460 Mass. 265

PCG Trading, LLC vs. Seyfarth Shaw, LLP, & others.1

Suffolk.

April 7, 2011.

- July 29, 2011.

Present: Ireland, C.J., Spina, Cordy, Botsford, Gants, & Duffly, JJ.

Robert L. Gamer {Matthew J. Walko with him) for the plaintiff.

Robert J. Muldoon, Jr. {David M. Dineen with him) for the defendants.

Botsford, J.

PCG Trading, LLC (PCG), has filed a complaint for legal malpractice and related claims against Seyfarth Shaw, LLP, and four individual attorneys associated or formerly associated with the firm. The sole issue raised in this appeal is whether a motion filed by PCG for admission of an attorney pro hac vice was properly denied by a judge in the Superior Court. We conclude that PCG’s motion should have been allowed.

*2661. Background. The following facts are taken from the allegations of PCG’s amended complaint pending in the Superior Court. Seyfarth Shaw’s representation of PCG in Massachusetts arose in connection with two lawsuits that originated in California. In 2002 and in 2005, respectively, Ellen Costigan obtained two judgments against the company Converge, LLC, and its parent, Converge, Inc. (collectively Converge), in California2; Seyfarth Shaw represented Converge in connection with both cases. Costigan had been an employee of Converge,3 and the first action was one for unpaid wages, brought before the California Labor Commission (commission) in 2001. The commission awarded Costigan approximately $130,000 in unpaid wages, interest, and penalties. Seyfarth Shaw, on behalf of Converge, unsuccessfully appealed the award to the California Superior Court, and on November 2, 2002, the court entered judgment against Converge on the commission’s award. At some point in this time period, Converge relocated to Massachusetts, and on November 29, 2002, Costigan commenced an action against Converge in the Superior Court for Essex County seeking to enforce the unpaid wages judgment (Essex County action).

In March of 2003, PCG purchased substantially all of Converge’s assets. Under the terms of the asset purchase agreement, Converge remained responsible for Costigan’s two claims against Converge, and agreed to indemnify PCG for any losses arising out of them. Seyfarth Shaw at the time continued to represent Converge in connection with Costigan’s claims, but also took on PCG as a client for various matters. However, Seyfarth Shaw did not disclose to PCG any actual or potential conflicts of interest relating to its representation of both Converge and PCG.

On May 16,2003, less than two months after the asset purchase of Converge by PCG, Seyfarth Shaw filed an unsealed motion *267to withdraw as counsel for Converge in the Essex County action. In the motion, Seyfarth Shaw stated:

“Seyfarth Shaw is informed, and therefore believes, that [Converge]: (i) is no longer in business; (ii) no longer has any employees, other than several directors and officers outside of Massachusetts, or any facilities; (iii) has no tangible or intangible assets in Massachusetts; and (iv) cannot pay Seyfarth Shaw for additional services. . . .
“Seyfarth Shaw’s withdrawal will not result in a material adverse effect on [Converge], Even assuming, arguendo, that [Costigan’s] Motion for Summary Judgment is allowed, that ruling will have no effect on [Converge]. [Costigan’s] action is solely to enforce a judgment of a foreign jurisdiction. [Converge] has no assets in Massachusetts. Therefore, [Costigan] will be unable to enforce in Massachusetts the judgment [she] obtains, if any, against [Converge] in this action.”

Seyfarth Shaw’s motion to withdraw was allowed, and Converge thereafter was defaulted. In December, 2003, judgment entered in the Essex County action against Converge in the amount of $143,840.67. Converge did not pay the judgment.

In March of 2002, Costigan filed an action against Converge alleging sex discrimination and wrongful discharge in the California Superior Court. Seyfarth Shaw, representing Converge, removed the case to the United States District Court for the Central District of California. Later, and over Converge’s objection, Seyfarth Shaw withdrew from representing Converge. Converge defaulted in the action as a result of Seyfarth Shaw’s withdrawal, and a default judgment of more than $3 million entered against Converge in November, 2005.

On July 25, 2006, Costigan commenced an action in the Superior Court for Norfolk County (Norfolk County action) against PCG and Converge, seeking to enforce against both companies the 2005 California default judgment and to enforce against PCG only the 2002 unpaid wages judgment. Seyfarth Shaw represented PCG in this action; Converge did not appear. In July, 2007, following a bench trial, a Superior Court judge found that the 2003 asset purchase of Converge by PCG was a *268de facto merger of the two companies as well as a fraudulent transfer, thereby rendering PCG liable for both of Costigan’s California judgments against Converge. Soon thereafter, judgment in the Norfolk County action entered against PCG in the amount of $3,323,802 plus interest. In December, 2007, PCG, represented by new counsel, entered into a settlement agreement with Costigan, and PCG’s appeal from the Norfolk County judgment was dismissed.

PCG filed the present action against Seyfarth Shaw in the Superior Court for Suffolk County in July of 2009. The amended complaint includes claims for legal malpractice, breach of contract, breach of fiduciary duty, and violation of G. L. c. 93A, based in substantial part on Seyfarth Shaw’s alleged conflict of interest arising from its dual representation of Converge and PCG in connection with the Costigan claims, and failure to advise PCG of that conflict.4 On or about October 2, 2009, PCG served on Seyfarth Shaw a motion to admit both William A. Brewer, III, and Robert L. Gamer pro hac vice as PCG’s trial counsel. Gamer is a senior counsel in the New York City office of the Dallas-based law firm of Bickel & Brewer, and Brewer is a partner in the same firm. Garner is a member in good standing of the State bars of New York and New Jersey.

Although Seyfarth Shaw initially assented to PCG’s motion, PCG never filed it with the court. Instead, on October 29, PCG filed a motion to admit only Gamer pro hac vice. Also on October 29, an article appeared in an Internet issue of the National Law Journal entitled, “Former client sues Seyfarth Shaw, claiming malpractice, conflict of interest.” The article summarized many of the allegations of PCG’s complaint, and in particular, included the following:

“According to the lawsuit, Seyfarth’s mistakes include filing an unsealed motion to withdraw from representing Converge in Essex County Superior Court when Costigan filed suit there to enforce the California wage judgment. PCG argues that Seyfarth’s description of Converge as an insolvent, virtually nonexistent company ‘would provide *269ammunition for Costigan to assert a successor liability claim.’
“PCG’s lawyer, Bill Brewer of Dallas-based Bickel & Brewer, said PCG’s deal with Converge was structured as an asset purchase not a merger.
‘The difficulty is that Seyfarth [filed court] papers in an attempt to relieve itself of its responsibility to another client of theirs, Converge, that not only misstated the facts, but stated the facts in a way that supported their [5] notion of [PCG’s] successor liability.’
“Taking this position when withdrawing from the Converge case jeopardized Seyfarth’s fiduciary responsibility to PCG, he said.” (Emphasis added.)

In response to this article, Seyfarth Shaw withdrew its assent to PCG’s motion to admit Garner pro hac vice, and filed an opposition.

A Superior Court judge (motion judge) held a hearing on the motion on November 19, 2009. Seyfarth Shaw argued primarily that Brewer’s comment quoted in the article violated Mass. R. Prof. C. 3.6, 426 Mass. 1392 (1998), and served as a ground to deny the motion to admit Garner pro hac vice. The motion judge denied PCG’s request for Gamer’s pro hac vice admission. PCG appealed from the denial to the Appeals Court, and we transferred the case to this court on our own motion.6

2. Discussion. “[A] member of the bar, in good standing, of any other state may appear, by permission of the court, as attorney or counselor, in any case pending therein, if such other state grants like privileges to members of the bar, in good standing, of this commonwealth.” G. L. c. 221, § 46A, inserted by St. 1935, c. 346, § 2. However, as this court has stated, “per*270mission of the judicial department is not merely important but is essential to the right to appear as an attorney under G. L. c. 221, § 46A,” DiLuzio v. United Elec., Radio & Mach. Workers, Local 274, 391 Mass. 211, 215 (1984) (DiLuzio), and “the degree of discretion accorded a judge in deciding whether to admit an out-of-State attorney is broad.” Merles v. Lemer, 391 Mass. 221, 223 (1984).

The motion judge denied PCG’s motion “substantially for the reasons set forth in [Seyfarth Shaw’s] opposition.” We turn, therefore, to the two reasons Seyfarth Shaw presented in its written opposition to PCG’s motion to admit Garner pro hac vice; these are the same principal grounds the firm advances on appeal. First, Seyfarth Shaw stated, and argues here, that PCG is adequately represented by local counsel, an element judges consider in exercising their broad discretion to decide whether to allow an attorney to appear pro hac vice. Second, and the primary reason asserted below and on appeal, Seyfarth Shaw claims that Brewer’s comment to the National Law Journal violated Mass. R. Prof. C. 3.6, 426 Mass. 1392 (1998).7 We consider the second reason first.

a. Violation of rule 3.6. Rule 3.6 (a) precludes a lawyer who is involved in the litigation of a case from making an out-of-court *271statement “that a reasonable person would expect to be disseminated by means of public communication if the lawyer knows or reasonably should know that it will have a substantial likelihood of materially prejudicing an adjudicative proceeding in the matter.” However, rule 3.6 (b) “identifies specific matters about which a lawyer’s statements would not ordinarily be considered to present a substantial likelihood of material prejudice, and should not in any event be considered prohibited by the general prohibition of paragraph (a).” Comment [4] to rule 3.6. See Matter of Cobb, 445 Mass. 452, 475 n.7 (2005) (“Rule 3.6 .. . concerning trial publicity, contains a safe harbor provision for certain extrajudicial statements”). See also Restatement (Third) of the Law Governing Lawyers, § 109 (c), at 162-163 (2000) (same, discussing earlier version of rule).

Seyfarth Shaw focuses on Brewer’s statement that Seyfarth Shaw “misstated the facts,” and argues that Brewer, in using this phrase, was charging Seyfarth Shaw with lying in court papers, or, as Seyfarth Shaw puts it, using words “which describe Seyfarth as a law firm that, in its own self-interest, intentionally filed false submissions to courts.” As such, the argument goes, Brewer was impugning Seyfarth Shaw’s “character, credibility, and reputation,” thereby placing the comment within the class of subjects “which are more likely than not to have a material prejudicial effect on a proceeding,” Comment [5] to rule 3.6, and thus covered by the proscription set forth in rule 3.6 (a).

We think Seyfarth Shaw’s characterization of Brewer’s statement exaggerates the level of the statement’s negative impact, but in any event, Seyfarth Shaw’s argument fails. Rule 3.6, adopted in the Commonwealth in 1997, replaced the more restrictive S.J.C. Rule 3:07, DR 7-107 (G), as appearing in 382 Mass. 788 (1981).8 Rule 3.6 follows in substance the corresponding American Bar Association (ABA) Model Rule of *272Professional Conduct, as amended in 1994.9 As the sources cited previously indicate, rule 3.6 (a) delineates prohibited conduct, while rule 3.6 (b) sets out exceptions, providing safe harbor for certain categories of statements that do not violate the prohibition in rule 3.6 (a).10 Under rule 3.6 (b), “a lawyer may state: (1) the claim, offense, or defense involved, and, except when prohibited by law, the identity of the persons involved; [and] (2) the information contained in a public record.”

*271“(6) a warning of danger concerning the behavior of a person involved, when there is reason to believe that there exists the likelihood of substantial harm to an individual or to the public interest; . . .

*272A review of the record establishes that Brewer’s remark quoted in the National Law Journal falls well within these two exceptions. Brewer’s statement that Seyfarth Shaw, “in an attempt to *273relieve itself of its responsibility to . . . Converge,” filed court papers “that not only misstated the facts, but stated the facts in a way” that supported Costigan’s notion of PCG’s successor liability in large measure tracks directly the allegations of PCG’s complaint. PCG alleges the following:

“3. Defendants, at various times, defended both Converge and PCG Trading against Costigan’s claims — at times blurring the line regarding which client they were representing. ... In fact, in attempting to rid themselves of Converge in order to continue representing PCG Trading, defendants filed an unsealed document in the Essex County Superior Court, which contained statements that were later relied upon as evidence by the Norfolk County Superior Court in holding PCG Trading liable for the prior judgments against Converge. Defendant did not disclose to PCG Trading their prior statements that were adverse to the interests of PCG Trading. . . .
“25. Nevertheless, defendants filed their withdrawal motion without regard to its potential negative impact on PCG Trading. . . . Defendants were well aware that Converge, Inc. had insufficient assets to pay [Costigan’s] Wage Judgment.[11] They also knew that, because PCG Trading had purchased substantially all of Converge, Inc. ’s assets, their description of Converge as an insolvent, virtually nonexistent company would (and later did) provide ammunition for Costigan to assert a successor liability claim against PCG Trading.” (Emphases added.)

As the quoted allegations show, Brewer, in words generally identical to those used in the complaint, summarized in his *274comment a primary “claim” (Mass. R. Prof. C. 3.6 [b] [1]) of PCG against Seyfarth Shaw. The substance of the claim is that in filing the motion to withdraw in the Essex County action, the law firm, in a breach of its fiduciary duty to PCG, supplied an important ground for Costigan’s subsequent argument that PCG was responsible for the judgments against Converge on a theory of successor liability.

To the extent the complaint itself does not allege that Sey-farth Shaw’s motion to withdraw “misstated” facts, the public court filings in the Norfolk County action do reflect the misstatement to which Brewer referred. Those court filings are matters of “public record.” Mass. R. Prof. C. 3.6 (b) (2). They reveal that a cornerstone of the defense advanced by Seyfarth Shaw on PCG’s behalf in the Norfolk County action was that Converge was not the insolvent shell with no assets that Sey-farth Shaw had described in its Essex County motion to withdraw. Instead, Seyfarth Shaw argued that Converge was a viable corporation with stock holdings worth $6 to $10 million, as well as contract rights and other assets. Placing the conflicting representations in Seyfarth Shaw’s Essex County and Norfolk County court filings side by side makes clear that Brewer’s statement that Seyfarth Shaw had “[filed court] papers” (the Essex County withdrawal motion) that “misstated the facts” finds support in the public record.12 We conclude, therefore, that no violation of rule 3.6 has been shown.13

It is true that courts have upheld denials of pro hac vice *275admissions when based on a finding of unethical conduct by the lawyer in question. See, e.g., Panzardi-Alvarez v. United States, 879 F.2d 975, 981 (1st Cir. 1989), cert. denied, 493 U.S. 1082 (1990), and cases cited (judge did not abuse discretion in denying lawyer’s pro hac vice admission given evidence of ethical violations in criminal matter). It is not, however, a proper exercise of discretion to base a denial on a claimed violation of a rule of professional conduct when, in fact, no violation has occurred. See, e.g., Obert v. Republican W. Ins. Co., 398 F.3d 138, 143, 147 (1st Cir. 2005) (striking revocation of lawyers’ pro hac vice status based in part on violation of local ethical rules, where record did not support such violation). The motion judge erred insofar as she based her denial of the pro hac vice motion on an alleged violation of rule 3.6 by Brewer.

b. Other grounds for denial of pro hac vice admission. As an additional or alternate justification for denying Gamer’s pro hac vice admission, Seyfarth Shaw contends that PCG is adequately represented by local counsel. Although our cases indicate this is a relevant consideration, we have never concluded that this reason alone would be sufficient to support the denial of a motion for admission pro hac vice; rather, it is but one factor to be considered. See Merles v. Lemer, 391 Mass. at 224 (“Competency of existing counsel is a relevant factor in adjudging pro hac vice motions . . . as an element shaping the judge’s discretion in civil cases”); DiLuzio, 391 Mass. at 216 (“This element

*276of adequate representation by existing counsel, when combined with the already extended procedural history of this case, may have reasonably prompted the judge to deny the motion”). Accordingly, the rationale for denial of Gamer’s motion under mle 3.6 having failed, the existence of adequate local representation cannot constitute, by itself, an independent ground to uphold the denial.14

3. Conclusion. The order denying the motion to admit Robert L. Gamer pro hac vice is reversed, and the case is remanded to the Superior Court for further proceedings consistent with this opinion.

So ordered.

PCG Trading v. Shaw
460 Mass. 265

Case Details

Name
PCG Trading v. Shaw
Decision Date
Jul 29, 2011
Citations

460 Mass. 265

Jurisdiction
Massachusetts

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