Defazio v. Wallis

Decision Date17 October 2006
Docket NumberNo. 05-CV-5712(ADS)(ARL).,05-CV-5712(ADS)(ARL).
Citation459 F.Supp.2d 159
PartiesVictor J. DeFAZIO, Jack Finkelstein, James Collins, and Henry Gebhard, Plaintiffs, v. Kevin WALLIS; Robert Aquino; Ryan P. Greenberg; Thomas Ryan; Bryan Zwolack; Capital Health Management, Inc.; Meridian Ambulance Group, LLC; Meridian Behavioral Sciences, LLP; Meridian Group Holdings, LLC; Meridian Behavioral Health Sciences, LLP; Meridian MSO, Inc.; Meridian MSO, LLC; National Health Car Corp; Phoenix Transport Corp. d/b/a Emergency Ambulance Service; University Care Network, LLC; Defendants "John Does" and "Jane Roes" "1" Through "15", The Manes "John Doe" and "Jane Roe" Being Fictitious, the Identity of Said Defendants Not Being Presently Known to the Plaintiffs; and/or Others Presently Unknown to the Plaintiff, Jointly or Severally, Doing Business Under the Trade Styles Affordable Ambulance, Capital Management, Med Transit, Meridian, Meridian Behavioral Health Services, Meridian Health Services, National Ems, National Management Group, Phoenix Ambulance, Physicians Health Services, Presidential Emergency Medical Service and University Health Plans, Defendants.
CourtU.S. District Court — Eastern District of New York
459 F.Supp.2d 159
Victor J. DeFAZIO, Jack Finkelstein, James Collins, and Henry Gebhard, Plaintiffs,
v.
Kevin WALLIS; Robert Aquino; Ryan P. Greenberg; Thomas Ryan; Bryan Zwolack; Capital Health Management, Inc.; Meridian Ambulance Group, LLC; Meridian Behavioral Sciences, LLP; Meridian Group Holdings, LLC; Meridian Behavioral Health Sciences, LLP; Meridian MSO, Inc.; Meridian MSO, LLC; National Health Car Corp; Phoenix Transport Corp. d/b/a Emergency Ambulance Service; University Care Network, LLC; Defendants "John Does" and "Jane Roes" "1" Through "15", The Manes "John Doe" and "Jane Roe" Being Fictitious, the Identity of Said Defendants Not Being Presently Known to the Plaintiffs; and/or Others Presently Unknown to the Plaintiff, Jointly or Severally, Doing Business Under the Trade Styles Affordable Ambulance, Capital Management, Med Transit, Meridian, Meridian Behavioral Health Services, Meridian Health Services, National Ems, National Management Group, Phoenix Ambulance, Physicians Health Services, Presidential Emergency Medical Service and University Health Plans, Defendants.
No. 05-CV-5712(ADS)(ARL).
United States District Court, E.D. New York.
October 17, 2006.

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COPYRIGHT MATERIAL OMITTED

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Dinerstein & Lesser, P.C., by Robert J. Dinerstein, Esq., of Counsel, Commack, NY, for the Plaintiffs.

Law Offices of Edward Weissman, by Edward Weissman, Esq., of Counsel, New York, NY, for the Defendants Kevin Wallis and Ryan P. Greenberg.

Law Offices of Thomas F. Liotti, by Thomas F. Liotti, Esq., of Counsel, Garden City, NY, for the Defendants Robert J. Aquino and Capital Health Management, Inc.

Law Offices of Anthony A. Capetola, by Donald T. Rollock, Esq., of Counsel, Winston Park, NY, Co-Counsel for the Defendant Thomas Ryan.

Pezold, Smith, Hirschmann & Selvaggio, LLC, by George C. Pezold, Esq., of Counsel, Huntington, NY, for the Defendant Bryan Zwolack.

The Law Office of Bennett D. Krasner, by Bennett D. Krasner, Esq., of Counsel, Atlantic Beach, NY, for the Defendant Phoenix Transport Corp.

No Appearance: The Defendants Meridian Ambulance Group, LLC, Meridian Behavioral Sciences, LLP, Meridian Group Holdings, LLC, Meridian Behavioral Health Sciences, LLP, Meridian MSO, Inc., Meridian MSO, LLC, National Health Care Corp., and University Care Network, LLC.

MEMORANDUM OF DECISION AND ORDER

SPATT, District Judge.


On December 8, 2005, Victor DeFazio, Jack Finkelstein, James Collins, and Henry Gebhard (collectively, the "plaintiffs") commenced this action against the numerous defendants alleging, among other things, violations of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961 et seq. ("RICO"). Presently before the Court is an appeal by the defendant Kevin Wallis ("Wallis") of an

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order of United States Magistrate Judge Arlene R. Lindsay that denied Wallis' motion to disqualify the plaintiffs' counsel.

I. BACKGROUND

It is difficult to discern from the complaint specifically what conduct the defendants allegedly engaged in that gave rise to this lawsuit. Although the complaint contains 238 paragraphs and is 32 pages long, it contains few factual allegations of misconduct. The plaintiffs assert causes of action for violations of Sections 1962(a), (b), and (c) of the RICO statute, and state law causes of action for breach of fiduciary obligation, common law tort, "conversion/theft/ embezzlement" and unjust enrichment.

The complaint does contain allegations that the defendants made unspecified misrepresentations to the plaintiffs with the purpose of inducing them to invest in certain business `entities, some of whom are named as defendants in this case. Also, at some point some of the defendants allegedly forged the signatures of the plaintiffs DeFazio, Finkelstein, and Collins on an application for a line of credit from the North Fork Bank, and misrepresented on that application that these plaintiffs were, among other things, officers and directors of the company applying for the loan. Finally, it is alleged that the defendants leased certain business equipment from third parties that they did not return when they terminated their operations. When the defendants did not return the leased equipment, the plaintiffs became liable as guarantors on the leases.

On January 6, 2006, the defendant Kevin Wallis ("Wallis") made a motion to disqualify the plaintiffs' counsel, Dinerstein & Lesser, P.C. and Robert J. Dinerstein, Esq. ("Dinerstein"), from representing the plaintiffs in this action based on allegations that Dinerstein previously represented Wallis and a small business with which Wallis was affiliated as an officer, and that during the course of that representation Wallis shared confidences with Dinerstein that can be used to Wallis' detriment in this lawsuit.

The submissions of the parties with respect to the motion to disqualify revealed that a hearing was necessary to resolve certain factual disputes related to Dinerstein's alleged representation of the Wallis. Accordingly, on March 13, 2006, the Court referred Wallis' motion to Judge Lindsay for the purpose of resolving all questions of fact and law relating to the motion to disqualify, and to issue an order determining the motion pursuant to Rule 72(a) of the Federal Rules of Civil Procedure.

On May 18, 2006, Judge Lindsay conducted a hearing at which Wallis, Dinerstein, and a third witness testified. On August 11, 2006, Judge Lindsay issued a written Order denying Wallis' motion. See Order, Docket Entry 91 (Aug. 14, 2006) (the "Order"). On August 20, 2006, Wallis timely filed an appeal of the Order to this Court.

II. DISCUSSION

A. The Legal Standards

1. Standard of Review

When considering an appeal of magistrate judge's ruling on a non-dispositive matter, a district judge "shall modify or set aside any portion of the magistrate's order found to be clearly erroneous or contrary to law." Fed.R.Civ.P. Rule 72(a); see also 28 U.S.C. § 636(b)(1)(A) ("A judge of the court may reconsider any [nondispositive] pretrial matter ... where it has been shown that the magistrate judge's order is clearly erroneous or contrary to law."). A finding is clearly erroneous if "the reviewing court on the entire evidence is left with the definite and firm conviction

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that a mistake has been committed." United States v. U.S. Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 92 L.Ed. 746 (1948); United States v. Isiofia, 370 F.3d 226, 232 (2d Cir.2004). An order is contrary to law "when it fails to apply or misapplies relevant statutes, case law, or rules of procedure." Catskill Dev., L.L.C. v. Park Place Entm't Corp., 206 F.R.D. 78, 86 (S.D.N.Y.2002) (citation omitted).

2. The Standard for Disqualification

"The authority of federal courts to disqualify attorneys derives from their inherent power to `preserve the integrity of the adversary process.'" Hempstead Video, Inc. v. Inc. Village of Valley Stream, 409 F.3d 127, 132 (2d Cir.2005) (citing Bd. of Educ. v. Nyquist, 590 F.2d 1241, 1246 (2d Cir.1979)). In exercising this power, the Court must "attempt[] to balance a client's right freely to choose his counsel against the need to maintain the highest standard of the profession." Hempstead Video, Inc., 409 F.3d at 132 (internal quotations and citations omitted).

Whether or not disqualification is warranted is subject to the Court's discretion. Cresswell v. Sullivan & Cromwell, 922 F.2d 60, 72 (2d Cir.1990). In this regard, given the "immediate adverse effect on the client by separating him from counsel of his choice, and that disqualification motions are often interposed for tactical reasons ... and inevitably cause delay," Nyquist, 590 F.2d at 1246, the Court must demonstrate reluctance in granting motions to disqualify counsel. See, e.g., W.T. Grant Co. v. Haines, 531 F.2d 671 (2d Cir.1976); see also Blue Planet Software, Inc. v. Games Intl, LLC, 331 F.Supp.2d 273 (S.D.N.Y.2004). As the Second Circuit has advised:

when dealing with ethical principles, ... we cannot paint with broad strokes. The lines are fine and must be so marked. Guideposts can be established when virgin...

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