Sun Life Assurance Company of Canada v. Wilmington Savings Fund Society, FSB, C.A. No. N18C-08-074 PRW CCLD (Del. Super. Dec. 19, 2019).
Motions to disqualify counsel rarely succeed in the Delaware courts. This decision illustrates the type of conflict that can justify disqualification based on prior representations. Plaintiff issued a life insurance policy of $6 million to an individual named Bartelstein. The policy was assigned to a trust whose beneficiary is an entity, with the moniker Ocean Gate, making Ocean Gate the policy’s ultimate beneficiary. Plaintiff filed this suit alleging the policy is void as a stranger-oriented life insurance wager on Bartelstein’s life procured for investors. The litigation gave rise to alleged conflict issues for involved counsel.
Plaintiff’s counsel in the matter, referred to as the Firm, was a longstanding outside counsel to Wilmington Savings Fund Society (“WSFS”), the securities intermediary for the beneficiaries in this matter. Following the filing of the current matter, WSFS contacted the Firm about the apparent conflict and the parties negotiated an agreement (the “Conflict Agreement”) whereby the Plaintiff agreed that it was not pursuing claims against WSFS, and WSFS agreed that there was no disabling conflict and that WSFS would not claim or contend that the Firm should be disqualified. Subsequently, WSFS brought a motion to disqualify the Firm because the same law firm also previously represented Ocean Gate.
The Superior Court CCLD found that under the specific facts of the case, the Firm could not continue to represent Plaintiff under Delaware Lawyers’ Rules of Professional Conduct Rule 1.9, due to their past representation of Ocean Gate and their failure to obtain the consent of Ocean Gate. Despite the existence of the Conflict Agreement, the Court found that the previous representation could cause prejudice to WSFS. The Court reasoned that WSFS was not the former client from which the Firm needed informed consent. The Court further found that even if the Conflict Agreement required WSFS to resist the Firm’s disqualification, counsel’s obligations to the Court, as officers of the legal system, overrode any hurdle posed by the Conflict Agreement. Plaintiff’s position was directly and materially adverse to Ocean Gate’s and the matters in which the Firm represented each party were “intimately connected." In fact, the Firm likely would have to confront their own prior work product during the trial and this apparent change of sides in front of the jury could potentially be prejudicial. While the Court acknowledged it was an “extreme and rare remedy,” it felt that disqualification was the only way to ensure the fairness of the litigation process.
