Oswall v. Tekni-Plex, Inc.

299 N.J. Super. 658, 691 A.2d 889 (App. Div. 1997)
  • Opinion Date: April 17, 1997

ATTORNEYS; CONFLICTS OF INTEREST—A law firm that represented a company and its then-president in a merger into a new company is barred from representing the former president in a dispute with the new company because (a) it would give the appearance of impropriety, and (b) the attorney-client privilege can only be waived by the post-merger company.

Oswall brought a breach of contract action against his former employer, alleging that the company had violated part of a non-competition agreement between them. The agreement was signed in 1991 by Oswall and the company’s then-president. Both the company and the president personally had been represented by the same law firm for over 20 years in various matters, including litigation, general corporate matters and real estate. The firm’s representation of both the president and the company continued through the company’s merger in 1994. As a result of the merger, the law firm no longer represented the company and the president was no longer part of the company, even though the name of the company was unchanged. The “new” company subpoenaed the president to appear at a deposition but a partner in the law firm (and still the president’s attorney) insisted that the president would only appear if the law firm were his counsel. The new company not only objected, but moved to disqualify the partner and the law firm from representing the president, claiming a conflict of interest because the law firm had represented the “old” company through the 1994 merger. By separate motion, the company sought to name the president as a third-party defendant, claiming he had acted ultra vires when he entered into the contract agreement with Oswall. The motion judge denied the company’s motion to join the president as a third-party defendant, but did disqualify the partner and the law firm from representing the president and ordered the president to appear on the date scheduled either with new counsel or without an attorney.

On appeal, the president contended that Rule 1.9 of the Rules of Professional Conduct (RPC) does not apply in this instance because: (1) the company, as it existed after the merger, is not the law firm’s former client since it was never represented by the law firm; (2) representation against a successor corporation is not representation adverse to a former client under Rule 1.9; and (3) the contract dispute with Oswall was not a matter “substantially related” (as that phrase from RPC 1.9 is used and interpreted) to the law firm representation of the president and the “old” company. However, following a long line of cases holding that even the appearance of impropriety is enough for disqualification of an attorney or law firm, the Appellate Division found against the former president and his attorney.

The Court’s reasoning asks whether an ordinary, knowledgeable citizen acquainted with the facts could conclude that an attorney represented a former client within the ambit of RPC 1.9, and whether that representation would pose a substantial risk of disservice either to clients or to the public interest. Since the “new” company inherited the contractual obligations of the “old” company and the law firm represented the “old” company, the Court felt an ordinary person could conclude there would be a risk of disservice if the attorney represented the president, even though the president was not a party to the action. The Court also held that a successor corporation retains the attorney-client privilege of its predecessor company, to be asserted or waived only by the current directors and officers of the company and not prior management, even if the dispute concerns matters that took place when prior management was running the company.