9 Fla. L. Weekly Supp. 558c
Insurance — Personal injury protection — Attorneys — Disqualification — Conflict of interest — Motion to disqualify attorney who worked for insurer in nonattorney claims litigation specialist position and is now employed by law firm from cases in which attorney directly worked on file or those which involve software purchased by insurer to determine usual, customary, and reasonable charge reductions or contract with certain PPO provider — Where there is no evidence offered to show that attorney had any involvement or input into software program or PPO contract, or any actual knowledge of material confidential information that would give him an unfair advantage in any cases, there is conflict between attorney and law firm only in handling cases in which attorney was actual adjuster — Insurer waived any conflict in case where the only evidence that attorney worked on case is attorney’s initials yielded by computer search of files, evidence shows attorney’s initials showed up on files long after he left insurer’s employ and in cases in which attorney could not have been involved, insurer’s claim that attorney worked on file was not disclosed to law firm for seventeen months, insurer has given no legitimate reason for delay in bringing motion to disqualify, and insurer has taken inconsistent positions regarding conflict, including proceeding with litigation and settling directly with attorney in some cases — Motion to disqualify denied
FORT LAUDERDALE CENTER FOR CHIROPRACTIC CARE, INC., aao Patrick Guisinger, Plaintiff, vs. PROGRESSIVE EXPRESS INSURANCE COMPANY, Defendant. County Court, 15th Judicial Circuit in and for Palm Beach County, Civil Division. Case No. SS-00-15564-RD. STEVEN ISAACS, D.C., aao Pearlnita Mitchell, Plaintiff, vs. PROGRESSIVE EXPRESS INSURANCE COMPANY, Defendant. Case No. SS-01-011979-RD. July 3, 2002. Charles E. Burton, Judge. Counsel: Irwin Gilbert, West Palm Beach, and Brian Korte, Boca Raton, for Plaintiffs. John Wilke, Boca Raton, and Robert Josefsberg, Miami, for Defendants.
Cert. denied. 11 Fla. L. Weekly Supp. 106c
ORDER ON MOTION TO DISQUALIFY KANE & KANE
THESE CASES came before the Court for an evidentiary hearing on May 6, 2002, May 7, 2002, June 18, 2002, and June 27, 2002, based upon the Defendant’s Motion to Disqualify the law firm of Kane & Kane. Both sides were well represented by counsel. The Plaintiff’s were represented by Irwin Gilbert, Esquire and Brian Korte, Esquire. The Defendant’s were represented by John Wilke, Esquire and Robert Josefsberg, Esquire. The Court wishes to commend all counsel for the professional manner in which they conducted themselves during this hearing. Based on the proceedings before the Court, the Court finds as follows:
Currently, there are approximately 700 cases throughout the State of Florida where motions to disqualify are pending. Each case involves the law firm of Kane & Kane or two other law firms Progressive claims are associated with Kane & Kane; Watson & Lentner and Marks & Fleischer, P.A. In many of those cases, discovery has been stayed pending the outcome of this evidentiary hearing. In Case Number SS-00-15564-RD, the case involves a usual, customary, and reasonable (UCR) charge reduction based upon a contract Progressive had with ADP Integrated Medical Solutions, Inc. In addition, Progressive alleges that Glenn Siegel actually worked on this claim file while employed as an adjuster with Progressive. In Case Number SS-01-011979-RD, the case involves payment to a healthcare provider by Progressive pursuant to a contract with Beech Street Corporation. Where material facts are in dispute concerning a motion for disqualification, an evidentiary hearing is required. Sch. Bd. Of Broward County v. Polera Bldg. Corp., 722 So.2d 971 (Fla. 4 DCA 1999).
Glenn Siegel became a member of The Florida Bar in 1996. After graduating, he worked for the law firms of Kogan & DiSalvo and Lesser & Lesser. He also did some work for attorney Donna Barfield. In April, 1999, he joined Progressive in a non-lawyer capacity as a claims litigation specialist. These companies included Progressive Express, Progressive Southeastern, Progressive Casualty, and Progressive Bayside. For purposes of this hearing, they are collectively referred to as “Progressive”. On October 30, 2000, Siegel left Progressive and within a day or two, became an associate with the law firm of Kane & Kane. The evidence showed that in September, 2000, Harley Kane made a remark during a telephone conversation as to when Siegel would be “joining their firm”. A lunch meeting followed where terms of employment were discussed, which was followed by a telephone call by Siegel accepting employment. Siegel then gave Progressive two weeks notice but at no time disclosed to his supervisors at Progressive that he was joining the Kane & Kane law firm. According to Progressive, Siegel continued to process and settle some Kane & Kane files, although he had no recollection as to a specific number or any specific case.
Upon joining Progressive, Siegel signed a confidentiality agreement. He was employed in the West Palm Beach Office as a claims litigation specialist or adjuster. Essentially, he adjusted PIP claims in Palm Beach County with the day to day duties of managing claim files. According to his supervisors at Progressive, Joyce Richardson and Don Matthews, they did not consider him to be an attorney acting on behalf of Progressive in any way, shape, or form. In their testimony, they alleged that he had access to more meetings and discussion of issues because of his status as an attorney, which they described as more than any other adjuster. They further maintained that Siegel had access to legal strategies developed by Progressive to defeat PIP lawsuits.
Siegel on the other hand generally described his role as not much more than a paper pusher. He would review a claim and either pay it or not. At some point, an issue arose with respect to Progressive’s contract with Beech Street, a PPO provider. According to Joyce Richardson, Siegel drafted a memorandum in regard to Progressive’s difficulty in defending the Beech Street contract and advocated that Beech Street stand behind and share in any liability with Progressive. Richardson considered this to be among the confidential discussions Siegel participated in. According to Siegel, however, his opinion was not based on any legal research, but rather, was based on a telephone discussion he had with Harley Kane wherein Kane pointed out the problem with the Beech Street contract and faxed Siegel additional information to support his position. Indeed, the evidence is consistent with that scenario because around that time, the Kane law firm had several hundred cases, many of which involved Beech Street, in which they were trying to negotiate a class settlement with Progressive.
According to Don Matthews, Siegel’s immediate supervisor, he learned that Siegel had joined Kane & Kane in December, 2000. He testified that approximately one week before Christmas, he telephoned Harley Kane and asked if he was going to put a “Chinese wall” around Siegel when it came to his handling of Progressive cases. Matthews testified that Kane told him no, but he waited to see what he would do anyway. Harley Kane confirmed the telephone call, but his recollection was that Matthews told him that Progressive would move to disqualify Siegel and Kane & Kane and Harley Kane told him to do what he had to do. Kane further requested that Progressive provide him a list of cases that Siegel had worked on.1 On August 15, 2001, Progressive filed this motion.2
The evidence showed that around this time, Kane & Kane had stepped up their marketing efforts to promote PIP litigation. They would advertise in medical journals and sponsor seminars in an effort to sign up more physicians in conjunction with Watson & Lentner and Marks & Fleischer, P.A. There was no other evidence introduced to suggest that these law firms had any other association with Kane & Kane. Harley Kane testified that because of these successful efforts, several new associates were hired in addition to Siegel and that approximately seventy percent of the firms business at that time was PIP litigation. This is significant because Don Matthews and Joyce Richardson attributed the increase in PIP litigation against Progressive to Siegel’s joining Kane & Kane. They testified that several months after Siegel joined Kane & Kane, lawsuits involving the Beech Street contract escalated. Further, Matthews estimated that the number of lawsuits filed by Kane & Kane doubled or tripled over the number filed in prior years.
Charles Kane testified that he had some contact with Siegel while he was an adjuster with Progressive. He estimated that his firm has handled six to seven thousand PIP cases and that he had personally been involved in two thousand PIP cases. In his opinion, Siegel would not have had access to much confidential information. He felt that the only confidential information Siegel might have had access to would be negative independent medical reports, which did not occur very often, and that he would often get those reports in discovery anyway. Further, as to any strategy developed by Progressive in it’s handling of PIP litigation, Kane testified that after dealing with thousands of cases, “you learn the strategy pretty quickly”.
During Siegel’s tenure with Progressive, a company called ADP Integrated Medical Solutions, Inc., had a services agreement with Progressive to manage their UCR charges by providing the software and generating the explanation of benefits information to the physicians and the insured. Further, through ADP, Progressive entered into a Physician Preferred Provider Agreement with Beech Street Corporation and published a Preferred Provider Directory for Florida.3 Accordingly, Progressive contends that Siegel and the Kane & Kane firm should be disqualified from handling any cases against Progressive where Siegel personally adjusted or worked on the claim file, UCR cases in which the ADP system was used4, and cases where the contract with Beech Street is at issue. Kane & Kane contend that Siegel was never an attorney for Progressive, that he never had access to or knowledge of privileged confidential information, and that even if he did, Progressive waived their rights to challenge this issue because of their delay in filing these motions. For example, Kane & Kane proffered several cases to the Court where Progressive had filed a motion to disqualify, but nevertheless went and settled a case directly with Siegel. Further, they proffered cases in which Progressive never filed a motion to disqualify, or after filing such a motion, continued on with discovery. In Case Number SS-00-15564-RD, Kane & Kane point out that while Harley Kane had the conversation with Don Matthews in December, 2000, Progressive nevertheless continued to engage in responding to discovery requests and waited until August 15, 2001 to file the instant motion.
WAS SIEGEL ACTING AS AN ATTORNEYFOR PROGRESSIVE?
As noted, Siegel was hired as a Claim Litigation Specialist to work the Palm Beach County PIP claims. According to Brent Sielaff, his manager, fifty percent of Siegel’s duties consisted of defending, settling and providing direction to defense counsel to pursue lowest ultimate cost settlements, twenty percent required him to track results on both loss and attorney fee payments, twenty percent included Siegel’s providing branch office support, and ten percent involved his leadership and demeanor. While Siegel apparently listed his title in the Lawyers Diary and Manual as “Spcl Cnsl Progressive Ins Co”, Sielaff, Richardson and Matthews all made it clear that they never perceived him to be acting as an attorney representing Progressive nor was he hired as an attorney to represent Progressive. Progressive contends that Siegel should be characterized as an attorney for them because he was a member of The Florida Bar, submitted a listing in a bar directory, and received at least one Court Order in the mail addressed to Glenn Siegel as attorney for Progressive. Notwithstanding, it is clear that no one at Progressive considered him to be acting in any capacity other than a claims adjuster. In order to determine whether an attorney-client relationship existed, a long-term or complicated relationship is not required, rather the Court must focus on the subjective expectation of the client that he or she is seeking legal advice. McPharland v. ISI Inv. Services, Inc., 890 F.Supp. 1029 (M.D. Fla. 1995), Bartholomew v. Bartholomew, 611 So.2d 85 (Fla. 2 DCA 1992).
In a case where a conflict of interest arises due to an attorney’s representation of a former client, the Court must apply a two-part test in ruling on a motion to disqualify: that an attorney-client relationship did in fact exist with the former client, thereby giving rise to an irrefutable presumption that confidences were disclosed during the relationship; and, the matter in which the law firm subsequently represented the interest adverse to the former client was the same, or substantially related to, the matter in which it represented the former client. State Farm Mut. Auto Ins. Co. v. K.A.W., 575 So.2d 630 (Fla. 1991).
BURDEN OF PROOF
The irrefutable presumption standard was applied to a case which involved an attorney-client relationship. In cases dealing with non-lawyer conflicts, the various district courts have applied different standards. In Esquire Cave, Inc. v. Maguire, 532 So.2d 740 (Fla. 2 DCA 1988), the second district required a showing that the employee was privy to confidential information and as a result, obtained an unfair advantage. In Lackow v. Walter E. Heller & Co. Southeast, Inc., 466 So.2d 1120 (Fla. 3 DCA 1985), the third district required a showing that the employee was privy to confidences. In Koulisis v. Rivers, 730 So.2d 289 (Fla. 4 DCA 1999), the fourth district held that disqualification turns on the factual inquiry of whether the party had actual knowledge of material confidential information. Once a prima facie case is established, the burden shifts to the other side to demonstrate it should not be disqualified by the greater weight of the evidence.
The court in State Farm, supra, relied in part on rule 4-1.9 of the Rules of Professional Conduct which addresses former representation by an attorney. Likewise, rule 4-1.10 has been applied to disqualify law firms where nonlawyer personnel, such as secretaries and paralegals, have moved from one law firm to another firm representing a client in the same or substantially similar matter, with interests adverse to a client of the former firm, Lackow, Koulisis, supra.
In Royal Caribbean Cruises, Ltd. v. Buenaagua, 685 So.2d 8 (Fla. 3 DCA 1997), the court held that disqualification of an attorney, who four years previously, worked as an adjuster in training for Royal Caribbean’s personal injury insurance carrier, was not required in an action brought against the cruise line in a Jones Act suit. In addition to finding there was no substantial relationship between the matters in issue, the court noted that the cruise line did not demonstrate that information to which attorney had access to as an adjuster gave him an unfair advantage. Thus, a court may consider a “lawyer’s involvement in a matter [which] can also be a question of degree”.5
WAIVER
Kane & Kane argue that if the Court should determine that a conflict exists, then Progressive has waived their right to disqualification by delay. A motion to disqualify should be made promptly after the discovery of the facts that lead to the motion. The failure to file a timely motion within a reasonable time may be a waiver of the right to seek disqualification. Case v. City of Miami, 756 So.2d 259 (Fla. 3 DCA 2000) (disqualification sought seven years later). Similarly, the fifth district found a waiver where the moving party had known of the conflict for more than three years. Balda v. Sorchych, 616 So.2d 1114 (Fla. 5 DCA 1993). However, waiting four months to file a motion to disqualify was held not to be a waiver. Birdsall v. Crowngap, Ltd., 575 So.2d 231 (Fla. 4 DCA 1991), holding that the delay was not unreasonable because the moving party thought the case might have been abandoned. Clearly, the rationale behind the rule that delays in filing a disqualification of attorney motion may not be used to disadvantage an opponent is to prevent a litigant from using the motion as a tool to deprive his opponent of counsel of his choice after completing substantial preparation of the case. Case, supra.
There is no bright-line as to when the delay in filing of a motion to disqualify acts as a waiver. Four months is apparently not enough time to impute a waiver, but a party who waits three years before filing such a motion, likely has waived the opportunity to file a motion for disqualification.
DISQUALIFICATION IS AN EXTRAORDINARY REMEDY
The disqualification of an attorney is an extraordinary remedy and therefore it should be used sparingly. Vick v. Bailey, 777 So.2d 1005 (Fla. 2 DCA 2000). The disqualification of a party’s lawyer is an unusually drastic measure. General Accident Ins. Co. v. Borg-Warner Accept. Corp., 483 So.2d 505 (Fla. 4 DCA 1986). Motions to disqualify counsel are often filed to prevent a breach of a professional duty that would otherwise enable one party to gain an unfair advantage over another. However, this must be balanced with a party’s right to select the lawyer of his choice, coupled with consideration of the hardship suffered by a party whose lawyer is disqualified and the financial burden on a client to a disqualified counsel. Clearly, the motion to disqualify should not be used as a trial tactic to delay proceedings, deprive the opposing party of counsel of his choice, or as a tool to frustrate the opponent. Eggers v. Eggers, 776 So.2d 1096, 1098 (Fla. 5 DCA 2001).
Other jurisdictions also hold that disqualification is to be used as a last resort. See Outdoor Adver. Ass’n of Ga., Inc. v. Garden Club of Ga., Inc., 527 S.E.2d 856, 862, 272 Ga. 146, 151 (2000) (quoting Blumenfeld v. Borenstein, 276 S.E.2d 607, 247 Ga. 406 (1981); Crown v. Hawkins Co., 910 P.2d 786, 795, 128 Idaho 114, 123 (Ct. App. 1996) (“Whenever possible, courts should endeavor to reach a solution that is least burdensome to the client….Where the motion to disqualify comes not from a client or former client…, but from an opposing party, the motion should be reviewed with caution.”); In re Ellis, 822 S.W.2d 602, 605 (Tenn. Ct. App. 1991) (stating that courts should “disqualify counsel with considerable reluctance and only when no other practical alternative exists”); In re Firestorm, 916 P.2d 411, 416, 129 Wash. 2d 130, 138 (1996) (“Disqualification of counsel is a drastic remedy that exacts a harsh penalty from the parties as well as punishing counsel; therefore, it should be imposed only when absolutely necessary.”). One reason that disqualification is such a drastic remedy is that a conflict of interest that applies to an attorney associated with a law firm is also imputed to other partners and associates working in that firm. Rule 4-1.10(a) of the Rules of Professional Conduct states that “while lawyers are associated in a firm, none of them shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so.”
To the extent that disqualification motions turn on alleged violations of ethics rules, courts must consider that ethics rules are not “to be employed as arrows in the litigator’s quiver, to be loosed from time to time at targets of opportunity as the ebb and flow of an adversarial proceeding may appear to dictate.” Douglas Richmond, “The Rude Question of Standing in Attorney Disqualification Disputes,” 25 Am. J. Trial Advoc. 17 (2001), citing Schuff v. A.T. Klemens & Son, 16 P.3d 1002, 1016, 303 Mont. 274 (2000).
FINDINGS OF FACT
While Glenn Siegel was a member of The Florida Bar, the evidence presented convinces the Court that he was employed by Progressive in a nonlawyer capacity and that no one at Progressive thought that he was acting in the capacity as their counsel. As applied to the facts of this case, the Court notes that Progressive does not seek to disqualify Siegel or Kane & Kane on every case that the firm has pending against Progressive, rather, they seek disqualification on only those cases in which he directly worked on the file, or those which involve the ADP program or Beech Street. Accordingly, it appears that Progressive does not allege that Siegel gained any material confidential information merely because he was employed as a claims litigation specialist, rather, the material confidential information was gained only on the issues raised for disqualification.
As to the ADP program, the Court finds that there was no evidence that Siegel had any involvement or input into the ADP Integrated Medical Solutions, Inc.’s program. This was a software program purchased by Progressive to determine UCR reductions. There was no evidence presented as to how ADP gathered the data for the program or that anyone at Progressive was consulted in regard to the data used for the program, let alone Siegel. The same holds true for the Beech Street contract. While Progressive attempted to show that Siegel researched and helped to develop Progressive’s strategy in handling “Beech Street cases”, the evidence showed that the extent of Siegel’s involvement was a telephone conversation with Harley Kane in which Kane convinced Siegel of problems Progressive would have in defending the contract. Siegel merely put those problems in a memorandum and forwarded them to his supervisors.
Finally, there was no evidence offered to show that Siegel had any “actual knowledge of material confidential information”. Koulisis, supra. While the subject matter Siegel dealt with as an adjuster for Progressive and the matters Siegel handles as plaintiffs counsel in PIP cases are similar, the Court is convinced that Siegel had little access to confidential matters as an adjuster that would give him an “unfair advantage” in any of these cases, Tuazon v. Royal Caribbean Cruises, Ltd., 641 So.2d 417 (Fla. 3 DCA 1994), where court held that plaintiff’s counsel, who served as an adjuster handling Jones Act cases, did possess an unfair advantage. As noted by Charles Kane in his testimony, there are only so many defenses an insurance carrier can raise in a PIP suit and you tend to see those time and time again.
Moreover, Progressive attempted to show by inference that there were other areas of conflicts. For example, Progressive points out that Siegel copied a list of all Beech Street providers before he left Progressive’s employment and attempted to contact people on that list as prospective clients. Notwithstanding, the evidence showed that those provider lists were already furnished in discovery to Kane & Kane and are public information on the internet. Further, there is no evidence to conclude that the increase in cases filed against Progressive by Kane & Kane had anything to do with Siegel joining that firm. To the contrary, the Court is convinced that the increase in PIP cases was due to the stepped up marketing efforts of the firm.
From listening to the testimony of the witnesses, it is easy to see that this issue has become a “personal” matter for these parties. There is little doubt that Siegel’s surreptitious departure from Progressive was a factor. To Progressive, and perhaps understandably, it didn’t smell right. Likewise, Kane & Kane felt that they did nothing wrong in hiring Siegel. Their belief was that they were simply getting a lawyer who had experience with the PIP legislation, not necessarily a lawyer who single handedly could bring the various Progressive insurance companies to their knees. While it is easy to commingle ethics codes and litigation conduct, it is clear that ethics codes are designed as a disciplinary process for an attorney and not specifically to be used to disqualify an attorney from representing a client.
The evidence presented and any common sense analysis suggests that there is clearly a conflict with Siegel (and therefore Kane & Kane) handling any cases in which Siegel was the actual adjuster on the file. Notwithstanding, as applied to the “Guisinger” case, the Court finds that Progressive has by their conduct waived any conflict. It is clear to the Court that Progressive must demonstrate by some evidence that Siegel worked on a file. It is also clear that more is required than by simply showing that a computer search yielded the initials “GES”. The evidence showed that “GES” showed up on other files long after Siegel left Progressive or in cases in which Siegel could not have had any involvement. Finally, while Progressive claims that Siegel worked on the Guisinger file, that fact was not disclosed for a period of seventeen months to Kane & Kane.
Progressive learned of a potential conflict in December, 2000, when Don Matthews spoke with Harley Kane. Yet Progressive did nothing for eight months before filing the motion to disqualify in this case. In that time period, Progressive sat back and allowed dozens of cases to be filed across the state by Kane & Kane. Moreover, Progressive has taken different positions in their handling of these cases. Subsequent to December, 2000, they actually proceeded with litigation and settled cases directly with Glen Siegel. In other cases, they have continued on with discovery without filing motions to disqualify. Finally, as applied to “Guisinger”, Progressive did not disclose to Kane and Kane that they had evidence Siegel allegedly worked on the file until after this hearing commenced in June, 2002. Unlike the facts of Birdsall, supra, Progressive has given no legitimate reason for the delay in bringing this motion.
While Progressive argues that they have the right to determine if they want to assert the conflict on a case by case basis, Snyderburn v. Bantock, 625 So.2d 7 (Fla. 5 DCA 1993), that is somewhat inconsistent with their position presented at this hearing. Either Glenn Siegel’s employment with Progressive created a conflict or it didn’t; he either possesses confidential information or he doesn’t. The law doesn’t authorize Progressive, or any defendant, to determine who plaintiffs counsel will be on a case by case basis.
Both parties presented expert testimony as to the role of the Rules of Professional Conduct under the facts presented here. The Court found that testimony to be helpful. But it seems apparent that conduct which may or may not give rise to a disciplinary action in another forum is not necessarily dispositive of the issues presented before the Court. Accordingly, it is
ORDERED AND ADJUDGED that the Motion to Disqualify Glenn Siegel and the law firm of Kane & Kane is DENIED. On the Guisinger claim, in which it was alleged that Siegel personally handled the claim file for Progressive as an adjuster, the motion would have been granted, however, the Court finds there has been a waiver. As to the remaining issues involving the ADP program or Beech Street contract, the motion is also DENIED. It is further
ORDERED AND ADJUDGED that the Orders entered which stay discovery proceedings are hereby lifted.
Notwithstanding the fact that this is a non-final Order, because of the statewide impact on several hundred cases as well as the burden placed on the parties and the courts to conduct evidentiary hearings in every county throughout the State of Florida, the Court certifies the following question as a matter of great public importance: Is there a conflict of interest which requires disqualification of an attorney and his law firm, if a former employee of an insurance company, who was a licensed attorney, but employed as a nonlawyer claims adjuster, leaves the insurance company and gains employment with a law firm whose primary source of business is the pursuit of PIP litigation cases, many of which involve the former employer insurance company?
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1As of the start of this hearing, Progressive had never provided a list of cases that Siegel worked on, although the list was finally produced in June, 2002.
2The parties acknowledge that Progressive filed their first motion to disqualify in some case in May, 2001.
3It is not disputed that these contracts and directories have been provided by Progressive in discovery in several cases.
4Progressive notes that since Siegel’s departure, the company no longer uses ADP for it’s UCR claims.
5R. Regulating Fla. Bar 4-1.9 comment.
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