O  T  H  E  R      D  E  C  I  S  I  O  N  S  :

Palmer v. Ernst & Young LLP, 2007 WL 1064047 (Mass. Super.)
(April 11, 2007) (Gants, J.).

Plaintiff Palmer entered into an annuity transaction with defendant Ernst & Young, which purported to limit defendant’s liability in connection with the transaction to £1 million. Palmer subsequently sued Ernst & Young for some $9 million. Ernst & Young moved for summary judgment on the amount of its liability.

The court held that contractual limitations of liability are generally valid under Massachusetts law, and that the term at issue was neither unconscionable nor the product of fraud or misrepresentation. The court then considered plaintiff’s more interesting challenge: that defendant’s attorney was practicing law in connection with the annuity transaction, and that the Massachusetts Disciplinary Rules prohibit an attorney from attempting to limit his liability for malpractice.

In assessing this challenge, the court rejected defendant’s argument that the Massachusetts Rules do not apply because its attorney was not advising plaintiff on Massachusetts law. “The fact that the legal advice involved establishing a foreign corporation may be relevant as to whose law may govern the formation of the trust and corporation, but it is not relevant as to whose rules of

professional conduct apply to the advice itself.” Id. at *3. The court further rejected the argument that defendant’s counsel was not practicing law – for “[w]hen a person provides legal advice about sophisticated tax matters and asserts that he is providing this advice as an attorney, the attorney is engaging in the practice of  law.” Id. at *5. The court also rejected the claim that the Massachusetts Rules do not apply because defendant’s counsel is not a member of the Massachusetts bar. “The bottom line is that attorneys and law firms engaged to practice law in Massachusetts, regardless of whether or not they are members of the Massachusetts Bar, cannot contractually limit their liability to their Massachusetts clients for legal malpractice and this Court will not enforce such a provision if they were to try.” Id. at *8.

Crucially, however, the court held that this rule only applies to lawyers and law firms – not to accounting and tax planning firms that happen to employ lawyers. Thus, since the attorney was acting solely on behalf of Ernst & Young when he provided plaintiff with the engagement letter for the transaction, the limitation of liability provision did not violate public policy and was enforceable. Defendant’s liability was therefore limited to £1 million as stated in the agreement.

New England Pro Tour, Inc. v. Hebb, 2007 WL 1264140 (Mass. Super.)
(April 18, 2007) (Gants, J.).

This case explores the potential conflicts that can arise when a law firm represents two clients who later become adversaries. Plaintiff moved to disqualify the law firm of Robinson & Cole LLP from further representation of defendant Hebb. Robinson & Cole originally represented Hebb both individually and as a member and manager of New England Pro Tour, LLC in connection with a purchase agreement entered into between the LLC and Greens Worldwide, Inc. After the LLC was purchased by Greens and became New England Pro Tour, Inc., a dispute arose between the company and Hebb over certain provisions in the purchase agreement and a related employment agreement. Plaintiff claimed that Robinson & Cole’s representation of Hebb for purposes of this dispute violated Rule 1.9 of the Massachusetts Rules of Professional Conduct.

The main question before the court was whether the current dispute was “substantially related” to the matter in which Robinson & Cole previously represented the parties. The Comments to Rule 1.9 state that the underlying question in this inquiry is “whether the lawyer was so involved in the matter that the subsequent representation can be justly regarded as a changing of sides in the matter in question.” Id. at *5. After noting with surprise that neither the SJC nor the Appeals Court has shed any light on the proper application of the substantial relationship test since the adoption of the Rule, the court held that the precise nature of the test was not

crucial to the outcome – for in this case, it was “plain that there is a substantial relationship between the two matters.” Id.

The court rejected Robinson & Cole’s claim that its prior representation of New England Pro Tour had essentially been a representation of Hebb only, insofar as the LLC was effectively wholly-owned by Hebb at the time. The fatal flaw in this argument “is that a corporation, even a corporation wholly-owned by a single person, is a distinct and separate legal entity, so representation of the corporation is distinct and separate from representation of its controlling shareholder.” Id. at *6. The court further rejected the claim that since all the information known to Robinson & Cole that was potentially adverse to New England Pro Tour came from Hebb himself, any other firm would have access to that same information (and it would therefore not help plaintiffs to have Robinson & Cole disqualified from the instant dispute). The court recognized that no client confidences would be preserved by disqualification of the law firm, but held that the fact “that disqualification is not necessary to serve the principal purpose underlying Rule 1.9(a) does not allow this court to rewrite” the Rule. Id. at *9. Plaintiff’s motion to disqualify counsel was therefore
allowed.