Pepper Hamilton Disqualified From Defamation Suit

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Pepper Hamilton

Pepper Hamilton has been disqualified from representing the owners and publishers of The Philadelphia Inquirer in a suit filed against the paper by union leader John J. Dougherty, a former client of Pepper Hamilton.

The Pennsylvania Superior Court disqualified the firm Tuesday in a ruling that reverses a Philadelphia trial judge's finding that Pepper Hamilton could stay on as counsel to newspaper owner Philadelphia Newspapers LLC, now Interstate General Media, and several current and former Inquirer staff members.

Dougherty filed a complaint in 2011 against the paper and several of its staffers over a series of "disparaging" editorials and articles written about Dougherty in 2008 during Dougherty's unsuccessful run for a seat in the Pennsylvania Senate. The newspaper and staff hired Pepper Hamilton to represent it. Dougherty sought the firm's removal given Pepper Hamilton represented Dougherty for a period through February 2007 related to a subpoena he received from the U.S. Attorney's Office and a search of Dougherty's home.

Dougherty argued a conflict existed because Pepper Hamilton intended to pursue discovery requests that included U.S. Attorney files from the federal investigation as part of its defense of the defamation claims Dougherty asserted against the paper and staff.

In writing for the majority, Superior Court Judge John L. Musmanno said the court's review revealed Pepper Hamilton's prior representation of Dougherty was "substantially related to the present matter" and that members of the law firm had confidential information from Dougherty.

According to the opinion in Dougherty v. Philadelphia Newspapers, Pepper Hamilton attorneys were privy to confidential communications with Dougherty during the federal investigation as well as documents Dougherty submitted in response to the subpoena. Pepper Hamilton's attorneys also communicated with federal investigators on behalf of Dougherty and counseled him regarding the documents to submit in response to the subpoena, Musmanno said.

Musmanno noted that at a case management hearing, Pepper Hamilton partner Michael E. Baughman said he would seek to obtain files related to an alleged investigation into Dougherty as part of the defense in the defamation action.

"Under the circumstances presented, we conclude that Pennsylvania Rules of Professional Conduct 1.9 and 1.10 bar Pepper's representation of defendants in the instant matter," Musmanno said.

Rule 1.10 provides that "'while lawyers are associated with a firm, none of them shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so by Rule ... 1.9,'" Musmanno noted. Rule 1.9 deals with duties to former clients.

Musmanno was joined in the majority by Judge John T. Bender. Judge Christine L. Donohue wrote a concurring opinion offering further support for Pepper Hamilton's disqualification. She noted in the opinion that Pepper Hamilton's promise to create an ethical screen in the firm to bar the defamation attorneys from learning the confidential information obtained in the firm's earlier representation of Dougherty was "essentially irrelevant in these circumstances."
"As Pepper Hamilton acknowledges, the existence of an ethical screen does not overcome a conflict of interest under Rule 1.9," Donohue said. Pepper Hamilton had instead argued Dougherty waived the issue by failing to timely file a motion to disqualify the firm, according to the opinion.

Donohue said that while the majority found Dougherty didn't waive that issue, she would find that the former client doesn't have to timely challenge the disqualification, but rather has to affirmatively waive any conflict.

"Rule 1.9 clearly requires the attorney to obtain the informed consent of the client when a conflict under the rules exists by, inter alia, making all reasonable and necessary disclosures to the former client and, where appropriate, advising the former client to seek independent legal advice as to whether to provide the requested informed consent or not," Donohue said. "Nothing in the text of Rule 1.9, of the Rules of Professional Conduct generally, is there any suggestion that counsel facing a Rule 1.9 conflict may, rather than affirmatively attempting to obtain informed consent, instead take no action at all vis-à-vis its former client and wait to see if the former client fails to raise it in a timely fashion."

Donohue said the only way to waive a conflict is for the former client to give informed consent. As to the ethical screen, Donohue said it can only be used to permit continued representation of a former client despite a Rule 1.9 conflict only when the conflict is created by a new lawyer to the firm who brings the conflict with him from his prior employment.

"Other than in this situation, which is not present here, an ethical screen will not insulate a law firm from the consequences of a Rule 1.9 conflict of interest," Donohue said.

Before reaching the merits of Dougherty's claims, the Superior Court first had to decide whether the issue was collateral and could be appealed. The trial court deemed the issue interlocutory and refused to certify it for appeal. The Superior Court determined that while other courts have ruled an order disqualifying counsel was not a collateral issue that could be appealed, those cases didn't address whether the denial of such disqualification request was immediately appealable.

"Our review in the instant case discloses that the parties have averred no facts establishing that the order at issue is inextricable from the merits of the case," Musmanno said, noting later that Dougherty presented a "colorable claim of the potential disclosure of attorney work product and breach of attorney-client privilege."

Calls to Pepper Hamilton weren't immediately returned.

Dougherty's attorney, Joseph R. Podraza of Sprague & Sprague, praised the court's ruling and said it explained "the obligation that is owed by lawyers and law firms to their former clients."

Gina Passarella can be contacted at 215-557-2494 or at gpassarella@alm.com. Follow her on Twitter @GPassarellaTLI.

(Copies of the 26-page opinion in Dougherty v. Philadelphia Newspapers, PICS No. 14-0218, are available from The Legal Intelligencer. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.) •

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