On certification to the Superior Court, Appellate Division.
The opinion of the court was delivered by: Justice Rivera-soto
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).
O Builders & Associates, Inc. v. Yuna Corporation of N.J.
RIVERA-SOTO, J., writing for a majority of the Court.
In this appeal, the Court considers whether plaintiff's attorney should be disqualified pursuant to RPC 1.18.
In February 2008, at the request of then-client Dr. Dong Hyun Lee (Dr. Lee), Peter Y. Lee, Esq. (Attorney Lee) met with Dr. Lee and Mrs. Kay Kang, the principal of defendant, Yuna Corporation of N.J., to discuss Attorney Lee's possible representation of Mrs. Kang. According to Mrs. Kang and Dr. Lee, Mrs. Kang's legal and business advisor, at the consultation they discussed Mrs. Kang's current business, business history, finances, pending legal disputes, and other confidential matters, for approximately three hours. Neither Mrs. Kang nor Dr. Lee, however, provided details, specificity, or corroboration regarding the discussion of such matters. According to Attorney Lee, they only discussed his possible representation in one then-current lawsuit in which Mrs. Kang was experiencing problems with her attorney. Attorney Lee denies that Mrs. Kang shared privileged or confidential information concerning her business, finances, or other pending legal disputes. Attorney Lee also asserts that he told Mrs. Kang that he could not make a representation decision until he reviewed the file and the court adjourned the trial, which was scheduled to start in one week. On the next day, after reviewing the case file, Attorney Lee wrote to Mrs. Kang and declined to represent her because the trial already had been adjourned twice, rendering a third adjournment unlikely; no discovery had yet been conducted; and he believed that there was a fundamental deficiency in the complaint. Attorney Lee produced documents that corroborated his representations. The parties agree that neither defendant nor Mrs. Kang retained Attorney Lee.
In August 2009, approximately eighteen months later, plaintiff, O Builders & Associates, Inc., brought an action against defendant seeking payment for construction, renovation, and remodeling work performed in defendant's restaurant. Defendant moved to disqualify plaintiff's counsel, Attorney Lee, claiming that this lawsuit will implicate confidential information discussed during Attorney Lee's prior consultation with its principal -- Mrs. Kang. After considering the submissions of the parties and hearing argument, the trial court denied defendant's motion. Defendant was granted leave to appeal, and the Appellate Division affirmed. The Supreme Court granted defendant's request for review of the Appellate Division's decision. 204 N.J. 41 (2010).
HELD: Defendant's motion to disqualify Attorney Lee was correctly denied because defendant failed to satisfy its burden of proving that the matters disclosed during the February 2008 consultation were "the same or substantially related" to this lawsuit, and that the information disclosed during that consultation was "significantly harmful" to defendant in this lawsuit.
1. This case is governed by Rule of Professional Conduct 1.18. Pursuant to its jurisdiction to regulate the legal profession, in 1984 the Court adopted the Rules of Professional Conduct. Subsequently, in light of changes made to the American Bar Association's (ABA) Model RPC, the Court adopted extensive amendments to the RPCs in 2004, which included the adoption of RPC 1.18. RPC 1.18 prohibits a lawyer who has had discussions with a prospective client from revealing any information acquired during the consultation, even if no attorney-client relationship results, unless permitted by RPC 1.9. In addition, RPC 1.18(b) precludes any representation of a client with interests materially adverse to those of a former prospective client in the same or a substantially related matter if the information acquired from the former prospective client could be significantly harmful to that person in the matter. The rule also provides for consent and screening as potential cures for RPC 1.18(b) conflicts. These protective measures, along with similar measures adopted by the ABA and the legal academy, including the American Law Institute, recognize the need to balance the client's right to protect confidential information disclosed during a preliminary consultation and the lawyer's right to be free to represent clients without being unduly restricted by consultations that do not ripen into an attorney-client relationship. (pp. 13-20)
2. The plain language of RPC 1.18 and its antecedents compel the conclusion that a lawyer who has been consulted by a former prospective client will be disqualified only if two factors exist together: the matter of the consultation and the matter then adverse must be "the same or substantially related," and the information the lawyer received during the consultation must be "significantly harmful" to the former prospective client in the now adverse matter. Matters are "substantially related" if (1) the lawyer for whom disqualification is sought received confidential information from the former prospective client that can be used against that former prospective client in the subsequent representation of parties adverse to the former prospective client, or (2) facts relevant to the prior prospective representation are both relevant and material to the subsequent representation. For information to be deemed "significantly harmful," disclosure of that information cannot be simply detrimental in general; the harm suffered must be prejudicial in fact to the former prospective client within the confines of the specific matter in which disqualification is sought. (pp. 20-22)
3. The party seeking disqualification bears the initial burden of production -- that the lawyer for whom disqualification is sought formerly consulted with their present adverse party and that the present litigation is materially adverse to the former prospective client. If that burden is met, the burden shifts to the attorney sought to be disqualified to demonstrate that the matter in which he consulted with the former prospective client is not the same or substantially related to the controversy in which the disqualification motion is brought. The burden of persuasion on all elements under RPC 1.18 remains with the moving party, as it bears the burden of proving that disqualification is justified. The motion should ordinarily be decided on the affidavits and documents submitted, and an evidentiary hearing should be held only when the court cannot decide the issue on the papers. (pp. 22-24)
4. Defendant's assertion that in order to sustain its burden seeking disqualification, it must disclose the very confidential information that it claims deserves protection, is rationally inconsistent. Because defendant asserts that Mrs. Kang already disclosed confidential information to Attorney Lee, those disclosures now, at least in respect to Attorney Lee, are nothing more than repetition and are not the initial disclosure of confidential information. In those instances where the disclosure of confidential information must be made, the parties may protect the confidentiality of their information by, among other means, requesting a protective order or in camera review. Furthermore, where the lawyer whose disqualification is sought denies ever receiving the claimed confidential information, as is the case here, an appropriate screening device would be to engage substitute counsel to oppose the motion. (pp. 25-26)
5. Defendant's motion to disqualify Attorney Lee rightly was denied because defendant has not demonstrated that the matters disclosed during the February 2008 consultation were the same or substantially related to the subject matter of this lawsuit, or that the information disclosed during that consultation was harmful to defendant in this lawsuit. Mrs. Kang's vague and unsubstantiated assertions that she disclosed business, financial, and legal information related to the current lawsuit does not satisfy defendant's burden of production and persuasion. In contrast, Attorney Lee provided a detailed recitation of the consultation, accompanied by contemporaneous documents corroborating that it was limited to a particular matter. Finally, defendant's assertion that disclosures made may become relevant should plaintiff succeed in the lawsuit and seek to enforce a judgment is illusory and premature. (pp. 27-29)
The judgment of the Appellate Division is AFFIRMED.
JUDGE STERN (temporarily assigned), DISSENTING, joined by JUSTICES LONG and ALBIN, expresses the view that the motion should not have been determined on the papers, and an evidentiary hearing was required, because there were disputed issues of material fact as to whether defendant's principal provided confidential information to plaintiff's counsel during the preliminary consultation.
CHIEF JUSTICE RABNER and JUSTICES LAVECCHIA and HOENS join in JUSTICE RIVERASOTO's opinion. JUDGE STERN (temporarily assigned) filed a separate, dissenting opinion in which JUSTICES LONG and ALBIN join.
JUSTICE RIVERA-SOTO delivered the opinion of the Court. This appeal requires that we consider, as a matter of first impression, the scope and application of RPC 1.18. That Rule of Professional Conduct was adopted in 2004 in order to "clarify a lawyer's obligations arising from preliminary consultations with a prospective client[,]" and it "allows that preliminary consultations may not result in a lawyer-client relationship, but nevertheless may in certain circumstances preclude the lawyer from accepting some subsequent representations adverse to the prospective client." Kevin H. Michels, New Jersey Attorney Ethics -- The Law Of New Jersey Lawyering § 13.6 at 261 (2011).
In this appeal, an attorney met with a then-prospective client;*fn1 although both agree that they discussed whether the lawyer would assume the representation of the client in respect of one specific pending case, their accounts of what else was discussed vary considerably. In any event, the attorney did not undertake that or any other representation on behalf of the now former prospective client. Some time later, and on behalf of a different client, the lawyer filed suit against a corporate entity wholly owned by the former prospective client. Alleging that the lawyer had become privy to confidential information during the earlier consultation, the entity owned by the former prospective client moved to disqualify the lawyer.
RPC 1.18 seeks to strike a delicate balance between a client's right to protect communications made in the context of a consultation precedent to the actual retention of a lawyer, and the lawyer's right to be free to represent clients without being unduly restricted by the yoke of short-lived consultations that do not ripen into an attorney-client relationship. It therefore recognizes, as a general rule, that "[a] lawyer who has had discussions in consultation with a prospective client shall not use or reveal information acquired in the consultation, even when no client-lawyer relationship ensues," save as otherwise permitted under the RPC's governing communications from former clients. RPC 1.18(a). Even assuming its application, however, the tension created by that general rule is relieved in part by a significant limitation on its reach: a lawyer who has consulted with a former prospective client "shall not represent a client with interests materially adverse to those of a former prospective client in the same or a substantially related matter if the lawyer received information from the former prospective client that could be significantly harmful to that person in the matter[.]" RPC 1.18(b).
Thus, in the context of an application to disqualify a lawyer based on a consultation with a former prospective client, two factors must coalesce: the matter of the consultation and the matter then adverse must be "the same or  substantially related," and the information the lawyer received during the consultation must be "significantly harmful" to the former prospective client in the current adverse matter. Moreover, as with all applications for the disqualification of counsel, the initial burden of going forward or of production -- that is, that the two matters are the same or substantially related and that the information imparted in the consultation is significantly harmful to the former prospective client -- rests on the party seeking disqualification. If that burden is satisfied, the lawyer for whom disqualification is sought may seek to rebut those allegations. In the end, however, the burden of persuasion and proof remains on the party seeking disqualification. We also reaffirm strongly the preference that applications seeking attorney disqualification be presented in writing, and that disqualification decisions should be made on the papers presented, except, of course, when an evidentiary hearing is needed because the court is unable to determine the matter on the written record before it.
As with many attorney disqualification/conflict of interest questions, the relevant facts arise in a context different from and collateral to the one giving rise to the alleged conflict. In that respect, this appeal is typical. The case on which this appeal is taken arises in connection with an August 2009 complaint filed by plaintiff O Builders & Associates, Inc. seeking payment for construction renovation and remodeling work performed in a restaurant owned by defendant Yuna Corp. of NJ, a/k/a "Baden Baden Restaurant." Defendant moved to disqualify plaintiff's counsel, Peter Y. Lee, Esq. (Attorney Lee) because, eighteen months earlier, the principal of defendant, Mrs. Kay Kang (formerly Park), had consulted with Attorney Lee. What follows are the facts relevant to defendant's disqualification motion, as developed before the Law Division.
On February 4, 2008,*fn2 at the request of a then-client, Dr. Dong Hyun Lee (Dr. Lee), Attorney Lee met with Mrs. Kang and Dr. Lee at Mrs. Kang's restaurant, the Baden Baden, in Palisades Park; since the death of Mrs. Kang's husband, Dr. Lee had acted as her unofficial business affairs advisor. According to Mrs. Kang, she consulted Attorney Lee "concerning pending litigation and business matters." She explained that "[t]here were several litigation matters left behind by my late husband, James Park, relating to two restaurants operating under the 'Baden Baden' trade name." She noted that one of the restaurants, located in Fort Lee, had closed in 2006, and that she met Attorney Lee at the remaining Palisades Park restaurant, in "one of the lower level party rooms." Her entire description of the substance of that consultation was scant: "At that time, we discussed extensively about my business history and the pending legal disputes. . . . We discussed various aspects of the Baden Baden business, including its history and its then-present state of affairs, confidentially."
Attorney Lee recalls that consultation differently. He states that "Mrs. Kang, Dr. Lee and [he] met at [Mrs. Kang's Palisades Park restaurant] to be introduced for the first time and discuss problems she was then having with present defense counsel, Michael S. Kimm, Esq., in connection with his handling of and representation in [a specific matter, titled the Koryeo Corp. case]." According to Attorney Lee, Mrs. Kang asked that he substitute for Kimm as her counsel in the Koryeo Corp. case, which was scheduled for trial in the Superior Court in one week. Attorney Lee "insisted that [he] could not make any decision until [he] reviewed the files and the [c]court adjourned the trial date for at least 30 days." He adamantly asserts that, at the February 4, 2008 meeting, "Mrs. Kang shared no privileged or confidential information with [him] concerning her or defendant's 'business history,' other 'pending legal disputes,' 'financial information' or 'then-present state of affairs[.]'" He reasons that the limitations on their discussions were "perhaps because all communications admittedly took place in the presence of our mutual friend and third-party, Dr. Lee, and the purpose of our meeting -- my representation of M[r]s. Kang in the [Koryeo Corp. case] -- did not require such information." After describing how and when he came to review the file in the Koryeo Corp. case, the very next day, on February 5, 2008, Attorney Lee wrote to Mrs. Kang and declined to represent her in the Koryeo Corp. case for three distinct reasons: (1) the trial was scheduled for February 11, 2008 and already had been adjourned twice, rendering a third adjournment unlikely; (2) although the lawsuit was more than a year old, no discovery --which he described as "essential in a litigant's timely and efficient preparation for trial" -- had been conducted; and (3) there was a fundamental deficiency in the complaint, as all available causes of action had not been pled. As part of his response to Mrs. Kang's assertions, Attorney Lee also produced documents that corroborated his representations.
In response, Mrs. Kang certified generally that "[a]t [the February 4, 2008] consultation, we discussed extensively my business history and several pending legal disputes for approximately three hours." She asserted that she "disclosed business, financial and legal information related to Yuna
[C]orp. and other matters to [Attorney Lee] and [that she] believe[d] to be related to the current law suit brought by O Builders, including discussion of [two then-pending cases, including the Koryeo Corp. case] and other general information about the circumstances of [her] business and legal affairs." She insisted that "[i]t remains [her] belief that the current suit will implicate portions of the information discussed with [Attorney Lee] previously when he was consulted for legal representation."
Dr. Lee also weighed in on Mrs. Kang's behalf. In his certification, he confirmed that, since the death of Mrs. Kang's husband, he had "served as advisor to [Mrs.] Kang on legal and business affairs, including several litigation cases related to her businesses and personal life." According to Dr. Lee, he "arranged and attended a consultation between [Mrs.] Kang and [Attorney] Lee around February, 2008, to arrange for [Attorney] Lee to represent [Mrs.] Kang and her business." He explained that "[w]e met in a basement karaoke room at the Baden Baden Restaurant in Palisades Park, owned by M[r]s. Kang, and discussed [Mrs.] Kang's business, pending legal disputes, finances, and other confidential matters for several hours." Other than relating those general topics, his certification contains no specifics as to what was said or discussed.
In short, although Attorney Lee, Mrs. Kang and Dr. Lee all agree that they met and discussed whether Attorney Lee would assume the representation on behalf of Mrs. Kang in the Koryeo Corp. lawsuit -- a representation Attorney Lee declined the very next day -- Attorney Lee denies anything further of substance was discussed, while Mrs. Kang and Dr. Lee claim that matters concerning Mrs. Kang's "business, pending legal disputes, finances, and other confidential matters" were discussed, albeit without providing any details, specificity or corroboration thereof.
After considering the submissions of the parties and hearing argument, the trial court denied defendant's motion to disqualify Attorney Lee. It summarily concluded that, upon review of defendant's application, it did "not find that there was any confidential information that was actually shared with counsel and no attorney/client representation or relationship existed between the movant and the attorney[.]" In its written order memorializing that decision, the trial court repeated that reasoning and conclusion, stating that "[d]efendant's motion to disqualify [Attorney Lee] is denied as the court does not find a conflict of interest or sufficient evidence of confidential information to disqualify [Attorney Lee] as attorney for [p]laintiff."
After defendant sought and was granted leave to appeal from that interlocutory order, the Appellate Division, in an unpublished, per curiam decision, affirmed the denial of defendant's motion to disqualify plaintiff's counsel. Noting that "[m]otions for disqualification should ordinarily be decided on the certifications and documentary evidence[,]" (citing Dewey v. R.J. Reynolds Tobacco Co., 109 N.J. 201, 222 (1988)), the panel stated that "[d]isqualification is only required if the two matters are substantially related." (citing City of Atl. City v. Trupos, 201 N.J. 447, 467 (2010)). It reasoned that, "[i]n this case, the two matters are completely unrelated[, as n]one of the suits pending when [Mrs.] Kang met with [Attorney] Lee had anything to do with the instant dispute." Taking issue with the paucity of proofs offered by defendant, it observed that "[a]lthough [Mrs.] Kang asserts that the discussion included 'the then-present affairs' of the 'Baden-Baden business,' she does not claim that those 'then-present affairs' had anything to do with the present dispute." The panel also highlighted that "[n]or does she explain how the allegedly confidential information could be used against her or her company in the instant litigation[,]" and that "her concerns about some advantage accruing to [Attorney] Lee with respect to collecting a judgment are stated in the vaguest of terms." It concluded that defendant "has not demonstrated that facts relevant to the prior representation are both 'relevant and material' to the instant case." The panel emphasized that "[d]efendant had the burden of persuasion to prove that disqualification was justified[,]" and that defendant's "vague assertions of possible prejudice utterly fail to show that disqualification was justified in this case." (citation omitted).
Although the judgment of the Appellate Division clearly was entered in an interlocutory appeal by leave granted, defendant filed a petition for certification before this Court; that petition was granted. O Builders & Assocs., Inc. v. Yuna Corp. of NJ, 204 N.J. 41 (2010).*fn3 For the reasons that follow, we too affirm the denial of defendant's motion to disqualify plaintiff's counsel.
Defendant principally asserts that the Appellate Division erred when it affirmed the order denying defendant's application to disqualify Attorney Lee, particularly "when the facts showed a very real possibility of an exchange of confidential ...