Goldenberg v. Corporate Air, Inc.

• Decision Date: 15 March 1983
• Court: Connecticut Supreme Court
• Parties: Blanche GOLDENBERG et al. v. CORPORATE AIR, INC., et al.

Page 296

457 A.2d 296

189 Conn. 504

Blanche GOLDENBERG et al. v. CORPORATE AIR, INC., et al.

Supreme Court of Connecticut.

Argued Dec. 1, 1982.

Decided March 15, 1983.

James A. Trowbridge, Bridgeport, with whom were Wesley W. Horton and Naomi A. Plakins, Hartford, for appellants (named defendant et al).

Arnold J. Bai, Trumbull, with whom was Garie J. Mulcahey, Stamford, for appellee (defendant Avco Corp.).

Before SPEZIALE, C.J., and ARTHUR H. HEALEY, PARSKEY, GRILLO and PICKETT, JJ.

PARSKEY, Associate Justice.

This case presents a variation of the troublesome question whether private counsel in a civil law suit and his firm should be disqualified for his having consulted with an attorney who changed sides during the pendency of the litigation.

The disqualification issue arises incidentally out of a tragic aircraft accident that occurred at Brainard Field in Hartford on November 28, 1978 and that resulted in the death of the pilot and two passengers. Multiple suits followed against various defendants among whom are Corporate Air, Inc. (Corporate Air), lessee and operator of the aircraft involved in the accident, and Avco Corporation (Avco), manufacturer of the two engines which powered the plane. There is an adverse interest between Corporate Air and Avco because Avco contends that the accident resulted from operational or pilot error while Corporate Air contends that defective equipment manufactured by Avco caused the accident.

Avco's insurer with respect to claims arising out of the accident is United States Aviation Insurance Group (USAIG). At the date of the accident and for two years thereafter one Joseph Flaherty was a staff attorney at USAIG who represented Avco in regard to its defense of any tort claims arising out of the crash. He was given total access to all Avco records, documents, tests, correspondence and personnel to assist him in formulating that defense. He not only was privy to all Avco's defense plans in regard to that accident, but he also, in great part, structured the defenses.

In 1981 Flaherty left USAIG and had gone to work for Peter J. McBreen and Company (McBreen), an accident investigation and insurance adjusting firm. McBreen represents the insurance underwriting company which insures Corporate Air in regard to this accident. Attorney William R. Moller represents Corporate Air in the several suits arising out of the accident. As an employee of McBreen, Flaherty has consulted with Attorney Moller in regard to this accident. There is no evidence that Moller knew of Flaherty's past relationships or that Moller acted improperly in any way. In response to a motion by Avco, the trial court nevertheless disqualified Moller and his office from representing Corporate Air in the several cases and rendered a further order designed to insulate Flaherty and his information from successor counsel. ¹ This appeal followed.

There are three competing interests at stake in the disqualification of Moller: first, Corporate Air's interest in freely selecting counsel of its choice; second, Avco's interest in protecting its confidential information from disclosure to an adversary in the pending litigation; and third, the public's interest in the scrupulous administration of justice. In balancing these interests the trial court found that the interests of Avco and the public outweighed the interest of Corporate Air and therefore exercised its discretion in favor of disqualification. In reviewing the court's action we must not only accord every reasonable presumption in favor of the trial court's decision, but we also should hesitate to reverse unless an abuse of discretion is manifest or injustice appears to have been done. State v. Jones, 180 Conn. 443, 448, 429 A.2d 936 (1980). We conclude that, except for the scope of the order, the trial court's action falls well within the bounds of its discretionary authority.

Before reaching the question of whether Avco's interest in protecting its confidential information from disclosure has been jeopardized, it must first be determined that an attorney-client relationship existed between Avco and Flaherty. State v. Jones, supra, 449, 429 A.2d 936. "The practice of law consists in no small part of work performed outside of any court and having no immediate relation to proceedings in court. It embraces the giving of legal advice on a large variety of subjects and the preparation of legal instruments covering an extensive field. Although such transactions may have no direct connection with court proceedings, they are always subject to subsequent involvement in litigation. They require in many aspects a high degree of legal skill and great capacity for adaptation to difficult and complex situations. No valid distinction can be drawn between the part of the work of the lawyer which involves appearance in court and the part which involves advice and the drafting of instruments. The work of the office lawyer has profound effect on the whole scheme of the administration of justice. It is performed with the possibility of litigation in mind, and otherwise would hardly be needed." State Bar Ass'n v. Connecticut Bank & Trust Co., 145 Conn. 222, 234-35, 140 A.2d 863 (1958). The relationship between an insured and attorneys in the legal department of the insurer in respect to litigation against the insured involving the subject matter of the insurance is that of attorney and client, whether or not the insurer employs outside counsel to represent the insured in the law suit.

We begin our analysis with an examination of the relationship between Joseph Flaherty and Avco. The fact that Flaherty was house counsel for Avco's insurer did not preclude him from developing an attorney-client relationship with Avco in regard to the airplane crash litigation. Despite Corporate Air's insistence that Flaherty was acting merely as an adjuster or claims supervisor with respect to Avco rather than as an attorney, it is apparent from even a casual observation that Flaherty's professional footprints are all over Avco's product liability landscape. RCA v. Rauland Corporation, 18 F.R.D. 440, 443 (N.D.Ill.1955). Not only was he given access to all Avco records, documents, tests and correspondence pertinent to the litigation, he was also privy to Avco's trial strategy. He participated in discussions designed to formulate Avco's trial plan and played an active role in structuring its defenses. His intimate knowledge of Avco's affairs received in the course of the attorney-client relationship subjected him to a fiduciary responsibility. Fund of Funds, Ltd. v. Arthur Andersen & Co., 567 F.2d 225, 233 (2d Cir.1977). Both house counsel and outside counsel are bound by the canons of professional responsibility. House counsel may not avoid the canons by claiming to be acting in some other capacity. NCK Organization, Ltd. v. Bregman Ltd., 542 F.2d 128, 133 (2d Cir.1976).

The disqualification dispute arose as a result of occurrences at a deposition taken in Pennsylvania in January, 1982, of an engineer employed by Avco at the time of the air crash. Flaherty was present at the deposition. Prior to attending the deposition, Flaherty requested and received permission to attend from John Considine, Flaherty's successor at USAIG. Considine informed Richard Small, who also had no objection. Small is the director of administration and legal officer at the Avco divisional headquarters at Williamsport, Pennsylvania. Corporate Air argues that, by consenting to Flaherty's attendance at the deposition, Avco waived the right to claim disqualification on the basis of presumed disclosure of confidential information. The short answer to Corporate Air's claim of waiver is that it was not raised before the trial court and therefore cannot be pursued before us on appeal. O'Connor v. Dory Corporation, 174 Conn. 65, 72, 381 A.2d 559 (1977).

But even were we to overlook this serious deficiency and examine the merits of Corporate Air's waiver claim, the result would be the same. Waiver is the intentional relinquishment of a known right. Although waiver need not be express but may be implied from acts or conduct; Novella v. Hartford Accident & Indemnity Co., 163 Conn. 552, 562, 316 A.2d 394 (1972); the facts and circumstances of this case are not such as would require us to find waiver as a matter of law. There is no evidence that prior to the deposition Avco had any reason to suspect that Flaherty would be disloyal to his fiduciary obligation to maintain Avco's confidences. Nor is there any evidence that Avco had any reason to believe that Flaherty's purpose in attending the deposition was to lend assistance to or even to discuss the accident with Avco's adversary.

Canon 4 ² of the Code of Professional Responsibility (Code) imposes on counsel the obligation to preserve the confidences and secrets of a client. This canon embodies the admonition contained in Canon 6 of the former Canons of Professional Ethics against "the subsequent acceptance of retainers or employment from others in matters adversely affecting any interest of the client with respect to which confidence has been reposed." Emle Industries, Inc. v. Patentex, Inc., 478 F.2d 562, 570 (2d Cir.1973). "An attorney should be disqualified pursuant to Canon 4 if he has accepted employment adverse to the interests of a former client on a matter substantially related to the prior litigation." State v. Jones, supra, 180 Conn. 449, 429 A.2d 936. Where, as here, the change in sides occurs in the same litigation, the satisfaction of the substantial relationship test is self-evident.

Corporate Air does not seriously question that Flaherty could not change sides during the pendency of the airplane crash litigation without violating Canon 4. Flaherty did not merely change employers; he changed sides. One day he was assisting Avco in its defense; the next, he was helping Avco's adversary, Corporate Air. That Flaherty was tainted by the resultant...