Medford Petroleum LLC v Quality Quick Mart, Inc.

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Medford Petroleum LLC v Quality Quick Mart, Inc. 2012 NY Slip Op 32386(U) September 10, 2012 Supreme Court, Suffolk County Docket Number: 11-32079 Judge: Thomas F. Whelan Republished from New York State Unified Court System's E-Courts Service. Search E-Courts (http://www.nycourts.gov/ecourts) for any additional information on this case. This opinion is uncorrected and not selected for official publication. [* 1] SHOI(T FOI(M ORDER INDEX No. CAL. No. 11-32079 SUPREME COURT - STATE OF NEW YORK LAS. PART 45 - SUFFOLK COUNTY PRESENT: Hon. THOMAS F. WHELAN Justice of the Supreme COUli ---------------------------------------------------------------X MEDFORD PETROLEUM LLC, MOTION DATE June 29. 2012 ADJ. DATE July 27, 2012 Mot. Seq. # OOI-MD Attorney for Plaintiff Steven A. Sternlicht, Esq. 1000 Main Street Port Jefferson, New York 11777 Plaintiff, Attorney for Defendants Stephen J. McGirr, PC 96 South Ocean Avenue Patchogue, New York 11772 - against ~ QUALITY QUICK MART, INC and STEPHEN J. McGIFF Defendant. ---------------------------------------------------------------X Upon the following papers numbered 1 to 14 read on this motion to disqualify as attorney; Notice of MOlion/ Order to Show Cause and supporting papers 1- 9 ; Notice of Cross Motion and supporting pflpers ___ , Answering Atlidavits and SupP011ingpapers 10- 12 ; Replying Affidavits and SupP011ingpapers ; Other Plaintiffs memo of law 13 - 14 ; (arid "nel lical irig eouli~el iil support 1Ilidopposed 10 the mtrtTtm) it is, ORDERED that the motion (00 1) by the plaintiff to disqualify defendant Stephen A. McGiff as attorney for defendant Quality Quick Mart, Inc. is denied. In this breach of contract action, the plaintiff seeks to recover its down payment in the failed purchase ofa gasoline station dealership and convenience store located at 2665 Route 112, Medford, New York. Subsequent to the execution of a sales contract, William C. Manus, Jr., the purchaser and principal of the plaintiff Medford Petroleum, LLC. withdrew from training classes offered by British Petroleum CBP"). Defendant Stephen McGitl: the defendant Quality Quick Mart lnc.'s attorney, refused to return the dovm payment in the amount 0[$42,000.000 on the ground that Manus wilfully breached the contract by failing to complete the training. A review of the complaint reveals that the plaintiff aIIegcs in the first cause of action that it IS entitled to the refund of its $42,000.00 down payment from the seller, defendant Quality Quick Mart, Inc. and compensatory damages of$500,000.00. In the second cause of action, the complaint [* 2] Medford Petroleum LLC v Quality Quick Mart et al Index No. 11-32079 Page 2 alleges that McGiffbreached a fiduciary duty by his refusal to comply with the contractual terms in paragraphs 5 and 6 of the Sales Agreement ("the Agreement") regarding the prompt return orthe down payment to the plaintin~ and seeks thc $42,000.00 down paymenl and compensatory damages in the amount of $500.000.00. In the third cause of action, the complaint alleges that McGirr breached the contract by his failure to account and promptly refund the $42,000.00 down payment to the plaintiff and seeks the $42,000.00 down payment and compensatOlY damages in the amount of $500,000.00. The plaintiff" now moves to disqualify the defendant McGiff as attorney for the defendant Quality Quick Mart.. Plaintiffs counsel affirms that McGirr will be required to testify at a deposition and at Lrialregarding the two causes of action that have been interposed against him. and regarding the agreement that he drafted on behalf of Quality Quick Mart, Inc. As such, counsel maintains that McGiff s testimony will be prejudicial to his codefendant/client, and is a conflict of interest. In support ofthc motion, the plaintiff submits, among other things, the pcrsonal affidavit of William C. Manus, Jr., a copy of the Agreement, a letter from Leon Petroleum LLc' a letter from the plaintiffs attorney to defendant McGift: and a letter from defendant McGiff to the plaintiff's attorney. William C. Manus, 1r. avers in his affidavit that he is the member manager of the plaintiff Medford Petroleum, LLC. Manus states that McGiffwas the attorney who represented the defendant Quality Quick Mart, Inc. and drafted the agreement in the sale ora gasoline service station dealership and convcnience store for $420,000.00. Defendant McGift" acted as escrowee of the $42,000.00 down payment for hath his client and the plaintiff: Medford Petroleum LLC. McGiff signed the sales contract acknowledging both his contractual and fiduciary capacity as escrowee. Manus states that the contract provided certain conditions to be met in order for the plaintiff to be appointed as a gasoline station dealer whlch were set forth In paragraphs 5 and 6. Manus avers that if any of these specified conditions were not met. the plaintiff had the right to void the contract and McGiff was obligated 10 promptly return the $42.000.00 down payment to the plaintiff. Paragraph 5 provided that the purchaser procure franchise agreement approval from8ritish Petroleum CUP"), in addition to securing an agreement by 81' or the landlord assume full responsibility for tanks. pumps and lines. Paragraph 6 provided that the plaintiff was required to obtain a satisfactory lease from Leon Petroleum. Manus states that in either paragraph the plaintiff had the right to terminate the contract if unable to fulfill the contingencies. Manus states that there was no condition precedent requiring him to successfully completc a training program with BP prior 10 obtaining a franchise. nor was he aware or such a requirement until two weeks after slgning the contract. Once he attended the training classes, Manus realized that he was incapable of passing the tests conducted in the training program and withdrew. [* 3] SHORT FURM ORDUl. INDEX No CAL. No. 11-32079 SUPREME COURT - STATE OF NEW YORK IAS. PART 4S - SUFFOLK COUNTY PRESENT: 1-1011. THOMAS F. WHELAN Justice of the Supreme Court ---------------------------------------------------------------X MEDFORD PETROLEUM LLC, MOTION DATE June 29, 2012 ADJ. DATE July 27, 2012 Mot. Seq. # OOI-MD Attorney for Plaintiff Steven A. Sternlicht, Esq. 1000 Main Street Port Jefferson, New York 11777 Plaintiff, Attorney for Defendants Stephen J. McGitI, PC 96 South Ocean Avenue Patchogue, New York 11772 - against QUALITY QUICK MART, INC and STEPHEN J. McGIFF Defendant. ---------------------------------------------------------------X Upun the folluwing papers numbered 1 to 14 read on this motion to disqualify as attorney; Notice of Motioni Order to Show Cause and supporting papers 1- 9 ; Notice of Cross Motion and supporting papers _~_.: AnsweringAffidavits and supporting papers 10 - 12 ; Replying Affidavits and supporting papers _: Other Plaintirrs memo of law 13 - 14 ; (Illld lifter !Jelll ill.? u'lumel ill WPPOlt and oppo~ed to tlte m-mio-n) it is, ORDERED that the motion (001) by the plaintiff to disqualify defendant Stephen A. McGi1T as attorney for defendant Quality Quick Mart, Inc. is denied. In this breach of contract action, the plaintiff seeks to recover its down payment in the hliled purchase ofa gasoline station dealership and convenience store located at 2665 Route 112, Medford, New York. Subsequent to the execution ofa sales contract, William C. Manus, Jr., the purchaser and principal of the plaintiiTMedford Petrolemn, LLC, withdrew from training classes offered by British Petroleum ("BP"). Defendant Stephen McGi±f, the defendant Quality Quick Mali Inc.'s attorney, refused to return the down payment in the amount 01"$42,000.000 on the ground that Manus wilfully breached the contract by failing to complete the training. A review of the complaint reveals that the plaintiff alleges in the first cause of action that it is entitled to the refund of its $42,000.00 dovvn payment from the seller, defendant Quality Quick Mart, Inc. and compensatory damages of$500,000.00. In the second cause of action, the complaint [* 4] Medford Petroleum LLC v Quality Quick Mart el al Index No. 11~32()79 Page 2 alleges that McGi ffbreached a fiduciary duly by his refusal to comply with thc contractual terms in paragraphs 5 and 6 of the Sales Agreement ("the Agreement'") regarding the prompt return of the down payment to the plaintiff, and seeks the $42,000.00 down payment and compensatory damages in the amount of $500.000.00. In the third cause of action, the complaint alleges that McGiff breached the contract by his failure to account and promptly refund the $42,000.00 dO,,","Il payment to the plaintiff and seeks the $42,000.00 down payment and compensatory damages in the amount of $500.000.00. The plaintiff now moves to disqualify the defendant McGill as attorney for the defendant Quality Quick Mart.. Plaintiffs counsel affirms that McGifT will be required to testify at a deposition and at trial regarding the two causes of action that have been interposed against him, and regarding the agreement that he drafted on behalf of Quality Quick Mart, Inc. As such, counsel maintains that McGiff s testimony will be prejudicial to his codefendant/client, and is a conflict of interest. In support of the motion, the plaintiff submits, among other things. the personal affidavit of William C. Manus, Jr., a copy of the Agreement, a leiter from Leon Petroleum LLC, a letter from the plaintiff's attorney to defendant McGift: and a letter from delcndant McGiff to the plaintiffs attorney. William C. Manus, Jr. avers in his affidavit that he is the member manager of the plaintiff Medford Petroleum, LLC. Manus states that McGiffwas the attorney who represented the defendant Quahty Quick Mart, Inc. and drafted the agreement in the sale ofa gasoline service station dealership and convcnlence store for $420,000.00. Defendant McGitf acted as escrowee of the $42,000.00 down payment for both his client and the plaintiff, Medford Petroleum LLC. McGtffsigncd the sales contract acknowledging both his contractual and fiduciary capacity as cscrowee. Manus states that the contract provided certain conditions to be met in order for the plaintil1'to be appointed as a gasoline station dealer which were set forth in paragraphs 5 and 6. Manus avers that Irany of these speci lied conditions wcre not met, the plaintiff had the right to void the contract and McGiff \vas obligated to promptly return the $42.000.00 down payment to the plailltiff~ Paragraph 5 provided that the purchaser procure 1ranchise agreement approval from British Petroleum ("Bp·'), in addition to securing an agreement by BP or the landlord assume full responsibility for tanks, pumps and lines_ Paragraph 6 provided that the plaintiff was required to obtain a satisfactory lease from Leon Petroleum. Manus states that in either paragraph the plaintiff had the righllO terminate the contract if unable to fulfill the contingcncies_ Manus states that there was no condition precedent requiring him to successfully complete a training program with BP prior 10 obtaining a franchisc. nor was he aware of such a requircment until two weeks after signing the contract. Once he attendcd the training. classes, Manus realized that he was incapable of passing the tests conducted in the trainmg program and withdrew. [* 5] Medford Petroleum LLC v Quality Quick Mart et al Index No. 11-32079 Page 3 Leon Petroleum, in a letter dated August 31, 20 II, informed Manus that he would not be approved for a lease with Leon Petroleum at the gasoline service station. By letter dated September 6, 20 Il, the plaintiff's attorney demanded that McCiifTto return the dovm payment of $42,000.00 to the plaintiff By letter dated September 13, 20 I ], McGirr declined to return the down payment on the ground that Manus voluntarily withdrev\I'prior to completion of the BP training program In addition to the terms of the Agreement, as stated above in Paragraphs 5 and 6, the Agreement provides in Paragraph II that ;;the Purchaser and Seller jointly and severally agree to indemnify and S<;lvearmless the Escrow Agent from and against any and all liability arising under h the performance of their duties hereunder, ...except with respect to any liability which may be incurred as a result of the Escrow Agent's bad faith or gross negligence". In opposition, the defendants Quality Quick Mart, Inc. and McGitl submit the personal affidavit of David Warren, and counsel's affirmation. Warren avers that he is the president orthe defendant Quality Quick Mart, Inc. He states that McGitfhas represented him and his company for a number of years, and he sees no conflict or problem with him representing both Quality Quick Mart, Inc. and himself as escrow agent in this action. If McGiff is caused to testify, Warren sees no prejudice to Quality Quick Mart, Inc. Warren thrther states that Manus was made aware of the requirement of training classes and that the contract was signed late in July 2011 because the next BP class was not olTered until August 2011. Wanen believes that Manus' withdrawal from the classes and cancellation of the contract caused Warren to lose other bona fide purchasers. The defendant's counsel affimls that the plaintiff has filled to demonstrate that the knowledge possessed by McGirr regarding the defendant's refusal to refund the down payment is no greater than that possessed by the co-defendant Quality Quick Mali, Inc., its principal, Warren, and the plaintiff's attorney. therefore McGiff's testimony is not necessary. A party's entitlement to be represented in ongoing litigtion by cOlU1selof his or her own choosing is a valued right which should not be abridged absent a clear showmg- on which the party seeking the disqualification carries the burden - that counsel's removal is warranted (see Goldman v Goldman, 66 AD3d 641, 885 NYS2J 641 [2d Dept 2009])_ Where the Rules of Professional Conduct (22 NYCRR 1200.0) are invoked in litigation, courts ;'are not constrained to read the rules [iterally or effectuate the intent of the drafters, but look to the rules as guidelines to be applied with due regard for the broad range of interests at stake" (Niesig v Team I, 76 NY2d 363, 369-370, 559 NYS2d 493 [1990]; .;,'ee S&S Hotel Ventures Ltd. Partnership v 777 S. H. Corp., 69 NY2d 437, 515 NYS2d 735[1987]). It is thc Supremc COUTt'sesponsibility to balance the competing intcrests, r and ·'It)he disqualification of an attorney is a matter that rests \-vithin the sound discretion of the Supreme Court" (Falk v Gal/o, 73 AD3d 685, 685, 901 NYS2d 99 [2ei Dcpt 2010); see Cardinale v (iolinel/o, 43 NY2d 288, 292, 401 NYS2d 191 [1977J, Erlanger v Erlanger, 20 NY2d 778. 779, 284 NYS2d 84 [2007J; Nationscredit Fin. Servs. Corp. v Turcios, 41 AD3d 802, 802, 839 NYS2d .523 1·2dDept 2007J; Flores v Willard J. PriceAssocs., LLC, 20 AD3d 343, 344, 799 NYS2d43 jl st [* 6] Medford Petroleum LLC v Quality Quick MaI1 et al Index No, 11-32079 Page 4 Dcpt 20051; Schmidl v Magnetic Head Corp., 101 AD2d 268, 277, 476 NYS2d 151 [2d Dept 1984]). and will not be overturned absent a showing of abuse (see W. T. Gmlll Co. v Haines, 531 F2d 671, 677. [2d Cir. N. Y. 1976]). Disqualification is appropriate only if proven by clear and convincing evidence that (I) the witness will provide testimony prejudicial to the client and (2) the integrity oflhc judicial system will suffer as a result (see Ross v Blitzer, 2009 WL 4907062 [SD NY 2009]). Rule I. 7(a)( 1) of the Rules of Professional Conduct prohibits an attorney from representing a client ··ifthe representation will involve the Imvyer in representing differing interests ..." However, [notwithstanding] the existence of a concurrent conflict of interest under paragraph (a), a lawyermay represent a client if: (1) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client; (2) the representation is not prohibited by law; (3) the representation does not involve the assertion of a claim by one client against another client represented by the lawyer in the same litigation or other proceeding before a tribunal; and (4) each alTected client gives informed consent, confirmed in writing. Rule 3.7 (a) of the New York Rules of Professional Conduct provides: A lawyer shall not act as an advocate before a tribunal in a matter in which the lawyer is likely to bc a witness on a significant issue of fact. Unless: (l) the testimony relates solely to an uncontested issuc; (2) the testimony relates solely to the nature and value of legal services rendered in the matter; (3) disqualification of thc lawyer would work substantial hardship on the client; (4) the testimony will relate solely to a matter offormality, and there is no reason to believe that substantial evidence will be offered in opposition to the testimony; or (5) the testimony is authorized by the tribunal. (see 22 NYCRR § 1200.29 [2009]). Here. the Coun finds that Rule 1.7 is inapplicable to the case at bar inasmuch as McGiffis not faced with representing more than one client and Warren has consented to such an arrangement in writing. With regard to Rule 3_7.the plaintiffhas failed to prove by clear and convincing evidence that disqualification would be appropriate under the circumstances presented. Disqualification may be required only when it is likely that the testimony to be given by the witness is necessary (see J.P. Foley & Co. v Vanderbilt. 523 F2d 1357. 1359 f2d eif. N. Y. 1975 D. A finding of necessity takes into account such factors as the significance orthe matters. weight orthe testimony. and availability [* 7] Medford Petroleum LLC v Quality Quick Mart et at Index No. 11-32079 Page 5 of other evidence (see Comden v Superior Ct. of Los Angeles County, 20 Cal3d 906, 576 P2d 97], cat denied 439 LJ S. 981 [1978]; see also Universal Athletic Sales Co. v American Gym, Recreational & Athletic Equip. Corp., 546 F2d 530, 538-539 (1976), cert denied 430 U.S. 984 [1977J; Fo,-ter Wheeler Corp. v 8ahcack & Wilcox Co. ¢ 440 F Supp 897, 903 [S.D.N.Y. 19771J. Since th<: plaintiff "failed to offer any proof as to the content or subject matter of the testimony that might be elicited hom the [defendant's] attorney," nor is it "apparent from the record as to why it IS necessary to call him as a witness," the plaintiff "failed to demonstrate that the testimony of the [defendant's] attorney is necessary" (Blanche, Verte & Blanche, Ltd. v Joseph Mauro & Sons, 91 AD3d 693, 694, 936 NYS2d 571 [2d Ocpt 2012J, quoting Bel1tvena v Edelman, 47 AD3d 651, 651-652, 849 NYS2d 626 [2008]). Nor docs the plaintiff demonstrate how such testimony would be so adverse to the factual assertions or account of events offered on behalf of the defendant Quality Quick Mart, Inc. as to warrant disqualification (see Goldstein v Held, 52 AD3d 471, 859NYS2d 707 [2d Dept2008]; BroadwltiteAssodates v Troung, 237 AD2d 162,654 NYS2d 144 [15t Dept 1997]). The plaintiffhas further Cailedto establish that McGiff and Quality QuickMart, Inc. have differing interests, and such an assertion has been rebutted by the SVi'ornaffidavit provided by Quality Quick Mart's prinCipal, David Warren, who attests that he and McGiffare united on the claim against them by the plaintiff and that there is no conflict of interest. Accordingly, the motion to disqualify McGifT is denied. Dated: HELAN, J.S.c:.

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