ZW Acquisition LLC v Volkov

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ZW Acquisition LLC v Volkov 2022 NY Slip Op 33295(U) September 29, 2022 Supreme Court, Kings County Docket Number: Index No. 500199/2022 Judge: Leon Ruchelsman Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication. INDEX NO. 500199/2022 FILED: KINGS COUNTY CLERK 09/29/2022 12:04 PM NYSCEF DOC. NO. 47 RECEIVED NYSCEF: 09/29/2022 THE STATE OF NEW YORK COUNTY OF KINGS : CIVIL TERM: COMMERCIAL 8 SUPREME COURT - .-·. OF .-·------.-- . . ·-.-. ---.---- .·--- ·.-·· -· --- . ---·-x ZW ACQUISITIO N LLC, Individua lly and Derivativ ely On Behalf of ZELDA WIGS, INC., Plaintiff, Decision and order Index No. 500199/20 22 - against - ZELDA V0LKOV; Defendant , September 29, 2022 """'and - ZELDA WIGS, INC, Nqminal Defendant --------- --------- ---- - ----- ----- ----x PRESENT: HON. LEON RUCHELSMAN The defendant Zelda Volkov has moved seeking to disqualify the attorney of pla.intiff , and the Law Firm of Ethan Kobre Esq. Schwartz Sladkus Reich Greeberg Atlas LLP on the grounds these attorneys represente d. the ciefenciant in a stock purchase agreement and thus a conflict of interest has arisen:. the mqtion. held. The plaintiff opposes Papers were submitted by the parties and arguments .After reviewing all the arguments this court now makes the following determina tion. Zelda Wigs Inc., was originally owned equally by Zelda Volkov and Shneur Korenblit . Mr. Koreribli t agreed to sell his fifty percent share to Ari Turk the principal of the plaintiff . On April 14, 2021 a stock purchase agreement was entered into between the plaintiff and Zelda Wigs Inc., replace Mr. whereby the plaintiff would Korenblit as half owner of the entity. Etha.rt Kobre Esq. and the Law Firm of Schwartz Sladkus Reich Greeberg Atlas LLP was [* 1] hired to prepare the documents . 1 of 6 A retainer agreement was INDEX NO. 500199/2022 FILED: KINGS COUNTY CLERK 09/29/2022 12:04 PM NYSCEF DOC. NO. 47 RECEIVED NYSCEF: 09/29/2022 executed and the nature of that agreement is the subject motion. of this A lawsuit was fi.J.,ed by the plaintiff alleging tha:t since the agreement was negotiated the defendant Ms. Volkov has refused to co:mmurtica te with the plaintiff and ,has essential ly shut the plaintiff out of the business. action for an injunction , contract, fraudi The complaint alleges causes of breach of fiduciary duty, breach of conversion ; unjust enrichmen t and other claims. The defendant Zelda Volkov has now moved seeking to disqualif y Mr. Kobre and his firm arguing that they represente d her in a personal capacity and that therefore they cannot represent the plaintiff in a lawsuit since against her an obvious conf 1 ict exists . The plaintiff counters no such personal represent ation existed, thus, the law firm may rep~esent the plaintiff in this .action against the defendant . Conclusio ns of Law Tt is well settl'ed that a party in a civil action maintains ah important right to select counsel o.f its choosing and that such right may not be abridged without some overriding concern (Matter of Abrams, 62 NY2d 183, 476 NYS2d 494 [1984]}. Ther:efore r the party seeking disqualif ication of an opposing party's counsel must present sufficien t proof supporting t:hat determina tion (Rovner v. Rahtzer, 145 AD3d 1016, 44 NYS3d 172 [2d Dept., 2016]). The former client conflict of interest rule is codified in the 2 [* 2] 2 of 6 INDEX NO. 500199/2022 FILED: KINGS COUNTY CLERK 09/29/2022 12:04 PM NYSCEF DOC. NO. 47 RECEIVED NYSCEF: 09/29/2022 New York Rules of Professio nal Condµct, Rule 1.9 (22 NYCRR §1200.0 et. seq.). Specifica lly, Rule 1.9(a) provides: "a lawyer who has formerly represente d a client in a matter shall not thereafte r represent another person in the same or a substanti ally related matter in which that person's interests are materiall y adverse to Although i3. hearing (Id). the interests of the former client ... " may he necessary where a substanti al issue of fact exists as to whether there is a conflict of interest (Olmoz v. Town of Fishkill; assertions [2d Dept., 684 NYS2d 611 258 AD2d 447, Builders/D evelopers Corp .• warrant to insufficie nt are mere conclusory 1999]) a 162 AD3d Inc., Hollis Care Group; v. (Legacy hearing 649, 80 NYS3d 59 [2d Dept., 2018]). ThUs, party a relationsh ip; a was there (1) that: demonstra te disqualif icatiqn seeking prior of counsel attorney must client (2) the matters involved in both represent ations are and r'elated; substanti ally the ( 3) present interests of the attorne-~r s past and present c;::lients are materiall y adverse (Moray v. UFS Industrie s 2017]; see, also, Inc . .r Falk [2008]; Jamaica Pub. elements P.i.D3d 781, 67 NYS3d 25'6 [2d Dept., v. Chittende n, 11 l'JY3d 73, 862 NYS2d 869 Serv. Co. v. AIU Ins. Co., 92 NY2d 631, 684 Once the moving party demonstra tes that these NYS2d 459 [1998]). three 156 are satisfied "an "irrebutta ble' presumptio n of disqualif ication follows" (Mccutchen v. 3 Princesse s and AP Trust , , , Dated February 3; 2004, 138 AD3d 1223, 3 [* 3] 3 of 6 29 NYS3d 611 [2d Dept., INDEX NO. 500199/2022 FILED: KINGS COUNTY CLERK 09/29/2022 12:04 PM NYSCEF DOC. NO. 47 RECEIVED NYSCEF: 09/29/2022 2016)) . The d~fendant relies upon the retainer agr~emertt to establish the law firm rep:resented Ms. Volkov personally, thus an exam:Lnation of ·"The retain.E;i.r agreement is the retainer a.greement is nece·ss·ary. .addressed to "Ms .. Volkov and Mr. Turk'~ (S'ee, S_alutation to Retainer The.· agte·ement comme·nces AgreE3merit [NYSCEF Doc. #39]). Inc. that "we .are plea_sed that ypu and Zelda Wigs, by stating (together, "Client'') have retained :Schwartz siadkus Reich Greenberg Atlas LLP ('"SSRG:A") in conne:ction with the _stock purcha:"s·e and redemptio·rt of a 50%. share -Zelda of ''Company")~, (the Inc. Wigs, (i_d). The defendant argues th.at ·''the letter expressly defines the client to the Cq;m.1_:>:any"· (see; Mem:o·randu:m in ·include: bo.th the._ individuals ~nd #~ 31) .geply, page 3 [N":(SCEf Doc. addressed to" !:Vis._ Vcilkov as an However, while the ietter is , incti·vidual, and indeed, there is·· ·no other· way to addre-ss ahy- corresponden ce t:o any person.,. there can be no reasonably basis to conclude the law firm represented Ms. Volkov in an individual capacity . .First,- the retainer letter only contains s.ig:hat:ure bJ._ock.s. for Thus, the. retainer Mr. Turk and zelc:ia Wigs Inc.;,. by Zelda Volk6v. letter did not contain behalf of Mr. capacity. Volkov Thus, notwithstand ing the ariy any individual signature permitt;L11g her clea'r la:n.gui;ige intent in to sigh of the t_h_e: oppor_tu_r1ity· cm ih an individual re.ta_ine·r agreement .agr19.ement, addressing Ms .. Vqlkov~ indicates that no represehtat±b h of Ms. Volkov was agree¢ 4 [* 4] 4 of 6 INDEX NO. 500199/2022 FILED: KINGS COUNTY CLERK 09/29/2022 12:04 PM NYSCEF DOC. NO. 47 RECEIVED NYSCEF: 09/29/2022 In Fitzpatric k v. American Internatio nal Group Inc., upon. 272 F.R.D. 100 [S.D.N.Y. 2010] the court explained that "because the corp6ratio n is inanimate , its decisions and communica tions as a client, as well as for other purposE:!s; must be made by its chosen represent atives, typical 1 y its Board acting collective ly or, in appropria te circumsta nces, its senior officers'1 and ''al though Board members may make decisions that are binding on the corporatio n, in doing so they act in their corporate capacitie s rather than as Thus, any personal reli,ance Ms. non-corpo rate in.di victuals" (id) . Volkov placed Upon counsel is based upon a failure tci appreciate This is particula rly t.l1e legal nuances of the corporate structure . true in this case where there is no a-ssertion by Ms. Volkov that she ever received personal advice from counsel. there are no ambiguiti es contained in the In addition, retainer agreement that should be construed against the drc1fter (Askari v. McDermott , Will Emery. LLP, 179 AD3d 127, & 114 NYS3d 112 [2d Dept., 2019]). The defendant next argues that she reasonably believed that Mr. Kobre her was personal Internatio nal Brotherho od of Teamsters et., Cir. 1997] the court declined to adopt O.S. v. al., 119 F3d 210 [2d However, attorney. a in "reasonab le belief" standard thus, objective ly no attorney Glient relationsh ip existed. As the court observed F.Supp2d 357 [S.D.N.Y. in 2000] S . E . C. Credit Bancorp, Ltd. , ·9 6 "the question: is not whether it was 5 [* 5] v. 5 of 6 INDEX NO. 500199/2022 FILED: KINGS COUNTY CLERK 09/29/2022 12:04 PM NYSCEF DOC. NO. 47 RECEIVED NYSCEF: 09/29/2022 reasotrable counsel was for'' a corporate officer "to assume that corporate in effect his own counsel because h·e was the shareholder ofn the entity. Rather, the sole individual must have '' 'made it clear' that he was seeking personal advice" (id). Since there is no such clarity regarding Mr. Kobre's representation, no reasonableness on the part of Ms, Volkov's subjective belief can create an attorney client relationship. Therefore, no such relationship existed and consequently; the motion seeking to disqualify Mr. Kobre and his firm is denied. So ordered. ENTER: DATED: September 29, 2022 Brooklyn N.Y, ... _)( Hon. Leon Ruchelsrnan 6 ..........-.............. -..................... [* 6] _______________________________________ 6 of 6

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