Murray v. Metropolitan Life Ins. Co., 583 F.3d 173 (2d Circ. 2009)

Brief Summary
The Second Circuit took a fact-specific and critical approach in applying the witness-advocate rule to a motion to disqualify counsel. The court requires the moving party to establish that the lawyer’s testimony will both prejudice the client and harm the integrity of the judicial system.

Complete Summary
Class action plaintiffs sued Metropolitan Life Insurance Company (“MetLife”) for violating securities laws when the company demutualized. Plaintiffs were MetLife policyholders.

After nine years of litigation, plaintiffs moved to disqualify MetLife’s counsel, Debevoise & Plimpton LLP, because the firm had represented MetLife policyholders during MetLife’s demutualization. The district court disqualified Debevoise & Plimpton but the Second Circuit reversed, holding that plaintiffs had no attorney-client relationship with Debevoise & Plimpton and that the witness-advocate rule did not apply.

Prior to ruling on the disqualification issue, the district court ruled, in the context of a discovery dispute, that plaintiffs had an attorney-client relationship with Debevoise & Plimpton and were therefore not exempt from discovery based on the attorney-client privilege. The district court then went on to expand this finding of an attorney-client relationship into a finding of a disqualifying conflict.

On interlocutory appeal, the Second Circuit began by noting that because the district court’s finding of an attorney-client relationship was inextricably intertwined with its finding of a conflict, both issues were subject to review. The Second Circuit held that plaintiffs never had an attorney-client relationship with Debevoise & Plimpton based on the well settled principle that an attorney who represents a corporation does not thereby represent its constituents. The court also noted that merely being a beneficiary of an attorney’s advice does not create an attorney-client relationship.

Plaintiffs further argued for disqualification based on the rule prohibiting a lawyer from being an advocate in a dispute in which she—or someone from her firm—is likely to be called as witnesses. The Second Circuit noted that the concerns behind this rule are less serious in imputation cases where the potential witness is not acting as trial counsel but is merely a member to trial counsel’s firm. None of the likely Debevoise & Plimpton witnesses were trial counsel for MetLife, the court noted. The court also cautioned that this rule is subject to abuse as a tactical tool to disqualify counsel. The court therefore formulated a rule designed both to curb such abuse and to promote the policy behind the rule in imputation cases:

[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.

Id. at 178-79. Applying the first prong, the court stated that even if the Debevoise & Plimpton lawyers’ testimony would be somewhat adverse to MetLife, the fact that MetLife desired to keep Debevoise & Plimpton as counsel militated strongly against a finding of prejudice. Applying the second prong, the court noted that disqualifying Debevoise & Plimpton would be just as likely to harm the integrity of the judicial system as keeping the firm in place because judicial efficiency would be compromised.

Significance of Opinion
The court’s witness-advocate rule allows the court to make fact-specific inquiries but places a heavy burden on movants.

This alert has been prepared by Hinshaw & Culbertson LLP to provide information on recent legal developments of interest to our readers. It is not intended to provide legal advice for a specific situation or to create an attorney-client relationship.

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