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Encore Energy, Inc. v. Morris Kentucky Wells, LLC

United States District Court, W.D. Kentucky, Bowling Green Division

May 6, 2019

ENCORE ENERGY, INC. PLAINTIFF
v.
MORRIS KENTUCKY WELLS, LLC DEFENDANT

          MEMORANDUM OPINION AND ORDER

          H. BRENT BRENNENSTUHL, UNITED STATES MAGISTRATE JUDGE

         Before the Court is the motion of Plaintiff, Encore Energy, Inc. (“Encore”), to Disqualify Attorney, Michael Vitale, and the law firm of English, Lucas, Priest, and Owsley, LLP (“ELPO”) from representing Morris Kentucky Wells, LLC (“Morris”) (DN 9). Defendant Morris has filed a response in opposition (DN 11). Encore filed a reply (DN 17). The matter stands submitted to the undersigned for ruling.

         Background

         This is a declaratory action brought by Encore seeking declaration from the Court that: 1) it is a “financial institution” within the meaning of 15 U.S.C. § 6801; 2) pursuant to 15 U.S.C. § 6801, Encore is prohibited from disclosing nonpublic personal information related to its investors; 3) 15 U.S.C. §6801 preempts Kentucky partnership law to the extent Kentucky law would require Encore to disclose nonpublic personal information related to investors; 4) pursuant to the Partnership Agreements, Morris has no right to the identities of other private investors in the Partnerships; 5) by virtue of 15 U.S.C § 6801 and the express terms of the Partnership Agreement, Morris is not entitled to receive any nonpublic personal information related to Encore's investors in the Partnerships; and 6) pursuant to the “turnkey” agreement contained within the offering memoranda, Morris is not entitled to information regarding Encore's expenditures and contracts (DN 1 PageID # 1-2). This action was filed in response to a lawsuit initiated by Morris in Warren Circuit Court seeking, inter alia, an order declaring the Partnerships general partnerships under Kentucky law and requiring Encore to disclose nonpublic personal information of other Partnership investors. The Warren Circuit action is held in abeyance pending the resolution of the present action (DN 9-2 PageID # 379, Exhibit A).

         Upon learning that attorney Michael S. Vitale and his law firm, ELPO, were retained to represent Morris in this matter, Encore sent a letter to ELPO notifying them that they believed ELPO's representation of Morris would be contrary to the Kentucky Rules of Professional Conduct. Encore claims, through prior representation of Encore, attorneys with ELPO became privy to confidential information relevant to the disputed issues in this action (Id. at 382-83, Exhibit B).

         ELPO represented Encore from May 2011 to March 2012 (DN 9-4 PageID # 386, Exhibit C; DN 11-1 PageID # 415). The scope of the representation was set forth in an engagement letter. The letter provided that ELPO would: 1) prepare and file documents to form Encore Holdings, LLC-the majority stockholder of Plaintiff, Encore Energy Inc.; 2) provide advice on an as-requested basis concerning human resources and real estate issues; and 3) represent Encore executives in litigation against Allied Energy, Inc. The engagement letter explicitly states ELPO was not retained to provide advice on securities or regulatory matters (Id. at 386-89).

         Discussion

         “The ethical standards by which federal courts measure an attorney's professional conduct are standards defined by federal law.” Carlsen v. Thomas, 159 F.R.D. 661, 663 (E.D. Ky. 1994). Attorneys that practice in the Western District of Kentucky must follow the standards set forth in the Rules for Professional Conduct as adopted by the Kentucky Supreme Court. Harper v. Everson, 2016 U.S. Dist. LEXIS 187887 at *7-8 (W.D. Ky. 2016); See 6th Cir. R. 469b); See LR 83.1, 83.2, 83.3; Ky. Sup. Ct. R. 3.130. Kentucky Rule of Professional Conduct 1.9 governs questions of disqualification. Entitled “Duties to former clients, ” Rule 1.9 states in relevant part:

(a) 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.
(c) A lawyer who has formerly represented a client in a matter or whose present or former firm has formerly represented a client in a matter shall not thereafter:
(1) use information relating to the representation to the disadvantage of the former client except as these Rules would permit or require with respect to a client, or when the information has become generally known; or
(2) reveal information relating to the representation except as these Rules would permit or require with respect to a client.

         The Sixth Circuit has articulated a three-part test for disqualifying counsel that tracks Rule 1.9. An attorney should be disqualified only if a Court finds that 1) a past attorney-client relationship existed between the party seeking disqualification and the attorney it seeks to disqualify; 2) the subject matter of those relationships was substantially related; and 3) the attorney acquired confidential information from the party seeking disqualification. Dana Corp. v. Blue ...


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