CHAMBERS OF RONALD J. HEDGES UNITED STATES MAGISTRATE JUDGE MARTIN LUTHER KING, JR. FEDERAL BUILDING AND COURTHOUSE 50 WALNUT STREET NEWARK, NJ 07101 973-645-3827
ORIGINAL FILED WITH CLERK OF THE COURT
This matter comes before me on the motion of Plaintiff ADP Commercial Leasing, LLC ("ADP"), to disqualify the law firm of Cole, Schotz, Meisel, Forman & Leonard, PA ("Cole Schotz) as counsel for defendant PMJ Enterprise, LLC ("PMJ"). PMJ opposes the motion. The motion was referred to me by Judge Sheridan. I have considered the papers submitted in support of and in opposition to the motion. There was no oral argument. Rule 78.
ADP is a designer and provider of integrated computer operating systems that automobile dealerships use to manage their day-to-day operations. It is a Delaware corporation with a principal place of business in New Jersey. PMJ owns and operates a Lincoln Mercury dealership. It is incorporated and has a principal place of business in Florida. Between 2002 and 2005 the parties entered into agreements pursuant to which ADP leased to PMJ a computer operating system.
ADP alleges that sometime in the fall of 2005 PMJ defaulted under the terms of the parties' agreements by failing to make payments due to ADP. In 2006, ADP decided to sue PMJ to collect the amounts PMJ allegedly owes it and began looking for attorneys. ADP developed an interest in retaining Steven Klein, a partner at Cole Schotz, as counsel because it was "impressed with the types of cases he handles" (Sudha Kantor Dep. 17:5) and believed his "credentials were along the lines of what [ADP] was looking for." (Kantor Dep. 46:4-5). On April 24, 2006, ADP's in-house counsel, Sudha Kantor, telephoned Edward Kiel, a partner at Cole Schotz with whom she was acquainted. Kantor expressed to Kiel ADP's desire to retain Cole Schotz in this matter and the parties engaged in a preliminary conversation. Kiel alleges that the conversation was very brief because he was rushing to get to a meeting. Their accounts of the conversation are as follows:
A. The Nature of ADP's Business
Kantor alleges that she provided Kiel with "specific background information "about ADP Dealer Services and ADP Commercial Leasing." (Kantor Dep. 20:9-10). Kiel had difficulty recalling many details the conversation, but did confirm discussing "what ADP does" and "the services that ADP provides." (Kiel Dep. 18:20-19:3).
B. The Nature of ADP's Dispute with PMJ
Kantor alleges that she disclosed the "complex" history of ADP's dispute with PMJ. (Kantor Dep. 21:18). Kiel stated that Kantor told him: (i) there was a "potential matter involving a Florida auto Dealership" (Kiel Dep. 10:21-22) known as "PMJ" (Kiel Dep. 11:23-25); (ii) the case involved "some type of software that was developed by ADP" (Kiel Dep. 19:9-10); (iii) there were "some licensing fees that were due" (Kiel Dep. 19:11-12), totaling several hundred thousand dollars (Kiel Dp. 14:25-15:3); and (iv) "there had been discussions before with the parties about trying to settle the case" (Kiel Dep. 15:15-16) but now "it wasn't going to settle" (Kiel. Dep. 15:20-21).
C. Disclosure of an Anticipated Counterclaim by PMJ
Kantor alleges that she disclosed the factual basis of a counterclaim that PMJ could file. (Kantor Dep. 34:10-13). According to Kantor, PMJ claimed that: "ADP had caused [its dealership] all these proble And made all kids of wild accusations, one of which was that one of [ADP's] salesperson was having an affair with [PMJ's] office manager or controller . . . [and she] was able to bilk [PMJ] out of millions of dollars." (Kantor Dep. 25:5-10). Kantor also stated that she discussed the "strengths and weaknesses of the case, the counterclaim, the potential counterclaim . . ." (Kantor Dep. 33:4-7).
Kiel alleges that he and Kantor discussed: (i) ADP's belief that " the other side would probably file a counterclaim" (Kiel Dep. 15:3-4); (ii) "the nature of the counterclaim" (Kiel Dep. 22:4) involving allegations that "the software didn't do what it was supposed to do" (Kiel Dep. 22:2-3) and "some allegation about an intimate relationship between some of the parties" (Kiel Dep. 21:13-14); and (iii) ADP's belief that these "claims were without merit" (Kiel Dep. 30:22-23).
D. Disclosure of ADP's Litigation Strategy
Kantor allegedly disclosed that (i) ADP "needed to move rather quickly" to file a complaint (Kantor Dep. 26:9-16); (ii) ADP "had a Florida counsel" that had "prepared a draft complaint" (Kantor Dep. 33:9-13), but it "was not as strong as [ADP] needed it to be" (Kantor Dep. 34:3); and (iii) ...