Alan Schorrs Employment Case of The Week ending December 21, 2012
In re Gormally & Cardillo, New Jersey Supreme Court, Disciplinary Review Board, Dkt. No. DRB 11-60, December 21, 2012)
This weeks Case of the Week does not come directly from the employment world, but the Supreme Court issued a disciplinary ruling that addresses an issue that often arises in employment litigation: whether the New Jersey Rules of Professional Responsibility are violated when an attorney agrees, as part of a settlement, not to sue the same defendant again. The Supreme Court provided an in-depth analysis of RPC 5.6(b), which employment law practitioners should read carefully and heed.
In 2007, attorney Cathy C. Cardillo filed a landlord-tenant claim entitled Rubinstein v. Bloomfield 206 Corp. The essence of the case was that the plaintiffs alleged a long pattern of overcharged rent and the plaintiffs were seeking $150,000 plus trebling under the Consumer Fraud Act. The Defendants, represented by attorney Charles X. Gormally, filed a motion to disqualify Cardillo claiming a conflict of interest stemming from a 2000 lawsuit in which she provided advice to one of the defendants principals. Cardillo opposed the motion. While the motion was pending, the parties agreed to settle the lawsuit for $150,000, which both parties were satisfied with.
The next day Cardillo signed a separate agreement with the defendants in which Cardillo agreed not to participate in representation in any future action against defendants. RPC 5.6(b) provides:
RPC 5.6 Restrictions on Right to Practice:
A lawyer shall not participate in offering or making:
(b) an agreement in which a restriction on the lawyer's right to practice is part of the settlement of a controversy between private parties.
Gormally claimed that he did not believe there was anything unethical about the agreement because Cardillo should have been ethically barred from suing the defendants anyway due to the previous conflict from 2000. Therefore, the parties were simply resolving the dispute regarding a previous conflict of interest. For her part, Cardillo clearly considered a possible violation of Rule 5.6, but she was in the process of selling her house and intended to immediately retire and move to Portugal. Therefore she did not perceive the agreement to be restricting her future practice. Nevertheless, Cardillo admitted her violation. Gormally did not.
The twist came when Cardillos house sale fell through along with her move to Portugal. In 2009, Cardillo decided that she wanted to represent a new plaintiff and sue the defendant again. She initiated a proceeding to have the Court declare her 2007 agreement unenforceable as a matter of public policy, claiming that it violated RPC 5.6(b). (You cant make this stuff up, folks.) The Judge agreed that the agreement violated RPC 5.6(b), finding that Youd have to be deaf, dumb and blind not to appreciate it. That this is violative of RPC 5.6. The Judge then referred both attorneys to the Disciplinary Board. It was essentially a case of first impression, probably because no other attorney had ever been dumb enough to try to have their own unethical agreement ruled unethical by the Court. The Court made a thorough analysis of RPC 5.6(b), and concluded that, even if attorneys make a separate agreement not to sue a defendant again, both parties violate the Rules of Professional Responsibility.
I have had this issue arise many times in employment litigation. Often, because employees become aware that an attorney has had success suing a particular employer, there become opportunities to sue the same employer multiple times. Sometimes, the employer seeks to make a condition of settlement that the attorney will agree not to sue them again. It is not always so direct. Sometimes the employer will offer to retain the attorney for consultation as to how to avoid future lawsuits, thus creating a future conflict of interest.
The Court addressed that precise issue as well, citing case law from Florida and Oregon, where such arrangements were made. The key is whether or not there is linkage. The Court did not address a situation whereby the defendant in an action contacted the plaintiffs attorney well after the litigation was over to seek a separate consulting agreement, but it appears that such an arrangement would not violate RPC 5.6(b) because it would not be part of the settlement of a controversy.
Both attorneys were reprimanded by the Disciplinary Review Board. Justice LaVecchia dissented, citing the attorneys clean records and the fact that the parties had a history and the agreement was, at least in part, an attempt to resolve both past and future conflict issues. Justice LaVecchia would not have opposed discipline.
The lesson here is that it is unethical for both the attorney for the plaintiff and the attorney for the defendant to negotiate, as part of any settlement, an agreement not to sue the same employer again.
Attorney for District VC Ethics Committee: Steven R. Irwin.
Charles X. Gormallys counsel: Michael R. Griffinger.
Cathy C. Cardillo appeared pro se.
Supreme Court Justices: For reprimand: Rabner, Hoens, Cuff (t/a), and Parrillo (t/a); dissenting: LaVecchia.