Calise v. Brady Sullivan Harris Mills, LLC, C.A. No. 18-99WES

WILLIAM CALISE, et al., Plaintiffs, v. BRADY SULLIVAN HARRIS MILLS, LLC, et al., Defendants.

JOSEPH M. RACHIELE, et al., Plaintiffs, v. BRADY SULLIVAN HARRIS MILLS, LLC, et al., Defendants.

C.A. No. 18-99WES

C/w C.A. No. 18-100WES

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF RHODE ISLAND

March 28, 2019

REPORT AND RECOMMENDATION

PATRICIA A. SULLIVAN, United States Magistrate Judge.

Virtually all difficult ethical problems arise from conflict between a lawyer's responsibilities to clients, to the legal system and to the lawyer's own interest in remaining an ethical person while earning a satisfactory living.

R.I. Rules of Professional Conduct, Preamble ¶ 9.

This wise precept, established by the Rhode Island Supreme Court as a guide for attorneys in discharging their competing responsibilities, supplies the motif that recurs throughout the unfortunate tale told in this report and recommendation. Pending before the Court is the motion of Defendants Brady Sullivan Harris Mill, LLC, and Brady Sullivan Properties, LLC, ("Brady Sullivan") seeking a permanent injunction.¹ ECF No. 65. The motionarises in both of these consolidated cases ("the Cases"),² which are based on an alleged mold infestation in a renovated mill building. Brady Sullivan is the real estate development corporation that renovated and manages the building; Plaintiffs are tenants in two of the apartment units. The motion veers off course from the merits of the Cases. Its focus is on the conduct of the two attorneys - Artin Coloian and Daniel Calabro, Jr. - who filed both of the Cases but withdrew on the eve of the Court's bench decision on Brady Sullivan's motion to disqualify them. Plaintiffs are now represented by other counsel.

The pending motion is based on Brady Sullivan's well-founded assertion that Attorneys Coloian and Calabro accepted as clients two of its former employees, an engagement fraught with undisclosed and unresolved conflicts of interests, as a result of which the Attorneys came into possession of Brady Sullivan's contractually protected confidential information, attorney-client information and related attorney work product (collectively, "Confidential Information") without authorization or consent in violation of Brady Sullivan's legal rights. Having acted promptly and worked aggressively to stuff the genie back in the bottle, Brady Sullivan now seeks to bring the matter to a close for good with a permanent injunction banning Plaintiffs and Attorneys Coloian and Calabro from using, reviewing, discussing, communicating and/or forwarding the Confidential Information to anyone (including successor counsel) and prohibiting Attorneys Coloian and Calabro from receiving or otherwise participating in any attorneys' fees associated with the Cases.

The Court's task in resolving the motion is eased by the absence of any dispute over the remedy: Plaintiffs (acting through their new counsel) and Attorneys Coloian and Calabro agree that Brady Sullivan may have the requested relief. The sticking point is whether the Court will issue the permanent injunction based a reasoned decision that includes findings of fact based on violations of the Rhode Island Rules of Professional Conduct, particularly R.I. Rules 1.7, 4.3 and 4.4(a).³

I. FACTUAL AND PROCEDURAL BACKGROUND

The motion arises from events that occurred mostly in March 2018, which may be briefly summarized.⁴ At its heart are two former management-level employees of Brady Sullivan: Julio Basabe, Maintenance Manager, and Christina Rahn, Property Manager (the "former employees").

As a condition of their employment with Brady Sullivan, both of the former employees signed confidentiality agreements barring them from, inter alia, disclosing certain information related to Brady Sullivan's products or services. At least one of them, Rahn, was privy to extensive confidential attorney-client communications directly related to the issues in the Cases and related matters pertaining to other tenants and former tenants of Brady Sullivan. While still employed at Brady Sullivan, Rahn surreptitiously printed, copied on thumb drives or CDs and/or emailed to her home email account Brady Sullivan documents that included substantial quantities of Brady Sullivan's confidential attorney-client information. Shortly after the Cases were filed by Attorneys Coloian and Calabro, the former employees abruptly resigned from Brady Sullivanand immediately engaged Attorneys Coloian and Calabro to represent them in connection with matters pertaining to Brady Sullivan. Attorneys Coloian and Calabro undertook this engagement and provided legal advice to the former employees despite the obvious conflict between the interests of the former employees and their existing clients, Plaintiffs and other tenants or former tenants of Brady Sullivan contemplating or already in litigation against it.

Over several days in March 2018, having formed an attorney-client relationship with the former employees, Attorneys Coloian and Calabro obtained information from Basabe and Rahn. They accepted documents from Rahn that she had secretly taken while employed at Brady Sullivan. Among these documents were many clearly reflecting Brady Sullivan's attorney-client communications. Attorneys Coloian and Calabro reviewed at least a handful of these documents, which constituted bulls-eye attorney-client communications between Brady Sullivan and its counsel regarding matters directly pertaining to the Cases and related matters.

There is no evidence that Attorneys Coloian and Calabro advised Basabe or Rahn about the jeopardy posed to them by breaching the confidentiality agreements or any duty of loyalty they might owe to their former employer. There is no evidence that Attorneys Coloian and Calabro advised Rahn about the jeopardy posed to her by her actions in taking and making a wholesale disclosure of Brady Sullivan's attorney-client information to the attorneys for the parties opposing it in litigation. There is no evidence that Attorneys Coloian and Calabro instructed either Rahn or Basabe not to disclose Brady Sullivan Confidential Information or took any steps to avoid an unwarranted intrusion into Brady Sullivan's privileged relationships. There is no evidence that Attorneys Coloian and Calabro advised or obtained a written waiver from Basabe or Rahn regarding limitations on the Attorneys' ability to represent the former employees in light of the Attorneys' concurrent representation of Plaintiffs and their other tenant clients.Relatedly, Attorneys Coloian and Calabro did not advise or obtain a written waiver from Plaintiffs or any of their other tenant clients on their acceptance of a materially limiting competing engagement. Instead, despite the conflicts, in derogation of their duty to Basabe and Rahn and likely animated by the competing duty owed to Plaintiffs and the other tenant clients, the Attorneys communicated with the former employees without regard to the confidentiality of the information being provided, and accepted documents from Rahn that they knew Rahn had taken from Brady Sullivan during her employment, among which they found (and accessed) Brady Sullivan's purloined attorney-client information.

Beginning on March 5, 2018, Brady Sullivan was alerted to the possibility of the breach through comments Attorney Coloian made to one of its attorneys. After further investigation, it promptly sued the former employees, Basabe and Rahn, in a separate action filed on March 15, 2018, and removed to this Court on March 22, 2018. Brady Sullivan v. Rahn, C.A. No. 18-133WES ("18-133").⁵ On April 12, 2018, the Court entered an injunction mandating that Basabe and Rahn comply with the confidentiality agreements, as well as that they and their attorneys (Attorneys Coloian and Calabro, and Attorney Sean Doherty, who briefly entered an appearance on behalf of Basabe and Rahn) must return all of the Brady Sullivan Confidential Information, including the attorney-client privilege information, to Brady Sullivan. 18-133 ECF No. 20.

Because the Confidential Information taken by Rahn had been delivered in various electronic formats and in hard copy, the Court's April 12, 2018, Order included specific requirements to ensure its return. This triggered a flurry of collateral activity in 18-133, as Brady Sullivan worked diligently to recover all of the Confidential Information. However, through no fault of Basabe, Rahn or Attorneys Coloian and Calabro, all of whom cooperated in good faith tocomply with the Court's April 12, 2018, Order, this effort was not entirely successful. Most recently, at the hearing of February 28, 2019, it was revealed that two thumb drives containing thousands of documents taken by Rahn appear to be irretrievably lost. Transcript Feb. 28, 2019, at 24, 26, 34 (18-133 ECF No. 69).⁶ Meanwhile, Basabe and Rahn are no longer actively defending themselves in 18-133; as a result, the clerk has entered default against them. 18-133 ECF No. 66.

Returning to the Cases, on April 13, 2018, based on R.I. Rules 4.4(a) and 1.7(a), Brady Sullivan moved to disqualify Attorneys Coloian and Calabro from representing Plaintiffs; the motion was supported by the depositions of Rahn and Basabe and the affidavits of one of Brady Sullivan's attorneys and its Information Technology ("IT") Manager. Following a hearing at which both parties declined the Court's offer to hear testimony, the Court scheduled the motion to disqualify for a bench decision to be delivered on July 25, 2018; this date was extended to September 25, 2018, at the request of the parties. Less than one week before the bench decision, Attorneys Coloian and Calabro filed notices of their withdrawals and substitute counsel entered for Plaintiffs. At the September 25 hearing, the Court found that the motion to disqualify had become moot but that serious issues remained to be resolved. To allow Brady Sullivan time to consider its options and with no objection from Plaintiffs, the Court entered a...