Representation of Business Owners Not Representation of Business for Conflict Purposes

On October 23, 2017, Justice Bransten of the New York County Commercial Division issued a decision in MVP Delivery & Logistics, Inc. v. American International Group, 2017 NY Slip Op. 32280(U), holding that a prior representation of a business's owners was not a representation of the business for conflicts purposes, explaining:

A party seeking disqualification of its adversary's lawyer must prove (1) the existence of a prior attorney-client relationship, (2) the matters involved in both representations are substantially related, and (3) the interests of the present client and former client are materially adverse. Satisfaction of these three criteria by the moving party gives rise to an irrebuttable presumption of disqualification. . . .

The threshold issue on this motion to disqualify is whether MVP establishes that it had a prior attorney-client relationship with Hodgson Russ. There is no question Grupp and Moll were former clients of Hodgson Russ. MVP argues Hodgson Russ also represented MVP through its representation of Grupp and Moll, who were principals of MVP. However, MVP does not provide any case law supporting its assertion that representation of an entity's principals is the same as representing the entity itself.

The burden is on MVP to prove the existence of its attorney-client relationship with Hodgson Russ. An attorney-client relationship is established where there is an explicit undertaking to perform a specific task. MVP has submitted no evidence to demonstrate Hodgson Russ agreed to or acted as its attorney in any action or legal matter. Moreover, MVP was not listed as a party in the captions of the FCA cases and Grupp and Moll signed the engagement letter with Hodgson Russ in their individual capacities, not as officers of MVP. Finally, John Sinatra, an attorney at Hodgson Russ who worked on the FCA cases, denies that MVP was Hodgson Russ' client. Although the existence of the relationship is not dependent upon the payment of a fee or an explicit agreement, a party cannot create the relationship based solely on his own beliefs or actions.

MVP also argues Hodgson Russ' December 2008 engagement letter to Grupp and Moll serves as an admission that it was advising Grupp, Moll and MVP regarding their litigation and dispute with DHL. In the last paragraph of the letter, Daniel Oliverio warned Grupp and Moll of a risk "that DHL may find out about [the New York FCA case] before making its termination payments to independent contractors like MVP." Despite MVP's contention, Mr. Oliverio clearly made this statement to apprise Grupp and Moll of collateral business risks associated with revealing their identities as relators after the complaints were unsealed. The statement was neither an admission that Hodgson Russ represented MVP nor an expansion of the scope of representation to matters other than the FCA cases. Therefore, MVP fails to establish a prior attorney-client relationship with Hodgson Russ.

(Internal quotations and citations omitted).