CAREPOINT HEALTH MANAGEMENT ASSOCIATES LLC v. RWJ BARNABAS HEALTH INC.

UNITED STATES DISTRICT COURT

DISTRICT OF NEW JERSEY

Civil Action No. 22-5421 (EP) (CLW)

CAREPOINT HEALTH

MANAGEMENT ASSOCIATES LLC, et

al., *FILED UNDER SEAL*

Plaintiffs,

OPINION AND ORDER

RWJ BARNABAS HEALTH, INC.,

Defendant.

CATHY L. WALDOR, U.S.M.J.

This comes before the Court upon Plaintiffs’ motion to disqualify Proskauer Rose LLP

from serving as counsel for Defendant. (ECF No. 117). The Court conducted oral argument on

this issue on November 20, 2024. (Tr. of Nov. 20, 2024 Hr’g, ECF No. 151). Upon careful

consideration of the record for this matter, and for good cause shown, and for the reasons discussed

herein, Plaintiffs’ motion is DENIED.

I. RELEVANT BACKGROUND AND PROCEDURAL HISTORY

Plaintiffs commenced this matter on September 9, 2022, filing a Complaint alleging that

Defendant RWJ Barnabas Health, Inc. engaged in “a years-long systematic effort . . . in conspiracy

with others, to destroy competition and to monopolize the provision of general acute care hospital

services and related health care services in northern New Jersey.” (Compl. ¶ 1, ECF No. 1).

Plaintiffs asserted claims against Defendant under the Sherman Act, 15 U.S.C. § 1, and the New

Jersey Antitrust Act, N.J.S.A. 56:9-1, et seq., and seek both monetary and injunctive relief. (Id. ¶¶

232-249).

Plaintiffs filed an Amended Complaint on September 14, 2022, (ECF No. 8), and the

parties thereafter submitted a proposed briefing schedule on Defendant’s anticipated motion to

dismiss. That schedule, which the undersigned adopted, required Defendant to serve, but not file,

any motion to dismiss on or before November 21, 2022. (Oct. 13, 2022 Order, ECF No. 13). The

record reflects that Defendant did so. (Walsh Decl., Ex. 6, ECF No. 129-7). Plaintiffs ultimately

amended their pleading twice more, (ECF Nos. 19, 24, 27), and Defendant moved to dismiss

Plaintiffs’ Third Amended Complaint in accordance with a Court-approved briefing schedule.

(ECF Nos. 26, 28-30).

Once the parties finished briefing Defendant’s motion, the undersigned set an initial

scheduling conference, (May 18, 2023 Order, ECF No. 31), and the parties submitted both a Joint

Proposed Discovery Plan and proposed scheduling order in advance. The undersigned denied

Defendant’s request to stay discovery pending resolution of its motion to dismiss and adopted the

parties’ discovery schedule. (June 21, 2023 Order, ECF No. 37). The parties thereafter proceeded

with discovery in earnest.1

By letter dated August 8, 2024, Plaintiffs’ counsel first advised the Court of their “concerns

about a conflict involving Proskauer’s prior representation of CarePoint”, as well as their intention

to file a motion to disqualify the Proskauer firm based on that alleged conflict. (Aug. 8, 2024

Letter, ECF No. 114).2 Plaintiffs made that revelation in connection with Defendant’s informal

application to compel Plaintiffs to provide interrogatory responses,3 noting that Proskauer’s pursuit

1 Defendant appealed the stay decision to the Hon. Evelyn Padin, U.S.D.J., who ultimately denied

that application as moot after denying Defendant’s motion to dismiss. (Nov. 17, 2023 Order, ECF

No. 62). The parties nevertheless engaged in discovery while Defendant’s appeal was pending.

2 The record reflects that, while Plaintiffs first alerted the Court about the potential conflict issue

on August 8, 2024, they previously raised the issue with defense counsel on July 12, 2024. (Id.).

3 Defendant first made that application by letter dated May 10, 2024. (ECF No. 97).

of that discovery forced them to seek disqualification. (Id.). Plaintiffs filed their disqualification

motion the following day, (ECF No. 117), and that application is fully briefed. (ECF Nos. 129,

132). With leave of Court, Plaintiffs and Proskauer each made ex parte submissions on August 30,

2024, consisting of privileged documents related to Proskauer’s previous representation of

CarePoint. The Court conducted oral argument on November 20, 2024, and Plaintiffs’ motion is

now ripe for resolution.

II. LEGAL DISCUSSION

a. An Overview of the Parties’ Arguments

Plaintiffs argue that Rule of Professional Conduct (“RPC”) 1.9(a) bars Proskauer from

representing Defendant in this matter and ask the Court to disqualify the firm on that basis.

(Generally Pl. Br., ECF No. 117-1). Specifically, in April 2020, Vivek Garipalli, acting on behalf

of CarePoint Health, retained Proskauer “to provide advice regarding [Coronavirus Aid, Relief,

and Economic Security Act, Pub. L. No. 116-136, 134 Stat. 281 (“CARES Act”)] relief eligibility,

compliance and use of funds.” (April 27, 2020 Engagement Letter at 1, ECF No. 117-3). Plaintiffs

contend that while “the representation initially concerned CarePoint’s eligibility for and spending

of federal dollars from the [CARES Act], it grew beyond that . . . Proskauer would come to advise

CarePoint regarding the permissibility of rent payments, loans, and related-party transactions in

the midst of its financial troubles and receipt of federal dollars.” (Pl. Br. at 1, ECF No. 117).

Plaintiffs argue that this litigation is “substantially related” to that prior representation and that,

because Plaintiffs did not provide informed consent for Proskauer’s participation in this case, RPC

1.9(a) prohibits Proskauer from appearing on Defendant’s behalf. (Pl. Br. at 7-11, ECF No. 117-

1; Reply Br. at 3-12, ECF No. 132).

Defendant raises several points in its opposition. Most fundamentally, Defendant argues

that this litigation is not “substantially related” to its previous work for CarePoint, and thus RPC

1.9(a) is inapplicable. (Opp. Br. at 29-38, ECF No. 130). Defendant further contends that

CarePoint has waived any conflict – either expressly (through an “advance waiver” embedded in

its retainer agreement with Proskauer or through separate consent that CarePoint provided at the

outset of this matter) or equitably (by failing to timely raise the conflict issue). (Id. at 15-24).

b. Legal Standards On a Motion for Disqualification Under RPC 1.9(a)

The United States Court of Appeals has noted that “[a] court may use its inherent

disciplinary power over the advocates appearing before it to disqualify an attorney.” In re Boy

Scouts of Am., 35 F.4th 149, 159 (3d Cir. 2022) (citing In re Corn Derivatives Antitrust Litig., 748

F.2d 157, 160 (3d Cir. 1984)). “Although disqualification ordinarily is the result of a finding that

a disciplinary rule prohibits an attorney’s appearance in a case, disqualification never is

automatic.” United States v. Miller, 624 F.2d 1198, 1201 (3d Cir. 1980). “Even when an ethical

conflict exists (or is assumed to exist), a court may conclude based on the facts before it that

disqualification is not an appropriate remedy.” In re Boy Scouts of Am., 35 F.4th at 160. “Relevant

factors depend on the specifics of the case, but generally include the ability of litigants to retain

loyal counsel of their choice, the ability of attorneys to practice without undue restriction,

preventing the use of disqualification as a litigation strategy, preserving the integrity of legal

proceedings, and preventing unfair prejudice.” Id. Thus, the Court must first determine whether

counsel have run afoul of an ethical rule and, if so, consider whether disqualification would be an

appropriate remedy under the relevant circumstances.

“The conduct of attorneys practicing in federal court is governed by the local rules of the

court.” Id. at 159. In the District of New Jersey, Local Civil Rule 103.1(a) addresses attorney

conduct and provides: “The Rules of Professional Conduct of the American Bar Association as

revised by the New Jersey Supreme Court shall govern the conduct of the members of the bar

admitted to practice in this Court, subject to such modifications as may be required or permitted

by Federal statute, regulation, court rule or decision of law.” Given this District’s reliance on New

Jersey’s Rules of Professional Conduct, “‘New Jersey courts are the primary authority when

applying [those Rules] to controversies.’” Shaikh v. Germadnig, No. 22-cv-2053 (GC) (RLS),

2022 WL 16716116, at *2 (D.N.J. Nov. 4, 2022), aff’d, No. CV 22-2053 (RK) (JBD), 2023 WL

4534127 (D.N.J. July 13, 2023), order aff’d, appeal dismissed, No. 23-2301, 2024 WL 2861845

(3d Cir. June 6, 2024) (quoting Chi Ming Yau v. He Cheng Rest. Corp., No. 12-cv-6754 (MCA),

2015 WL 3540596, at *4 (D.N.J. June 2, 2015)). The Superior Court of New Jersey, Appellate

Division, has observed that “[r]equests to disqualify an opponent’s attorney are generally viewed

with disfavor given ‘their potential abuse to secure tactical advantage.’” State v. Habel, No. A-

4004-19T4, 2020 WL 7419067, at *2 (N.J. Super. Ct. App. Div. Dec. 18, 2020) (quoting Escobar

v. Mazie, 460 N.J. Super. 520, 526 (App. Div. 2019)). Within this District, “it is well settled that

because motions to disqualify can have such drastic consequences, courts disfavor such motions

and grant them only ‘when absolutely necessary.’” Rohm & Haas Co. v. Am. Cyanamid Co., 187

F. Supp. 2d 221, 226 (D.N.J. 2001) (quoting Alexander v. Primerica Holdings, Inc., 822 F.Supp.

1099, 1114 (D.N.J.1993)).

Plaintiffs seek disqualification under RPC 1.9(a), which provides: “A lawyer who has

represented a client in a matter shall not thereafter represent another client in the same or a

substantially related matter in which that client’s interests are materially adverse to the interests of

the former client unless the former client gives informed consent confirmed in writing.” N.J. Rules

Prof’l Conduct R. 1.9(a). In City of Atl. City v. Trupos, the Supreme Court of New Jersey explained

that RPC 1.9(a)’s “prohibition is triggered when two factors coalesce: the matters between the

present and former clients must be ‘the same or ... substantially related,’ and the interests of the

present and former clients must be ‘materially adverse.’” 992 A.2d 762, 771 (N.J. 2010). “RPC

1.10 imputes an attorney’s conflict of interest under RPC 1.9 onto other lawyers in his or her firm.”

Matter of Est. of Krivulka, No. A-0803-21, 2022 WL 3693103, at *8 (N.J. Super. Ct. App. Div.

Aug. 26, 2022).

The Trupos court also clarified the procedure applicable when a litigant seeks

disqualification under RPC 1.9(a):

In the process, the initial burden of production—that the lawyer(s)

for whom disqualification is sought formerly represented their

present adverse party and that the present litigation is materially

adverse to the former client—must be borne by the party seeking

disqualification . . . If that burden of production or of going-forward

is met, the burden shifts to the attorney(s) sought to be disqualified

to demonstrate that the matter or matters in which he or they

represented the former client are not the same or substantially

related to the controversy in which the disqualification motion is

brought. That said, the burden of persuasion on all elements under

RPC 1.9(a) remains with the moving party, as it “bears the burden

of proving that disqualification is justified.”

992 A.2d at 771 (internal citation omitted). Given the disfavored nature of disqualification, that

burden is a “heavy” one. Rohm & Haas Co., 187 F. Supp. 2d at 226-27 (“A party seeking

disqualification must meet a ‘heavy burden’ of proof before a court will disqualify an attorney or

law firm.”) (citations omitted).

While most of the elements of RPC 1.9(a) are straightforward and require little

interpretation (i.e., whether a lawyer previously represented a client, whether a current

representation is “materially adverse” to that former client’s interest, and whether the

representations involve the “same” matter), the question of whether two matters are “substantially

related” is more complex. In Trupos, the New Jersey Supreme Court provided guidance by

“distill[ing]” the relevant case law into the following “workable standard”:

[F]or purposes of RPC 1.9, matters are deemed to be “substantially

related” if (1) the lawyer for whom disqualification is sought

received confidential information from the former client that can be

used against that client in the subsequent representation of parties

adverse to the former client, or (2) facts relevant to the prior

representation are both relevant and material to the subsequent

representation.

992 A.2d at 774. The Trupos court further explained that it adopted that standard “because it

protects otherwise privileged communications . . . while also requiring a fact-sensitive analysis to

ensure that the congruity of facts, and not merely similar legal theories, governs whether an

attorney ethically may act adverse to a former client.” Id.

c. Plaintiffs Have Not Established That Proskauer’s

Representation of Defendant in this Matter Violates RPC 1.9(a)

As an initial matter, the Court finds that both sides have met their respective burdens of

production. First, Plaintiffs have demonstrated, through certifications and exhibits, that Proskauer

previously represented CarePoint Health. (E.g., Cert. of William Pelino ¶¶ 3-4, ECF No. 132-1).

Second, Defendant’s role in this litigation is unquestionably adverse to CarePoint’s interests.

Neither point is in legitimate dispute. The burden of production thus shifts to Defendant to show

that this litigation is neither “the same” nor “substantially related” to Proskauer’s prior work for

CarePoint. It has met that burden through the submission of exhibits and arguments demonstrating

the differences between that prior work and this case. (See, e.g., Decl. of David Manko, ECF No.

130-2; Decl. of William Walsh, Ex. 2, ECF No. 129-3; Opp. Br. at 4-8, 30-32, ECF No. 130). The

Court must now move to the final stage of the inquiry and determine whether Plaintiffs have carried

their burden of persuasion in proving that disqualification would be appropriate under RPC 1.9(a).

Trupos, 992 A.2d at 771. The Court finds they have not done so.

RPC 1.9(a) prohibits Proskauer from participating in a subsequent, adverse representation

that is either “the same” or “substantially related” to the work it performed for CarePoint. Plaintiffs

do not contend that the matters in question are “the same”, nor would the record support such a

finding. The Court therefore focuses its analysis on whether the matters are “substantially related”

as the New Jersey Supreme Court defined that phrase in Trupos. 992 A.2d at 774. Thus, the Court

must determine whether Plaintiffs have proven either that (1) Proskauer received confidential

information from CarePoint that it can use against CarePoint in this litigation; or (2) facts relevant

to Proskauer’s prior representation of CarePoint are both relevant and material to this litigation.

Id.

As to the former point, Plaintiffs have not established that CarePoint provided Proskauer

with “confidential information” that the firm might use against Plaintiffs in this case. Plaintiffs

did not address the issue in their moving brief, opting instead to wait for Defendant to meet its

burden of production. (Generally Pl. Br., ECF No. 117-1). In their reply brief, Plaintiffs simply

assume that Proskauer obtained such information, (Rep. Br. at 11, ECF No. 132) (“It is nonetheless

inconceivable that Proskauer would not have been privy to client confidences and confidential

information.”), without identifying any,4 let alone describing how Proskauer might use it against

CarePoint here. Indeed, Plaintiffs argued that they have no obligation to do so, given the

disjunctive nature of the Trupos court’s “substantially related” test. (Id. at 9-11). This is

particularly significant given the Court’s understanding that the New Jersey State Commission of

Investigation conducted a years-long investigation into CarePoint’s dealings, including its

financial circumstances, and that the investigation culminated in the creation of a publicly

4 Plaintiffs certainly know what CarePoint gave to Proskauer, having themselves provided the

Court with a voluminous collection of such materials for in camera review.

available report. As Plaintiffs have not met their burden of persuasion regarding Proskauer’s

receipt of confidential information, the Court moves to the Trupos court’s second substantial

relationship test: whether facts relevant to Proskauer’s prior representation are both relevant and

material in this case.

Plaintiffs contend that, because Proskauer previously provided CarePoint with legal advice

regarding certain related-party transactions, and because Defendant has now (1) raised such

transactions as part of its defense against Plaintiffs’ claims in this case; and (2) sought extensive

discovery on those transactions, the concept of related-party transactions is relevant and material

to both representations. (Pl. Br. at 3, ECF No. 117-1) (“CarePoint counsel determined that

responses to Proskauer’s discovery demands directly implicate Proskauer’s prior representation of

CarePoint”); (id. at 5) (“By pursuing their strategy of blaming CarePoint’s Founders, several of

whom Proskauer apparently had attorney-client communications [with] . . . Proskauer has now

caused this litigation to be substantially related to Proskauer’s prior representation of CarePoint.”);

(Pl. Reply at 8, ECF No. 132) (“Here, Proskauer had attorney-client communications with two

Founders and it exchanged information and advice with CarePoint regarding related-party

transactions. Proskauer’s primary defense of Barnabas now centers around an obsession over the

minutiae of Founder related-party payments at CarePoint. That is a congruity of facts.”). Plaintiffs

further represented that they would “be able to make a straightforward evidentiary case that

disqualification is required” on these grounds by submitting “documentary evidence to the Court

for in camera review”. (Pl. Reply at 2, ECF No. 132).

The Court has now reviewed the parties’ ex parte submissions, which are composed of

correspondence and other documents regarding, among other things, the related-party transactions

at issue in Plaintiffs’ argument. After careful consideration of those materials, the Court finds that

Plaintiffs have not established that the information in question is relevant and material to

Proskauer’s current representation of Defendant. Specifically, while Plaintiffs suggest that

Proskauer provided advice to CarePoint regarding the propriety of making related-party

transactions, generally, (Pl. Br. at 1-2, ECF No. 117-1; Pl. Reply at 3, 8, ECF No. 132), their in

camera submission belies that idea. Rather, Proskauer provided forward-looking advice about

whether the use of specific government funds for a small number of hypothetical transactions

would pass muster under the relevant rules and regulations. It appears that the only “related-party”

involved was a single hospital’s landlord. As one Proskauer attorney involved in the prior

representation described the firm’s involvement: “Proskauer only provided advice concerning the

permissibility of Christ Hospital making rent payments to a related party, and the implications of

repaying a loan, using CARES Act funds.” (Decl. of David A. Manko, ¶ 7, ECF No. 130-2).

Having reviewed the parties’ full in camera submissions in detail, the Court finds that summary to

be accurate.

Plaintiffs have not established how the specific, hypothetical related-party transaction at

issue in Proskauer’s prior representation of CarePoint is relevant and material to this case. Rather,

it seems that Plaintiffs suggest that Proskauer may be extrapolating that CarePoint engaged in other

related-party transactions (i.e., a CarePoint hospital had a related-party landlord, so CarePoint may

have engaged in other related-party transactions). Stretched supposition is not fact, however, and

a congruency of facts is necessary to trigger RPC 1.9(a)’s restrictions on legal representation. The

same is true for Plaintiffs’ reference to Proskauer’s involvement with a specific loan forbearance

agreement. (Tr. of Nov. 20, 2024 Hr’g at 20:20-25, ECF No. 151). In sum, the Court finds that

Plaintiffs have not shown that this case is substantially related to Proskauer’s previous

representation of CarePoint. Plaintiffs have therefore not met their “heavy” burden of proving that

Proskauer’s representation of Defendant runs afoul of RPC 1.9(a).

d. Even If a Conflict Existed, Plaintiffs Have Waived It Through Their Delay

Even if the Court were to assume, without deciding, and for the sake of this motion only,

that Proskauer’s participation in this case violates RPC 1.9(a), disqualification would be

inappropriate as Plaintiffs have waived the issue. While the Court notes that Defendant has raised

three distinct waiver arguments, see discussion supra Section II(a), it will focus first on

Defendant’s argument for implicit or equitable waiver based on Plaintiffs’ delay in seeking

disqualification. Given their prolonged delay, the Court finds that Plaintiffs have waived the right

to seek such relief.

The Court begins by noting that the parties disagree on the applicable legal standard.

Defendant argues that the Court should apply the five-factor test that Judge Lechner described in

Alexander v. Primerica Holdings, Inc., 822 F. Supp. 1099 (D.N.J. 1993). That test is as follows:

In determining whether the moving party has waived its right to

object to the opposing party’s counsel, consideration must be given

to (1) the length of the delay in bringing the motion to disqualify, (2)

when the movant learned of the conflict, (3) whether the movant was

represented by counsel during the delay, (4) why the delay occurred

and (5) whether disqualification would result in prejudice to the non-

moving party.

(Id. at 1115). Judges in this District have routinely applied the Alexander factors when evaluating

whether a party has waived the right to seek disqualification. E.g., Dill v. Yellin, No.22-cv-6116

(SRC), 2024 WL 1928359, at *2 (D.N.J. May 2, 2024) (Judge Chesler); Fragoso v. Zhejun Piao,

433 F. Supp. 3d 623, 627 (D.N.J. 2019) (Judge Quraishi); Residences at Bay Point Condo. Assoc.,

Inc. v. Chernoff Diamond & Co., LLC, No. 16-cv-5190 (MCA), 2017 WL 3531683, at *12 (D.N.J.

Aug. 17, 2017) (Judge Hammer); Chi Ming Yau v. He Cheng Rest. Corp., No. 12-cv-6754 (MCA),

2015 WL 3540596, at *6 (D.N.J. June 2, 2015) (Judge Dickson). Plaintiffs contend that both the

New Jersey Supreme Court and Appellate Division have rejected the Alexander test, finding

instead that waiver is only appropriate in “extraordinary circumstances”. (Reply Br. at 15, ECF

No. 132) (citing Twenty-First Century Rail Corp. v. New Jersey Transit Corp., 44 A.3d 592, 600,

n.6 (N.J. 2012); Matter of Est. of Krivulka, No. A-0803-21, 2022 WL 3693103, at *12 (N.J. Super.

Ct. App. Div. Aug. 26, 2022)).

In light of the parties’ disagreement, the Court makes several observations. First, while the

District of New Jersey certainly looks to New Jersey state court decisions for guidance in

interpreting and applying the Rules of Professional Conduct, it is not bound by them. Fragoso,

433 F. Supp. 3d at 627 (citing Carlyle Towers Condo. Ass’n, Inc. v. Crossland Sav., FSB, 944 F.

Supp. 341, 345 (D.N.J. 1996); L. Civ. R. 103.1 (specifying that while New Jersey’s RPC apply to

attorneys practicing in this District, those Rules are “subject to such modifications as may be

required or permitted by Federal statute, regulation, court rule or decision of law.”) (emphasis

added). Second, in this instance the Court is neither interpreting nor applying the Rules; that phase

is over. The Court has assumed for the sake of argument that Proskauer’s conduct violates RPC

1.9(a) and is now addressing the distinct issue of whether Plaintiffs have, through their delay,

implicitly waived the right to seek disqualification. The Court is not persuaded that the state courts

have any special expertise on such matters. Third, given the specific circumstances of this case,

in which Defendant’s waiver argument is based on Plaintiffs’ nearly twenty-month delay in seeking

disqualification, the distinction appears to be semantic. The Appellate Division has recognized

that “[r]ather than applying the five Alexander factors, New Jersey published opinions have

recognized that undue delay may amount to ‘extraordinary circumstances’ justifying permitting a

conflicted firm to continue representation.” Matter of Est. of Krivulka, 2022 WL 3693103, at *13.

Thus delay, if sufficiently egregious, can serve as a basis for waiver under either approach. In any

event, this Court finds that an application of the Alexander factors, which examine the length of

and reasons for a delay, as well as the prejudicial effect on the nonmoving party, strikes the most

appropriate balance.

The first two Alexander factors, which require the Court to determine when the moving

party learned of a conflict and the length of that party’s delay in seeking disqualification, are related

and the Court will consider them together. Plaintiffs argue that Defendant’s April 2024 discovery

requests, which sought “voluminous and granular” information regarding Plaintiffs’ related-party

transactions, first gave them reason to believe that Proskauer was weaponizing information it

obtained while representing CarePoint. (Reply Br. at 17, ECF No. 132). Specifically, Plaintiffs

contend that their “investigation into Proskauer’s everything quest for ‘the Founders’ fraud,

mismanagement, and cash extractions’ . . . ultimately led back to Proskauer.” (Id.). Describing

the alleged conflict more generally, Plaintiffs argue: “[a]gainst its former client, Proskauer

explicitly aims to prove that Barnabas’s anti-competitive conduct did not cause harm to CarePoint

by trying to uncover evidence that CarePoint and its Founders were separately misusing its funds.”

(Pl. Br. at 3, ECF No. 117-1). The record reflects, however, that Plaintiffs have been on notice of

Defendant’s “founder fraud” argument since November 21, 2022, when Defendant served its

original motion to dismiss. In the brief in support of that motion, Defendant argued, in relevant

part: “[CarePoint’s] difficult times were caused by the Founders’ extraction of case from their

hospitals. According to a report by the New Jersey Commission of Investigation, CarePoint

hospitals paid the Founders over $157 million in ‘questionable management fees and allocations’

that ‘dwarfed’ the hospitals’ own ‘operating margins.’” (Walsh Decl., Ex. 6 at 6-7, ECF No. 129-

7). Defendant restated that point in the parties’ June 13, 2023 Joint Proposed Discovery Plan,

(Walsh Decl., Ex. 7, ECF No. 129-8), and explicitly sought discovery regarding payments

Plaintiffs made to the Founders and other related-parties (“any entity in which the Founders have

a direct or indirect financial interest”) in its First Set of Document Requests dated June 24, 2023.

(Walsh Decl., Ex. 8, ECF No. 129-9). Given that Plaintiffs have been on notice of Defendant’s

“founder fraud” argument since November 2022, received multiple confirmations of that strategy

in June 2023, and yet first raised the issue in July 2024 – a delay of well over a year, by any metric

– the Court finds that the first and second Alexander factors favor waiver.

Turning to the third factor, Dilworth Paxson LLP has served as Plaintiffs’ counsel at all

times relevant to the disqualification issue. Plaintiffs’ counsel has also been aware of Proskauer’s

prior representation of CarePoint throughout that period. As for the fourth factor, the Court must

examine the reason for the movant’s delay in seeking disqualification. Alexander, 822 F. Supp. at

1115. Given that the Court does not find Plaintiffs’ explanation regarding the timing of their

motion (i.e., that they only learned of the potential conflict after reviewing Defendant’s April 2024

discovery requests) to be credible in light of the motion record, the timing of Plaintiffs’ motion,

made in close correlation with Plaintiffs’ recent decision to resume litigating this case aggressively

after months of financial-related delay, strongly suggests that Plaintiffs’ application may be an

attempt to secure a litigation advantage. Rohm & Haas Co., 187 F. Supp. 2d at 229-30 (“The

essence of this analysis is whether the party seeking disqualification as a tactical maneuver.”).

Both the third and fourth Alexander factors therefore weigh in favor of waiver.

Finally, the Court must examine whether Proskauer’s disqualification would result in

prejudice to Defendant. Alexander, 822 F. Supp. at 1115. The Court finds that it would, and that

such prejudice would be significant. Proskauer has represented Defendant in this litigation for

over two years, and counsel represents that Defendant has “invested thousands of hours in

Proskauer”. (Def. Br. at 25, ECF No. 130). That investment, of course, continued for more than

a year after Plaintiffs first received the sort of information that they now contend put them on

notice of Proskauer’s conflict. Defendant has made an incredible investment of both time and

money that would be wasted if the Court were to grant disqualification at this juncture. Defendant

would have to start from scratch with any new counsel, and devote the extensive time and financial

resources necessary to bring those attorneys up to speed. This factor therefore weighs in favor of

waiver. Rohm & Haas Co., 187 F. Supp. 2d at 231 (finding prejudice where “[i]t would require a

substantial effort and a tremendous expenditure of legal fees to prepare a new law firm to litigate

this matter at this late stage of litigation”).

Each of the Alexander factors favors waiver here. Moreover, the Court finds that Plaintiffs’

delay in raising the disqualification issue – between 13 and 19 months, depending on whether the

Court uses Defendant’s original motion to dismiss or its June 2023 discovery requests as the

triggering event – is consistent with the period that Courts have found sufficient for waiver

purposes. See id. (collecting cases and noting delays of between thirteen months and nearly three

years). The Court therefore finds that, even if Proskauer’s participation in this case amounts to a

violation of RPC 1.9(a), Plaintiffs have waived the right to seek disqualification here. In light of

this determination, the Court need not, and does not, reach Defendant’s other waiver arguments

(i.e., “advance” waiver pursuant to the retainer agreement between CarePoint and Proskauer, or

“express waiver” pursuant to the October 2021 e-mail exchange between Proskauer and counsel

for CarePoint).

III. CONCLUSION

Based on the foregoing, it is on this 27th day of November, 2024,

ORDERED that Plaintiffs’ motion for disqualification, (ECF No. 117), is DENIED; and

it is further

ORDERED that the stay of the deadlines for appealing this Court’s rulings regarding the

New Jersey State Commission of Investigation’s motion for a protective order, (ECF No. 99),

Defendant’s cross-motion to compel, (ECF No. 105), and the Commission of Investigation’s

motion for reconsideration, (ECF No. 137), is hereby lifted. The period for appeal shall begin

running as of the date of this Order; and it is further

ORDERED that the New Jersey State Commission of Investigation’s deadline for

responding to the subpoena at issue in the aforementioned motions shall remain stayed pending

resolution of any appeal to the District Court. In the event that no party timely appeals, the New

Jersey State Commission of Investigation shall respond to that subpoena on or before January

10, 2025; and it is further

ORDERED that, as the Court has referred herein to information that one or more parties

have submitted either in camera or under seal, the Clerk of the Court shall file this Opinion and

Order under temporary seal. If a party seeks to maintain any portion of this Opinion and Order

under seal, that party shall file a motion complies with the requirements of Local Civil Rule 5.3

on or before December 13, 2024. Any such motion must include a proposed redacted version of

the Opinion and Order.

s/ Cathy L. Waldor

Hon. Cathy L. Waldor, U.S.M.J.