Court Opinion

ID: 5711178
Source: CourtListenerOpinion
Date Created: 2022-01-12 15:54:12.187978+00
Date Added: 2024-06-11T08:40:31.242543
License: Public Domain

Andrias, J.E (dissenting).
Because the confidential information obtained by plaintiffs counsel Epstein Becker & Green, EC. (EBG) from defendant WellCare Health Flans, Inc. in the course of its prior due diligence work for Morgan Stanley may be reasonably perceived as placing such confidences in jeopardy of disclosure to plaintiff, I respectfully dissent and would affirm.
It is undisputed that, in connection with its initial public offering in late 2003, WellCare made extensive due diligence disclosure to the offering’s underwriter, Morgan Stanley, through Morgan Stanley’s then counsel EBG. Only months later, EBG was retained by plaintiff to prosecute this litigation against WellCare and defendant thereafter moved for and obtained the presently appealed order disqualifying EBG from acting as plaintiffs counsel.
It is well settled that the disqualification of an attorney is a matter that rests within the sound discretion of the court (see Flores v Willard J. Price Assoc., LLC, 20 AD3d 343, 344 [2005]). EBG’s disqualification was proper since it obtained confidential information in the due diligence process within the context of a fiduciary relationship (see Greene v Greene, 47 NY2d 447, 453 [1979]) and that information is substantially related to the issues presented in the instant litigation. A fiduciary relationship may exist between an underwriter and an offeror of securities (see EBC I, Inc. v Goldman, Sachs & Co., 5 NY3d 11 [2005]), and the motion court correctly found that such a relationship did exist between Morgan Stanley and WellCare, at least to the extent that Morgan Stanley was bound to preserve from adverse use against WellCare in other contexts confidential information elicited from it to facilitate the underwriter’s due diligence. This duty was properly imputed to EBG in its capacity as Morgan Stanley’s counsel.
While recognizing that in certain instances, even where no formal attorney-client relationship exists, a fiduciary obligation has been sufficient to warrant attorney disqualification, the majority, relying for the most part on EBC I, Inc. v Goldman, Sachs & Co. (supra), feels that no fiduciary relationship existed between Morgan Stanley and WellCare and so none may be imputed to Morgan Stanley’s attorney. As aptly noted by the *89motion court, the crux of disqualification is not the attorney-client relationship itself, but the fiduciary relationship that results from it. Whether or not Morgan Stanley, as underwriter, was a fiduciary in the limited sense that Goldman Sachs was found to be in EBC I, Inc. v Goldman, Sachs & Co. (supra at 21-22 [“(T)he fiduciary duty we recognize is limited to the underwriter’s role as advisor. We do not suggest that underwriters are fiduciaries when they are engaged in activities other than rendering expert advice”]) does not warrant a different result. In EBC I, the Court merely held that the parties had created their own relationship of higher trust which required Goldman Sachs to deal honestly with its client and disclose its conflict of interest (id. at 22.)
Here, Morgan Stanley in its role as underwriter undertook as part of its relationship with WellCare to conduct the due diligence work necessary for the public offering of WellCare stock it was underwriting and retained EBG as its agent for that purpose. In that role, EBG obtained “secret” information from WellCare within the meaning of Code of Professional Responsibility DR 4-101 (22 NYCRR 1200.19), to which it would not otherwise have been privy. Thus, even if it was not a fiduciary as found in the context of EBC I, at the very least, EBG owed WellCare a fiduciary or special obligation not to disclose to anyone other than Morgan Stanley the “secret” information obtained by it in the course of rendering professional services to Morgan Stanley, so that Morgan Stanley could use it for the purposes for which EBG was retained.
It is undisputed that the confidential information turned over by WellCare to EBG in the course of, and to advance the purpose of, the encompassing confidential relationship included employee policies, retention and recruitment documents, litigation strategy, and business and competitive analyses directly relevant to the unfair competition claims now brought by plaintiff against WellCare. While EBG urges that the disqualification of the entire firm is unnecessary to protect WellCare against any conflict that the lawyers who worked on the WellCare offering may have, in view of the circumstance that EBG has made no attempt to screen those lawyers from the lawyers working on the present case, it was proper to impute their conflict to the entire firm (see e.g. Panebianco v First Unum Life Ins. Co., 2005 WL 975835, *3, 2005 US Dist LEXIS 7314, *8 [SD NY, Apr. 27, 2005, 04 Civ 9331]).
*90Saxe and Gonzalez, JJ., concur with Catterson, J.; Andrias, J.E, and Nardelli, J., dissent in a separate opinion by Andrias, J.E
Order, Supreme Court, New York County, entered on or about February 24, 2005, reversed, on the law, without costs, and the motion to disqualify plaintiff’s original litigation counsel denied.