World Hill Ltd. v Sternberg

[*1] World Hill Ltd. v Sternberg 2009 NY Slip Op 52289(U) [25 Misc 3d 1224(A)] Decided on November 6, 2009 Supreme Court, New York County Friedman, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 November 6, 2009
Supreme Court, New York County

World Hill Ltd., a foreign corporation, and BARUCH SAAR, Plaintiffs,

against

Ophir Sternberg and ALLISON GREENFIELD, Defendants.



116916/07



For Plaintiffs:

Stuart J. Moskovitz. Esq.

819 Highway 33

Freehold, New Jersey 07728

For Defendants:

Elliot L. Schaeffer, Esq.

Schaeffer & Krongold LLP

450 Seventh Avenue, 14th Floor

New York, New York 10123

Marcy S. Friedman, J.

This is an action to recover on a promissory note. Defendants move to dismiss the action for lack of personal jurisdiction and to disqualify Stuart Moskovitz from representing plaintiffs.Defendants' motion was made well after the sixty day limit for service of a motion to dismiss for lack of personal jurisdiction pursuant to CPLR 3211(e). While plaintiffs do not expressly request denial of defendants' motion based on untimeliness, plaintiffs note that defendants appeared for a discovery conference without raising objections to service. (Aff. In Opp., ¶ 32.) The court accordingly holds, on its own motion, that the branch of the motion to dismiss should be denied as untimely. (Wiebusch v Bethany Mem. Refm. Church, 9 AD3d 315 [1st Dept 2004].)

As to the branch of defendants' motion for disqualification of plaintiffs' counsel, [*2]defendants first contend that Mr. Moskovitz represented both plaintiffs (or their agent) and defendants in negotiating the agreement by which plaintiffs acquired defendants' interest in their company, Oz Equities, LLC ("Oz"). Defendants further contend that plaintiffs' counsel will be a necessary witness on whether plaintiffs' counsel represented that the promissory note at issue would be deemed satisfied as a result of the transfer of defendants' interest.

Regarding adverse representations, New York Rules of Professional Conduct Rule 1.9(a), formerly Code of Professional Responsibility Disciplinary Rule 5-108, provides: "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 unless the former client gives informed consent, confirmed in writing." As this Rule reflects, "[a]ttorneys owe a continuing duty to former clients not to reveal confidences learned in the course of their professional relationship. It is this duty that provides the foundation for the well-established rule that a lawyer may not represent a client in a matter and thereafter represent another client with interests materially adverse to interests of the former client in the same or a substantially related matter." (Kassis v Teacher's Ins. & Annuity Assn., 93 NY2d 611, 615-616 [1999].)

Regarding the advocate witness rule, Rule of Professional Conduct 3.7, like former Disciplinary Rule 5-102, generally prohibits an attorney from acting as an advocate before a tribunal where it is likely that the attorney will be called as a witness on a significant issue other than on behalf of the client, and it is apparent that the testimony may be prejudicial to the client. The rule also prohibits an attorney from acting as an advocate where the attorney knows he or she is likely to be a witness on a significant issue of fact on the client's behalf, unless the testimony relates to enumerated subjects, not here relevant, such as a matter of formality, an uncontested issue, or the value of legal services. (See e.g. Broadwhite Assocs. v Truong, 237 AD2d 162 [1st Dept 1997]; Martinez v Suozzi, 186 AD2d 378 [1st Dept 1992]; Fairview at Old Westfield, L.P. v European Am. Bank, 186 AD2d 238 [2d Dept 1992].)

The burden of proof is on the party seeking disqualification. (Tekni-Plex, Inc. v Meyner & Landis, 89 NY2d 123, 132 [1996], rearg denied 89 NY2d 917.) As the Court of Appeals has recognized, disqualification motions have "been used as a litigation tactic to gain strategic advantage over an adversary." (Id. at 131-132 [1996], citing S & S Hotel Ventures Ltd. Partnership v 777 S.H. Corp., 69 NY2d 437, 443 [1987].) The conflict rules therefore should not be "mechanically applied when disqualification is raised in litigation." (Kassis, 93 NY2d at 617, quoting S & S Hotel Ventures, 69 NY2d at 444.)

Applying these standards, the court finds that defendants have failed to satisfy their burden of showing that plaintiffs' counsel's disqualification is required under the advocate witness rule. While plaintiffs dispute that Mr. Moskovitz represented defendants in the negotiations for the purchase of Oz, they do not dispute that he communicated directly with defendants in the course of these negotiations, and that he has personal knowledge of the discussions regarding the consideration for the transfer of defendants' interest to plaintiffs.

Plaintiffs deny that the consideration included satisfaction of the $825,000 promissory note on which plaintiffs sue in this action. Plaintiffs' position is supported by the purchase or transfer agreement (Ex. F to Defs.' Motion) which, on its face, provides for defendants to receive one-third of the net proceeds of the selling price of real property owned by Oz, and makes no [*3]reference to satisfaction of the substantial promissory note.

Significantly, defendants fail to make any showing that the agreement is ambiguous or incomplete, and that the parol evidence rule will not apply to bar evidence of a contemporaneous oral agreement that contradicts the terms of the writing. (See generally W.W.W. Assocs. v Giancontieri, Inc., 77 NY2d 157 [1990].) Defendants thus fail to show that Mr. Moskovitz may be called as a witness on either party's behalf.

The court finds, similarly, that defendants fail to meet their burden of demonstrating that Mr. Moskovitz should be disqualified under the adverse representation rule. It is well settled that "[t]o determine whether an attorney-client relationship exists, a court must consider the parties' actions. An attorney-client relationship is established where there is an explicit undertaking to perform a specific task. While the existence of the relationship is not dependent upon the payment of a fee or an explicit agreement, a party cannot create the relationship based on his or her own beliefs or actions." (Pellegrino v Oppenheimer & Co., Inc., 49 AD3d 94, 99 [1st Dept 2008] [internal quotation marks, brackets, and citations omitted].)

Here, defendant Sternberg asserts that "[w]e felt that he [Moskovitz] was at all times acting as attorneys for all parties to the Transfer Agreement." (Sternberg Aff. In Support ["Sternberg Aff."], ¶ 18.) Defendant Sternberg also states that he "never felt the need to obtain a separate attorney because it was my understanding, and Moskovitz led me to believe, that since we had a common goal, maximizing the assets of Oz, Moskowitz was protecting everyone." (Sternberg Reply Aff., ¶ 9.) In opposition, Mr. Moskovitz categorically denies that he represented defendants in the negotiations for transfer of their interest to plaintiffs. He also points out that he entered into a written retainer with Oz and Sternberg when he represented them in a prior matter involving Oz's ownership of a parking lot.

Defendant Sternberg's carefully worded affidavits in support and in reply on this motion conspicuously fail to state that Mr. Sternberg, a sophisticated business person, made any agreement to retain Mr. Moskovitz as his attorney in connection with the sale of his interest in Oz to plaintiffs, or discussed any terms of the representation.[FN1] Rather, Mr. Sternberg relies on the notion that plaintiffs and defendants had a common interest, and on his "belief" that Mr. Moskovitz was representing him. On the above authority, this belief is plainly insufficient to establish an attorney-client relationship. Mr. Sternberg's vague assertions that Mr. Moskovitz "represented that he was acting on behalf of all parties," and that he "told us that he negotiated this position for us with [plaintiff] Saar" (Sternberg Aff., ¶¶ 16, 20) are also unavailing. Mr. Sternberg states that he told Mr. Moskovitz his terms for the sale and that Mr. Moskovitz told [*4]him that plaintiff Saar agreed to cancel the debt. (Id., ¶ 20.) However, Mr. Sternberg's affidavits do not affirmatively assert, or cite any facts to show, that Mr. Moskovitz conducted the negotiations in his capacity as Mr. Sternberg's attorney, and not merely as plaintiffs' attorney dealing with Mr. Sternberg pro se. (See Sternberg Aff., ¶¶ 19-22.) Defendant Greenfield's affidavit adds nothing, as it merely adopts defendant Sternberg's assertions. (Greenfield's Aff. In Support, ¶ 9.) Under these circumstances, defendants fail to raise a triable issue of fact as to whether Mr. Moskovitz represented them in negotiating the transfer of their interests and the alleged satisfaction of the promissory note.

As indicated above, Mr. Moskovitz did represent defendants Sternberg and Greenfield, or their then company Oz, in matters before a state court regarding Oz' ownership of a parking lot and in bankruptcy court. However, defendants have made no showing that these representations were substantially related or adverse to the instant action.

It is accordingly hereby ORDERED that defendants' motion is denied; and it is further

ORDERED that the parties shall appear for a discovery conference in Part 57 of this Court on December 3, 2009 at 11:00 a.m.

This constitutes the decision and order of the court.

Dated: New York, New York

November 6, 2009

________________________

MARCY FRIEDMAN, J.S.C. Footnotes

Footnote 1:When Mr. Moskovitz represented Mr. Sternberg and Oz in connection with the prior matter involving ownership of the parking lot, Mr. Sternberg signed not only a retainer (Ex. 6 to Moskovitz Aff. In Opp.) but also a "Waiver of Conflict" (Ex. E to Defs.' Motion). This Waiver refers to Mr. Moskovitz' appearance on behalf of Sternberg and Oz in the matter involving the parking lot and also states that Sternberg and Greenfield are desirous of selling their shares in Oz to plaintiff Saar's agent, Cohen. The Waiver of Conflict then goes on to state: "Ophir [Sternberg] and Allison [Greenfield] agree to waive any conflict arising out of the attorney/client relationship between Eli [Cohen] and Attorney Moskovitz." Notwithstanding the broad language of the Waiver, defendant Sternberg takes the position that the Waiver applied to the parking lot matter and not the transfer negotiations, and he does not rely on the Waiver to support his claim that Mr. Moskovitz represented him in the negotiations.