Opinion
No. 651010/2011.
10-20-2014
ANDERSON & ANDERSON LLP–GUANGZHOU, Beijing Kaiming Law Offices, and Guandong Huatu Law Firm, Plaintiffs, v. NORTH AMERICAN FOREIGN TRADING CORP., Defendant.
The attorneys on the matter were Richard H. Dolan, Niall D. O'Murchadha and Jeffrey M. Eilender of Schlam, Stone and Dolan LLP (for Defendants/movants). David C. Buxbaum of Anderson & Anderson LLP, New York and Yosef Weintraub of Weintraub LLC (for Plaintiffs/opponents).
The attorneys on the matter were Richard H. Dolan, Niall D. O'Murchadha and Jeffrey M. Eilender of Schlam, Stone and Dolan LLP (for Defendants/movants).
David C. Buxbaum of Anderson & Anderson LLP, New York and Yosef Weintraub of Weintraub LLC (for Plaintiffs/opponents).
Opinion
EILEEN BRANSTEN, J.
This breach of contract action comes before the Court on Defendant North American Foreign Trading Corp.'s (“NAFT”) motion to disqualify Plaintiffs' counsel, David Buxbaum and the firm Anderson & Anderson LLP. Plaintiffs Anderson & Anderson LLP–Guangzhou (“Anderson Guangzhou”), Beijing Kaiming Law Offices (“Kaiming”) and Guandong Huatu Law Firm (“Huatu,” collectively, “Plaintiffs”) oppose. For the reasons set forth below, the motion is granted.
All facts in this section are undisputed, unless otherwise noted.
In 2005, the International Centre for Dispute Resolution & Commercial Arbitration Tribunal issued a decision granting NAFT an arbitration award valued at approximately $22,000,000 plus interest, fees and expenses (the “Arbitration Award”). (Second Amended Complaint (“Compl.”) ¶¶ 8, 9.)
In September 2005, NAFT contacted Anderson Guangzhou for assistance in collecting the Arbitration Award. Anderson Guangzhou referred NAFT to Huatu. NAFT retained Huatu, pursuant to a written agreement, to aid in collecting the Arbitration Award. (Compl. Ex. 1 (“Agreement”).) Plainiffs' current attorney, David Buxbaum of Anderson & Anderson LLP, was appointed as an agent to assist in the matter. (Compl.¶ 13.)
Under the Agreement, Huatu was entitled to an 18% contingency fee upon money Huatu recovered for NAFT. (Agreement, ¶ 4.) The Agreement stated that NAFT could unilaterally terminate the contract should no result be had in collecting the Arbitration Agreement within six months of the Agreement's effective date. (Agreement, ¶ 8.)
In June 2009 NAFT entered into a Supplementary Agreement with Huatu, Kaiming and Anderson Guangzhou. (Comp., Ex. 2 (“Supplemental Agreement”).) The Supplemental Agreement provided for an 18% contingency fee, split amongst Huatu, Kaiming and Anderson Guangzhou, and further provided for NAFT to pay Plaintiffs' attorneys fees incurred in prosecuting the collection action on the Arbitration Agreement. (Supplemental Agreement, ¶ 4.) The Supplemental Agreement was in effect until December 31, 2009. (Supplemental Agreement, ¶ 4.) Buxbaum negotiated, drafted, and translated the Agreements.
Plaintiffs allege that they discovered that the arbitration respondents owned stock in a publicly-held company (the “Assets”). (Compl.¶ 16.) As a result of this discovery, Plaintiffs allege that they filed suit in China in November 2009, in order to “(1) convert the Arbitration Award to an enforceable judgment in China and (2) enforce the judgment by attaching the Assets.” (Compl.¶ 17.) On November 3, 2009, the Shenzhen Intermediate People's Court issued an Order acknowledging the validity of the Arbitration Award and providing for the enforcement of the award against the Assets owned by respondent in the arbitration. (Compl. ¶ 20, Ex. 3 (the “Order”).)
The Order valued the Assets at approximately $41.5 million. (Compl.¶ 24.) Plaintiffs contend, based largely on the Supplementary Agreement's paragraph 4, that they became entitled to compensation upon the Chinese court issuing the Order. (Compl.¶ 23.)
NAFT contends that the Supplemental Agreement expired in December 2009, and Plaintiffs had not collected any amounts in connection with the Arbitration Award by that time. NAFT further states that in October 2010, with Plaintiffs' knowledge, NAFT sold the Arbitration Award for $11.2 million. (Compl.¶ 27.) Plaintiffs allege that this transaction was a settlement, by which NAFT received $11.2 million and released the Assets that Plaintiffs discovered from a levied attachment. (Compl.¶ 27.)
Plaintiffs assert that NAFT was obligated to pay Plaintiffs upon NAFT's receipt of the $11.2 million. NAFT rejected Plaintiffs' demand for payment of the 18% contingency fee. (Compl.¶ 31.)
Plaintiffs filed the Second Amended Complaint on December 4, 2013, asserting three causes of action, namely (i) breach of contract, (ii) quantum meruit, and (iii) implied contract in fact. Plaintiffs claim that they entered into two written agreements to provide legal services to NAFT, that they provided legal services to NAFT between June 2009 and December 2009 and that NAFT has failed to pay the contingency fee reflected in the Agreement and Supplemental Agreement. (Compl.¶¶ 33–37.)
On January 9, 2014, Plaintiffs moved for summary judgment. On February 18, 2014, NAFT moved to disqualify Plaintiff's counsel, David Buxbaum and Anderson & Anderson LLP. On March 31, 2014, this Court stayed all proceedings in this matter pending the outcome of NAFT's motion to disqualify.
I. Motion to Disqualify Standard
In S & S Hotel Ventures Ltd. Partnership v. 777 S.H. Corp., 69 N.Y.2d 437, 443, 515 N.Y.S.2d 735, 508 N.E.2d 647 (1987), the Court of Appeals stated important guidelines for courts to follow in considering a motion to disqualify an attorney:
The Code of Professional Responsibility establishes ethical standards that guide attorneys in their professional conduct.... When raised in litigation, however[,] ... the Code provisions cannot be applied as if they were controlling statutory or decisional law. When we agree that the Code applies in an equitable manner to a matter before us, we should not hesitate to enforce it with vigor. When we find an area of uncertainty, however, we must use our judicial process to make our own decision in the interests of justice to all concerned.
Disqualification of a law firm during litigation implicates not only the ethics of the profession but also the substantive rights of the litigants. Disqualification denies a party's right to representation by the attorney of its choice. The right to counsel of choice is not absolute and may be overridden where necessary—for example, to protect a compelling public interest-but it is a valued right and any restrictions must be carefully scrutinized. Moreover, we cannot ignore that where the Code of Professional Responsibility is ... in the context of an ongoing lawsuit, disqualification of a plaintiff's law firm can stall and derail the proceedings, redounding to the strategic advantage of one party over another.
(internal citations omitted).
Although S & S Hotel Ventures was based upon the now outdated Code of Professional Responsibility, New York's current Rules of Professional Conduct, effective April 1, 2009, are substantively similar in all respects material to the instant motion. See Losquadro v. Carltun on Park, Ltd., 24 Misc.3d 1235(A), at *1 (Sup.Ct. Nassau County July 30, 2009) (granting disqualification motion, stating that “as there is no basis for concluding that the holdings of well-established case law ha[ve] been eviscerated by the adoption of the New Rules [of Professional Conduct], resort to such case law may be made by the Court”).
New York's Rules of Professional Conduct suggest disqualification under certain conditions. See 22 NYCRR § 1200.0. For example, Rule 3.7, “Lawyer as Witness,” suggests disqualification if “the lawyer is likely to be a witness on a significant issue of fact.” Rule 3.7 provides certain exceptions, such as if the testimony relates solely to the nature and value of legal services rendered in the matter, or if disqualification of the lawyer would work substantial hardship on the client. Rule 3.7 also disqualifies an attorney if another lawyer in the firm is likely to be called as a witness and it is apparent that the testimony may be prejudicial to the client, or the lawyer is precluded from representation by Rule 1 .7 or Rule 1.9.
Rule 1.7, entitled “Conflict of Interest: Current Clients,” prohibits an attorney from representing a client if a reasonable lawyer would conclude that the representation will involve the lawyer representing differing interests or there is a significant risk that the lawyer's professional judgment will be adversely affected by the lawyer's own financial, business, property or other personal interests.
Rule 1.9, entitled “Duties to Former Clients,” prohibits an attorney from representing a client if the matters are substantially related and the client's interests are materially adverse to the interests of the former client.
Finally, Rule 8.4, entitled “Misconduct,” simply states that a lawyer shall not engage in conduct that is prejudicial to the administration of justice. NAFT argues that this prevents a lawyer from representing a client in a case in which the lawyer is a party.
II. NAFT's Motion to Disqualify
NAFT puts forth two principal arguments in favor of disqualifying David Buxbaum, a partner at Anderson & Anderson LLP, from representing Plaintiffs in this action. First, NAFT argues that Buxbaum must be disqualified under Rule 3.7 as a necessary witness because he or someone at his direction drafted the Agreements at issue. Second, NAFT argues that as it is a former client of Buxbaum, Buxbaum is prohibited from representing Plaintiffs in this “substantially related” litigation.
Rule 3.7 Advocate–Witness Rule and “Necessary” Testimony
Disqualification of an attorney under the advocate-witness rule is required only when it is likely that the testimony to be given by the attorney as witness is “necessary.” S & S Hotel Ventures, 69 N.Y.2d at 445–46, 515 N.Y.S.2d 735, 508 N.E.2d 647 ; see also Talvy v. Am. Red Cross in Greater NY, 205 A.D.2d 143, 152, 618 N.Y.S.2d 25 (1st Dep't 1994), aff'd 87 N.Y.2d 826, 637 N.Y.S.2d 687, 661 N.E.2d 159 (1995). “Testimony may be relevant and even highly useful but still not strictly necessary. A finding of necessity takes into account such factors as the significance of the matters, weight of the testimony, and availability of other evidence.” S & S Hotel Ventures, 69 N.Y.2d at 446, 515 N.Y.S.2d 735, 508 N.E.2d 647 ; see also Advent Assocs., LLC v. Vogt Family Inv. Partners, L.P., 56 A.D.3d 1023, 1024, 867 N.Y.S.2d 569 (3d Dep't 2008) (testimony must be unique to attorney-witness).
NAFT contends that Buxbaum's testimony is “necessary” for several reasons. First, NAFT alleges that Buxbaum drafted both the Agreement and the Supplementary Agreement, and the Agreements' ambiguity is central to this dispute. Second, NAFT contends that it negotiated those agreements only with Buxbaum and no one else. Third, NAFT argues that Buxbaum has already testified by submitting an affidavit in support of Plaintiffs' motion for summary judgment, and further that he is the only person to have ever submitted any factual affidavit or affirmation on behalf of Plaintiffs during the two year history of the instant action. Finally, NAFT contends that NAFT's liaison with Buxbaum, Robert Schweitzer, has died, making Buxbaum's testimony “necessary.”
Plaintiffs argue that Buxbaum's testimony is not strictly necessary and that NAFT has failed to show that Buxaum's testimony would not be cumulative. Plaintiffs contend that “the other two signatories to the Supplementary Agreement—Kaiming and Huatu ... [are] presumed under the law to have had some knowledge and understanding of the [ ] Agreements.” See Pls.' Mem. of Law at 6. Plaintiffs contend that NAFT has failed to show why the Chinese law firms, Kaiming and Huatu, are not equally viable sources of information as Buxbaum.
First, Buxbaum's testimony relates to a significant matter in this case. The outcome of the instant dispute will depend upon the contested interpretation of the Agreements. Plaintiffs' Second Amended Complaint alleges that Plaintiffs were entitled to payment upon securing an attachment in China. See Compl. ¶¶ 21–23. In contrast, NAFT interprets the Agreements to require payment only upon NAFT's receipt of cash based upon a Chinese court order. See NAFT's Rule 19–a Statement submitted in opposition to Plaintiffs' Motion for Summary Judgment (N.Y.SCEF Do. No. 224 ).
Plaintiffs do not contest that the interpretation of the Agreements is a significant issue. Nor do Plaintiffs dispute that Buxbaum drafted the Agreements and translated them into English from Chinese. Plaintiffs also appear to accept NAFT's allegation that NAFT only negotiated the Agreements with Buxbaum.2 See Affidavit of Andrew G. Lowinger (“Lowinger Aff.”) ¶¶ 7–8.
The conclusion that the interpretation of the Agreements is a significant issue in this action should not be read to imply that the merits of Plaintiffs' pending summary judgment motion have been decided.
Second, Buxbaum's testimony would not be cumulative of other evidence. Plaintiffs contend that Kaiming and Huatu are presumed to have “some knowledge and understanding” of the Agreements and that Buxbaum's testimony is therefore cumulative and unnecessary. However, notably absent from Plaintiffs' argument is a contention that anyone at Kaiming or Huatu had any role in negotiating or drafting the Agreements. Plaintiff does not contest NAFT's allegation that it negotiated only with Buxbaum and that Buxbaum alone drafted the Agreements. Finally, NAFT alleges that its principal point of contact with Buxbaum, Robert Schweitzer, who could have been an alternative source of evidence, has died.
Accordingly, Buxbaum's testimony about negotiating, drafting, and translating the Agreements will be necessary to interpret the central issues underlying this breach of contract action and will not be cumulative of other testimony. See S & S Hotel Ventures, 69 N.Y.2d at 445–46, 515 N.Y.S.2d 735, 508 N.E.2d 647.
Having established that Buxbaum's testimony is “necessary” to significant issues in this case, the Court will now analyze the various exceptions to disqualification under the advocate-witness rule cited by Plaintiffs. Rule 3.7 of the New York Rules of Professional Conduct lists five exceptions. However, the parties only place two exceptions at issue here, specifically (i) whether the testimony relates solely to the nature and value of legal services rendering in the matter, and (ii) whether disqualification would work substantial hardship on the client. See 22 NYCRR § 1200.0, Rule 3.7(a)(2), (3).
Exceptions to Disqualification under Advocate–Witness Rule
Nature and Value of Legal Services
The first exception, which allows an attorney to continue representing a client while also testifying, applies if the testimony relates solely to the nature and value of legal services rendered in the case. See 22 NYCRR § 1200.0, Rule 3.7(a)(2).
NAFT argues that Buxbaum will testify about both interpreting the Agreements as well as the nature and value of the legal services he performed. NAFT argues that allowing Buxbaum to testify about the Agreements would render meaningless the requirement that the testimony “solely” relate to the nature and value of legal services.
Plaintiffs contend that the substance of this suit pertains to the nature and value of legal services. Plaintiffs view this case as relating solely to a lawsuit against a former client to collect unpaid legal fees stemming from legal services that were rendered in China. Plaintiffs argue that Buxbaum's testimony would relate solely to the nature and value of legal services because the Agreements at issue “are merely documentary formalities that delineate the nature and scope of the legal services ... [and] provide the basis for calculating the legal fees to be paid.” See Pls.' Mem. of Law at 7.
Both parties misinterpret the “legal services” exception. The plain language of the exception states that it applies only to testimony about the nature and value of legal services “rendered in the matter.” The exception does not apply generally to any testimony about the nature and scope of legal services performed at any time, but rather applies only to testimony about services performed within the action where the testimony is offered.
The New York State Bar Association (“NYSBA”) Comment to Rule 3.7 supports this interpretation. The NYSBA advises that the “legal services” exception applies where “the testimony concerns the extent and value of legal services rendered in the action in which the testimony is offered.” See NYSBA N.Y. Rules of Conduct with Comments, Rule 3.7 cmt. 3 (2014), available at www.nysba.org/professionalstandards (emphasis added). The comment continues by clarifying that the exception “permit[s] the lawyers to testify[,] avoid[ing] the need for a second trial.... [I]n such a situation the judge has firsthand knowledge of the matter in issue; hence, there is less dependence on the adversary process to test the credibility of the testimony.” Id.; see also Henry v. Advance Process Supply Co., 11 A.D.3d 430, 430, 782 N.Y.S.2d 769 (2d Dep't 2004) (“In addition, there is no merit to the plaintiffs' contention that the law firm representing the defendants should have been disqualified on the ground that it might be called upon to produce a witness to testify regarding any legal fees paid by the defendants in defense of this action.”) (emphasis added).
Here, Plaintiffs do not contend that Buxbaum's testimony would relate solely to the nature and value of legal services rendered in this action. There is no question that Buxbaum would testify about legal services rendered in China relating to enforcement of the Arbitration Award. Accordingly, the “legal services” exception does not apply.
2. Substantial Hardship on Client
The second exception to attorney disqualification under the advocate-witness rule applies where such disqualification would “work substantial hardship on the client.” See 22 NYCRR § 1200.0, Rule 3.7(a)(3). Where there is a suggestion of monetary damage to plaintiff as a result of a change in counsel and a showing that counsel possesses unique abilities, skills, or knowledge, the loss of which would imperil a plaintiff's chances of ultimate success, a court may consider denial of the motion to disqualify on the grounds of substantial hardship. Losquadro v. Carltun on the Park, 24 Misc.3d 1235(A) at *7 (Sup.Ct. Nassau County July 30, 2009) ; see also Grossman v. Commercial Capital Corp., 59 A.D.2d 850, 850, 399 N.Y.S.2d 16 (1st Dep't 1977) (pecuniary hardship alone is insufficient to avoid disqualification).
The NYSBA has also provided guidance on the “hardship” exception. Ethical Canon 5–10, part of the Code of Professional Responsibility, stated that the hardship exception should apply only “[i]n the exceptional situation where it will be manifestly unfair to the client for the lawyer” to be disqualified. See N.Y. Lawyer's Code of Prof'l Responsibility, EC 5–10 (2007), available at www.nysba.org/WorkArea/DownloadAsset.aspx?id=26638, 399 N.Y.S.2d 16. The NYSBA describes a balancing test, stating that “[i]n making such decision,” a court should “determine the personal or financial sacrifice of the client that may result[,] ... the materiality of the lawyer's testimony, and the effectiveness of the lawyer's representation in view of his or her personal involvement.” Id.
As noted above, although some of the NYSBA commentaries and opinions cited are based upon the Code of Professional Responsibility, New York's current Rules of Professional Conduct are substantively similar for the purposes of the instant motion. Cf. Losquadro v. Carltun on Park, Ltd., 24 Misc.3d 1235(A), at *1 (Sup.Ct. Nassau County July 30, 2009) (“[A]s there is no basis for concluding that the holdings of well-established case law ha[ve] been eviscerated by the adoption of the New Rules [of Professional Conduct], resort to such case law may be made by the Court”).
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Further, the NYSBA's Committee on Professional Ethics provides guidance on the “hardship exception” in a published opinion. In Opinion 642, the Committee on Professional Ethics stated “we note that the [hardship] exception [,] ... predicated on the substantial hardship that would befall the client because of the distinctive value of the lawyer as counsel in the particular case, applies only in the most exceptional situations, see EC 5–10.” NYSBA Comm. on Prof'l Ethics, Op. 642 (1993) (emphasis added).
Plaintiffs argue that disqualifying Buxbaum would cause them a “substantial hardship.” According to Plaintiffs, Buxbaum is a unique expert on both Chinese and New York law and they would be prejudiced if they had to continue this action without him. Plaintiffs also contend that it would take too much time and money for a new attorney to familiarize him or herself with the case.
NAFT contends that disqualification is necessary to prevent Buxbaum from mixing expert testimony on Chinese law with legal arguments and statements of fact in his papers. NAFT further contends that there is no need for Plaintiffs' counsel to have expertise in Chinese law because foreign law is the province of experts. Finally, NAFT contends that Plaintiffs' argument about financial hardship is contradicted by Plaintiffs' admission that Buxbaum does not regularly appear because the cost of a flight from China is prohibitively expensive.
Balancing the interests of the Plaintiffs as clients, the materiality of the testimony, and prejudice to NAFT, the Court holds that Plaintiffs would not suffer “substantial hardship” if Buxbaum were disqualified. The Court recognizes the valued right of Plaintiffs to select their counsel of choice and the expense of retaining new counsel, but finds that Buxbaum must be disqualified as a necessary witness.
In S & S Hotel Ventures Ltd. Partnership v. 777 S.H. Corp., 69 N.Y.2d 437, 443, 515 N.Y.S.2d 735, 508 N.E.2d 647 (1987), the Court of Appeals held that disqualification was not necessary where “plaintiff repeatedly declares throughout its submissions that it does not intend to call [its attorney] as a witness at all.” Here, in contrast, Plaintiffs have never stated that they would not call Buxbaum as a witness. Further, the only factual affidavits that Plaintiffs have submitted during the pendency of this action are sworn to by Buxbaum. As stated above, Plaintiff has not identified a single individual who was as critical to negotiating, drafting, and translating the Agreements and could testify in place of Buxbaum.
While Plaintiffs argue that this case is complex and requires the unique talents of Buxbaum, Plaintiffs also contend that this case is simple and that it is time for it to end. For example, in a letter to the Court dated June 13, 2014, Plaintiffs assert that “[t]he reality is that the Defendant has no case, none whatsoever.... It is time to end this farce.” Plaintiffs' contradictory statements weigh against their claims of hardship due to complexity.
The complexity of this case arises from the interpretation of the Agreements that Buxbaum negotiated, drafted and signed. Plaintiffs assert that they performed legal services under the Agreements; NAFT does not dispute the actions that Plaintiffs took. Rather, the dispute in this action is whether the work Plaintiffs' performed entitles them to payment under the terms of the Agreements. Buxbaum is the only individual identified by either party who has personal knowledge of the Agreements, and therefore his testimony is critical. See Brunette v. Gianfelice, 171 A.D.2d 719, 720, 567 N.Y.S.2d 279 (2d Dep't 1991) (“plaintiff's attorney has admitted his participation in the negotiation of the agreement, as well as having personal knowledge of the parties' intent, ... [therefore] he ought to be called' as a witness for the plaintiff and ... be disqualified”). Buxbaum is more critical as a witness than as an advocate.
Plaintiffs' claim of pecuniary hardship is also unavailing. Plaintiffs state that they have already hired another attorney who unassociated with Anderson New York due to the prohibitive expense of having Buxbaum travel from China to appear for court appearances. Further, as Commercial Division Rule 1(a) states, “[c]ounsel who appear in the Commercial Division must be fully familiar with the case in regard to which they appear....” See 22 NYCRR 202.70. Therefore, assuming that Plaintiffs have complied with the Commercial Division Rules, the attorney who appeared on Plaintiffs' behalf is already knowledgeable about the facts of this case and would not require as much time to familiarize himself as would an entirely new attorney.
Accordingly, Buxbaum must be disqualified as counsel for Plaintiffs under the “advocate-witness rule,” and the “hardship” exception does not apply.
No Basis Yet Exists to Disqualify Firm Under Rules 3.7 or 1.7
In addition to seeking disqualification of Buxbaum individually, NAFT also seeks to disqualify Buxbaum's entire firm, Anderson & Anderson LLP (“Anderson New York”). NAFT argues that Buxbaum's testimony will be adverse to Plaintiffs, which under Rule 3.7(b)(1) prohibits any lawyer at Buxbaum's firm from representing Plaintiffs. NAFT alleges that Buxbaum's testimony will be adverse to the clients because Buxbaum stated to someone at NAFT that the attachment Plaintiffs obtained in China was “all but worthless.”
At this stage in the litigation, NAFT has not established a sufficient basis to disqualify Buxbaum's entire firm under Rule 3.7. Discovery is not complete and no depositions have occurred. Buxbaum has not submitted the purported statement in any sworn document to the Court, nor has he testified in a deposition to such a statement. Until such an occurrence, there is no concrete basis to conclude that Buxbaum will testify in a manner prejudicial to Plaintiffs, as NAFT supposes.
NAFT also briefly argues that Anderson New York should be disqualified on the basis of a current client conflict and that it should not be permitted to be an attorney if it is a party. First, the interests of the three Plaintiffs in the instant action are identical, and not in conflict, because they all receive a percentage of any recovery. See Compl. ¶ 19 (“the contingency fee of 18% was to be reallocated among the three law firms”). Second, Anderson New York is not a party to this litigation and therefore cannot disqualified on that basis.
Former Client Conflict
In addition to the “advocate-witness” rule, NAFT contends that Buxbaum and Anderson New York must be disqualified under the “former client” rule. NAFT contends that the two litigations are “substantially related,” mandating disqualification. Plaintiffs argue that the cases are not substantially related because this litigation does not involve the same transaction as was previously litigated by Plaintiffs on behalf of NAFT.
In addition to disqualification under the “advocate-witness” rule, Buxbaum must also be disqualified under the “former client” rule. According to the Court of Appeals, a party seeking disqualification of its adversary's lawyer must prove: “(1) the existence of a prior attorney-client relationship ..., (2) that the matters involved in both representations are substantially related, and (3) that the interests of the present client and former client are materially adverse.” Tekni–Plex, Inc. v. Meyner & Landis, 89 N.Y.2d 123, 131, 651 N.Y.S.2d 954, 674 N.E.2d 663 (1996) (internal citations omitted). “Satisfaction of these three criteria by the moving party gives rise to an irrebuttable presumption of disqualification.” Id.
Here, there is no question that Buxbaum and NAFT had a prior attorney-client relationship that was established by the Agreement. The Agreement, attached to the Complaint as Exhibit 1, states that “[NAFT] entrusts [Huatu's] attorneys as agents ... [and] appoints ... David C. Buxbaum [among others,] as the agents to handle this case.” Compl. Ex. 1 at 1.
Second, Plaintiffs are Buxbaum's present clients. NAFT is Buxbaum's former client. Plaintiffs seek several million dollars in this action from NAFT. Direct adversity in litigation meets the definition of “materially adverse interests.” See, e.g., Nationwide Assocs., Inc. v. Targee St. Internal Med. Grp., P.C., 303 A.D.2d 728, 729, 758 N.Y.S.2d 108 (2d Dep't 2003) (“there is no dispute that the interests of the respondents [defendants] and Nationwide [plaintiff] are adverse.”).
Finally, the subjects of the current and former representations are “substantially related.” In order for Plaintiffs to establish breach of the Agreements and entitlement to compensation, Plaintiffs must establish that they performed under the Agreements. See, e.g ., Harris v. Seward Park Hous. Corp., 79 A.D.3d 425, 426, 913 N.Y.S.2d 161 (1st Dep't 2010) (elements of breach of contract claim are “existence of a contract, the plaintiff's performance thereunder, the defendant's breach thereof, and resulting damages”) (emphasis added). The fact that Plaintiffs' performance in the Chinese litigation is an element that Plaintiffs must prove to be entitled to recovery in the instant litigation shows that the two matters are substantially related. Cf. Bd. of Managers of McCaren Park Mews Condo. v. McCaren Park Mews LLC, 41 Misc.3d 1224(A), at *6 (Sup.Ct. Kings County Nov. 7, 2013). (finding “substantial relation” where “information generated in the first matter is substantially related to a material issue in the subsequent matters”) (emphasis added).
In addition, “[t]his prohibition is imputed to current and former members of the same firm.” See Grunstein v. Grunstein, 201 A.D.2d 621, 621, 607 N.Y.S.2d 974 (2d Dep't 1994) ; see also Cardinale v. Golinello, 43 N.Y.2d 288, 296, 401 N.Y.S.2d 191, 372 N.E.2d 26 (“[disqualified attorney's] disability extends to the other lawyers in the firm ... even though there is no direct proof ... of any improper disclosures or breaches of confidence”). Accordingly, both Buxbaum and the firm of Anderson New York are disqualified from representing Plaintiffs in this litigation under the “former client” rule.
Timeliness of Motion
Plaintiffs contend that NAFT's motion to disqualify is untimely and must be denied on that basis. Plaintiffs argue that NAFT should have moved to disqualify Buxbaum when he began representing Plaintiffs in 2012.
NAFT argues that untimeliness is not a sufficient basis to deny a motion under the “advocate-witness” rule. NAFT also argues that untimeliness does not bar a motion to disqualify under the “former client” rule when factual circumstances of the representation have changed. NAFT contends that it thought Anderson Guangzhou was representing itself pro se in this action. According to NAFT, it was not until Plaintiffs filed their summary judgment motion, in which Plaintiffs clarified that Anderson Guangzhou is a separate entity from Anderson New York, that NAFT realized there was a conflict. NAFT argues that this provides a change in circumstance sufficient to justify the delay.
Plaintiffs cite White v. Burke, 131 Misc.2d 59, 61, 498 N.Y.S.2d 990 (Sup.Ct. Saratoga County Feb. 20, 1986) for the proposition that a two-year delay in seeking disqualification warrants denial of a motion to disqualify based upon the “former client” rule. Plaintiffs also cite Eisenstadt v. Eisenstadt, 282 A.D.2d 570, 571, 723 N.Y.S.2d 395 (2d Dep't 2001) to show that a two-year delay can defeat a disqualification motion under the “advocate witness” rule.
In Eisenstadt, the Second Department found that the attorney's testimony was not necessary, rendering any timeliness considerations dicta. 282 A.D.2d at 571. In White, there had been an extensive family court trial three year earlier, over twenty-three days with twenty-eight witnesses. 131 Misc.2d at 61, 498 N.Y.S.2d 990. The White court held that there was no reason for the delay in seeking disqualification. Id.
Here, in contrast to both Eisenstadt and White, there is a reasonable justification for the delay. First, the need for disqualification become evident only after Buxbaum, and only Buxbaum, submitted an affidavit in support of summary judgment, showing his testimony to be “necessary.” See Dishi v. Federal Ins. Co., 112 A.D.3d 484, 484, 976 N.Y.S.2d 379 (1st Dep't 2013) (denying disqualification as premature). Second, Plaintiffs clarified, in their summary judgment papers, that Anderson Guangzhou and Anderson New York are two different entities. NAFT plausibly alleges that it only brought the disqualification motion when it learned that Anderson Guangzhou was not appearing pro se.
Given the new information that has come to light, the motion cannot be denied due to untimeliness.
The Court has considered the parties' remaining arguments and finds them unavailing.
Conclusion
For the reasons set forth above, it is hereby
ORDERED that Defendant NAFT's motion to disqualify counsel for Plaintiffs is GRANTED and David Buxbaum, Esq. and Anderson and Anderson LLP are hereby disqualified from representing Plaintiffs in this matter; and it is further
ORDERED that this action is stayed for thirty days from service of a copy of this order with notice of entry of this decision upon the parties and upon Plaintiffs, who shall within said period, retain another attorney in place of the attorney and firm named above; and it is further
ORDERED that the new attorney retained by Plaintiffs shall serve upon all parties a notice of appearance and file same with the Clerk of the Trial Support Office (Room 158), and the Clerk of the Part within said thirty-day period; and it is further
ORDERED that counsel for the parties appear for a status conference on Thursday, December 11, 2014, at 60 Centre Street, room 442, at 10:00 a.m.
This constitutes the decision and order of the Court.