REFEREE’S AMENDED DECISION AND ORDER By decision and order dated January 26, 2021 (the “Order of Reference”) (NYSCEF. DOC. NO. 133), the Hon. Carol R. Edmead, J.S.C. referred this matter to the Special Referee Part for assignment to a Referee to hear and determine the issue of “the disqualification of The Alan Frank Firm as counsel for Respondent Windsor Securities, LLC in the underlying Arbitration (Motion Sequence No. 003).” Justice Edmead also ordered that the Arent Fox/Rousseau Settlement Agreement be produced to the undersigned for an in camera review. The matter was assigned to the undersigned on April 4, 2022. The hearing commenced and concluded on November 2, 2022. Petitioner’s counsel, Anthony Sylvester, Esq., appeared. Respondent’s counsel, Samantha Millrood, Esq., also appeared. Decision was reserved. BACKGROUND On May 29, 2020, petitioner Herrick, Feinstein LLP filed a petition seeking the disqualification of Alan L. Frank Associates, P.C. (“The Alan Frank Firm”) as counsel for Windsor Securities, LLC, (“Windsor”), Arent Fox, LLP (“Arent Fox”) and Julius A. Rousseau, III (“Rousseau”), individually and as corporate designee of Arent Fox, for alleged egregious conduct in and underlying JAMS arbitration, including simultaneous representation of clients who include petitioner’s former partner, Arent Fox, where Rousseau is currently a partner, and Windsor, in a malpractice action against Herrick. Petitioner also sought an order compelling Windsor to produce the Arent Fox/Rousseau Settlement Agreement (“the Settlement Agreement”). On January 20, 2021, petitioner filed a motion seeking the same relief, except that they wanted the Settlement Agreement to be produced and inspected by the court in camera (Motion Sequence No. “003″). After several court dates, on January 6, 2021, Justice Edmead referred the matter to the undersigned to conduct a hearing on the above issue. On February 17, 2021, Justice Edmead granted the motion only to the extent that Windsor was ordered to produce the Settlement Agreement to the court for an in camera inspection. The matter was scheduled for a hearing on November 2, 2022. RELIEF SOUGHT Plaintiff is seeking that The Alan Frank Firm be disqualified as counsel for Respondent Windsor Securities, LLC. HEARING On November 2, 2022, the following individuals appeared: Anthony Sylvester, Esq., counsel for petitioner Herrick, Feinstein, LLP Samantha Millrood, Esq., counsel for respondent Windsor Securities, LLC Alan Frank, Esq., respondent and witness Doug Heffer, Esq., Foley & Lardner, LLP, witness Both sides made opening statements. EVIDENCE Petitioner’s 1 — Underlying Federal Court complaint dated February 29, 2016 Petitioner’s 2 — Rousseau’s opposition papers to the motion for partial summary judgment dated September 17, 2018 Petitioner’s 3 — Arbitration subpoena dated October 14, 2019 Petitioner’s 4 — Responses and Objections to arbitration subpoena directed to Arent Fox, LLP, dated December 20, 2019 Petitioner’s 5 — Letter to JAMS arbitrators from Mr. Frank’s firm dated February 5, 2020 Petitioner’s 6 — Alan Frank email to counsel dated February 12, 2020 Petitioner’s 7 — Email from Scott Ross to JAMS arbitrators, dated February 14, 2020 Petitioner’s 8 — Email from Alan Frank to JAMS arbitrators, dated February 17, 2020 Petitioner’s 9 — Letter to JAMS arbitrators from Mr. Frank’s firm dated March 4, 2020 Petitioner’s 10 — Letter to JAMS arbitrators from Mr. Frank’s firm dated March 6, 2020 Petitioner’s 11 — Transcript of the December 21, 2020 deposition of Julius A. Rousseau, III Affirmation of Alan L. Frank in Support of Windsor Securities’ Verified Answer to Petition for Order Disqualifying Counsel dated July 1, 2020 — Court Took Judicial Notice Declaration of Julius Rousseau III dated July 3, 2020 — Court Took Judicial Notice TESTIMONY Petitioner’s Case Mr. Sylvester called Alan Frank as his first and only witness. On direct examination, respondent Alan Frank testified that he instituted a lawsuit on respondent Windsor’s behalf claiming that Rousseau had been negligent in performing legal services for Windsor, to which Windsor denied. He testified that the matter against Rousseau and Arent Fox concluded with a settlement in May of 2019. He testified that to this day, Windsor stands by the contention that Rousseau acted in a negligent manner. He testified that at the deposition in the underlying Federal Court complaint (Petitioner’s “Exhibit 1″), he had “an appreciation” that Rousseau was adverse to his client Windsor. He testified that at the deposition, it was his intention to obtain information beneficial to the position of his client, including undermining Rousseau’s defense. He testified that his client filed a motion for summary judgment and Rousseau filed opposition papers (Petitioner’s “Exhibit 2″), which contained a declaration which Mr. Frank believed contradicted Rousseau’s sworn deposition testimony. He testified that he filed an arbitration matter against the petitioner in 2016, approximately six months after the Federal Court case was initiated. He testified that at the arbitration proceeding, he asserted that petitioner was negligent in performing legal services, as well as Rousseau. He testified that pursuant to the arbitration proceeding, a subpoena was issued and directed towards Arent Fox (Petitioner’s “Exhibit 3″), but not towards Windsor or Mr. Frank’s firm. He testified his office served the responses and objections to his arbitration subpoena directed to Arent Fox. He testified that the responses and objections to the arbitration subpoena numbered 1 through 13 (Petitioner’s “Exhibit 4″) were interposed on behalf of the Arent Fox firm and that he signed the last page of the document. He testified that he carried out what he believed to be his duties in responding in good faith with regard to the subpoena, and that his responses and objections were meritorious. He claimed that before he signed and sent the document, the Foley and Lardner firm vetted, revised, edited and finalized the draft of the objections, reviewing them for accuracy and adequacy. He testified that in preparing the above document, he or someone at his firm communicated with the Foley Lardner firm, providing them with draft responses and objections, to which they provided commentary. He also testified that at the time of these communications, the Foley Lardner firm was representing Rousseau and Arent Fox and he was aware that the Foley Lardner firm had an attorney/client relationship with Rousseau and Arent Fox, and with that connection, the firm possessed confidential information regarding both Rousseau and Fox. He testified that the petitioner would not seek the deposition of Rousseau. He testified that the letter sent to JAMS arbitrators (Petitioner’s “Exhibit 5″) referenced the fact that the petitioner was seeking to serve Rousseau a deposition subpoena. He testified that he did not oppose the petitioner serving Rousseau a deposition subpoena and intended to accept service of the subpoena on Rousseau’s behalf, which was memorialized in an email to counsel (Petitioner’s “Exhibit 6″). He testified that when he wrote the email, he knew that Rousseau had counsel at Foley Lardner and that on or about February 12th of 2020, his firm was having conversations with the Foley Lardner firm about the deposition of Rousseau. He testified that in a February 14, 2020 email to the JAMS arbitrators, he agreed to accept service of a deposition subpoena to Rousseau (Petitioner’s “Exhibit 7″). He testified that he was awaiting a callback from either Mr. Wang or Mr. Heffer because he was never in touch with Rousseau. He testified that in an email to the JAMS arbitrators dated February 17, 2020 (Petitioner’s “Exhibit 8″), he stated that in connection with the deposition testimony and subpoena to be served on Rousseau, that he was counsel to Rousseau. He testified that the email also contained four enumerated objections to the subpoena, which he was interposing on behalf of Windsor and Arent Fox. He testified that after he sent the February 17, 2020 email, he received communication from the petitioner that they objected to his representation of Rousseau. He testified that in a letter he sent to JAMS arbitrators dated March 4, 2020 (Petitioner’s “Exhibit 9″), it was stated that his firm represented Rousseau, who was a non-party. He testified that at the time he sent a letter to JAMS arbitrators dated March 6, 2020 (Petitioner’s “Exhibit 10″), he was aware that the petitioner had raised the issue of a conflict of interest brought about by his representation of Rousseau. He testified that in that same letter, he informed the panel that he would not be representing Rousseau, the decision of which was made sometime between March 4th and March 6th of 2020. He testified that during that two-day period, he was aware of the aforementioned conflict of interest issue. He testified that after December of 2019, he had communications with the Foley Lardner firm regarding the deposition subpoena directed to Rousseau, including preparation of objections. He testified that during the aforementioned time, the Foley Lardner firm was representing Rousseau individually and the Arent Fox firm. He assumed that the Foley Lardner firm therefore possessed confidential information from both Rousseau and the Arent Fox firm regarding their representation of Windsor. On cross-examination, Mr. Frank testified that Rousseau, Arent Fox and/or the Foley Lardner firm (who were representing Rousseau and Arent Fox) never imparted any confidential information to him regarding Rousseau, Arent Fox and/or the petitioner. He testified that neither he nor his firm received any confidential information from Rousseau and/or Arent Fox regarding the petitioner. He testified that during his communications with the Foley and Lardner firm, or when he agreed to accept service of the aforementioned arbitration subpoena, he never provided any confidential information regarding Rousseau, Arent Fox or the petitioner. Mr. Sylvester rested. Respondent’s Case Ms. Milrood called Douglas Heffer to testify. He testified that he is a partner with the Foley and Lardner law firm, admitted to the bar in New York State and has been practicing since 2006. He testified that his firm currently represents respondents Arent Fox and Rousseau. He testified that his firm never ceased representing or severed ties with Arent Fox or Rousseau. He testified that his firm represented Arent Fox and Rousseau in the Southern District of New York federal court matter captioned “Windsor v. Arent Fox,” which has since been settled. He testified that in the aforementioned action, the Alan Frank firm represented Windsor and that as part of the settlement agreement, Arent Fox and Rousseau executed a confidential settlement agreement. He testified that he was aware that in the underlying arbitration proceeding of this matter, that the petitioner served a subpoena for documents on Arent Fox. He testified that his firm on Arent Fox’s behalf authorized the Alan Frank form to accept service of the Arent Fox document subpoena and produced Arent Fox’s responsive documents directly to petitioner’s counsel in response to the subpoena. He testified that hose documents were an identical reproduction of the documents that Arent Fox produced to Windsor when they were adversaries in the Southern District of New York federal action. He testified that neither he nor his firm ever provided, under any circumstances, any confidential or privileged information of Arent Fox, Rousseau or the petitioner to the Alan Frank firm in preparation for or response to petitioner’s subpoena for Arent Fox. He testified that he learned that the petitioner sought to serve a subpoena on Rousseau for his deposition. He testified that his firm on Rousseau’s behalf authorized the Alan Frank firm to accept service of the aforementioned subpoena. He testified that he did not know whether or not the aforementioned subpoena was ever issued. He testified that Arent Fox and Rousseau never authorized him or his firm to disclose confidential information of Arent Fox, Rousseau or the petitioner to the Alan Frank firm. He testified that in the aforementioned arbitration matter, if a third-party subpoena is served on Arent Fox and Rousseau, his firm will represent them. On cross-examination, Mr. Heffer testified that regarding the documents produced in the aforementioned arbitration action, he was aware that certain of those documents belonged to the Arent Fox firm regarding Windsor, and that they were not his firm’s files. He testified that to the best of his knowledge, those documents were the same as those provided to Windsor in the aforementioned federal court matter. He testified that his firm communicated with Rousseau and Arent fox in order to obtain those files and that in order to collect the files, he had to have confidential attorney-client communications with Rousseau and Arent Fox. He testified that he had an opportunity to review the aforementioned subpoena, and a draft of the responses and objections that the Alan Frank firm prepared. He could not recall if he communicated with Arent Fox or Rousseau regarding those objections. He testified that if he were asked about the details of his communication with Rousseau regarding preparation of the aforementioned objections, he would assert the attorney-client privilege. He testified that he remembers the testimony elicited during the confidential settlement agreement between his clients and Windsor. He testified that the agreement provided an aspect of the conflict-of-interest waiver. On redirect examination, Mr. Heffer testified that he did not disclose to Mr. Frank or his firm the substance of any communications, or any privileged or confidential communications he had with Arent Fox or Rousseau regarding the pending arbitration he had with Arent Fox and/or Rousseau. The Court took judicial notice of the Affirmation of Allen J. Frank in Support of Windsor Securities’ Verified Answer to Petition for Order Disqualifying Counsel dated July 1, 2020 and the Declaration of Julius Rousseau III dated July 3, 2020. Ms. Millrood rested. DISCUSSION The Special Referee is limited by the scope and direction of the order of reference (see Marshall v. Pappas, 143 A.D.2d 979 [2d Dept. 1988], Volk v. Volk, 254 A.D.2d 274 [2d Dept. 1998]). The Special Referee also resolves conflicting testimony and matters of credibility. Herman v. Gill, 61 A.D.3d 433 (1st Dept. 2009). In determining same, the referee is to consider the character, demeanor, and interest of the witness[s]. As the trier of fact, the referee determines whether or not the testimony is colored intentionally or unintentionally by those factors (see Lauria v. Lauria, 187 A.D.2d 888, 889 [3d Dept. 1992]). The disqualification of an attorney is a matter that rests within the sound discretion of the court, Flores v. Willard J. Price Assocs., LLC, 20 A.D.3d 343 (1st Dept. 2005); Nationwide Assocs., Inc. v. Targee St. Internal Med. Grp., P.C., 303 A.D.2d 728, (2d Dept. 2003). While a party’s entitlement to be represented in ongoing litigation by counsel of his or her own choosing is afforded significant weight, the right to choose one’s counsel will be abdicated where there is a clear showing by a movant that disqualification is warranted. Caravousanos v. Kings Cty. Hosp., 27 Misc. 3d 237, 243 (Sup. Ct. Kings Cty. 2010). Not only can the Court disqualify an attorney for acting improperly, “but also to avoid the appearance of impropriety.” Caravousanos at 244; Heelan v. Lockwood, 143 A.D.2d 881, (2d Dept. 1988) (stating that “[i]t is an undeniable maxim of the legal profession that an attorney must avoid even the appearance of impropriety”); Narel Apparel Ltd. v. Am. Utex Int’l., 92 A.D.2d 913, (2d Dept. 1983) (“The standards of professional ethics dictate that a party ‘and indeed the public at large, are entitled to protection against the appearance of impropriety and the risk of prejudice attendant on abuse of confidence, however slight.’”); Kelly v. Greason, 23 N.Y.2d 368 (1968) (“The lawyer may not place himself in a position where a conflicting interest may, even inadvertently, affect, or give the appearance of affecting, the obligations of the professional relationship.”); Moray v. UFS Indus., 156 A.D.3d 781 (2d Dept. 2017) (“Even when an actual conflict of interest may not exist, disqualification may be warranted based on a mere appearance of impropriety. An attorney must avoid not only the fact, but even the appearance, of representing conflicting interests. An attorney may not place himself or herself in a position where a conflicting interest may, even inadvertently, affect, or give the appearance of affecting, the obligations of the professional relationship.”); Halberstam v. Halberstam, 122 A.D.3d 679 (2d Dept. 2014) (“Moreover, even when an actual conflict of interest may not exist, disqualification may be warranted based on a mere appearance of impropriety.”). Any doubts as to the existence of a conflict must be resolved in favor of disqualification.” Caravousanos, supra at 245; Heelan, supra at 883 Where a conflicting interest may, even inadvertently, affect, or give the appearance of affecting, the obligations of the professional relationship, the courts have been scrupulous in resolving all doubts in favor of disqualification. Justinian Capital SPC ex rel. Blue Heron Segregated Portfolio v. West LB AG, N.Y. Branch, 90 A.D.3d 585 (1st Dept. 2011) (“Doubts as to the existence of a conflict of interest must be resolved in favor of disqualification.”); Moray, supra at 784. The Rules of Professional Conduct prohibit a lawyer from representing a party with materially adverse interests to that of a former client in the same matter or in a substantially related matter, absent a written waiver. N.Y. Rules of Professional Conduct §1.9; Cardinale v. Golinello, 43 N.Y.2d 288 (1977). Also, the conflicts of an individual attorney are generally imputed to their entire firm. N.Y. Rules of Professional Conduct §1.10; Cardinale at 295. This continuing duty of loyalty is the continuing duty of confidentiality that an attorney owes to a former client. N.Y. Rules of Professional Conduct §1.6. In the instant matter, the Court finds that there has been a clear showing that the Alan Frank Firm should be disqualified as counsel for the respondent Windsor. The court agrees with Plaintiff’s contention that by undertaking the representation of Arent Fox and Rousseau (Herrick’s former partner and the sole subject of the malpractice claims against Herrick in the Arbitration), Windsor, by and through The Alan Frank Firm, has necessarily availed itself of Herrick’s confidences. It is unlikely that an attorney who has taken on the task of interposing objections and responses to a document request would do so unless they are representing that party, and therefore, be privy to privileged and confidential information regarding that party. Under these circumstances., the Alan Frank Firm must be disqualified as counsel for Windsor, since its representation has now taken on the appearance of impropriety. As a former partner of Herrick, Rousseau owes continuing fiduciary obligations to the partnership and his former partners. By agreeing to represent both Arent Fox and Rousseau, while simultaneously representing Windsor, The Alan Frank Firm availed Windsor of Herrick’s confidences, litigation strategy, and settlement strategy, which would certainly be within the knowledge of Herrick’s former partner. Based on the evidence and testimony elicited, the Alan Frank Firm apparently prepared Windsor’s Amended Demand against Herrick after The Alan Frank Firm had agreed to undertake the legal representation of the very Herrick partner whom The Alan Frank Firm claims committed malpractice. In that Amended Demand, The Alan Frank Firm went ahead and accused both Arent Fox and Rousseau of having committed malpractice. Then, in December 2019, the Alan Frank Firm appeared as attorneys for Arent Fox, responded to document demands for Arent Fox, and produced documents for Arent Fox. In so doing, The Alan Frank Firm undoubtedly conferred with, and received information directly or indirectly from, Rousseau, despite The Alan Frank Firm’s unsworn letter claiming they never spoke to him. In order to disqualify a party’s attorney, there need not be direct evidence of breach of a confidential relationship, as the issue is not the “actual or probable betrayal of confidences,” but the “mere appearance of impropriety and conflict of interest.” Nemet v. Nemet, 112 A.D.2d (2d Dept. 1985); In re Hof, 102 A.D.2d 591 (2d Dept. 1984) (“Clearly, petitioner need not set forth specifics to substantiate a claim of breach of the confidential attorney-client relationship as to do so would obviate the protection afforded by disqualification.”); Decana Inc. v. Contogouris, 27 A.D.3d 207, (1st Dept. 2006) (“That the attorney in question may not have obtained confidential information from plaintiffs during his earlier representation of them did not render his disqualification inappropriate, since plaintiffs were entitled to be free from the apprehension, naturally arising under the circumstances at bar, that the prior representation would inure to their current adversaries’ advantage.”); Moray, supra at 784 (“Furthermore, even assuming that no significant client confidences were acquired by Monteleon, this does not remove the imputation of disqualification from D’Agostino. Because even the appearance of impropriety must be eliminated, it follows that even where it is demonstrated that the disqualified attorney possesses no material confidential information, a firm must nonetheless erect adequate screening measures to separate the disqualified lawyer and eliminate any involvement by that lawyer in the representation.”). While an adversary is not forbidden from speaking with former employees, The Alan Frank Firm apparently exceeded what is ethically appropriate pursuant to the NY Rules of Professional Conduct. In fact, The Alan Frank Firm actually decided to represent a former key partner of an adversary who had access to all of Herrick’s confidences. Although The Alan Frank Firm claims that it did not obtain Herrick’s confidences, the very possibility of this happening, either intentionally or inadvertently, places Herrick at possible risk of their confidential information being disclosed. This possibility must be avoided by counsel pursuant to the settled rules of ethical conduct. Respondent’s arguments are belied by the fact that The Alan Frank Firm withdrew as counsel for Rousseau, citing possible conflicts of interest. Their desire to remain as counsel for Windsor with claims that no such conflict exists seems disingenuous, as there is an inherent conflict of interest in the Alan Frank Firm’s simultaneous representation of Windsor and non-party witnesses Arent Fox and Rousseau. Such joint representation creates an unwaivable conflict of interest and presents challenges, because a lawyer is ethically required to provide the same degree of loyalty to the deposition witness as to his client in the litigation. Consequently, when a lawyer is asked to represent a non-party witness at a deposition, he/she must first determine whether the new representation will create a conflict of interest with the party-client. While the Alan Frank Firm’s representation of Windsor in these circumstances is at the very least ill-advised, the Court notes that this determination in no way states or even implies that the Alan Frank Firm’s purpose or actions were nefarious in their representation of Windsor, or that any confidences of the firm’s prior clients were actually compromised or breached. However, that is not the standard by which courts determine disqualification, which is proper under the circumstances herein. Determination Regarding Disclosure of the Confidential Settlement Agreement As per Justice Edmead’s order, the undersigned was authorized to review the confidential settlement agreement in camera and had an opportunity to do so. Upon review of the agreement, the Court finds that a disclosure of the confidential settlement agreement contains information that if disclosed, could be prejudicial to the parties who executed said agreement. Such agreement, while containing information related to this matter, is neither material nor relevant to the limited issue of disqualification of counsel under these particular circumstances, and would not add any additional information or insight which would affect the Court’s determination, as the testimony elicited and evidence submitted provides a more than sufficient basis for the undersigned to make a determination. CPLR §3101, see Allen v. Crowell-Collier Publ. Co., 21 N.Y.2d 403 (1968). Therefore, the agreement shall remain confidential until such further order of the current referring Justice, as Justice Edmead has since retired from the bench. Therefore, the Court finds that the Alan Frank Firm should be disqualified from representing Windsor in this matter going forward. The petition and Motion Sequence No. 003 are granted only to the extent that of the disqualification and denied as to production of the Settlement Agreement as stated above. As such, it is hereby ORDERED AND ADJUDGED that; and it is further ORDERED that counsel for Plaintiff is directed to e-file to NYSCEF Plaintiff’s exhibits and admitted into evidence and a copy of the November 2, 2022 transcript; and it is further ORDERED that counsel for Plaintiff shall serve a copy of this order with notice of entry upon Defendant Abbott by mail and to all parties via NYSCEF and upon the Clerk of the General Clerk’s Office (60 Centre Street, Room 119), who is directed to enter judgment. This constitutes the decision and order of the court. Dated: February 24, 2023
