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Bartlett v. Bartlett

United States District Court, N.D. Illinois, Eastern Division

December 20, 2016

Mark Bartlett, Plaintiff,
James Bartlett, Denise Bartlett, Evan Bartlett, Anoosh Motamedi, and Mark Keenan, Defendants.


          Manish S. Shah United States District Judge

         Mark Bartlett and his brother James Bartlett jointly own cash-lending stores. Mark is suing James-along with James's wife, son, and two employees-for allegedly setting up rival stores and siphoning business and resources away from the brothers' co-owned stores. [1].[1] James now moves to disqualify Mark's counsel, Arnstein & Lehr LLP (including lead counsel Steven Malitz), because the firm previously represented the brothers' cash-lending businesses in litigation with third parties and did estate planning for James and his wife. For the following reasons, the motion to disqualify is denied.

         I. Legal Standards

         Local Rule 83.50 incorporates ABA Model Rule of Professional Conduct 1.9 on duties to former clients. Rule 1.9(a) provides that “[a] lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related matter in which that person's interests are materially adverse to the interests of the former client unless the former client gives informed consent, confirmed in writing.” In considering motions to disqualify, courts must balance two important considerations: “the sacrosanct privacy of the attorney-client relationship (and the professional integrity implicated by that relationship) and the prerogative of a party to proceed with counsel of its choice.” Schiessle v. Stephens, 717 F.2d 417, 419-20 (7th Cir. 1983). Although courts have a duty to safeguard the attorney-client relationship, “it must also be recognized that disqualification, as a prophylactic device for protecting the attorney-client relationship, is a drastic measure which courts should hesitate to impose except when absolutely necessary.” Cromley v. Bd. of Educ. of Lockport Twp. High Sch. Dist. 205, 17 F.3d 1059, 1066 (7th Cir. 1994). Motions to disqualify counsel are typically disfavored because “they can be misused as techniques of harassment” and they “depriv[e] a party of representation of their own choosing, ” but “there obviously are situations where they are both legitimate and necessary.” Freeman v. Chicago Musical Instrument Co., 689 F.2d 715, 721-22 (7th Cir. 1982). The moving party “bears a heavy burden of proving facts required for disqualification.” Evans v. Artek Sys. Corp., 715 F.2d 788, 794 (2d Cir. 1983).

         The standard for disqualification of an attorney who undertakes litigation against a former client is the so-called “substantial relationship” test. LaSalle Nat'l Bank v. Lake Cty., 703 F.2d 252, 255 (7th Cir. 1983). The test has three steps: “First, the trial judge must make a factual reconstruction of the scope of the prior legal representation. Second, it must be determined whether it is reasonable to infer that the confidential information allegedly given would have been given to a lawyer representing a client in those matters. Third, it must be determined whether that information is relevant to the issues raised in the litigation pending against the former client.” Id. at 255-56. Matters are substantially related “if they involve the same transaction or legal dispute or if there otherwise is a substantial risk that confidential factual information as would normally have been obtained in the prior representation would materially advance the client's position in the subsequent matter.” ABA Model Rules Prof'l Conduct § 1.9 cmt. 3; see Analytica, Inc. v. NPD Res., Inc., 708 F.2d 1263, 1266 (7th Cir. 1983). If a substantial relationship exists, it is presumed that the attorney received confidential information during the prior representation. LaSalle Nat'l, 703 F.2d at 257. Although the presumption is rebuttable, “[a] very strict standard of proof must be applied to the rebuttal of this presumption, however; and any doubts as to the existence of an asserted conflict of interest must be resolved in favor of disqualification.” Id.

         II. Background

         Mark Bartlett and his brother James Bartlett jointly own American Cash Loans, LLC, and B & B Investment Group, Inc. As relevant here, the companies operate four cash-lending stores in New Mexico, which are allegedly managed by James. In 2011, the brothers hired Arnstein & Lehr LLP to represent these companies, another Bartlett business, and Mark individually in two Illinois state court breach of contract actions involving third parties. Around this time, James also hired Arnstein & Lehr LLP for estate-planning work for him and his wife, Denise Bartlett. Steven Malitz was the originating partner for both matters, but his partner Jay Tarshis handled James's estate-planning work in 2011 and 2012. Through 2014, Tarshis also performed some discrete transactional work for two other business entities owned by James.

         In early 2015, Mark-represented by Arnstein & Lehr LLP-brought suit against James in Florida state court, alleging that James breached the brothers' business agreement and his fiduciary duties by failing to transfer funds from the cash-lending stores to Mark. James filed a motion to disqualify Arnstein & Lehr as Mark's counsel and requested that the firm return his estate planning file materials. Mark substituted in new counsel before the motion to disqualify was decided. Arnstein & Lehr returned James's file, along with a letter from its general counsel stating that the firm would not perform any additional services for James. In 2015, using other counsel, Mark asserted similar claims against James in New Mexico state court (in two consolidated cases). The Florida court stayed proceedings pending completion of the New Mexico litigation and then dismissed the case without prejudice. The New Mexico litigation remains pending.

         In 2016, Mark brought suit against James here in federal court, asserting that James, his wife Denise, his son Evan, and employees Anoosh Motamedi and Mark Keenan engaged in a racketeering scheme in violation of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961. Arnstein & Lehr, with Malitz as lead counsel, represent Mark in the current RICO action against James. James moves to disqualify Malitz and Arnstein & Lehr, asserting that the firm has a conflict of interest because James is a former client.

         III. Analysis

         A. Prior Litigation Matters

         In 2011, Steven Malitz sent an engagement letter and retainer agreement from Arnstein & Lehr to James and Mark Bartlett. [8-3]. The firm agreed to represent a few Bartlett businesses (American Cash Loans, LLC, B & B Investment Group Inc., America's Cash Advance Store, Inc., and OPM Enterprises, Inc.) in two pending lawsuits in the Circuit Court of Cook County: OPM Enterprises, Inc. v. Affinity Credit Services, Inc., Case No. 09 CH 00521, and Michael D'Ambrose v. American Cash Loans, LLC et al., Case No. 09 L 011858. The letter also stated that the firm would represent Mark, who was named individually in the D'Ambrose action. [8-3] at 1. The parties argue over whether James was a client of Arnstein & Lehr for either litigation matter. Although he was not a named party in either suit, and the letter stated that the firm was only representing the Bartletts' businesses and Mark individually, James signed the letter “individually and on behalf of” the businesses. [8-3] at 3. Arnstein & Lehr argues that this was only meant to obligate James to pay for attorney fees if the businesses did not, but there is no language in the letter to that effect. At the end of the day, even if James were not represented by Arnstein & Lehr as a named party, as a co-owner of businesses that necessarily act through people, he would expect to have a confidential relationship with the attorneys representing the businesses.

         In OPM Enterprises, Inc. v. Affinity Credit Services, Inc., Bartlett-owned OPM Enterprises, Inc. sued a third party in 2009 for allegedly failing to make payments pursuant to a consulting agreement. See [14-2] at 21-29. James does not dispute that Malitz's point of contact for the case was Mark, who was principal of OPM, and the case was resolved in 2011. [14-2] ¶¶ 19, 21. In Michael D'Ambrose v. American Cash Loans, LLC et al., a third-party sued Bartlett-owned businesses American Cash Loans, LLC, B & B Investment Group, Inc., and America's Cash Advance Store, Inc., in 2009 for allegedly failing to make payments pursuant to investment agreements entered into in 2003. An unjust enrichment claim was also brought against Mark for allegedly failing to disburse proceeds from a partnership dissolved in 2008. See [14-2] at 8-20. James also does not dispute that Mark was the firm's point of contact in the D'Ambrose case and that it was dismissed in 2011. [14-2] ¶¶ 9, 14.

         James has made no argument that these prior litigation matters are substantially related to Mark's current RICO suit, although it is his burden to establish a substantial relationship. Two Bartlett businesses in the D'Ambrose action-American Cash Loans, LLC, and B & B Investment Group, Inc.-are mentioned in the RICO complaint as jointly-owned businesses from which James and the other defendants allegedly siphoned off business and resources. But James does not argue that any confidential information from these prior actions would be relevant to the issues raised in this RICO action several years later. ...

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