Hempstead Video Inc. v. Inc. Village of Valley Stream

• Citation: 409 F.3d 127
• Decision Date: 31 May 2005
• Docket Number: Docket No. 04-0578-CV.,Docket No. 04-0749-CV.
• Parties: HEMPSTEAD VIDEO, INC., Plaintiff-Appellant, v. INCORPORATED VILLAGE OF VALLEY STREAM, George A. Donley, individually, and as Mayor of the Incorporated Village of Valley Stream, Michael Belfiore, individually, and as Deputy Mayor of the Incorporated Village of Valley Stream, Paul F. Brown, individually, and as Trustee of the Incorporated Village of Valley Stream, Edward R. Delucie Jr., individually, and as Trustee of the Incorporated Village of Valley Stream, Joanne T. Antun, individually, and as Trustee of the Incorporated Village of Valley Stream, Vincent W. Ang, individually, and as Clerk of the Incorporated Village of Valley Stream, and Jack Cutler, individually, and as Inspector of the Village of Valley Stream, Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Page 127

409 F.3d 127

HEMPSTEAD VIDEO, INC., Plaintiff-Appellant, v. INCORPORATED VILLAGE OF VALLEY STREAM, George A. Donley, individually, and as Mayor of the Incorporated Village of Valley Stream, Michael Belfiore, individually, and as Deputy Mayor of the Incorporated Village of Valley Stream, Paul F. Brown, individually, and as Trustee of the Incorporated Village of Valley Stream, Edward R. Delucie Jr., individually, and as Trustee of the Incorporated Village of Valley Stream, Joanne T. Antun, individually, and as Trustee of the Incorporated Village of Valley Stream, Vincent W. Ang, individually, and as Clerk of the Incorporated Village of Valley Stream, and Jack Cutler, individually, and as Inspector of the Village of Valley Stream, Defendants-Appellees.

Docket No. 04-0578-CV.

Docket No. 04-0749-CV.

United States Court of Appeals, Second Circuit.

Argued: February 24, 2005.

Decided: May 31, 2005.

Paula Schwartz Frome, Garden City, NY, for Plaintiff-Appellant.

Stanley A. Camhi, Jaspan Schlesinger Hoffman, LLP, Garden City, NY, for Defendants-Appellees.

Before: LEVAL, CABRANES, and KATZMANN, Circuit Judges.

LEVAL, Circuit Judge.

Plaintiff-appellant Hempstead Video, Inc. ("HV") appeals from a judgment of the United States District Court for the Eastern District of New York (E. Thomas Boyle, M.J.) in favor of the defendant, the Incorporated Village of Valley Stream, and related officials and entities (collectively "Valley Stream" or the "Village"). The magistrate judge ruled that HV breached its settlement agreement with Valley Stream, and that Valley Stream was therefore released from its obligations of forbearance under the agreement. The judge also denied HV's motion to disqualify Valley Stream's counsel. We affirm.

BACKGROUND

HV, a corporation owned by James Alessandria, operates an adult video store in the Village of Valley Stream. Shortly after the store opened in 1994, HV became involved in a permit and zoning dispute with the Village. HV filed suit under 42 U.S.C. § 1983 in the United States District Court for the Eastern District of New York, alleging principally that Valley Stream was selectively enforcing its mercantile permit requirement in violation of the Equal Protection Clause of the Fourteenth Amendment.

The parties reached a settlement agreement on April 30, 1996, which was "so-ordered" by Magistrate Judge Boyle. Pursuant to the agreement, Valley Stream agreed to issue a mercantile permit and to treat HV in a manner "substantially similar" to other businesses. Valley Stream also agreed not to prosecute HV under its adult use ordinance, Local Law 4, as long as HV complied with the terms of the settlement agreement. HV agreed, among other things, to cover its windows so the interior of the store could not be viewed from the outside, to mark its store with only two signs reading "adult store" or "adult shop," and to refrain from any form of outdoor advertising. The portion of the settlement agreement that is crucial to this dispute states:

[HV] may continue to operate its business at its present location within the Village, provided that its business operation remains substantially the same as its current business operations. It is specifically understood that [HV] shall not have enclosed viewing rooms, live peep shows or live performances or similar type activities at the premises.

(emphasis added). The agreement goes on to provide that if one party believes the other is in breach, the complaining party is required to give the other party notice of the alleged violation, and it allows "twenty (20) days from receipt of the notice within which to cure such violation or seek appropriate relief from the Court."

I. The Present Dispute

In January 2003, Valley Stream received an anonymous tip that HV had installed several booths for viewing pornographic videos. An inspection revealed six booths, each closed by a door which could be locked from the inside. Each booth contained a video monitor to display pornographic videos. Each was also equipped with a paper towel dispenser on the outside. The booths were approximately thirty-six inches wide, forty inches deep, and ninety to ninety-six inches high. The walls of the booths did not go all the way to the ceiling, but rather stopped approximately eighteen inches below the ceiling. With the doors closed, one could not see into the booths.

Valley Stream informed HV by a letter dated January 13, 2003 that it considered HV in breach of the settlement agreement's prohibition on "enclosed viewing rooms." The letter stated:

Pursuant to paragraph 12 of the aforementioned Settlement and Order, the Village hereby gives you written notice that you are in violation of paragraph 5 of said Settlement and Order and have twenty (20) days from receipt of this notice to cure such violation or seek appropriate relief from the court.

The letter demanded that HV permanently remove the booths.

The parties thereafter engaged in sporadic negotiations. HV suggested fitting the booths with Dutch doors or with curtains. The Village rejected the proposals, expressing the view that any barrier providing privacy and thus facilitating sex or masturbation on the premises would violate the agreement.

After nearly four months passed without resolution, Valley Stream wrote to the magistrate judge requesting a conference. At the conference, Valley Stream argued that by virtue of its breach of the settlement agreement, HV had forfeited its rights under the agreement, leaving Valley Stream free to prosecute under its adult use ordinance. The magistrate judge adjourned the proceeding, instructing Valley Stream to submit an order to show cause. That afternoon, HV removed the doors from the booths.

The magistrate judge held an evidentiary hearing on August 21, 2003, at which several witnesses testified, including Elena Winter, the former president and manager of HV, who testified for the Village. The magistrate judge then took the case under advisement.

II. The Motion to Disqualify Valley Stream's Counsel

On November 12, 2003, while the case was still under consideration by the magistrate judge, HV moved to disqualify the Village's attorney, Stanley A. Camhi, and his firm of Jaspan Schlesinger Hoffmann LLP ("Jaspan"). HV based its motion primarily on the fact that its counsel for labor matters, William Englander, had become "of counsel" to the Jaspan firm in July 2003. HV also contended the Jaspan firm should be disqualified because one of Jaspan's lawyers, Jon Santemma, had a ten-minute telephone conversation with Alessandria, the owner of HV, about a condemnation proceeding in a neighboring town.

Englander's connection with the Jaspan firm had come about as follows. Prior to July 2003, Englander was a solo practitioner, renting office space from the Jaspan firm. He had periodically represented Alessandria and his businesses on labor matters for more than twenty years. In April 2003, he began assisting HV's present counsel in defending against a complaint Elena Winter had filed with the Equal Employment Opportunity Commission (EEOC), alleging that she was fired on account of her pregnancy.

Englander, who was in his mid-70s, decided to "semi-retire" and work fewer hours. He proposed to turn the representation of several of his clients, particularly a local school district, over to the Jaspan firm. He agreed to become "of counsel" to Jaspan effective July 1, 2003 "[i]n order to effect an orderly transition of those matters." As for the Englander clients not being transferred to Jaspan, which included Alessandria and HV, Englander continued to represent them in his individual capacity. Jaspan had no access to those clients' files.

At the time Jaspan called Winter as a witness against HV in this case, Jaspan was unaware of Englander's representation of HV in the EEOC proceedings initiated by Winter, and Englander was unaware of Jaspan's representation of Valley Stream in this proceeding against HV. There had been no communication between Englander and the Jaspan lawyers about either case.

The potential conflict came to light on September 18, 2003, when Englander, in connection with Winter's EEOC proceeding against HV, sent a letter to the EEOC written on Jaspan letterhead and faxed a copy to his co-counsel in that matter, who also represents HV in this suit. Englander asserted in his affidavit that his use of the Jaspan letterhead for that letter was "an inadvertent error" as Jaspan had no involvement in the matter. In a separate incident additionally cited by HV to support its disqualification motion, a woman who identified herself as being from the Jaspan firm, later telephoned Alessandria to ask for his fax number on Englander's behalf.

The alleged conflict involving Jon Santemma arose as follows. Santemma, who specializes in tax certiorari and condemnation proceedings, joined the Jaspan partnership in June 2003. Calls made to his number at his prior firm were automatically transferred to his phone at Jaspan. Alessandria phoned Santemma in July 2003, seeking advice about a condemnation proceeding being initiated by another town against another of Alessandria's stores.¹ Alessandria and Santemma spoke for approximately ten minutes. Santemma was not retained and never opened a file on the matter. There is no suggestion in the record that HV owned or operated the business which was the subject of the condemnation proceeding or had any connection with that business beyond the fact that the owner of its stock also owned the other business.

III. The Magistrate Judge's Decisions

The magistrate judge granted Valley Stream's motion for a declaratory judgment on January 5, 2004. He rejected HV's contention that the booths were not "rooms," as prohibited by the settlement agreement, as well as its argument that the booths were not "enclosed" because of the eighteen-inch gap between the tops of the walls of the booths and the ceiling. The magistrate judge found as well that...