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U.S. Home Corporation v. Settlers Crossing, LLC

United States District Court, Fourth Circuit

October 3, 2013

U.S. HOME CORPORATION
v.
SETTLERS CROSSING, LLC, et al.

MEMORANDUM OPINION

DEBORAH K. CHASANOW, District Judge.

Presently pending and ready for resolution in this contract dispute is an objection filed by Plaintiff/Counter-Defendant U.S. Home Corporation and Counter-Defendant Lennar Corporation (together, "Lennar") to an order entered by United States Magistrate Judge William G. Connelly on June 21, 2013, granting an emergency motion for protective order filed by Defendant/Counter-Plaintiff iStar Financial, Inc. ("iStar"). (ECF No. 545). The issues are fully briefed and the court now rules pursuant to Local Rule 105.6, no hearing being deemed necessary. For the reasons that follow, the objection will be overruled.

I. Background

On June 7, 2013, iStar filed a motion for protective order seeking, inter alia, to quash a subpoena served by Lennar on iStar's testifying expert, Geosyntec Consultants, Inc. ("Geosyntec"). (ECF No. 519).[1] In support of its motion, iStar attached the declaration of its attorney, John A. Rosans. (ECF No. 519-3). Lennar opposed the motion, relying on the attached declaration of its general counsel, Mark Sustana. (ECF No. 523-1, at 4-7). The competing declarations and associated exhibits set forth the relevant facts as follows.[2]

iStar contacted Geosyntec's office in Columbia, Maryland, on or about March 11, 2010, "for the purpose of discussing whether Geosyntec could provide consultant services to assist [iStar] in preparing for trial." (ECF No. 519-3 ¶ 3). After conducting a conflicts check, Geosyntec advised iStar that it "had done work for Lennar and its holding companies in the past" and "had some active but completely unrelated Lennar projects on the west coast, " but that "none of the former or then current work for other Lennar-related entities posed a conflict of interest with respect to this litigation." ( Id. at ¶¶ 3, 6). On or about August 11, 2010, iStar engaged Geosyntec as a "consulting expert" in this matter. ( Id. at ¶ 7).

In March 2013, iStar approached Geosyntec "for the purpose of discussing whether [it] would be suited to serve as a testifying expert on matters unrelated to Geosyntec's previous work product, which had been conducted and prepared pursuant to the [consulting] engagement letter." ( Id. at ¶ 8). During a meeting on March 22, Geosyntec reconfirmed that its "work for Lennar was unrelated to this litigation and the substantive issues raised therein and that it otherwise did not pose any conflict of interest for Geosyntec." ( Id. ). iStar engaged Geosyntec as a "testifying expert" on or about April 12. ( Id. ).

On May 15, counsel for iStar served its expert reports on Lennar and other parties, including a report prepared by a Geosyntec environmental engineer.[3] Soon thereafter, counsel for Lennar contacted iStar's attorney to advise that "Geosyntec[] is and has been a consultant with Lennar on a variety of matters and, as a result, has a conflict that precludes Geosyntec from acting adverse to Lennar's interest in this case." (ECF No. 519-5). On the same date, Lennar's counsel directly contacted general counsel for Geosyntec and "made inquiry about Geosyntec's work for iStar in this litigation[.]" (ECF No. 519-3 ¶ 10).[4] Geosyntec reported this conversation to counsel for iStar, advising that "it would revisit its historical retention in this litigation and its conflict of interest processes." ( Id. ).

The next day, Geosyntec's general counsel sent the following email to counsel for Lennar:

Please be advised that I have looked into the history of this matter. When the engagement was commenced in 2009, [5] a conflicts check was conducted. Geosyntec concluded that there was no conflict of interest because it had done no work for Lennar at or near the site in question, the Geosyntec personnel involved have never been contracted to any work whatsoever for Lennar, and there was no potential breach of confidentiality obligations that were in place with Lennar when this project commenced.
Geosyntec's understanding of conflict rules applicable to engineers and scientists (where projects are approached on the basis of objective and technical expertise) is that they are different from those applicable to lawyers. The mere existence of a client relationship on unrelated project assignments does not necessarily present a conflict as long as there is no breach of confidentiality.
There is of course a possibility that the existence of the client relationship could make it difficult to express an opinion that could be adverse to the relationship and it is considered necessary to disclose the client relationship at the time of the subsequent engagement. Therefore, the fact that Geosyntec had a relationship with Lennar was disclosed to [iStar's counsel] at the time of the engagement, and [iStar] elected to retain Geosyntec nevertheless.
Because we believe that no conflict exists, and because of our commitment in undertaking engagement with [iStar's counsel], we feel that we are obligated to continue to perform that engagement. Our approach in dealing with these engagement issues has evolved with time and our current procedures would require notification to Lennar prior to accepting an expert witness role where Lennar is an adverse party - not because we view it as a conflict in our profession, but because of the relationship issues involved. This was not the policy at the time of the engagement in question.

(ECF No. 519-6, at 2).

A string of accusatory communications between counsel for iStar and Lennar followed. iStar expressed its "deep concern" regarding Lennar's direct contact with Geosyntec, which it viewed as constituting "a clear violation of Federal Rule 26(b)(4) and, by extension, rais[ing] significant ethical considerations." (ECF No. 519-7, at 2). Lennar complained that iStar had "known about Geosyntec's engagement by Lennar since 2009 and that [it] nevertheless elected to employ Geosyntec as an expert..., even as Geosyntec continued to accept substantial new matters from Lennar, including confidential assignments involving [the office of Geosyntec's general counsel]." (ECF No. 519-8).

The parties were required by Judge Connelly - to whom the case was referred for resolution of discovery disputes and other non-dispositive pre-trial matters - to submit weekly status reports advising of their progress. In a status report dated May 24, counsel for iStar represented to the court, in relevant part:

As indicated in last week's update, iStar served three expert reports on May 15, 2013. Among iStar's experts was an environmental engineer from Geosyntec Consultants, a firm with offices nationwide and that employs over 1, 000 engineers, geologists, scientists, and other technical specialists. Geosyntec has done no work for Lennar related to this property or this litigation. iStar, however, has learned the Lennar's general counsel, Mark Sustana, contacted Geosyntec directly on Monday regarding Geosyntec's retention and work in this matter.
Also on Monday, counsel for Lennar separately wrote to our office and claimed that Geosyntec "is and has been a consultant with Lennar on a variety of matters and, as a result, has a conflict that precludes Geosyntec from acting adverse to Lennar's interest in the case." We, along with Geosyntec, steadfastly disagree. Prior to our retention of Geosyntec on this matter in 2009, it is our understanding that Geosyntec conducted an internal conflicts check and concluded that there was no conflict of interest. It is also our understanding that Geosyntec has never done work for Lennar related to the Bevard site or this litigation, that the Geosyntec personnel involved in this matter had never been contracted to any work for Lennar, and that Geosyntec internally ensures that its confidentiality obligations to Lennar (and to iStar) are maintained. By email on Tuesday - as necessitated by Lennar's counsel's direct contact with Geosyntec - Geosyntec confirmed to Lennar directly that no conflict exists.

(ECF No. 523-1, at 22).

By a letter to Judge Connelly dated May 30, ...


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