Phillips v. Fashion Institute of Technology

Background

Marjorie Phillips sued Fashion Institute of Technology (FIT), her supervisor, and a coworker for employment discrimination and retaliation. FIT had been represented by Nixon Peabody, LLP, and Derek Sells of the Cochran Firm represented Phillips.

The district court had granted summary judgment for all defendants and closed the case. The Second Circuit affirmed the dismissal of Phillips’s claims against FIT and her supervisor, Mary Davis, but reversed the dismissal of her claims against coworker Marilyn Barton and sent those claims back to the district court for trial. FIT then sought final judgment and taxable costs concerning the claims that had been dismissed.

Before a court conference about FIT’s costs motion, Sells and another lawyer for Phillips spoke with Tara Daub, FIT’s lawyer. Sells proposed that FIT settle the costs motion by paying Phillips; Daub rejected the proposal. Sells then sent a demand letter directly to four FIT leaders—the president, general counsel, affirmative action officer, and vice president for human resources. The letter argued that FIT’s effort to recover costs was discriminatory and retaliatory. It was not sent to Daub or another Nixon Peabody lawyer.

FIT moved for sanctions under the court’s inherent authority, which allows a federal court to punish bad-faith litigation conduct. FIT requested attorneys’ fees, restrictions on direct contact with FIT, exclusion of the demand letter from evidence, restrictions on related litigation, and referral of Sells to the court’s Committee on Grievances.

Rule 4.2(a)

New York Rule of Professional Conduct 4.2(a) generally prohibits a lawyer representing a client from communicating about the representation directly with a person the lawyer knows is represented by another lawyer in the matter, unless the other lawyer consents or the law authorizes the communication.

For a represented organization, the rule ordinarily covers employees who supervise or regularly consult with the organization’s lawyer about the matter, can obligate the organization concerning the matter, or whose conduct could expose the organization to civil or criminal liability. The court did not have enough information to determine whether the affirmative action officer or vice president for human resources met those criteria. It found, however, that FIT’s president had authority to obligate FIT and therefore qualified as a represented party under the rule.

Court’s Analysis

The court rejected Sells’s argument that Nixon Peabody’s representation of FIT did not extend to the individual recipients. It also found that the demand letter plainly concerned the federal litigation: its caption identified the federal case, it described FIT’s effort to recover costs after the dismissal of Phillips’s claims against FIT, and the letter was sent before the separate state-court case was filed. The court further noted that Phillips’s other lawyer had raised the demand letter during the federal court conference.

The court also rejected Sells’s reliance on Rule 4.2(b), which concerns a lawyer causing the lawyer’s client to communicate with a represented person and requires reasonable advance notice. The court found that Rule 4.2(b) did not apply because Sells himself sent the letter. Rule 4.2(a), which required prior consent from FIT’s lawyer, governed instead. Based on Daub’s declaration and the absence of contrary evidence, the court found that Sells had not obtained that consent.

The court further found that Sells acted in bad faith. It reasoned that after Daub rejected his settlement proposal, Sells communicated directly with a represented FIT party about the same subject. The court inferred that he did not include Daub because he did not want her to see the communication, and it treated that as an improper purpose.

Disposition

The court found that Derek Sells violated Rule 4.2(a) in bad faith and determined that sanctions were appropriate. It ordered Sells to pay FIT all attorneys’ fees incurred in connection with FIT’s sanctions motion. The parties were ordered to meet and confer about the amount; if they could not agree, FIT was required to submit billing records and a short letter, followed by Sells’s response.

The court also ordered Sells and other attorneys at the Cochran Firm not to contact FIT employees who meet the criteria in Comment 7 to Rule 4.2 about the litigation without Nixon Peabody’s explicit permission.

The court declined to exclude the demand letter from evidence, bar future litigation or claims based on the letter, or refer Sells to the Committee on Grievances. The court warned that future violations or other ethical breaches could lead to a referral and stated that the order would be part of that record. The Clerk of Court was directed to grant FIT’s sanctions motion.