Muriel Siebert & Co. v. Intuit Inc.
868 N.E.2d 208, 8 N.Y.3d 506, 836 N.Y.S.2d 527 (2007)
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Rule of Law:
An attorney may conduct an ex parte interview with an opposing party's former employee, even one who was privy to privileged information, so long as the attorney takes appropriate measures to prevent the disclosure of privileged or confidential information.
Facts:
- Muriel Siebert & Co., Inc. (Siebert) and Intuit Inc. (Intuit) entered a 'strategic alliance' agreement to operate an internet brokerage service.
- The business relationship soured, and Siebert alleged that Intuit had failed to promote the service as agreed.
- Nicholas Dermigny, an Executive Vice President at Siebert, was a key participant in the negotiation and implementation of the agreement.
- After litigation began between the companies, Dermigny was part of Siebert's 'litigation team,' privy to confidential communications and legal strategy.
- On September 6, 2005, Dermigny was terminated by Siebert.
- After his termination, Intuit’s attorneys contacted Dermigny directly and arranged for an informal interview without Siebert's knowledge or consent.
- Before the interview, Intuit’s attorneys instructed Dermigny not to disclose any privileged or confidential information, including communications with Siebert’s counsel or litigation strategy.
- During the interview, Intuit's attorneys questioned Dermigny only about the underlying facts of the case, and no privileged information was disclosed.
Procedural Posture:
- Plaintiff Muriel Siebert & Co., Inc. commenced an action against Defendant Intuit Inc. in New York Supreme Court (trial court) for breach of contract and breach of fiduciary duty.
- During discovery, Siebert filed a motion to disqualify Intuit's attorneys after learning they had interviewed a former Siebert executive.
- The Supreme Court granted Siebert’s motion, disqualifying Intuit’s counsel based on an 'appearance of impropriety.'
- Intuit, as appellant, appealed the disqualification order to the Appellate Division of the Supreme Court (intermediate appellate court).
- The Appellate Division reversed the trial court's order, holding that disqualification was not justified.
- The Appellate Division then granted Siebert, as appellant, leave to appeal to the Court of Appeals (New York's highest court) and certified a question for review.
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Issue:
Does an attorney's ex parte interview with an opposing party's former employee, who was previously privy to privileged communications, warrant disqualification of that attorney when proper safeguards are taken to prevent the disclosure of privileged information?
Opinions:
Majority - Pigott, J.
No. Disqualification of an attorney is not warranted merely because they conducted an ex parte interview with an opponent's former employee who was once privy to privileged information, provided that counsel takes measures to steer clear of that information. The ethical rule prohibiting communication with a represented party (DR 7-104 [a] [1]) applies only to current employees, not former ones. Following the reasoning in Niesig v. Team I, the court balanced the need for informal discovery, which streamlines litigation, against the protection of privileged information. Because a former employee like Dermigny can no longer bind the corporation and is not an agent for litigation purposes, the risk of improvident disclosure is lower. The court rejected the lower court's 'appearance of impropriety' standard, holding that disqualification requires more than a mere possibility of disclosure. Here, Intuit’s attorneys acted properly by cautioning Dermigny against revealing privileged information, and the record shows no such information was actually elicited, so there is no basis for disqualification.
Analysis:
This decision provides a clear and practical framework for attorneys in New York regarding ex parte communications with an adversary's former employees. It firmly rejects the vague 'appearance of impropriety' standard for attorney disqualification in this context, requiring instead evidence of actual misconduct or disclosure of privileged information. The ruling affirms the importance of informal discovery as a tool for efficient litigation while establishing a procedural safeguard for its use. By creating a bright-line rule that DR 7-104(a)(1) does not apply to former employees, the court provides certainty for practitioners and encourages the gathering of relevant facts outside of formal depositions.
