Alter v Oppenheimer & Co. Inc.

[*1] Alter v Oppenheimer & Co. Inc. 2008 NY Slip Op 52402(U) [21 Misc 3d 1136(A)] Decided on November 20, 2008 Supreme Court, New York County Gische, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 20, 2008
Supreme Court, New York County

Irina Alter, Plaintiff,

against

Oppenheimer & Co. Inc. f/k/a Fahnestock & Co. Inc., and Eric Shames, Defendants.



121188/03



ATTORNEY FOR THE PLAINTIFF :

STORCH AMINI & MUNVES P.C., 140 EAST 45TH STREET - 25TH FL, NEW YORK, NEW YORK 10017 (212) 490-4100

ATTORNEY FOR THE PLAINTIFF :

STORCH AMINI & MUNVES PC, 2 GRAND CENTRAL TOWER, 25TH FL, NEW YORK, NEW YORK 10017 (212) 490-4100

ATTORNEY FOR THE DEFENDANT :

STRADLEY, RONON STEVENS YOUNG, 2600 ONE COMMERCE SQUARE, PHILADELPHIA, PA 19103

ATTORNEY FOR THE DEFENDANT:

PATTERSON BELKNAP WEBB/TYLER, 1133 AVENUE OF THE AMERICAS, NEW YORK, NEW YORK 10036 (212) 336-2922

Judith J. Gische, J.

This is an action based upon claims of employment discrimination, sexual harassment and a hostile work environment by plaintiff Irina Alter ( Alter"). Alter has reached a settlement with Oppenheimer & Co., Inc., f/k/a Fahenstock & Co., Inc. ( Oppenheimer"), but not with the individually named defendant, Eric J. Shames s/h/a Eric Shames ( Shames"). Shames is represented by Stradley Ronon Stevens & Young, LLP ( SRSY"), a Pennsylvania law firm, and Patterson Belknap Webb Tyler, LLP ( PBWT), who is local counsel. PBWT previously brought a motion on behalf of attorneys at SRSY for their admission to the New York Bar pro hace vice. The court granted both motions. Orders, Gische J., 9/27/05 (Lurie) and 12/23/05 (Mahoney).

PBWT has now brought this motion on behalf of both firms for an order allowing them to [*2]withdraw as counsel for Shames. Both firms claims they now have a conflict of interest because plaintiff has settled with Oppenheimer, but Shames has not. Shames represents himself in opposition to his lawyers' motion; he is a practicing attorney who is admitted to the New York State bar. Plaintiff has submitted papers supporting the motion to withdraw. Alter agrees that a conflict has developed requiring that opposing counsel withdraw from representing Shames.

Motions substantially similar, if not identical, to this one have been made in other cases involving the same defendants, but before another judge. Those cases, brought by different plaintiffs, also involve claims of sexual harassment by Shames which were allegedly condoned by his employer. Andrea Bertoline v. Oppenheimer & Co. Inc. f/k/a Fahenstock & Co. Inc. and Eric Shames, Index No. 121187/03 ( Bertoline"); Christina Pellegrino v. Oppenheimer & Co. Inc. and Eric Shames, Index No. 107834/04 ( Pellegrino").

There is also a pending action in the United States District Court for the Eastern District of New York by yet another plaintiff also alleging sexual harassment by Shames while employed at Oppenheimer. Josephine Chapple v. Fahnestock & Co. Inc., Eric Shames and Robert Pelham, No. 03-Civ-04989 (NGG)(JMA)] ["Chapple"]. Defendants in that case are awaiting a decision on their motion for summary judgment.

This case has an extensive history of litigation in which many of the facts, allegations, and arguments of the parties have been addressed. Since they have been addressed in prior decisions by this court, they will only be repeated here as necessary.

Arguments

Alter was employed within Oppenheimer's legal department as a paralegal. She worked under the supervision of Shames who was, at that time, employed by Oppenheimer as its in-house general counsel. He was also an officer of the company. Alter claims she was sexually harassed by Shames who heaped upon her unwanted attention and made sexual advances which she resisted. Alter contends further that Oppenheimer condoned or tolerated a hostile work environment that permitted Shames to act in this manner. Alter claims that once Shames discovered she was pregnant, he not only lost interest in her, but terminated her from employment for pretextual reasons.

Although Shames separated from employment after this action was commenced, Oppenheimer has continued to pay his legal fees and he is still represented by PBWT and SRSY in this and the other cases.

This case was scheduled for trial in June 2008. Prior to April 2008, plaintiff and both defendants entered into meaningful settlement negotiations in hopes of avoiding a trial. Though eventually plaintiff and Oppenheimer finalized their agreement, Shames and plaintiff could not reach a settlement. The settlement agreement between plaintiff and Oppenheimer which was finalized after this motion was brought is (as the parties have agreed) confidential. It has not been filed with the court.

Both law firms brought this motion before the trial seeking to withdraw on the basis that Oppenheimer intended to settle, but Shames refused to. The firms argue that because the claims against Shames will now have to be tried, this puts them in the untenable position of having to zealously represent Shames on the one hand, but also protect Oppenheimer from questions that may be contrary" to Oppenheimer's interests on the other hand. The attorneys argue that although Oppenheimer has settled, they still have to protect the company, and therefore, they are [*3]hopelessly doomed to elevate one client's interests over the other, which is a violation of Disciplinary Rule 5-105 of the Code of Professional Responsibility ( DR 5-105"). Thus, they contend there is a basis for mandatory withdrawal from their representation of Shames.

In the alternative, both firms contend they should be permitted to withdraw, even if there is no conflict. They contend that Shames has lost confidence in them and has made disparaging remarks which shows he is unsatisfied with them. The attorneys argue that Shames has accused the firms of selling him" out, or at least, protecting the more important" client. According to both firms, this has caused a rift in their relationship with Shames and now it has become unreasonably difficult for them to carry out their employment effectively. DR 2-110 (c) (1) (iv).

PBWT separately argues on its own behalf that it is local counsel for SRSY and it has only performed the tasks that SRSY assigned to it. Essentially, PBWT contends (through the affirmations of Ellen M. Martin, Esq.) that its services are fungible and Shames can easily get another law firm of comparable size and reputation to represent him at trial, if that is what he would like to do.

Shames denies there is now, or there has ever been, any conflict of interest between himself and Oppenheimer, and therefore, there is no conflict in these attorneys continuing to represent him at trial. He argues that now that Oppenheimer has settled, there is even less of a chance a conflict could emerge. Shames denies having lost confidence in either firm and even commends both firms for knowing these cases intimately. He argues these attorneys, and only these attorneys, can best represent him at trial because of their familiarity with the case and that if they are allowed to withdraw, it will be to his detriment.

Shames argues that he was the one who reached out to and retained SRSY in 2004 once he learned of the lawsuits being brought against Oppenheimer, himself, and another officer. Shames contends he chose this firm because of his longstanding personal and professional relationship with SRSY (and Mahoney in particular). SRSY has been Oppenheimer's outside counsel on a number matters since 1996.

Shames argues that as per the letter of engagement that PBWT sent him in February 2004 ( letter of engagement") and a joint representation letter ( joint representation letter"), also dated February 17, 2004, he agreed to be jointly represented with Oppenheimer and the other officer. Shames argues that this decision was reached after everyone involved - PBWT, SRSY, Oppenheimer, the other officer and himself - considered whether there was any conflict in having the defendants jointly represented, but concluded there was none. The letter of engagement he refers to contains the following provision: This will confirm that you have requested [PBWT] to render legal services to you in connection with the above-referenced matters . . ." The letter provided to the court is redacted. The only other provision either side has provided is the termination paragraph. It provides as follows:

Termination. You have the right to terminate the Firm's engagement at any time. The Firm also has the right to terminate the engagement at any time, subject to giving you a reasonable opportunity to arrange alternative representation. In either case, if for any reason Oppenheimer has not paid your fees and expenses, you will remain obligated to pay for services rendered and costs paid or incurred on you behalf through the date of termination."

The joint representation letter provides further that: [*4]

I a writing to ask you to confirm your agreement to joint representation of all of the defendants in these cases and to set out our understanding of the conditions under which we will undertake the joint representation in these lawsuits. [PBWT] will represent the Company [Oppenheimer], Bob Pelham and you in these matters indicated above. This joint representation assumes that there is no conflict of interest. Based on the information we have to date, we are aware of no such conflict, and we believe that [Oppenheimer's], Bob Pelham's and your interests are consistent. As we have discussed, however, if any conflict of interest does arise, we would have to withdraw from certain representation to avoid representing conflicting parties. [Oppenheimer] and Bob Pelham have both agreed that in the event of a conflict between them and you, we could continue to represent you. In the event of such conflict, we would no longer represent [Oppenheimer] and/or Bob Pelham, as the case may warrant. We will notify you promptly if any information creating a conflict comes to our attention. Likewise, if you believe that a conflict has arisen, you should notify us immediately. . ."

Based upon these letters, Shames argues that the parties already contemplated and decided what they could do in the event a conflict arose. Shames contends that PBWT can and should continue to represent him, thus there is no conflict" at all.

Shames denies ever accusing any of his attorneys of selling him" out or that he has lost faith in them. To the contrary, he contends they are best capable of representing him at trial. He denies that his relationship with either firm is dysfunctional," as defendants allege, but speculates the motion was brought to pressure him into a settlement to save Oppenheimer money and avoid the publicity of a trial. Shames argues his interests and Oppenheimer's are compatible, even if they are different." Shames contends that at trial the Oppenheimer fact witnesses will have to testify under oath about what they observed, did, etc. Thus, whether these attorneys or others represent those witnesses will make no difference.

Shames argues that under the Disciplinary Rules, if either firm believed there was a conflict of interest they had to move as soon as it became apparent. Neither firm, however, brought this motion until days before trial, and then solely based upon one defendant having settled and the other not. Shames argues this issue of settlement/non-settlement was obvious months ago but neither firm brought a motion then, apparently not believing there was a conflict. Shames also states that neither firm has moved to be relieved in the Chapple case in which a motion for summary judgment is pending. Both firms argue they did not move to be relieved because they are waiting how the motion is decided and out of concern a motion to withdraw might harm either defendants legal position before that court.

Alter supports PBWT and SRSY's motion to withdraw. Plaintiff contends that while some conflicts are waivable, some cannot be, and this is one of them. Alter argues that Oppenheimer and Shames have completely different and irreconcilable interests in this lawsuit. Alter argues that if the firms are not relieved, and she prevails at trial, Shames may try to have the verdict set aside based upon this alleged conflict. Plaintiff claims that much of the EBT testimony[FN1] elicited from Oppenheimer's witnesses was incriminating to Shames, but exculpatory [*5]or favorable to Oppenheimer. Thus, according to plaintiff the conflict is so severe that the firms will be hampered from effectively mounting a defense for Shames.

Discussion

DR 2-110 sets forth rules that attorneys must follow when seeking withdrawal from employment. Withdrawal is mandatory in certain situations, including where an lawyer knows, or it is obvious that continued employment will result in violation of a disciplinary rule." DR 2-110 (b) (2). When an attorney seeks permission to withdraw, and withdrawal is not mandatory, however, the attorney must show it can withdraw without material adverse effect on the interests of the client . . ." DR 2-110 (c) (1). One situation where withdrawal is permissive, not mandatory, is where [t]he lawyer's continued employment is likely to result in a violation of a disciplinary rule." DR 2-110 (c) (2).

Both firms and the defendants agree that initially there was no conflict in Oppenheimer and Shames being jointly represented. It was Shames - a practicing attorney - who personally contacted SRSY to accept such employment. DR 5-105 (c). After the attorneys at each firm and all the parties involved considered the ramifications of simultaneous representation, including the advantages and risks involved, they all agreed that PBWT could represent all the defendants competently. That consensus and consent is memorialized in the letter of joint representation that PBWT sent to Shames and which he signed. DR 5-105 (c); Hall Dickler Kent Goldstein & Wood LLP v. McCormick, 36 AD3d 757 (2nd Dept 2007).

Although the attorneys argue that they have to prepare for the Shames trial but also protect Oppenheimer from questions that would be an inconvenience or contrary to the interests of [Oppenheimer]," thus presenting a conflict of interest, this argument is easily dismantled.

The legal claims against Oppenheimer in this action have now wll been settled; there are no pending claims against Oppenheimer. Consequently, Oppenheimer is no longer a defendant in this action and has no role to play at trial other than to have its people testify truthfully as to relevant facts. Any fact witnesses that Shames (or plaintiff) may call are subject to the subpoena powers found in Article 23 of the CPLR. These witnesses can appear either with or without an attorney. Even assuming some of these witnesses are Oppenheimer employees, and Oppenheimer would like to provide them with legal representation at trial, there is no reason that the attorney appearing for such witnesses has to be either of these firms.

More importantly, in the letter of joint representation, PBWT, Shames and the other defendants anticipated a conflict might arise in the future. The letter contains a blueprint for how any conflict should be resolved: in the event of a conflict between them [Oppenheimer and Pelham] and you [Shames], we could continue to represent you [Shames]. In the event of such conflict, we would no longer represent [Oppenheimer] and/or Bob Pelham, as the case may warrant." (emphasis added). Simply put, in the event of a conflict PBWT cannot continue to represent Oppenheimer, but it can continue to represent Shames.

Although no documentation of the agreement (if any) between SRSY and the defendants has been provided to the court, their motion is subject to the same threshold showing as PBWT. Thus, like PBWT, SRSY has to satisfy the threshold requirements set forth in DR 5-105 pertaining to mandatory withdrawal. Since Oppenheimer is no longer a defendant in the case, [*6]SRSY, like PBWT, has no conflict of interest.

Both firms argue that they have grounds for permissive withdrawal. DR 2-110 (c) (1). This is based upon statements and comments Shames has made to them and in opposition to this motion. They contend Shames has questioned their loyalty to him and that he has accused the firms of bringing this motion to force him to settle. Shames has, in fact, stated he thinks this motion was motivated by Oppenheimer's desire to avoid the expense and embarrassment of a trial. The court finds that there is no basis for either firm's motion for permissive withdrawal and it is denied for the reasons that follow.

PBWT's role thus far as counsel has not been marginal or limited, as the firm now claims. To the contrary, there has been formidable motion practice in this case, including a complicated motion by plaintiff for consolidation. Opposition to that motion was successfully prepared with the assistance of, PBWT. PBWT was also appellate counsel in connection with the appeal of this court's decision denying their motion to disqualify plaintiff's firm. Order, Gische J., 8/1/06. PBWT supported the motions by Lurie and Mahoney for admission pro hac vice, stating in relevant part, that PBWT would be working closing with these attorneys if admitted. Thus, PBWT's role has been important, if not pivotal in this case.

Neither firm has shown that the attorney-client relationship with Shames is irrevocably broken or that it has become unreasonably difficult" for either firm to carry out its employment effectively. DR 2-110 (c) (1) (iv). Even examining Shames' comments with the most critical eye, his comments do not convey the level of mistrust or acrimony that would justify letting the attorneys withdraw at this point in the proceedings. This motion was, in fact, brought by the attorneys just four (4) days before the trial was scheduled to begin. The court also notes that this motion was not brought at the time the alleged conflict arose which was months before trial when the parties first entered into settlement negotiations. Anderson v. Nassau County Dept of Corrections, 376 F. Supp. 2d 294 (EDNY 2005). Shames has raised legitimate concerns that allowing the firms to withdraw at this stage of the case will have material adverse effects on his ability to vigorously defend himself at trial. DR 2-110 (c) (1).

Other statements by him, that the firms are favoring the paying client, or choosing the company over him, are expressions of frustration and presented only in a defensive posture to the motion his attorneys has now made. Oppenheimer had, in fact, hoped for a global settlement to avoid any more unwanted attention to this case. This is evident by its agreement with Alter, the terms of which are confidential.

The attorneys cannot bootstrap their motion to withdraw by relying upon statements Shames has made in opposition to the motion itself. Neither firm has made a threshold showing that its relationship with Shames has become so dysfunctional," it is impossible for any workable attorney-client relationship to continue. Shames has presented cogent and convincing arguments that he still has faith in these attorneys and why he believes they can present him with the best defense.

The court has also considered and rejects plaintiff's argument that Shames may later use this conflict" to try to vacate a jury's verdict if it is favorable to her. Shames has mounted a formidable opposition to the motion to withdraw. Not only has he proved that the firms' continued employment is unlikely to result in a violation of a disciplinary rule, allowing them to withdraw will have a material adverse effect on Shames ability to vigorously defend himself at [*7]trial. Shames has the fundamental right to legal representation by the attorneys of his choice, provided there is no basis for them to withdraw or be disqualified.

Although plaintiff argues certain conflicts can never be waived, there is evidence that the firms and the defendants waive any potential conflicts in this case and did so only after full disclosure. compare Flores v. Willard J. Price Associates,LLC, 20 AD3d 343 1st Dept 2005); Booth v. Continental Insurance Company, 167 Misc 2d 429 (Sup Ct Westchester 1995). Plaintiff's concern about how allowing the firms to remain on the case will affect her, seeks to shift the court's attention away from whether the attorneys can continue to competently represent their own client. Plaintiff never brought a motion or cross-moved to disqualify the firms. She cannot lighten her burden of proof by seeking this relief informally now. see In re Adoption of Baby Boy C., 5 Misc 3d 377 r'vd 27 AD3d 34 (1st Dept 2005).

Conclusion

Neither firm has established its entitlement to withdrawal as Shames' counsel, therefore their motion for such relief is denied. Stays, if any, on the trial of this matter are vacated forthwith. Plaintiff's counsel shall immediately serve a copy of this order upon Trial Support who is directed to restore the case to its rightful place on the trial calendar.

Any relief requested that has not been addressed has nonetheless been considered and is hereby expressly denied. This constitutes the decision and order of the court.

Dated:New York, New York

November 20, 2008So Ordered:

_______________________

Hon. Judith J. Gische, J.S.C. Footnotes

Footnote 1:Plaintiff has included partial transcripts from these depositions as exhibits. Though stamped confidential," no one has argued that any confidentiality agreement has been breached. In any event, now that they are exhibits to this motion, they are part of the court record.