Carnegie Companies, Inc. v. Summit Properties, Inc.

918 N.E.2d 1052 (2009)

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Nature of the Case

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Facts

P became interested in buying an office building in Twinsburg, Ohio, from D. P's President, Paul Pesses, began negotiating directly with D's lawyer, Stuart Laven, of the law firm of Ulmer & Berne LLP. The parties entered into a contract and, P deposited $50,000 in earnest money with an escrow company. P rescinded the contract and sought return of the earnest money. P sued D, seeking a declaratory judgment that D had breached the purchase agreement and P was entitled to return of its deposit. D answered the complaint and counterclaimed for breach of contract and fraud in the inducement. D claimed that it entered the agreement based on P's misrepresentation that the offer was not subject to financing, but P later backed out of the deal due to difficulty securing financing. D sought the $50,000 deposit, reimbursement of all fees and expenses, lost profits, and exemplary damages. D was represented in the litigation by Stuart Laven of Ulmer & Berne. P moved to disqualify Ulmer & Berne from representing D in this matter. P argued that it was a client of Ulmer & Berne at the time the litigation began and, therefore, lawyers from that firm could not ethically represent its opponent in this litigation without P's consent. P argued that Ulmer & Berne attorney Robert J. Karl, of the Columbus office, was representing it in an unrelated matter regarding its contemplated acquisition of property in Marietta, Ohio. P representatives asked Mr. Karl whether they would need to report to the Ohio EPA the release of chemicals by a former dry cleaner at the Marietta property. According to Mr. Karl, he was unable to advise P at that time due to incomplete information. Mr. Karl did not complete a conflict check or go through his firm's procedure for opening a new file in June 2007. Both sides agree that Mr. Karl never sent P an engagement or termination letter limiting the scope or timing of Ulmer & Berne's representation of P and Ulmer & Berne's bill for that telephone call did not in any way suggest it was a final bill. Stuart Laven, of Ulmer & Berne's Cleveland office, testified that he had worked as outside counsel for D since 1974. He admitted that he did not complete a conflict check when he began representing it against P in the Twinsburg transaction in August 2007. After P rescinded the Twinsburg deal, Mr. Laven ran a conflict check and learned that Ulmer & Berne lawyers had represented P in the past. Communications revealed that P was not a current client of the firm and, therefore, that the firm had no conflict of interest in representing D against P in the Twinsburg dispute. The trial court granted the motion to disqualify. It determined that Mr. Laven was not able to represent D in the Twinsburg matter against P without full disclosure and a waiver from both clients. It held that P was entitled to an award of attorney fees and expenses, based upon the finding of bad faith. D appealed.