OPINION ON PLAINTIFF EBIX.COM, INC'S MOTION TO DISQUALIFY THE LAW FIRM OF CUMSKY AND LEVIN AS COUNSEL FOR THE MCCRACKEN DEFENDANTS (# 67)1 I. INTRODUCTION
Plaintiff and Delaware-based software licensing corporationebix.com, Inc. ("`ebix") is suing defendants Frank McCracken Jr., NickDiMarco, Paula Dunmire, Joanne Stanton, Gayle Griffith, McCrackenInsurance Solutions, LLP ("MIS"), and McCracken Financial Software, Inc.("MFS")2, alleging illegal misappropriation of confidentialinformation and customers from ebix. Specifically, ebix seeks injunctiverelief and damages arising from the defendants' alleged breach ofconfidentiality agreements and other contracts, breach of employmentcontracts, the federal Copyright Act, breach of the Illinois andMassachusetts trade secrets acts, commercial disparagement of ebix'sbusiness and intangibles, chapter 93A, and tortious interference withcontractual relations. (See Plaintiffs Second Amended Complaint #14) ebixalleges that the defendants' misappropriation of its client and customerlist, software, trade secrets, and other business intangibles, and theformation of a new corporation that competes directly with itspreexisting business breached the confidentiality and trade secretagreements that each defendant signed.
While this suit was originally filed in the Northern District ofIllinois, on December 20, 2001 that court transferred this case toMassachusetts after allowing discovery on the jurisdictional issue raisedby the defendants' motion to transfer. (See Certified Copy of TransferOrder #1) Immediately before the Court is ebix's motion to disqualifyRichard Levin and Seth Salinger, the two attorneys representing most ofthe defendants, as well as their law firm, Cumsky & Levin, LLP.3(#67) Levin and Salinger (referred to herein as the "attorneys")represent defendants Frank McCracken, Nick DiMarco, Paula Dunmire, JoanneStanton, Gayle Griffith, and MIS (collectively, the "McCrackendefendants"). ebix maintains that the attorneys' continued representationof the McCracken defendants runs afoul of the Massachusetts Rules ofProfessional Conduct because they previously represented ebix's corporatepredecessors in substantially related matters.
In response to ebix's motion to disqualify, the McCrackendefendants filed an Opposition of the McCracken Defendants toEbix.com's Motion to Disqualify the Law Firm of Cumsky & Levin LLP as Counsel for the McCrackenDefendants (#78), a Supporting Memorandum (with exhibits) (#73) and theaffidavits of Seth H. Salinger, Esq. (#74), Richard J. Levin (#76) andFrank H. McCracken, Jr. (#75). ebix then filed a Reply Memorandum of Lawin Further Support of Its Motion to Disqualify the Law Firm of Cumsky& Levin LLP as Counsel for the McCracken Defendants (with exhibits)(#85). A hearing on the instant motion was held on October 24, 2003;after the hearing ebix filed a letter to supplement its previously filedpleadings (#91), and the McCracken defendants filed a responsive letter(#92) and a Supplemental Affidavit of Seth H. Salinger, Esq. (#93)
With the issue having been fully briefed by the parties and ahearing having been held, the plaintiffs motion is now in a posture forresolution. For the reasons discussed below, the plaintiffs motion wasdenied by electronic order on March 31, 2004.4 II. RELEVANT FACTS
A. Factual Background and Advent of this Lawsuit
ebix's immediate corporate predecessor, Delphi Information Systems("Delphi"), was formed in 1976. (#68, p. 3) On or about January 31, 1991,Delphi merged with McCracken Computer, Inc. ("MCI"), an entity formed andrun by Frank McCracken, Jr. ("McCracken") (Id.) As part of the merger,Delphi acquired all rights in Insight, a copyrighted software program,created by McCracken. (Id. at 4) McCracken, who did not remain with themerged entity (called Delphi/McCracken, then Delphi/ebix) signed anon-compete agreement with Delphi; ebix represents that a ten-year clauseapplies to several conditions of that agreement. (Id.) Levin andSalinger, who were associated at the time of the merger with the law firmof Looney & Grossman, represented MCI and McCracken on a number ofmatters over the years. (Id. at 3-4)
ebix filed this lawsuit after the formation of MIS in 2001, shortlyafter the expiration of (at least part of) the McCracken non-competeagreement. ebix maintains that McCracken formed MIS "for the specificpurpose of providing maintenance and support to users of ebix's Insightsoftware." (#68, pp. 4-5) McCracken also allegedly "orchestrated thedeparture of all of the ebix employees responsible for supporting Insight," employees who are alsodefendants in this action; obtained confidential information from thoseformer employee-defendants; and "solicited business from ebix's Insightcustomers." (Id.) According to ebix, these actions violate or breach (1)the McCracken non-compete agreement; (2) the confidentiality agreementsbetween the former employees and ebix; (3) the Massachusetts and IllinoisTrade Secret Acts; (4) Massachusetts General Laws chapter 93A; (5) thefederal Copyright Act; (6) the implied covenant of good faith and fairdealing; and (7) tortious interference with contractual relations. (Seegenerally #14) ebix alleges that at least sixteen companies havecancelled their contracts for Insight-related services and now receivethat support from MIS and the former ebix employees. (#68, p. 5)
B. The Pre-Motion Discussions of a Potential Conflict
While ebix maintains that it first addressed the conflict ofinterest issue in July of 2003, Levin and Salinger maintain that ebixshould have known about Levin's prior representation of MCI much earlier.(#73, p. 2) First, in an October 4, 2001 deposition conducted inassociation with the motion to transfer venue in the Northern District ofIllinois, McCracken noted that Levin had been his attorney "for a verylong time," and Levin told ebix's Illinois counsel in ojf-the-record discussions that he had represented McCracken and MCI forseveral years and was familiar with insurance industry software. (#73 at6) Second, in the May 6, 2002 scheduling conference before this court,Levin disclosed that he had represented MCI for several years. (Id. at7)
On July 18, 2002, ebix sent Levin a letter addressing its concernsover Levin and Salinger's former representation of MCI, Delphi, andDelphi/ebix. (#68, p. 5) The letter indicated that the conflict came toebix's attention when reviewing files and corporate documents connectedwith the case, and stated: In order for us to more meaningfully evaluate whether there is a conflict that could require your withdrawal as counsel in this matter, we would like to understand your view as to why your current representation of these individuals and entities in the above-referenced action does or does not violate Rule 1.9 or any other rule of professional conduct or ethical canon. To that end, we request that you provide us in writing details regarding the scope, nature, extent and duration of the representation you and Mr. Salinger provided to Delphi/ebix from 1991 to present.(#68, pp. 5-6)
Levin responded with a letter of his own on July 25, 2002,maintaining "[i]t has been no secret since the outset of this case thatthe undersigned represented [MCI]" before the merger . . ." (#68, p.6) He further stated: Neither Seth [Salinger] nor I have any recollection of Seth representing MCI prior to the sale nor representing [Delphi] or Ebix subsequent to the sale. Further, I have no recollection or record of providing any legal services to Ebix/Delphi after the sale. To the extent there was any incidental service to Ebix/Delphi after January 31, 2001 [sic, should read 01/31/91], it was of a de minimis nature, and certainly not related in any way to the issues in the present case. To the extent you have information, other than speculation, that either Seth or I represented Ebix/Delphi from January 1991 to the present, please provide me with details and we will be happy to review.
(#68, p. 6)
As counsel for ebix did not respond to this letter, Levin andSalinger represent that they "assumed that Mintz Levin had examined theissue and had determined that no conflict of interest existed." (#73, p.10)
ebix maintains that this issue next arose in January of 2003, whenthe parties held a Rule 37 discovery conference. (#68, p. 6) ebixrepresents that Levin made statements during that conference suggestinghe had not only obtained relevant information during his earlierrepresentations, but that he was using such information in his currentrepresentation of the McCracken defendants. (#68, p. 6) Specifically,ebix alleges that Levin stated that ebix's 1991 market share forinsurance agency management software-80%-had declined during the 1990s as ebix expanded its applications and product lines, andthat ebix once had over 100 Insight customers but had 30 at the time itfiled its Second Amended Complaint. (#68, p. 6) When asked, Levin toldebix's counsel he knew this information because he had "representedMcCracken for years." (Id. at 7) However, Levin has responded that he didnot know this based on his prior representation of Delphi/McCracken; thelast time he represented Delphi/McCracken in any capacity was in 1995,and customers began leaving in significant numbers in 1998. (#73, p. 13)Levin represents that his "limited role with Delphi ended altogether in1995," and "[a]fter he authored his last auditor's letter for Delphi'saccountants, Levin did not have even tangential contacts with thecompany." (Id.)
On January 17, 2003, ebix sent another letter to Levin, reiteratingits concern with the prior representation and demanding that Levin andSalinger immediately produce all ebix client files. (#68, p. 7) ebix madethe same request of Levin and Salinger's former law firm, Looney &Grossman. (Id.) On January 29, 2003, Levin sent ebix a letter stating hehad undergone a "review of all files under [his] custody for whichservices were, at one time, provided to Delphi/McCracken"; such reviewnow indicated that Levin had represented ebix on at least eight different matters. (#68, p. 7) ebix statesthat it had assumed Levin had already made such a review, based on itsrequest (and Levin's response) in July of 2002. (Id.) In this letter,Levin identified eight prior matters, one before the merger and the otherseven after the merger, in which it represented Delphi/McCracken. ebixthen made "numerous requests" to view the ebix client files; on February7, 2003, Levin and Salinger forwarded four boxes, and then reviewed eightboxes at the Looney offices. (#68, pp. 7-8) On May 2, 2003, Levin andSalinger forwarded four additional boxes to ebix. (Id. at 8)
The grounds of this motion lie in Levin and Salinger's priorrepresentations of MCI and Delphi/McCracken. Under Rule 1.9 of theMassachusetts Rules of Professional Conduct ("Rule 1.9"), an attorney maynot represent a client in a matter that is both adverse5 and"substantially related" to a matter in which he represented a formerclient, ebix maintains that Levin and Salinger represented ebix'scorporate predecessors in matters pertaining to the McCrackennon-compete agreement, the confidentiality agreements, copyright andtrademark registrations of Insight, and general employment-relatedmatters and that those matters are substantially related to thislitigation. The McCracken defendants respond that this motion is tacticaland untimely, maintaining that the attorneys' prior representations arenot related to the issues in this suit. They argue further that ebix hasfiled this motion only to continue to stall the progress ofdiscovery.6
A. The Massachusetts Rules of Professional Conduct
Decision on the instant motion is controlled by Rule 1.9. TheDistrict of Massachusetts has adopted the Massachusetts Rules ofProfessional Conduct, per Local Rule 83.6(4)(B) (incorporating byreference "those canons and rules adopted by the Supreme Judicial Courtof Massachusetts, embodied in Rules 3:05, 3:07 and 3:08 of saidcourt, . . .). Rule 1.9 states, in pertinent part, that: (a) A lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related matter in which that person's interests are materially adverse to the interests of the former client unless the former client consents after consultation.See National Med. Care v. Home Med. of America, Inc., No. 00-1225,2002 WL 31068413, *8 (Mass. Super. Ct., Sept. 12, 2002) ("[T]he spiritof Rule 1.9 is that a law firm retains a limited duty of loyalty to aformer client-it may not use a former client's confidential informationagainst that client, and should not represent a new client in any matterwhere the former client reasonably should fear that its earlierconfidences will be misused.").
In Adoption of Erica, 426 Mass. 55, 686 N.E.2d 967 (1997), the SJCarticulated the test for determining when an impermissible conflictexists between a former and current client: (1) "the currentrepresentation must be `adverse' to the interests of the former client";and (2) "the matters of the two representations must be `substantiallyrelated.'" 426 Mass. at 61, 686 N.E.2d at 971 (citations omitted)7."Where the primary purpose of the `substantially related' test is topreserve client confidences by avoiding an `intolerably strongtemptation' to betray them, the assessment of whether matters are`substantially related' must focus on whether the overlap or similaritybetween the two matters would potentially give rise to such a`temptation.'" Dee v. Conference Holdings, Inc., No. 976608, 1998 WL1247926, *2 (Mass. Super., July 14, 1998). This turns on whether it is"reasonable to assume that confidential information would have been givento the attorney in the first matter that would be helpful to theadverse client in the second matter." Id. See also Rodriguez v. Montalvo,No. 02-CV-40139-NMG (D. Mass., Jan. 12, 2004)(unpublished opinion), at p.13 ("The substantial relationship between the subject matters [in the twocases] (indeed their identity) raises the specter that informationgleaned from [plaintiffs] communications with [defense counsel's formeremployee] could be used against [plaintiff] by her adversary" in theinstant action.).
Relying on these two articulated factors, the Adoption of Ericacourt vacated the lower court's disqualification of the adoptee'sattorney. 426 Mass. at 64, 686 N.E.2d at 974. The adoptee's attorney hadformerly represented the adoptee's grandfather (before the adoptee wasborn), but nothing in the evidentiary record suggested that the formerrepresentation was adverse to the adoptee's interests or had anyrelationship to the adoption proceeding. 426 Mass. at 61, 686 N.E.2d at971-72. Finding no evidence that the attorney had used confidentialinformation obtained from the grandfather in the subsequent adoptionproceeding, the court noted "[w]e encourage deference to an attorney'sbest judgment as to whether her representation of a client brings herinto conflict with any provisions of the disciplinary code." Id. at 973(citations omitted). A finding of actual use of confidential information is unnecessary if thesubstantial relationship test is met; under that test, the court willassume an attorney will use confidences obtained from the former clientin the subsequent representation. See Bays v. Theran, 418 Mass. 685, 691,639 N.E.2d 720, 724 (1994) ("[T]he `substantial relationship' testoperates by assuming that confidences were transmitted in the formerattorney-client relationship.").8
B. Who Has The Burden of Proving or Disproving a Conflict?
Here, each party attempts to cast the burden ofproving-ordisproving-a conflict on their opponent. In most contexts, the movantbears the burden of proving a conflict. See In re Georgette, 439 Mass. 28,35, 785 N.E.2d 356, 362 (2003) (Discussing Massachusetts Rules ofProfessional Conduct and citing criminal case of Commonwealth v. Sojfen,377 Mass. 433, 386 N.E.2d 1030, 1034 (1979) for rule that the "burdenlies with person alleging conflict to prove its existence and precisecharacter"); City of Springfield v. Rexnord Corp., 111 F. Supp.2d 71, 73(D. Mass., 2000) (Regarding a motion to disqualify an expert, the court stated, "[a]n objecting party has the burden ofproving that there exists a conflict of interest warrantingdisqualification.")
ebix points the court to Comment 15 to Rule 1.7 of theMassachusetts Rules of Professional Conduct, which states "[r]esolvingquestions of conflict of interest is primarily the responsibility of thelawyer undertaking the representation." Further, "in cases of doubt,counsel must resolve all questions against the acceptance of employmentwhenever such acceptance may impinge upon the interests of his presentand former clients." Mailer v. Mailer, 390 Mass. 371, 455 N.E.2d 1211,1213 (1983) (affirming denial of motion to disqualify attorney whorepresented husband in divorce proceeding after wife had consulted himabout divorcing husband several years earlier, when in course ofconsultation wife revealed publicly available information about herhusband and lapse of five years was relevant factor). Nonetheless, itstill seems that, under the substantial relationship test (whichRule 1.9 incorporates), the burden lies with the former client: Under the "substantial relationship" test, a subsequent representation is proscribed "on the sole ground that the later suit, simply because of its substantial relation to the former one, exposes the attorney to an intolerably strong temptation to breach his duty of confidentiality to the former client. The [former] client need never prove that the attorney actually misused the confidences to the client's disadvantage. Instead he must prove only the existence of the tempting situation by showing (1) that an attorney-client relationship existed in the former legal representation, and (2) that the former and current representations are both adverse and substantially related.Bays, 418 Mass, at 690, 639 N.E.2d at 723 (quoting Note,Developments in the Law: Conflicts of Interest in the Legal Profession,94 Harv.L.Rev. 1244, 1318 (1981)) (emphasis in original). Thus, itappears that ebix bears the burden of satisfying the substantialrelationship test.9
C. The Suspicion Associated with Motions to Disqualify
The SJC has emphasized that `"[d]isqualification, as a prophylacticdevice for protecting the attorney-client relationship, is a drasticmeasure which courts should hesitate to impose except when absolutelynecessary.'" Adoption of Erica, 426 Mass, at 58, 686 N.E.2d at 970(quoting Freeman v. Chicago Musical Instrument Co., 689 F.2d 715, 721(7th Cir. 1982)). That court has also warned of the misuse of suchmotions by parties seeking to harass their opposition. See Adoption ofErica, 426 Mass. at 64, 686 N.E.2d at 974 ("We have noted our concernabout the high cost to litigants and to the court system occasionedby motions to disqualify attorneys, especially when such motionsare used as harassment and dilatory tactics.").
D. The Matters Asserted to be Substantially Related
As mentioned above, there are several discrete matters on whichLevin and Salinger represented ebix's predecessors that ebix asserts aresubstantially related to the claims in this lawsuit. If any one of thesematters is substantially related to claims in this litigation, that wouldbe a basis for disqualification of Levin and Salinger and their firm.That is, if ebix can establish that Levin and Salinger represented ebixor its predecessors on even one matter that is substantially related to amatter on which they are now representing the McCracken defendants, thenLevin and Salinger would be in violation of Rule 1.9 and disqualificationwould be appropriate.
1. The Merger/Non-Compete Agreement Representation
First, ebix asserts that McCracken's alleged breach of thenon-compete agreement comprises a primary focus of this litigation. Inshort, ebix claims that McCracken violated his non-compete agreement by"(i) forming the McCracken Entities for the specific purpose of competingwith and being a competitor of Plaintiff; (ii) soliciting DiMarco,Dunmire, Stanton, and Griffith to become employees . . .; and (iii) directing DiMarco, Dunmire,Stanton and Griffith to solicit the Plaintiffs Insight Systemcustomers. . . ." (#14, ¶ 65) An invoice sent to Delphi/McCrackenfor services rendered in January of 1991 contains two references to legalwork purportedly done by Levin and Salinger on that non-competeagreement.
01/29/91 Legal research regarding covenants not to compete and validity of McCracken Employment Agreements for Opinion Letter 01/30/91 Legal research regarding covenant not to compete for opinion letter; Draft of opinion letter(#68, p. 9) ebix also points to a fax from Levin on January 31,1991 (the date of the merger) entitled "Plan of Reorganization and MergerAmong Delphi Information Systems, Inc., McCracken AcquisitionCorporation, McCracken Computer, Inc. and the Stockholders of McCrackenComputer, Inc." (#68, p. 9) That Plan of Reorganization purportedlyreferenced the "non-competition Agreement with Frank H. McCracken." (#68,p.9)
Moreover, according to ebix, if Levin and Salinger are allowed tocontinue to represent the McCracken defendants, they will on behalf "oftheir current clients to the detriment of ebix. . . . challenge theenforceability of the McCracken Non-Competition Agreement, an agreement that they previously advised ebix wasenforceable." (#91, p. 2) ebix further asserts that Levin and Salinger'sactions here represent "an attempt on behalf of a current client toundo what has been done previously on behalf of a former client" (Id.)(emphasis in original).
Not surprisingly, Levin and Salinger deny the substantiality andrelevance of the advice they provided on this matter. They state thatduring the merger Delphi was represented by Testa, Hurwitz &Thibeault, and Jones, Day (Los Angeles); MCI was represented by the NewYork office of Graubard, Mollen, Horowitz, Pomeranz and Shapiro("Graubard"). (#73, p. 21) The attorneys represent that Graubard "neededMassachusetts counsel to opine on the enforceability of Massachusettscontracts so that it could advise MCI to enter into the mergeragreement," and the opinion addressed to Graubard "was a standard formatthat merely advised New York counsel that MCI's execution of thedocuments in connection with the Stock Purchase did not violateMassachusetts law." (#73, p. 1)
Further, Levin and Salinger take issue with ebix's portrayal of thefacts surrounding the non-compete agreement. Specifically, Levin andSalinger assert that the Opinion of Counsel (the "Opinion") referenced byebix "did not pertain in any way to Frank McCracken's individual covenant not tocompete. The covenant not to compete which is the subject of one of theplaintiff's causes of action was not between MCI and Delphi/ebix; rather,it was between Frank McCracken, individually, and Delphi/ebix." (#92, p.1)(emphasis in original). In sum, say the attorneys, they "rendered noadvice to Delphi/ebix [during the merger] and did not otherwise representit with respect to Frank McCracken's covenant not to compete. . . .Accordingly, as Levin and Salinger never represented ebix in connectionwith the covenant not to compete, they cannot be disqualified on thegrounds that ebix mistakenly thinks that they did." (Id.)
Obviously, the factual circumstances surrounding the covenant notto compete which is the subject of this lawsuit and the research done bySalinger for McCracken individually regarding covenants not to competeare confusing and hard to sort out, especially viewed in hindsight.However, from all that appears, there was in place a non-competitionagreement between Delphi/ebix and McCracken individually, the purportedviolations of which comprise part of the instant lawsuit. Notably, Levinand Salinger did not draft McCracken's non-compete or any of thenon-compete agreements at issue in this case or offer any opinion on theenforceability of those non-competes. (See, e.g., #73, p. 23, #76, ¶ 20). However, Salinger testified that he apparently diddo research regarding non-competes in general for McCracken individually,but not for ebix. (See #93, ¶ 3) ("I never rendered any opinion onany subject (and certainly not on covenants not to compete) toDelphi/ebix or to its counsel").
In determining whether to allow ebix's motion, the crux of thiswhole matter is whether Levin and Salinger's current representation ofthe McCracken defendants is "substantially related" to their priorrepresentation of ebix and its predecessors. The Massachusetts courtshave not yet provided a definitive definition of "substantially related.""Courts using the `substantially related test' have taken differingapproaches in its application, with some courts focusing on whether theissues involved are similar and other courts focusing on whether there isa factual overlap between the two matters. . . . Massachusetts has notyet determined which approach it will take." Gerzof v. Cignal GlobalCommunications, Inc., No. 00-3337, 2001 WL 721622, *1 (Mass. Super., June5, 2001) (citing Adoption of Erica, 426 Mass, at 58). See alsoMassachusetts Bar Association Committee on Professional Ethics Opinion2003-4 (2003), at p. 2 ("MBA Op.") (noting that courts have developed twodefinitions for the substantially related rule, but that the SJC had yetto determine which of the two tests to embrace).
Thus, the Court does not have precise guidelines for what makes twomatters "substantially related." And, indeed, "[o]ne noted authority hascommented that gallons of ink have been consumed by those who have triedto determine or explain the test for deciding whether a substantialrelationship exists between representations." Chrispens v. CoastalRefining & Marketing, Inc., 257 Kan. 745, 751, 897 P.2d 104, 111(1995) (citing ABA/BNA Lawyers' Manual on Professional Conduct, 51:215).Instead of consuming more ink attempting to articulate the definitivetest for what makes matters "substantially related", this Court willdetermine whether either the facts or the issues are so similar betweenthe current and prior representations that disqualification iswarranted.10
Here, the factual contexts of the two representations are not verysimilar. As discussed above, with regard to the non-compete, Levin andSalinger provided some legal research on non-competes in general to McCrackenindividually, not to ebix. Now, in their representation of the McCrackendefendants, Levin and Salinger are arguing the position that McCrackendid not breach his non-compete with ebix/Delphi-a non-compete that Levinand Salinger did not draft nor offer opinions on during theirrepresentation of ebix's predecessors. Thus, the facts are not similar atall. Indeed, even if Levin and Salinger were doing research and offeringopinions on the actual non-compete at issue in this case, as long as theywere doing so for McCracken individually, there is no conflict becauseLevin and Salinger had nothing to do with drafting or opining on thatnon-compete for ebix.11
Moreover, the legal issues also are not so similar that Levin andSalinger should be disqualified. In the present representation, Levin andSalinger are claiming that McCracken did not violate the non-compete andperhaps that the non-compete is not enforceable; in the priorrepresentation, Levin and Salinger provided research and an opinion onnon-competition agreements in general and as stated above, they provided such to McCracken individually,not to ebix12. This simply is not a situation in which Levin andSalinger researched and drafted an agreement for ebix13 and are nowturning around and contesting the legality of that same agreement for thedefendants. Put another way, any information communicated by ebix and itspredecessors to Levin and Salinger would have no bearing on theirrepresentation of McCracken with regards to his non-compete because Levinand Salinger did not represent ebix or its predecessors with regards tothat specific agreement Thus, the non-compete issue does not provide abasis for the disqualification of Levin and Salinger.
2. Copyright and Trademark Protection of Insight
ebix is also suing the McCracken defendants for copyrightviolations, including unlawful copying. It asserts that Levin advised MCIto register all computer programs with the Copyright Office in 1986, andto "assign someone . . . to work with [him] so that we may do what isnecessary to register all valuable programs." (#68, pp. 9-10) Accordingly, MCI assigned one ColinShea to work with Levin on copyrighting Insight's predecessor, the "RappProgram." (Id.) Shea signed eight Certificates of Copyright Registrationwith the Copyright Office in July of 1987, on MCI's behalf. (Id.) ebixalso posits that Levin likely represented Delphi/McCracken inre-registering those trademarks in 1994. (Id.) ebix maintains that Levinalso represented MCI in the trademark registration of "INSIGHT."
The McCracken defendants respond that there is no nexus betweenadvising MCI to register its copyrights and trademarks and actualinfringement. (#73, p. 22) The McCracken defendants are correct. Simplyput, there is no substantial relationship (factually or legally) betweenregistering copyrights and trademarks for MCI and then allegedlyinfringing those copyrights by copying the software and the manuals.Thus, this issue does not provide a basis for disqualifying Levin andSalinger.
3. Advising on Confidentiality Provisions
Another of ebix's claims pertains to the alleged abuse ofconfidentiality agreements by its former employees who now work for MIS.ebix contends that Levin and Salinger actually reviewed theconfidentiality agreements that form the basis of that claim. (#68, p. 10) ebix also contends that theattorneys reviewed MCI's Draft Employee Handbook and "provided advicewith respect to MCI's policies on the protection of confidentialinformation by employees, conflicts of interest and outside employment."(Id.) In support of this, ebix directs the Court to a letter sent fromLevin to Shea at MCI, dated December 18, 1990, that states: Obviously, confidentiality is a critical component of a business which relies on trade secrets. Consequently, the confidentiality agreement that you ask employees to sign should be carefully drawn and comprehensive. I understood from the Handbook that employees are required to execute a confidentiality agreement. I would like to see the document that is being used, and if one is not being used, I strongly urge that one be utilized.(#68, Ex. V)
The letter also contains several proposed changes to the Handbook,including a suggestion that you should include in the Handbook  aprohibition prohibiting employees from working for a competitor orengaging in a business in competition with McCracken while they areemployed by McCracken." (Id.) Attached to the letter are Handbookprovisions entitled "Conflicts Of Interest," "Confidentiality," and"Outside Employment" that are heavily edited. There is also an attachmententitled "Work for Hire: Copyright & Patent Assignment Ownership ofIntangible Property," which has one handwritten edit. The attorneys respond that they only reviewed the MCI handbookbefore the merger (as MCI dissolved in the merger), and that they did notdraft the Confidentiality Agreement actually at issue in this suit (andnever saw it until 2001, when ebix sent demand letters to the McCrackendefendants before filing this suit). (#73, pp. 22-23) The attorneysmaintain in short that drafting confidentiality provisions for MCI hasnothing to do with the agreements in this litigation. (#73, pp. 22-23)Again, the Court agrees with Levin and Salinger. Since Levin and Salingerdid not draft the confidentiality agreement at the center of thislawsuit, there is no conflict for them to now argue that the McCrackendefendants did not breach such confidentiality agreement or even thatsuch agreement is unenforceable. In other words, there is no substantialrelationship between previously offering advice on an employee handbookand currently arguing over a specific confidentiality agreement and thusno reason for disqualifying Levin and Salinger.
4. Claim re: Unfair Competition and Tortious Interference
Next, ebix claims that the McCracken defendants have engaged in unfaircompetition and tortious interference in wooing away its customers. (Seegenerally #14, pp. 18-20) Levin and Salinger apparently representedDelphi/McCracken in writing a letter threatening to bring identical claimsagainst a competitor. Specifically, in December of 1991, Levin wrote aletter to a competitor of Delphi/McCracken after the competitor sentletters to Delphi/McCracken customers requesting "the opportunity to showyou how our system is superior to what you have now." (#68, p. 11) Theconstructive cease and desist letter states: Delphi/McCracken deems the marketing tactics evidenced by Mr. Packner's correspondence to be actionable, giving rise to various causes of action, including unfair competition under federal and state laws, interference with contractual and advantageous relations and unfair and deceptive trade practices.(#68, Ex. R)
The attorneys respond that this representation had nothing to dowith the current action: "Not only does the letter written by Levin havenothing to do with the specific claims pled by Ebix (the alleged theft ofInsight customers), [but] in writing the letter, Levin gained absolutelyno confidences that could be used to Ebix's detriment in this suit."(#73, p. 23) This purported conflict merits little discussion. Thecurrent representation on the tortious interference claim and the priorrepresentation of Delphi/McCracken against entities which may have beentortiously interfering are hardly substantially related-indeed, theybarely seem to be related at all, apart from the fact that both involveclaims of possible tortious interference. Thus, again, there is not a basis fordisqualifying Levin and Salinger.
5. Drafting and Negotiating Insight Software Licenses andMaintenance and Support Agreements
ebix claims the McCracken defendants infringed on the copyrights itholds in the Insight software (acquired by Delphi/McCracken in the 1991merger). ebix states that Levin was `"general counsel' to ebix and itspredecessor for well over ten years." (#68, p. 12) In that capacity,Levin allegedly "gained an intimate knowledge of the various software andlicensing and support agreements entered into between ebix and itscustomers, many of which are identical to those now in force between ebixand its clients and . . . implicated in the present dispute." (Id.)Prior to the merger, Levin and Salinger allegedly represented theplaintiff (in its earlier forms) in 40 matters regarding softwarelicenses and related maintenance and support agreements. (Id.)Specifically, ebix maintains Levin and Salinger represented the plaintiffin negotiating such agreements with two Insight customers whose move toMCI forms the basis of ebix's claims against the McCracken defendants(Insurance One and Daniels Insurance Agency, Inc.). (#68, p. 12)
After the merger, Levin and Salinger allegedly representedDelphi/McCracken on eight licensing matters between 1991 and 1995; onlysome of these, apparently, pertained to Insight (Id.) This includesan addendum they prepared in 1991 to the Insight Purchase and LicenseAgreement and Support Services Agreement (which was betweenDelphi/McCracken and Kaye Insurance Associates). (#68, p. 12)
In response, the attorneys state first that referring to Levin as"general counsel" is "knowingly false." (#73, p. 24) They state that"[w]hereas before the Stock Purchase, Levin had been counsel to and was adirector of MCI, that role terminated with the merger." (Id.) After themerger, Levin apparently represented Delphi/McCracken (which was at thetime based in California) "with respect to a small number of isolatedissues emanating from its Burlington, Massachusetts office." (Id.)
Second, and most important, the attorneys maintain that none of theagreements Levin reviewed or drafted are actually in play in this case,and ebix is not suing for breaches of licensing or maintenanceagreements. (Id.) They attest that they had nothing to do with thecontracts the McCracken defendants allegedly interfered with (i.e., thecontracts with Insurance One and Daniels Insurance Agency) (Id. at p. 25)("[T]hese contracts contain language that was anathema to the corporatephilosophy of MCI, and Levin would not have advised their adoption by Ebix, even if he had been asked to review them,which he was not.").
Thus, again, this is not a situation in which the present and priorrepresentations are substantially related. Notably, the claim in thiscase is that the McCracken defendants violated ebix'scopyright on Insight-there is no claim that the McCrackendefendants breached licensing agreements. Due to the lack of asubstantial relationship between the current and prior representationsregarding the alleged copyright violation, there is no ground fordisqualifying Levin and Salinger.
6. Drafting and Negotiating Licenses and Other AgreementsPertaining to Dismissed Antitrust Counterclaim
ebix maintains that Levin and Salinger played a role inrepresenting Delphi/McCracken in entering tying agreements that thenformed the basis of the antitrust counterclaims they filed in this action(which they have since dismissed) (#68, p. 13). While acknowledging thedismissal of those claims, ebix argues that Levin and Salinger aretainted by having pressed them for over nine months. (Id.)
The antitrust counterclaims alleged illegal tying agreements withFlat Top Company and Accordia. In 1984 Levin represented MCI, apparentlyin connection with software licensing agreement amendments with Flat TopCompany; in 1984, Levin was associated with the law firm of Levin &Berk. (Id.) In 1994, he represented MCI in connection with a potential breach of alicensing agreement with Accordia. (#68, p. 13) ebix seems to becontending that these representations amount to "play[ing] a direct rolein the review, drafting, negotiating and amending of software license andsupport agreements with those two entities." (Id.)
The attorneys respond that "Levin had nothing to do with draftingany of the agreements that MIS later contended constituted illegal tying,and it is disingenuous and even insulting of Ebix to suggest so." (#73,p. 25) Moreover, they maintain that the dismissal mooted this issue.Levin and Salinger are correct-dismissal of the tying claims has mootedthe issue and the Court need not address the issue further.
7. Representations in Matters Involving Richard Roy
Richard Roy is a former ebix employee who ebix alleges "hasprovided services to Defendants MIS and/or Frank McCracken." (#68, p. 14)Roy began working for ebix in 1986, and shortly thereafter Levinrepresented MCI in connection with allegations by Roy's former employer,Redshaw, that Roy had breached his confidentiality and non-competitionagreement with that employer, and that MCI had tortiously interfered withRedshaw's relationship with Roy. (Id.) Levin also represented MCI in 1987 in drafting Roy's severanceagreement, an agreement that contained "detailed provisions ofconfidentiality of [MCI's] proprietary information and software,non-solicitation of both employees and customers, and non-competition."(#68, p. 14) (emphasis in original) Levin also represented MCI in 1988in connection with Roy's claims for unpaid commissions on the CALCOInsurance account, a client whose move to MIS is included in ebix'stortious interference count. (Id.)
In response, the attorneys contend that Levin's review of theconfidentiality agreements was on behalf of MCI (as everything took placebefore the merger), and had nothing to do with ebix's confidentialityagreement. (#73, p. 26) They maintain moreover that ebix has not shownhow this representation would have given Levin access to confidentialinformation that could be relevant in this suit. (Id.)
There are two issues here: (1) the attorneys' review of Roy'sconfidentiality agreement with Redshaw and MCTs alleged tortiousinterference thereof; and (2) the attorneys' negotiation of Roy'sseverance from MCI and their representation of MCI in connection withRoy's claims for unpaid commissions on the CALCO account. Unfortunatelyfor the plaintiff neither of these issues is substantially related to any of the issues in the instant lawsuit. It strainscredulity to even assert that Levin and Salinger's review of Roy'sconfidentiality agreement with Redshaw, a party totally unrelated to thecurrent case, and MCI's purported interference with Roy's contract withRedshaw is somehow related, even tangentially, to the allegations in thiscase that the McCracken defendants tortiously interfered with ebix'scontracts. Similarly, the fact that the attorneys negotiated with Royover his severance agreement and unpaid commissions on the CALCO accounthas nothing to do with the attorneys' current representation of theMcCracken defendants, even though as part of this action, ebix hasalleged that the McCracken defendants interfered with ebix's contractwith CALCO.14
8. General Representation, Including Employee Matters
Finally, ebix maintains that Levin and Salinger provided generalrepresentation to Delphi/McCracken in the 1990s. In support, ebix quotesletters to Delphi/McCracken's auditors from 1992 through 1995 (the"auditor letters"), in which Levin stated his firm "represents theCompany on a regular basis . . ." (#68, Ex. F)
Notably, the complete sentence from that letter ebix quotes seemsto undermine its assertion that Levin was serving in the role ofgeneral counsel to Delphi/McCracken during this period. The sentence, infull, reads: While the undersigned represents the Company on a regular basis, our engagement has been limited to specific matters as to which we have been consulted by the Company, and there may exist matters of a legal nature which could have a bearing on the Company's financial condition with respect to which we have not been consulted.(#68, Ex. F) (emphasis added).
ebix also maintains that Levin was Clerk and a Director of MCI fromDecember of 1982 until at least January 31, 1991. (#68, p. 15)
This "general representation" included representing MCI andDelphi/McCracken in a number of employee-related matters, according toebix, including: (1) two discrimination-related claims brought before theMassachusetts Commission Against Discrimination (in 1986 and 1991); (2)claims by a former employee of wrongful termination and breach of theimplied covenant of good faith and fair dealing (in 1988); and (3) a wageclaim by a former employee (in March of 1991). (Id.)
The attorneys respond that ebix has not shown how theserepresentations are relevant to the current dispute or would prejudiceebix. (#73, p. 26) Not to belabor a point, but once again the attorneys are correct.
I find that none of the matters pointed to by the plaintiff aresubstantially related to any of the issues in the current litigation.Some may be "related" to some degree, but none are "substantiallyrelated." Therefore, there is no basis for the disqualification of Levinand Salinger. For the aforementioned reasons, an electronic order enteredon March 31, 2004 denying Plaintiff's Motion to Disqualify the Law Firmof Cumsky & Levin LLP as Counsel for the McCracken Defendants (#67).The file is herewith RETURNED to the District Judge for furtherproceedings.
1. The docket of this case is hopelessly confused. Plaintiffebix.com, Inc.'s Motion to Disqualify the Law Firm of Cumsky and Levinas Counsel for the McCracken Defendants is clearly denoted #67 on theface of the motion. However, on the Court's computerized records, #69 islisted as being the motion to disqualify. The Clerk's Office hasapparently lost #69; it cannot be located. Accordingly, the Court enteredelectronic orders on March 31, 2004 denying both motion #67 and motion#69 (in the event it is a motion). In the within Opinion, the Courtgives its reasons for denying the motion before the Court, i. e.,Plaintiff ebix.com, Inc.'s Motion to Disqualify the Law Firm of Cumskyand Levin as Counsel for the McCracken Defendants (#67).
2. There is some confusion as to whether the correct name ofthis entity is McCracken Financial Software, Inc. or McCracken FinancialSolutions, Inc. (See #14, ¶ 8) The Court assumes that these two namesrefer to the same entity and that entity is referred to herein asMFS.
3. In support of its motion, ebix filed a Memorandum of Law inSupport of Its Motion to Disqualify the Law Firm of Cumsky & LevinLLP as Counsel for the McCracken Defendants with attached Affidavit ofSteven D. Weatherhead, Esq. and exhibits (#68).
4. The parties have consented to have the undersigned issue afinal ruling on the motion pursuant to 28 U.S.C. § 636(c) and theDistrict Judge has referred the matter for that purpose. It is noted that§ 636(c) permits the parties to consent to a magistrate judgeconducting ". . . any or all proceedings . . . in a civilmatter."
5. At the hearing on this motion, counsel for both sides agreedthat there is no dispute that ebix and the McCracken defendants are"adverse." Thus, the issue of whether the sides are adverse need not bediscussed in this Memorandum and Order. The deciding factor in theinstant motion thus is whether the matters on which Levin and Salingerare representing the McCracken defendants are "substantially related" tothe matters on which they represented ebix and itspredecessors.
6. At the hearing, counsel for ebix discussed in detail eachclaim in this lawsuit that he claimed was substantially related tomatters on which Levin and Salinger represented ebix. Each matter isaddressed separately in this Memorandum and Order, infra.
7. Prior to the Adoption of Erica case, the SJC had notexplicitly adopted the so-called "substantially related" test.
8. While the Adoption of Erica court did not discuss the issueof prejudice, the Superior Court has stated that the considerationconstitutes a separate ground for denying a disqualification motion. SeeNational Med. Care, 2002 WL 31068431, *8 ("This Court concludes that theunfair prejudice that disqualification would cause to [the currentclient] as a result of the delay, and the disruption and delay it wouldproduce to the administration of justice are independent reasons to denythe motion."). Because the Court concludes here that there is nosubstantial relationship between the attorneys' prior and currentrepresentations, the prejudice issue need not be addressed,
9. Counsel for ebix essentially conceded this point at thehearing on this motion.
10. The Seventh Circuit applies a three-step variant of thisapproach: "Initially, the trial judge must make a factual reconstructionof the scope of the prior legal representation. Second, it must bedetermined whether it is reasonable to infer that the confidentialinformation allegedly given would have been given to a lawyerrepresenting a client in those matters. Finally, it must be determinedwhether that information is relevant to the issues raised in thelitigation pending against the former client." Westinghouse Elec. Corp.v. Gulf Oil Corp., 588 F.2d 221, 225 (7 Cir., 1978). Moreover, this approach seems to be consistent with what theMassachusetts Bar Association Committee on Professional Ethics counseledin its recent opinion regarding the "substantially related" rule. See MBAOp. at p. 2 (suggesting that lawyers, in determining if representationsare substantially related, should determine both whether the issues arethe same and whether the factual contexts are the same).
11. The fact that Levin and Salinger (at the time with Looney& Grossman) may have billed the successor entity for their work doesnot sway the Court because as McCracken testified, billing the successorentity was merely a logistical matter: "even though Looney & Grossmanmay have sent its invoke to my former controller . . . at thesuccessor corporation, . . . there were a series of adjustments postclosing for a variety of items, . . . and I also paid for Looney &Grossman's services . . . with either a post closing adjustment or theexchange or reimbursement checks when various closing and post closingdetails were worked out. . . ." (#75, ¶ 6)
12. Indeed, in this particular circumstance, it is hard toseparate the facts from the legal issues; in any event, Levin andSalinger's prior representation regarding non-competes in general andLevin and Salinger's present representation regarding McCracken'snon-compete specifically cannot be considered "substantiallyrelated."
13. Levin and Salinger have submitted sworn testimony to theCourt that they neither drafted nor opined on the specific non-compete atissue in this case. The plaintiffs have not submitted any sworn testimonydemonstrating that Levin and Salinger are not being truthful. Thus, theCourt shall accept Levin and Salinger's accounts of whattranspired,
14. The Court notes that Roy is not a named defendant in thiscase.