NEW YORK COUNTYSupreme CourtJustice Edmead Click here to see Judicial Profile MEMORANDUM DECISION[1]In this Article 78 Proceeding, petitioner Laro Service Systems, Inc. (“Laro”) seeks a judgment (1) declaring that respondent New York City Business Integrity Commission (“BIC”) acted arbitrarily and capriciously in issuing an unloading license to respondent New Fulton Fish Market Cooperative at Hunts Point (the “Cooperative”), based on a non-compliant bid; (2) declaring that BIC acted arbitrarily and capriciously in conducting a sham bidding process designed and altered to ensure that the unloading license would end up in the hands of the Cooperative; (3) annulling BIC’s licensing of the Cooperative to perform the unloading function; (4) granting a permanent injunction enjoining BIC from permitting the Cooperative to act as a licensed unloader at the New Fulton Fish Market at Hunts Point (the “New Fulton Fish Market”) in the absence of a new and proper bidding process; and (5) awarding Laro the costs and disbursements of this proceeding.[2]In opposition, BIC and the Cooperative argue that BIC’s decision to grant the Cooperative an unloading license was rational, not arbitrary, and a valid exercise of its power and discretion.[3]Subsequent to the parties’ submissions on the Article 78 proceeding, the Cooperative moved by order to show cause to disqualify Randy M. Mastro and Gibson, Dunn & Crutcher LLP (the “firm”) from representing Laro, arguing that Mr. Maestro, a necessary witness in this action, violated the advocate-witness rule of Disciplinary Rule (“DR”) 5-102. At oral argument, the Cooperative modified its prayer for relief and stated that disqualification was now an insufficient remedy, and that in fact, the Court must vacate its previous orders granting a stay and subsequently a preliminary injunction. The Cooperative argued that Mr. Mastro’s affirmation and representation of Laro tainted the Court’s review of the proceedings at the outset by hearing, notwithstanding in the fact that the Court expressed that it did not consider, Mr. Mastro’s position on legislative intent. The Cooperative further requested that Laro be given an opportunity to obtain new counsel and that the proceedings proceed before another Justice. [4]In support of disqualification, the Cooperative argues that the determination of the merits of Laro’s claim is dependent, in part, upon the Court’s interpretation of Local Law No. 50. Mr. Mastro submitted an affirmation attesting to his purportedly unique knowledge of facts concerning his involvement as Chief of Staff to Mayor Giuliani and as Deputy Mayor for Operations in the drafting and passage of Local Law No. 50. Therefore, Mr. Mastro has become an important witness, in addition to counsel in this case, and has placed his credibility as a fact witness at issue in violation of DR 5-102′s proscription against advocates acting as a witness.The Cooperative also contends that only Mr. Mastro is able to testify with respect to his discussions with BIC representatives concerning (1) whether Local Law No. 50 would apply to the New Fulton Fish Market, (2) the propriety of BIC’s RFLP, and (3) the legality of BIC’s issuance of an unloading license to the Cooperative, and to the alleged statement by the Cooperative’s market manager’s that “some of the ‘old unloaders’ from before the City initiative ‘ were interested in assuming those in-house positions.” Further, Laro’s intent to offer the testimony of Rudy Washington is unavailing, since Mr. Washington does not claim to have played a role in drafting Local Law No. 50, testifying in its favor, or having overseen its implementation. Furthermore, since Mr. Mastro’s testimony is susceptible to impeachment, his participation might prejudice Laro. As a result of Mr. Mastro’s disqualification, the firm should also be disqualified.In opposition to disqualification, Laro argues that the Cooperative failed to demonstrate that Mr. Mastro has made himself a “necessary” witness on a “significant issue” and that the Court should consider the timing of such application as a potential tactic to delay the proceeding.[5] Further, Laro contends that this Article 78 proceeding turns more on the administrative record and not upon witness testimony, and points out that the Court did not permit any witness testimony on the legislative intent of Local Law No. 50. Also, Laro’s trial witness on legislative intent was Rudy Washington. Furthermore, Mr. Mastro is not a necessary witness to the pre-decision correspondence or the Cooperative’s manager’s admission about bringing back old unloaders. III. AnalysisDisqualificationRule 5-102 of the Code of Professional Responsibility (22 NYCRR 1200.21) provides, in pertinent part: (a) A lawyer shall not act, or accept employment that contemplates the lawyer’s acting, as an advocate on issues of fact before any tribunal if the lawyer knows or it is obvious that the lawyer ought to be called as a witness on a significant issue on behalf of the client [except as to certain enumerated matters not relevant to this proceeding]* * * (c) If, after undertaking employment in contemplated or pending litigation, a lawyer learns or it is obvious that the lawyer ought to be called as a witness on a significant issue on behalf of the client, the lawyer shall not serve as an advocate on issues of fact before the tribunal [except as to certain enumerated matters not relevant to this proceeding].The advocate-witness disqualification rules contained in the Code of Professional Responsibility provide guidance, not binding authority, for courts in determining whether a party’s counsel or counsel’s law firm should be disqualified during litigation (S & S Hotel Ventures Ltd. Partnership v. 777 S.H. Corp., 69 NY2d 437, 515 NYS2d 735 [1987]). Courts must also consider such factors as the party’s valued right to choose its own counsel, and the fairness and effect in the particular factual setting of granting disqualification or continuing representation (Id.). “Disqualification may be required only when it is likely that the testimony to be given by the witness is necessary” (S & S Hotel Ventures Ltd. Partnership v. 777 S.H. Corp., 69 NY2d 437, 445-446, 515 NYS2d 735 [1987]; see Matter of Galluccio v. Fochios, 303 AD2d 190, 755 NYS2d 597), or that it would have been prejudicial to counsel’s client (Galluccio v. Fochios, 303 AD2d 190, 755 NYS2d 597 [2003] [upholding denial of motion to disqualify respondent's counsel who represented him in negotiations resulting in the agreement that is the subject of the underlying arbitration, where petitioner failed to establish that counsel's testimony is necessary, since the same testimony that petitioner cites as necessary can be obtained from other witnesses, such as respondent himself or petitioner's own former counsel]). Testimony may be relevant and even highly useful but still not strictly necessary (S & S Hotel Ventures Ltd. Partnership v. 777 S.H. Corp.). A finding of necessity takes into account such factors as the significance of the matters, weight of the testimony, and availability of other evidence (S & S Hotel Ventures Ltd. Partnership v. 777 S.H. Corp.). Where a client knowingly chooses to forego the testimony of its lawyer because it prefers to continue the representation of its law firm, it is curious indeed for the adversary to insist that the lawyer ought to be called as a witness for that client, and for a court on that basis to disqualify the lawyer or the lawyer’s firm (S & S Hotel Ventures Ltd. Partnership v. 777 S.H. Corp., supra [it was error to give no recognition to plaintiff's contention that counsel's testimony was not material or even necessary, because there was no occasion to go behind the various agreements to determine their intent, the issues raised under the agreements being solely questions of law; because counsel's brother was the only person with firsthand knowledge of the conversations on which plaintiff's case hinges; and because counsel's testimony would at most be cumulative or relate only to matters of formality]).The communications between Mr. Mastro and the BIC representatives and the Cooperative’s market manager are irrelevant to the disposition of petitioner’s application for injunctive relief and Article 78 petition. The Court need not consider such communications, since the legislative intent is gleaned from the language of Local Law No. 50 itself. Further, the Court need not, and did not, consider such communications in its decision granting injunctive relief. The history concerning organized crime’s involvement with the Fulton Fish Market was widely known and uncontested. Although the parties contested the legislative intent of Local Law No. 50 and whether the Local Law No. 50 prohibited any of the market players, i.e., the wholesalers, unloaders, loaders, from performing another function in the Market, the Court need only rely on the preamble to Local Law No. 50 and the description of the functions therein. Since reliance upon Mr. Mastro’s factual affirmations are unnecessary to the disposition of the petition, the grant of disqualification would cause undue and unwarranted delay of the proceeding, and hardship on Mr. Mastro’s client, Laro.The Cooperative also failed to demonstrate that Mr. Mastro’s testimony, if called by the Cooperative, would be prejudicial to Laro (Ansonia Assocs. Ltd. Partnership v. Public Service Mut. Ins. Co., 277 AD2d 98, 717 NYS2d 30 [1st Dept 2000] [motion to disqualify plaintiff's counsel properly denied where plaintiff had no intention of calling counsel to testify and defendant failed to demonstrate that the attorney's testimony was necessary; defendant also failed to demonstrate that counsel's testimony, when called by defendant, was prejudicial to plaintiff]; cf. Price v. Price, 289 AD2d 11, 733 NYS2d 420 [1st Dept 2001] [in plaintiff's consolidated action for divorce and to vacate a prenuptial agreement as "manifestly unfair" and the product of "fraud, undue influence, duress, coercion and misrepresentation," plaintiff's counsel, which had the obligation to protect plaintiff's interests in the prenuptial negotiations will be put in the untenable position of arguing that it abjectly failed in its efforts to protect those interests]). It bears repeating that the Court need only look to the statute to determine the legislative intent. However, in the event the Court found it necessary to consider evidence outside of the statute, the Court need not rely on Mr. Mastro’s purported personal knowledge of the legislative intent of Local Law No. 50. In the affidavit of Rudy Washington, dated September 13, 2005, Mr. Washington states that the Market operated with three separate components (¶4) and that Local Law No. 50 “did not contemplate such a dual function” of wholesalers as unloaders (¶16). Such evidence, if considered by the Court, would have rendered Mr. Mastro’s testimony cumulative in this regard.Accordingly, disqualification of Mr. Mastro and Gibson, Dunn & Crutcher LLP from representing Laro is unwarranted. Consequently, the Cooperative’s application for an order vacating this Court’s earlier decisions on September 23, 2005 and September 30, 2005, is denied.Article 78 It is well established that a Court’s function in an Article 78 proceeding is to determine, upon the proof before the Administrative Agency, whether the determination had a rational basis in the record or was arbitrary and capricious (HLV Assoc. v. Aponte, 223 AD2d 362, 636 NYS2d 52 [1st Dept 1996]; see Fanelli v. NYC Conciliation and Appeals Bd., 90 AD2d 756, 757, 455 NYS2d 814 [1982] affd 58 NY2d 952, 460 NYS2d 534 [1983] [disposition of the proceeding is limited to the facts and record adduced before the agency when the administrative determination was rendered]). A determination is arbitrary and capricious if it is without sound basis in reason, and in disregard of the facts (see Century Operating Corp. v. Popolizio, 60 NY2d 483, 470 NYS2d 346 [1983]; Pell v. Bd. of Educ., 34 NY2d 222, 231, 356 NYS2d 83 [1974]; see also, Oxford English Dictionary, 2nd Edition (Clarendon Press, Oxford 1998), defining arbitrary as “to be decided by one’s liking; dependent upon will or pleasure; at the discretion or option of anyone,” and defining capricious as “guided by will or fancy rather than judgment or settled purpose; subject to change or irregularity, so as to appear ungoverned by law.”). Thus, if there is a rational basis for the administrative determination, there can be no judicial interference (Pell v. Bd. of Educ., 34 NY2d 222 supra). It is also well established that an agency is to be accorded wide deference in its interpretation of its own regulations and, to a lesser extent, in its construction of the governing statutory law, provided that such interpretation is not irrational or unreasonable (Matter of Gaines v. Div. of Hous. and Community Renewal, 90 NY2d 545, 548-549, 664 NYS2d 249 [1997]). So long as its interpretation is “neither irrational, unreasonable nor inconsistent with the governing statutes,” and supported by substantial evidence, it will be upheld; the court may not substitute its judgment” for that of the agency, “even if the court might have decided the matter differently” (Matter of Toys “R” Us v. Silva, 89 NY2d 411, 419, 654 NYS2d 100 [1996]; Parkway Village Equities Corp. v. Board of Standards and Appeals of the City of New York, 279 AD2d 299, 720 NYS2d 6 [1st Dept 2001]; see also Matter of Trump-Equitable Fifth Ave. Co. v. Gliedman, 62 NY2d 539, 478 NYS2d 846 [1984]; In the Matter of SoHo Alliance v. New York City Board of Standards and Appeals, 264 AD2d 59, 703 NYS2d 150 [1st Dept 2000]).Where, however, the question is one of pure statutory reading and analysis, dependent only on accurate apprehension of legislative intent, there is little basis to rely on any special competence or expertise of the administrative agency (Kurcsics v. Merchants Mut. Ins. Co., 49 NY2d 451, 459, 426 NYS2d 454; see Matter of Astoria Gas Turbine Power, LLC v. Tax Commn. of City of N.Y., supra). “In such a case, courts are ‘free to ascertain the proper interpretation from the statutory language and legislative intent’ ” (Seittelman v. Sabol, 91 N.Y.2d 618, 625, 674 N.Y.S.2d 253, 697 N.E.2d 154, quoting Matter of Gruber [New York City Dept. of Personnel-Sweeney], 89 N.Y.2d 225, 231-232, 652 N.Y.S.2d 589, 674 N.E.2d 1354). Thus, unless such language “is not altogether clear and unambiguous” (Beekman Hill Assoc. v. Chin, 274 AD2d 161, 712 NYS2d 471 [1st Dept 2000] citing Matter of Bockis v. Kayser, 112 AD2d 222, 223, 491 NYS2d 438 [1985]), questions of pure legal interpretation of statutory language do not warrant judicial deference to administrative expertise (Matter of Toys “R” Us v. Silva, 89 NY2d 411, 419, supra). The Court’s function in this Article 78 proceeding is to determine whether Laro has demonstrated that BIC’s alleged compliance with Local Law No. 50 in issuing the unloading license to the Cooperative is not supported by substantial evidence in the record before the BIC.In its decision, dated August 2, 2005, BIC stated, in part, that: . . . the RFLP advised potential proposers that such licenses, if any, would be awarded to qualified proposers whose proposals the Chair determined to be “the most consistent with the best interests of the City, including the lawful, orderly, and efficient operation of the Market Area.” Proposers were further advised that the Chair would reach a decision after reviewing their methods of operation, experience, resources (both personnel and equipment), price, billing and recordkeeping capacity, and ability to ensure adequate sanitation.As to methods of operation, BIC failed to pass judgment on the appropriateness of the proposed methods of operations. Here, BIC stated that “Both Laro ‘and [the Cooperative] provided a recitation of their proposed unloading, delivery, and billing procedures for various types of seafood.” Further, both Laro and the Cooperative were found to have “extensive experience” in the Market Area, “sufficient proposed resources, including equipment and personnel” to conduct unloading operations, substantially similar and reasonable price quotes, billing systems that met regulatory requirements, adequate descriptions of sanitation procedures, and demonstrated that they will be responsible for the collection of useable and broken pallets. BIC then concluded that both Laro and the Cooperative were “qualified to ensure the lawful, orderly, and efficient operation of the Market.” BIC’s mere statement that proposals were submitted indicates a failure to assess the appropriateness of the proposed methods of operations. BIC also failed to assess the impact of the Cooperative’s role as wholesaler and delegated role as Market Manager upon its proposed role as an unloader. Under Local Law No. 50, the Market Manager is a person designated by the Commissioner to supervise the operations of the market area (NYC Adm. Code §22-202 k), including implementing the rules of Local Law No. 50 (discussed infra at page 3) and referring matters concerning the market to any law enforcement agency (Id.). The Market Manager was vested with the authority, inter alia, to “enforce violations of any provision of this chapter or rules promulgated thereunder” and provide a “response to complaints relating to the operation of businesses in the market area’.” (emphasis added) (Local Law No. 50 §22-202 k). Notwithstanding the above, the Cooperative had been appointed by the City in a lease[6] to fulfill the role of the Market Manager, in contravention of the express mandate that the Commissioner has the authority to select the Market Manager, and in contravention of the role of the Market Manager in the Market. Under the lease between the City and the Cooperative, the Cooperative was given the responsibility for “all operation and management of the Premises and the Permit Area and the market thereat, including, without limitation, all loading and unloading activities, security, cleaning, and sanitation services” (Section 11.06(a)). Further, the Cooperative was given the right to “determine the manner of operation of the Premises and the Permit Area, including the hours of operation of the market thereat, to establish reasonable rules and regulation in connection therewith ‘” (Section 11.06(b)). Essentially, the Market Manager’s role is to receive complaints, supervise, and enforce violations committed by the wholesalers and the unloaders, who were previously found by the City council to have established a “gray market” and engaged in unscrupulous business practices[7] that impaired the economic vitality of this industry. However, the Market Manager function was essentially delegated to the Cooperative, who are the wholesalers, and now, unloaders. During the testimony of the Commissioner on September 30, 2005, he recognized the inherent conflict between the role of the Cooperative as Market Manager and of the Commissioner appointed Market Manager. The function of the Market Manager to monitor the activities of those who provide services within the Market is potentially severely compromised where one entity controls both functions, and this compromise was not considered at all by BIC. Further, the unloader was prohibited from interfering with the Market Manager in the discharge of his or her functions, and was expressly prohibited from conducting unloading in an area unless the Market Manager has approved the use of such area by such unloader or has assigned such unloading business to such area (RCNY §1-29(d)(2); 1-29(b)). Notably, unloaders were prohibited from engaging in “any other business or perform[ing] any other service in the market areas that would interfere with the ability of the unloading business adequately and effectively to perform unloading activities” (RCNY §1-29(d)(1) (emphasis added). And, Local Law 50, 22-202 (j) exempts from the definition of “loading services” any “loading” by “an employee of a wholesaler (emphasis added). There is no indication that the Commissioner considered the impact of the Cooperative’s role as wholesaler and/or Market Manager, upon the ability of the Cooperative “to adequately and effectively [] perform unloading activities.” Nor is there any indication that BIC considered 22-202 (j)’s exemption from the definition of “loading services” any “loading” by “an employee of the Cooperative as “the wholesaler.”Finally, BIC failed to consider the legislative intent to isolate the functions of the wholesalers and unloaders. When determining whether to issue an unloading license to a proposed bidder, the Commissioner is required to consider the “qualifications of proposers, their proposed methods of unloading, the labor and equipment they propose to utilize in the unloading operation, rates proposed to be charged to wholesalers, procedures proposed to be used to comply with sanitary requirements, and any other information relating to performance standards, responsibility and service that the commissioner deems appropriate” (NYC Admin. Code §22-204) (emphasis added).BIC was required to evaluate the qualifications of the Cooperative to act as unloaders in accordance with the overall purpose of the statute, and the licensing requirements therein.The preamble to Local Law No. 50 and the manner in which the major participants are defined and treated by Local Law No. 50 §22-202 and RCNY demonstrate that the functions of the key players in the Market were to remain isolated.The preamble states: . . . that organized crime’s corrupting influence over certain functions in the market, including the unloading and loading functions, has resulted in the commission of numerous crimes and wrongful acts there, including but not limited to physical violence or threats of violence, property damage, and thefts; that organized crime’s corrupting influence over the market has fostered and sustained a cartel that has forced seafood suppliers and truckers to use particular unloading crews at fixed prices in an anticompetitive scheme that has been censured by a federal judge; that organized crime’s corrupting influence has resulted in retailers parking on city streets and city property nevertheless having to pay high fees to private loading crews whose principal function has been to provide “security” for those vehicles and their contents while retailers have purchased fish in the crime-ridden market area; and that these corrupting influences have further resulted in higher prices for wholesale seafood than would otherwise have to be paid in the absence of this activity. The council further finds that the market’s businesses, including wholesalers, seafood deliverers, unloaders and loaders, have not been effectively regulated by the city in the past under existing laws and regulations governing public markets ‘ wholesalers have established a “gray market” in tenancies at rates in excess of those being paid to the city and have thus deprived the public of its rightful return on city property, and further, that unscrupulous businesses have taken advantage of this absence of regulation to engage in fraudulent practices, such as the creation of “phantom wholesalers” whose businesses disappear from the market before payment can be obtained from them for seafood they have received from suppliers, and that such practices have discouraged suppliers from utilizing the market area ‘ .Therefore, “in order to provide for the more efficient and orderly conduct of business in the market area, to ensure that any such activities are lawfully conducted, to promote the economic vitality of the market and to protect the public interest, it is necessary for the commissioner of small business services to have expanded authority ‘ issue requests for licensing proposals to provide unloading and loading services in the market area” (NYC Administrative Code §22-201).This Court has previously opined that the absence of the word “separate” from the face of Local Law No. 50 is not dispositive to the determination of legislative intent. The statute herein, which enumerates the roles and powers of each service provider, exemplifies the concept of “separation of powers”[8] as that legal principle has been applied to the United States Constitution. In this regard, without expressly stating that each of the branches of the United States is prohibited from performing the functions of the other, it is well established that the Constitution prohibits one branch from encroaching on central prerogatives of another (Miller v. French, 530 US 327 [2000]).Similarly, although not “hermetically sealed” from one another, the distinct roles and responsibilities of the Market Manager, loader, unloader and wholesaler were made clearly distinguishable by virtue of the rules defining these service providers and the rules governing their conduct. The possibility of collusion among Market members to raise prices and restrict the market in the same way as a monopoly or a “cartel” was created by BIC’s issuance of an unloading license to a wholesaler/Market Manager, in contravention of the purpose of Local Law No. 50. BIC failed to consider this critical possibility in its licensing determination.Thus, the Court finds that the determination lacked a rational basis in the record and was arbitrary and capricious, in that it disregarded the quintessential fact that the proposed unloader, i.e., the Cooperative, consisted of the wholesalers, and was also fulfilling the role of Market Manager. ConclusionIt is herebyORDERED that the petition is granted solely to the extent that it is hereby ADJUDGED that respondent New York City Business Integrity Commission (“BIC”) acted arbitrarily and capriciously in issuing an unloading license to respondent New Fulton Fish Market Cooperative at Hunts Point and that the determination of BIC, dated August 2, 2005, is annulled, and that the BIC is permanently enjoined from permitting the Cooperative to act as a licensed unloader at the New Fulton Fish Market at Hunts Point in the absence of a new and proper bidding process; and it is furtherORDERED that the Cooperative’s application for an order vacating the Court’s decisions of September 23, 2005 and September 30, 2005 on the grounds that plaintiff’s counsel, Randy Mastro, violated the advocate-witness rule of DR 5-102, and that disqualification was necessitated since the outset of this proceeding, is denied.This constitutes the decision and judgment of the Court.1. The Petition bears sequence #001 and the order to show cause by the New Fulton Fish Market Cooperative at Hunts Point bears sequence #002. Both motions are consolidated for joint disposition and are decided herein.The Court presumes that the parties are familiar with the facts as set forth in this Court’s earlier decision, dated September 30, 2005 and, in the interest of brevity, will not re-count the factual background of this case.2. On September 30, 2005, the Court granted the branch of the petition seeking a temporary restraining order and preliminary injunction enjoining BIC from permitting the Cooperative to act as a licensed unloader at the Fulton Fish Market at Hunts Point.3. The full extent of BIC’s and the Cooperative’s arguments pertaining to the Article 78 petition are contained in the Court’s order, dated September 30, 2005.4. The Cooperative therefore withdrew the branch of its order to show cause for an order compelling Mr. Mastro’s testimony and subjecting him to cross-examination (Transcript, dated October 3, 2005, page 173, line 15-20).5. During oral argument, the Cooperative averred that Laro was on notice of the disqualification issue by virtue of a footnote in BIC’s memorandum of law submitted on September 30, 2005.6. In August 2001, the City entered into a lease agreement with the Cooperative, in which the Cooperative was granted the right to manage the new facility, including contracting for unloading services (Cooperative Memo of Law, page 1).7. See preamble to Local Law No. 50.8. The Constitution of the United States of America provides: All legislative Powers herein granted shall be vested in a Congress of the United States, which shall consist of a Senate and House of Representatives (US Const, art I, §1). The executive Power shall be vested in a President of the United States of America (US Const, art II, §1 [1]). The judicial Power of the United States, shall be vested in one supreme Court, and in such inferior Courts as the Congress may from time to time ordain and establish (US Const, art III, §1).
