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Goodman North American Partnership Holdings, LLC v. Linden Property Holdings, LLC

Superior Court of New Jersey, Law Division, Union

December 26, 2018


          Barry J, Muller, Esq. (Fox Rothschild LLP) for Plaintiff, Goodman North American Partnership Holdings, LLC

          Jaimee Katz Sussner, Esq. (Sills Cumtnis & Gross P.C.) for Defendants, Linden Property Holdings, LLC, GAF Corporation., GAP Chemicals Corporation, Ronnie Heyman, Carl Eckardt, Celeste Levin, and Jason Pollack




         This matter comes before the Court on defendants, Linden Property Holdings, LLC ("LPH"), GAP Corporation ("GAF Corp."), GAF Chemicals Corporation ("GAF Chemicals"), Ronnie Heyman ("Mr. Heyman"), Carl Eckardt ("Mr. Eckardt"), Celeste Ms. Levine ("Ms. Levine"), and Jason Mr. Pollack ("Mr. Pollack") (collectively "Defendants") motion to disqualify Fox Rothschild LLP (the "Fox Rothschild Firm") from representing plaintiffs, Goodman North American Partnership Holdings, LLC ("Goodman" or "Plaintiff') in the underlying litigation, due to an alleged conflict of interests with Mark Mr. Hall, Esq. ("Mr. Hall"), former associate at Riker Danzig Scherer Hyland Perretti LLP ("Riker Danzig") and current partner at Fox Rothschild, Defendants* motion is opposed.


         The following salient facts are derived from the parties' submissions, relevant exhibits attached thereto, and the oral arguments of counsel.

         The underlying matter arises out of an unsuccessful real estate transaction between, LPH and Goodman. See Certification of Jaimee Katz Sussner ("Sussner Cert."), Ex. A ("Cmplt"). Plaintiffs Complaint was filed under seal on or about August 8, 2017. Id. As alleged therein, Goodman was to purchase the property located in Linden, New Jersey (the "Subject Property") from LPH, the current owner. Id. at ¶¶ 1-2.

         The Subject Property came into LPH's possession through a convoluted series of corporate mergers, name changes, and stock transfers. The relevant history of the corporate entities and the Subject Property is summarized as follows:

         International Specialty Products ("ISP") was formed in 1991 as a subsidiary of GAF Chemicals. ISP Environmental Services Inc. ("ISP Environmental"), a subsidiary of ISP was also formed in 1991. GAF Chemicals owned the Subject Property at the time and transferred it to ISP Environmental in 1991. In early 1991, ISP and ISP Environmental were spun off from GAF Chemicals and other entities in the G-I/GAF corporate family. On October 31, 2000, GAF merged into its direct subsidiary G-I Holdings, which in turn merged into its direct subsidiary G Industries Corp., which then merged into its direct subsidiary GAP Fiberglass Corporation, formerly known as GAF Chemicals (GAF Chemicals changed its name to GAR Fiberglass Corporation on December 24, 1996). Following the merger of G Industries Corp. into GAF Fiberglass Corporation, the company's name was changed to GAF. Subsequently, on November 13, 2000, the company then known as GAF merged into its direct subsidiary, GAF Building Materials Corporation, whose name changed in the merger to G-I Holdings, Inc. In August 2011, Ashland Inc. (now Ashland LLC) ("Ashland") purchased all of the outstanding shares of common stock of ISP. As part of that transaction, ISP Environmental conveyed the Subject Property to LPH.

         In its Complaint, Plaintiff contends that Defendants fraudulently induced it to enter into a . contract to purchase the Subject Property by "misrepresenting and concealing labilities, including potential liabilities, for off-site contamination arising from environmental conditions relating to the Property, which were known to Defendants." Sussner Cert, Ex. A ("Cmplt.") at ¶ 2. Specifically, Goodman alleges that Defendants knew, but did not disclose that (i) "GAF Chemicals and [ISP] had been identified by the [Environmental Protection Agency ("EPA")] as potentially responsible parties for certain environmental contamination related to the [Subject Property], and that there were either pending lawsuits, administrative actions, and/or unresolved claims impacting the [Subject Property]' and (ii) claims that LPH was responsible for off-site contamination issues at the [Subject Property] under the [1989 Administrative Consent Order, as amended in 2006 ("AOC"), issued by the New Jersey Department of Environmental Protection ("NJDEP"). Id. at ¶¶ 60, 63. Plaintiff contends that it was Defendants' objective to "dupe [it] into purchasing the [Subject Property] and unwittingly, assu[me] the substantial, undisclosed environmental labilities." Id. at ¶ 3. As a result, Goodman alleges that it incurred over $2.2 million in due diligence costs and expenses, which it would not have incurred had Defendants revealed the aforementioned environmental conditions and liabilities. Id. at ¶ 4, Plaintiff also contends it is owed monies due to it under the real estate contract, damages from lost business opportunities, and other damages. Id. at ¶ 6.

         On January 5, 2001, G-I filed bankruptcy. Pursuant to Bankruptcy Court Orders dated January 11, 2001 and March 13, 2001, the Bankruptcy Court approved the employment and retention of Riker Danzig and Weil Gotshal & Manges LLP as co-counsel for G-I. Through the course of the bankruptcy G-I also retained a number of special counsel, including but not limited to McCarter & English LLP, who served as special environmental insurance counsel and Arnold & Porter LLP (now Arnold & Porter Kaye Scholer LLP) who served as special environmental counsel for dealing with certain claims asserted by the DOI, NOAA, EPA, and the State of Vermont Riker Danzig continues to represent G-I in the Bankruptcy Case proceedings. The Riker Danzig litigation team has been led by Dennis O'Grady ("Mr. O'Grady") since January 2001. Defendants have included a certification from Mr. O'Grady along with their moving papers, which describes his firm's role as well as Mr. Hall's involvement in representing G-I.

         Mr. Hall joined Riker Danzig as an entry-level associate in September 2000 and began working in the Bankruptcy Group. Mr, Hall was assigned to G-Ps bankruptcy case shortly after the case was filed in January 2001. Initially Mr. Hall performed a support role in the Bankruptcy Case, but according to Mr. O'Grady's Certification he ultimately acted as second chair to Mr. O'Grady in overseeing, counseling, advising, directing, and conducting G-I's representation before the Bankruptcy Court. As such, Mr, Hall assumed a significant and central role exercising day-to-day responsibility for numerous aspects of the case, including drafting and filing of pleadings and participating and assisting in the analysis and negotiation of environmental issues with, among others, the EPA, NOAA, DOI, and the NJDEP, including their respective environmental proofs of claim concerning the Subject Property. Over time, the Bankruptcy Case became almost the full-time focus of Mr. Hall's work at Riker Danzig, and Mr. Hall along with Alexa Richman-LaLonde became gatekeepers and historians of the complex events that defined the environmental issues in the Bankruptcy case, which continued until his departure from Riker Danzig to Fox Rothschild in November 2016.

         Mr. Hall's familiarity with the Bankruptcy case and its environmental elements were so extensive that he eventually became a clearing house for all communications, documents and other information, including legal memoranda produced by outside and in-house counsel for G-I, that related to G-I's potential environmental liabilities, including those affecting the property. Further, Mr. Hall and O' Grady were included on virtually all emails and other correspondence that pertained to the Bankruptcy Case, most of which were also exchanged with G-I's in-house legal team that specifically included Defendants Ms. Levine and Mr. Pollack, At times, Mr. Hall had near daily meetings, phone calls and other communications with Mr. Pollack and Ms. Levine, including with respect to the resolution of the environmental proofs of claim submitted by the United States and the NJDEP in the Bankruptcy Case relating to the Subject Property. Defendants contend that these communications routinely, and necessarily, involved the exchange of confidential and privileged information. Mr. Hall's dealings with G-I continued long after the Confirmation Order, confirming the Bankruptcy Plan was entered in 2009, and remained ongoing at the time of this departure for Riker Danzig in 2016. During those seven years, Mr. Flail was actively involved in resolving the proof of claim that had been filed by the NJDP in the Bankruptcy Case, including those relating to the Subject Property.

         Mr, O'Grady's certified that Riker Danzig provided counsel to G-I in the Bankruptcy Case through confirmation of G-I's chapter 11 bankruptcy plan on November 12, 2009, and has continued to do so ever since in connection with a wide array of proofs of claims, including environmental proofs of claim. These matters have included the overall handling and ultimate resolution of (i) environmental proofs of claim filed by the United States on behalf of the EPA, the NOAA, and DOI in connection with numerous properties, including the Subject Property, and (ii) environmental proofs of claim filed by the NJDEP in connection with numerous properties, including the Subject Property. While the Weil Firm assumed primary responsibility for, among other things, negotiating, drafting, and conforming the Bankruptcy Plan for G-I, Riker Danzig focused on G-I's environmental liabilities and environmental proofs of clam that had been submitted in the Bankruptcy case, including proof of claim filed by the DOJ, EPA, NOAA and the NJDEP.

         Mr. O'Gtady further certified that between 2001 and 2009 Riker Danzig, along with Mr. Hall, "assisted with almost every single aspect of G-I's case. Riker Danzig summarized its representation of G-I in its Final Fee Application to the Bankruptcy Court as follows:

Riker Danzig also provided substantial services in connection with the Debtors' numerous environmental obligations and claims, including reviewing and analyzing and communicating with internal and external counsel regarding potential claims, liabilities and recoveries related to the Debtors' environmental sites. Riker Danzig analyzed over a hundred sites pertaining to G-I's global environmental strategy and participated in negotiations and settlement discussion with various potentially responsible parties, governmental entities and insurers, including significant discussion with the Environmental Protection Agency, which lead to a critical compromise of the EPA's claims in the Chapter 11 case, helping clear the path to the Debtors; ultimate reorganization. The resolution and reduction of G-I's potential environmental liabilities was critical to the Debtors' successful organization.

         Riker Danzig's total compensation for fees and expense throughout the nine year period form the filing of the Bankruptcy Case to the entry of the Confirmation Order was more than $15 million, and fees and expenses ...

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