Marin v AI Holdings (USA) Corp.
Annotate this CaseDecided on May 17, 2012
Supreme Court, New York County
Richard A. Marin, , Plaintiff,
against
AI Holdings (USA) Corp., AI PROPERTIES AND DEVELOPMENT (USA) CORP., AFRICA ISRAEL INVESTMENTS LTD., IZZY COHEN and NADAV GRINSHON, Defendants.
651224/11
Attorneys for Plaintiff:
ZUKERMAN GORE BRANDEIS & CROSSMAN
875 Third Avenue
New York, NY 10022
By: John K. Crossman, Esq.
Frank C. Welzer, Esq.
Attorneys for Defendants:
MORRISON COHEN LLP
909 Third Avenue
New York, NY 10022
By: Y. David Scharf, Esq.
Kristin T. Roy, Esq.
Evan Lupion, Esq.
Bernard J. Fried, J.
Plaintiff moves for an order disqualifying Y. David Scharf, Esq. and his law firm, Morrison Cohen LLP, pursuant to Rules of Professional Conduct (RPC) 3.7 (a) and (b) (22 NYCRR 1200.00 [previously 1200.21 (DR5-102)]), from continuing to represent defendants in this action.
The allegations of the complaint are discussed in detail in my decision on defendants' pre-answer motion to dismiss in this action, which was granted in part, but plaintiff's breach of contract and implied contract causes of action remain. Briefly, plaintiff, Richard A. Marin, was the chairman and chief executive officer of two subsidiary companies (together, AI-USA) of defendant Africa Israel Investments Ltd. (AFI), of which individual defendants Izzy Cohen and Nadav Grinshpon are officers or board members. Plaintiff alleges that Cohen and Grinshpon terminated his employment [*2]and denied him bonus and compensation payments because he undertook an investigation into their alleged corporate improprieties, which included the writing off of debt owed to AI-USA and the diversion of AI-USA's business opportunity. Plaintiff contends that, in the fall 2010, he discussed the alleged corporate improprieties with Cohen, his supervisor, who told him to "drop it." Plaintiff alleges that this incident was part of a larger corporate culture at Africa-Israel aimed at protecting senior executives by covering up their wrongdoing. Plaintiff states that he initiated an investigation at AI-USA regarding improprieties within the company, which he hired an outside law firm to conduct, but that, at AFI's insistence, Scharf was also involved in the investigation.
Plaintiff's employment was terminated at a December 8, 2010, at a meeting with Scharf, who handed plaintiff a letter from AI-USA, signed by Cohen and Grinshpon, stating that plaintiff would not receive additional compensation. Plaintiff alleges that he was not paid promised compensation because Cohen and Grinshpon sought to cover up and punish him for bringing up the alleged corporate improprieties, and that Scharf is a necessary witness, because he was party to, and has unique knowledge of events that transpired both prior to, and including, plaintiff's termination.
Plaintiff argues that, because Scharf's testimony is both necessary to the litigation and expected to be prejudicial to Scharf's clients, the defendants herein, Scharf should be disqualified under RPC Rule 3.7 (a), which states that "a lawyer shall not act as advocate before a tribunal in a matter in which the lawyer is likely to be a witness on a significant issue of fact"(RPC 3.7 [a]). Plaintiff asserts that Scharf has unique knowledge concerning: (1) the improprieties which plaintiff investigated; (2) the result of plaintiff's having brought up the improprieties; (3) AFI's alleged corporate culture of covering up improprieties (4); and plaintiff's termination.
Plaintiff contends that Morrison Cohen should be disqualified as well because he will call Scharf as a witness and his testimony will be prejudicial to defendants. RPC 3.7 (b) states that "[a] lawyer may not act as advocate before a tribunal in a matter if: (1) another lawyer in the lawyer's firm is likely to be called as a witness on a significant issue other than on behalf of the client, and it is apparent that the testimony maybe prejudicial to the client."
The Court of Appeals has held that the advocate-witness disqualification rules, outlined in the Rules of Professional Responsibility, "provide guidance, not binding authority" for courts, in considering whether an attorney should be disqualified (S & S Hotel Ventures Ltd. Partnership v 777 S.H. Corp. [hereinafter, S & S Hotel]), 69 NY2d 437, 440 [1987]). Given that attorney disqualification can deprive a party of the valued right to representation of his or her choice (Falk v Gallo, 73 AD3d 685, 686 [2d Dept 2010]), and can be used strategically by an adversary to "stall and derail the proceedings" (S & S Hotel, 9 NY2d at 443), a motion to disqualify should not be granted "absent a clear showing that disqualification is warranted" (Falk, 73 AD3d at 686).Pivotal in a disqualification motion is a determination as to whether or not testimony is necessary, which depends on multiple factors, including the "significance of the matters, weight of the testimony, and availability of other evidence" (S & S Hotel, 69 NY2d at 446). The party seeking to disqualify its opponent's attorney bears the "heavy burden" of proving that necessity (see ODS Optical Disc Service GmBH v Toshiba Corporation, 41 AD3d 166, 166 [1st Dept 2007]; Falk, 73 AD3d at 686). Furthermore, even "relevant . . . highly useful" testimony may still not be "necessary," (S & S Hotel, 69 NY2d at 446), and disqualification not warranted, unless the moving party "indentif[ies] the projected testimony . . . and demonstrat[es] how it would be so adverse to [*3]the factual assertions or account of events offered on behalf of the client as to warrant . . . disqualification'" (Broadwhite Assocs. v Truong, 237 AD2d 162, 163 [1st Dept 1997], quoting Martinez v Suozzi, 186 AD2d 378, 379 [1st Dept 1992]).
Plaintiff asserts that Scharf represented non-party Jona Rechnitz, in a transaction in which Grinshpon improperly moved to Rechnitz's company, JSR, property management work that AI-USA had been performing for a company named "China Sonangol." Scharf, however, avers that he was unaware of the shift in the property management business to JSR until after the negotiations were complete, and that he did not discuss the matter with Grinshpon at all. Rechnitz also submits an affidavit in which he avers that Morrison Cohen had no role in his negotiations with AI-USA, or China Sonangol, regarding the property management work.
Plaintiff further asserts that Scharf represented Rechnitz and dealt directly with AFI executives in a transaction where Grinshpon ordered AI-USA to bid through, and pay a fee to, JSR, on a Times Square property, when AI-USA was already obligated to pay a fee to another broker. Scharf avers that he neither represented Rechnitz in, nor even knew of, the Times Square property bid transaction until after negotiations fell through, and that he did not know of the broker commission until reading plaintiff's affidavit in this action. Rechnitz also avers that Morrison Cohen had no part in the transaction negotiations.
Plaintiff has not demonstrated that testimony concerning these transactions could not be provided by Rechnitz, or other parties involved therewith. He also has not demonstrated that Scharf is the only witness in the internal corporate investigations, or that there are no others who can testify as to the AFI corporate culture. Testimony is not necessary where it is cumulative of other testimony (see Sokolow, Dunaud, Mercadier & Carreras LLP v Lacher, 299 AD2d 64, 76 [1st Dept 2002]).
Furthermore, Scharf is not a necessary witness on plaintiff's contract claims, because testimony he would offer is irrelevant to the claims. Assuming the truth of plaintiff's allegations concerning Scharf's observation of improprieties, these observations would have little impact on plaintiff's breach of contract claims, which require a showing of (1) the existence of a contract, (2) the plaintiff's performance under the contract, (3) the defendant's breach of that contract, and (4) resulting damages (JP Morgan Chase v. J.H. Elec. of NY, Inc., 69 AD3d 802, 803 [2d Dept 2010]). Plaintiff has not demonstrated that testimony as to corporate officer malfeasance is necessary to establish these claims (Wegman v Dairylea Cooperative, Inc., 50 AD2d 108, 111 [4th Dept 1975] ("[P]laintiff need not allege or prove the reason for his discharge. Plaintiff's burden extends only to proving the existence of an employment contract . . . .").
Regarding Scharf's attendance at plaintiff's termination, plaintiff does not point to any specific testimony he would need from that meeting, where he was present with his own counsel. Assuming, as plaintiff asserts, that Scharf offered plaintiff another income opportunity at the meeting, plaintiff has not adequately addressed the relevance of this to this case. As to the actual termination, plaintiff has the letter from Cohen and Grinshpon on behalf of AI-USA, that was handed to him that day, firing him, and stating that plaintiff would not be receiving bonus compensation, an undisputed event. Plaintiff has not articulated other testimony from Scharf about the meeting that is necessary.
Plaintiff projects that Scharf's necessary testimony would include that Grinshpon and Cohen ordered that he be terminated and not paid his annual bonus because he was causing trouble by [*4]raising improprieties and that Scharf put a halt to an internal corporate investigation because of concerns about the impact on management in Israel. Plaintiff argues that in opposition to this motion, Scharf has not adequately addressed what he knows about these matters, which warrants additional discovery. Defendants dispute the need for discovery.
Whether these points might have required Scharf's testimony is now academic, because plaintiff's tortious interference claims have been dismissed. Plaintiff has not demonstrated that, to prove his contract claim, he requires testimony concerning alleged corporate officer malfeasance, or the reason why he was terminated or not paid his bonus.
As plaintiff, at this juncture, does not specify other testimony that is required from Scharf in this action, he has not demonstrated, on this record, that disqualification is appropriate and his motion is denied. As plaintiff has not demonstrated that Scharf is a necessary witness, there is no reason to disqualify Morrison Cohen. In light of the foregoing, it is unnecessary to address defendants' argument that Scharf would not be able to testify about his interactions with the defendants' executives regarding the alleged improprieties because the communications are covered by attorney-client privilege, which defendants will not waive. It is also unnecessary to conduct an in camera review, as it appears plaintiff has requested,[FN1] of something Scharf allegedly told him concerning an investigation.
Therefore, it is
ORDERED that plaintiff's motion to disqualify attorney Y. David Scharf and Morrison Cohen LLP as counsel for defendants (Motion Sequence No. 002) is denied.
DATED:__________________
ENTER:
_______________________________J.S.C.
Footnotes
Footnote 1:Plaintiff has requested that he be permitted to submit a statement under seal, but there is no sealing motion before me.
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