Tuesday, January 4, 2011

Fifth District Holds Attorney Contract Relating To Client Representation Not Against Public Policy

UPDATE: On November 7, 2011, the Florida Supreme Court issued THIS order and declined to review the Fifth District's Opinion discussed below.

In Garfinkel v. Mager (5D09-1991 & 3273), the Fifth District reversed the trial court's order and held that a provision in a contract that Mager would not represent any party that initiated a claim against Garfinkel was not against public policy.  The court held that:
We conclude that the contract would not violate public policy where if, as alleged in the complaint, Mager possessed confidential information as the result of his prior employment and fiduciary relationship with Garfinkel and appellees would be able to use that information to the detriment of Garfinkel if they provided representation or assistance to a party who had initiated or maintained a lawsuit or claim against Garfinkel.
The facts were described as follows:
From October 2006 to July 2, 2007, attorney Mager was employed by Garfinkel, a law firm, and served as  the firm's managing partner. On July 2, 2007, Garfinkel terminated Mager's employment. Mager subsequently sued Garfinkel for monies allegedly owed as a result of his contributions to the firm. That lawsuit was dismissed when the parties entered into a global settlement agreement in February 2008.
Pursuant to the terms of the settlement agreement, Garfinkel paid Mager $175,000 (in addition to $100,000 previously paid to Mager), Mager dismissed the lawsuit against Garfinkel, and the parties released each other from any past or present claims. The agreement provided that appellees would not render any assistance nor give advice to any party who initiated, maintained, or prosecuted any lawsuit or claim against Garfinkel. 
In October 2008, Garfinkel filed a complaint against Mager seeking damages, injunctive relief, and a declaratory judgment that the settlement agreement provisions were valid and enforceable. The complaint alleged that appellees breached the contract by, among other things, representing clients in actions brought against Garfinkel. Appellees filed a motion to dismiss the complaint arguing that the settlement agreement was against public policy because it improperly limited the freedom of potential clients to choose Mager as their lawyer and limited Mager's freedom to accept future clients. The trial court granted appellees' motion, finding first that the agreement violated Rule 4-5.6 of the Rules Regulating the Florida Bar. 
With regard to the legal analysis, the court stated:
In determining whether paragraph 8(c) contravenes public policy, it is appropriate to consider the intent behind the adoption of Rule 4-5.6. The rule is intended to protect the ability of future clients to retain a lawyer of their choosing and to prohibit attorneys and their present clients and adversaries from limiting that ability by private agreement.  See Fla. Ethics Op. 93-4 ("The prohibition contained in rule 4-5.6 seeks to protect the professional autonomy of lawyers as well as clients' access to the lawyer of their choosing."). While the right of a party to chose his or her attorney is deeply engrained in our jurisprudence, that right is not unlimited. A party does not have the right to an attorney possessing confidential information of the adversary so as to provide the party with an unfair informational or tactical advantage....The Rules Regulating the Florida Bar affirmatively restrict attorneys with "inside" knowledge from using it for the gain of other clients. See generally, R. Regulating Fla. Bar 4-1.6 (confidentiality of client information); 4-1.7 (conflict of interest; current client) 4-1.8 (conflict of interest; prohibiting use of client information to disadvantage of client); 4-1.9 (conflict of interest; former client).
In the present case, it was alleged that Mager had not only been the managing partner for Garfinkel, P.A., but had also served as personal counsel for Alan Garfinkel, individually. Furthermore, appellees expressly acknowledged in the settlement agreement that Mager's services to Garfinkel had been "special, unique and extraordinary" and that he had acquired confidential information concerning Garfinkel's operations -- "the use or disclosure of which could cause Garfinkel substantial losses and damages which could not be readily calculated and for which no remedy at law would be adequate." The confidential information alleged to be possessed by Mager included financial data, accounting information, legal strategies, business plans, dealings with expert witnesses, and other information that potentially would give an adversary an unfair tactical advantage in litigation.
The court concluded that "If the allegations of the complaint and second amended complaint are accepted as true, then the parties' agreement reflects a reasoned effort to balance the aforesaid competing public interests and would not be injurious to the public good or otherwise contrary to public policy."  Additionally, the court rejected a cross-appeal in a footnote by stating "We further find appellees' cross-appeal to be without merit."

The oral argument can be viewed below:

Part I

Part II

Prior disputes involving these parties, as previously discussed HERE, are linked below:


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