A high-profile attorney has been removed from a civil racketeering case after a federal judge said his prior representation of the defendant and his use of an unfiled document from a related proceeding disqualified him from handling the matter.
The ruling stayed proceedings and gave Ira Lee Sorkin’s client, Annette Lorber, 45 days to retain new counsel.
Eastern District Judge Arthur Spatt (See Profile), sitting in Central Islip, disqualified Sorkin, of Lowenstein Sandler, holding “the possibility for trial taint” was “clear” from Sorkin’s prior representation of his current adversary, Jonathan Winston, Lorber’s son-in-law, in a regulatory investigation more than 10 years ago.
Moreover, Spatt added in Lorber v. Winston, 12-cv-3571, that disqualification was further supported by Sorkin’s use in Lorber’s complaint against Winston of a document Winston’s attorneys drafted but never filed in connection with a criminal case against Winston, when Sorkin no longer represented him. Lorber’s complaint said the document, a probation memorandum, contained “false and misleading information.”
“It is clear to the Court that Sorkin should not have used the Probation Memo in the manner he did,” Spatt wrote in his Nov. 24 decision.
Sorkin said in an interview that he respected the opinion, which “obviously took a great deal of reasoning.” He later added, “We don’t necessarily agree, but will abide by the court’s decision and are pleased the judge did not dismiss the lawsuit.”
In 1998, the National Association of Securities Dealers—the predecessor of the Financial Industry Regulatory Authority—entered a $625,000 arbitration award against Winston in connection with his conduct, and the conduct of his securities brokerage firm, First United Equities Corporation, when selling stock to Jules and Florine Wachter.
Around 1999, the agency launched an investigation into Winston and First United.
Winston retained Sorkin, who appeared with Winston twice while he was questioned during the agency’s investigation.
Winston subsequently became aware he was the subject of criminal investigation and consulted with Sorkin on possible representation. Sorkin declined to take the case because of a conflict of interest.
As the probe went on, Winston dated Lorber’s daughter, Eve, and married her in April 2000. Their divorce is pending, according to Winston’s attorney, Judd Burstein.
Winston was indicted in March 2001. He pleaded guilty to conspiracy to commit securities fraud and conspiracy to commit money laundering.
In May 2005, Eastern District Judge Nicholas Garaufis (See Profile) sentenced him to 10 years of probation and restitution of more than $108 million. Winston also was banned for life from associating with a broker or dealer.
Winston’s probation ended in 2010, with five years being the legal limit for probation, said Burstein.
Lorber’s complaint, filed in July, claims Winston convinced her family the case against him was “unjust” and that she was not aware of the restitution order.
Winston then allegedly seized on a chance to manage Lorber’s finances. At that point, Lorber’s complaint said, Winston “abused his position to fraudulently borrow or outright steal funds from [Lorber] in the aggregate amount of approximately $10,000,000.”
Burstein said the allegations are “demonstrably false” and a motion to dismiss is pending.
Less than a month after the complaint was filed, Winston moved to disqualify Sorkin.
Sorkin argued that the disqualification motion was premised on “matters wholly unrelated” to the suit and called it “a desperate attempt to forestall the inevitable determination” that Winston defrauded Lorber.
In October, Winston filed a motion to dismiss the complaint, or at least disqualify Sorkin, based on Sorkin’s use of a memorandum drafted but never filed by the law firm of Gerald Lefcourt P.C., representing Winston while he was on probation.
Spatt said the document, filed under seal, appeared to be formatted as a memorandum of law but had several blank pages and an unsigned signature line.
Winston objected to Sorkin’s “improper and unethical use of a plainly privileged draft of a memorandum of law.”
Winston said he did not share the memorandum with anyone but Eve before their divorce proceedings at a time he thought they had a successful marriage.
Sorkin argued that motion was the “height of frivolity.” He said there was “no privilege of any kind” and, if there had been, the privilege had been waived.
Spatt observed that Sorkin offered “varying accounts” of how he got the memorandum.
At an Oct. 5 court conference, Sorkin said the document “was given to a third party” who passed it along to another party who gave Sorkin the memorandum in the presence of the first third party.
But in court papers, Sorkin said he received a copy of the memorandum from the offices of Raoul Felder, who had previously represented Eve in the divorce proceedings.
In an affidavit, Sorkin said that when receiving the memorandum, neither Felder nor his associate told him the document was privileged. Sorkin said Felder told him the memorandum had been given to him by Lorber or her daughter.
Felder said in an affidavit that he did not recall the circumstances surrounding actual receipt of the document.
Spatt observed the regulatory investigation and the criminal case all happened before Winston allegedly began defrauding Lorber.
But the facts of those issues would “undoubtedly be material…as Winston’s intent and credibility will be key issues” in the current litigation.
He said the possibility of Sorkin’s cross-examination of Winston was “sufficient ground” for disqualification.
Spatt said that courts generally have held that the prospect of attorneys cross-examining former clients generally does not require disqualification, but those courts also have recognized that they must be vigilant in avoiding any taint of the trial process.
“Here, the possibility for trial taint is clear,” Spatt wrote, later adding, “These prior criminal conduct issues are ideal subjects for cross-examination, and they are within the knowledge of attorney Sorkin. His obligation to the Plaintiff is to use this information against Winston, his former client. If he declines to use this information, he will be violating his duty to Lorber, his present client. Unfortunately, this serious conflicting dilemma can only be avoided by removing Sorkin as counsel for the Plaintiff in this case.”
Spatt said it also was “clear” Winston proved the document was shielded by the work-product privilege.
Spatt said that Winston may have given the memorandum to his wife, but “this alone is not enough to waive the work product privilege.”
Waiver of the privilege, Spatt continued, constitutes more than disclosure to a third party and had to result “in a substantial increase in the risk that it will be obtained by an adversary.”
Winston had “no reason” to think the document would end up in the hands of a “potential adversary,” the judge said.
Moreover, he said the memorandum was protected by the “marital communications privilege” because at the time of disclosure, Winston’s marriage was still “viable.”
Asked about Sorkin’s disqualification, Burstein said, “I feel terrible, but it is an entirely self-inflicted wound.” He later added, “It’s sad. The last person I want to do this to is Ike Sorkin, someone who I always admired.”
Lorber also had been represented by Lowenstein attorneys Savannah Stevenson and Nicole Pappas De Bellol.
@|Andrew Keshner can be contacted at email@example.com.