Meigel v Schulman

[*1] Meigel v Schulman 2009 NY Slip Op 51853(U) [24 Misc 3d 1242(A)] Decided on August 12, 2009 Supreme Court, Kings County Saitta, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on August 12, 2009
Supreme Court, Kings County

Christopher Meigel, Plaintiff,

against

Micki Schulman and ELRAC, INC., Defendants.



42387/2007



Plaintiff Attorney-

Charles Haviv, Esq.

45-29 47th Street

Woodside, New York 11377

(718) 361-5656

Defendant Attorney -

Carmen Callahan & Ingham

266 Main Street

Farmingdale, New York 11735

Wayne P. Saitta, J.

Defendants MICKI SCHULMAN and ELRAC INC., move this Court for an Order pursuant to 49 USC §30106 dismissing the complaint against the Defendant ELRAC INC. (hereinafter "ELRAC").

Upon reading the Notice of Motion dated December 1, 2008, together with the Affirmation in Support of Tracy S. Reifer, Esq., dated December 1, 2008 and all exhibits annexed thereto; the Affirmation in Opposition of Charles Haviv, Esq., dated April 3, 2009, and all exhibits annexed thereto; the Affirmation Tracy S. Reifer, Esq., dated June 4, 2009, and all exhibits annexed thereto; the Supplemental Affirmation of Charles Haviv, Esq., dated June 4, 2009, and after argument of counsel and due deliberation thereon, Defendants' motion is denied for the reasons set forth below.

FACTS

The underlying action involves a motor vehicle accident in which Plaintiff alleges he was injured when he was struck by a car driven by Defendant SCHULMAN and owned by Defendant ELRAC. Defendants have moved to dismiss the case against ELRAC on the grounds that ELRAC is a car leasing company and can not be held vicariously liable pursuant to 49 USC §30106, commonly known as the Graves Amendment. The Court sua sponte raised the issue of whether Defendants' counsel had a conflict in representing both Defendants while seeking to dismiss the complaint against only one of them.

ARGUMENT

Defendants argue that there is no conflict for one attorney to represent both Defendants because there is no viable cause of action against ELRAC, as it is in the auto leasing business and there is no question of negligence on its part. Defendant SCHULMAN submits an affidavit asserting that were no problems with the vehicle. Defendants further argue that because the leasing agreement between the Defendants requires SCHULMAN to indemnify ELRAC for any loss over $25,000, including attorneys fees, it is in SCHULMAN's best interest to have the case dismissed against ELRAC. Lastly, Defendants argue that there has been full disclosure of the potential for conflicts and the Defendants have both consented to the joint representation.

Plaintiff did not address the conflict issue, but argues that the motion to dismiss the complaint against ELRAC should not be granted at this time as Plaintiff has not had the opportunity to conduct discovery as to whether ELRAC properly maintained and serviced the vehicle.

ANALYSIS

An attorney's representation of multiple parties to the same action can create an impermissible conflict of interest where their interests turn out to be adverse.

Generally under the Code of Professional Responsibility, "an attorney may not represent adverse interests or undertake to discharge conflicting duties and must avoid even the appearance of representing conflicting interests, except where the conflict of interest is nominal or negligible, or where there has been complete disclosure or consent". 7 NY Jur. 2d Attorneys at Law § 162.

Each defendant is entitled to hold the expectation that its attorney will consider the interest of that defendant alone, undiluted by loyalty to the moving defendant, when discharge of a potential contributing, co-defendant is at issue. A motion for summary judgment in favor of one defendant of necessity has the potential for conflict of interest as regards other defendants. Hill v. Berkshire Farm Center and Services For Youth, 137 Misc 2d 429, 521 NYS2d 358, NY Sup.,1987 While there are cases where representation of joint defendants is permissible based on full disclosure and consent, where the defendants interests are in fact adverse, the conflict can not be waived. Greene v Greene, 47 NY2d 447, 418 NYS2d 379 (1979); Dorsainvil v Parker, 14 Misc 3d 397, 829 NYS2d 851, (NY Sup. 2006); Booth v Continental Ins. Co., 167 Misc 2d 429, 634 NYS2d 650.

There is an inherent conflict of interest in representing two named defendants [*2]where, if the case against one defendant (owner/lessor) is dismissed pursuant to the Graves Amendment, the other defendant (driver) is left bearing full liability for the

claims alleged in Plaintiff's complaint. The driver has no independent advocate to oppose the motion which would result in the driver shouldering full liability.

The conflict remains despite the provision in the lease that requires the driver, SCHULMAN, to reimburse ELRAC for any loss they suffer arising from her use of the vehicle.

Such a lease provision is enforceable, but not as to losses resulting from ELRAC's own negligence. This means that if ELRAC's motion to dismiss pursuant to the Graves Amendment was denied on the grounds that they were negligent in maintaining the vehicle, and ELRAC was found liable to the Plaintiff because of that negligence, ELRAC could not seek indemnification from Schulman for that percentage of the damages caused by its negligence.

Further, such an indemnification provision is enforceable only to the extent that the losses that exceed the minimum primary coverage ELRAC was required to provide pursuant to VTL §370. Elrac v Ward, 96 NY2d 58, 724 NYS2d 692 (Ct of Ap 2001); Haight v Estate of DePamphilis, 5 AD3d 547, 772 NYS2d 833 (2nd Dept. 2004). Thus ELRAC may only seek reimbursement for any losses that exceeded the $25,000 in coverage they were required to provide Schulman.

There is an inherent conflict in an attorney representing both the driver and the leasing company where there is a possibility that the leasing company may have been negligent. If ELRAC was negligent then the driver would be entitled to contribution from ELRAC and ELRAC could not seek indemnification for such contribution based on its own negligence.

In this case, counsel has produced an affidavit from SCHULMAN stating that there was nothing wrong with the vehicle, which counsel argues shows that there is no question as to negligence by ELRAC, and thus no conflict.

However, this line of reasoning conflates the issue of whether ELRAC was negligent with whether an attorney representing both ELRAC and the driver can vigorously investigate, on the driver's behalf, whether ELRAC was negligent.

It is difficult to imagine an attorney, who represented only the driver, agreeing that ELRAC was not negligent based on the fact that the driver, who is not an expert, thought there was nothing from with the car. It is even more difficult to imagine an attorney who represented only the driver, procuring such an affidavit from their client. An independent counsel would almost certainly at a minimum insist on conducting discovery of ELRAC's maintenance and service records before conceding that ELRAC was not negligent.

There is also a need for separate counsel to evaluate whether there is a basis to argue that the Graves Amendment is not applicable in a given case, either on constitutional grounds or because the company is not a leasing company within the meaning of the act. While it is true that if ELRAC was held vicariously liable, the driver may be liable to reimburse ELRAC for its losses and attorneys fees that exceeded $25,000. However there many be situations in which counsel would conclude that having the leasing company remain in the case, if there is a legal basis for doing so, [*3]may increase the chances of a favorable settlement that outweigh the risk of having to reimburse the leasing company and pay additional legal fees. A client is entitled to the undivided loyalty of counsel, even for such strategic decisions.

Lastly, Plaintiff is entitled to conduct discovery as to the maintenance of the vehicle, before having to answer the summary judgment motion, as such information is both material and within ELRAC's sole control. Therefore summary judgment would be premature at this time.

WHEREFORE, Defendants' motion to dismiss is denied with leave to renew after separate counsel is provided for Defendant SCHULMAN and after the completion of discovery. This constitutes the decision and order of the Court.

ENTER:

JSC