U.S. District Judge Timothy J. Savage of the Eastern District of Pennsylvania granted Stevens & Lee’s motion to withdraw as counsel for a recently terminated partner, but as a consequence the firm may now have to withdraw as its own counsel, too.

Stevens & Lee filed a motion to withdraw as counsel for Harrisburg partner William R. Balaban a day after it fired him. The firm had been representing itself and Balaban in a suit brought by Elliott Greenleaf that alleged Balaban stole data from the firm before abruptly quitting to join Stevens & Lee, that he and Stevens & Lee continued to access Elliott Greenleaf’s data through a Dropbox account after Balaban left the firm, and that Balaban misused Elliott Greenleaf escrow funds for personal uses.

Stevens & Lee didn’t explain in its brief June 20 statement announcing Balaban’s termination why it fired him months after the suit, Elliott Greenleaf v. Balaban , was filed. And the firm wouldn’t do so at Monday’s hearing on its motion to withdraw, citing attorney-client privilege. Stevens & Lee partner Jeffrey D. Bukowski simply said that the firm first learned new information on May 24 and then other information after that.

In a response to the motion to withdraw, Elliott Greenleaf questioned the timing of Stevens & Lee’s request. It said in its June 22 filing that Stevens & Lee represented Balaban through the depositions of Balaban and many Stevens & Lee attorneys, including the firm’s president, Ernie Choquette, who was at Monday’s hearing. Elliott Greenleaf said the defendants often declined to answer deposition questions, asserting attorney-client privilege.

“After gaining that tactical advantage over EGS, defendant S&L only now chooses to terminate the employment of defendant Balaban, and finally act upon the conflicts always inherent in its representation of him, by belatedly exiting its role as his counsel,” the firm said.

While Savage gave Elliott Greenleaf attorney Frederick P. Santarelli the opportunity to comment, he told Santarelli that Elliott Greenleaf had nothing to do with this motion. Savage said it is between himself, Balaban and Stevens & Lee.

Despite a prior conflict waiver signed by Balaban and Stevens & Lee, Bukowski said Balaban’s termination causes the reasons for a waiver to no longer exist.

“What existed in the first place?” Savage asked.

Bukowski said the firm reasonably believed it could represent Balaban and its own interest without any material conflict.

Savage asked what else had changed, pointing out that Balaban’s employment with Stevens & Lee was not why the conflict waiver was allowed and that his termination does not create a conflict on its own.

“Didn’t I make it clear” at an April hearing that “I saw a serious potential for conflict?” Savage asked. “Was this a business decision and not a professional one?”

Savage asked whether the firm ran the conflict issue by its own counsel, to which Bukowski said it had. He then peppered Bukowski about which Rules of Professional Conduct allowed for the firm to withdraw.

“The fact that he no longer works at the firm does not appear to be a reason. That’s not a reason,” Savage said. “Because if that is a reason, one would think the firm had originally decided to keep them all together so they can protect each other and that now that” Balaban is not at the firm, the parties can’t protect one another.

To that, Bukowski replied that the reason, then, for allowing the withdraw would be that it would not materially affect Balaban, who he said does not oppose the motion.

Santarelli said Stevens & Lee was made aware months ago of the alleged crimes Balaban committed because they were outlined in the lawsuit. He said the firm’s reason for firing him at this stage could signal it learned of additional crimes that may have been committed.

“One could gather they did learn something was wrong and wanted out,” Savage said, adding he wouldn’t take the firm to task for that. “You’d have to be dumb not to see that.”

With that, Savage quickly followed that he thought Stevens & Lee lawyers were disqualified from representing the firm and that the firm needed to hire new counsel. Savage said the problem, however, is that now the firm’s lawyers have learned too much about Balaban’s position in the case and he wondered what they would be able to tell their new counsel about the case.

“You put yourself in that box,” he said, though he added that he wasn’t ascribing any bad motives to Stevens & Lee.

Savage granted the firm’s motion to withdraw as Balaban’s counsel and asked whether it would have a problem being disqualified as its own attorney as well. When Bukowski said he would have to discuss the matter with the firm, Savage quickly pointed out that he would not delay the case. The firm had requested a 30-day stay to give Balaban time to find new counsel. Savage declined that request and Balaban said he was in the process of finding new counsel.

Savage told Bukowski that the firm can’t make the decision of whether to withdraw as its own counsel on its own. He said it needed an objective opinion. Savage also cautioned Stevens & Lee about the ramifications of this situation down the line. He said he doesn’t know what course Balaban would take if he lost his case and whether he would look to blame Stevens & Lee.

“I would be worried if I were you,” he told Bukowski.

Santarelli requested the reason for Balaban’s termination be disclosed as it might be relevant to the trial. He said Balaban could testify to that and he requested a deposition of Balaban to that end. Bukowski said Elliott Greenleaf could send a deposition notice and the firm would have to decide how to respond. Savage again pointed out that it couldn’t make that decision on its own.

Savage said he would give Stevens & Lee until Monday to decide if it would withdraw as its own counsel. If the firm decides against that, Savage said he will hold a hearing at which he said Stevens & Lee must be represented by outside counsel for that limited purpose only.

Aside from Choquette and Bukowski, Stevens & Lee attorney Stacey Scrivani was also at the hearing on behalf of the firm. Balaban was there without counsel. Santarelli was joined by Elliott Greenleaf attorney Mark Schwemler. Elliott Greenleaf also named as defendants in the suit former clients Pamela and Charles Herron, who were represented locally at the hearing by James C. Haggerty of Haggerty Goldberg Schleifer & Kupersmith.

According to the transcript of an April 10 hearing in the case, one of the Herrons’ companies owes Elliott Greenleaf $4 million in fees for six years of legal work that culminated in a trial. Santarelli said at the hearing that Balaban and Stevens & Lee said the case was handled on a contingency-fee basis, but Santarelli said that wasn’t true. Elliott Greenleaf Chairman John M. Elliott said at that hearing that the case was done on a deferred-fee basis because the company was a startup. Elliott said that when discussions about paying the fees began, Balaban looked to leave the firm, according to the transcript.

Gina Passarella can be contacted at 215-557-2494 or at gpassarella@alm.com. Follow her on Twitter @GPassarellaTLI.