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'New Formulation' on Conflicts Returns Debevoise to $8 Billion MetLife Case
New York Law Journal
September 30, 2009
In determining that Debevoise & Plimpton should not be removed as counsel in a case where several of its lawyers may be called as witnesses, a federal appellate court has issued a "new formulation" of the rule requiring the disqualification of attorneys for a conflict of interest.
"[W]e now hold that a law firm can be disqualified by imputation only if the movant proves by clear and convincing evidence that [A] the witness will provide testimony prejudicial to the client, and [B] the integrity of the judicial system will suffer as a result," the 2nd U.S. Circuit Court of Appeals ruled Tuesday in In re MetLife Demutualization Litigation, 09-3716-cv.
The circuit concluded unanimously that plaintiffs had failed to meet that standard in an $8 billion class action arising from MetLife's 2000 conversion from a mutual company to a publicly traded stock company and ordered the reinstatement of Debevoise & Plimpton as the insurer's counsel.
Eastern District Judge Thomas C. Platt had disqualified the firm on Sept. 1, one week before trial was set to begin. Relying on a discovery ruling issued two years ago, he found Debevoise had a conflict of interest.
The class did not make its disqualification motion until the eve of trial after Debevoise had been representing MetLife in all litigation related to the conversion for nine years, Chief Judge Dennis Jacobs noted. Such a lengthy delay, he wrote, suggests "opportunistic and tactical motives," which have "a general tendency to impair rather than promote confidence in the integrity of the judicial system."
Judges Peter W. Hall and Richard C. Wesley joined the opinion. Judges Jacobs and Hall were assigned to the case after it had been argued. Judge Guido Calabresi recused himself prior to argument and Jose A. Cabranes afterward.
Tuesday's opinion explained the reasoning behind a brief order issued on Sept. 22 reversing Debevoise's disqualification.
On Sept. 25, Eastern District Chief Judge Raymond J. Dearie, acting in Judge Platt's temporary absence, disbanded the 150 potential jurors who had been held on a standby basis for the start of jury selection. A new pool of jurors will have to be summoned, and it is expected it will take several weeks before jury selection can begin.
The jurors will hear the claims of 8.6 million holders of life insurance policies prior to the conversion, who contend MetLife violated federal securities laws by failing to disclose information that would have alerted them to the fact that they were being shortchanged in the conversion.
The class asserts that under the deal, which they were required to approve, its members only received 54 cents on the dollar for the interests they surrendered. The class pegs the value of the interests they gave up at $15 billion, compared with the $8.4 billion interest its members received in the new stock company.
MetLife's policyholders approved the conversion with a 93 percent majority in spring 2000.
NEW STANDARD CRAFTED
Judge Jacobs held that disqualification motions should be "sparingly" used when the lawyers expected to testify will not be involved in the presentation of a case to a jury.
The class had contended that disqualification was required because it planned to call four Debevoise lawyers: Seth Rosen, Wolcott B. Dunham and James C. Scoville, three transactional lawyers who had been involved in the conversion but had no involvement in the litigation; and Carl Micarelli, a litigator who has been involved in the lawsuit but will not appear before the jury.
After reviewing the four lawyers' expected testimony, Judge Jacobs concluded they would do "little more than authenticate documents and confirm facts that do not appear to be in dispute."
