author: TOM S. LEE, District Judge.

text:
    D.H. DEW, Jr., Plaintiff, v. ILLINOIS CENTRAL GULF RAILROAD COMPANY, A.E. Chance, Defendants.
    Civ. A. No. W85-0087(L).
    United States District Court, S.D. Mississippi, W.D.
    Sept. 24, 1985.

      Don Barrett, Barrett, Barrett, Barrett & Patton, Lexington, Miss., for plaintiff.
    Clifford K. Bailey, III and Kenna L. Mansfield, Jr., Wells, Wells, Marble & Hurst, Jackson, Miss., for defendants.
   MEMORANDUM OPINION AND ORDER

TOM S. LEE, District Judge.

This cause is before the court on motion by defendants Illinois Central Gulf Railroad Company (Railroad) and A.E. Chance to dismiss Chance as a defendant. Plaintiff D.H. Dew, Jr. filed timely response to the defendants’ motion, and the court has considered the memoranda with attachments submitted by both parties.

Plaintiff alleges that the Railroad negligently designed, constructed and thereafter maintained a bridge over Tcheva Creek in Yazoo County, Mississippi so as to cause log and debris jams with attendant flooding damage to the lands and crops of plaintiff. The action was originally filed in the Circuit Court of Yazoo County against the Railroad and two unnamed Railroad employees. By amended complaint, plaintiff named A.E. Chance and Dean Hopson as the Railroad employees with direct supervisory control over the maintenance of the Tcheva Creek bridge. Plaintiff alleged that Chance and Hopson, both Mississippi residents, were negligent in the performance of their duties, resulting in property damage to plaintiff. The Railroad thereafter removed the action to this court pursuant to 28 U.S.C. § 1441, alleging fraudulent joinder of Chance and Hopson by plaintiff for purposes of defeating diversity jurisdiction. Before any discovery was undertaken, Dew filed his motion to remand. The motion was overruled by the magistrate on the strength of the affidavit of A. E. Chance wherein he denied any immediate supervisory responsibility for the maintenance of the Tcheva Creek bridge. The Railroad’s motion to dismiss Chance followed accordingly.

The parameters of a district court’s review of a fraudulent joinder claim are well defined ill this circuit. Viewing all contested factual allegations and resolving all uncertainties as to the current state of the controlling substantive law in favor of the plaintiff, the court must determine that “there is no possibility that the plaintiff would be able to establish a cause of action against the in-state defendant in state court” (emphasis original) before declaring that such in-state defendant was fraudulently joined. Green v. Amerada Hess Corp., 707 F.2d 201, 205 (5th Cir.1983), reh. denied, 714 F.2d 137, cert. denied, 464 U.S. 1039, 104 S.Ct. 701, 79 L.Ed.2d 166 (1984); B., Inc. v. Miller Brewing Co., 663 F.2d 545, 549 (5th Cir.1981); Keating v. Shell Chemical Co., 610 F.2d 328, 332 (5th Cir. 1980); Tedder v. F.M.C. Corp., et al, 590 F.2d 115, 119 (5th Cir.1979). The parties may submit affidavits and deposition transcripts along with their motions, and the court may consider such evidence along with the factual allegations contained in the complaint when determining the issue of fraudulent joinder. B., Inc., 663 F.2d at 549; Keating, 610 F.2d at 332. The court is constrained, however, to find that the in-state defendant was properly joined and that there is incomplete diversity where “there is even a possibility that a state court would find a cause of action stated against any one of the named in-state defendants on the facts alleged by the plaintiff.” B., Inc., 663 F.2d at 550.

Affidavits and deposition testimony submitted with the memoranda in the instant cause raise a significant issue of fact relating to Chance’s supervisory responsibility over the maintenance of the Tcheva Creek bridge. Correspondingly, while it is clear under Mississippi law that a railroad is liable for damage caused by the obstruction of a natural watercourse by a railroad line, New Orleans N.E.R. Co. v. Burdette, 183 So. 915 (Miss.1938), it is not clear that a railroad employee who is negligent in failing to perform or in performing an undertaken task is never individually liable to any person injured thereby. Under the stringent test for fraudulent joinder applied in this circuit and resolving all contested factual and legal issues most favorably to the plaintiff, this court cannot conclude that there is no possibility that Dew would be able to establish a cause of action against Chance in a Mississippi court. The defendants have not met their burden of proving fraudulent joinder in this case.

It is, therefore, ordered that defendants’ motion to dismiss A.E. Chance is denied. It is further ordered that this cause be remanded to the Circuit Court of Yazoo County, Mississippi because' the retention of Chance in the case destroys complete diversity of citizenship between the parties and deprives this court of subject matter jurisdiction.

      . Hopson was subsequently dismissed from the action by agreed order dated July 8, 1985.

      . Defendants forcefully assert that Chance, as engineering superintendent of the Railroad’s entire southern district, had only the broadest supervisory control over maintenance of the Tcheva Creek bridge and that a railroad building and bridge supervisor, C.F. Cantrell, had direct responsibility for maintenance and repair of the bridge, including removal of drift accumulation. The court notes, however, deposition testimony of both Chance and Cantrell to the effect that removal of the drift and debris from the Tcheva Creek bridge was eventually accomplished by a private contractor, Vaughn Construction Company; that Chance signed the contract on behalf of the Railroad; and that Cantrell had no responsibility for drift removal on contract jobs.

      . Defendant analogizes Chance’s position in relation to Dew with that of a county supervisor charged by statute with maintenance and repair of county roads, who is sued by a plaintiff injured through negligence in maintenance and repair of a road. Mississippi law limits the supervisor’s liability to tasks he personally undertakes, which, when done negligently, proximately cause the plaintiffs injury. Lee v. Sills, 95 Miss. 623, 49 So. 259 (1909), Jackson v. Gordon, 173 Miss. 759, 163 So. 502 (1935); Berry v. Warren, 304 So.2d 284 (Miss. 1974). The court is not convinced that such analogues, though useful, clearly preclude the cause of action asserted by Dew against Chance. Chance’s liability, if any, does not arise by statute; nor is Chance’s alleged liability totally passive in nature in light of the fact that he contracted on behalf of the Railroad to remove the debris from Tcheva Creek Bridge.


source: Caselaw Access Project

author: COPENHAVER, District Judge.

license: Public Domain

text:
    HEALTH CARE AND RETIREMENT CORPORATION OF AMERICA, an Ohio corporation; and American States Insurance Company, Plaintiffs, v. ST. PAUL FIRE & MARINE INSURANCE COMPANY, Defendant.
    Civ. A. No. 84-2288.
    United States District Court, S.D. West Virginia, Charleston Division.
    Sept. 25, 1985.

      Charles E. Hurt, Charleston, W.Va., for plaintiffs.
    Norman K. Fenstermaker, Huntington, W.Va., for defendant.
   MEMORANDUM ORDER

COPENHAVER, District Judge.

This matter is before the court upon the motion of the plaintiffs for summary judgment.

I. INTRODUCTION

This civil action was brought by the plaintiffs, Health Care and Retirement Corporation of America (hereinafter Health Care) and American States Insurance Company (hereinafter American), in an effort to recover from the defendant, St. Paul Fire & Marine Insurance Company (hereinafter St. Paul), the sum paid for settlement of a claim brought against Health Care and to recover the expenses incurred in connection with the defense of and settlement of the claim. The plaintiffs allege that St. Paul is a liability insurance company which issued to Health Care an insurance policy of comprehensive general liability insurance coverage from March 31, 1981, to March 31, 1982. Complaint ¶ II. The parties are in agreement that the policy provided that St. Paul would pay all sums which Health Care should become legally obligated to pay as damages because of bodily injury caused by an occurrence of the kind insured against. Complaint ¶ II, Answer 112. Additionally, plaintiffs allege that the policy required St. Paul to provide Health Care with legal representation and costs with respect to actions instituted against Health Care. Complaint ¶ II.

It is further alleged that on or about December 16, 1981, Helen R. Dolin instituted an action against the plaintiff Health Care in various courts, including the United States District Court for the Southern District of West Virginia, alleging, in part, a breach of a construction contract for cleaning services which resulted in physical and mental pain and suffering for which Dolin sought damages in the amount of $200,-000.00. Complaint ¶ III, Answer Exhibit A, Dolin v. Wolfe Industries, et al., C.A. 81-2512. The plaintiffs assert that the St. Paul policy provided coverage for mental anguish, mental injury or illness. Complaint ¶ III. Health Care allegedly notified St. Paul of the actions filed by Dolin. Complaint ¶ IV. According to the allegations set forth in the complaint, St. Paul refused to afford insurance coverage in part because it claimed that the action filed by Dolin alleged intentional acts on behalf of Health Care. Complaint ¶ IV. Health Care allegedly then informed St. Paul that its actions were not intentional and requested that St. Paul conduct an investigation and afford coverage. Complaint ¶ IV. St. Paul allegedly refused to investigate the claim. Complaint ¶ IV. St. Paul has denied that Health Care advised the defendant that the actions were not intentional and demands strict proof of the allegation. Answer ¶ 4.

The plaintiffs allege that American had issued unto Health Care an umbrella policy of insurance which was secondary and excess to the St. Paul policy. Complaint ¶ V. As a result of St. Paul’s refusal to afford coverage, it is alleged that American, with full reservation of rights, undertook to afford Health Care a defense. Complaint IIV.

The plaintiffs claim that after extensive trial preparations and thorough investigation, it was deemed in their best interests to settle the Dolin claim. Complaint ¶ VI. According to the plaintiffs, on January 27, 1984, the Dolin claim was settled for the sum of $22,000.00. Complaint ¶ VI. Expenses incurred in the defense and settlement of the claim are said to be $11,161.12. Complaint If VI. Thus, the plaintiffs demand judgment of and from St. Paul in the amount of $33,161.12, plus interest and costs. Complaint ¶ VII.

II. SUMMARY JUDGMENT

A. Contract or Agreement

Health Care and American have moved the court pursuant to Rule 56 of the Federal Rules of Civil Procedure for summary judgment that St. Paul owes unto the plaintiffs the costs of defense and expenses and the reasonable settlement sum expended for settlement of the personal injury claim of Helen R. Dolin.

St. Paul has asserted that coverage was denied because of the definition of the term occurrence in the policy with Health Care. The policy provides as follows:

“Occurrence” means an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the Insured ____

In her suit against Health Care, Dolin in part alleges that she entered into a contract with Health Care which provided that she was to perform certain work and services for Health Care for which she was to be paid on both a lump sum and an hourly basis. Additionally, Dolin recited that there was an agreement made whereby Health Care would reimburse Dolin and pay her for additional work not contemplated in the contract. Dolin alleged in part that Health Care breached the contract and agreement.

The court observes that exclusion (a) of the Comprehensive General Liability Insurance policy specifically provided that “[tjhis insurance does not apply: (a) to liability assumed by the Insured under any contract or agreement____” Thus, it appears from the plain language of the policy that there is no coverage for amounts of money owed to Dolin as a consequence of contracts for services or for extra work done by agreement.

The affidavit of Paul G. Sieben, vice president of Health Care, states that Dolin contracted with Health Care to provide janitorial services in buildings being constructed by Health Care. Sieben states that a dispute arose with Dolin regarding the amount due her under contracts. According to Sieben, Health Care was ordered by the United States Department of Housing and Urban Development (HUD) not to make further disbursements to Dolin under her contract because of Dolin’s failure to pay wages to some of her employees and her failure to pay the scale of wages required by HUD. Sieben states that Dolin instituted various suits against Health Care in both state and federal courts and that several mechanics liens were filed by Dolin in various counties in West Virginia. After incurring expenses in trial preparation and the defense of the actions, Health Care settled all of the claims for the sum of $22,000.00. According to Sieben, Health Care “was willing to concede that the amount of $12,302.35 represented sums claimed that could have been claimed for extra cleaning services and the balance was for claimed personal injuries____” Plaintiffs’ Motion for Summary Judgment, Affidavit of Paul G. Sieben.

St. Paul has submitted the affidavits of Marvin W. Masters and Helen Dolin. Masters, one of the attorneys for Dolin in the suits against Health Care, states that demand was made for personal injuries as well as contract damages. According to Masters, Health Care “consistently took the position that plaintiff was not entitled to any sum of money for personal injuries and settlement was arrived at through negotiations concerning the amounts under the contract as opposed to any consideration being given to mental or physical injury or suffering.” Memorandum of St. Paul in Opposition to Motion for Summary Judgment, Exhibit A, Affidavit of Marvin W. Masters.

Dolin states that she claimed damages both as a result of personal injury and contract liability. In the final settlement, Dolin states that she did not receive all the money claimed for contract damages. According to Dolin, Health Care “took the position that I was not entitled to any sum of money for personal injuries, although, in the final settlement I signed a release for any and all damages, including personal injuries. I do not consider that the settlement included any amount of money for personal injuries.” Id., Exhibit B, Affidavit of Helen Dolin.

St. Paul argues, based upon the affidavit of Sieben submitted by Health Care itself, that at most Health Care is entitled to only $22,000.00 less $12,302.25 and any of the defense costs attributable to defending the breach of contract. Moreover, St. Paul argues that in view of the affidavits of Masters and Dolin, it is questionable whether any of the settlement amount and the legal cost of defense are referrable to anything other than alleged amounts owed under contract or agreement.

Initially, the court observes that nowhere does Health Care argue that it is entitled to monies due under the contract. Instead, issue is taken with the affidavits of Dolin and Masters. Health Care submitted the affidavit of Charles E. Hurt, who was Health Care’s attorney with regard to the suits brought by Dolin. Hurt states that all of the settlement negotiations were conducted with Dolin’s counsel, Robert Taylor. According to Hurt, the position of Health Care throughout was that it was not indebted to Dolin for any sum, either for personal injuries or breach of contract. Hurt states that settlement negotiations were never based on any amount due under contract or for personal injuries, but when finally effected was based on a concession that Dolin may have been entitled to no more than $12,302.25 for extra cleaning services and that the balance represented Dolin’s personal injury claim. Moreover, Hurt states that there was never any direct communication with Dolin. Hurt notes that with regard to Dolin’s claims of mental depression, he was furnished a medical report of Dr. Gina M. Puzzuoli, a psychiatrist. The report is attached to the affidavit and concludes that as a result of the conflict with Health Care, Dolin suffered a major depression resulting in the need for psychotherapy and chemotherapy for at least a year. Hurt then states he had Dolin examined by Dr. William B. Ross-man, who concluded that Dolin had a quite noticeable depression that may be related to the business experience with Health Care. According to Hurt, when the settlement was finally concluded with Robert Taylor, it was based primarily upon her claim for personal injuries. Health Care Reply Memorandum, Affidavit of Charles E. Hurt.

It is noted that the Agreement of Release and Indemnification signed by Dolin specifically recited that “[t]he undersigned acknowledges that although the claims of the > undersigned and the amount received by the undersigned in settlement thereof involves claims for monies due under contract and by virtue of contract, the majority of the undersigned’s claim represents personal injuries.” Motion for Summary Judgment.

Based upon all the foregoing, it is plain that at least a portion of the claims and the ultimate settlement represented monies due under contract or agreement which are specifically excluded by the policy. However, how the settlement amount was negotiated and what portion of the sum represented amounts attributable to contract or agreement as distinguished from personal injury remains a disputed question of fact.

B. Slander, Defamation and Disparaging Material

St. Paul argues that other than breach of contract, the only other allegation setting forth a cause of action is contained in paragraph twenty of the Dolin complaint. In paragraph twenty, Dolin alleges that “in addition to the intentional failure to pay plaintiff for work performed by her and her employees, Corporation intentionally falsely informed her employees that she had been paid when Corporation knew that she hadn’t.”

Subparagraph (e) of the St. Paul policy provides that “[t]his insurance does not apply: ... (e) to personal injury arising out of a publication or utterance described in Group B [the publication or utterance of a libel or slander or of other defamatory or disparaging material, or a publication or utterance in violation of an individual’s right of privacy], concerning any organization or business enterprise, or its products or services, made by or at the direction of any Insured with knowledge of the falsity thereof.” The language of the exclusion is plain and plaintiffs in their memorandum appear to concede that it is applicable.

That concession, however, does not conclude the matter for, as plaintiffs observe, the complaint may fairly be read as alleging other causes of action. For instance, upon reading the complaint one could conclude that there are personal injury claims premised upon outrageous conduct, interference with existing contractual relations or intentional infliction of mental distress. Thus, exclusion (e) does not operate as to excuse St. Paul from providing coverage or defense of the Dolin Claim.

C. Occurrence

St. Paul further contends that coverage and defense have been properly denied because of the policy definition of occurrence which excludes bodily injury or property damage expected or intended from the standpoint of the insured. St. Paul contends that the allegations in the complaint regard intentional acts of Health Care. In determining the insuror’s duty to provide coverage and to defend an action against an insured, the general rule is that the court must look to the allegations of the pleadings in the action against the insured. Babcock & Wilcox Co. v. Parsons Corp., 430 F.2d 531 (8th Cir.1970). The pertinent allegations of the Dolin complaint are as follows:

20. Further, in addition to the intentional failure to pay plaintiff for work performed by her and her employees, Corporation intentionally falsely informed her employees that she had been paid when Corporation knew that she hadn’t.
21. That as a sole and proximate result of the intentional and willful acts and omissions of Corporation, your plaintiff’s life was threatened, she was placed in fear of her life, she was harassed and otherwise was deprived of the enjoyment of her life, all as a result of the intentional and outrageous acts and conduct of the defendant corporation.
22. That as a sole and proximate result of all of the aforesaid acts, conduct and omissions of Corporation in the manner and method aforesaid, your plaintiff was placed in fear that she would lose all of her property and assets and be rendered bankrupt and homeless.
23. That as the sole and proximate cause of the willful, intentional and culpable acts of Corporation, acting by and thorough its agents, servants and employees, plaintiff was caused to and did become severely sick, nervous, worried, anxious and frightened as a result thereof and she suffered physical and mental pain and suffering, physical and mental discomfort and has been prevented from enjoying her life and will suffer the same in the future and she has been damaged in the amount of $200,000.00.
24. That the acts and conduct of Corporation were intentional, willful and wanton and all done with a reckless disregard for the health and safety of your plaintiff and were done maliciously such that plaintiff is entitled to punitive damages from Corporation in the amount of $1,000,000.00.

St. Paul argues that Dolin’s allegations are clear in claiming that the acts of Health Care were made “with a purpose to injure her such that the action is excluded from coverage by the policy language ‘neither expected nor intended from the standpoint of the insured.’ ” St. Paul’s Memorandum at 13.

Courts have recognized that the purpose of the intentional injury exclusion clause is to prevent extending to the insured a license to commit malicious acts. See, e.g., Woida v. North Star Mutual Insurance Co., 306 N.W.2d 570 (Minn.1981). Contemporary liability insurance policies such as the one extended to Health Care by St. Paul generally provide coverage on an “occurrence” basis, which is most often defined to mean, in pertinent part, an accident which results in bodily injury or property damage neither expected or intended from the standpoint of the insured. See generally 11 Couch on Insurance 2d (Rev. ed.) § 44.285.

The insurance industry began using the exclusionary phrase “expected or intended from the standpoint of the insured” in policies affording a general coverage for liability as of approximately 1966 when a revision of standardized policy language was undertaken. See Patrons-Oxford Mutual Insurance Co. v. Dodge, 426 A.2d 888 (Me. 1981) Prior to 1966, the exclusion, language was generally “bodily injury or property damage caused intentionally by or at the direction of the insured,” and the court decisions indicated difficulty with the language in interpreting the concept of accident. See Id. Basically, as to the pre 1966 language, there were two views. One view held that the “caused intentionally” language was to be from the perspective of the insured, as it was the state of will of the insured by whose agency the injury was caused that determines whether an injury was accidental. Id. The second view characterized the former as a type of punishment to a wrongdoer which ignored the role of insurance as for the benefit of injured victims of accidents. Id. Thus, the second view considered the injury from the point of view of the victim. Id. Therefore, the language revision has been viewed as designed to make plain that the accident component of an occurrence is to be evaluated from the perspective of the insured rather than of the injured victim. Id. That the occurrence must be unexpected and unintended from the standpoint of the insured has prompted one commentator to state: “This should obviate the position taken by some courts that the accident should be considered from the viewpoint of the injured person.” 1 R. Long, The Law of Liability Insurance § 1.22 (1985 & May 1985 Cum.Supp.).

The term “intentionally” requires that the person consciously desires the result of his act or knows with substantial certainty that the loss or damage will follow from his conduct regardless of his desire. See, e.g., Indiana Lumbermens Mutual Insurance Co. v. Brandum, 419 N.E.2d 246 (Ind.App. 1981); Iowa Kemper Insurance Co. v. Stone, 269 N.W.2d 885 (Minn.1978); Cincinnati Ins. Co. v. Mosley, 41 Ohio App.2d 113, 322 N.E.2d 693 (1974). Several courts that have considered the question have determined that for purposes of the intentional injury exclusion clause, the term “expected” means a high degree of certainty or probability, or some variation thereof. See, e.g., Clark v. Allstate Insurance Co., 22 Ariz.App. 601, 529 P.2d 1195 (1975); C. Raymond Davis & Sons, Inc. v. Liberty Mutual Insurance Co., 467 F.Supp. 17 (E.D.Pa.1979). A number of courts have determined that there is no difference between the terms expected and intended for purposes of construing an intentional injury exclusion clause. See, e.g., Grange Mutual Casualty Co. v. Thomas, 301 So.2d 158 (Fla.1974); Patrons-Oxford Mutual Insurance Co. v. Dodge, 426 A.2d 888 (Me. 1981); State v. Glens Falls Insurance Co., 137 Vt. 313, 404 A.2d 101 (1979). However, in a great number of cases, the court did not explicitly consider whether the terms expected or intended were synonymous, but rather concentrated on determining whether the conduct of the insurer was within the scope of the intentional injury exclusion clause and thereby arguably and intentionally support the view that the terms are synonymous.

Although it is plain from a review of the complaint filed by Dolin that intentional acts are alleged,, that does not necessarily mean that Health Care intentionally injured Dolin. Nor does the complaint allege a specific intent to injure. The court finds persuasive the conclusion of courts construing exclusionary clauses such as the one at issue whereby a distinction is drawn between an allegation of a specific intent to injure on the one hand and injury which was the unintended result of an act. See, e.g., Quincy Mutual Fire Insurance Co. v. Abernathy, 469 N.E.2d 797 (Mass.1984); Travelers Insurance Co. v. Cole, 631 S.W.2d 661 (Mo.1982); Grinnell Mutual Reinsurance Co. v. Frierdich, 79 Ill. App.3d. 1146, 35 Ill.Dec. 418, 399 N.E.2d 252 (1979); Vappi & Co. v. Aetna Casualty & Surety Co., 348 Mass. 427, 204 N.E.2d 273 (1965); 11 Couch on Insurance 2d (Rev. ed), § 44.285; 1 R. Long, The Law of Liability Insurance, § 1.16 generally (1985 & May 1985 Cum.Supp.). In fact, the majority rule with respect to intentional injury exclusions is that the exclusion applies if the insured intended to do a particular act, and intended to do some harm, even if the harm actually done was radically different from the harm intended. Yet, on the other hand, an intentional injury exclusion will not apply if the insured intentionally does an act, but has no intent to commit harm, even if the act involves the foreseeable consequences of great harm or even amounts to gross or culpable negligence. See, e.g., Allstate Insurance Co. v. Steinemer, 723 F.2d 873 (11th Cir.1984); Hartford Fire Insurance Co. v. Spreen, 343 So.2d 649 (Fla. 3d Dist.Ct.App.1977); Phoenix Insurance Co. v. Helton, 298 So.2d 177 (Fla. 1st Dist.Ct.App.1974). See also Annot. “Construction and Application of Provision of Liability Insurance Policy Expressly Excluding Injuries Intended or Expected by Insured”, 31 A.L.R.4th 957 (1984). Without such a distinction, the policy language referring to “the standpoint of the insured” is rendered meaningless.

St. Paul also points to the general rule which provides: Annot., 2 A.L.R.3d 1238, “Liability Insurance: Specific Exclusion of Liability for Injury Intentionally Caused by Insured” (1965 & Supp.1984) (footnote omitted).

Generally, the obligation of a liability insurer to defend an action brought against the insured by a third party is determined by the allegations of the complaint in such action. This rule has been applied in the cases where a liability insurer has denied the obligation to defend its insured on the basis of an “intentional injury or damage” exclusion in the policy. From these cases it appears, generally, that if the allegations in the action against the insured are unequivocal with regard to claiming injury or damage from the wilful, intentional acts of the insured, and if the character of the acts alleged is such that it would, if proved, establish the insured’s intent to cause the injury or damage, the insurer is under no duty to defend.

It is not plain from the fact of Dolin’s complaint that the character of the acts alleged would, if proved, establish Health Care’s intent to injure Dolin. Moreover, the rule that the insurer should look exclusively to the allegations of the complaint has come under growing criticism and attack such that a minority rule has evolved which acknowledges the reasonable expectations of the insured and imposes a duty to investigate. See, e.g., Columbia Union National Bank v. Hartford Accident and Indemnity Co., 669 F.2d 1210 (8th Cir.1982); Tennessee Corporation v. Hartford Accident and Indemnity Co., 463 F.2d 548 (5th Cir.1972); Pittsburgh Plate Glass Co. v. Fidelity & Casualty Co., 281 F.2d 538 (3d Cir.1960); McGettrick v. Fidelity & Casualty Co., 264 F.2d 883 (2d Cir.1959); Hardware Mutual Casualty Co. v. Hilderbrandt, 119 F.2d 291 (10th Cir.1941); Healy Tibbitts Construction Co. v. Foremost Insurance Co., 482 F.Supp. 830 (N.D.Cal.1979); Bituminous Casualty Corp. v. Travelers Insurance Co., 122 F.Supp. 197 (D.Minn.1954); Allstate Insurance Co. v. Novak, 210 Neb. 184, 313 N.W.2d 636 (1981); Spruill Motors, Inc. v. Universal Underwriters Insurance Co., 212 Kan. 681, 512 P.2d 403 (1973); City of Palmyra v. Western Casualty & Surety Co., ATI S.W.2d 428 (Mo. 1972); Kepner v. Western Fire Ins. Co., 109 Ariz. 329, 509 P.2d 222 (1973); United States Fidelity & Guaranty Co. v. Baugh, 257 N.E.2d 699 (Ind.App.1970); National Indemnity Co. v. Flesher, 469 P.2d 360 (Alaska 1970); Gray v. Zurich Insurance Co., 54 Cal.Rptr. 104, 65 Cal.2d 263, 419 P.2d 168 (1966).

Criticism of the general rule acknowledges that the notice pleading system does not operate with such precision as to predict accurately insurance coverage. See, e.g, Texaco, Inc. v. Hartford Accident & Indemnity Co., 453 F.Supp. 1109, 1113 (E.D.Okla.1978); Kepner, 109 Ariz. at 331, 509 P.2d at 224. It is conceded that at least until notice pleading a reasonable amount of certainty existed since pleading requirements were strict and variances of proof were not generally tolerated. The complaint under notice pleading is designed only to put an opposing party on notice. Rule 8, Federal Rules of Civil Procedure. As such, the complaint offers “unreliable assurance that the third party’s complaint will accurately reflect its claim or predict the basis of any relief. Amendments to the pleadings to conform with the evidence can be made with ease, absent prejudice to an opposing party. Thus, the fact of a complaint may be a poor measure of what is to follow. Indeed, notice pleadings can become so ambiguous and non-committal that the defendants do not and cannot reasonably know what is being alleged.” 1 R. Long, The Law of Liability Insurance, § 5.08 (1985 & May 1985 Cum.Supp.). See also 7C Appleman, Insurance Law and Practice (Berdal ed.) § 4685.01 (1979 & 1981 Pocket Part) (noting that the better view requires that the insurer make an investigation of the circumstances of the claim).

Accordingly, courts have come to question the appropriateness of relying solely upon the pleadings of the third party’s complaint to determine the rights created and obligations imposed by an insurance contract. In place of the general rule, courts have instead imposed a duty of reasonable investigation on the insurer in ascertaining its duty to defend. See, e.g., cases and authority cited at pages 161— 162.

St. Paul does not argue the merits of the general rule or criticize the duty of reasonable investigation approach. Rather, St. Paul simply points out that the reasonable investigation approach is the minority rule.

Neither party directs the court to any West Virginia ruling that gives any indication as to how the West Virginia Supreme Court of Appeals would rule if faced with the issue. In the absence of a state court ruling, the duty of the federal court is to decide the issue, recognizing that the issue must be decided as the court believes the state’s highest court is likely to decide from all that is known about its methods of reaching decisions and by considering all the data, developing lines of authority, dicta and legislative developments that the state court would consider. Bernhardt v. Polygraphic Co. of America, 350 U.S. 198, 76 S.Ct. 273, 100 L.Ed. 199 (1956); Wilson v. Ford Motor Co., 656 F.2d 960 (4th Cir. 1981); Roginsky v. Richardson-Merrell, Inc., 378 F.2d 832 (2d Cir.1967); Daily v. Parker, 152 F.2d 174 (7th Cir.1945); 19 Wright & Miller, Federal Practice and Procedure: Jurisdiction § 4507 (1982 & Pocket Part 1983).

The court observes that West Virginia has consistently applied the rule that an insurance policy which requires construction must be construed liberally in favor of the insured and strictly against the insurer. Hensley v. Erie Insurance Co., 283 S.E.2d 227 (W.Va.1981); Broy v. Inland Mutual Insurance Co., 160 W.Va. 138, 233 S.E.2d 131 (W.Va.1977); Polan v. Travelers Insurance Co., 156 W.Va. 250, 192 S.E.2d 481 (1972); Thompson v. State Automobile Insurance Co., 122 W.Va. 551, 11 S.E.2d 849 (1940). It has also been stated by the West Virginia Supreme Court of Appeals that the “rule is but a tacit acknowledgement that the insurance policy is prepared by the company and therefore, the average policyholder has no opportunity to influence the policy language.” Hensley, 283 S.E.2d at 229.

In addressing issues arising out of disputes involving insurance policies, the West Virginia court has recently indicated a predisposition toward what it denoted as modern trends and developments. Hensley, 283 S.E.2d at 229. In Hensley, the court adopted the modern trend which permits recovery for punitive damages arising from gross, reckless or wanton negligence absent some specific exclusion of coverage for punitive damages in the policy. Hensley, 283 S.E.2d at 230, 233.

It is observed that the West Virginia Legislature has addressed the question of unfair insurance claim settlement practices.

W.Va.Code § 33-11-4(9) (1982 Replacement Vol. & Cum.Supp.1985). The text of W.Va. Code section 33-11-4(9) states in pertinent part that “[n]o person shall commit or perform with such frequency as to indicate a general business practice ... (c) [flailing to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies; (d) [rjefusing to pay claims without conducting a reasonable investigation based upon all available information.”

Inasmuch as the West Virginia Supreme Court has adopted the modern approach in another area of dispute regarding insurance coverage and the Legislature has indicated an interest in regulating insurance practices by enacting a statutory scheme which characterizes as unfair the failure to adopt and implement reasonable standards for conducting prompt investigation of claims, it appears that the West Virginia Supreme Court would adopt the minority rule requiring reasonable investigation.

Based upon all the foregoing, St. Paul had a duty to investigate the facts once Health Care informed it that it neither expected nor intended personal injury to Dolin. The plaintiffs allege that Health Care “advised the defendants that the actions were not intentional and requested that the defendant investigate the claim and the facts surrounding the same and afford the plaintiff Health Care, coverage, which the defendant failed and refused to do.” Complaint 11IV. St. Paul has denied the allegation and demands specific proof. The memoranda of the parties did not address the facts regarding what information Health Care provided St. Paul. Thus, there remains a genuine issue as to material facts such that summary judgment is not appropriate. Rule 56, Federal Rules of Civil Procedure.

III. CONCLUSION

Accordingly, based upon all the foregoing, it is ORDERED that the motion of the plaintiffs for summary judgment be, and it hereby is, denied.

The Clerk is directed to forward certified copies of this order to all counsel of record.

      . There are, in fact, two policies involved. The parties have stipulated to and filed the policies with the court. One policy provided coverage from March 31, 1980, to March 31, 1981, while the other policy was in effect from March 31, 1981, to March 31, 1982. The pertinent provisions of each of the policies are identical.


author: VON DER HEYDT, Senior District Judge.

text:
    In the Matter of the Complaint of KOREA SHIPPING CORP., as Owner of the M/V SWIBON, For Exoneration From or Limitation of Liability.
    No. A83-477 In Admiralty.
    United States District Court, D. Alaska.
    Sept. 25, 1985.
    Ronald L. Bliss, Anchorage, for movant.
    David R. Millen, Anchorage, Alaska, Brian D. Starer, New York City, John M. Conway, Donald A. Burr, Allen McGrath, Anchorage, Alaska, for respondents.
   VON DER HEYDT, Senior District Judge.

THIS CAUSE comes before the court on Korea Shipping Corporation’s motion for disqualification of counsel, order of preclusion, and other sanctions. This is an admiralty action for exoneration from or limitation of liability, growing out of a collision on the Bering Sea between the M/V Swibon and the M/V Pan Nova, two Korean cargo vessels. Only the Swibon, property of Korea Shipping Corporation, survived the collision. In addition to this suit, related actions are pending in this district and in the Southern District of New York.

The occasion for the motion was a pair of meetings on November 9, 1984, in which lead counsel for claimants Pan Korea Shipping Company, Ltd. and Pan Ocean Bulk Carriers, Ltd. (“the Pan Nova claimants”) met with three persons connected with Korea Shipping Corporation (“K.S.C.”)- K.S. C.’s counsel of record in this action was not informed of these meetings in advance, nor did it consent to or attend them. K.S.C. asks the court to:

1. Disqualify Haight, Gardner, Poor & Havens, counsel for the Pan Nova claimants, from further participation in litigation involving this casualty;

2. Prohibit Haight, Gardner and its clients from using or communicating any information gathered during the meetings;

3. Deem the allegations of Paragraph XI of the Second Amended Complaint to be admitted (thereby precluding the Pan Nova claimants from introducing evidence- on the issue of limitation of liability, a central issue in this litigation); and

4. Award certain costs and attorneys’ fees to K.S.C.

The court declines to impose these sanctions.

I. Facts

Both parties have submitted affidavits, presenting versions of the events in question that conflict in a number of respects. The affiants are in accord, however, as to the outlines of those events.

In October of 1984, Haight, Gardner was preparing to open a new office in Hong Kong. Howard S. Miller, who has had no connection with this case, was to become the resident partner in that office. Mr. Miller planned a trip around the Far East with his partner, Brian D. Starer, whose prior contacts with the region were more extensive than his own. Mr. Starer is the firm’s designated liaison with the Hong Kong office. He is also lead counsel for the Pan Nova claimants in this litigation. While Brian Starer’s purpose in making the trip is disputed, it is undisputed that Howard Miller traveled for the purpose of developing contacts with clients and prospective clients in Tokyo, Seoul and Hong Kong.

Shortly before leaving for Tokyo, Mr. Starer dispatched at least eleven identically worded telexes to firms in Tokyo and Seoul, stating that he would like to introduce them to Mr. Miller and discuss Haight, Gardner’s plans in the Pacific basin. One such telex was addressed to Y.T. Jeon of K.S. Line, whom Brian Starer had met while conducting depositions related to this litigation. At the time of the depositions, Mr. Jeon had been K.S. Line’s Assistant Manager for Law and Insurance. By October of 1984, however, K.S. Line had been fully absorbed into its affiliate, K.S.C., and Y.T. Jeon had resigned. The October telex and subsequent telexes instead reached Min Hyun Youn, K.S.C.’s Manager in charge of its Legal and Insurance Division. Apparently, neither Mr. Youn nor Mr. Jeon is an attorney.

As K.S.C. did not respond to the initial telex, Haight, Gardner dispatched two follow-up telexes prior to Brian Starer’s arrival in Seoul. The last of these, signed by a Haight, Gardner associate, contained a heading referencing the Pan Nova litigation. This reference appears to have been inadvertent. Burrick affidavit; Burrick deposition at 24-25. The texts of all three telexes were directed solely to the development of business for the Hong Kong office.

Mr. Starer telephoned K.S.C.’s offices on the morning of November 9, spoke with Mr. Youn’s assistant, and arranged a meeting (apparently still believing he would be seeing Y.T. Jeon). At about 11:30 a.m. Messrs. Youn, Starer, and Miller met in Mr. Youn’s office. They discussed general topics relating to Asian shipping for 45 minutes to one hour. Significantly, all who were present agree that they did not discuss the Pan Nova litigation during this initial session. Furthermore, it is undisputed that there was no prior arrangement for the meeting to continue over lunch. At the conclusion of this session, Mr. Youn invited the Haight, Gardner lawyers to accompany him to lunch.

The subject of the Pan Nova litigation was first broached at lunch; the parties do not dispute that it was Mr. Youn who raised it. It is agreed that the ensuing discussion touched on settlement, on the expense of the litigation, and on a Korean administrative decision relating to liability. Messrs. Starer and Miller claim that the discussion was very brief and was not substantive, cut short by Brian Starer’s statement that he could not discuss the case without the presence of K.S.C.’s attorneys. Mr. Youn alleges that Mr. Starer held forth on the above subjects for upwards of forty minutes.

Later that afternoon, at Mr. Youn’s invitation, Youn and the Haight, Gardner attorneys met with Byoung Kook Min and James M. West of the Korean law firm Min & Sohn. Min & Sohn is K.S.C.’s domestic Korean counsel, and also advises K.S.C. regarding foreign law in this litigation and in other matters. First West affidavit 112; Second Min affidavit 11112-3. Byoung Kook Min is a partner with that firm and is licensed to practice law both in Korea and in New York. James West is employed by Min & Sohn as Resident Foreign Legal Consultant; he is a member of the Texas bar. Both Judge Min and Mr. West “have been frequently involved in consultations between K.S.C. and its American lawyers retained in connection with ... [the Swibon/Pan Nova] casualty.” First West affidavit 114. In addition, Judge Min has served as an expert on Korean law in the Anchorage litigation.

The afternoon meeting opened with a discussion of the capabilities of the Hong Kong office. After a time Mr. Youn stated that he had “no objections if the lawyers wished to discuss the pending Swibon litigation among themselves.” First Youn affidavit If 9. For about an hour thereafter, those present argued settlement, as well as the merits of a number of issues in dispute in this litigation.

While in Seoul, the Haight, Gardner attorneys also visited the Pan Nova claimants, a meeting devoted both to business development and to this litigation. Finally, they visited Kim & Chang, Korea’s largest law firm, solely to promote business for the new office. In accounting for his meetings with the K.S.C. personnel, Mr. Starer divided his billing between a Hong Kong office account and a Pan Nova account, charging the latter for a meeting “re possible settlement.”

II. Propriety of the Min & Sohn Meeting

K.S.C. alleges that the Min & Sohn meeting (1) violated DR 7-104(A)(l) of the Code of Professional Responsibility, in that it constituted communication with an adverse party with neither consent nor presence' of its counsel; (2) violated DR 4-101(B), in that Haight, Gardner knowingly received protected attorney-client confidences; and (3) violated Rule 26 of the Federal Rules of Civil Procedure, in that it constituted improper discovery.

The court notes at the outset that even if this characterization of the afternoon meeting were correct, it would not follow as a matter of course that Haight, Gardner should be disqualified and its clients defaulted on the limitation issue. See, e.g., Grahams Service Inc. v. Teamsters Local 975, 700 F.2d 420, 423 (8th Cir.1982); W.T. Grant Co. v. Haines, 531 F.2d 671, 677 (2d Cir.1976). The demanding test for imposing of such draconian sanctions is explored more fully below in connection with the luncheon meeting. With respect to the Min & Sohn meeting, however, undisputed testimony establishes that there was no violation of any ethical or civil rule.

DR 7-104(A)(1), as adopted in both Alaska and New York, prohibits a lawyer from communicating “on the subject of the representation with a party he knows to be represented by a lawyer,” unless “he has the prior consent of the lawyer representing such other party or is authorized by law to do so.” The Min & Sohn meeting took place in the presence of and with the consent of two attorneys retained by K.S.C. in connection with the Swibon/Pan Nova casualty. Both are admitted to practice in the United States. By the admission of Mr. West, both “have been frequently involved in consultations” relating to the case. Indeed the very conversation at issue, as described by Mr. West, reveals a sophisticated understanding of the dispute on the part of the Min & Sohn attorneys.

Nonetheless, K.S.C. argues that because Min & Sohn is not counsel of record in this litigation, the presence and consent of its attorneys could not legitimate the afternoon meeting. No meeting could be held, in K.S.C.’s view, without the presence or express consent of the attorneys who have entered court appearances on behalf of K.S.C. K.S.C.’s position raises an issue of first impression: whether the phrase “lawyer representing such other party” in DR 7-104(A)(l) encompasses only counsel who have entered an appearance in the litigation that is the subject of the communication — once an appearance has been entered — or whether the required consent may be sought from other attorneys retained by the party in connection with the same dispute.

In the view of this court, the more restrictive reading would do nothing to advance the purpose of the rule. The thrust of DR 7-104 “is to prevent situations in which a represented party may be taken advantage of by adverse counsel.” Wright v. Group Health Hospital, 103 Wash.2d 192, 691 P.2d 564, 567 (1984). The rule grows out of a recognition that there is often an “imbalance in knowledge and skill” between lawyer and layman. American Bar Foundation, Annotated Code of Professional Responsibility 333 (1979); See also Snufy Enterprises v. Columbia Pictures Industries, Inc., 1978-2 Trade Cas. ¶ 62,170, at 75,221 (D.Utah 1978) (concern that lawyer might “hopelessly entangle the adverse party in a web of legal sophistry”); Leubsdorf, Communicating with Another Lawyer’s Client: The Lawyer’s Veto and the Client’s Interests, 127 U.Pa.L.Rev. 683, 684 (1979). A related purpose of the rule is to “preserve the proper functioning of the legal profession” by ensuring that in making decisions relating to a dispute a client has the benefit of the advice of the legal expert he has employed to assist him. ABA Committee on Professional Ethics, Formal Opinion No. 108 (1934); In re McCaffrey, 275 Or. 23, 549 P.2d 666, 668 (1976).

The Min & Sohn meeting took place in the presence of and with the consent of two attorneys retained by K.S.C. to render advice in this case. Because the lawyers were conversant with the matters discussed, K.S.C. was not placed at a disadvantage. Neither was K.S.C. deprived of expert legal advice. These experienced attorneys were capable of evaluating the circumstances and of terminating the meeting if it did not further K.S.C.’s interests. The rationale for DR 7-104 demands no more.

Conversely, K.S.C.’s proposed interpretation of DR 7-104 would have negative side effects. It could encourage sharp practice by enabling one attorney to entrap another into an ethical violation. Moreover, such an interpretation would needlessly hobble settlement negotiations in disputes involving two or more separate litigations, each handled by different counsel of record. With regard to the Swibon/Pan Nova casualty, for example, K.S.C.’s interpretation would prevent settlement discussions from proceeding without formal approval from both Bradbury, Bliss & Riordan and Healy & Baillie, counsel of record in the parallel New York litigation.

Because the narrow interpretation of DR 7-104 advanced by K.S.C. would impose needless and possibly dangerous restrictions on the practice of attorneys, the court declines to adopt it. It is sufficient that the Min & Sohn meeting took place with consent of attorneys retained by K.S.C. in connection with the dispute that was discussed.

In.view of the court’s resolution of the DR 7-104 allegation, K.S.C.’s additional claims of violations of DR 4-101 and the Civil Rules must likewise fail. Assuming that confidential information was imparted during the Min & Sohn meeting, the information was imparted voluntarily during a discussion in which K.S.C. was represented by attorneys. If such a practice were viewed as a violation of DR 4-101 or the discovery rules, counsel could routinely employ a disqualification motion as a tactical maneuver after settlement discussions, since such discussions often involve a candid exchange of the parties’ positions and prospective strategies. These rules were never intended to prohibit the kind of attorney-to-attorney exchange that took place in Judge Min’s office.

III. The Luncheon Meeting

The luncheon meeting between the Haight, Gardner lawyers and Min Hyun Youn presents a more complex problem, because no K.S.C. attorney attended or consented to that meeting. Moreover, the parties are in substantial disagreement as to the subject matter and extent of the luncheon discussion. As in the case of the Min & Sohn meeting, K.S.C. alleges violations of Disciplinary Rules 7-104 and 4-101, and of the Federal Rules of Civil Procedure.

For the purposes of this motion the court will assume, without deciding, that Mr. Youn’s version of the luncheon meeting is the correct one. In assessing the gravity of the ethical violation made out by the Youn affidavits, however, the court will look to uncontroverted circumstantial evidence of Brian Starer’s intent, rather than rely upon K.S.C.’s unsupported allegations regarding intent.

Mr. Starer does not appear to have visited Mr. Youn for the purpose of discussing the Swibon/Pan Nova casualty. Had he had such an intention, he surely would have raised the subject during the initial hour of conversation in Mr. Youn’s office, for the parties agree that no arrangement was made to meet further over lunch until Mr. Youn’s invitation at the conclusion of the morning session. Instead, it is undisputed that the subject of the casualty first arose at lunch. The meeting with Mr. Youn does not represent a premeditated stratagem to take advantage of a K.S.C. executive.

A. DR 4-101

K.S.C. has made no showing of a violation of DR 4-101 at the luncheon meeting. Neither of Mr. Youn’s affidavits describes a single statement of any significance made by Mr. Youn at the luncheon meeting, still less the nature of any item of confidential information he might have revealed. First Youn affidavit f 7; Second Youn affidavit HIT 5-8.

K.S.C. argues that its allegation requires no support because there is a presumption that confidential information is revealed when a party discusses a matter with a lawyer. It is true that such a presumption, rebuttable in certain circumstances, operates to disqualify a lawyer who has previously represented an opposing party in a substantially related matter. E.g., Trone v. Smith, 621 F.2d 994, 999 (9th Cir.1980); Silver Chrysler Plymouth, Inc. v. Chrysler Motors Corp., 518 F.2d 751, 754 (2d Cir.1975). The presumption grows out of the particularly great danger that confidences will have been disclosed during a prior representation, as well as out of the concern that professional commitment will be endangered if a lawyer knows that he may later change sides. Trone v. Smith, supra, 621 F.2d at 998. Where an attorney has not previously represented an opposing party but has merely communicated with him, the latter concern disappears and the former is less acute. Accordingly, courts faced with such contacts have applied no presumption regarding confidential information; disqualification must be supported by a showing of release of confidential information or other prejudice. See, e.g., Meat Price Investigators Ass’n v. Spencer Foods, Inc., 572 F.2d 163, 165 (8th Cir. 1978); Ceramco, Inc. v. Lee Pharmaceuticals, 510 F.2d 268, 271 (2d Cir.1975).

Of course, to require K.S.C. to set out in its affidavits the substance of the confidential facts alleged to have been compromised would further disseminate the confidences and undermine the very interest DR 4-101 aims to protect. Cf. Trone v. Smith, supra, 621 F.2d at 999. But here the supporting affidavits fail even to establish that Mr. Youn spoke about confidential subjects. This showing falls far short of what would be required to enable the court to infer a violation of DR 4-101, or to infer that K.S.C. had been sufficiently damaged thereby to warrant sanctions.

B. DR 7-104

Assuming Mr. Youn’s version of the luncheon events to be correct, the meeting included a forty-minute discussion of the Swibon/Pan Nova casualty. Though there is no showing of release of confidential information, such an ex parte discussion would be a naked violation of DR 7-104. The court finds, however, that the violation described in the Youn affidavits would not justify the sanctions K.S.C. has demanded.

The court turns first to K.S.C.’s demand for disqualification. The standard to be applied to motions for disqualification founded on violations of DR 7-104 has received scant attention in this circuit. The Eighth Circuit, though according district courts substantial discretion in disposing of such motions, Grahams Service, supra, 700 F.2d at 423, has identified three competing interests to be balanced:

1) the client’s interest in being represented by counsel of its choice;
2) the opposing party’s interest in a trial free from prejudice due to disclosures of confidential information; and
3) the public’s interest in the scrupulous administration of justice.

Meat Price Investigators, supra, 572 F.2d at 165. The Fifth Circuit likewise requires “a balancing of prejudices to the parties,” Shelton v. Hess, 599 F.Supp. 905, 909 (S.D. Tex.1984), while the Second has demanded a compelling reason before separating a party from his chosen counsel, e.g., W.T. Grant Co., supra, 531 F.2d at 677.

Because of the great prejudice often associated with an enforced change of counsel, courts applying these standards have granted disqualification only when the moving party has demonstrated substantial and irreparable harm growing out of the ethical violation. Thus in Shelton v. Hess, supra, disqualification rested on a “high risk” that confidences would be compromised with “irreparable prejudice to [the adversaries’] ability to defend.” 599 F.Supp. at 510. Likewise, in an unreported case heavily relied upon by K.S.C., disqualification occurred because the court could not cleanse the litigation of the effects of a 2V2-hour ex parte interrogation of a defendant by plaintiff’s counsel, during which “specific facts” going “to the heart” of the dispute were revealed. Zeller v. Bogue Electric Mfg. Corp., No. 71 Civ. 5502, Slip Op. at 3, 5 (S.D.N.Y. Mar. 11, 1975).

In the instant case it can hardly be doubted that disqualification would deal a heavy setback to the Pan Nova claimants. Haight, Gardner has actively litigated this action since its inception more than two years ago. Its attorneys have conducted or defended more than sixty-five depositions and issued extensive interrogatories and requests for production. Much of the benefit of such discovery and trial preparation would inevitably be lost in a transition to new counsel. To counterbalance the major prejudice disqualification would cause to the Pan Nova claimants, K.S.C. must show substantial and irreparable damage to K.S.C. should Haight, Gardner continue its representation.

Given that Mr. Youn divulged no confidential information during lunch, such irreparable harm could only be found in the luncheon meeting’s role as a settlement discussion. Undoubtedly it is possible for an ex parte settlement discussion to threaten sufficient harm, tangible or intangible, to counterbalance the prejudice caused by disqualification. This could be so, for example, where an attorney so intimidates or confuses an adversary that there is a substantial risk that in future, properly conducted settlement negotiations the party’s judgment will be impaired. But there has been no showing of any such harm here. First, K.S.C. cannot claim that future settlement decisions would be tainted without showing what, if any, authority or influence Mr. Youn would have over a decision to settle. The Youn affidavits demonstrate only that Y.T. Jeon, the man with whom Haight, Gardner sought to meet, probably would have had little authority in this regard. Second, Mr. Youn appears to be a sophisticated businessman. He is familiar with this litigation and, owing to his connection with K.S.C.’s Legal and Insurance Division, he presumably is not an innocent with respect to litigation in general. To quote a Second Circuit decision involving related provisions of DR 7-104, he is “neither a callow youth nor a befuddled widow.” W.T. Grant, supra, 531 F.2d at 674. Courts faced with violations of DR 7-104 involving improper contact with sophisticated laymen have declined to find the requisite prejudice to support the extreme sanction of disqualification. E.g., id. at 674-77; Snufy Enterprises, supra, 1978-2 Trade Cas. at 75,221-22.

While K.S.C. has not shown prejudice that would override the Pan Nova claimants’ interest in retaining counsel of their choice, its motion to disqualify might nonetheless be well taken if the third factor identified by the Eighth Circuit, “the public’s interest in the scrupulous administration of justice,” militated strongly in favor of disqualification. Meat Price Investigators, supra, 572 F.2d at 165. Such a situation rose in Kleiner v. First National Bank of Atlanta, 751 F.2d 1193 (11th Cir. 1985). There the trial court had disqualified an attorney for contacting adverse parties in “arrogan[t]” disregard of an express order of the court. The Court of Appeals upheld the sanction “without regard for future taint affecting the outcome of the proceeding.” 751 F.Supp. at 1210.

Here the alleged misconduct, while potentially a matter of concern to the grievance committee of the relevant bar association, is not so egregious as to require the intervention of the court. See W.T. Grant, supra, 531 F.2d at 677. As noted previously, uncontroverted circumstantial evidence indicates that the violation, if it occurred, was not planned in advance as a means of taking advantage of K.S.C. Moreover, Mr. Starer did not interrogate Mr. Youn; nor does it appear that he attempted to dupe him. At most, Brian Starer succumbed to a temptation to advocate his own views on settlement directly to a K.S.C. executive who was familiar with the case. While improper, such conduct is not in the same class as the conduct in Kleiner, where counsel’s “retention would have eroded public trust in the judiciary.” 751 F.2d at 1210. Accordingly, the court declines to disqualify Mr. Starer or his firm.

K.S.C.’s request that this court default the Pan Nova claimants on a central issue in this litigation is likewise unsupportable. Addressing a similar request for sanctions for a violation of DR 7-104, the Second Circuit in W.T. Grant observed:

We can find no precedent for dismissal of the complaint____ The sins of counsel should not be visited upon his client so as to vitiate the latter’s cause of action.

531 F.2d at 676-77. In the absence of a showing of prejudice to K.S.C. growing out of the alleged violation, the court declines to impose a crippling sanction on the Pan Nova claimants.

The court also elects not to impose the other sanctions K.S.C. has requested. The proposed orders relating to confidentiality are inappropriate because, inter alia, there has been no showing of release of confidential information. In addition, K.S.C. has requested that the court award costs and fees to enable Anchorage counsel to consult in person with Messrs. Youn, Min, and West. K.S.C. has not shown that such a meeting is required.

Accordingly, IT IS ORDERED:

(1) THAT the Pan Nova claimants’ requests for oral argument and for an evidentiary hearing are DENIED pursuant to Local Rule 5(C)(1);

(2) THAT Korea Shipping Corporation’s motion for disqualification of counsel, order or preclusion, and other sanctions is DENIED.

      . Although the four hours billed to this account may imply that Brian Starer considered at least a significant portion of his luncheon meeting to have been devoted to Pan Nova matters, the court has been provided with inadequate data on which to base such an inference or a contrary inference. The court does not resolve the swearing contest between the K.S.C. and Pan Nova affiants regarding the nature of the luncheon discussion.

      . Alaska’s DR 4-101 provides, in pertinent part: (B) Except when permitted under DR 4-101(C) and (D), a lawyer shall not knowingly
      (1) reveal a confidence or secret of his client.
      The rule is substantially identical in New York. K.S.C. argues that knowing solicitation of lawyer-client confidences violates this rule, relying on a Ninth Circuit opinion that has now been withdrawn. See American Protection Ins. Co. v. MGM Grand Hotel — Las Vegas, Inc.,. 765 F.2d 925 (9th Cir.1985) (withdrawing opinion and dismissing appeal for lack of jurisdiction).

      . The court does not decide whether K.S.C. has made a prima facie showing that confidential information was released at the Min & Sohn meeting.

      . See supra note 2. The court assumes, without deciding, that K.S.C.’s interpretation of the rule is correct.

      . Even under the extreme facts of Kleiner, however, the trial court disqualified only the individual attorney responsible for the violation, leaving his firm in possession of the case. Moreover, in that case the client’s interest in having counsel of its choice was entitled to relatively little deference because the client had participated in the violation.

      . Because the alleged improper exchange appears to have occurred spontaneously during an otherwise proper meeting, this case is distinguishable from In re Geiger Enterprises, Inc., 5 B.R. 694 (Bankr.W.D.N.Y.1980).