Court Opinion

ID: 4547003
Source: CourtListenerOpinion
Date Created: 2020-07-09 14:08:38.823379+00
Date Added: 2024-06-11T12:58:21.604898
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NOT FOR PUBLICATION WITHOUT THE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-1953-19T1

BRIAN DELANEY,

          Plaintiff-Respondent,

v.

DYKSTRA ASSOCIATES, INC.
d/b/a DYKSTRA ASSOCIATES,
PC, LMSD HOME BUILDERS
LLC, and GLEN EDWARDS,

          Defendants,

and

WANTAGE RIDGE
DEVELOPMENT, LLC, 43 MAIN
STREET, LLC and LIBERTY NEW
CONSTRUCTION PAINTING CO.
d/b/a LIBERTY PAINTING,

     Defendants-Appellants.
_________________________________

                   Argued telephonically June 1, 2020 –
                   Decided July 9, 2020

                   Before Judges Sumners and Natali.
            On appeal from the Superior Court of New Jersey, Law
            Division, Morris County, Docket No. L-0955-19.

            Bob Kasolas argued the cause for appellants Wantage
            Ridge Development, LLC, 43 Main Street, LLC and
            Liberty New Construction Painting Co. d/b/a Liberty
            Painting (Brach Eichler, LLC, attorneys; Bob Kasolas,
            on the briefs).

            Anthony Bedwell argued the cause for respondent
            (Bedwell & Pyrich, LLC, attorneys; Anthony M.
            Bedwell and Alissa Pyrich, of counsel and on the brief).

PER CURIAM

      On leave granted, defendants 43 Main Street LLC (43 Main), Wantage

Ridge Development LLC, and Liberty New Construction Painting Co. (Liberty)

(collectively, the "Prassas defendants") appeal the motion judge's order

disqualifying Bob Kasolas, Esq. and Brach Eichler LLC as their counsel. While

we agree with the judge that plaintiff Brian Delaney had a basis to seek the

disqualification of Kasolas and Brach Eichler LLC, we reverse because we

conclude Delaney waived his right to seek their disqualification.

                                       I

      This court is very familiar with the primary participants in the within

dispute as a result of prior consolidated appeals arising from their fractured

business relationship. Delaney v. Dykstra, Nos. A-1115-16, A-3246-16, A-

                                                                       A-1953-19T1
                                       2
5523-17 (App. Div. Aug. 12, 2019). A brief summary of the prior appeals are

necessary to provide context for the present controversy before us.

      In 2005, Delaney, together with Owen Dykstra, Doug Dykstra, and

Dimitrios Prassas, formed CC Holdings, LLC (CCH) as its sole members for the

purpose of developing a mixed-use property in Sparta. In 2014, Prassas and the

Dykstras decided to remove Delaney as a member of CCH and purchase

ownership interest therein due to his alleged hostile and combative behavior

towards them and his company's default on a loan from CCH. This led to three

separate lawsuits which were consolidated in the Chancery Division.

      In April 2016, after a settlement agreement was reached in the

consolidated matters, it was placed on the record before the trial court, and later

memorialized in writing. Delaney, however, refused to honor the agreement

resulting in the parties' respective efforts to rescind or enforce the agreement.

The court eventually entered five orders from October 2016 to July 2018, all in

favor of the Dykstras, Prassas, and CCH, to uphold and enforce the settlement

agreement and award them attorneys' fees and costs. On appeal, we affirmed

the court's orders in a thirty-three-page unpublished opinion. Throughout the

litigation, in the trial court and this court, Kasolas, a member of the law firm

Brach Eichler, LLC, represented Prassas without any objection from Delaney.

                                                                           A-1953-19T1
                                        3
      On April 29, 2019, about three months before our opinion was issued,

Delaney filed the within complaint against defendants alleging conversion and

bailee conversion. In particular, Delaney alleged that "[i]nstead of crediting

[him] as having made capital contributions to CCH by way of making . . .

payments . . . [defendants] either directly misappropriated or improperly

transferred" those funds, intending "to permanently deprive [him] of the funds

or otherwise use the funds for purposes other than that for which they were

intended." Delaney sought compensatory damages, pre- and post-judgment

interest, punitive damages, attorneys' fees and costs, and "imposition of a

constructive trust and lien on the assets" of defendants regarding the bailee

conversion count.

      On June 18, Kasolas, representing the Prassas defendants, filed a motion

to dismiss Delaney's complaint with prejudice based upon the contention the

complaint made the same claims this court adjudicated in the aforementioned

decision, Delaney, slip op. at 1-23.

      On September 25, Delaney filed a motion to disqualify Kasolas and Brach

Eichler from representing the Prassas defendants. In support, Delaney attached

a certification and an abundance of documents to show that either Kasolas

                                                                      A-1953-19T1
                                       4
specifically, or the law firm of Brach Eichler generally, had represented him

across various lawsuits over the past decade.

      On November 1, after oral argument, the motion judge issued an order and

bench decision disqualifying Kasolas and Brach Eichler as counsel for the

Prassas defendants. The judge noted it was troubled by "the representation by .

. . Kasolas and his firm of . . . Delaney, [which] goes back quite a few years[,]"

and although there had been "a significant gap in time" following the prior

litigation, and Delaney never moved for disqualification, "[t]he fact that he

didn't move to disqualify earlier . . . is [in]sufficient for this court to . . . rule

that . . . Delaney waived his right to make a disqualification motion, or that he

is in some fashion estopped" from doing so.

      Analyzing RPC 1.9(b), the court held Kasolas and Brach Eichler "were

privy to confidential information from . . . Delaney" and that Kasolas "certainly

has some insights into [Delaney's] personality, thinking, [and] how he

approaches particular decisions whether it be in litigation, business, etc."

Ultimately, the judge determined Kasolas and Brach Eichler should be

disqualified because they represented Delaney regarding CCH matters during

the events giving rise to Delaney's current suit.

                                                                              A-1953-19T1
                                          5
     When Kasolas sought a stay, the judge disclosed his need to recuse himself

from future proceedings in the matter. The judge commented:

           I don't know that a stay is appropriate for this court to
           grant or entertain. And I'll tell you further . . . in all
           candor up to this point, between yesterday and today, I
           did not know enough about this case for me to make the
           comments I'm going to make . . . . I didn't realize until
           I got into these other issues, and had an opportunity to
           have a perspective as to what the range of the issues . .
           . are, in this case with regard to some of the other
           defendants. The Dykstra Associates defendants, I've
           known members of the Dykstra family . . .
           professionally when I was in practice for many years. I
           had an appropriate professional relationship with them
           and, quite frankly, I have a very high regard for them,
           and I think it's probably something that's going to
           happen in the next day or so that I'm going to recuse
           myself from any further proceedings in this case, for
           that reason. It has nothing to do with the issue in this
           case for today, but going forward I believe in the
           interest of fairness to all parties that I recuse myself
           from further proceedings. I don't think I have to, but I
           think that it is probably the better course of action
           because I have . . . utilized their services when I was in
           practice for engineering services, surveying services,
           and the like, and I just don't think it's appropriate . . .
           for me to be ruling on the merits of the case going
           forward after today.

     Twenty days later, the Prassas defendants filed a motion for leave to

appeal the November 1 order, which this court granted.

     Prior to our order granting leave to appeal, the motion judge issued a letter

amplifying his bench decision.     R. 2:5-6(c).    The judge analyzed whether

                                                                          A-1953-19T1
                                       6
Kasolas and Brach Eichler's representation of the Prassas defendants in this

matter would violate the conflict of interest provisions outlined in RPC 1.7

because they were "substantially related[,]" under RPC 1.9 pursuant to City of

Atl. City v. Trupos, 201 N.J. 447 (2010), to the prior matters in which Kasolas

and Brach Eichler represented Delaney. The judge reasoned that under RPC 1.7,

there was "no question" that their representation of the Prassas defendants would

be adverse to Delaney.

      Examining Delaney's documentary evidence, the judge found it "evident

that there was communication between and representation by Kasolas/Brach

Eichler and . . . [Delaney] in 2012 referencing [a] First Hope Bank loan closing,"

which gave Kasolas and Brach Eichler the opportunity to "access [Delaney's]

personal financial information, including tax returns and financial statements."

The judge determined "Kasolas and Brach Eichler, without question, also

represented . . . Delaney personally and Windsor Lake Estates, LLC, [(WLE)]

of which Delaney was the sole member, in several cases in litigation . . . in the

years 2008 [and] 2009." The judge also found Kasolas and Brach Eichler

represented Delaney regarding preparation of CCH's Operating Agreement in

2011 and in another case in Sussex County in 2013. In this matter, the judge

maintained Kasolas and Brach Eichler as "[c]ounsel for the [Prassas]

                                                                          A-1953-19T1
                                        7
[d]efendants are directly opposing [Delaney's] interests, in regard to matters that

were addressed during [Delaney's] and opposing counsel's professional

relationship."

      Further, citing Trupos, 201 N.J. at 444, the judge concluded the "facts

relevant to the prior representation are both relevant and material to the

subsequent representation."         Because of the "multi-year professional

relationship" between Kasolas, Brach Eichler, and Delaney, the judge ruled

"[t]here is a clear risk, indeed a probability, that but for disqualification, Delaney

may be required to rebut or refute statements or advice allegedly made or

communicated to him by Kasolas/Brach Eichler as to his rights, obligations, and

remedies, especially as they relate to his involvement in CCH." As such, the

judge deemed such a situation "unseemly."

                                          II

      In their appeal, the Prassas defendants allege the motion judge erred by

disqualifying Kasolas and Brach Eichler from representing them. Specifically,

they argue the judge "plainly failed to actually apply the Trupos elements"

because: (1) he "erred in determining Brach Eichler ever . . . represented

Delaney in anything pertaining to CCH"; (2) Brach Eichler's representation of

Delaney in any other litigation was not "substantially related" to the instant

                                                                              A-1953-19T1
                                          8
litigation; and (3) he failed to point out "what specific 'confidential information'

Brach Eichler learned from Delaney that could be used materially or adversely

against him in this matter."

      The Prassas defendants also maintain that any representation of WLE by

Brach Eichler cannot create a conflict between Brach Eichler and Delaney in his

individual capacity because neither Kasolas nor Brach Eichler represented WLE

with regard to its bankruptcy. The Prassas defendants contend the judge should

have conducted an evidentiary hearing to make factual findings concerning the

details of Kasolas and Brach Eichler's relationship with Delaney. The Prassas

defendants further maintain the judge erred by not finding Delaney "waive[d]

any purported conflict [Kasolas and] Brach Eichler has in representing [the]

Prassas [d]efendants in this matter." In addition, they argue the judge should

have recused himself prior to issuing a decision on the disqualification motion

because he had a conflict based on a previous business relationship with the

Dykstras.

                                      A.

      Initially, we briefly address the Prassas defendant's contention the judge

should have recused himself before considering whether to disqualify Kasolas

and Brach Eichler. Specifically, they maintain because the judge admitted he

                                                                            A-1953-19T1
                                           9
had a prior business relationship with the Dykstras, he erred by finding that "the

disqualification motion 'had nothing to do' with the balance of the case or his

conflict." We see no abuse of discretion. State v. Marshall, 148 N.J. 89, 275-

76 (1997). Delaney's disqualification motion had nothing to do with the Dykstra

defendants, with whom the judge was previously associated with in his legal

practice before becoming a judge. The fact the judge ruled against the Prassas

defendants, does not in itself, suggest the judge was biased in doing so as a result

of his prior relationship with their co-defendants.       And there are no facts

intimating he was biased.

                                        B.

      We review a motion judge's decision on a disqualification motion de novo.

Trupos, 201 N.J. at 463. Therefore, we need not defer to the judge's decision.

Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995).

We must weigh "'the need to maintain the highest standards of the [legal]

profession' against 'a client's right freely to choose his counsel.'" Dewey v. R.

J. Reynolds Tobacco Co., 109 N.J. 201, 205 (1988) (alteration in original)

(quoting Gov't of India v. Cook Indus., Inc., 569 F.2d 737, 739 (2d Cir. 1978)).

      RPC 1:7 (a)(1) and (2) provide that an attorney shall not represent a client

if "the representation of one client will be directly adverse to another client," or

                                                                            A-1953-19T1
                                        10
"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."

      RPC 1.9(a) prohibits "[a] lawyer who has represented a client in a matter

[from] thereafter represent[ing] 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." Matters are substantially related if

             (1) the lawyer for whom disqualification is sought
             received confidential information from the former
             client that can be used against that client in the
             subsequent representation of parties adverse to the
             former client, or (2) facts relevant to the prior
             representation are both relevant and material to the
             subsequent representation.

             [Trupos, 201 N.J. at 451-52.]

Thus, disqualification "is triggered when two factors coalesce: the matters

between the present and former clients must be 'the same or . . . substantially

related,' and the interests of the present and former clients must be 'materially

adverse.'" Id. at 462 (alteration in original).

      Disqualification motions are normally decided based on affidavits or other

documentary evidence, unless the motion judge determines live testimony is

                                                                           A-1953-19T1
                                        11
required because conflicting affidavits are presented, and witness credibility is

at issue. Id. at 463 (citing Dewey, 109 N.J. at 222). The burden rests on the

former client to prove he or she "previously had been represented by the attorney

whose disqualification is sought," Dewey, 109 N.J. at 222, and the prohibition

of RPC 1.9(a) applies, Trupos, 201 N.J. at 462. To demonstrate the lawyer came

into possession of confidential information from the prior relationship, the

former client must make more than "bald and unsubstantiated assertions" that he

or she disclosed "business, financial and legal information" that the client

believes might be related to the matter for which the disqualification of the

attorney is sought. O Builders & Assocs., Inc. v. Yuna Corp. of N.J., 206 N.J.
109, 129 (2011).     If there is prima facie proof of a possible ground for

disqualification, the burden of producing countervailing evidence shifts to the

lawyer and his or her present client. Trupos, 201 N.J. at 462-63.

      Following these principles, we conclude the motion judge was correct in

determining Kasolas and Brach Eichler's prior representation of Delaney in

various matters is materially adverse to Delaney's interests in the within

litigation. Our review of the record leads us to the same conclusion reached by

the judge that Kasolas and Brach Eichler's previous representation dealt with

facts that are relevant and material to Delaney's allegations herein.

                                                                         A-1953-19T1
                                       12
      Kasolas and Brach Eichler's attorney-client relationships have intertwined

with the parties to this matter and the prior matters in transactional and litigation

matters. For example, Kasolas and Brach Eichler, represented Delaney and

Prassas in 2011 regarding the appraisal of CCH's property. Further, Brach

Eichler worked on Delaney's behalf with respect to CCH's Restated Operating

Agreement by contacting Faith Hope Bank regarding loan guarantees. 1

      As the judge properly found, Kasolas and Brach Eichler, through their

representation of Delaney over the years, have been privy to issues which bear

on the instant litigation. Delaney claims defendants misappropriated funds that

he, through WLE, issued to CCH purportedly as capital contributions. Kasolas

and Brach Eichler have been involved with Delaney since the inception of his

involvement with CCH and the initiation of CCH's development project, which

is the focus of this matter. As such, the issues on which Kasolas and Brach

Eichler represented Delaney in the past are relevant and material here, and the

court properly applied RPC 1.9 and the Trupos standard in considering whether

they should be disqualified in representing the Prassas defendants.

1
   Contrary to the Prassas defendants' argument, the judge did consider the gap
of time between Kasolas and Brach Eichler's representation of Delaney and this
litigation. He noted in his bench decision, "[t]here may have been a significant
gap in time" between the previous representation by Kasolas and Brach Eichler,
but nevertheless determined that disqualification was proper.
                                                                             A-1953-19T1
                                        13
                                       C.

      Even though we agree that a disqualifying conflict existed as a result of

Kasolas and Brach Eichler's prior representation of Delaney in various matters,

we conclude the judge erred in finding Delaney did not waive his right to seek

their disqualification.

      In Dewey, the Supreme Court "conclude[d] that under RPC 1.9 a

mandatory disqualification is no longer required." 109 N.J. at 215. And in

Chattin v. Cape May Greene, Inc., 243 N.J. Super. 590, 609 (App. Div. 1990),

we held the trial court had not abused its discretion when denying a motion to

disqualify opposing counsel, because the movant had "unduly delayed raising

the issue until shortly before the retrial, even though it was aware of the facts

relevant to the alleged conflict for several years." Beyond these rulings, there

is a dearth of authority in our state courts on whether a party can waive a motion

to disqualify an opposing party's legal representation. Thus, we look to our

federal brethren, where we find meaningful guidance.

      In Alexander v. Primerica Holdings, Inc., 822 F. Supp. 1099, 1115 (D.N.J.

1993), writ of mandamus granted, 10 F.3d 155 (3d Cir. 1993), the federal district

court declared that "[w]aiver is a valid basis for the denial of a motion to

disqualify." There, the court held a motion seeking disqualification, filed three

                                                                          A-1953-19T1
                                       14
years after commencement of the litigation and under circumstances in which

facts regarding the conflict had been known from the outset, was untimely. Id.

at 1120. The court stated:

            [A] finding [of waiver] is justified . . . when a former
            client was concededly aware of the former attorney's
            representation of an adversary but failed to raise an
            objection promptly when he had the opportunity. In
            [this] circumstance, the person whose confidences and
            secrets are at risk of disclosure or misuse is held to have
            waived his right to protection from that risk.

            [Id. at 1115 (alterations in original) (quoting
            Commonwealth Ins. Co. v. Graphix Hot Line, Inc., 808
F. Supp. 1200, 1208 (E.D. Pa. 1992)).]

      The court set forth five factors relevant to a determination whether the

moving party seeking disqualification of an opponent's counsel had waived the

right to that relief: "(1) the length of the delay in bringing the motion to

disqualify, (2) when the movant learned of the conflict, (3) whether the movant

was represented by counsel during the delay, (4) why the delay occurred, and

(5) whether disqualification would result in prejudice to the non-moving party."
Ibid. Particularly important was whether the movant appeared to be using the

motion as a technical maneuver. Ibid. (citing Richardson-Merrell, Inc. v.

Koller, 472 U.S. 424, 436 (1985) (expressing a concern for the "tactical use of

disqualification motions to harass opposing counsel")).

                                                                          A-1953-19T1
                                       15
      We conclude application of the Alexander test to this matter establishes

that Delaney waived his right to disqualify Kasolas and Brach Eichler from

representing the Prassas defendants. Delaney has been constantly involved in

litigation in various forms against Prassas, the Dykstras, and their related

business entities regarding essentially the same dispute, and never before moved

to disqualify Kasolas and Brach Eichler. From all accounts, Delaney is a

sophisticated developer who was vigorously represented by competent counsel

at all stages of the prior litigation. In this litigation, it is arguable that Delaney

continues to rebuff compliance with the settlement agreement between himself

and CCH's principals we previously upheld, and now belatedly attempts to

separate the Prassas defendants from the legal counsel they retained throughout

that litigation and others, in which Delaney was an adversarial party.              To

disqualify Kasolas and Brach at this stage would prejudice the Prassas

defendants – strategically and financially 2 – as they have relied upon their

counsel throughout their various legal skirmishes with Delaney, without his

objection.

2
  New counsel for the Prassas defendants would have to invest significant time
in learning the extensive history between the parties.
                                                                              A-1953-19T1
                                        16
      Considering the extensive prior litigation between the parties in which

Kasolas and Brach Eichler represented Delaney's adversaries as well as

Delaney's possession of supporting documentation he now uses as a sword to

disqualify Kasolas and Brach Eichler, we cannot reasonably find Delaney was

unaware there were grounds to disqualify Kasolas and Brach Eichler prior to his

motion. Delaney proffers no reasonable explanation for his motion's delay. We

find no merit to his contention that his failure to previously pursue

disqualification should not be considered in determining if he waived his right

to seek disqualification now. We thus are left with the belief his motion was

clearly filed for disfavored "tactical reasons." Therefore, we reverse the judge's

order granting Delaney's motion for disqualification.

      Any arguments that we have not addressed is because they lack sufficient

merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).

      Reversed and remanded.

                                                                          A-1953-19T1
                                       17