United States District Court, D. New Jersey
THE RESIDENCES AT BAY POINT CONDOMINIUM ASSOC., INC., Plaintiff,
CHERNOFF DIAMOND & CO., LLC, Defendants.
HAMMER, UNITED STATES MAGISTRATE JUDGE
matter comes before the Court on the motion of Defendants,
The Residences at Bay Point, LLC, Albert Dweck and David
Schwartz, to disqualify Plaintiff's counsel, Louis J.
Lamatina, Esq. See Mot. to Disqualify, D.E. 44.
Defendant Chernoff Diamond & Co., LLC, joins in
Defendants' motion. Plaintiff opposes the motion. D.E.
50. The Court held oral argument on May 5, 2017, and required
the parties to submit supplemental briefing on the
movants' arguments under New Jersey Rules of Professional
Conduct 1.7(a)(2) and 1.8(i). The Court has considered the
parties' submissions, the oral argument, and the law. For
the reasons set forth herein, the Court will deny the motion.
case stems from a flood insurance claim made by Plaintiff,
The Residences at Bay Point Condominium Association
(“the Association”) for flood damage occurring in
the aftermath of Superstorm Sandy in October 2012.
See Compl. ¶¶ 15 to 18, Ex. 1 to Not. of
Removal, D.E. 1-1. The Association is a “New Jersey
not-for-profit corporation…entrusted with the
management of the premises known as The Residences at Bay
Point (“The Residences”). Id. ¶ 8.
The Residences is a forty-eight-unit, “residential
condominium complex located at 320 Maryland Avenue, Point
Pleasant Beach, New Jersey.” Id. Defendant,
The Residences at Bay Point LLC, is the Sponsor of the
condominium (“the Sponsor”), meaning that it is
the entity which purchased the property and converted it to
the condominium form of ownership. Compl. ¶ 10.
Defendants Albert Dweck and David Schwartz are managing
members of the Sponsor. Id. ¶ 7. The Residences
at Bay Point, LLC, Dweck, and Schwartz shall be collectively
known as “the Sponsor Defendants.” Dweck and
Schwartz were also members of the Plaintiff's Board of
Directors by virtue of the Sponsor's ownership of
eighteen of the units, with Dweck serving as President of the
Board at or around the time of Superstorm Sandy. Declaration
of Albert Dweck (“Dweck Decl.”) ¶ 3, Jan.
13, 2017, D.E. 44-1.
flood insurance policy in controversy was issued by third
party Defendant, The Standard Fire Insurance Company d/b/a
Travelers Indemnity and Affiliates (“Standard”).
Compl. ¶ 1. Standard acts as an agent of the United
States government and issues flood insurance policies
administered by the Federal Emergency Management Agency
(“FEMA”). Id. ¶ 13. Defendant
Chernoff Diamond & Co. (“Chernoff”) is an
insurance broker and was retained by Plaintiff for the
purpose of procuring proper flood insurance coverage for
Plaintiff's condominium complex. Id. ¶ 7.
The Association's initial Policies with Standard were
written on the National Flood Insurance Program
(“NFIP”) General Property Form, which provides
coverage on an actual cash value basis. Chernoff Compl.
¶ 15, Exh. 3 to Not. of Removal, D.E. 1-3. In or around
2008, Chernoff became the broker of record in connection with
the Policies, which were renewed without change. Id.
¶ 16. In 2009, after the Residences became a
condominium, the Association requested that the Policies be
amended to provide for reimbursement on a replacement cost
basis, which Plaintiff alleges would have been the proper
type of insurance for a condominium complex. Id.
¶ 17. Thereafter, Chernoff submitted an application to
Standard for the policy to be written on the NFIP Residential
Condominium Building Association Policy (“RCBAP”)
form, which provides coverage on a replacement cost basis.
Id. ¶ 18. Standard made the requested change.
Id. ¶ 19.
the Association, through Dweck, informed Chernoff that it no
longer wanted coverage using the RCBAP form. Id.
¶¶ 23-25. Chernoff informed Standard of the
requested change, and Standard then re-wrote the coverage
back to the General Property Form, meaning that the
condominiums were again covered on an actual cash value
basis, not on a replacement cash value basis. Id.
undisputed that for all relevant time periods, Plaintiff
complied with the terms of the General Property policies in
place and paid all required premiums. Compl. ¶ 17, D.E.
1-1. However, after Plaintiff notified Standard regarding the
extensive damage to the premises as a result of Superstorm
Sandy, “Standard subsequently advised of its refusal to
honor the policies as written and its unilateral decision to
‘reform' the policies from the General Property
policies it sold to Plaintiff to Residential Condominium
Building Association Policies…because General Property
policies cannot be issued to residential condominiums.”
Id. ¶ 19. Plaintiff alleges that although its
damages totaled $602, 828.11, Standard paid only $221,
131.24. Id. ¶ 20. Plaintiff also alleges that
Standard charged Plaintiff $361, 696.87 in
“co-insurance penalties” for Plaintiff's
failure to obtain the correct insurance, the RCBAP policy,
for a condominium property. Id.
filed a lawsuit against Standard in this Court on April 10,
2013 (“the 2013 action”). See The Residences
at Bay Point Condominium Ass'n, Inc. v. Standard Fire
Ins. Co. et. al., Civ. No. 13-2380. Mr. Lamatina
represented Plaintiff. In the 2013 action, Plaintiff alleged that
Standard's “unilateral decision to
‘reform' the policies from the General Property
Policies it sold to Plaintiff to Residential Condominium
Building Association Policies” and the subsequent
imposition of the co-insurance penalties constituted a breach
of the insurance contract. See generally Complaint
in 2013 Action, April 10, 2013 (“2013 Compl.”).
Plaintiff also named Chernoff as a defendant in the 2013
case, alleging breach of contract and negligence for
Chernoff's failure to “procure adequate and
applicable flood insurance for the plaintiff.”
January 14, 2014, Plaintiff amended its complaint in the 2013
Action to add the Sponsor Defendants, alleging claims of
negligence and breach of fiduciary duty, among other things.
See Sec. Am. Compl. in 2013 Action, Jan. 14, 2014.
Plaintiff alleged that “[d]uring 2009-2010 and through
March 2013, Dweck controlled the Association together with
the other Sponsor appointed representative on the three (3)
member Board, Schwartz.” Id. ¶ 76.
Plaintiff claimed that the Sponsor defendants, in so
controlling the Board, failed to procure the proper type of
flood insurance. Id. ¶ 83. Plaintiff alleged
that it was Dweck who specifically instructed Chernoff to
re-write the policy back to the General Property policies,
instead of maintaining the proper RCBAP policies.
Id. ¶ 72.
August 2014, the Court dismissed all claims against Standard,
ruling that the General Property policies that Standard had
issued could not be honored as written because the premises
had been converted to condominium form of ownership, that
Standard correctly reformed the policies to Residential
Condominium Building Association Policies, and that Standard
properly applied the costly co-insurance penalties.
See Wolfson Opin., Exh. U to Lamatina Decl., D.E.
51-3. The Court then declined to exercise supplemental
jurisdiction over the remaining state law claims, including
those made against Chernoff and the Sponsor Defendants, and
dismissed the entire action on August 28, 2014. Id.
September 25, 2014, Plaintiff filed suit in Ocean County
Superior Court, again asserting its state law claims against
Chernoff and the Sponsor Defendants for their failure to
procure the proper flood insurance for the premises. See
generally Compl., D.E. 1-1. Plaintiff brought claims of
breach of contract and negligence against Defendant Chernoff.
Id. ¶¶ 26-34. As against the Sponsor
Defendants, Plaintiff alleged negligence, breach of fiduciary
duty, violation of the Planned Real Estate Development Full
Disclosure Act, N.J.S.A. 45:22A-37, and violation of the
Consumer Fraud Act, N.J.S.A. 56:8-1. Id.
¶¶ 35-62. The Sponsor Defendants then asserted
cross claims against co-Defendant Chernoff for
indemnification, contribution, and negligence. See
Cross-Claim, Exh. 2 to Not. of Removal, D.E. 1-2. On July 11,
2016, Chernoff filed a Third-Party Complaint against Standard
for claims of contribution, and apportionment of liability as
to FEMA. Chernoff Compl., D.E. 1-3. FEMA, as a federal
agency, removed the case to this Court on August 23, 2016.
Not. of Removal ¶ 4, D.E. 1.
Sponsor Defendants brought this motion to disqualify on
January 13, 2017, more than three years after the Sponsor
Defendants were made parties to this lawsuit, and even though
Mr. Lamatina represented Plaintiff in the 2013 Action without
objection and has represented Plaintiff in this action since
its inception. D.E. 44. Chernoff has joined in the Sponsor
Defendants' motion to disqualify, but does not assert any
additional basis for disqualification than those already
advanced by the Sponsor Defendants. D.E. 46.
movants argue that the Court should disqualify
Plaintiff's counsel, Louis Lamatina, Esq., for three
reasons: (1) the existence of a prior attorney-client
relationship between Lamatina and Defendant Dweck; (2)
Lamatina has an improper proprietary interest in the current
litigation, because he owns, through his family's
company, ten of the condominium units at issue here; and (3)
Lamatina's status as a necessary witness. See
generally Mot. to Disqualify, D.E. 44. The movants'
main argument in support of this motion is premised on the
existence of a prior attorney-client relationship between
Lamatina and Dweck, which the movants argue warrants
disqualification under New Jersey Rule of Professional
Conduct 1.9(a). See Br. in Supp. of Mot., D.E. 44-2.
Disqualification Based on RPC 1.9
of professional ethics in the District Court of New Jersey
are governed by L. Civ. R. 103.1(a). See Carlyle Towers
Condo. Ass'n v. Crossland Sav., FSB, 944 F.Supp.
341, 344 (D.N.J. 1996). This Rule provides that “the
Rules of Professional Conduct of the American Bar Association
as revised by the New Jersey Supreme Court shall govern the
conduct of the members of the bar admitted to practice in
this Court the Rules of Professional Conduct.”
See L.Civ. R. 103.1(a). “Thus, to resolve
questions of professional ethics, this Court turns to New
Jersey's Rules of Professional Conduct.”
Carlyle Towers Condo., 944 F.Supp. at 345. In this
case, the movants mainly rely on New Jersey RPC 1.9, which
provides that 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.”
an application for attorney disqualification…the party
who brings a disqualification motion, based on an
attorney's successive representations, bears the burden
of proving that disqualification is appropriate.”
Ciba-Geigy Corp. v. Alza Corp., 795 F.Supp. 711, 714
(D.N.J. 1992). The burden in motions of this nature is
considered especially heavy because, in this District,
"[m]otions to disqualify are viewed with
'disfavor' and disqualification is considered a
'drastic measure which courts should hesitate to impose
except when absolutely necessary.'" Alexander v.
Primerica Holdings, Inc., 822 F.Supp. 1099, 1114 (D.N.J.
1993) (quoting Schiessle v. Stephens, 717 F.2d 417,
420 (7th Cir. 1983)).
disfavor results from the unfortunate reality that motions to
disqualify are sometimes made solely for “tactical
reasons, ” and that even when they are made in good
faith, motions to disqualify cause inevitable delay in the
underlying proceedings and create added hardships to the
opposing party. Carlyle Towers Condo., 944 F.Supp.
at 345 (citing Dewey v. R.J. Reynolds Tobacco Co.,
109 N.J. 201, 218 (1988)); see also Cohen v. Oasin,
844 F.Supp. 1065, 1067 (E.D. Pa. 1994) (warning that the
Rules of Professional Conduct are not indented to be used as
a “procedural weapon.”) Therefore, Courts are
required to balance "the sacrosanct privacy of the
attorney-client relationship (and the professional integrity
implicated by that relationship) and the prerogative of a
party to proceed with counsel of its choice.”
Schiessle, 717 F.2d at 420; see also In re
Cedant Corp. Sec. Litig., 124 F.Supp.2d 235, 249 (D.N.J.
2000) (advising that a court considering a disqualification
motion should “closely scrutinize the facts ... [and]
balance the hardships to the client whose lawyer is sought to
be disqualified against potential harm to the adversary
should the attorney be permitted to proceed").
case at bar, the movants allege that Dweck, while serving in
his role as a member of the Association's Board of
Directors, had an attorney client relationship with Lamatina
in this litigation before Dweck, as an individual, was added
as a Defendant in the 2013 Action. The movants assert that
Lamatina's prior representation of Dweck in this matter
runs afoul of New Jersey RPC 1.9(a), which states “[a]
lawyer who has represented a client in a matter shall not
thereafter represent another client in the same or
substantially related mater in which that client's
interests are materially averse to the interests of the
former client.” In support of their motion, the movants
rely heavily on Dweck's declaration. See
generally Br. in Supp. of Mot. to Disqualify, D.E. 44-2.
asserts that he first became acquainted with Lamatina in
August 2012, at which time Lamatina, through his family's
company, Bay Point Investments, LLC, purchased ten
condominium units at the Residences. Dweck Decl. ¶ 2,
D.E. 44-1. Dweck claims that after Superstorm Sandy hit, he
and Lamatina “work[ed] together to have the damage
adjusted and submit the claim and…worked together to
pursue the initial lawsuit in federal court against the flood
insurer.” Id. ¶ 4. Dweck alleges that
“[t]his joint endeavor had the added aspect that Lou
was an attorney and was providing whatever legal services and
advice were relied upon.” Id. Dweck states
that “[d]uring the entire time I was working with Lou
on the flood insurance claim, my understanding was that Lou,
as the attorney providing legal services to assist the
pursuit of that claim, was representing…me and the
Sponsor as owner of [a] major share of the units, and the
Association and Residences as a whole.” Id.
Sponsor Defendants also assert that Lamatina and Dweck were
working together as attorney and client when Lamatina asked
Dweck to sign affidavits in support of the Association's
opposition to Chernoff's efforts to dismiss the case at
some point in the 2013 Action. Exhs. A & B to Dweck
Decl., D.E. 44-1. Those affidavits provide very limited and
general information about the condominiums, the insurance
policies, and the damages suffered from Hurricane
Sandy. Id. The movants also point to
multiple communications from Lamatina in which Lamatina
identified himself as the attorney for the Board of Directors
of the Association, of which Dweck was a member. See
generally Reply Br. at 1-7, D.E. 62.
also claims in his declaration in support of this motion that
he conveyed important communications to Lamatina prior to
this Dweck's inclusion in this litigation, which evidence
the existence of an attorney client relationship. Dweck Decl.
¶¶ 4, 9-11 Dweck states that he “discussed
with Lou my entire history of transactions with Chernoff
concerning the purchase of property and flood insurance for
the Residences over the years since Chernoff had taken over
as the broker which I believe was in 2008…[and] it was
my understanding that I was providing this information and
having these discussions in the context of an attorney-client
relationship.” Dweck Decl. ¶ 4. The movants claim
that these communications were significant because the they
believe that the information Dweck provided to Lamatina in
relation to his history of transactions with Chernoff is
“being used against them” in the present lawsuit,
insofar as Lamatina, as counsel for the Association, is
claiming that the Sponsor defendants controlled the
Association's Board of Directors and “caused it to
buy the wrong insurance.” Br. in Supp. of Mot. at 9-10,
relying heavily on his own declaration, disputes Dweck's
characterization of their relationship. See
generally Lamatina Decl., 50-1. Lamatina claims that
from the inception of the first lawsuit filed against
Standard and Chernoff in early 2013, it was “abundantly
clear to Dweck, a sophisticated real estate investor, founder
and CEO of his own firm that I represented the Association,
and not him or his limited liability company.”
Id. ¶ 4. Lamatina points to a resolution
drafted by the Association's Board, and the subsequent
Retainer agreement, both executed in early 2013, which
identified Lamatina as counsel for the Association and its
Board of Directors only. See Exh. K to Lamatina
Decl., D.E. 51-2. (“Be it resolved that the Board of
Directors of the Residences at Bay Point Condominium
Association, Inc. has met on March 2013 and resolved to
retain the Law Offices of Louis J. Lamatina as General
Counsel to the Association and to represent the Board in
litigation matters including the litigation against
Standard”). Furthermore, Lamatina emphasizes that his
interactions with Dweck were only in Dweck's
“capacity as a member of the Board of Directors of the
Association, ” rather than in Dweck's personal
capacity. Id. ¶ 25.
also refutes the movants' contention that Lamatina used
information disclosed by Dweck as the basis for the present
lawsuit against the Sponsor Defendants. Lamatina alleges that
he learned of the fact that Dweck directed Chernoff to
purchase the wrong insurance by way of an affidavit submitted
in the 2013 action by Chernoff's representative, rather
than through any confidential communications occurring
between Lamatina and Dweck. Lamatina Decl. ¶
on this information, the Court must determine whether a prior
attorney-client relationship existed between Lamatina and
Dweck in this litigation. If the answer to this threshold
question is no, then the Court need not look any further in
analyzing whether disqualification is warranted under NJRPC
1.9. See Host Marriott Corp. v. Fast Food Operators,
891 F.Supp. 1002, 1007 (D.N.J. 1995) (finding that
disqualification under RPC 1.9 requires the existence of a
prior attorney client relationship).
attorney-client relationship can be express or implied.
Because the movants do not argue that there was an express
attorney-client relationship between Dweck and Lamatina, the
Court's analysis will focus on whether the movants can
carry their burden of establishing the existence of an
implied attorney-client relationship. “To establish an
implied attorney-client relationship ‘a party must show
(1) that it submitted confidential information to a lawyer,
and (2) that it did so with the reasonable belief that the
lawyer was acting as the party's attorney.'”
Montgomery Academy v. Kohn, 50 F.Supp.2d 344, 350
(D.N.J. 1999) (quoting Pain Prevention Lab, Inc. v.
Electronic Waveform Labs, Inc., 657 F.Supp. 1486, 1495
(N.D. Ill. 1987)). To establish the existence of an implied
relationship, the party seeking disqualification must show
more than his or her subjective belief that the relationship
existed. See Ellis v. Ethicon, Inc., Civ. No.
05-726, 2005 U.S. ...