A plaintiff attorney in a putative class suit will be sanctioned for inviting to a deposition involving confidential materials a third-party lawyer, who allegedly used the harvested information in a separate suit against the same defendants.
U.S. Magistrate Judge Tonianne Bongiovanni on Wednesday granted a defense motion for a penalty against Moshe Maimon, a partner with Levy Phillips & Konigsberg in New York.
She has yet to determine what sanctions to impose, pending her review of how the confidential material was used.
The suit, Shevlin v. The Phoenix Life Insurance Co., 09-cv-6323, was filed in October 2009 in Mercer County Superior Court and removed to federal court that December.
The plaintiffs claim they were misinformed about Phoenix’s demutualization — the transition from a policyholder-owned to a shareholder-owned company — and that the move reduced dividend payments to policyholders.
They allege breach of contract, breach of the covenant of good faith and fair dealing, negligence, unjust enrichment and violation of a New York consumer-fraud statute, and seek class certification for a group of Phoenix policyholders.
In November 2010, Bongiovanni issued a discovery confidentiality order, the terms of which were negotiated by the parties.
Under the order, any party to the suit, or a third party, could designate materials confidential, meaning they could be used "solely for purposes of the prosecution or defense of this action."
The order also required that any third party to whom confidential materials are to be disclosed must first get a copy of the order and sign a nondisclosure agreement.
Last July 25, Maimon deposed Phoenix senior executive Philip Polkinghorn at the law firm’s New York office.
Accompanying Maimon was Khai LeQuang, a partner at Orrick, Herrington & Sutcliffe in Irvine, Calif., who was representing other prospective plaintiffs against Phoenix but was not involved in Shevlin.
Maimon knew that LeQuang would be attending and that he was contemplating litigation against the company.
LeQuang, who had traveled to New York principally to engage in prelitigation talks with Phoenix, was introduced as assisting counsel, but his affiliation was not revealed, according to a defense brief. LeQuang did not sign a nondisclosure agreement.
During the deposition, Maimon questioned Polkinghorn about and referred to documents that were tagged confidential. Several hours into the meeting, LeQuang’s affiliation was revealed and he was asked to leave.
Eight days after the deposition, LeQuang filed a complaint in the District of Connecticut against Phoenix and other affiliated entities, Lima LS plc v. PHL Variable Insurance Co., 12-cv-1122.
That suit — brought by an investment firm based in England and Wales that acquired numerous Phoenix policies through the secondary market — alleges that the company violated racketeering and antitrust laws.
The plaintiff claims that Phoenix tried to manipulate insurance markets and defrauded policyholders, who paid premiums on worthless policies and never collected death benefits.
LeQuang eventually did sign a nondisclosure agreement in connection with the Shevlin deposition, but not until two weeks after he filed Lima.
Phoenix urged sanctions, contending that Maimon flouted the confidentiality order by allowing LeQuang to attend.
LeQuang was there not as assisting counsel but to "learn and exploit information to use against Phoenix and Mr. Polkinghorn in unrelated litigation," Phoenix argued. It alleged there was a "significant overlap" between the questions asked at the deposition and the allegations in the Lima complaint.
Maimon contended that LeQuang was not shown or given copies of confidential documents.
Bongiovanni granted Phoenix’s request for a hearing, originally scheduled for Nov. 9 but postponed until Jan. 16 because of post-Hurricane Sandy travel difficulties.
On Wednesday, she found that Maimon violated the confidentiality order and agreed that he should be sanctioned under Rule 16(f), which allows courts to impose such measures by motion or sua sponte on attorneys who violate pretrial orders.
Maimon planned to refer to confidential documents during the meeting and allowed LeQuang to sit in knowing he was contemplating litigation against Phoenix, Bongiovanni said.
"Although the documents were not shown to Mr. LeQuang, his presence during questioning regarding same is enough to constitute disclosure of confidential information to him," Bongiovanni wrote, noting LeQuang’s failure to execute a nondisclosure agreement until weeks later.
Whether the plaintiffs benefited from, or the defendants were harmed by, the breach is irrelevant to the finding of a violation, the judge said. "These factors will be considered by the Court in deciding the appropriate sanction to impose."
Sheldon Finkelstein of Podvey, Meanor, Catenacci, Hildner, Cocoziello & Chattman in Newark, co-counsel to Hartford, Conn.-based Phoenix, declines comment.
Maimon, LeQuang and Joseph Moodhe of Debevoise & Plimpton in New York, Finkelstein’s co-counsel, did not return calls.