiffs were liable to Sandpiper for increased rent for all past and future rental payments due under the lease.
Plaintiffs filed the complaint in this action in November, 1997 alleging claims of legal malpractice against Martin Ettin, David Reberkenny & Abromowitz, Gregory Saputelli and Obermayer, among others. Plaintiffs voluntarily dismissed their claims against Gregory Saputelli and Obermayer. On July 31, 1998, Plaintiffs filed their second amended complaint and named as defendants Martin Ettin, Ettin's law firm, Davis, Reberkenny & Abromowitz, Gregory Saputelli and Saputelli's former law firm, Gregory D. Saputelli & Associates. In this action, Obermayer and Kimberly Sutton represent the Saputelli Defendants against their former clients in the state court action. Discussion
The Court will first address Plaintiffs' motion to disqualify the Saputelli Defendants' attorneys, and then turn to the Saputelli Defendants' cross-motion for sanctions.
I. Plaintiffs' Motion to Disqualify the Saputelli Defendants' Attorneys, Kimberly D. Sutton, Esquire, and Obermayer, Rebmann, Maxwell & Hippel, LLP.
Plaintiffs seek an order of the Court disqualifying the Saputelli Defendants' counsel, Kimberly D. Sutton, Esquire, and Obermayer because Sutton and Obermayer represented Plaintiffs as defense counsel in the underlying state court action.
The Saputelli Defendants opposed the motion to disqualify their attorneys and filed a cross-motion seeking sanctions under Fed. R. Civ. P. 11 claiming that the motion to disqualify their attorneys is frivolous. Defendants' letter brief submitted in opposition to Plaintiffs' motion purports to contain both their opposition to Plaintiffs' motion and their argument in support of their motion for sanctions under Fed. R. Civ. P. 11.
Plaintiffs claim that disqualification is required here because Obermayer and Sutton's continued representation of the Saputelli Defendants violates Rules 1.9(a)(1), 1.9(a)(2) and 1.9(b) of the Rules of Professional Conduct of the American Bar Association as adopted by the New Jersey Supreme Court ("RPC") because this action is "substantially related" to the state court action in which Sutton and Obermayer represented Plaintiffs as defense counsel, and Sutton and Obermayer now represent in this action interests that are adverse to their former clients. The Saputelli Defendants' opposition appears to be based on Plaintiffs' tacit consent to their former attorneys' representation of the Saputelli Defendants in this action. Defendants' claim that "Plaintiffs never voiced any objection to [Obermayer's] representation of . . . Gregory D. Saputelli . . . [and] actively encouraged [Obermayer] to handle this litigation." Defendants' Letter Brief dated February 12, 1999 submitted in Opposition to Plaintiffs' Motion to Disqualify and in Support of Defendants' Motion for Rule 11 Sanctions ("Defendants' Brief") at 4. Defendants further argue that Sutton's and Obermayer's representation of the Saputelli Defendants against their former clients is permissible because "Plaintiffs sat by, without voicing any protest whatsoever[,] as [Obermayer] represented Mr. Saputelli's interests during a conference before the Court and during numerous depositions." Id. Defendants further argue that Sutton and Obermayer's representation here is not precluded under RPC 1.9 because one of the four Plaintiffs, Ronald Cantor, waived the attorney-client privilege as to his conversations with Defendant Gregory Saputelli and Kimberly Sutton at Saputelli's deposition. Defendants' arguments are without merit.
The Rules of Professional Conduct of the American Bar Association as adopted by the New Jersey Supreme Court apply to the conduct of attorneys appearing in this Court. See Local Rule 103.1(a); Essex Chemical Corp. v. Hartford Accident and Indemnity Co., 993 F. Supp. 241, 245-46 (D.N.J. 1998); Michaels v. Woodland, M.D., 988 F. Supp. 468, 470 (D.N.J. 1997) (Rosen, J.) (citations omitted); Steel v. General Motors Corp., 912 F. Supp. 724, 732 (D.N.J. 1995) (Kugler, J.), aff'd sub nom., Cardona v. General Motors Corp., 942 F. Supp. 968 (D.N.J. 1996) (Orlofsky, J). "This court must look to the New Jersey state courts' interpretation of the RPC as primary authority guiding its determination, subject to such modifications as federal law may require or permit." Steel, 912 F. Supp. at 732; see also Essex Chemical, 993 F. Supp. at 246; Kaselaan & D'Angelo Assoc., Inc. v. D'Angelo, 144 F.R.D. 235, 237 (D.N.J. 1992) (Simandle, J.). "Where there is no definitive state court decision interpreting the RPC, a federal court may reach its own conclusion as to the appropriate application." Steel, 912 F. Supp. at 732 (citing Allyn Z. Lite, New Jersey Federal Practice Rules 34 (1995 ed.)). The relevant New Jersey rule provides in pertinent part: Conflict of Interest: Former Client.
(a) A lawyer who has represented a client in a matter shall not thereafter:
(1) represent another client in the same or a substantially related matter in which that client's interests are materially adverse to the interests of the former client unless the former client consents after a full disclosure of the circumstances and consultation with the former client; or
(2) use information relating to the representation to the disadvantage of the former client except as RPC 1.6 would permit with respect to a client or when the information has become generally known.
(b) The provisions of RPC 1.7(c) are applicable as well to situations covered by this rule. RPC 1.9.
New Jersey courts have strictly construed RPC 1.9's requirements, and all doubts must be resolved in favor of the party seeking disqualification. See Herbert v. Haytaian, 292 N.J. Super. 426, 438-39, 678 A.2d 1183, 1189 (App. Div. 1996) (quoting Reardon v. Marlayne, Inc., 83 N.J. 460, 416 A.2d 852 (1980)); Kaselaan, 144 F.R.D. at 238.
If the Court finds that Sutton's representation of the Saputelli Defendants against her former clients is a violation of RPC 1.9, Obermayer and any attorney in that firm are precluded from representing the Saputelli Defendants in this action. See RPC 1.10(a) ("When 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 . . . RPC 1.9."); Essex Chemical, 993 F. Supp. at 246; Kaselaan, 144 F.R.D. at 238; Dewey v. R.J. Reynolds Tobacco Co., 109 N.J. 201, 222, 536 A.2d 243, 253 (1988) ("If the court finds that the attorney has represented the former client, then that attorney and any firm with which he or she has become affiliated should be disqualified from representing the adverse party.") (citing RPC 1.10(a)).
The Court's analysis in deciding this motion must focus on i) whether the case pending before this Court is the "same" or "substantially related" to the state court action in which Sutton and Obermayer represented Plaintiffs as defense counsel, and, if so, whether Plaintiffs consented to their former attorneys representation of their adversaries in this action, see RPC 1.9(a); ii) whether Sutton and Obermayer are using information in this action that they learned in their capacity as Plaintiffs' defense counsel in the state action, see RPC 1.9(a)(2); and iii) whether, in the absence of an actual conflict, Sutton and Obermayer's representation of Plaintiffs rises to the level of an "appearance of impropriety" that would mandate disqualification, see RPC 1.9(b). See Steel, 912 F. Supp. at 734; Kaselaan, 144 F.R.D. at 238. Finally, the Court must balance the competing interests between a party's right to choose his own counsel against "the `need to maintain the highest standards of the profession.'" Dewey, 109 N.J. at 218, 536 A.2d at 251 (quoting Government of India v. Cook Indus., Inc., 569 F.2d 737, 739 (2d Cir. 1978)); ...