Schmidt v. State of NY

• Decision Date: 27 December 2000
• Citation: 279 A.D.2d 62,722 N.Y.S.2d 623
• Parties: SCOTT M. SCHMIDT et al., Respondents,<BR>v.<BR>STATE OF NEW YORK, Appellant. (Claim No. 98418.)
• Court: New York Supreme Court — Appellate Division

279 A.D.2d 62

722 N.Y.S.2d 623

SCOTT M. SCHMIDT et al., Respondents,

v.STATE OF NEW YORK, Appellant. (Claim No. 98418.)

SCUDDER, J.

December 27, 2000.

Eliot Spitzer, Attorney General, Albany (Michael S. Buskus of counsel), for appellant.

Ellis & Kustell, Buffalo (Carl B. Kustell of counsel), for respondents.

GREEN, J.P., and KEHOE, J., concur with SCUDDER, J.; WISNER and HURLBUTT, JJ., dissent and vote to reverse in a separate opinion by WISNER, J.

OPINION OF THE COURT

SCUDDER, J.

Defendant contends on appeal that the Court of Claims erred in refusing to preclude claimants' use of statements obtained from employees of the New York State Department of Transportation (DOT) at the behest of claimants' counsel, allegedly in violation of Code of Professional Responsibility DR 7-104 (a) (1) (22 NYCRR 1200.35 [a] [1]). Defendant also contends that the court erred in refusing to preclude claimants from deposing the employees who made the statements and to disqualify claimants' counsel based on the alleged violation of the disciplinary rule. We conclude that the court properly denied defendant's motion seeking that relief.

I

In June 1996 claimant Scott M. Schmidt was seriously injured in a motor vehicle accident at an intersection controlled by a traffic signal installed and maintained by the DOT. In September 1996 claimants served on the Attorney General a notice of intention to file a claim, alleging that the accident was caused by a faulty traffic signal. By serving that notice, claimants thereby extended the time in which to file their claim (see, Court of Claims Act § 10 [3]). In May 1998 an investigator employed by claimants' counsel interviewed the four-person crew that had repaired the signal on the day of the accident. In June 1998 claimants filed and served a claim alleging that the signal crew's failure to align the signal properly after repairing it caused the accident.

Claimants thereafter disclosed the statements taken from the four DOT employees, and claimants alleged in their bill of particulars that the negligence of those employees caused the accident. The statements are not included in the record on appeal, but defendant has characterized them as statements of what the signal crew "did and observed on the day of the accident." In moving, inter alia, to preclude the use of the statements and to disqualify claimants' counsel, defendant contended that, by contacting the employees without the permission of the Attorney General, claimants' counsel violated DR 7-104 (a) (1) as that rule was interpreted in Niesig v Team I (76 NY2d 363). Claimants contended in opposition to the motion that the Attorney General had not established an attorney-client relationship with the DOT or those employees at the time the interviews were conducted, and that claimants were entitled to conduct an investigation to determine whether they had a viable claim.

In denying the motion, the court determined that the disciplinary rule was not violated because the employees were not represented by the Attorney General at the time the interviews were conducted. We conclude that the service of the notice of intention did not trigger representation of the DOT by the Attorney General. Furthermore, even if we were to agree with defendant that there was an attorney-client relationship by the time of the interviews, we would nevertheless conclude that claimants' counsel is not chargeable with knowledge that the employees were "parties" or that they were represented by the Attorney General.

II

We begin our analysis with an examination of the disciplinary rule and Niesig. DR 7-104 (a) (1) provides in pertinent part that "[d]uring the course of the representation of a client a lawyer shall not * * * [c]ommunicate or cause another to communicate on the subject of the representation with a party the lawyer knows to be represented by a lawyer in that matter unless the lawyer has the prior consent of the lawyer representing such other party or is authorized by law to do so." In Niesig, the Court of Appeals considered the implications of that rule when it is invoked in litigation. The plaintiff in that case moved after commencement of the action for an order permitting his counsel to conduct a private interview with those employees of a corporate third-party defendant who witnessed the accident. The Court held that the motion was properly granted because none of the employees was a "party" within the meaning of DR 7-104 (a) (1). The Court construed the term "party" as it is used in that disciplinary rule "to include corporate employees whose acts or omissions in the matter under inquiry are binding on the corporation (in effect, the corporation's `alter egos') or imputed to the corporation for purposes of its liability, or employees implementing the advice of counsel" (Niesig v Team I, supra, at 374 [emphasis added]) and to exclude "employees who were merely witnesses to an event for which the corporate employer is sued" (Niesig v Team I, supra, at 375).

III

On appeal it is not disputed that the employees in question are in fact "parties" as that term is defined in Niesig because they are employees whose acts or omissions may be imputed to defendant for purposes of its liability (see, Niesig v Team I, supra, at 374; Assn of Bar of City of NY Comm on Prof and Judicial Ethics Opn 1991-4). This case, however, presents an issue not addressed by Niesig, i.e., the point at which a governmental party is in fact "represented by a lawyer in [a] matter" for purposes of triggering the ethical restraints of DR 7-104 (a) (1). Technically, the State of New York is always represented by counsel (see, Executive Law § 63 [1]; see also, Note, DR 7-104 of the Code of Professional Responsibility Applied to the Government "Party," 61 Minn L Rev 1007, 1029). "However, `if a governmental party were always considered to be represented by counsel for purposes of [DR 7-104 (A) (1)], the free exchange of information between the public and the government would be greatly inhibited'" (NY St Bar Assn Comm on Prof Ethics Opn 652 [1993]).

Here, the Court of Claims determined that, until the Attorney General actually speaks to, or corresponds with, the employees involved or provides them with privileged information about the case, the employees are not "represented by a lawyer in [the] matter," notwithstanding that they may be "parties" for purposes of DR 7-104 (a) (1). Although we decline to define the precise event that triggers representation because the facts will vary from case to case, we conclude that the court properly rejected defendant's contention that, for purposes of DR 7-104 (a) (1), the Attorney General commenced his representation of the DOT, including the employees at issue, when claimants served their notice of intention. In our view, the notice of intention serves two purposes: it extends the time for claimants to file a claim from 90 days to two years from the accrual of the claim (see, Court of Claims Act § 10 [3]; Hodge v State of New York, 213 AD2d 766, 767) and it enables the State to conduct a prompt investigation of a possible claim in order to ascertain the existence and extent of the State's liability (see, Sega v State of New York, 246 AD2d 753, 755, lv denied 92 NY2d 805). To conclude that the service of a notice of intention triggers the Attorney General's representation would not serve either purpose. Indeed, to so conclude would potentially preclude the investigation of a possible claim by claimants' counsel once a notice of intention is served, in order to avoid violating DR 7-104 (a) (1).

IV

A second issue not addressed by Niesig, and a further basis for the Court of Claims' denial of defendant's motion, concerns the issue of knowledge, i.e., whether claimants' counsel knew or should have known that the employees at issue were parties who were represented by the Attorney General at the time the interviews were conducted. The restrictions set forth in DR 7-104 (a) (1) apply only to communications "with a party the lawyer knows to be represented by a lawyer in that matter." DR 7-104 (a) (1) has been held to apply to a lawyer who "knew or should have known" that the party contacted was represented by counsel (Matter of Harris, 259 AD2d 170, 175). The Court in Niesig wrote: "By preventing lawyers from deliberately dodging adversary counsel to reach—and exploit—the client alone, DR 7-104 (A) (1) safeguards against clients making improvident settlements, ill-advised disclosures and unwarranted concessions" (Niesig v Team I, supra, at 370 [emphasis added]).

Defendant contends that this is a case in which claimants' counsel ignored the obvious when the employees in question were interviewed at his behest. Defendant contends that, once a notice of intention was served, claimants' counsel should have known that the employees in question were represented by the Attorney General. We disagree.

As the dissent acknowledges, there is no violation of the disciplinary rule unless claimants' counsel knew or should have known that the employees were "employee-parties" under Niesig and that the Attorney General represented the DOT. We disagree with the dissent, however, that under these facts claimants' counsel knew or should have known of the employees' status as "parties" and that the employees were represented by the Attorney General by virtue of his representation of the DOT. Unlike the facts in Niesig, here there was no pending action at the time the employees were interviewed; rather, claimants' counsel was conducting an investigation to determine whether claimants had a viable claim against defendant. Certainly, the investigator could have discovered from the employees that the signal had been properly aligned, or that it had been misaligned by a cause unrelated to the signal crew; in fact, the signal had been struck by a tractor trailer prior to repairs made by the signal crew, and a recurrence of such an incident could have caused the misalignment. In...