THIS OPINION WAS INITIALLY ISSUED UNDER PROTECTIVE ORDER AND IS BEING RELEASED TO THE PUBIC IN REDACTED FORM ON OCTOBER 22, 1993 _________________________________________________________________ INTERVENOR'S MOTION FOR DISQUALIFICATION GRANTED: OCTOBER 18, 1993 __ _________________________________________________________________ GSBCA 12586-P, 12599-P, 12629-P CLEVELAND TELECOMMUNICATIONS CORPORATION AND METRICA, INC., and ANSTEC, INC., and TRI-COR INDUSTRIES, INC., Protesters, v. NATIONAL AERONAUTICS AND SPACE ADMINISTRATION, Respondent, and RECOM TECHNOLOGIES, INC., Intervenor. Carl E. Anderson of Arter & Hadden, Cleveland, OH; and David R. Smith and Bridnetta D. Edwards of Alexander, Gebhardt, Aponte & Marks, Washington, DC, counsel for Protester Cleveland Telecommunications Corporation and Metrica, Inc. James J. Regan and Kathryn D. Kirmayer of Crowell & Moring, Washington, DC, counsel for Protester ANSTEC, Inc. Kenneth S. Kramer, William A. Davis, and Shannon L. Haralson of Fried, Frank, Harris, Shriver & Jacobson, Washington, DC, counsel for Protester Tri-Cor Industries, Inc. Sumara M. Thompson-King, Office of the General Counsel, National Aeronautics and Space Administration, Washington, DC; and Laura Henry, Office of the General Counsel, National Aeronautics and Space Administration, Cleveland, OH, counsel for Respondent. John J. Fausti and Kathryn Adah Stackhouse, Washington, DC, counsel for Intervenor. BORWICK, Board Judge. This protest involves a challenge, mounted by ANSTEC Inc., to the potential award by the National Aeronautics and Space Administration (NASA) of a contract for computational, administrative, professional, and engineering services (CAPES) to Recom Technologies, Inc. (Recom). Recom seeks the disqualification of ANSTEC litigation counsel, Crowell & Moring, because Crowell & Moring currently represents a sister subsidiary (Sterling Software U.S.A.) of a major proposed subcontractor on Recom's proposal team (Sterling Software U.S.). Recom relies on District of Columbia Rule of Professional Conduct 1.7(b).1 We grant the motion to disqualify. Sterling Software (U.S.) is heavily involved in Recom's proposal team and will inevitably be involved in the litigation against Crowell & Moring's client, ANSTEC. Sterling Software (U.S.A.), the other current client of Crowell & Moring, is in the same general business as Sterling Software (U.S.), shares l services through the parent, and shares with Sterling Software (U.S.). The relationship is so intertwined as to produce a strong likelihood of a problem of dual loyalty arising from the simultaneous representation of Sterling and ANSTEC. Background Recom is the sole potential awardee for the CAPES procurement. Recom is to be responsible for Sterling Software (U.S.) is proposed to handle scientific engineering Another firm is to be responsible for . Protest File, Exhibit 11, Volume 1 at 2. The proposed is an employee of Sterling Software (U.S.).2 ____________________ 1 Recom also relies on Rule 1.9 seeking disqualification because Crowell & Moring represented a former client, Sterling Federal Systems, Inc., in an alleged substantially related matter, Sterling Federal Systems, Inc., GSBCA 9835-P, 1989 BPD _______________________________ 78. We do not address the issues raised by this ground in view of our ruling on the current client issue. 2 Recom also proposed from its other teaming partner. Protest File, Exhibit 11, Vol. II, Appendix A. Sterling Software (U.S.) will provide , comprising of Recom's proposed work force. Declaration of Russell Molari, President, Scientific Systems Division of Sterling Software (U.S.) (Molari Declaration) (Oct. 8, 1993) 2. Sterling Software (U.S.) assisted Recom in preparing the proposal. Sterling Software (U.S.) personnel contributed concepts, text, and review of the management portion of the mission suitability proposal. Sterling Software (U.S.) personnel assisted Recom in devising the . Id. 4-5. Recom's was developed with recommendations of Sterling Software (U.S.) management and technical personnel based on Sterling's prior experience with NASA. Id. 6.3 Sterling Software (U.S.) is a subsidiary of Sterling Software, Inc. Declaration of Albert K. Hoover, Esq., Assistant General Counsel of Sterling Software, Inc. (Hoover Declaration) (Oct. 8, 1993) 2. Crowell & Moring has an existing client, Sterling Software (U.S.A.), formerly known as Systems Center, which is also a subsidiary of Sterling Software, Inc. Sterling Software, Inc. acquired Systems Center in July of 1993. Letter from Jeanette P. Meier, Executive Vice President and General Counsel of Sterling Software, Inc., to Crowell & Moring (Oct. 5, 1993) (Meier Letter); Hoover Declaration 5. Sterling Software (U.S.A.) has retained Crowell & Moring to advise it on Declaration of Geno P. Tolari, President of Sterling Software (U.S.) (Tolari Declaration) (Oct. 8, 1993) 7. Sterling Software, Inc. conducts its business operations through subsidiaries, but Sterling Software, Inc. does "business as one." For federal tax and financial purposes, Sterling Software, Inc. and its subsidiaries are consolidated. Hoover Declaration 2-3. for subsidiaries are performed by the parent corporation. "Sterling's General Counsel's Office provides legal advice to all subsidiaries." Id. 4. Sterling Software (U.S.) manages certain Sterling Software (U.S.A.) contracts, one of which is a quasi-Government contract with . Tolari Declaration 5. The employees involved in that contract are employees of Sterling Software (U.S.A.) but report to the management of Sterling ____________________ 3 Recom has entered into teaming agreements with Sterling Software (U.S.) and another firm prior to contract award. Protest File, Vol. II, Exhibit 11 at 107. Software (U.S.). Id. An employee of Sterling Software (U.S.) who participated with Recom in developing the proposal at issue in this protest has been directed to assist Sterling Software (U.S.A.) in obtaining government business and managing its present government contracts. Id. 7. The president of Sterling Software (U.S.) is presently on a six month assignment to Sterling Software (U.S.A.) to manage the transition of Sterling Software (U.S.A.) into the Sterling Software family of companies. Hoover Declaration 6. In this protest, ANSTEC alleges that the Government failed to sufficiently account for Recom's . Complaint 30. In addition, ANSTEC alleges that if a cost realism analysis had been performed on the Recom proposal, the Government would have recognized that Recom cannot (and that is required by the RFP) Id. 39. ANSTEC has filed interrogatories on Recom seeking information from "subcontractors" as to the identity of individuals involved in formulating and drafting any aspect of the proposal, including price and costing strategies and the proposed ANSTEC also seeks information on all oral communications held by Recom (or its subcontractors) regarding plans to and the approach to the cost proposal portion of the proposal. ANSTEC Interrogatories to Recom. ANSTEC requested Recom to produce all documents referring to those subjects. ANSTEC Document Production Request to Recom. The executive vice president and general counsel for Sterling Software, Inc. has advised Crowell & Moring that Sterling Software, Inc. withholds consent for Crowell & Moring to represent ANSTEC in this protest. Meier Letter. Discussion Courts have a duty to rule on attorney disqualification issues to safeguard the sacrosanct privacy of the attorney-client relationship which is necessary to maintain trust in the legal profession and to protect the integrity of the judicial process. Panduit Corp. v. All States Plastic Mfg. Co., 744 F.2d 1564 (Fed. Cir. 1984). This is also true of boards of contract appeals, which have inherent authority to control their dockets and the attorneys appearing before them. See Goldsmith v. United States Board of Tax Appeals, 270 U.S. 117, 121 (1926). See also Griffin & Dickson v. United States, 16 Cl. Ct. 347, 351, 357 (1989) (boards of contract appeals possess inherent authority to impose sanction of dismissal without prejudice and lesser sanction of attorney discipline and assessment of litigation costs against attorney). We are mindful of several, and countervailing, public policies in approaching disqualification motions. First, litigants are entitled to counsel of their choice, particularly in a specialized area such as Government contracts. Second, disqualification hinders the speedy resolution of lawsuits. Finally, we must be wary of motions being used purely as a litigation tactic. Thus, motions to disqualify must be viewed cautiously. Laker Airways Ltd. v. Pan American World Airways, 103 F.R.D. 22, 27-28 (D.D.C. 1984). On the other hand, the Bar has an interest in avoiding even the appearance of impropriety; consequently, when there is doubt, the doubt should be resolved in favor of disqualification. Glueck v. Jonathan Logan Inc., 512 F. Supp. 223, 228 (S.D.N.Y. 1981), aff'd, 653 F.2d 746 (2d Cir. 1981). In deciding disqualification matters, we apply the Rules of Professional Conduct of the District of Columbia Bar, because Crowell & Moring practices in the District of Columbia. B.G.W. Ltd. Partnership, GSBCA 10501, 91-3 BCA 24,336, at 121,584. Recom relies on District of Columbia Bar Rule of Professional Conduct 1.7, which provides in pertinent part: (b) Except as permitted by paragraph (c) below, a lawyer shall not represent a client with respect to a matter if: (1) A position to be taken by that client in that matter is adverse to a position taken or to be taken by another client with respect to the same matter; . . . . (c) A lawyer may represent a client with respect to a matter in the circumstances described in paragraph (b) above, if: (1) Each potentially affected client provides consent to such representation. . . . ANSTEC argues that Rule 1.7 does not apply: In this case, Sterling Software (U.S.) . . . is not a party to the litigation, and cannot take any positions in the case. Thus, by its terms, Rule 1.7 does not apply. . . . The parties to whom ANSTEC is directly adverse are NASA and less directly, RECOM. Sterling Software U.S. . . . has only an indirect interest in the outcome. ANSTEC Supplemental Opposition to Recom Motion to Disqualify at 4. Implicit in ANSTEC's argument is the thought that to apply in a litigation context, Rule 1.7 requires the adversity of formal parties to litigation; but the Rule is not so limited. Rule 1.7 applies when there is adversity of positions "to be taken . . . with respect to a matter." The comments to the D.C. Rule of Professional Conduct make it clear that the "matter" is broader than the litigation; it encompasses the subject of the litigation: The concept of a "matter" is typically apparent in on- the-record adversary proceedings or other proceedings in which a written record of the position of [the] parties exists. . . . A lawyer may not undertake a presentation known to be adverse to the interests of another client, whether that representation is in a court proceeding, an on-the-record administrative hearing, a notice-and-comment rulemaking, or in an effort to influence policy or achieve a legislative result. Comment 3. ANSTEC, represented by Crowell & Moring, challenges Recom's ability to Sterling Software (U.S.), however, is one of the authors of Recom's proposal--in particular, portions of the mission suitability proposal and the proposed by Recom. The challenge to Recom is also a challenge to Sterling Software (U.S.), which undoubtedly has "taken a position" in the CAPES procurement. Considering only the litigation, Sterling Software (U.S.) will have to "take a position," although not as a formal party. Sterling Software (U.S.) is responsible for the Sterling Software (U.S.) is supplying the proposed work force, and will undoubtedly assist Recom personnel in justifying the reasonableness of the and mission suitability portions of the proposal. Testimony by Sterling Software (U.S.) personnel is not inconceivable. Informed commentary rejects the notion that the client asserting the conflict must be one of parties to the litigation: On the other hand, adversity of position in litigation is not a necessary precondition for the existence of a direct conflict. If, for example, two businesses were competing for the same Government contract, and each engaged the same lawyer to prepare bids, Rule 1.7(a) [of the Model Rules of Professional Conduct] would surely be applicable. A number of cases hold that representation is directly adverse . . . when a lawyer may be called upon to attack the credibility as a witness of a person the lawyer currently represents . . . in a substantially related matter, even if that person is not a party in a pending matter. Geoffrey C. Hazard Jr. & W. William Hodes, The Law of Lawyering: A Handbook on the Model Rules of Professional Conduct 1.7:203, at 234 (2d ed., Supp. 1992). Recom's counsel represents that Sterling Software (U.S.) personnel are now deeply involved with Recom's personnel in defending against ANSTEC's protest. Recom Supplemental Memorandum in Support of Disqualification at 9. ANSTEC, moreover, anticipates the participation of Sterling Software (U.S.) in the litigation; it has sought information by written discovery from Recom's subcontractors on responsibility for certain phases of the proposal and oral conversations regarding As ANSTEC mounts an attack on Recom's proposal it also mounts an attack on Sterling Software (U.S.), the author of part of the proposal. If ANSTEC, through Crowell & Moring, is successful in overturning the award to Recom, both Recom and Sterling Software (U.S.) will be deprived of revenue from this contract.4 Thus, there is a clear and direct adversity of interest between ANSTEC and Sterling Software (U.S.) with respect to the litigation over the CAPES procurement. Crowell & Moring also argues that its other client (Sterling Software (U.S.A.)) is a separate subsidiary of the parent Sterling Software, Inc., and has an attenuated relationship with Sterling Software (U.S.): [U]pon information and belief, the relationship between these two legally distinct entities, which have different businesses, operate as separate profit centers, and seek and retain outside counsel independently from each other, is very attenuated. ANSTEC Opposition to Recom Motion to Disqualify at 16. We do not consider the relationship attenuated. To the contrary, Crowell & Moring must treat Sterling Software (U.S.) and Sterling Software (U.S.A.) as if the subsidiaries are one client. Sterling Software, Inc. operates on a one company philosophy, providing common , to the subsidiaries. In this regard, we note that the letter refusing consent for Crowell & Moring to represent ANSTEC was written by the executive vice president and general ____________________ 4 Recom's counsel represents that Sterling Software (U.S.) will over the next five years if Recom does not retain the contract. Recom Supplemental Memorandum in Support of Disqualification at 4. counsel of Sterling Software, Inc. The subsidiaries do not have their own in-house counsel; legal advice is furnished through the parent's Office of General Counsel.5 Thus, if Crowell & Moring is allowed to remain in the protest, it could very well find itself in the anomalous position of fighting Sterling Software, Inc.'s Office of General Counsel on matters related to the CAPES procurement, while assisting that same office on matters related to its other business with Sterling Software (U.S.A.). Further, it is apparent that Sterling Software (U.S.) acts as a corporate "big sister" to Sterling Software (U.S.A.), a client of Crowell & Moring. The president of Sterling Software (U.S.) is on assignment to manage the transition and integration of Sterling Software (U.S.A.) into the Sterling Software corporate family. Sterling Software (U.S.) provides management support and other expertise to the conduct of Sterling Software (U.S.A.)'s business. The two subsidiaries are not isolated entities; they are in the same general business (providing goods and services to the Government) and there is considerable cross- fertilization of support and personnel. As noted above, an employee of Sterling Software (U.S.) who participated with Recom in developing the proposal at issue in this protest has been directed to assist Sterling Software (U.S.A.) in obtaining Government business and managing its present Government contracts. Given Crowell & Moring's simultaneous representation of Sterling Software (U.S.A.) and ANSTEC, this person could very well be advised by Crowell & Moring (in its capacity as the lawyer for Sterling Software (U.S.A.)) and also be a hostile target of opportunity for Crowell & Moring (in its capacity as lawyer for ANSTEC). The case of Teradyne Inc. v. Hewlett-Packard Co., No. C-91- 0344, 1991 WL 239949 (N.D. Cal. 1991) is instructive. There, a firm represented Teradyne against the Hewlett-Packard Co., in a patent infringement suit, while at the same time it represented Apollo Computer, a wholly-owned subsidiary of Hewlett-Packard, in ____________________ 5 Sterling Software (U.S.A.) retained Crowell & Moring by retainer letter dated October 4, 1993, signed by a legal administrator of Sterling Software (U.S.A.). Retainer Agreement. This appears to be a renewal of the firm's relationship with the client when the client was an independent entity called Systems Center. Declaration of Jeanette Meier (Oct. 14, 1993) 7; ANSTEC's Opposition to Recom's Motion to Disqualify, at 13. There is a question whether the legal administrator was authorized to sign this agreement in light of the particular terms and conditions in the retention letter. Crowell and Moring agrees those terms are irrelevant to the issue before the Board. Letter from Crowell & Moring to Board (Oct. 14, 1993.) What is not refuted by the retention letter is that the parent's (Sterling Software Inc.) Office of General Counsel is responsible for legal work for the subsidiaries. trademark matters. The court disqualified the firm from representing Teradyne: The court finds that [Hewlett-Packard]'s control and supervision of the legal affairs of Apollo, and specifically its direct role in the retention and supervision of the work of Fish & Richardson as outside counsel, represents a significant identity of legal interest between Apollo and its parent [Hewlett- Packard]. This identity of interest is sufficient for a finding that the two should be treated as a single client for the limited purpose of determining whether there is a conflict between [the law firm's] representation of Apollo and its representation of Teradyne in the present action against [Hewlett- Packard]. See Hartford Acc. and Indem. Co. v. RJR Nabisco, Inc., 721 F.Supp. at 540 (parent deemed client of subject law firm through representation of its subsidiary where parent supervised and directed course of litigation on behalf of subsidiary). . . . . The court finds that the disqualification standard for adverse simultaneous representation should apply to the facts of this case. The degree of connectedness between [Hewlett-Packard] and Apollo, particularly the fact that all of Apollo's legal work was referred to and handled by [Hewlett-Packard's] office of legal counsel, leads the court to conclude that although [Hewlett-Packard] and Apollo may be separate entities for some purposes, they are one client for the purposes of the conflict rules. [The law firm is] therefore disqualified from further representation of plaintiff Teradyne in this matter. Id.6 at *5-6. ANSTEC points to Pennwalt Corp. v. Plough, Inc., 85 F.R.D. 264 (D. Del. 1980) for the proposition that there is no per se disqualification of lawyers when simultaneously suing and representing "sister" corporations on unrelated matters. Rather, the relationship of the subsidiaries is to be examined. Id. at 272. The proposition is correctly stated. But there, the court noted that the law firm's withdrawal from one of the client relationships prevented a conflict sure to arise when: (1) the subsidiaries were placed in the same division of the parent; (2) the same chief executive officer of the division sat on the boards of both subsidiaries; and (3) legal work for the two subsidiaries was consolidated at headquarters. Id. In this ____________________ 6 The asterisk refers to the Westlaw page designation as it appears in the Westlaw printout. case, variations on that theme are present. Here the parent provides common legal services to the subsidiaries with management personnel from Sterling Software (U.S.) guiding and directing the operations of Sterling Software (U.S.A.). Similar relationships have been found sufficiently close to warrant disqualification. In Stratagem Development Corp. v. Heron International N.V., 756 F. Supp. 789 (S.D.N.Y. 1991), the court, applying Canon 5 of the New York Code of Professional Responsibility, disqualified a law firm. The firm represented a client suing a property developer for breach of a development agreement and represented a subsidiary of the same developer in an unrelated labor dispute. The court found that the duty of undivided loyalty to client, which Canon 5 promoted, extends when the client is a subsidiary of the entity to be sued. Thus the firm could not at the same time represent both a subsidiary and another party suing the parent of the subsidiary's parent. Id. at 792; see also Glueck. Decision Recom's motion to disqualify ANSTEC's present counsel, Crowell & Moring, is GRANTED. Crowell & Moring may, however, work with ANSTEC in securing new counsel and familiarizing new counsel with the proceedings to date. Upon application of counsel, the Board will entertain a motion to suspend proceedings for a period of no longer than five working days to allow these things to be done. ________________________________ ANTHONY S. BORWICK Board Judge