N.J. Ct. R., R. Prof. Conduct 1.9 states: (a) A lawyer who has represented a client in a matter shall not thereafter: (1) 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 consents after a full disclosure of the circumstances and consultation with the former client; or (2) use information relating to the representation to the disadvantage of the former client except as N.J. Ct. R., R. Prof. Conduct 1.6 would permit with respect to a client or when the information has become generally known. (b) The provisions of N.J. Ct. R., R. Prof. Conduct 1.7(c) are applicable as well to situations covered by this rule.
Defendant parent corporation owned all of the stock of plaintiff subsidiary until 1988, at which time defendant sold plaintiff subsidiary to plaintiff acquiring corporation. A New York law firm represented defendant in all its legal affairs. The law firm sent its bills for legal services rendered to plaintiff subsidiary to defendant. After the sale, the Occupational Safety and Health Administration (OSHA) inspected one of plaintiff subsidiary's bakeries and issued formal citations. Plaintiffs filed the instant suit against defendant claiming that defendant misrepresented the condition of the baking equipment at the time of the sale. Defendant retained the law firm and a partner contacted two of plaintiff subsidiary's former officers to obtain information. Plaintiffs moved to disqualify the law firm. The trial court granted the motion.
Should the law firm be disqualified?
On appeal, the court affirmed, holding that the trial court properly disqualified the law firm in order to avoid the appearance of impropriety. The law firm had access to information on prior OSHA inspections. That could place the law firm at an advantage if it was permitted to represent defendant in the matter.