Opinion
Index No. 512735/2021 Motion Seq. Nos. 10,11 NYSCEF DOC. No. 264
02-15-2024
ZOMONGO.TV USA INC. D/B/A USA, JOCELYNE LISA HUGHES-JEREMY GENE OSTROWSKI, ZOMONGO.TV -OSTROWSKI and Plaintiffs, v. CAPITAL ADVANCE SERVICES:, LLC, Defendant,
Unpublished Opinion
DECISION AND ORDER
HON. LEON RUCHELSMAN J.S.C.
The defendant has moved seeking to disqualify plaintiff's counsel:. The plaintiff has cross-moved seeking sanctions. The motions have been opposed respectively. Papers were submitted by the parties and arguments held. After reviewing all the arguments this court now makes the following determination.
As recorded in prior orders, the plaintiff, Zomongo, a corporation involved in the advertising industry, entered: into two merchant cash agreements with the defendant. The first agreement was dated February 12, 2-018 whereby the defendant purchased $449,700 of plaintiff's future receivables for $3C0,0CC. The second agreement was dated April 11, 2018 whereby the defendant purchased $861,925 of plaintiff's future receivables for $575,000. The complaint alleges the defendant failed to deliver the: purchased amounts pursuant to the agreements and improperly withdrew daily amounts in excess of the amounts to which the parties agreed. On December 22, 2023 the plaintiff filed a fourth proposed amended complaint and asserted claims based upon RICO (18 U.S.C. §1962). The crux of the allegations assert that the defendant is really controlled by another entity called Yellowstone which is the parent company and which really loaned the funds to the plaintiffs. The defendants now assert that in 2017 ands 2018 the plaintiff's counsel worked as counsel on behalf of Yellowstone and represented Yellowstone while the contracts in this case were entered into between the parties. Thus, due to counsel's representation of Yellowstone at that time the defendant now seeks to disqualify that counsel. As noted the motion is opposed.
Conclusions of Law
It is well settled that a party in a civil action maintains an important right to select counsel of its choosing and that such right may not be abridged without some overriding concern (Matter of Abrams, 62 N.Y.2d 183, 476 N.Y.S.2d 494 [1984]). Therefore, the party seeking disqualification of an opposing party's- counsel must present sufficient proof supporting that determination (Rovner v. Rantzer, 145 A.D.3d 1016, 44 N.Y.S.3d 172 [2d Dept., 2016]).
The former client conflict of interest rule is codified in the New York Rules of Professional Conduct, Rule 1.9 (22 NYC RR §1200.0 et. seq..) . Specifically, Rule 1.9(a) provides: "a. lawyer who has formerly represented a client in a matter shall not. there after represent another person in the same or a Substantially related matter in which that person's interests are materially adverse to the interests of the former client..." (id). Although a hearing may be necessary where a substantial issue of fact exists as to whether there is a conflict of interest (Olmoz v. Town of Fishkill, 258 A.D.2d 447, 684 N.Y.S.2d 611 [2d Dept., 1999]) mere conclusory assertions are insufficient to warrant a hearing (Legacy Builders/Developers Corp., v. Hollis Care Group, Inc., 162 A.D.3d 649, 80 N.Y.S.3d 59 [2d Dept., 2018]).
Thus, a party seeking disqualification of counsel must demonstrate that: (1) there was a prior attorney client relationship; (2) the matters involved in both representations are substantially related; and (3) the present interests of the attorney's past and present clients are materially adverse (Moray v. UFS Industries Inc-,, 156 A.D.3d 781, 67 N.Y.S.3d 256 [2d Dept., 2017]; see, also, Falk v. Chittenden, 11 N.Y.3d 73, 862 N.Y.S.2d 869 [2008]; Jamaica Pub. Serv. Co. v. AIU Ins., Co., 92 N.Y.2d 631, 684 N.Y.S.2d 459 [1998]). Once the. moving party demonstrates that these three elements are satisfied "an "irrebuttable presumption of disqualification follows" (McCutchen v. 3 Princesses and A P Trust Dated February 3, 2004, 138 A.D.3d 1223, 29 N.Y.S.3d 611 [2d Dept., 2016]).
Thus, in interpreting the prior rule DR 5-108(A)(1) which is substantially the same in import, disqualification would be proper where it is established that there is a substantial relationship between the current litigation and the prior one (Kuberzid v. Advanced Dermatology, P.C., 260 A.D.2d 548, 688 N.Y.S.2d 596 [2d Dept-, 1999]). Thus, .concerning this substantial relationship prong, in Spano v. Tawfik, 271 A.D.2d 522, 705 N.Y.S.2d 659 [2d Dept., 2000], the court held disqualification improper where the plaintiff's attorney suing defendant for breach of contract once represented the defendant in a trademark infringement action when plaintiff and defendant were the sole shareholders of the corporation that settled that trademark action. The court noted, there was insufficient evidence the matters were substantially related. Indeed, for the two matters to be viewed as substantially related they must be 'identical to' each: other or 'essentially the same' (Lightning Park, Inc., v. Wise Lerman Katz, P.C., 197 A.D.2d 52, 60 9 N.Y.S.2d 904 [1st Dept., 1994]).
The parties concede that a similar motion to disqualify counsel was filed in an action in New York county and that the motion to disqualify there was denied. Indeed, in. Gateway International 360 v. Richmond Capital Group., et al,, Index Number 654636/2018 the court held that the movants had failed to establish a "substantial relationship" between the counsel's work for Yellowstone and the funder in that case (see, Decision and Order [NYSCEF Doc.. No. 2.36]). The defendant in this case argues that decision does not foreclose disqualification in this case because in that case the denial was based upon the fact the work performed for Yellowstone was hot related to the claims of the lawsuit, however, in this case the work performed for Yellowstone consist of the claims sought to be introduced in the proposed amended complaint.
However, in order to demonstrate the prior and current representations are substantially related the movant must present facts supporting any disqualification. The case of Bloom, v. St. Paul Travelers Companies Inc., 24 A.D.3d 584, 806 N.Y.S.2d 692 [2d Dept., 2005], is instructive. In that case the defendants moved to disqualify plaintiff's counsel on the grounds plaintiff's counsel previously represented the defendants. The court denied the request noting that defendants, failed to meet their burden. The court explained that "the defendants' Conclusory assertions that one of the Law Firm's attorneys 'worked closely with' certain unidentified employees of one or more of the defendants in connection with a number of cases that were more or less related to the general area of uninsured or underinsured motorist coverage failed to establish 'that information material to the evaluation, prosecution, settlement or accomplishment of the former representation's] given [their] factual and legal issues [might.] also [be] .material to the evaluation, prosecution., settlement or accomplishment of the current representation given its factual and legal issues'" (id). The court further found that "not only is there no evidence that the legal issue at the heart of the present action is 'essentially the same as' any of the various legal issues with respect to which the Law Firm's attorneys provided legal counsel to the defendants in the past...but the defendants failed to demonstrate that the present representation is 'substantially related7 to the prior representation in any way" (id).
In this action, the defendants do not explain how any prior representations of plaintiff's counsel are substantially similar to this action to demand disqualification. It is true that prior matters where counsel represented Yellowstone involved merchant cash funding, however, other than that generalization, there is no specific evidence the matters are related at all. Merely because this action concerns a merchant cash funder and the previous matters also involved merchant cash funders does not mean the cases are related without any evidence demonstrating the similarities (see, Reem Contracting Corp., v. Resnick Murray St, Associates, 43 A.D.3d 369, 843 N.Y.S.2d 3 [1st Dept., 2007]). Thus, there is no evidence the issues in this litigation are identical to or essentially the same as the prior representations. There is further no evidence the plaintiff's counsel received "specific,- confidential information substantially related to the present litigation" (see, Sgromo v. St. Joseph's Hospital Health Center, 245 A.D.2d 1096, 666 N.Y.S.2d 89 [4th Dept., 1997]) .
Therefore, based oh the foregoing, the motion seeking disqualification is denied. The cross-motion seeking sanctions is denied.
So ordered.