My previous posts regarding this hearing appear here.
Proceed with this caveat: What follows is paraphrased, and in a few cases it represents only my best estimation of the exchange between a particular attorney and the Judge. It is not intended to be taken as a verbatim transcription. It relies on my often difficult to decipher notes and my imperfect memory. Also keep in mind (as at least one other blogger has noted as well) that the Judge was frequently barely audible to those of us in the gallery. Of all the participants at this hearing, Laura Schnell of Eisenberg & Schnell spoke most clearly; she expressed herself unambiguously, with an easily discernible and confident intonation. Her voice filled the high-ceilinged cavernous courtroom, and it appeared that she accomplished this feat effortlessly.
PART ONE
Zachary D. Fasman, partner at Paul Hastings, is at the podium, taking questions from Justice Bernard Fried. Judge Fried asks excellent questions, and has clearly done his homework, thoroughly reviewing the submissions from both sides. Fasman represents Sullivan & Cromwell in S&C's action against their former associate Aaron Charney. Charney sued them for alleged anti-gay discrimination. Sullivan & Cromwell argue in a Motion to Dismiss that Charney's complaint should be tossed out (or in the alternative, passages should be stricken from it) because it discloses client confidences and secrets.
Judge Bernard Fried=J
Zachary D. Fasman, Esq.=ZDF
The judge's first question boiled down to a request for clarification about the state of the law.
J: Is there any authority that says that the identity of a firm's client is itself confidential even though it is commonly and publicly referred to and well-known that the law firm represents this client? Is the name of associate or partner assigned to a matter confidential?
Fasman answered that the fact that an attorney or law firm represents a specific client is not necessarily confidential, but depending on the circumstances, it may be.
J: But you pick up the New York Law Journal, for example, on any given day and you can read all the names of the attorneys and their clients.
ZDF: If Charney had said "I work for this or that client" that would be one thing. But Charney went beyond that, and said XXX was a client of Sullivan & Cromwell, and then he attached an e-mail regarding that client and billing issues. [My assumption is that ZF is referring to the Kotran email to Charney and Grinberg on July 24, 2006 which references Kodak and billing/staffing issues. That email was attached to Charney's complaint.]
ZDF: If all Charney had said was that he worked on ____ transaction, assuming that transaction was in the public domain, then we wouldn't be standing here. [REALLY? They would not have moved to dismiss Charney's complaint for any other reason?]
Fasman cites Wise v. ConEd for the proposition that in New York, an attorney cannot bring a lawsuit where confidences and secrets would be revealed.
In Wise v. Consolidated Edison Co. of New York,282 A.D. 335, 723 N.Y.S.2nd 462 (1st Dep't 2001) (reported at 17 ABA/BNA Lawyers' Manual On Professional Conduct Current Reports 310 (May 23, 2001)), the New York court held that house counsel could not bring a claim in light of counsel's obligations of confidentiality, and also ordered that the record be sealed.
ZDF: Disciplinary Rule 4-101 prohibits a lawsuit from being brought where it would reveal client "confidences" and "secrets."J: Does Charney reveal client "confidences"?
ZDF: "Secrets" is broader. Anything a client wants kept confidential or would be detrimental to the client is a "secret" that must be preserved. Charney revealed just those types of secrets and confidences.
DR 4-101 Preservation of Confidences and Secrets of a Client.
(A) "Confidence" refers to information protected by the attorney-client privilege under applicable law, and "secret" refers to other information gained in the professional relationship that the client has requested be held inviolate or the disclosure of which would be embarrassing or would be likely to be detrimental to the client.
ZDF: The law is when an attorney brings suit against his employer, the overarching, supervening interest of the client cannot be sacrificed. This case is more egregious than one because Charney reveals the secrets of an innocent third party. The Rule in New York is stricter than the rule in California cited by Charney's counsel [presumably Charney's attorneys relied on California case law]. In New York you have to take every measure to avoid revelation of secrets or confidences even if the lawsuit cannot be maintained without it, including in employment discrimination cases. Aaron Charney does not admit that anything in his Complaint is inappropriate. [Fasman, it seems, wishes to project an aura of surprise, even indignance, that Charney refuses to concede this point. But would Fasman concede it if the shoe were on the other foot?]
J: DR 4-101 protects client secrets. But how does the Sullivan & Cromwell Partnership Agreement (which Charney attached to his complaint) fall into this category?
ZDF: We are not here because of the Partnership Agreement, but because client secrets were revealed.
J: How is a client embarrassed by being identified as having been assigned to a specific associate or partner?
ZDF: That alone, in appropriate circumstances, is not a violation. Aaron Charney's publishing of inappropriate information, staffing decisions on a particular transaction. Aaron Charney should not have revealed that in his Complaint because that was embarrassing to the client.
J: Embarrassing? How? Paragraph 88 of Charney's complaint regarding S&C partner, Kotran. Kotran's decision re staffing. How can Merrill Lynch be embarrassed?
ZDF: It depends on the attitude of the client re public discussion of staffing. S&C doesn't allow public discussion of staffing. Revealing who worked on a matter or who was assigned to it is not appropriate, and falls within "client confidences and secrets" under DR 4-101.
J: Let's turn to the e-mail in Exhibit C [July 24, 2006 email from Kotran to Grinberg and Charney re Kodak billing. Kotran essentially says: Let's avoid over staffing this one because the client is expressing concern about fees]. What is the problem?
ZDF: Charney took S&C documents and disclosed them to the press. That's why we fired him. And, what's more, Charney's lawyers have a "huge problem" here regarding the case law. They haven't said "termination" in this case was an act of retaliation, but they intend to do just that. In fact, they have to do so because that is the only way to get monetary damages. S&C will then argue that termination was proper, i.e. Charney was fired for revealing client confidences. In probing that issue by necessity client confidences will play a role in the litigation. If we litigated he will allege retaliation to get damages, and the highly inappropriate result would be that which the case law was specifically designed to prevent. These documents should not become part of the public record, but they will if this case is allowed to proceed.
J: But you have alternatives, right?
ZDF: Yes we proposed two, but the silence from the other side is deafening.
J: If I strike certain language, is Charney entitled to the opportunity to supplement his Complaint?
Fasman says he wants the Judge to strike everything in the Complaint relating to S&C's clients.
ZDF: There is no reason for S&C's clients to be brought up in this matter.
J: Negotiate exact wording... work around potential revelations... strike improper language.
J: Why should partnership agreement be stricken? Is it "confidential" or embarrassing?
ZDF: Both. [Fasman then proceeds to move away from the question quickly.] The Partnership Agreement is irrelevant and confidential. I have no idea why Mr. Charney included it. The Partnership Agreement does not belong in the public domain.
Fasman expresses frustration about the "silence" from the other side, their refusal to take up S&C's suggestions. He seems to be telegraphing that this is especially upsetting considering what he characterizes as Charney's "leak" to the "press."
And now the Judge calls Aaron Charney's attorney, Laura Schnell, to make her arguments against S&C's Motion to Dismiss.
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