## Facts

- Susan W. Ebner was an attorney employed and paid by Cincinnati Bell.
- Cincinnati Bell owned a government-contracting subsidiary, CBIS Federal Inc. (CBIS).
- Ebner’s office was near CBIS, and she sometimes assisted CBIS with legal matters, but she was never employed or paid by CBIS.
- Cincinnati Bell sold CBIS to DynCorp; the entity was renamed DynTel Corporation (DynTel).
- DynCorp told Ebner it would not offer her a job after the sale.
- Ebner informed DynTel that she could not provide any further assistance and moved her office to make the separation clear.
- After the sale, Ebner entered DynTel’s premises only as a visitor (including obtaining a visitor badge and being escorted).
- A dispute arose involving DynTel and the federal government, leading to litigation against DynTel based on conduct tied to the pre-sale period.
- DynCorp contended Cincinnati Bell had to indemnify DynCorp/DynTel for the government litigation; Cincinnati Bell disagreed.
- For about six months during the indemnification disagreement, Ebner represented Cincinnati Bell, and DynCorp referred to Ebner as Cincinnati Bell’s attorney.
- The United States District Court for the District of Columbia ordered the parties to arbitrate their indemnification disagreement.
- Only after the arbitration order did DynCorp claim Ebner owed DynTel an ethical “duty of loyalty” and demanded that she withdraw from representing Cincinnati Bell; DynCorp threatened to report Ebner to the D.C. bar.
- Ebner submitted an ethics question to the D.C. bar’s legal ethics committee, which concluded she had no attorney-client relationship with DynTel and owed DynTel no duties.
- Ebner offered to have the arbitrators decide the ethics issue; DynCorp declined and instead sued Ebner in the Eastern District of Virginia, alleging she violated a duty of loyalty to DynTel by continuing to represent Cincinnati Bell.
- The Virginia district court dismissed the complaint with prejudice, finding the suit baseless and filed in the wrong forum.
- DynCorp appealed; Ebner sought sanctions, asserting the suit was brought to harass and to gain a tactical edge in the D.C. arbitration.

## Issues

1. Did DynCorp and DynTel state a viable claim that Ebner owed DynTel a duty of loyalty (based on an asserted attorney-client relationship) that barred her from representing Cincinnati Bell in the indemnification arbitration?
2. Should the case be remanded for sanctions where the collateral Virginia ethics suit was baseless and filed for an improper purpose?

## Decision

- The Fourth Circuit affirmed the district court’s dismissal with prejudice.
- The court agreed that ethics objections to Ebner’s participation should have been addressed in the District of Columbia proceedings (or through D.C. disciplinary channels), not through a separate lawsuit in Virginia.
- The court remanded for entry of appropriate sanctions against DynCorp and its counsel.

## Legal Principles

- A claimed duty of loyalty or conflict of interest requires facts showing an attorney-client relationship; occasional assistance while employed by a related corporate entity, without employment or payment by the alleged client and with clear post-transaction separation, does not establish such a relationship.
- Challenges to opposing counsel’s ethics or participation should ordinarily be raised in the forum handling the underlying dispute (or before the relevant disciplinary authorities), rather than through collateral litigation in another jurisdiction.
- Federal courts may impose Rule 11 sanctions when a complaint lacks a factual or legal basis and is filed for an improper purpose, such as to harass or to interfere with ongoing proceedings.

## Conclusion

DynCorp’s Virginia lawsuit sought to recast Cincinnati Bell’s in-house attorney as DynTel’s lawyer to force her withdrawal from the D.C.-ordered arbitration, despite DynCorp’s prior treatment of her as Cincinnati Bell’s counsel and the D.C. bar committee’s conclusion that no attorney-client relationship existed; the Fourth Circuit affirmed dismissal with prejudice and sent the case back for sanctions against DynCorp and its counsel for pursuing baseless, collateral ethics litigation.


DynTel Corp. v. Ebner, 120 F.3d 488 (1997)