Segal v Five Star Elec. Corp.
Annotate this CaseDecided on June 28, 2018
Supreme Court, New York County
Gary Segal, Petitioner(s),
against
Five Star Electric Corporation AND TUTOR PERINI CORPORATION, Respondent(s).
651745/2018
Petitioner's Attorney: Gabriel Altman, Esq. and Maria Eva Garcia, Esq. Mintz and Gold LLP 600 3rd Ave FL 25, New York, NY 10016. 212-696-4848
Respondent's Attorney: Nicole I Hyland, Esq. and Tyler Emrys Kent Maulsby, Esq. Frankfurt Kurnit Klein & Selz 488 Madison Avenue, 9th Fl. New York, NY 10022. 212-826-5552.
Andrew Borrok, J.
Recitation, as required by CPLR 2219(a), of the papers considered on the review of this motion for a Notice of Petition to Disqualify Counsel
PAPERS NUMBERED
Notice of Motion and Affidavits Annexed 1
Answering Affidavits 2
Replying Affidavits 3
Sur-Reply Affidavits
Upon the foregoing cited papers, the Decision/Order on this motion is as follows:
Gary Segal (the Petitioner)'s Petition to disqualify Robert Saville, Esq. (Mr. Saville) and Castle & Associates, P.C. (Castle) pursuant to CPLR §7502(a) is granted for the following reasons below.
The Relevant Facts and Circumstances
In July 2011, Respondent Tutor Perini Corporation (Tutor), an international civil and building construction company, acquired (the Acquisition) GreenStar Services Corporation, a large specialty construction company which consisted of three affiliated companies: Five Star Electronic Corporation (Five Star; Five Star and Tutor, collectively the Respondents); WDF, and Nagelbush Mechanical. At the time of the Acquisition, the Respondents retained the Petitioner as the President and CEO of Five Star for a five-year term. Section 8 of the Employment Agreement (the Employment Agreement), dated July 1, 2011, by and between Petitioner and Five Star as a wholly owned subsidiary of Tutor, provides that all disputes, claims or controversies arising out of or relating to the Employment Agreement shall be arbitrated in Los Angeles.
As an electrical contractor performing public work projects, Five Star was subject to the Minority-Owned, Women-Owned or Disadvantaged Business Enterprises program (MWDBE). The MWDBE program requires contractors to subcontract a portion of their work on public projects to construction firms that are (x) disadvantaged businesses, and/or (y) are majority owned by either a woman, or a minority.
In the late 2000s, the Department of Justice began an industry-wide crackdown on alleged MWDBE fraud. The U.S. Attorney's Office of the Eastern District of New York investigated (the EDNY Investigation) Five Star for not complying with the requirement of the MWDBE program. Nomi Castle, Esq. of Castle as Tutor's attorney had the Petitioner meet with Daniel Horwitz, Esq. of McLaughlin and Stern LLP. Mr. Horwitz was then retained to represent Five Star in connection with the MWDBE matter and to make a voluntary disclosure to the New York District Attorney's Office regarding a potential MWDBE violation on a pubic project. The day after Mr. Horwitz was retained, on June 26, 2014, a search warrant was executed in Five Star's offices. Subsequent to the execution of the warrant, Petitioner sought personal legal advice from James Glasser, Esq. During a meeting with Ms. Castle who represented Tutor (Five Star's parent and the owner of Petitioner's employer) and Mr. Saville, the then general counsel of Five Star, according to the Petitioner and Mr. Glasser, Mr. Glasser's representation of Petitioner was terminated by Ms. Castle and Petitioner was informed that he would then be represented by Mr. Horwitz.[FN1] Accordingly, and for the avoidance of doubt, even accepting the assertion that Mr. Saville and Ms. Castle did not fire Mr. Glasser, Mr. Saville and Castle engaged in a dual representation of Five Star and the Petitioner when they directed who would represent the Petitioner in the MWDBE matter and did not advise him at that time that he might need to retain his own attorney.[FN2] In December, 2014 (some 6 months later), however, Petitioner was advised to retain his own lawyer and that Mr. Horwitz would not be representing him.[FN3] In January, 2015, Petitioner retained Ira Lee Sorkin Esq. as his personal attorney.[FN4]
On September 29, 2016, pursuant to the terms of the Employment Agreement, Respondents commenced an Arbitration proceeding (the Arbitration)[FN5] in JAMS Los Angeles to recover alleged costs, purported lost profits, and anticipated fines arising out of the MWDBE matter. Respondents retained Castle and Mr. Saville to represent them in the Arbitration.
Petitioner brings this Petition pursuant to CPLR §7502(a) to disqualify Mr. Saville and Castle from representing Respondents in the Arbitration because they obtained confidential information in connection with their representation of the Petitioner in the course of the approximately 6 months where they directed the Petitioner's representation in connection with the MWDBE matter arguing that (x) with respect to Castle, Castle represented him in the MWDBE matter, dismissed his attorney Mr. Glasser and hired Mr. Horwitz to handle this matter and did not advise him that he needed his own lawyer and (y) with respect to Mr. Saville, pursuant to N.Y.R. Prof. Cond. Rule 3.7(a), Mr. Saville was the general counsel of Five Star at the time of the EDNY Investigation and is a necessary witness in the pending Arbitration.
I. CASTLE
An attorney-client relationship may be established where the parties' words and actions demonstrate a mutual agreement to form such a relationship.[FN6] New York courts have held that an attorney client relationship is established where the attorney makes "an explicit undertaking to perform a specific task" for the purported client.[FN7] The attorney-client privilege is examined from the client's vantage point and is made for the purpose of rendering legal services or advice, in the course professional relationship.[FN8] In UpJohn Co. v. United States 449 U.S. 383 (1981), the United States Supreme Court held that the communications with employees are protected by attorney-client privilege when the protection is necessary to defend against litigation.[FN9] Specifically, the Court held that the attorney-client privilege applies to corporate employees acting to secure legal advice from counsel, where the communications concerned matters within the scope of the employees' corporate duties, and the employees themselves were sufficiently aware that they were being questioned in order that the corporation could obtain legal advice.[FN10]
In this case, Castle was outside counsel to Tutor and directed Petitioner that Mr. Horwitz would be representing him and/or Five Star in the MWDBE matter. According to the Respondents opposition papers, Petitioner expected that Mr. Horwtiz, Castle and Mr. Saville would be sharing confidential information.[FN11] To wit, viewing the situation from the Petitioner's [*2]perspective he believed that an attorney-client relationship existed between Mr. Horwitz, Castle and Mr. Saville and himself and that his confidential communications with whom he reported to was protected. At no time during the June, 2014 meeting where Mr. Glasser alleges that he was fired by Ms. Castle does Respondent contest that they advised Petitioner that they were not representing him and/or that they advised Petitioner that he should continue to retain his own attorney. For the avoidance of doubt, Respondent contests that Mr. Glasser was fired by Castle, however, it is undisputed that Castle directed that Mr. Horwtiz would represent Petitioner in the MWDBE matter, Mr. Glasser was terminated and that Petitioner was not advised that he needed his own attorney at that time. Under the circumstances, and seeing the situation from the Petitioner's vantage point, anyone would reasonably believe that Castle was representing them and the dual representation of Petitioner and Five Star was created. Accordingly, having obtained confidential information in connection with this dual representation, Castle is disqualified from representing Five Star in the Arbitration with Petitioner.
II. SAVILLE
N.Y.R. Prof. Cond. Rule 3.7(a), also known as the "advocate-witness rule" provides that an attorney is disqualified if it is likely that the attorney will be called as a witness in the underlying proceeding and relate to a "significant issue of fact."[FN12]
In this case, Mr. Saville as the former General Counsel of Five Star (and now CEO of Five Star) was intimately familiar with and represented Five Star and Petitioner in connection with the MWDBE matter. Petitioner's conduct as it relates to the MWDBE will be a significant issue of fact at the Arbitration and Mr. Saville is likely to be called as a witness in the Arbitration. Accordingly, Mr. Saville is also disqualified.
Dated: June 28, 2018
_______________________
Hon. Andrew Borrok
Justice of the Supreme Court Footnotes
Footnote 1:Dec. Glasser as Exhibit S to the Petition ¶5 and ¶6; Segal Affidavit as Exhibit T to the Petition¶8, ¶9, ¶10, ¶11, ¶12.
Footnote 2:Segal Aff. ¶9.
Footnote 3:Segal Aff. ¶12.
Footnote 4:Segal Aff. ¶12.
Footnote 5:Five Star Electric Corporation and Tutor Perini Corporation v. Gary Segal, JAMS Arbitration Case No. 1220054774.
Footnote 6:See Pellegrino v. Oppenheimer & Co., 49 AD3d 94, 99 (1st Dep't 2008).
Footnote 7:Id.
Footnote 8:Rossi v. Blue Cross Blue Shield of Greater New York, 73 N.Y.2d 588 (Ct. of Appeals 1988).
Footnote 9:Segal Aff. ¶9; Upjohn Co. v. United States, 449 U.S. 383 (1981).
Footnote 10:Upjohn Co. v. United States, 449 U.S. 383 (1981).
Footnote 11:Segal Aff. ¶4.
Footnote 12:N.Y.R. Prof. Cond. 3.7(a); Harris v. Sculco, 86 AD3d 481 (1st Dep't 2011).
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