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Infogroup, Inc. v. Databasellc

United States District Court, D. Nebraska

May 4, 2016

INFOGROUP, INC., Delaware corporation; INFOUSA, INC., AND Delaware corporation; and INFOUSA MARKETING, INC., Delaware corporation; Plaintiffs,
v.
DATABASELLC, a Nevada limited-liability company; VINOD GUPTA, BLAKE VAN GILDER, JASON DAILEY, MARK PULJAN, JON MCCORMICK, JOHN DOES, AND 1-20; and DATABASEUSA.COM LLC, a Nevada limited-liability company; Defendants.

MEMORANDUM AND ORDER

CHERYL R. ZWART UNITED STATES MAGISTRATE JUDGE

Citing a conflict of interest, Defendants have moved to disqualify Gregory C. Scalione and Koley Jessen P.C. L.L.O. as counsel for the Plaintiff. (Filing No. 199). Gupta claims Koley Jessen previously represented him from 2001 to 2010 (when he was CEO, Board Chairman and the largest single shareholder of Infogroup), and from 2011 to 2014 (when he was CEO, Board Chairman, and the largest single shareholder of Database). For the reasons stated below, the motion will be denied.

“A party’s right to select its own counsel is an important public right and a vital freedom that should be preserved; the extreme measure of disqualifying a party’s counsel of choice should be imposed only when absolutely necessary.” Macheca Transport Co. v. Philadelphia Indemnity Insurance, Co., 463 F.3d 827, 833 (8th Cir. 2006). “The decision to grant or deny a motion to disqualify an attorney rests in the discretion of the [district] court, ” Petrovic v. Amoco Oil Co., 200 F.3d 1140, 1154 (8th Cir. 1999) (internal quotations omitted) and motions to disqualify must be subjected to “particularly strict scrutiny” due to the potential for abuse. Droste v. Julien, 477 F.3d 1030, 1035 (8th Cir. 2007).

Violations of ethical guidelines may provide a basis for disqualifying an attorney, but the Eighth Circuit has not adopted a bright line rule requiring disqualification in all cases where an ethics violation has occurred or will occur unless the attorney in question is disqualified. See Ark. v. Dean Foods Prods. Co., 605 F.2d 380, 383 (8th Cir. 1979)(overruled on other grounds, In re Multi-Piece Rim Prod. Liab. Litig., 612 F.2d 377 (8th Cir. 1980)).

Defendant Gupta claims Koley Jessen’s representation of the Plaintiff violates Nebraska Rule of Professional Conduct § 3-501.9. The court has reviewed this rule to assess whether Scaglione and Koley Jessen can represent any defendant in this case. Section 3-501.9 states:

(a) A lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or 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.
. . .
(c) A lawyer who has formerly represented a client in a matter or whose present or former firm has formerly represented a client in a matter shall not thereafter:
(1) use information relating to the representation to the disadvantage of the former client except as these Rules would permit or require with respect to a client, or when the information has become generally known; or
(2) reveal information relating to the representation except as these Rules would permit or require with respect to a client.

Neb. Ct. R. of Prof. Cond. § 3-501.9.

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 a subsequent matter.” Neb. Ct. R. of Prof. Cond. § 3-501.9 ct. 3.

[T]he determination of whether there is a substantial relationship turns on the possibility, or appearance thereof, that confidential information might have been given to the attorney in relation to the subsequent matter in which disqualification is sought. The rule thus does not necessarily involve any inquiry into the imponderables involved in the degree of relationship between the two matters but instead involves a realistic appraisal of the possibility that confidences had been disclosed in the one matter which will be harmful to the client in the other. . . . [I]t is not appropriate for the court to inquire into whether actual confidences were disclosed.

Restatement (Third) of Law Governing Law. § 132 (2000) cmt (d)(iii) (reporter’s notes) (quoting Westinghouse Elec. Corp. v. Gulf Oil Corp., 588 F.2d 221, 224 (7th Cir. 1978); accordDean Foods ...


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