Hakimian Mgt. Corp. v Richard C. Fiore, Inc.

[*1] Hakimian Mgt. Corp. v Richard C. Fiore, Inc. 2007 NY Slip Op 51352(U) [16 Misc 3d 1108(A)] Decided on July 9, 2007 Supreme Court, New York County Ling-Cohan, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 July 9, 2007
Supreme Court, New York County

Hakimian Management Corp., Plaintiff,

against

Richard C. Fiore, Inc., a/k/a "RCF, Inc.", Richard Fiore and Thomas Sullivan, Defendants,



600472/02



Plaintiff Hakimian Management Corp. and Ben and Joe Hakimian:

Norman Flitt, Esq.

Rosenberg & Estis, P.C.

733 Third Avenue

New York, NY 10017

(212 867-6000

Defendants Richard C. Fiore, Inc. and Richard C. Fiore

Clifford Schwartz, Esq.

Schwartz & Blumenstein

350 Fifth Avenue, Suite 2412

New York, NY 10118

(212) 290-0400

Doris Ling-Cohan, J.

It is ordered that this motion is granted, to the extent set forth below, and the cross motion is granted in part and denied in part, to the extent set forth below.

Background

This is an action brought by plaintiff Hakimian Management Corp. (HMC) to recover, among other things, the sum of $250,000.00, representing payments made by HMC, additional defendants Behrouz Ben Hakimian and Joe Hakimian (the Hakimians) and related entities (collectively, the Hakimian group) to defendants Richard C. Fiore, Inc. a/k/a "RCF, Inc." (RCF), Richard C. Fiore (Fiore) and Thomas Sullivan (Sullivan) (collectively the Fiore/RCF group). The payments were made in connection with a joint venture between the Hakimian group and the Fiore/RCF group, known as Seaport Associates, LLC (the LLC), formed to acquire and develop property owned by the City of New York and managed by the New York City Economic Development Corporation (the EDC), located at the South Street Seaport (the Seaport Project) in New York, New York.

Fiore and his company, RCF, responded to a request for proposals by the EDC to develop the Seaport Project. The EDC issued a letter, dated May 12, 2000, to Fiore and RCF conditionally designating RCF as the developer for the Seaport Project (Affidavit of Richard C. Fiore in Support of Defendants' Motion [Fiore Aff.], Ex. A to Ex. A [Conditional Designation Letter]). One of the conditions imposed by the EDC was that RCF enter into an agreement with [*2]an acceptable equity partner regarding the financing of the project (id.). Fiore and RCF selected the Hakimians as the equity partner for the project (Fiore Aff., at ¶ 7). On or about September 11, 2000, Fiore, Sullivan and the Hakimians executed a document entitled, "Term Sheet Re: Joint Venture Agreement" (the Joint Venture Agreement), setting forth the terms of the joint venture between the Fiore/RCF group and the Hakimian group to acquire the property from the EDC and to develop the Seaport Project (Fiore Aff., Ex. B to Ex. A).

On or about December 14, 2000, the Hakimian group and the Fiore/RCF group entered into an Operating Agreement for the LLC (the Operating Agreement), setting forth the detailed terms for the operation of the LLC to acquire the property and to develop the Seaport Project (Fiore Aff., Ex. C to Ex. A). The members of the LLC were the individuals and entities who owned interests in the LLC. The members affiliated with the Hakimian group collectively owned an 85% interest in the LLC (Operating Agreement, § 3.5). The members affiliated with Fiore/RCF group owned a 15% interest in the LLC, with RCF owning a 10% share and Sullivan owning a 5% share (id.). The Hakimians were designated as the manager of the LLC, with broad authority to make decisions regarding the development of the Seaport Project [FN1] (Operating Agreement, § 5.1). The Hakimian group was required to make certain payments to enable the LLC to carry out the Seaport Project, totaling $930,000.00 (Operating Agreement, § 6.1 [c]). These payments, designated as member's preferred equity loans, included the sum of $150,000.00 paid by the Hakimian group to RCF, upon execution of the Joint Venture Agreement, and the additional sum of $100,000.00 to be paid by the Hakimian group to Fiore and Sullivan upon the execution of the Operating Agreement (id.). The Operating Agreement further provided that if the contract of sale with the EDC to purchase the property for the Seaport Project was not executed by a specific date, RCF and Sullivan were required to refund to the Hakimian group the payments already made, totaling $250,000.00, and Fiore and Sullivan personally guaranteed the refund of this amount (Operating Agreement § 6.1 [c]).

Negotiations were conducted between the LLC and the EDC to enter into a contract for the sale of the property for the Seaport Project. The LLC and the EDC were, however, unable to reach an agreement, and the EDC terminated the Conditional Designation Letter it had issued to RCF on or about May 10, 2001 (Fiore Aff., at ¶ 11; and Ex. E to Ex. A). In view of the fact that joint venture for the Seaport Project failed to move forward, Ben Hakimian wrote a letter dated September 6, 2001 to Fiore, RCF and Sullivan requesting a refund of all monies paid by the Hakimian group in connection with the project pursuant to the Operating Agreement (Fiore Aff., Ex. F to Ex. A). Fiore, RCF and Sullivan failed to refund the money.

In or about February 2002, HMC commenced the instant action seeking, among other things a refund of the $250,000.00 paid by the Hakimian group in connection with the Seaport Project (see Fiore Aff., Ex. A [Amended Complaint]). Fiore and RCF served an answer to the [*3]amended complaint asserting counterclaims against HMC and the Hakimians, who were joined as additional defendants on the counterclaims (Fiore Aff., Ex. B [Fiore/RCF Answer]). The counterclaims asserted by Fiore and RCF sought, among other things, damages for economic loss from the terminated project, based upon the alleged failure of HMC and the Hakimians to act in good faith in the negotiations with the EDC and to comply with the terms of the Operating Agreement and the Conditional Designation Letter (id.). The note of issue was filed on April 27, 2005 and this case is on the waiting list for trial.

Defendants Fiore and RCF ( the moving defendants or the Fiore/RCF defendants) move to disqualify the law firm of Rosenberg & Estis, P.C. (R&E), which was substituted as counsel for HMC and the Hakimians, in or about February 2006 (Fiore Aff. in Support, Ex. C). HMC and the Hakimians cross-move: (1) to disqualify the Fiore/RCF defendant's present counsel, Schwartz & Blumenstein, if this Court grants their motion to disqualify R&E; and (2) to join additional defendants Ben and Joe Hakimian, as parties plaintiff. The law firm at issue in this motion, R&E, was not substituted as counsel for plaintiff until February 2006, and this motion to disqualify them was made shortly thereafter, in March 2006. This motion was not, however, fully briefed and submitted until more recently [FN2].

Discussion

1. Motion by Fiore and RCF to Disqualify R&E from Representing HMC and the Hakimians

In support of their motion to disqualify R&E from representing HMC and the Hakimians, the moving defendants rely upon two provisions of the Code of Professional Responsibility: (1) DR 5-108 (22 NYCRR § 1200.27) ("Conflict of Interest; Former Client"); and (2) DR 5-102 (22 NYCRR § 1200.21) ("Lawyers as Witness"). The Court of Appeals has recognized that motions to disqualify the counsel of an opposing party, made during the course of litigation, involve significant competing interests. The provisions of the Code of Professional Responsibility establish important "ethical standards that guide attorneys in their professional conduct" (S&S Hotel Ventures Ltd. Partnership v 777 S. H. Corp., 69 NY2d 437, 443 [1987]). Nevertheless, when Code provisions are raised in the context of a motion to disqualify counsel, they are not to be applied rigidly as if they were "controlling statutory or decisional law" (id.; see also Tekni-Plex, Inc. v Meyner and Landis, 89 NY2d 123, 132 [1996], rearg. den. 89 NY2d 917 [1996]). Accordingly, courts must exercise the discretion to weigh the important ethical standards represented by the Code of Professional Responsibility and the need to avoid the appearance of impropriety, against the other interests implicated in a motion to disqualify opposing counsel, including the rights of litigants to be represented by counsel of their choice who is familiar with the matter and the possibility that a motion to disqualify may be a litigation tactic to delay the proceedings and to gain a strategic advantage over an adversary (see Jamaica Pub. Serv. Co. v AIU Ins. Co., 92 NY2d 631, 638 [1998]; Tekni-Plex, Inc. v Meyner and Landis, 89 NY2d at 131-132; S&S Hotel Ventures v 777 S. H. Corp., 69 NY2d at 443). In the context of these important considerations, the two bases for the motion by Fiore and RCF to disqualify R&E are analyzed below.

A. DR 5-108: Conflict of Interest; Former Client [*4]

DR 5-108 provides, in pertinent part: "[A] ... a lawyer who has represented a client in a matter shall not, without the consent of the former client after full disclosure:1. 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.2. Use any confidences or secrets of the former client except as permitted by DR 4-101 [1200.19] ( C ) or when the confidence or secret has become generally known."

The Code provision of DR 5-108(A) reflects an attorney's fiduciary duties of both confidentiality and loyalty to his or her clients, thereby imposing a "continuing obligation on attorneys to protect their clients' confidences" even after the representation has ended (Tekni-Plex, Inc .v Meyner and Landis, 89 NY2d at 130). A party seeking disqualification of an adversary's lawyer pursuant to DR 5-108(A), in this case Fiore and RCF, must prove: "(1) the existence of a prior attorney-client relationship between the moving party and opposing counsel, (2) that the matters involved in both representations are substantially related, and (3) that the interests of the present client and former client are materially adverse ..."

(Tekni-Plex, Inc. v Meyner and Landis, 89 NY2d at 131, citing Solow v W. R. Grace & Co., 83 NY2d 303, 308 [1994]; see also Jamaica Pub. Serv. Co. v AIU Ins. Co., 92 NY2d at 636). A moving party must satisfy all three of the above criteria, in order to give rise to a presumption of disqualification of opposing counsel (see Tekni-Plex, Inc. v Meyner and Landis, 89 NY2d at 131-132; see also Jamaica Pub. Serv. Co. v AIU Ins. Co., 92 NY2d at 636).

The major issue on the motion to disqualify is whether Fiore and RCF have established that they had a prior attorney-client relationship with R&E with respect to the Seaport Project, a matter which is substantially related to the instant litigation. According to Fiore, R&E, particularly the firm's partner, Robert Kessler, Esq. (Kessler), represented both HMC and the Hakimians, as well as defendants Fiore, RCF and Sullivan, in major aspects of the Seaport Project and was "an integral part of the facts and circumstances underlying this action" (Fiore Aff., at ¶ 5). Fiore asserts that R&E drafted both the Joint Venture Agreement and the Operating Agreement for the LLC, upon which the primary action is based (Fiore Aff., at ¶ ¶ 8, 10). Fiore further asserts that Kessler represented all of the parties to this action in the negotiations with the EDC for the contract of sale to purchase the property for the Seaport Project, as reflected by the "volume" of correspondence Kessler drafted to the EDC and the meetings he attended with the EDC (Fiore Aff., at ¶ 9). Lastly, Fiore further asserts that Kessler "participated in discussions with the parties regarding the Project and the negotiations with the EDC" (id.).

Kessler submitted an affidavit in which he states that in July 2000 he was assigned by one of his partners at R&E, Richard Sussman, Esq., to draft the Joint Venture Agreement on behalf of the Hakimians and HMC (Kessler Aff. in Opposition [Kessler Aff.], at ¶ 2). Kessler asserts it was clear to him that, when he was preparing the Joint Venture Agreement, he was "representing the interests of the Hakimians and HMC and not the group controlled by RCF and Thomas Sullivan", as that group was represented by Clifford Schwartz, Esq. (Schwartz) of the [*5]law firm of Schwartz & Blumenstein (Kessler Aff., at ¶ 5 [emphasis in original]). According to Kessler, he spoke to the Hakimians, principally to Ben Hakimian, "to get the parameters of the deal [for the Seaport Project] and the Terms to be included in the Joint Venture Agreement" (Kessler Aff., at ¶ 4 [parenthetical supplied]). Kessler asserts that he forwarded drafts of the Joint Venture Agreement to Schwartz seeking his comments and spoke with him from time to time concerning this matter (Kessler Aff., at ¶ 6, and Ex. G [copies of fax cover sheets showing distributions of drafts of Joint Venture Agreement to Schwartz] ). Kessler also acknowledges that he drafted the Operating Agreement for the LLC, comprised of the Hakimian group and the Fiore/RCF group, to be formed to acquire the properties from the EDC and to develop the Seaport Project (Kessler Aff., at ¶ 9). He asserts, however, that, in drafting the Operating Agreement, he represented the Hakimians and HMC, rather than the group comprised of RCF and Sullivan, which was represented by Schwartz [FN3] (Kessler Aff., at ¶ 10). Kessler asserts that he corresponded with and spoke to Schwartz from time to time regarding the Operating Agreement to obtain the comments his clients had to contribute on that agreement (Kessler Aff., at ¶ 11; and Ex. H [copies of fax cover sheets and letters sending copies of drafts of the Operating Agreement to Schwartz, as well as Fiore, Sullivan and the Hakimians]). In his reply affirmation, Schwartz admits that he received drafts of both the Joint Venture Agreement and the Operating Agreement (Reply Affirmation of Clifford Schwartz, Esq. [Schwartz Reply Aff., at ¶ 10 [A] [ii]).

In his affidavit, Kessler asserts that he represented the Hakimians and the LLC (comprised of both the Hakimian group and the Fiore/RCF group) in the negotiations with the EDC for the contract of sale to purchase the properties for the Seaport Project (Kessler Aff., at ¶ 1). After the execution of the Joint Venture Agreement, Kessler acknowledges that he "contacted the EDC to

discuss the terms of the transaction" (Kessler Aff., at ¶ 8). Fiore has submitted a copy of a letter, dated October 17, 2000 by Kessler to the EDC , in which Kessler states that his firm (R&E) represents the "potential purchaser" of the property for the Seaport Project, referring to the joint venture comprised of the defendants and the Hakimians, which was subsequently organized as the LLC (Fiore Aff., Ex. D). After the Operating Agreement was signed and the LLC was formed, Kessler states that he was asked to review drafts of the proposed contract of sale submitted by the EDC and to advise the Hakimians regarding the drafts (Kessler Aff., at ¶ 12). Kessler acknowledges that he reviewed a draft of the proposed contract of sale with the EDC, which he received from the Hakimians in late January 2001, made comments on the draft and distributed his comments to the Hakimians, RCF and Sullivan to solicit their contributions with [*6]respect to the drafts (Kessler Aff., at ¶ 14). Kessler admits that he had discussions with Fiore and Sullivan with respect to the parameters of the deal with the EDC and his comments on the proposed draft contracts submitted by the EDC, yet he denies that he received confidential information from Fiore and Sullivan (Kessler Aff., at ¶ 15). Kessler then asserts that he was "never made privy to any proprietary information" by either Fiore or Sullivan "that would be adverse to their interests in relation to the Hakimians", and that "the Hakimian group and the RCF group were, for purposes of the negotiation of the contract of sale, united in interest as members of the LLC" (Kessler Aff., at ¶ 16).

In reply, Schwartz has asserted that the Fiore and RCF were represented solely by R&E before the EDC (Schwartz Reply Aff., at ¶ 10 [A] [ii]). In support, Schwartz has submitted copies of fax cover sheets and letters to the EDC concerning the drafts of the contract of sale and related issues, which were submitted directly to Fiore and Sullivan, rather than to Schwartz or any other attorney allegedly representing defendants on the Seaport Project (Schwartz Reply Aff., Ex. B). Additionally, the moving defendants have submitted a draft of an escrow agreement and a confidentiality agreement, to support their claim that Mr. Kessler provided further representation of Fiore with regard to the settlement of a prior developer's claim against the Seaport Project (Schwartz Reply Aff., at ¶ 10 [A] [i] and Ex. A). The draft escrow agreement provides for R&E to act as the escrow agent (Schwartz Reply Aff., Ex. A).

The submissions of the parties establish that Kessler assumed a lead role in drafting the Joint Venture Agreement and the Operating Agreement for the LLC; however, Fiore and RCF were represented by Schwartz in reviewing the drafts of these documents. Kessler was, however, the only attorney representing Fiore, RCF, as well as the other members of the LLC, including the Hakimians and Sullivan, in the negotiations with the EDC concerning the contract of sale for the Seaport properties, and related matters. Therefore, Fiore and RCF have established that they had a prior attorney-client relationship with Kessler. Further, the negotiations with the EDC regarding the contract of sale for the Seaport Project is a matter which is substantially related to the instant action, in which R&E is representing HMC and the Hakimians, whose position in this litigation is materially adverse to that of Fiore and RCF. Accordingly, Fiore and RCF have established all of the three criteria for disqualifying Kessler from representing the HMC and the Hakimians in this action, pursuant to DR 5-108(A) (see Tekni-Plex, Inc. v Meyner and Landis, 89 NY2d at 131).

The issue remains, however, whether Kessler's disqualification can be imputed to all of the attorneys in the law firm of R&E. Generally, where one attorney in a law firm is disqualified from representing a client, based upon a conflict of interest with a former client pursuant to DR 5-108(A), all of the attorneys in the law firm are, likewise, prohibited from representing that client (see DR 5-105 [D]; Kassis v Teacher's Ins. and Annuity Assn., 93 NY2d 611, 617 [1999]). Thus, it has been held that once the moving party satisfies all of the three criteria for disqualification of an attorney pursuant to DR 5-108 (A), discussed above, an irrebuttable presumption of disqualification of the attorney's entire law firm arises (see Tekni-Plex, Inc. v Meyner and Landis, 89 NY2d 131-132; Casita, LP v MapleWood Equity Partners (Offshore, Ltd.), 34 AD3d 251, 252 [1st Dept 2006]).

Even if there are limited circumstances, however, in which the presumption of imputed disqualification of all attorneys in a law firm and the presumption of shared confidences may be rebutted, HMC and the Hakimians have failed to sustain the heavy burden required to do so. For [*7]example, in Solow v W.R. Grace & Co. (83 NY2d 303 [1994]), the Court of Appeals held that a large New York City law firm was not disqualified from representing the plaintiffs in an action against W.R. Grace & Co. (Grace), based upon the fact that firm had previously defended Grace in a similar action. The Court of Appeals emphasized the fact that the attorney who was primarily responsible for defending Grace in the prior action had left the firm several years prior to the current litigation and the remaining attorneys at the firm established that they had limited involvement with the matter and did not possess confidential information from Grace (Solow, 83 NY2d at 313-314).

The Court of Appeals, however, reached a different result in Kassis v Teacher's Ins. and Annuity Assn. (93 NY2d 611), where it held that a small law firm should be disqualified from representing the defendants in an action, as an associate in the firm had "switched sides" from another small law firm in which he had previously performed significant work on behalf of the plaintiff in the same action. According to the Court of Appeals, in order to rebut the presumption of imputed disqualification of a law firm based upon shared confidences, the party seeking to avoid disqualification of a law firm "must prove that any information acquired by the disqualified lawyer is unlikely to be significant or material in the litigation" (Kassis, 93 NY2d at 617). The Court also emphasized the fact that the other factors, including the size of a law firm and the degree of interaction among the attorneys can also influence whether the presumption of imputed disqualification of an entire law firm can be rebutted (id. at 617-618). The Court of Appeals concluded that the law firm seeking to avoid disqualification failed to rebut the presumption that the associate who had "switched sides" acquired significant confidential information material to the litigation from his prior representation of the plaintiff in the same action (id. at 618-619). Moreover, the fact that the law firm in question was a small firm characterized by informality and interactions among attorneys increased the opportunities of the other attorneys in the firm to share the confidential information obtained by the associate, rendering any measures used by the firm to screen the associate from the other attorneys ineffective (id. at 617-619).

In the instant case, HMC and the Hakimians did not rebut the presumption that all of the attorneys in the law firm of R&E should be disqualified from representing them in the instant action. They have failed to demonstrate that any confidential information Kessler acquired from Fiore and RCF in the course of representing them, as members of the LLC, in the negotiations and drafting of the contract of sale with the EDC, is unlikely to be significant or material in this litigation. Given Kessler's extensive involvement in setting up the joint venture (the LLC), in the negotiations with the EDC and the drafting of the contract of sale on behalf of all parties, R&E's "burden in rebutting the presumption" that Kessler "acquired material confidences is especially heavy" (Kassis v Teacher's Ins. and Annuity Assn., 93 NY2d at 618-619). The Court of Appeals further stated in Kassis that "[c]onclusory averments that [the attorney] did not acquire such confidences during the prior representation failed to rebut that presumption as a matter of law" (id., at 619 [parentheticals supplied]; see also Casita, LP v MapleWood Equity Partners, 34 AD3d at 252). Accordingly, Kessler's conclusory denials that he acquired confidential information from Fiore and RCF are insufficient to rebut the presumption of disqualification of the entire R&E law firm. Moreover, in view of the fact that R&E is a medium [*8]sized "boutique"law firm of only 41 attorneys [FN4], similar to the law firm at issue in Kassis, it is highly likely that any information Kessler acquired from Fiore and RCF will be shared with other attorneys in the firm. Accordingly, Kessler's conclusory statement that none of the other attorneys at R&E have "asked me any questions about the negotiations, other than the bare bones facts, as set forth above, regarding my role as an attorney" (Kessler Aff., at ¶ 19) is insufficient to rebut the presumption that the entire firm should be disqualified.

The instant case is analogous to other recent cases in which courts have held that a law firm, which previously served as counsel to a corporation, is disqualified from representing individual shareholders, directors or officers in subsequent litigation against the corporation or other shareholders, directors or officers. In Tekni-Plex, Inc. v Meyner and Landis (89 NY2d 123), the Court of Appeals concluded that a law firm, that had previously represented a predecessor corporation on matters involving environmental permits and compliance was disqualified from representing the corporation's sole shareholder, chief executive officer and director in an arbitration proceeding against a successor corporation involving breach of warranties concerning compliance with environmental permits and regulations. In Casita, LP v MapleWood Equity Partners (34 AD3d 251 [1st Dept 2006], affg 11 Misc 3d 1054 [A] [Sup Ct, New York County 2006]), the Appellate Division held that a law firm was disqualified from representing the plaintiff investor in the defendant investment fund, as one of the law firm's attorneys had previously performed substantial work at another law firm in the formation of the defendant fund, its relationship with several affiliated entities, as well as on investment issues (see also Mancheski v Gabelli Group Capital Partners, Inc., 22 AD3d 532 [2d Dept 2005] [disqualifying law firm of former counsel for defendant corporation from representing one of the plaintiff shareholders in a suit seeking, inter alia, judicial dissolution of the corporation; former corporate counsel was also a shareholder and a plaintiff in the action]; Morris v Morris, 306 AD2d 449 [2d Dept 2003] [disqualifying law firm that had represented close corporation from representing defendant founder and sole shareholder of the corporation in a derivative suit by the minority shareholder]; Credit Index, L.L.C. v Risk Wise Intl., L.L.C., 296 AD2d 318 [1st Dept 2002], affg 192 Misc 2d 755 [Sup Ct, New York County 2002] [law firm disqualified from representing defendants in breach of contract action, where firm had previously represented founder and majority shareholder of the plaintiff corporation in a substantially related matter; court also held that the plaintiff corporation's sole shareholder remained a client of defendants' law firm, thereby giving rise to disqualification under DR 5-105 [A]]; Feygin v Martell, 283 AD2d 304 [1st Dept 2001] [disqualifying attorney who had previously represented both plaintiff and defendant in joint strategy or common interest against another party in a prior action, from representing the defendant in an action to enforce an agreement with the plaintiff to share the proceeds of the settlement of the prior action]). Similarly, in the instant case, R&E should be disqualified from representing HMC and the Hakimians in the present action, which is substantially related to the work performed by firm partner Robert Kessler, Esq. in representing the LLC and all of its members, including Fiore and RCF, in the formation of the parties' joint [*9]venture and in the negotiation and drafting of the contract of sale in the ultimately unsuccessful deal with the EDC.

In the instant matter, there is no issue of laches or undue delay in the motion by Fiore and RCF to disqualify R&E. In contrast to the situation disfavored by the relevant case law, in which the moving party has delayed until the eve of trial to disqualify counsel representing the opposing party since the inception of the litigation, Fiore and RCF made their motion promptly after R&E was substituted as plaintiff's counsel (compare cases where courts denied motions to disqualify counsel, citing undue delay in seeking such relief; see, e.g., Marcus v Marcus, 17 AD3d 219 [1st Dept 2005]; Rodriguez v 1414-1422 Ogden Ave. Realty Corp., 304 AD2d 400 [1st Dept 2003]).

R&E argues that disqualification may not be granted absent an evidentiary hearing, relying primarily upon Lightning Park, Inc. v Wise Lerman & Katz, P.C. (197 AD2d 52 [1st Dept 1994]). However, in Lightning Park, a hearing was directed because, unlike the instant matter, the movant in that case failed "to establish a substantial relationship between the issues in the present litigation and the subject matter of the prior representation", on the papers submitted (id. at 55). Furthermore, reliance by R&E on Kaufman v Kaufman (63 AD2d 609, 610 [1st Dept 1978]) is misplaced, as that case involved a "substantial issue of fact ... with regard to a possible conflict of interest", not present here, and the Kaufman case was decided prior to the recent decisions from the Court of Appeals and the Appellate Division cited herein, in which no hearing was held (see, e.g. Kassis v Teacher's Ins. and Annuity Assn., 93 NY2d 611; Tekni-Plex, Inc. v Meyner and Landis, 89 NY2d 123; Casita, LP v MapleWood Equity Partners, 34 AD3d 251).

Accordingly, as Fiore and RCF have sustained their burden to establish all of the requisite criteria to disqualify R&E, as articulated by the Court of Appeals (see, e.g. Jamaica Pub. Serv. Co. v AIU Ins. Co., 92 NY2d at 636; Tekni-Plex, Inc. v Meyner and Landis, 89 NY2d at 131), such firm is disqualified from any further representation of HMC and the Hakimians.

B. DR 5-102 Lawyer as Witness

DR 5-102, which is a further basis to disqualify R&E, provides, in pertinent part: "A. A lawyer shall not act, or accept employment that contemplates the lawyer's acting, as an advocate on issues of fact before any tribunal if the lawyer knows or it is obvious that the lawyer ought to be called as a witness on a significant issue on behalf of the client...

B. Neither a lawyer nor the lawyer's firm shall accept employment in contemplated or pending litigation if the lawyer knows or it is obvious that the lawyer or another lawyer in the lawyer's firm may be called as a witness on a significant issue other than on behalf of the client, and it is apparent that the testimony would or might be prejudicial to the client."

The rationale for the Code provisions prohibiting an attorney from serving as both trial counsel and a trial witness, the so-called "advocate-witness" rule, is "the concept that a lawyer's professional judgment should be exercised for the client's benefit, free of compromising influences and loyalties" (S&S Hotel Ventures Ltd. Partnership v 777 S.H. Corp., 69 NY2d at 444). In order to disqualify opposing counsel pursuant to the advocate-witness rule, a party must [*10]establish that the attorney "ought" to be called as a witness, meaning that the lawyer's testimony is not merely relevant to the transaction at issues, but that the testimony is necessary. "A finding of necessity takes into account such factors as the significance of the matters, weight of the testimony, and availability of other evidence", particularly whether the testimony of the attorney witness is merely cumulative of that of other witnesses (id. at 445-446).

In the instant matter, Fiore and RCF have established that Kessler, a former EDC senior counsel, ought to be called as a witness, within the meaning of DR 5-102 (A), as he is the most knowledgeable individual concerning the formation of the LLC and the negotiations with the EDC regarding the Seaport Project, despite the fact that other persons, including the Hakimians, are also knowledgeable about this matter. (see Sokolow, Dunaud, Mercadier & Carreras LLP v Lacher, 299 AD2d 64 [1st Dept 2002] [attorney who was defendant in action for breach of contract arising out of failed law firm merger disqualified from representing his own clients, under the advocate-witness rule, in actions by the other law firm involved in the merger to collect legal fees, as the court found that the attorney ought to be called as a witness on a significant issue]). It was during the negotiations before the EDC, in which Mr. Kessler allegedly received directives from the Hakimians, that supposedly led to the termination of the Conditional Designation Letter and the loss of the Seaport project (see Schwartz Reply Aff. at ¶ 10[B]). Thus, Mr. Kessler's efforts on behalf of the parties before the EDC may be material at trial. HMC and the Hakimians have provided no evidence to support Kessler's conclusory assertions that the Hakimians have more personal knowledge concerning the negotiations with the EDC, as they allegedly assumed the lead role in the negotiations and participated in conversations and meetings at which Kessler was not present (Kessler Aff., at ¶ ¶ 17, 18). Indeed, the evidence submitted in connection with the parties' motion papers indicates that Kessler, rather than the Hakimians, has more personal knowledge concerning the negotiations with the EDC, and that his testimony will not be cumulative of that of the Hakimians and other witnesses. At his deposition, Ben Hakimian testified that he has no minutes, no diary and no records of the negotiations with the EDC (Schwartz Reply Aff. [B. Hakimian Dep. Tr.], at 28), and in response to many questions concerning the transaction, he testified that his recollection was limited (Schwartz Reply Aff. at ¶ 12 and B. Hakimian Dep. Tr. at 66-67, 69-72, 74-78, 83, 93-95). Moreover, Fiore and RCF have submitted copies of correspondence from Kessler establishing that he has extensive knowledge of the negotiations with the EDC concerning the contract of sale for the Seaport Project (see Schwartz Aff. in Support, Ex. D; Schwartz Reply Aff., Exs. B and C).

Accordingly, Fiore and RCF have established that Kessler should be disqualified pursuant to the advocate-witness rule in DR 5-102 (A) from representing HMC and the Hakimians. The disqualification of Kessler pursuant to DR 5-102 (A), however, does not require the disqualification of the entire law firm of R&E pursuant to this provision (see Sokolow, Dunaud, Mercadier & Carreras LLP v Lacher, 299 AD2d at 76). Moreover, Fiore and R&E have not established that R&E should be disqualified pursuant to DR 5-102 (B), as they intend to call Kessler as a witness and his testimony will be prejudicial to R&E's clients, HMC and the Hakimians. Nevertheless, in view of the conclusion above, that R&E should be disqualified pursuant the conflict of interest provision in DR 5-108 (A), the fact the Kessler should be disqualified pursuant to the advocate-witness rule in DR 5-102 (A) provides an additional basis for disqualifying R&E from representing HMC and the Hakimians in this action.

[*11]2. Cross Motion by HMC and the Hakimians

A. Disqualification of the Attorney for Fiore and RCF

The first branch of the cross motion by HMC and Hakimians seeks to disqualify Schwartz from representing Fiore and RCF pursuant to the advocate-witness rule of DR 5-102, if this Court determines that Kessler should be disqualified pursuant to this Code provision. According to HMC and the Hakimians, if the Court determines that Kessler is an essential witness, then it should also determine that Schwartz is, likewise, an essential witness regarding: (1) his participation in the negotiations concerning the drafting of the Joint Venture and Operating Agreements for the LLC; and (2) his role as the attorney for Fiore and RCF during the negotiations between the LLC and the EDC (Affirmation of Norman Flitt, Esq. in Support of Cross Motion [Flitt Aff. in Support], at ¶ 51). HMC and the Hakimians assert that if Kessler is disqualified pursuant to the advocate-witness rule, fairness requires the disqualification of Schwartz as counsel to Fiore and RCF. Otherwise, Kessler would be subject to examination by Fiore and RCF, without allowing HMC and the Hakimians a similar opportunity to examine Schwartz (id. at ¶ 52).

HMC and Hakimians have not, however, cited any case law to support their fairness argument for disqualifying Schwartz. Further, the evidence submitted in connection with the motion and cross motion reveals that Schwartz, in contrast to Kessler, is not an essential witness, as Schwartz reviewed, but did not draft, the Joint Venture and Operating Agreements, and Schwartz did not participate in the negotiations with the EDC, as did Kessler (Schwartz Reply Aff. at ¶ 17). Lastly, Schwartz did not represent all of the members of the LLC in the negotiations with the EDC, as did Kessler, and, thus, is not subject to disqualification pursuant to the conflict of interest provision of DR 5-108 (A). Accordingly, the branch of the cross motion to disqualify Schwartz as counsel to Fiore and RCF is denied.

B. Joining the Hakimians as Plaintiffs

Plaintiff seeks to join the Hakimians, who are now additional defendants on the counterclaims of Fiore and RCF, as plaintiffs in this action, pursuant to CPLR 305 ( c ), 1001, 1003, 2001 and 3025 ( c ). This is not, however, an inadvertent ministerial error in a party's name on the caption of a summons or pleading, which may be corrected pursuant to CPLR 305 ( c ) or 2001 (compare, e.g. Continental Ins. Co. v Joseph Marx Co., 220 AD2d 343 [1st Dept 1995] [allowing plaintiff to amend caption to change the name of insurer's subrogor]; Staheli v Aetna Ins. Co., 52 AD2d 754 [4th Dept 1976] [allowing amendment of summons to correct name of plaintiff, where defendant not prejudiced] [cases cited by HMC and Hakimians]).

HMC and the Hakimians seek to join the Hakimians as plaintiffs pursuant to CPLR 1001 (a) (Necessary Joinder of Parties), which provides, in pertinent part: "(a) Parties who should be joined. Persons who ought to be parties if complete relief is to be accorded between the persons who are parties to the action or who might be inequitably affected by a judgment in the action shall be made plaintiffs or defendants. ..."

HMC and the Hakimians also rely upon CPLR 1003 which provides, in pertinent part, "Parties may be added at any stage of the action by leave of court or by stipulation of all parties who have appeared ...".

In support of their cross motion, HMC and the Hakimians emphasize that Fiore and RCF [*12]will not be prejudiced by the joinder of the Hakimians as plaintiffs, as they have already joined the Hakimians as additional defendants on their counterclaims (Flitt Aff. in Support at ¶ 66). Fiore and RCF object to the proposed joinder of the Hakimians as plaintiffs, based on the failure of HMC and the Hakimians to explain why such joinder is required to accord all parties complete relief, in their papers in support of the cross motion, and the extreme delay in seeking to join the Hakimians as plaintiffs until after the case was placed on the trial calendar.

The reasons provided by HMC and the Hakimians as to why joinder of the Hakimians, as plaintiffs, is necessary to accord all parties complete relief are persuasive. While HMC was a party to the Joint Venture Agreement, it was not a party to the Operating Agreement of the LLC. The Hakimians and other entities controlled by them were, however, parties to the Operating Agreement and, thus, are proper claimants to the refund of the payments of $250,000.00 made by the Hakimian group to Fiore and Sullivan in connection with the Seaport Project (see Operating Agreement, at ¶ ¶ 3.5 and 6.1 [c]; Flitt Reply Aff. at ¶ 15).

Thus, in view of the fact that this Court has decided to disqualify R&E as counsel for HMC and the Hakimians, and the fact that the Hakimians have already been joined as additional defendants on the Fiore and RCF counterclaims, this Court will, in its discretion, allow the joinder of the Hakimians as plaintiffs, if the following conditions are satisfied: (1) within 20 days after their substitution as counsel, the new counsel for HMC and the Hakimians must serve an amended complaint reflecting the joinder of the Hakimians as plaintiffs, without changing the substance of the allegations; and (2) within 20 days after service of the amended complaint, defendants shall serve an amended answer, without changing the substance of their affirmative defenses and counterclaims.

Accordingly, it is

ORDERED that the motion by defendants Fiore and RCF to disqualify the law firm of Rosenberg & Estis, P.C. as counsel for HMC and the Hakimians is granted, and this law firm is directed to cease its representation of HMC and the Hakimians in this matter, and HMC and the Hakimians are directed to substitute new counsel within 30 days of the date of service of this decision and order, with notice of entry; and it is further

ORDERED that the branch of the cross motion by HMC and the Hakimians to disqualify the law firm of Schwartz & Blumenstein as counsel for defendants Fiore and RCF denied; and it is further

ORDERED that the branch of the cross motion by HMC and the Hakimians to join the Hakimians as plaintiffs is granted, on condition that: (1) within 20 days after their substitution as counsel, the new counsel from HMC and the Hakimians shall serve upon defendants and the Clerk of the Trial Support Office, located at the New York County Court House, 60 Centre Street, New York, New York, an amended complaint reflecting the joinder of the Hakimians as plaintiffs, without changing the substance of the allegations; and (2) within 20 days after service of the amended complaint, defendants shall serve an amended answer, without changing the substance of their affirmative defenses and counterclaims; and it is further

ORDERED that, within 30 days of entry, defendants Fiore and RCF shall serve upon all parties to this action, a copy of this decision and order, together with notice of entry.This constitutes the Decision and Order of the Court.

Dated:ENTER:, [*13]

Doris Ling-Cohan, JSC Footnotes

Footnote 1: The Operating Agreement provided, in pertinent part, "While RCF will be consulted regarding major decisions in construction and development, all final construction and managerial decisions in connection with the Project will be made by the Manager in its sole discretion, it being intended that Manager have a broad range of power in making decisions regarding the construction, development, operation and management of the Project..." (Operating Agreement, § 5.1).

Footnote 2: This motion and the cross motion were not submitted to the Court until December 14, 2006.

Footnote 3: In support of their position that Kessler represented all parties with respect to the Operating Agreement, Fiore and RCF note that the amended complaint alleges: "Upon information and belief, the parties then hired Rosenberg and Estis, P.C. attorneys to draft the operating agreement of the parties' limited liability company that was to be called Seaport Associates, LLC. The agreement was drafted and it was executed" (Fiore Aff., Ex. A [Amended Complaint], at ¶ 11). In their answer to the amended complaint, however, Fiore and RCF denied knowledge and information sufficient to form a belief as to the truth of this allegation, and referred the Court to "such documents as may exist" (Fiore Aff., Ex. B [Fiore/RCF Answer to Amended Complaint and Counterclaims]).

Footnote 4:The website for R&E, www.rosenbergestis.com, indicated that the firm has 41 attorneys, including 18 partners, as of May 2007. Another partner in R&E, Norman Flitt, Esq. Is representing HMC and the Hakimians in the instant litigation.