Second Circuit Reverses Order Disqualifying Debevoise & Plimpton In MetLife Demutualization Litigation

Policyholders of the Metropolitan Life Insurance Company when it was a mutual insurance company brought suit in April 2000, complaining that they had been misled and shortchanged in the transaction by which the company had demutualized. Nine years after the action was commenced – and five weeks before trial was scheduled to begin – the plaintiffs moved to disqualify the lead counsel for MetLife, Debevoise & Plimpton LLP. The grounds alleged related to that firm's representation of MetLife in the underlying demutualization; the plaintiffs also asserted that the witness-advocate rule required disqualification because four Debevoise lawyers who worked on the demutualization would give testimony adverse to MetLife at trial. U.S. District Court Judge Thomas C. Platt granted the motion to disqualify on September 1; the district court then stayed its order and immediately certified the issue to the U.S. Court of Appeals for the Second Circuit.

 
The Second Circuit reversed the district court and, yesterday, it issued a written opinion setting forth its reasoning. The appellate court held "that a law firm can be disqualified by imputation only if the movant proves by clear and convincing evidence that [A] the witness will provide testimony prejudicial to the client, and [B] the integrity of the judicial system will suffer as a result." It then concluded that Debevoise should not have been disqualified because it did not have an attorney-client relationship with the policyholders by virtue of its representation of MetLife and the plaintiffs failed to establish that the purported violation of the “witness-advocate” rule in this case would warrant disqualification.
 
The decision is In re MetLife Demutualization Litigation, 09-3716-cv (2d Cir. Sept. 29, 2009).