July 22, 2013
CITIZENS UNITED RECIPROCAL EXCHANGE, Plaintiff-Appellant,
ALLISON T. KURTZ, ESQ. and MASSOOD & BRONSNICK, L.L.P., Defendants-Respondents.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued November 8, 2012
On appeal from the Superior Court of New Jersey, Law Division, Mercer County, Docket No. L-382-12.
Christopher S. Tretola argued the cause for appellant (Bright & Sponder, attorneys; Mr. Tretola, on the brief).
A. Ross Pearlson argued the cause for respondents (Wolff & Samson P.C., attorneys; Mr. Pearlson and Lindsay A. Smith, on the brief).
Before Judges Fuentes, Ashrafi and Hayden.
Plaintiff Citizens United Reciprocal Exchange (CURE) appeals from the Chancery Division order dismissing its complaint to disqualify an attorney and a law firm pursuant to Rules of Professional Conduct (RPCs) 1.9 and 1.10. We affirm.
The record reveals that CURE identifies itself as "an insurance reciprocal exchange authorized by the Department of Banking and Insurance to exchange reciprocal contracts among its members." It employed defendant Allison T. Kurtz as an in-house attorney from October 19, 2009 to December 5, 2011. Kurtz's primary assignment involved representing CURE against personal injury protection (PIP) claims, mainly at arbitration. During her tenure, Kurtz worked on approximately 180 PIP matters, including several filed by defendant Massood & Bronsnick, L.L.C. ("the law firm" or "the firm").
In November 2011, Kurtz advised CURE that December 5, 2011 would be her last day of employment but did not disclose her next employer. On December 13, 2011, Kurtz began working for the law firm, and within a week the firm placed her name on its letterhead. The firm had decided to preclude Kurtz from handling CURE cases, directly or indirectly, for one year and informed the office staff before she began her employment.
In late December 2011, CURE received two form letters from Forthright indicating that Kurtz would be handling two PIP claims arbitrations against CURE. CURE immediately contacted Kurtz about these letters. In response, the law firm sent a letter to CURE, dated January 6, 2012, explaining that the designation of Kurtz had been a clerical mistake as it had "taken the proper precautions to ensure" that Kurtz had been "properly walled-off" and that Kurtz would be "precluded from handling any files or cases involving" CURE.
On January 11, 2012, CURE received another Forthright form letter, dated January 6, 2012, indicating that Kurtz would be handling a third PIP claim arbitration against CURE. In a letter dated January 16, 2012, the law firm corrected this inaccurate information. The firm reiterated that a clerical error had mistakenly designated Kurtz as the attorney, and explained that she had never reviewed or received the files and had no involvement with or responsibility for the three cases.
On January 18, 2012, CURE sent a letter to the law firm demanding that it withdraw from all pending PIP matters against CURE. The firm refused. On January 26, 2012, the law firm replied to CURE, warranting that Kurtz "never had any involvement whatsoever" in any CURE matter, explaining again that Kurtz's name was inserted on the letters erroneously, and confirming that the attorney designation on the three files had been corrected.
On February 9, 2012, CURE filed a complaint and order to show cause against defendants, requesting injunctive relief to prevent both Kurtz and the law firm from representing any party with interests adverse to CURE in all PIP matters. At the time, the firm had more than one hundred claims pending against CURE. CURE alleged that due to Kurtz's past employment, defendants were violating the Code of Professional Conduct by their participation in substantially related matters adverse to CURE.
In its verified complaint, CURE contended that through in-house training Kurtz obtained intimate knowledge of CURE's "confidential business information and business practices." At weekly litigation strategy meetings, Kurtz heard discussions about billing practices and claims handling procedures as well as discussions of individual pending cases. She worked closely with other attorneys and adjusters and learned settlement strategies and "CURE's parameters and tolerances." According to CURE, "[a]s a result of Kurtz's employment with CURE, she learned CURE's confidential and proprietary practices which related to, among other things, billing practices, underwriting guidelines, [and] PIP eligibility investigations . . . ." Consequently, CURE concluded, "Kurtz had obtained specific sensitive, confidential information which could be used against CURE in the future."
In a responding certification, Kurtz stated that she had not learned specific confidential information that concerned new cases, which were not pending when she left CURE. She pointed out that each case had unique facts, although there might be similar legal issues or procedures. She denied that confidential strategies were employed in handling these basic matters, which were won or lost on the strength of the medical records and supporting documents specific to each case. By way of example, she explained that when the arbitration issue was the medical necessity for a procedure, the insurance company argued that the existing medical records were insufficient to demonstrate the medical necessity of the contested treatment and the claimant argued that that the records were sufficient for these purposes. As another example, she noted that when the issue was the appropriate code, the interpretation of statutes and regulations were argued and no confidential information would be helpful to either side. Further, she maintained, when the issue was usual, customary and reasonable rates, it was well known that CURE, along with the other PIP carriers, used certain national databases readily accessible to the public.
Joseph Massood, the senior partner of the law firm, certified that it was very common for attorneys in the PIP field to "switch sides, " especially young attorneys seeking to gain experience. He explained that he had litigated over 100 cases against CURE and was fully familiar with its litigation strategies, settlement limitations, and legal arguments. In his experience, an insurer's business policies, underwriting practices, and billing procedures were not relevant to the litigation of PIP claims.
At the return date of the order to show cause on March 14, 2012, CURE argued that Kurtz must be disqualified because she had knowledge of "confidential" information, "business considerations, " and the "personalities and tendencies of different PIP adjusters." In response, defendants argued that PIP cases are "simple, routine matters" involving no confidential information, and that CURE's claim of confidential information was too vague and imprecise.. The firm further argued that, due to litigating against CURE for many years, its attorneys knew the insurer's litigation strategies, including its settlement parameters.
The trial court denied CURE's motion, noting that CURE only made very general arguments and failed to identify specific confidential information shared with Kurtz that could be used against it in specific PIP matters. The judge concluded that CURE did not meet the high burden of proof necessary to obtain the severe remedy of disqualifying a law firm. This appeal followed.
The New Jersey RPCs prevent an attorney from representing parties in matters adverse to former clients if that matter is the same or substantially related to the former client's matter. RPC 1.9. Specifically, the rule provides in pertinent part:
A lawyer who has represented a client in a matter shall not thereafter 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 gives informed consent confirmed in writing.
Prior to 2004, cases concerning "substantially related" matters applied the "appearance of impropriety" standard. City of Atlantic City v. Trupos, 201 N.J. 447, 464 (2010). When New Jersey revised the RPCs in 2004, our Supreme Court expressly eliminated all reference to this standard. Ibid. (quoting In re Sup. Ct. Advisory Comm. on Prof'l Ethics Op. No. 697, 188 N.J. 549, 562 (2006)). In fact, the appearance of impropriety plays no role at all in the analysis of whether two matters are substantially related. Op. No. 697, supra, 188 N.J. at 562 n.5 ("[W]e reject the appearance of impropriety as a factor to be considered in determining whether a prohibited conflict of interest exists under R.P.C. . . . 1.9."). Instead, the inquiry of whether a matter is substantially related must be based entirely on the facts of the case. Trupos, supra, 201 N.J. at 464.
Under the revised standard, two matters are substantially related in the context of RPC 1.9
if (1) the lawyer for whom disqualification is sought received confidential information from the former client that can be used against that client in the subsequent representation of parties adverse to the former client, or (2) facts relevant to the prior representation are both relevant and material to the subsequent representation.
[Id. at 467.]
The party seeking disqualification has the burden of proving entitlement to that remedy. Id. at 463. The determination of whether counsel should be disqualified is an issue of law that we review de novo. Ibid.
When the court is asked to determine whether two matters are "substantially related for purposes of applying RPC 1.9(a), " the analysis "turn[s] on the identification of  particular confidence[s] having been revealed." Twenty-First Century Rail Corp. v. N.J. Transit Corp., 210 N.J. 264, 278 (2012). In order to prove that confidential information has been disclosed, a party must show specific facts that can be damaging, and not general litigation strategies or just the possibility that such information might be disclosed. See O Builders & Assocs., Inc. v. Yuna Corp. of NJ, 206 N.J. 109, 129 (2011) (holding that defendant's burden was not satisfied when it "vaguely claimed only that information 'concerning pending litigation and business matters' had been disclosed"). See also Model Rules of Prof'l Conduct R. 1.9 cmt. 3 (1983) ("In the case of an organizational client, general knowledge of the client's policies and practices ordinarily will not preclude a subsequent representation . . . .").
While CURE protests that Kurtz has obtained "confidential" information, it has failed to provide that information, even under a protective order, and relate it specifically and in detail to the firm's pending cases. As noted in the Restatement:
a lawyer might also have learned a former client's preferred approach to bargaining in settlement discussions or negotiating business points in a transaction, willingness or unwillingness to be deposed by an adversary, and financial ability to withstand extended litigation or contract negotiations. Only when such information will be directly in issue or of unusual value in the subsequent matter will it be independently relevant in assessing a substantial relationship.
[2 Restatement (Third) The Law Governing Lawyers § 132 comment d(iii) (2000).]
Based upon our review of the record and the applicable legal principles, we agree with the trial court that CURE failed to demonstrate that Kurtz had acquired confidential information that could be used against CURE in future PIP matters. CURE's allegations that Kurtz had knowledge of business practices, litigation strategies, and staff personalities were too imprecise and general to meet the high standard required by Trupos to show that the matters were substantially related. The judge appropriately noted that the general knowledge Kurtz had received did not become confidential factual information when used in the relatively informal, routine, fact-specific PIP proceedings. We conclude that CURE did not meet its burden of proving that a violation of RPC 1.9 occurred.
CURE also contends that the law firm is disqualified under RPC 1.10. This rule disqualifies an entire law firm if a single attorney is disqualified pursuant to RPC 1.9, unless certain stringent requirements are followed. Because we agree that Kurtz's employment did not violate RPC 1.9 and she should not be disqualified from representing clients in PIP matters against CURE, it is unnecessary to consider whether the whole firm should be disqualified under RPC 1.10.