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CITY OF WAUKEGAN v. MARTINOVICH

December 16, 2005.

CITY OF WAUKEGAN, an Illinois municipal corporation, Plaintiff,
v.
LARRY MARTINOVICH, Defendant.



The opinion of the court was delivered by: ROBERT GETTLEMAN, District Judge

MEMORANDUM OPINION AND ORDER

On June 11, 2003, plaintiff, the City of Waukegan, Illinois, filed a five count complaint against defendant Larry Martinovich ("Martinovich"), the owner of property located in Waukegan (the "Martinovich Property"). Plaintiff seeks declaratory and injunctive relief as well as cost recovery for the disposal and release of contaminants to and from the Martinovich Property, pursuant to state and federal environmental and tort law. After lengthy settlement efforts failed, defendant filed a counterclaim on July 15, 2005, alleging similar environmental violations by plaintiff concerning a property owned by plaintiff that is adjacent to the Martinovich Property.

On November 4, 2005, plaintiff filed the instant motion to disqualify Carol L. Dorge ("Dorge"), who first appeared as counsel for defendant in June 2005, pursuant to Rule 83.51.9 of Professional Conduct for the Northern District of Illinois and Rule 1.9 of the Illinois Code of Professional Responsibility. Plaintiff argues that Dorge is barred from representing defendant because she previously served as a consultant to plaintiff regarding plaintiff's efforts to redevelop and environmentally remediate the downtown Waukegan area that includes the Martinovich Property. For the reasons stated below, the court grants plaintiff's motion to disqualify Dorge.

  STATEMENT OF FACTS

  The following facts are those relevant to the instant motion only. The instant action arises from the Waukegan Downtown and Waterfront Revitalization Project. As part of the project, plaintiff received a $200,000 grant from the U.S. Environmental Protection Agency ("EPA") for the redevelopment of brownfields in the downtown Waukegan area, an effort known as the Brownfields Redevelopment Initiative ("Initiative").

  In furtherance of the Initiative, plaintiff entered into an agreement with a professional planning firm, Vandewalle & Associates ("Vandewalle"), to oversee the implementation of the EPA grant. Plaintiff's agreement with Vandewalle stated that the Lakeside Group, a division of Vandewalle, would work "in conjunction with Carol Dorge, Attorney at Law." The agreement enumerated several tasks or work elements, and specified that Dorge would complete work element seven ("Task Seven"). The scope of Task Seven was described by Dorge in a proposal memorandum dated July 8, 1999, which was on her legal stationary. Dorge's proposal describes her qualifications, including that she is "an attorney who specializes in Environmental Law, including Brownfields," and highlights her experience with the "legal tools" like eminent domain, quick take, zoning, nusiance control, and code enforcement that are used in brownfield redevelopment projects "to be proactive, and to alleviate liability concerns."

  Plaintiff accepted Dorge's proposal as her retention agreement ("Retention Agreement"), and Dorge worked for plaintiff on the Initiative through February 2000. According to the Retention Agreement, Dorge's activities included: (1) identifying "technical, legal, financial and other tools which will facilitate the redevelopment of parcels of property"; (2) educating owners, prospective owners and the public on the risk-based approach to clean-up; (3) negotiating access agreements with owners of privately owned parcels of property; and (4) exploring "involuntary measures of securing access and remediation with the City and Corporate Counsel and assist where appropriate." Most of Dorge's correspondence to plaintiff regarding the Initiative, including her invoices, was on her legal letterhead.

  Dorge filed a breach of contract suit against plaintiff in the Circuit Court of Lake County regarding her fees for her work on the Initiative. In her first amended state court complaint, filed April 22, 2004, Dorge cites excerpts of conflict waivers that she had requested regarding her representation of other owners of property in the area targeted by the Initiative who were involved in environmental access negotiations with plaintiff.*fn1 In one excerpt, Dorge stated that Kathleen and Ronald Rice (the "Rices") wished to retain Dorge to represent them in negotiations with plaintiff, and that plaintiff had also filed a lawsuit against Kathleen Rice, which involved the Rices' property. Dorge states that "there is a potential for a conflict of interest" and that her representation of the Rices was contingent on receiving a waiver from the Rices and plaintiff. Another excerpt indicated that Dorge sought to represent Michael Coan ("Coan") and North County Development Group, LLC in negotiations with plaintiff. In the excerpt, Dorge conceded that there is "a potential conflict of interest," and asked plaintiff to acknowledge a waiver of the conflict. The state court found in Dorge's favor, and awarded her $14,000 in fees.

  While working as a consultant for plaintiff, Dorge had conversations with defendant Martinovich and assisted plaintiff in effectuating the access agreement between plaintiff and defendant. This agreement permitted plaintiff's consultants to conduct environmental assessments of the Martinovich Property, as well as the adjacent property that is the subject of defendant's counterclaim. The data derived from these assessments is the basis of plaintiff's complaint against defendant. Defendant testified in his affidavit that Dorge asked him to "cooperate in an environmental investigation," which she told him would probably be required if he wanted to finance or sell his property. Defendant also testified that Dorge told him that she was not representing plaintiff for purposes of purchasing his property.

  Dorge filed an appearance on behalf of defendant in the instant action on June 24, 2005, approximately a year after the suit was filed and after extensive settlement negotiations by plaintiff with defendant and his former counsel. On October 21, 2005, plaintiff sent an e-mail to Dorge requesting that she withdraw her appearance as counsel for defendant. The e-mail also stated that plaintiff was unwilling to waive the conflict, and that it would file a motion to disqualify Dorge is she did not voluntarily withdraw. Plaintiff stated that it was very concerned about "the obvious conflict" between Dorge's present representation of Martinovich and her role involving the same property on behalf of plaintiff, and noted that Dorge may be called as a witness on behalf of plaintiff.

  Dorge did not withdraw. Instead, she wrote a letter, dated October 26, 2005, to the Diver Group ("Diver"), a law firm that had served as counsel to plaintiff regarding aspects of the Initiative. Dorge asked Diver to help "facilitate a meeting with [plaintiff] and facilitate a waiver of conflict" to represent defendant in the instant suit. Dorge stated that a waiver was "not required, but would put the ethical accusations to bed." Dorge did not copy plaintiff or its counsel, Jeep & Blazer, LLC ("Jeep & Blazer"), on her October 26 letter. Diver responded by letter dated October 26, 2005, and directed Dorge to contact Jeep & Blazer. Plaintiff wrote Dorge an e-mail dated October 31, 2005, stating that Jeep & Blazer had forwarded a copy of her October 26, 2005, letter. Plaintiff's e-mail stated that Dorge's request for a waiver of conflict was rejected, and noted that "given the statements in your letter [to Diver] we will assume that you will not voluntarily withdraw your appearance and we will therefore immediately file a motion to disqualify."

  DISCUSSION

  Plaintiff argues that based on the nature and extent of Dorge's prior representation and her actions on behalf of plaintiff specifically related to the Initiative that involved the environmental condition of the properties at issue in the claims and the counterclaims, she is barred from representing Martinovich in the instant action. For the reasons discussed below, plaintiff is correct.

  Rule 83.51.9 of the Local Rules of Professional Conduct for this Court provides in relevant part:
Conflict of Interest: Former Client
(a) A lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related in which the person's interests are materially adverse to the interests of the former client unless the former client consents after disclosure.
Although neither party saw fit to cite a single case regarding the standards for attorney disqualification, the Seventh Circuit has established a frequently cited, three-part analysis to determine whether to disqualify an attorney. See Cromley v. Board of Education of Lockport Township High School District 205, 17 F.3d 1059, 1064 (7th Cir. 1994). First, the court determines whether a substantial relationship exists between the subject matter of the prior and present representations. Id. If the court concludes that a substantial relationship exists, it must determine if the presumption of shared confidences with respect to prior representation has been rebutted. Id. If the court concludes this presumption has not been rebutted, the court must then determine whether the presumption of shared confidences has ...

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