DENTAL HEALTH ASSOCIATES SOUTH JERSEY, P.A., v. RRI GIBBSBORO, LLC

 

(NOTE: The status of this decision is Published.)

               NOT FOR PUBLICATION WITHOUT THE
              APPROVAL OF THE APPELLATE DIVISION

                                   SUPERIOR COURT OF NEW JERSEY
                                   APPELLATE DIVISION
                                   DOCKET NO. A-0320-21

DENTAL HEALTH
ASSOCIATES SOUTH
JERSEY, P.A., PG DENTAL
MANAGEMENT II LLC,
and DR. AMISH PATEL,
                                     APPROVED FOR PUBLICATION

     Plaintiffs-Appellants,                  March 10, 2022

                                         APPELLATE DIVISION
v.

RRI GIBBSBORO, LLC,
SCOTT SINGER, and TODD
SINGER, SAMANTHA WOLFF,
DENTAL OF CLEMENTON,
LLC, and JAMES MARMO,

     Defendants-Respondents.
___________________________

           Argued March 3, 2022 – Decided March 10, 2022

           Before Judges Alvarez, Haas, and Mawla.

           On appeal from an interlocutory order of the Superior
           Court of New Jersey, Law Division, Camden County,
           Docket No. L-3993-20.

           Ellis I. Medoway argued the cause for appellants Dental
           Health Associates South Jersey, PA, PG Dental
           Management II LLC, and Dr. Amish Patel (Archer &
           Greiner, PC, attorneys; Ellis I. Medoway, on the
           briefs).
            Elliot D. Ostrove argued the cause for respondents RRI
            Gibbsboro, LLC, Scott Singer, and Todd Singer
            (Epstein Ostrove, LLC, attorneys; Elliott D. Ostrove, of
            counsel and on the brief; Maureen C. Pavely, on the
            brief).

      The opinion of the court was delivered by

MAWLA, J.A.D.

      We granted plaintiffs Dental Health Associates South Jersey, P.A., PG

Dental Management II, LLC, and Dr. Amish Patel leave to appeal from an

August 6, 2021 order disqualifying the law firm of Archer & Greiner, PC

(Archer) from serving as their counsel. We reverse and remand for further

proceedings consistent with this opinion.

      Plaintiffs initiated this lawsuit in June 2020 alleging they executed an

asset purchase agreement with sellers, who were not party to the litigation, to

purchase dental practices, including patient records and dental equipment.

Pursuant to the purchase agreement, the sellers assigned their leases for multiple

office locations, including a Clementon office operated by defendants RRI

Gibbsboro, LLC, Scott Singer, and Todd Singer. Following the agreement's

execution, plaintiffs alleged defendants locked them out of the Clementon

office, wrongfully converted the equipment and patient records, and sought an

injunction prohibiting defendants from blocking access to the premises.


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      A few weeks after filing the complaint, plaintiffs retained Archer and its

partner Kerri E. Chewning as their new counsel. Chewning filed a first amended

complaint in June 2020 and a second amended complaint in September 2020.

Plaintiffs asserted the following claims against defendants: conversion; tortious

interference with contract and/or business expectancy; breach of contract;

violation of the New Jersey Law Against Discrimination; and defamation.

      The complaints' introduction referenced an unrelated 2015 litigation

involving defendants in New York, to which plaintiffs were not a party. Before

addressing the import of the introduction in plaintiffs' complaint, we explain the

background of the New York litigation.

      The New York case involved a lawsuit filed by a "control fund" that

entered into an asset purchase agreement with the Singers to purchase an equity

stake in a marketing and human resources company the Singers owned that

provided non-clinical services to dental practices owned by Todd. 1 Pursuant to

the agreement, Scott would be named CEO of company, Todd remained owner

of the dental practices and would be named president and chief clinical officer

of the company, and both would draw salaries under their employment contracts.



1
   We use first names because Todd and Scott share the same surname. We
intend no disrespect.
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A dispute arose following the closing and the Singers sought to terminate the

service contracts between the company and the practices.

      The New York plaintiffs filed a complaint alleging:            fraudulent

inducement of the acquisition agreement seeking monetary damages and

specific performance; breach of the acquisition agreement, monetary damages,

and specific performance; breach of the acquisition agreement's restrictive

covenants; breach of the covenant of good faith and fair dealing; breach of

fiduciary duty; unjust enrichment; and conversion. The New York plaintiffs

sought a temporary restraining order (TRO) against the Singers for violating the

agreement's restrictive covenants, including a prohibition on soliciting

employees and a non-compete clause. Following entry of the TRO, the New

York trial court had to determine whether to enforce the acquisition agreement's

restrictive covenants and convert the TRO to a preliminary injunction. The

Singers opposed a preliminary injunction arguing the restrictive covenants were

illegal and contrary to public policy. The court rejected the public policy

argument and granted the preliminary injunction.

      The Singers and their related entities in the New York litigation retained

the law firm of Tarter, Krinsky & Drogin, LLP to represent them in the appeal

from the preliminary injunction. Anthony D. Dougherty, then a partner at the


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firm, handled the appeal and was involved in the matter from December 2015

until September 2017 when the litigation settled and was dismissed.

      With this as the background, we turn to paragraph ten of the complaint

Archer filed here, which read as follows:

                   In an [eighteen]-page [d]ecision . . . from a case
            strikingly similar to the one now before this [c]ourt,
            [the New York court] had this to say about the Singer
            brothers when entering an injunction against them:

                  ....

                  The equities . . . do not lie with defendants
                  [the Singer brothers], who brazenly and
                  unapologetically crippled the [New York
                  plaintiff's c]ompany by stealing the
                  [e]mployees and competing . . . in direct
                  contravention of . . . the [a]cquisition
                  [a]greement.

                                       ***

                  [The Singers'] notion that this case presents
                  a public health concern or that patients . . .
                  stand to see their dental care adversely
                  impacted is nothing more than a conclusory
                  scare tactic proffered by the Singers.

                                       ***

                  Under these circumstances, it is clear the
                  Singers seek to invoke "public policy as a
                  sword for personal gain rather than a shield
                  for the public good."


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                  [(fifth and tenth alterations in original).]

      In December 2020, defendants filed an answer and counterclaim claiming

"[t]he allegations contained in [p]aragraph [ten] . . . are non-factual arguments

and/or conclusions of law, for which no response is required." The answer

further asserted the paragraph should be stricken pursuant to ---- 4:6-4(b) and
                                                              Rule

denied the allegations, noting the New York decision was interlocutory.

      Dougherty joined Archer as a partner in January 2021. On June 28, 2021,

Scott sent Dougherty an email congratulating him on the move to Archer.

Defendants' counsel then contacted Chewning asserting a conflict of interest

given Dougherty's prior representation of the Singers and their entities in the

New York matter and demanded Archer withdraw as plaintiffs' counsel.

Defendants subsequently filed the disqualification motion.

      Scott certified he retained Dougherty in 2015 to represent him, his brother,

and their related entities in the New York litigation. He stated Dougherty

represented other entities related to him and his brother and most recently

represented him in an arbitration in August 2019. He alleged Dougherty had

knowledge of the trial strategy and defenses in the New York matter and

"obtained confidential information about the Singer [d]efendants and . . . the

defenses . . . they now assert in the pending matter." His certification attached


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billing statements showing Dougherty's activity. He stated: "Dougherty learned

about our finances, habits, methodologies, personality, and other personal

information concerning me, Todd, and our businesses."        Defendants noted

Archer did not advise them Dougherty joined the firm as mandated under RPC

1.10(c)(3).

      Chewning and Dougherty each filed a certification in opposition to the

motion recounting their respective involvement. Each certified they worked in

different Archer offices and had never met, let alone spoken with each other

about defendants or their cases. Chewning certified when she received the letter

from defendant's counsel alleging the conflict, she contacted Archer's general

and assistant general counsel to handle the matter. Dougherty's certification

stated his access to Archer's file was restricted by the firm after defendants'

counsel wrote to Chewning. The firm's assistant general counsel also submitted

a certification confirming he had Dougherty "screened from the present matter."

      At oral argument, defendants' counsel argued the strategies and "defenses

raised by the Singer defendants in this matter with respect to an illegally or

improperly constituted entity for the provision of dental services was the same

defense that was raised in the New York matter."         Counsel asserted "the

similarity between the two matters is necessarily established by plaintiff's


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admission" via their sworn statements where they "declare that the New York

matter is . . . 'strikingly similar' to the one now before this [c]ourt."

        Plaintiffs' counsel noted the first amended verified complaint containing

the "strikingly similar" language was filed six months before Dougherty joined

Archer and did not constitute an admission the two cases were alike. And even

if it did, the court had to apply the Trupos2 standard and determine whether the

matters were substantially related.       Counsel argued the matters were not

substantially related because the two cases were litigated in separate

jurisdictions and involved different causes of action and law.

        The motion judge granted the disqualification and issued a written

opinion.     He concluded disqualification was required under RPC 1.10(b),

reasoning:

              Plaintiff[s'] complaint . . . on its face establishes the
              existence of [the] conflict. . . . Dougherty, while
              representing defendants in [the] New York litigation,
              signed papers as the lead attorney . . . . Plaintiff's
              original complaint as well as the two amended verified
              complaints rely upon the New York decision . . . as
              relevant to establishing improper business tactics by
              defendants in this case. . . . Dougherty would possess
              confidential information relating to the New York
              litigation upon which plaintiffs here rely upon to the
              detriment of defendant[s].


2
    City of Atlantic City v. Trupos,  201 N.J. 447 (2010).
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            . . . [P]laintiffs are judicially estopped from trying to
            distance themselves from clear and unambiguous
            allegations contained in both the original complaint and
            the second amended complaint.

                                         I.

      "Disqualification of counsel is a harsh discretionary remedy which must

be used sparingly." Cavallaro v. Jamco Prop. Mgmt.,  334 N.J. Super. 557, 572

(App. Div. 2000). "[A] motion for disqualification calls for [the court] to

balance competing interests, weighing the 'need to maintain the highest

standards of the profession' against a 'client's right freely to choose his [or her]

counsel.'" Dewey v. R.J. Reynolds Tobacco Co.,  109 N.J. 201, 218 (1988)

(quoting Gov't of India v. Cook Indus., Inc.,  569 F.2d 737, 739 (2d Cir. 1978)).

Courts must engage in a "painstaking analysis of the facts." Id. at 205 (quoting

Reardon v. Marlayne Inc.,  83 N.J. 460, 469 (1980)). Our review is de novo.

Trupos,  201 N.J. at 463.

                                        II.

      Plaintiffs argue defendants did not meet their burden to demonstrate the

New York litigation was substantially related to the present matter, and the

motion judge failed to analyze the facts and found the matters were substantially

related relying on one unproven allegation in the complaint. They assert the

judge assumed Chewning obtained confidential information from Dougherty

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                                         9
even though they never met, and the allegations raised in the complaint were

asserted prior to Dougherty joining Archer. They further point out the motion

judge incorrectly relied on RPC 1.10(b), which does not apply unless the lawyer

is disqualified under RPC 1.9.

      Plaintiffs argue if the judge applied Trupos, he would have concluded

there was no conflict of interest because the cases were different. The New York

litigation concerned an acquisition agreement's restrictive covenants containing

anti-solicitation and non-compete provisions, whereas this matter involves a

lease agreement and dispute over access to a dental office, records, and

equipment. Plaintiffs also point out the discrimination claims raised here were

not part of the New York litigation. They argue judicial estoppel does not apply

because there was no final adjudication in either case.

      RPC 1.9(a) prohibits a lawyer who formerly represented a client from

representing another client "in the same or a substantially related matter in which

that client's interests are materially adverse" to the former client's interests

unless the former client provides written informed consent. Additionally, RPC

1.9(c) prohibits a lawyer from using or revealing information relating to a former

client's representation to the former client's disadvantage. RPC 1.9 is strictly

construed because "[i]f there be any doubt as to the propriety of an attorney's


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representation of a client, such doubt must be resolved in favor of

disqualification." Herbert v. Haytaian,  292 N.J. Super. 426, 438-39 (App. Div.

1996) (alteration in original) (quoting Reardon,  83 N.J. at 471). The party who

seeks the disqualification bears the burden of persuasion. Trupos,  201 N.J. at
 462.

       In Trupos, the Supreme Court enumerated a two-part test to analyze

disqualification under RPC 1.9 and held matters are "substantially related" if:

             (1) the lawyer for whom disqualification is sought
             received confidential information from the former
             client that can be used against that client in the
             subsequent representation of parties adverse to the
             former client, or (2) facts relevant to the prior
             representation are both relevant and material to the
             subsequent representation.

             [Id. at 467.]

These factors require a "fact-sensitive analysis to ensure that the congruity of

facts, and not merely similar legal theories, governs whether an attorney

ethically may act adverse to a former client." Ibid.

       In determining whether two matters are substantially related the analysis

"turn[s] on the identification of any particular confidence[s] having been

revealed." Twenty-First Century Rail Corp. v. N.J. Transit Corp.,  210 N.J. 264,

278 (2012). To demonstrate a lawyer received confidential information from


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the prior relationship, the client must make more than "bald and unsubstantiated

assertions" that the lawyer disclosed "business, financial and legal information"

related to the matter for which disqualification is sought. O Builders & Assocs.,

Inc. v. Yuna Corp. of N.J.,  206 N.J. 109, 129 (2011).

      The motion judge did not conduct the fact-sensitive analysis required by

Trupos. Instead, he accepted defendants' argument the New York litigation and

this matter were substantially related on an unproven allegation in plaintiffs'

complaint. Plaintiffs' opposition to the disqualification motion detailed several

ways in which the cases were different, but the judge did not examine those

arguments beyond the surface of the complaint. A more thorough analysis of

the facts was required. For example, the judge concluded "Dougherty would

possess confidential information relating to the New York litigation upon which

plaintiffs here rely upon to the detriment of defendant" without explaining what

the confidential information was. The record does not disclose what, if any,

confidential information or strategies Dougherty shared with Chewning. The

judge did not address the fact the first amended complaint was filed in this

matter before Dougherty ever joined the firm.

      The record also lacks fact findings regarding the second Trupos prong. In

this regard, the judge did not address the fact the New York case and this case


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concern different parties, subject matter, causes of action, and law, which would

undermine the notion the matters are substantially related.

      Furthermore, judicial estoppel was inapplicable because the doctrine

applies when a party takes inconsistent positions in separate proceedings

Cummings v. Bahr,  295 N.J. Super. 374, 387 (App. Div. 1996); see also Kimball

Int'l, Inc. v. Northfield Metal Prods.,  334 N.J. Super. 596, 606-07 (App. Div.

2000). Plaintiffs were not a party to the New York matter.

      Assuming the judge intended to invoke equitable estoppel, we remain

unconvinced.    Equitable estoppel is intended to "prevent injustice by not

permitting a party to repudiate a course of action on which another party has

relied to his detriment." Knorr v. Smeal,  178 N.J. 169, 178 (2003). "[T]o

establish equitable estoppel, plaintiffs must show that [a party] engaged in

conduct, either intentionally or under circumstances that induced reliance, and

that [the other party] acted or changed their position to their detriment." Ibid.

      This case was in the initial pleadings stage and the record does not support

the conclusion the allegations in the complaint induced reliance by or caused

defendants to change their position to their detriment requiring the imposition

of equitable estoppel to prevent an injustice.        Defendants' denial of the




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allegations in paragraph ten of the complaint would be consistent with their

defense.

      For these reasons, we remand for further fact finding by the motion judge.

If the judge finds there are insufficient facts to make a determination, he should

order discovery and if necessary, hold a plenary hearing to develop the record

before deciding the disqualification motion.

      Reversed and remanded. We do not retain jurisdiction.
                         I hereby certify that the foregoing
                         is a true copy of the original on
                         file in m y office. ~ ~ \


                             CLERK OF THE A P ~TE DIVISION




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