Court Opinion

ID: 5141309
Source: CourtListenerOpinion
Date Created: 2021-12-29 15:07:58.64102+00
Date Added: 2024-06-11T08:24:28.594918
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE
                               APPROVAL OF THE APPELLATE DIVISION
        This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the
     internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.

                                                        SUPERIOR COURT OF NEW JERSEY
                                                        APPELLATE DIVISION
                                                        DOCKET NO. A-4209-19

H and H MANUFACTURING
COMPANY, INC., a/k/a
H&H,

          Plaintiff-Respondent,

v.

MARK TOMEI, Individually
and as Guardian ad Litem for
VINCENT TOMEI,

          Defendants-Appellants,

and

ESTATE OF MARIE TOMEI,
deceased, by the Executor
MARK TOMEI, individually
and derivatively on behalf of
Nominal Defendant H&H
Manufacturing Co., Inc.

          Intervenor/Third Party-
          Plaintiff,

v.

THOMAS R. TOMEI, and
H&H Manufacturing Co., Inc.,

     Third-Party Defendants.
_________________________

            Submitted October 18, 2021 – Decided December 29, 2021

            Before Judges Rothstadt and Natali.

            On appeal from an interlocutory order from the
            Superior Court of New Jersey, Law Division, Camden
            County, Docket No. L-4972-19.

            Davis Bucco, attorneys for appellant (Paul A. Bucco,
            on the briefs).

            Obermayer Rebmann Maxwell & Hippel LLP,
            attorneys for respondent (Matthew A. Green and Lars
            J. Lederer, on the brief).

PER CURIAM

      On leave granted, defendant Vincent Tomei, 1 by his son and limited

guardian Mark Tomei, appeals a May 22, 2020 Law Division order disqualifying

his counsel, Paul Bucco, Esq., and the law firm Davis Bucco Makara & Dorsey

(Davis Bucco). Having considered the parties' submissions in light of the record

and against the applicable legal principles, we reverse the May 22, 2020 order

and remand for further proceedings.

1
  As the parties share similar surnames, we refer to them by their first names,
intending no disrespect.
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                                       2
                                       I.

      This appeal has its origins in two actions that involve the control and

ownership of plaintiff, H&H Manufacturing Company, Inc. (H&H). H&H is a

corporation that manufactures parts for industrial turbines and has it principal

place of business in Delaware County, Pennsylvania.        Vincent is a retired

certified public accountant who handled H&H's books and records and other

financial corporate documents and served on its board of directors.

      Thomas Tomei, Vincent's other son, began working at H&H in 1972. He

too served on its board of directors but also held the office of president and

general manager, overseeing all aspects of H&H's day-to-day operations. Since

1984, H&H has been wholly owned by the Tomei family and affiliated trusts

whose beneficiaries are Tomei family members.

      Over the course of their business relationship, Thomas and Vincent's

positions became adverse. On April 8, 2013, H&H held a special meeting of the

stockholders. Paul Bucco acted as secretary at the meeting and prepared the

minutes, which indicated, in part, that both Vincent and Thomas would serve on

the board of directors for a one-year term, and that Davis Bucco would represent

H&H in all legal matters in 2013.

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                                       3
       Upon receiving the meeting minutes, Thomas wrote to Paul Bucco and

objected to several aspects of the proposed minutes, including that Davis Bucco

had been appointed to represent H&H.          He claimed that Davis Bucco's

appointment was not discussed in his presence, and that he had no knowledge of

any conforming retainer agreement.

       In May 2013, Vincent demanded H&H pay $25,000 for his personal tax

liabilities.   When Thomas refused, Vincent withdrew over $34,000 from

Thomas's personal account. The same day, and without approval of the board

of directors or other shareholders, Vincent sent Thomas a fax purporting to

terminate him from his employment with H&H. On June 3, 2013, Vincent held

an alleged meeting of the shareholders where he attempted to alter the board of

directors, replacing Thomas with Mark. Thomas was not provided proper notice

of the meeting.

       On June 17, 2013, Vincent filed suit in the Pennsylvania Court of

Common Pleas, Delaware County (Delaware County Action) in his own name

and, ostensibly, on behalf of H&H, asserting claims of breach of contract, breach

of fiduciary duty, and conversion, and also requesting equitable relief. 2

2
  Vincent was declared partially incapacitated on September 9, 2016. Mark was
appointed as Vincent's limited guardian and continued the litigation on Vincent's
behalf.
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Specifically, Vincent claimed to be owner of all H&H voting stock. He further

asserted that Thomas was a minority shareholder who owned only non-voting

shares and who had been terminated from H&H and removed from its board of

directors. He also alleged that Thomas converted H&H funds for personal use,

wrongfully took possession of and retained H&H books and records, refused to

sell his shares to H&H upon his termination as required by contract, and failed

to pay Vincent his salary as required by his employment agreement.              The

plaintiffs were represented by Paul Bucco and the Davis Bucco firm. Thomas

filed an answer with counterclaims.

      On December 8, 2017, following a bench trial, the court found in favor of

Thomas on all counts in the complaint. The court determined Vincent forged and

fabricated H&H's corporate documents, including shareholder certificates and

meeting minutes to establish his ownership in H&H. It further found that all

outstanding H&H shares were owned by the Thomas Tomei Trust, of which Thomas

was the sole beneficiary, and the estate of Marie Tomei, Vincent's late wife. It also

determined that Thomas's alleged termination and removal from the board of

directors were void, and that Thomas was "authorized to make all decisions

concerning the operations and management of H&H." Vincent was also found liable

for improperly converting $34,224.58 from Thomas's bank account.

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      Most notable as it relates to the issues before us, the court also dismissed all

claims Vincent asserted on H&H's behalf, concluding it was "not a proper party to

[the] litigation" as Vincent "lack[ed] standing to sue on behalf of H&H" because

"H&H's board of directors never approved the filing of [the] lawsuit or ratified its

filing" and Vincent failed to file a proper derivative suit.

      The Pennsylvania appellate court affirmed, and the Pennsylvania Supreme

Court denied further review. Throughout the Delaware County Action and all

related appeals, Paul Bucco and Davis Bucco represented Vincent and purported to

represent H&H's interests, signing all pleadings and appellate submissions on its

behalf.

      On December 11, 2019, H&H filed the instant action against Vincent and

Mark, individually, and as guardian ad litem for Vincent, in the Law Division.

H&H's claims in this matter are based, in part, on damages it alleges it sustained as

a result of the improper Delaware County Action. Specifically, H&H maintains

Vincent and Mark lacked authority to initiate and continue the Delaware County

Action, and that because of that lawsuit, a receiver had to be appointed, costing the

corporation in excess of one million dollars in damages. It also asserts additional

claims against Vincent for breach of fiduciary duties, fraud, conversion, civil

conspiracy, corporate waste, unjust enrichment, and tortious interference of contract.

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                                           6
       Paul Bucco, the same attorney who represented Vincent and purportedly

H&H as plaintiffs in the Delaware County Action, now represents Vincent as a

defendant against H&H. H&H moved to disqualify Paul Bucco and his firm

pursuant to RPC 1.9(a)3 contending that a conflict of interest existed based on

his prior representation of H&H. It based its application on the fact that Paul

Bucco and Davis Bucco claimed to have represented H&H throughout the

Delaware County Action. H&H also claimed that Paul Bucco and Davis Bucco

represented it prior to the initiation of the Delaware County Action. Finally,

H&H argued Paul Bucco should be disqualified under RPC 3.74 because he is a

critical and indispensable witness based, in part, on his involvement in the April

2013 corporate meeting.

3
   RPC 1.9(a), Duties to Former Clients, provides: "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."
4
    RPC 3.7(a) provides:

             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.
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      In opposition, Vincent argued that Paul Bucco's and Davis Bucco's

representation in the Law Division action did not violate RPC 1.9(a) because

their representation of H&H in the Delaware County Action was "derivative and

nominal." He explained that "H&H's involvement in the Delaware County

Action was premised on Vincent['s] . . . position that he was a shareholder of

H&H," but the court determined that Vincent had no ownership of H&H and, as

a result "it was impossible for H&H to have been [Paul Bucco's or his firm's]

client." He also noted that H&H's Law Division complaint stated that Vincent

and Mark were unauthorized to initiate or continue litigation on H&H's behalf

and argued "H&H simply cannot take the position that [Paul Bucco and Davis

Bucco] had no authority to represent H&H and, simultaneously, that [Paul

Bucco and Davis Bucco] represented H&H to the extent a conflict of interest

currently exists."

      Vincent also argued that the two actions were not "substantially related"

because Paul Bucco and Davis Bucco did not receive confidential information

from H&H, and facts relevant to their purported representation of H&H were

not relevant to his representation of Vincent. Finally, Vincent claimed Paul

Bucco's testimony was not necessary and, therefore, RPC 3.7 was inapplicable.

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                                      8
      H&H filed a reply brief in which it characterized the argument that Paul

Bucco and Davis Bucco represented H&H only in a derivative capacity as

"disingenuous at best." It stressed that Vincent "did not do anything to bring the

action as a 'derivative' suit and therefore H&H was not a 'nominal' or 'derivative'

party to the prior suit." It also explained that Paul Bucco purported to represent

H&H as recently as February 2020, when he refused to turn over H&H

documents to Thomas. Finally, H&H argued that RPC 1.9 does not require that

the attorney sought to be disqualified had obtained confidential information

where "facts relevant to the prior representation are relevant and material to the

subsequent representation in the instant matter."

      After hearing oral arguments, the judge granted H&H's motion.               In

disqualifying Paul Bucco and Davis Bucco, the judge determined that they had

represented H&H in the Delaware County Action. He essentially reasoned that

filing pleadings on behalf of a party equates to representation, and he was not

aware of any conflict case that recognized a "nominal representation"

distinction.

      Second, the judge determined that the two matters were "substantially

related." In reaching that conclusion, he first acknowledged that it was not clear

that Paul Bucco or his firm received confidential information from H&H.

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                                        9
Nevertheless, the judge found the matters to be substantially related because

facts relevant to the Delaware County Action were closely connected and

material to the present action. Specifically, he explained that the Law Division

action sought to redress damages incurred by H&H from the "initiation and . . .

continuation of the litigation in the first case," and that findings of fact from the

Delaware County Action, including that Vincent forged and fabricated corporate

documents, were germane to plaintiff's claims.

         Finally, the judge determined that representation of Vincent in the present

action by Paul Bucco and Davis Bucco was materially adverse to their former

client, H&H. He reasoned "H&H is the plaintiff [and] . . . Vincent is the

defendant in the case. It doesn’t get any . . . more clearly adverse." In reaching

that conclusion, the judge rejected defendant's argument that there was no

adversity because Paul Bucco and Davis Bucco represented H&H "in name

only."     The judge also briefly discussed RPC 3.7 but did not make any

substantive findings or base his decision on a violation of that RPC. This appeal

followed.

                                          II.

         Before us, Vincent again argues that Paul Bucco and Davis Bucco

represented H&H in the Delaware County Action in only a "nominal" capacity,

                                                                               A-4209-19
                                         10
which he claims is insufficient for disqualification under RPC 1.9(a). He also

argues, relying on Host Marriott Corp. v. Fast Food Operators, Inc., 891 F. Supp.

1002 (D.N.J. 1995), that disqualification under RPC 1.9(a) is inapplicable where

counsel was not in a position to obtain confidential information from his

purported former client.

      Based on the unique circumstances presented, we conclude that Paul

Bucco and Davis Bucco's unauthorized appearance on behalf of H&H in the

Delaware County Action does not qualify as "representation" as contemplated

by RPC 1.9(a), and therefore, cannot solely form the basis for their

disqualification. However, because we cannot discern from the record whether

Paul Bucco or Davis Bucco represented H&H in any other substantially related

matters, or whether disqualification under RPC 3.7 is appropriate, we remand

for further proceedings. In the interest of completeness, we nevertheless address

and reject Vincent's interpretation of Host Marriott.

                                       III.

      Our evaluation of "an order granting or denying a disqualification motion

invokes our de novo plenary review in light of the fact that a decision on such a

motion is made as a matter of law." Twenty-First Century Rail Corp. v. New

Jersey Transit Corp., 210 N.J. 264, 274 (2012). Disqualification of counsel is

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                                      11
generally a "harsh discretionary remedy which must be used sparingly."

Cavallaro v. Jamco Prop. Mgmt., 334 N.J. Super. 557, 572 (App. Div. 2000).

Motions to disqualify are typically disfavored because they "can have such

drastic consequences." Rohm & Haas Co. v. Am. Cyanamid Co., 187 F. Supp.

2d 221, 226 (D.N.J. 2001). However, a motion to disqualify requires the court

to "balance competing interests, weighing the need to maintain the highest

standards of the profession against a client's right freely to choose his counsel."

Twenty-First Century Rail, 210 N.J. at 273-74 (quoting Dewey v. R.J. Reynolds

Tobacco Corp., 109 N.J. 201, 218 (1988)).

      A party's "right to retain counsel of his or her choice is limited in that

there is no right to demand to be represented by an attorney disqualified because

of an ethical requirement." Ibid. (quoting Dewey, 109 N.J. at 218). Once a

conflict of interest is determined to exist, the appropriate remedy is

disqualification of the attorney, except in the interests of justice. See State v.

Jimenez, 175 N.J. 475, 484 (2003); State v. Loyal, 164 N.J. 418, 430 (2000).

"[A]ny doubt as to the propriety of an attorney's representation of a client . . .

must be resolved in favor of disqualification." Estate of Kennedy v. Rosenblatt,

447 N.J. Super. 444, 451 (App. Div. 2016) (quoting Herbert v. Haytaian, 292

N.J. Super. 426, 438-39 (App. Div. 1996)).

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                                       12
      "[T]he initial burden of production—that the lawyer(s) for whom

disqualification is sought formerly represented their present adverse party and

that the present litigation is materially adverse to the former client—must be

borne by the party seeking disqualification." City of Atlantic City v. Trupos,

201 N.J. 447, 462 (2010). While the burden of production may shift, "the burden

of persuasion on all elements under RPC 1.9(a) remains with the moving party,

as it 'bears the burden of proving that disqualification is justified.'" Id. at 462-

63 (quoting Div. of Youth & Family Servs. v. V.J., 386 N.J. Super. 71, 75 (Ch.

Div. 2004)).

      "The term 'represented' is not defined in RPC 1.9, nor is it defined

elsewhere in the Model Rules or in the New Jersey RPCs." Dewey, 109 N.J. at

214; see also RPC 1.0. As such, "the existence of an attorney-client relationship

- that is a representation - may be governed by principals of substantive law

'external to' the rules of professional conduct." Kevin H. Michels, New Jersey

Attorney Ethics, § 21:2-1 at 539 (2021).

      Our Supreme Court has held that "representation is inherently an aware

consensual relationship, one which is founded upon the lawyer affirmatively

accepting a professional responsibility." In re Palmieri, 76 N.J. 51, 58 (1978)

(internal quotations omitted). In other words, the attorney-client relationship

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                                        13
begins with a non-lawyer's reliance on the professional skills of an attorney,

who, in turn, knows of this reliance and accepts responsibility for it. Ibid.; see

also Restatement (Third) of the Law Governing Lawyers § 14 (Am. Law. Inst.

2000) ("A relationship of client and lawyer arises when . . . a person manifests

to a lawyer the person's intent that the lawyer provide legal services for the

person; and . . . the lawyer manifests to the person consent to do so."); Dixon

Ticonderoga Co. v. Estate of O'Connor, 248 F.3d 151, 169 (3d Cir. 2001)

(same).    The client must demonstrate from an identifiable action or

manifestation, reliance on an attorney in his professional capacity. See Herbert,

292 N.J. Super. at 436-37.

      Moreover, courts have held that asserting a derivative claim on behalf of

a corporate entity does not create an attorney-client relationship with the entity.

See Simms v. Rayes, 316 P.3d 1235, 1238-39 (Ariz. Ct. App. 2014) (finding no

conflict of interest where law firm filed a derivative claim on corporate entity's

behalf while simultaneously defending individual shareholder against the

corporate entity, reasoning the firm had no attorney-client relationship with the

corporate entity); Shen v. Miller, 150 Cal. Rptr. 3d 783, 786, 791 (Ct. App.

2012) (similar); see also In re Dayco Corp. Derivative Sec. Litig., 102 F.R.D.

624, 630 (S.D. Ohio 1984) ("case law is virtually unanimous in holding that one

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                                       14
counsel can represent a stockholder bringing both an individual and a derivative

action"). A derivative action is an action brought by a shareholder to assert the

rights of a corporation. See In re PSE&G S'holder Litig., 173 N.J. 258, 277-78

(2002). While deemed to belong to the corporation, derivative actions allow

individual shareholders to protect their interests from directors' misfeasance and

malfeasance affecting shareholders as a whole.             See Strasenburgh v.

Straubmuller, 146 N.J. 527, 549-50 (1996). In contrast, an individual action

involves a "special injury" that does not affect all shareholders. Id. at 550.

      We disagree with the judge that the fact that Paul Bucco and Davis Bucco

entered an appearance on behalf of H&H establishes "representation" under RPC

1.9(a). As the Delaware County court found, Vincent lacked standing to file a

direct action on behalf of H&H because the board of directors never approved

or ratified his filing of the lawsuit. H&H essentially concedes that fact in the

present action, as its complaint alleged that neither Vincent nor Mark were

authorized to initiate or continue the Delaware County Action on H&H's behalf.

      Further, the record contains no evidence of a written agreement or oral

representation by H&H establishing an "aware consensual," In re Palmieri, 76

N.J. at 58, attorney-client relationship under New Jersey law. Indeed, based on

the Delaware County court's findings, H&H never consented to Paul Bucco's or

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                                       15
Davis Bucco's representation in that matter and, as such no attorney-client

relationship could have formed. Simply put, Paul Bucco and Davis Bucco did

not actually "represent" H&H, they merely alleged they did, and whatever

consequences may flow from that inaccurate characterization, such self-serving

pronouncements cannot serve as the sole basis for the creation of an attorney-

client relationship. In re Palmieri, 76 N.J. at 58; Herbert, 292 N.J. Super. at 436-

37. Paul Bucco and Davis Bucco's appearance on behalf of H&H was, at best,

akin to a defectively filed putative derivative action, which, as noted, does not

create an attorney-client relationship with the corporate entity. Simms, 316 P.3d

at 1238-39; Shen, 150 Cal. Rptr. 3d at 791; In re Dayco, 102 F.R.D. at 630.

      Although not cited by the parties, our research has revealed one similar

case, Brooks v. Quinlan, 839 S.E.2d 51 (Ga. Ct. App. 2020), where the court

reached a different conclusion, and which we decline to follow. There, the

majority member of a limited liability company (LLC) filed suit against a

minority member. Id. at 574. The majority member also named the LLC as a

nominal defendant and asserted a derivative claim of breach of fiduciary duty

on its behalf against the minority member. Ibid. Counsel for the minority

member filed an answer on behalf of the defendants including the LLC. Ibid.

The majority member unsuccessfully moved to strike the answer on behalf of

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                                        16
the LLC, which defense counsel opposed. Ibid. Thereafter, in response to the

majority member's motion for partial summary judgment, the court declared her

as the "sole manager" of the LLC and later granted her motion to realign the

LLC as a plaintiff. Id. at 575.

      After re-filing her complaint with the LLC as a plaintiff, the majority

member moved to disqualify defense counsel under Rule 1.9(a) of the Georgia

Rules of Professional Conduct, which mirrors RPC 1.9(a). Ibid. The trial court

granted the motion and the court of appeals affirmed. Id. at 576, 578.

      The appellate court found defense counsel's representation established "a

clear violation of [RPC] 1.9(a) on its face."      Id. at 578. In reaching that

conclusion it concurred with the trial court in rejecting the argument that defense

counsel's "nominal" representation of the LLC was insufficient to create a

conflict under RPC 1.9. Ibid. Instead, it adopted the trial court's determination

that by filing an answer on the LLC's behalf and opposing plaintiff's motion to

strike that answer it was "impossible to cast the representation as so minimal

that it should be ignored." Ibid.

      We find Brooks unpersuasive and decline to adopt the court's reasoning.

First, we note that there, the appellate court applied an abuse of discretion

standard of review, whereas we review the present disqualification order de

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                                       17
novo. Id. at 577; Twenty-First Century Rail, 210 N.J. 264, 274 (2012). More

importantly, we disagree that counsel can "represent" a corporate entity within

the meaning of RPC 1.9(a) in circumstances where a court issued a final

determination after fact finding and concluded that counsel was unauthorized to

represent the entity.   Finally, as noted, New Jersey law requires that any

representation must be a "consensual" relationship, that begins with a

manifestation of assent by the client. In re Palmieri, 76 N.J. at 58; Dixon

Ticonderoga, 248 F.3d at 169. Where the purported client has not manifested

assent, as H&H indisputably never did here, there can be no "representation."

We disagree with the Brooks court that an attorney-client relationship can be

created by the filing of pleadings, regardless of the significance or substantive

nature of those submissions. As noted, other remedies are available for incorrect

and improper representations in pleadings.

      Nevertheless, the record contains references suggesting that Paul Bucco

and Davis Bucco may have represented H&H in other capacities. Specifically,

it appears Paul Bucco served as acting secretary in at least one meeting of H&H

stockholders on April 8, 2013, and H&H alleged without adequate support in

the record that "Davis Bucco represented H&H in at least ten matters, over seven

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                                      18
years," a point Vincent disputes, claiming all such appearances were appeals

arising from the Delaware County Action.

      Further, disqualification under RPC 3.7 may be appropriate, an issue the

judge did not dispositively address. Because the record as presented affords us

no meaningful opportunity to review the scope of Paul Bucco and Davis Bucco's

representation of H&H outside of the Delaware County Action, or to what extent

Paul Bucco will be a necessary witness under RPC 3.7, we remand for further

proceedings to determine if disqualification is warranted.

                                      IV.

      In any event, we reject Vincent's position that Host Marriot renders RPC

1.9(a) inapplicable where the attorney facing disqualification did not receive

confidential information from the former client, as that interpretation runs

directly counter to our Supreme Court's holding in Trupos. While Host Marriot

provided RPC 1.9(a) "is not implicated . . . until the movant shows that 'the

attorney was in a position where he could have received information which his

former client might reasonably have assumed the attorney would withhold from

his present client,'" fifteen years later in Trupos, the Supreme Court held that

under RPC 1.9(a) "matters are deemed to be 'substantially related' if (1) the

lawyer . . . received confidential information from the former client that can be

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                                      19
used against that client . . . , or (2) facts relevant to the prior representation are

both relevant and material to the subsequent representation." Host Marriott, 891

F. Supp. 1002, 1007 (quoting Allegaert v. Perot, 565 F.2d 246, 250 (2d Cir.

1977)); Trupos, 201 N.J. at 451-52 (emphasis added). By using disjunctive

phrasing including the word "or," the Trupos Court made clear that an attorney's

knowledge of confidential information is not necessary for disqualification

under RPC 1.9(a).

      We leave the scope and manner of the remand proceedings to the judge's

discretion. To the extent the judge determines it necessary, the parties may

engage in limited discovery to determine the extent Paul Bucco and his firm

represented H&H in any other matter, and whether any such representation was

"substantially related" to the present action under the two-part test discussed in

Trupos. Finally, to the extent H&H seeks to disqualify Paul Bucco pursuant to

RPC 3.7, additional factual findings shall also be made by the judge.

      Reversed and remanded for further proceedings consistent with our

opinion. We do not retain jurisdiction.

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