Court Denies Motion to Disqualify Counsel Because Prior Representation Was Not Substantially Related to Present One

On November 21, 2017, Justice Sherwood of the New York County Commercial Division issued a decision in Capital One Equip. Fin. Corp. v. Harari, 2017 NY Slip Op. 32460(U), denying a motion to disqualify counsel because their previous representation was not substantially related to the present one, explaining:

Defendants ask that the issue of disqualification be deferred until after the cases have been consolidated. In the event the motion to consolidate is not granted, however, defendants contend Herrick should be disqualified from representing plaintiff in the New York Actions because Herrick represented eight of the defendants in 13 interrelated bankruptcy cases, the most recent of which occurred in 2003.

Neither party disputes that, under New York law, a party seeking to disqualify a law firm based on prior representation must establish: (1) the existence of a prior attorney-client relationship between the moving party and opposing counsel, (2) that the matters involved in both representations are substantially related, and (3) that the interests of the present client and former client are materially adverse. Such a showing raises an irrebuttable presumption of disqualification.

The New York State Bar Association's commentary to Rule 1.9 of the Rules of Professional Conduct states that:

Matters are substantially related for purposes of this Rule if under the circumstances, a reasonable lawyer would conclude that there is otherwise a substantial risk that confidential factual information that would normally have been obtained in the prior representation would materially advance the client's position in the subsequent matter.

. . .

The motion for disqualification turns on whether Herrick's prior representation is substantially related to the present action. Defendants do not assert that the bankruptcy cases are substantially related to this action. Defendants' assertion that all actions arise in the exact same context is little more than an overbroad assertion that issues in all actions are similar, if not identical, an assertion which the Second Department found was insufficient in Med. Capital Corp. Defendants' arguments that the actions are substantially related turns on its assertion that factual information that would normally have been obtained in Herrick's bankruptcy representations would materially advance plaintiffs position in this matter. This argument fails as well. Although defendants contend Herrick has gained extensive knowledge of defendants' inner workings, defendants have failed to advance any argument as to how this knowledge includes secret information that is material to any of the issues involved here or otherwise might give plaintiff an advantage in this case, particularly in light of the straightforward nature of plaintiffs claims. Furthermore, the fact that Herrick's representation occurred at least fourteen years ago is relevant because any inside financial knowledge defendants claim Herrick gained is outdated and was disclosed in the bankruptcies.

(Internal quotations and citations omitted).

Sometimes, the question of whether a lawyer can be involved in a case that relates in some way to a previous or current client can be a complicated question. We have significant experience in litigating such questions. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions about conflicts in legal representation.