IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

REGIONAL EMPLOYERS’ ASSURANCE :

LEAGUES VOLUNTARY EMPLOYEES’ :

BENEFICIARY ASSOCIATION TRUST, : CIVIL ACTION

:

Plaintiff, : NO. 03-6903

 :

v. :

:

GRETCHEN HUTTO CASTELLANO, :

et al., :

:

Defendants :

____________________________________

GRETCHEN HUTTO CASTELLANO, :

:

Counterclaim Plaintiff, :

:

v. :

:

REGIONAL EMPLOYERS’ ASSURANCE :

LEAGUES VOLUNTARY EMPLOYEES’ :

BENEFICIARY ASSOCIATION TRUST, :

et al., :

:

Counterclaim Defendants. :

MEMORANDUM

Jones, J. July 1, 2009

Before the court is Plaintiff/Counterclaim Defendants’ Motion to disqualify Ira

Silverstein, Esq. and Thorp Reed & Armstrong, P.C. as counsel for Gretchen Hutto Castellano

(Doc. No. 127) and Defendant/Counterclaim Plaintiff’s Response in Opposition thereto (Doc.

No. 133). For the reasons set forth below, the court will deny the Motion to Disqualify Counsel.

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I. Background

In his April 12, 2005, Memorandum denying Mrs. Castellano’s motion to disqualify

counsel for Counterclaim Defendants, the late Judge Clifford Scott Green summarized the

background of this case as follows:

Plaintiff/Counterclaim Defendant Regional Employers’

Assurance Leagues Voluntary Employees’ Beneficiary Association

Trust (“REAL VEBA”) initiated this action by filing a Praecipe for

Writ of Summons in the Court of Common Pleas of Montgomery

County of Pennsylvania. Plaintiff then filed its Complaint for

declaratory relief under the Pennsylvania Declaratory Judgment

Act, 42 Pa. C.S.A. § 7532 et seq. and sought monetary damages

regarding death benefits allegedly payable to Defendant Gretchen

Hutto Castellano (“Mrs. Castellano”). Mrs. Castellano

subsequently removed this action to federal court based on its

federal subject matter, i.e., ERISA. This matter is essentially a

contract dispute over the interpretation of provisions in trust and

plan documents relating to the death benefits payable to Mrs.

Castellano upon the death of her husband, Dominic M. Castellano

(“Dr. Castellano”). These benefits are payable out of the REAL

VEBA welfare benefit plan and are administrated by PennMont

Benefit Services, Inc. (“PennMont”).

Dr. Castellano died on June 17, 2003. Mrs. Castellano

notified the Counterclaim Defendants of her husband’s death on

July 7, 2003. In response to Mrs. Castellano’s claim, Counterclaim

Defendants mailed Mrs. Castellano a Settlement Agreement in

which they gave Mrs. Castellano two options: 1) she could accept

the $750,000 in death benefits in annual payments over the course

of ten years; or (2) she could accept the death benefits in a lump

sum discounted to present value ($597,560.14). Plaintiff required

Mrs. Castellano to sign a release as a condition of receiving any

benefits. Mrs. Castellano’s counterclaim is based on the contention

that she is entitled to a lump sum payment of $750,000 under the

Plan’s terms.

(Mem. & Order, Apr. 12, 2005, 1-3.)

Today the court addresses another motion to disqualify counsel – this time filed by

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Plaintiffs/Counterclaim Defendants who seek disqualification of counsel for Mrs. Castellano. 

The instant Motion to Disqualify Counsel was filed on August 15, 2007. (Doc. No. 127.) Mrs.

Castellano filed her Response on August 29, 2007. (Doc. No. 133.) The Motion to Disqualify

Counsel and the parties’ cross-motions for summary judgment, which also were filed in August

2007, were set aside while the parties attempted settlement. Judicial officers have made several

unsuccessful attempts to help the parties reach an amicable resolution of this matter, which is

currently in its sixth year of litigation and which shows no sign of resolution. The court soon

will turn to the pending cross-motions for summary judgment. 

II. Standard of Review

A district court should grant a motion to disqualify counsel “only when it determines, on

the facts of the particular case, that disqualification is an appropriate means of enforcing the

applicable disciplinary rule.” United States v. Miller, 624 F.2d 1198, 1201 (3d Cir. 1980). In

making such a determination, the district court “should consider the ends that the disciplinary

rule is designed to serve and any countervailing policies, such as permitting a litigant to retain the

counsel of his choice and enabling attorneys to practice without excessive restrictions.” Id. Even

if the court finds that an attorney violated a disciplinary rule, “disqualification is never

automatic.” Id.

In this district, motions to disqualify are an “extreme sanction” that should not be

imposed lightly. Shade v. Great Lakes Dredge & Dock Co., 72 F.Supp.2d 518, 520 (E.D. Pa.

1999). “The party seeking to disqualify opposing counsel bears the burden of clearly showing

that continued representation would be impermissible. Vague and unsupported allegations are

not sufficient to meet this standard.” Cohen v. Oasin, 844 F.Supp. 1065, 1067 (E.D. Pa. 1994).

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III. Discussion

A. Conflict of Interest with STEP

The moving parties argue that Mrs. Castellano’s counsel should not represent Mrs.

Castellano and STEP Plan Services, Inc. (“STEP”) concurrently. Mrs. Castellano’s counsel

represent STEP in cases pending in other courts against the Counterclaim Defendants. (See Mot.

to Disqualify Counsel 6-7 (referring to STEP Plan Services, Inc. v John Koresko, V, (Civ. No.

2004-7718), which is pending in the Philadelphia County Court of Common Pleas, and Sanchez

and Daniels v. STEP Plan Services, Inc., (Civ. No. 03-1550) (N.D. Ill.)).) The moving parties

allege that Mr. Silverstein has compromised his loyalty to Mrs. Castellano to further the interests

of his other client, STEP.

The Local Rules of the United States District Court for the Eastern District of

Pennsylvania incorporate the Pennsylvania Rules of Professional Conduct, which the Supreme

Court of Pennsylvania has adopted. See E.D. Pa. Local R. 83.6(IV)(B). Rule 1.7 of the

Pennsylvania Rules provides as follows:

(a) Except as provided in paragraph (b), a lawyer shall not

represent a client if the representation involves a concurrent

conflict of interest. A concurrent conflict of interest exists if:

(1) the representation of one client will be directly adverse to another

client; or

(2) there is a significant risk that the representation of one or more clients

will be materially limited by the lawyer's responsibilities to another client,

a former client or a third person or by a personal interest of the lawyer.

(b) Notwithstanding the existence of a concurrent conflict of

interest under paragraph (a), a lawyer may represent a client if:

(1) the lawyer reasonably believes that the lawyer will be able to provide

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competent and diligent representation to each affected client;

(2) the representation is not prohibited by law;

(3) the representation does not involve the assertion of a claim by one

client against another client represented by the lawyer in the same

litigation or other proceeding before a tribunal; and

(4) each affected client gives informed consent.

Pa. R. P. C. 1.7.

Mr. Silverstein has filed an affidavit specifically representing to the court that no conflict

exists because of his representation of Mrs. Castellano and STEP in different judicial

proceedings. (Castellano’s Resp. in Opp’n to Mot. to Disqualify Counsel, Ex. 4, Aff. of Ira B.

Silverstein, Esq., Aug. 29, 2007 (“Silverstein Aff. I”) ¶ 16.) Mr. Silverstein has also filed a

second affidavit in which he details how Mrs. Castellano and STEP have provided informed

consent to his concurrent representation of them. (Doc. No. 187, Aff. of Ira B. Silverstein, Esq.,

June 29, 2009 (“Silverstein Aff. II”) ¶¶ 6-11.)

Upon review of the record in this matter, the court is unwilling to find that this case

presents a significant risk that the representation of Mrs. Castellano will be materially limited by

Mr. Silverstein’s responsibilities to STEP or Mr. Silverstein personal interests. Pa. R. P. C.

1.7(a)(2). The arguments of the moving parties and the affidavit of the moving parties’ attorney

do not convince the court that a conflict of interest exists between Mrs. Castellano and STEP or

that Mr. Silverstein is pursuing a personal campaign against the Counterclaim Defendants. (See

Mot. to Disqualify Counsel, Ex. 1, Aff. of Virginia I. Miller, Esq. ¶ 14.) Furthermore, the

moving parties have not demonstrated that Mr. Silverstein’s continued representation of Mrs.

Castellano would be impermissible. See Cohen, 844 F.Supp. at 1067. Even assuming,

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arguendo, that Mr. Silverstein’s representation of STEP does materially limit his responsibilities

to Mrs. Castellano, the affidavits Mr. Silverstein has filed satisfy the court that Mr. Silverstein

has met the requirements for continued representation under Rule 1.7(b). He has sworn to his

belief that no conflict exists, and the court does not find that belief to be unreasonable. 

Furthermore, each affected client has provided informed consent. Without a concurrent conflict

of interest and with each of the affected parties’ consent to joint representation, the court will not

disqualify Mrs. Castellano’s counsel from continued representation.

B. Potential Trial Witness

The moving defendants argue that Mr. Silverstein should be disqualified from further

representation of Mrs. Castellano because he is a potential trial witness on the counterclaims. 

They allege that Mr. Silverstein provided Mrs. Castellano with information regarding the conduct

alleged in her counterclaim and that Mr. Silverstein is subject to examination as a witness.

According to the Pennsylvania Rules of Professional Conduct,

(a) A lawyer shall not act as advocate at a trial in which the lawyer

is likely to be a necessary witness unless:

(1) the testimony relates to an uncontested issue;

(2) the testimony relates to the nature and value of legal

services rendered in the case; or

(3) disqualification of the lawyer would work substantial

hardship on the client.

(b) A lawyer may act as advocate in a trial in which another lawyer

in the lawyer's firm is likely to be called as a witness unless

precluded from doing so by Rule 1.7 or Rule 1.9.

Pa. R. P. C. 3.7.

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The court shall not disqualify Mr. Silverstein on the basis of Rule 3.7. The court is not

convinced that Mr. Silverstein “is likely to be a necessary witness.” Pa. R. P. C. Rule 3.7(a). 

Furthermore, the court finds that disqualification of Mr. Silverstein and his firm as counsel to

Mrs. Castellano after years of complex and protracted litigation would work a substantial

hardship on Mrs. Castellano. Pa. R. P. C. Rule 3.7(a) (3). 

C. Solicitation of Clients

The moving parties allege that Mr. Silverstein violated Pa. R. P. C. 7.3 by directly

soliciting Mrs. Castellano as a client. The court finds that the evidence presented by the moving

parties does not so demonstrate. (See Mot. to Disqualify Counsel 22-24, Excerpt from

Castellano Dep., July 11, 2007.) Furthermore, Mr. Silverstein has sworn that Mrs. Castellano

was referred to him by her former counsel, the law firm Reed Smith, LLP, and he did not solicit

her as a client. (Silverstein Aff. I ¶¶ 3-8; Silverstein Aff. II ¶ 4.) The court shall not disqualify

Mr. Silverstein on the basis of the moving parties’ solicitation allegation.

D. Violation of Other Rules of Professional Conduct

The moving parties argue that Mr. Silverstein violated various rules of professional

conduct by filing counterclaims on behalf of Mrs. Castellano in this matter. (See Mot. to

Disqualify Counsel 25-31 (alleging violations of Pa. R. P. C. 3.1, 3.3, 4.1, 4.4, & 8.4).) They

allege that Mrs. Castellano’s counterclaims are devoid of any factual predicate and that Mr.

Silverstein’s conduct in this matter is prejudicial to the administration of justice.

At this stage of the litigation, the court is not permitted to engage in fact-finding

regarding the allegations in Mrs. Castellano’s counterclaim. Such fact-finding is reserved for

trial. The court shall consider the factual basis for Mrs. Castellano’s counterclaims when it

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reviews the cross-motions for summary judgment. Based on the record as it exists today, the

court finds no support for the moving parties’ allegations of assorted ethical violations by Mrs.

Castellano’s counsel. 

IV. Conclusion

The court will deny the motion to disqualify counsel. An appropriate Order follows.

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