by Gary Taylor
Zerger & Mauer, LLP v. City of Greenwood
(Federal 8th Circuit Court of Appeals, May 30, 2014)
From 2006 to 2010 the city of Greenwood, Missouri and Martin Marietta Minerals were in a dispute over a rock quarry south of the city. The dispute concerned truck traffic traveling in interstate commerce through Greenwood. eventually, the parties entered into an agreement in which Martin paid Greenwood $7 million, and Greenwood agreed to designate Second Avenue for the truck traffic. In the agreement, Greenwood declared that the truck traffic did not constitute a nuisance. Greenwood had obtained a prior judgement in the case against Martin for $12 million; therefore, Greenwood was essentially making a $5 million concession so that it could designate the truck traffic route it deemed most beneficial. Zerger and Mauer represented Greenwood throughout the dispute, receiving over $4 million in legal fees.
Subsequently in 2011, eighteen individuals who owned property along Second Avenue filed sued against Martin and others, seeking damages for a private nuisance among other claims. Zerger and Mauer served as counsel for these plaintiffs. Prior to the trial court’s resolution of the merits of the case, Greenwood – a non-party to the proceedings – moved to disqualify Zerger and Mauer from representing the property owners, arguing that the firm’s current representation constituted a conflict of interest. In Greenwood’s view, Zerger and Mauer were advancing arguments that directly conflicted with Greenwood’s interests from the prior litigation. The district court agreed and disqualified the law firm, which appealed to the Eighth Circuit Court of Appeals. After settling a jurisdictional claim, the Court of Appeals examined the conflict of interest claim.
Missouri Rules of Professional Conduct for the legal profession outline the duties an attorney owes former clients:
A lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related matter in which that person’s interests are materially adverse to the interests of the former client unless the former client gives informed consent, confirmed in writing.
On the question of whether the city’s prior litigation with Martin was “substantially related” to the property owner’s suit, the court looked first to the commentary accompanying the above-cited rule of conduct. The commentary explains that matters are substantially related “if they involve the same transaction or legal dispute or if there otherwise is a substantial risk that confidential factual information as would normally have been obtained in the prior representation would materially advance the client’s position in the subsequent matter.” The court found it clear that the factual underpinnings of the two representations were nearly identical. “Similarly, the legal issues central to both are substantially related, largely centering on the reasonableness of Martin’s conduct. Although a private nuisance claim and a public nuisance claim may protect distinct rights, the legal theories are exceedingly intertwined.” Given these conditions, the court found a “substantial probability – or at the very least a substantial appearance – that Greenwood disclosed confidential information related to the negotiations that the plaintiffs could use to their advantage.
Zerger and Mauer next asserted that their representation of the property owners was not “materially adverse” to Greenwood’s interests. The firm argued that the declaration in the first settlement that the truck traffic is reasonable and not a nuisance involved a public nuisance and has no bearing on the property owners’ private nuisance claim. The court rejected this, being “unpersuaded by Zerger and Mauer’s continued attempt to make public and private nuisances unrelated concepts….” The court stated that the firm is advocating a position that contradicts a term in Greenwood’s settlement. It is seeking to collect damages on behalf of the property owners “for Martin’s allegedly tortious use of Second Avenue – a path that Greenwood desires to reserve as the exclusive route for truck traffic. Not only do [the property owners] have an interest in collecting substantial damages, they also naturally have an interest in otherwise disrupting Martin’s use of Second Avenue.” The property owners’ overall interests are materially adverse to Greenwood’s interests, and as such Greenwood may demand that its former law firm not advocate for the property owners’ interests. The Court of Appeals thus affirmed the district court’s disqualification of Zerger and Mauer from the second litigation.