Bennett Silvershein Associates v. Furman

• Decision Date: 29 October 1991
• Docket Number: No. 91 Civ. 3118 (MBM).,91 Civ. 3118 (MBM).
• Citation: 776 F. Supp. 800
• Parties: BENNETT SILVERSHEIN ASSOCIATES, Bennett Silvershein, Joan Wolfson, and Marilyn E. Silvershein, Plaintiffs, v. Jay FURMAN, individually and as Executor of the Estate of Morris Furman, Barbara Murray, Individually and as Executrix of Estate of Morris Furman, Gail Furman, Robert Murray, Joseph Ades, Albert Ades, Robert Ades, Michael Ades, Walter J. Samuels, Barjay Associates, Barjay Management Inc., Realty Investors Development Corp., R.D. Management Corp., Hyannis Associates, Twenty-First AP # 9 Corp., SSF Hyannis Associates, Somerville S.C. Associates, Jay-Bob Associates, Chambersburg Associates, Edgewood Associates, SSB Realty Associates, Twenty-Third Glasgow Corp., C & A Associates, St. Albans Associates, and Twenty-Sixth St. Albans Corp., Defendants.
• Court: U.S. District Court — Southern District of New York

776 F. Supp. 800

BENNETT SILVERSHEIN ASSOCIATES, Bennett Silvershein, Joan Wolfson, and Marilyn E. Silvershein, Plaintiffs, v. Jay FURMAN, individually and as Executor of the Estate of Morris Furman, Barbara Murray, Individually and as Executrix of Estate of Morris Furman, Gail Furman, Robert Murray, Joseph Ades, Albert Ades, Robert Ades, Michael Ades, Walter J. Samuels, Barjay Associates, Barjay Management Inc., Realty Investors Development Corp., R.D. Management Corp., Hyannis Associates, Twenty-First AP # 9 Corp., SSF Hyannis Associates, Somerville S.C. Associates, Jay-Bob Associates, Chambersburg Associates, Edgewood Associates, SSB Realty Associates, Twenty-Third Glasgow Corp., C & A Associates, St. Albans Associates, and Twenty-Sixth St. Albans Corp., Defendants.

No. 91 Civ. 3118 (MBM).

United States District Court, S.D. New York.

October 29, 1991.

Stephen M. Charme, Liebman, Charme & Oppenheimer, Marvin Levine, Stadtmauer, Bailkin, Levine & Masyr, New York City, for plaintiffs.

Alan Levine, Celia G. Barenholtz, and Sheryl Silver, Kronish, Lieb, Weiner & Hellman, New York City, for defendants.

OPINION AND ORDER

MUKASEY, District Judge.

Plaintiffs Bennett Silvershein Associates, Bennett Silvershein, Joan Wolfson, and Marilyn E. Silvershein move to disqualify Kronish, Lieb, Weiner & Hellman from acting as trial counsel for defendants Jay Furman, Joseph Ades, Albert Ades, Robert Ades, Walter Samuels, several other family members of the foregoing individuals, and several partnerships and corporations controlled by the individual defendants. Ten years before the filing of this civil RICO action with pendent state law claims, Bennett Silvershein ("Silvershein") briefly consulted Joseph Hellman, a name partner at Kronish Lieb, about certain matters tenuously related to the matters at issue in this action. For reasons set forth below, plaintiffs' motion is denied.

I.

Silvershein met with Hellman in October 1981 at the suggestion of a friend (Silvershein Aff. ¶ 10), because he was having "problems" with his investments in two real estate partnerships (Chambersburg and St. Albans) sponsored and/or controlled by Morris Furman ("Furman") and his associates. (Silvershein Rep. Aff. ¶ 13) These partnerships are two of the four real estate partnerships whose management and performance generated the dispute underlying this action. Each of the four partnerships owns a shopping center. (Verified Compl. ¶ 37)

Plaintiffs allege that defendants wrongfully diluted their partnership interests through a series of fraudulent loans and transfers from the four partnerships to other entities controlled by the defendants. Plaintiffs allege that defendants thus engaged in "schemes to defraud, self-dealing, and wrongful manipulation of the business dealings" of the four partnerships. (Verified Compl. ¶ 2; Silvershein Aff. ¶ 8) The overlap, however, between these allegations and the substance of the Hellman-Silvershein meeting is at most uncertain. Not only did the bulk of the acts alleged in the Complaint occur after 1981, but the acts alleged to have occurred before 1981 are claimed to have been fraudulently concealed by defendants. Therefore, by the Complaint's own terms, none of the acts alleged in the Complaint could have been discussed at the 1981 meeting.

Silvershein ultimately did not retain Kronish Lieb, nor did he have any contact with Kronish Lieb beyond the single consultation. Neither did Silvershein sue Furman and his associates in 1981. In fact, ten years elapsed before Silvershein started this action, alleging fraud, breach of fiduciary duty, and violations of RICO, in April 1991. Hellman has submitted an affidavit stating that he cannot recall meeting with Silvershein (Hellman Aff. ¶ 3); he asserts that he can confirm such a meeting only by a notation in his 1981 lawyer's diary and by the presence of client numbers. (Hellman Aff. ¶¶ 4, 6) Kronish Lieb apparently assigns such numbers whenever a prospective client meets with any member of the firm. (Hellman Aff. ¶ 6) Further, Alan Levine ("Levine"), the only lawyer on defendants' Kronish Lieb team who even worked for the firm in 1981, was then an associate in a different department from Hellman's. Hellman avers that he would have had no reason, in the normal course of business, to have discussed the Silvershein meeting with Levine. (Hellman Aff. ¶ 11) Nevertheless, Silvershein contends that during his consultation with Hellman he disclosed confidential information that creates a fatal conflict of interest requiring Kronish Lieb to be disqualified. I disagree.

II.

Motions to disqualify opposing counsel are viewed with disfavor in this Circuit because they are "often interposed for tactical reasons" and result in unnecessary delay. United States Football League v. National Football League, 605 F.Supp. 1448, 1452 (S.D.N.Y.1985) (collecting cases). The Second Circuit has "indeed been loathe to separate a client from his chosen attorney.... The delay and additional expense created by substitution of counsel is a factor to which it has attached considerable significance...." Bohack Corp. v. Gulf & Western Indus., Inc., 607 F.2d 258, 263 (2d Cir.1979). Thus, although doubts should be resolved in favor of disqualification, Cheng v. GAF Corp., 631 F.2d 1052, 1059 (2d Cir.1980), vacated on other grounds and remanded, 450 U.S. 903, 101 S.Ct. 1338, 67 L.Ed.2d 327 (1981), the party seeking disqualification must carry a "heavy burden," Vegetable Kingdom, Inc. v. Katzen, 653 F.Supp. 917, 922 (N.D.N.Y.1987), and must meet a "high standard of proof" before a lawyer is disqualified. Evans v. Artek Sys. Corp., 715 F.2d 788, 791 (2d Cir.1983) (citing Government of India v. Cook Indus., Inc., 569 F.2d 737, 739 (2d Cir.1978)); Twin Laboratories, Inc. v. Weider Health & Fitness, 1989 WL 49368, at *4, 1989 U.S.Dist. LEXIS 4693, at *11 (S.D.N.Y. May 1989).

Generally, an attorney may not knowingly reveal a client confidence if to do so would disadvantage that client. See Fund of Funds, Ltd. v. Arthur Andersen & Co., 567 F.2d 225, 227 n. 2 (2d Cir.1977); see also Model Code of Professional Responsibility EC 4-5, 4-6 (1980) ("A lawyer should not use information acquired in the course of the representation of a client to the disadvantage of the client...."; "The obligation of a lawyer to preserve the confidences and secrets of his client continues after the termination of his employment."). Therefore, the Model Rules of Professional Conduct prescribe that "A lawyer who has formerly represented a client in a matter shall not thereafter 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...." Model Rules of Professional Conduct Rule 1.9(a) (1983). Among other reasons, this model rule was designed to "give the court confidence that a lawyer will not use unfairly the secrets gained in prior employment." Weider, 1989 WL 49368, at *2, 1989 U.S.Dist. LEXIS 4693, at *7.

This Circuit has reviewed attorney disqualification motions under Canon 4 of the Model Code of Professional Responsibility. See, e.g., Cheng v. GAF Corp., 631 F.2d 1052, 1059 (2d Cir.1980), vacated on other grounds and remanded, 450 U.S. 903, 101 S.Ct. 1338, 67 L.Ed.2d 327 (1981)); NCK Org. Ltd. v. Bregman, 542 F.2d 128, 129 n. 2 (2d Cir.1976). Under Canon 4, courts apply a three-part test to determine whether an attorney should be disqualified:

(1) is the moving party a former client of the adverse party's counsel;

(2) is there a substantial relationship between the subject matter of the counsel's prior representation of the moving party and the issues in the present suit; and

(3) did the attorney whose disqualification is sought have access to, or was he likely to have had access to, relevant privileged information in the course of his prior representation of the client?

See Evans v. Artek Systems Corp., 715 F.2d 788, 719 (2d Cir.1983) (citing Cheng, 631 F.2d at 1059); Emle Industries, Inc. v. Patentex, Inc., 478 F.2d 562, 570-71 (2d Cir.1973); Keoseian v. Von Kaulbach, 707 F.Supp. 150, 151 (S.D.N.Y.1989); T.C. Theatre Corp. v. Warner Bros. Pictures, Inc., 113 F.Supp. 265, 268 (S.D.N.Y.1953) (Weinfeld, J.). When applying this test, courts must look with "painstaking" care at the facts, United States v. Standard Oil Co., 136 F.Supp. 345, 367 (S.D.N.Y.1955), maintaining a balance between a party's right to preferred counsel and the need to "preserve the integrity of the adversary process." Board of Education v. Nyquist, 590 F.2d 1241, 1246 (2d Cir.1979). Cf. Emle, 478 F.2d at 564-65 (referring to the "need to maintain the public's trust in the integrity of the Bar").

A. Attorney Client Relationship

The first element of the test for disqualification requires plaintiffs to demonstrate that they were formerly clients of Kronish Lieb. Defendants concede that this element is present. (Def.Mem. at 7) Courts have found that "an attorney-client relationship ... exists when the party divulging confidences and secrets to an attorney believes that he is approaching the attorney in a professional capacity with the intent to secure legal advice." Trinity Ambulance Service, Inc. v. G & L Ambulance Services, Inc., 578 F.Supp. 1280, 1283 (D.Conn.1984).

Moreover, an attorney client relationship can be established even if the attorney ultimately is not retained. As the Court of Appeals for the Seventh Circuit has written, "The fiduciary relationship existing between lawyer and client extends to preliminary consultation by a prospective client with a view to retention of the lawyer, although actual employment does not result." Westinghouse Elec. Corp. v. Kerr-McGee Corp., 580 F.2d 1311, 1319 (7th Cir.), cert. denied, 439 U.S. 955, 99 S.Ct. 353, 58 L.Ed.2d 346 (1978); accord Seeley v. Seeley, 129 A.D.2d 625, 627, 514 N.Y.S.2d 110, 112 (1987); Model Code of Professional Responsibility EC 4-1.

B. Substantial Relation

Ten years...