Sarbey v. Natl. City Bank, Akron

• Decision Date: 31 January 1990
• Docket Number: No. 14094,14094
• Citation: 66 Ohio App.3d 18,583 N.E.2d 392
• Parties: SARBEY, Appellant, v. NATIONAL CITY BANK, AKRON et al., Appellees.
• Court: Ohio Court of Appeals

Page 18

66 Ohio App.3d 18

583 N.E.2d 392

SARBEY, Appellant, v. NATIONAL CITY BANK, AKRON et al., Appellees.

No. 14094.

Court of Appeals of Ohio, Ninth District, Summit County.

Decided Jan. 31, 1990.

Scott H. Ruport and Mark W. Bernlohr, Akron, for appellant.

Stephen Petras, Cleveland, for appellees.

BAIRD, Presiding Judge.

This cause comes before the court upon the appeal of plaintiff Edward H. Sarbey from the order of the Summit County Court of Common Pleas disqualifying Sarbey's attorney, Scott H. Ruport, from representing Sarbey in his claim against defendants, on the ground of conflict of interest in violation of DR 5-105 of the Ohio Code of Professional Responsibility.

Defendants in the action below were: (1) National City Bank, Akron ("NCB Akron"), as cotrustee of the David M. Siff trust, and as cotrustee of the Charles E. Schwartz trust; (2) Lowell Siff, individually and as cotrustee of the David M. Siff trust; (3) Irene S. Sarbey and David J. Schwartz as cotrustees of the Charles E. Schwartz trust; (4) Richard S. Amundsen, a trust officer of NCB Akron, individually; (5) Gary Craig, a former trust officer of NCB Akron, individually; and (6) the law firm of Benesch, Friedlander, Coplan & Aronoff as escrow agent.

In June 1986, Sarbey and the defendants ¹ entered into a management agreement whereby Sarbey was employed as agent to operate, manage, and negotiate for the rental and leasing of store spaces at Fairlawn Plaza Shopping Center, which was owned by the above-named trusts. Pursuant to the terms of the agreement, Sarbey assigned his management duties to Fairlawn Plaza, Inc., a corporation specifically formed for this purpose and wholly owned by Sarbey, who was also its president and, apparently, sole officer. In February 1988, the shopping center was sold for approximately $16 million. A dispute arose concerning Sarbey's right to commissions and other compensation stemming from this sale.

Defendants filed suit for declaratory judgment against Sarbey in the Summit County Probate Court on July 11, 1988. On July 25, Attorney Scott H. Ruport filed leave to plead as Sarbey's attorney. Ruport filed a motion to dismiss for lack of subject matter jurisdiction, which was granted on August 29. Prior to the dismissal, on August 26, Ruport, on behalf of Sarbey, initiated the present action in the Summit County Court of Common Pleas for declaratory judgment, breach of contract, quantum meruit, unjust enrichment, fraud, and bad faith. A pretrial conference was held on December 28, 1988, at which apparently all parties and their attorneys were present. Trial was set for June 7, 1989.

On March 15, 1989, after numerous preliminary discovery motions and notices had been filed, appellees NCB Akron, Craig, and Amundsen ² filed a motion to disqualify attorney Ruport on the basis of conflict of interest in violation of DR 5-105(A), which reads:

"A lawyer shall decline proffered employment if the exercise of his independent professional judgment on behalf of a client will be or is likely to be adversely affected by the acceptance of the proffered employment, except to the extent permitted under DR 5-105(C)."

NCB Akron alleged that, beginning in December 1986, Ruport had represented it in at least six cases involving Fairlawn Plaza Shopping Center, and that Ruport was continuing to act as its attorney in two of these cases. Ruport's first representation of NCB Akron was in a dispute over commissions claimed pursuant to an agreement with Wedren Properties, Inc., the former manager of Fairlawn Plaza Shopping Center. NCB Akron claimed that the Wedren management agreement was substantially similar to the Sarbey agreement, and that the Wedren agreement was drafted by a law firm with which Ruport was associated at the time of its drafting. NCB Akron further claimed that the issues in the Wedren dispute were substantially similar to the issues in the present case. Finally, NCB Akron had not expressly consented to Ruport's dual representation in this case, under the requirements of DR 5-105(C), which reads:

"In the situations covered by DR 5-105(A) and (B), a lawyer may represent multiple clients if it is obvious that he can adequately represent the interest of each and if each consents to the representation after full disclosure of the possible effect of such representation on the exercise of his independent professional judgment on behalf of each."

Appellant denied that Ruport was involved in any way with the drafting of the Wedren agreement, and denied that he had ever been a member of the law firm that drafted it. Appellant admitted that Ruport represented NCB Akron in the Wedren litigation, yet claimed that there was no substantial similarity between the issues in these two cases, as the Wedren case involved a dispute over the management of the shopping center, while the present case involved its sale.

Appellant admitted that Ruport was the attorney for both past and pending cases in which defendants were named parties, yet asserted that, in all these other cases for which NCB Akron claimed Ruport had been its attorney, Ruport's true client was Sarbey (i.e., Fairlawn Plaza, Inc.), and that NCB Akron and the other defendants were named as parties to these actions only for the sake of "technical completeness" of the pleadings. ³ As all these cases purportedly involved disputes over lease agreements with various tenants of the shopping center, there was no substantial similarity between these cases and the present action.

Appellant further asserted that there would be no conflict of interest in Ruport's dual representation, in that no confidences would be revealed or used against NCB Akron, as Sarbey was either the conduit of all communications or was otherwise privy to all communications, that Ruport had with NCB Akron in all these cases. Finally, appellant asserted, even if there was conflict of interest stemming from Ruport's prior representation of NCB Akron in the Wedren case, that NCB Akron had effectively waived its right to relief by failing to timely object, and thus had impliedly consented to Ruport's adverse representation.

On April 12, 1989, the trial court ruled that attorney Ruport was disqualified to represent Sarbey in the present case on the grounds that Ruport had represented and continued to represent NCB Akron in its capacity of cotrustee of the Siff and Nobil trusts, ⁴ and that NCB Akron had not consented to Ruport's dual representation in the present case.

Assignment of Error

"The trial court erred in granting defendants' motion to disqualify counsel.

"(A) National City Bank waived any right to object to the representation of the plaintiff-appellant by Scott H. Ruport and/or Ruport Co., L.P.A.

"(B) Assuming arguendo that National City Bank did not waive its right to object to the representation of the plaintiff-appellant by Scott H. Ruport and/or Ruport Co., L.P.A., such representation does not constitute a conflict of interest and/or violation of any ethical standard."

Though appellant assigns a single error on appeal, he raises two distinct issues for review. We will first address the issue of whether there was conflict of interest such as to warrant disqualification of Ruport from representing Sarbey in this case. At the outset, we note that our standard of review when considering an appeal from a trial court's disqualification of an attorney is that the finding of the trial court will be reversed only upon a showing of abuse of discretion by the trial court. See Cleveland v. Cleveland Elec. Illum. Co. (N.D.Ohio 1977), 440 F.Supp. 193, 196.

In determining whether an attorney should be disqualified from representing an interest adverse to a former client, the courts have generally recognized that a "substantial relationship test" is to be applied. That test requires that disqualification should be ordered where there is any substantial relationship between the subject matter of a former representation and that of a subsequent adverse representation. T.C. Theatres Corp. v. Warner Bros. Pictures, Inc. (S.D.N.Y.1953), 113 F.Supp. 265, 268. The burden of proof in such a case is on the former client now moving for disqualification:

"[T]he former client need show no more than that the matters embraced within the pending suit wherein his former attorney appears on behalf of his adversary are substantially related to the matters or cause of action wherein the attorney previously represented him, the former client. The Court will assume that during the course of the former representation confidences were disclosed to the attorney bearing on the subject matter of the representation. It will not inquire into their nature and extent. Only in this manner can the lawyer's duty of absolute fidelity be enforced and the spirit of the rule relating to privileged communications be maintained." Id.

However, the burden of proof shifts and the applicable standard changes where an attorney seeks to represent an interest adverse to a present client:

" * * * [T]he lawyer who would sue his own client, asserting in justification the lack of 'substantial relationship' between the litigation and the work he has undertaken to perform for that client, is leaning on a slender reed indeed.

"Putting it as mildly as we can, we think it would be questionable conduct for an attorney to participate in any lawsuit against his own client without the knowledge and consent of all concerned. * * *

" * * * [T]he 'substantial relationship' test does not set a sufficiently high standard by which the necessity for disqualification should be determined. That test may properly be applied only where the representation of a former client has been terminated and the parameters of such relationship have been fixed. Where the relationship is a continuing one, adverse representation is prima facie improper, * * * and the attorney must be prepared to show, at the very least, that there will be no actual or apparent conflict...