The opinion of the court was delivered by: Spatt, District Judge
MEMORANDUM OF DECISION AND ORDER
This case concerns a dispute over the plaintiff's sale to the defendants of nursing homes located in Glen Cove and Port Jefferson, New York. Currently pending before the Court are two motions: (1) a motion by the defendants to compel arbitration and stay the proceedings, and (2) a motion by the plaintiff to disqualify counsel for the defendants, Michael B. Schulman, Esq. For the reasons that follow, the Court denies the defendants' motion to compel arbitration and stay proceedings, and directs the parties to appear for an evidentiary hearing regarding the plaintiff's motion to disqualify attorney Schulman.
Prior to January 30, 2007, Plaintiff Michael Miness and his children (the "Miness Family") owned a nursing home business with operations located in Port Jefferson and Glen Cove, New York. The Miness Family organized the business using four legal entities, all of which they owned: Glengariff Holding Corp., ("Glengariff Holding"), Glengariff Corporation ("Glengariff Operating"), Glen-Haven Holding Corp. ("Glen-Haven Holding"), and Glen-Haven Residential Health Care Facilities, Inc. ("Glen-Haven Operating"). Glengariff Holding and Glen-Haven Holding held title to the business's real property in Glen Cove and Port Jefferson; Glengariff Operating and Glen-Haven Operating (together, the "Operating Companies") controlled the management of each of these facilities.
Pursuant to stock purchase agreements signed January 30, 2007 and January 31, 2007, and amended August 28, 2008 (the "Purchase Agreements"), Miness and his children sold the four corporations that owned the assets of the nursing home business to the defendants Surinder Ahuja, Veena Ahuja, the Ahuja Family Trust, Namita Mohan, and Vanita Mudgil. The Purchase Agreements also provided that, upon the final consummation of the defendants' purchase of the business, the Operating Companies were to hire Miness as a consultant for the business for two years, pursuant to certain conditions. On January 27, 2009, two years after the first versions of the Purchase Agreements were signed, the defendants took full ownership of all four legal entities that owned the assets of the business. Also on that date, the Operating Companies and Miness executed an employment contract (the "Miness Employment Agreement") retaining Miness as a consultant for a term of two years.
One of the conditions contained in the plaintiff's employment agreement was what the parties refer to as a "census requirement," which provided that the Operating Companies could terminate the plaintiff's employment prior to the end of his two year term if, for any given three month period, the occupancy of the nursing homes averaged less than 90%. The parties agree that this occupancy requirement was not met between January 28, 2009 and the end of April, 2009. Thus, on April 28, 2009, the Operating Companies-now owned by the defendants-terminated Miness pursuant to the census requirement provision.
On July 1, 2009, Miness filed the present lawsuit. In general, Miness asserts that the defendants defrauded him into selling his nursing home business by falsely promising to make certain improvements to the business, and by falsely promising to retain him as a consultant to the business on favorable terms. Miness further alleges that the defendants economically coerced him into agreeing to be bound by the 90% census requirement, knowing that this requirement could not be met and that the defendants could use this provision to evade their obligation to retain him as a consultant. Based on these allegations, Miness asserts several causes of action, including claims for federal securities fraud; common law fraud; and negligent misrepresentation. In addition, the complaint contains claims for breach of the Purchase Agreements and for breach of the Miness Employment Agreement. Finally, the plaintiff also asserts two declaratory judgment causes of action requesting that the Court declare that the plaintiff's termination of employment with the Operating Companies was not valid.
There are two motions now pending before the Court in this case. The first is by the defendants, who seek to compel the plaintiff to arbitrate his present claims for breach of the Miness Employment Agreement and declaratory judgment, and also seek to stay the remainder of this action during the arbitration. For this motion, the defendants rely on a provision of the Miness Employment Agreement that provides that, "[i]f any dispute arises between the parties hereto, it shall be settled by arbitration held within the County of Nassau, State of New York, before an arbitrator of the American Arbitration Association." (Miness Employment Agreement, ¶ 13(h).) The plaintiff opposes this motion.
In the second motion, the plaintiff seeks to disqualify Attorney Schulman. According to the plaintiff, prior to the commencement of this lawsuit, defense counsel Schulman had significant confidential discussions with the plaintiff concerning the transactions underlying the present action, and, therefore, Schulman cannot ethically serve as attorney for the defendants. Defense counsel Schulman denies the plaintiff's factual assertions, and the defendants oppose the motion.
A. As to the Defendants' Motion to Compel Arbitration and Stay the Action
The defendants seek to enforce a provision of the Miness Employment Agreement that requires the plaintiff to arbitrate disputes that arise between the parties to that agreement. The plaintiff opposes this motion on the grounds that none of the named defendants is a party to the Miness Employment Agreement, and thus the defendants have no standing to enforce the terms of the contract. In addition, the plaintiff contends that, even if the defendants were capable of enforcing the contract's provisions, the present dispute is not "between the parties [to the Miness Employment Agreement]," and thus it is not within the scope of the contract's arbitration provision. The Court agrees.
First, the only signatories to the Miness Employment Agreement are Miness and the Operating Companies. The Operating Companies are not parties in this action, and thus cannot invoke its provisions in this case. As for the defendants, none are party to the Miness Employment Agreement, and unless they are explicit third party beneficiaries of the contract, they cannot enforce its terms. See Premium Mortg. Corp. v. Equifax, Inc., 583 F.3d 103, 108 (2d Cir. 2009) ("A non-party to a contract governed by New York law lacks standing to enforce the agreement in the absence of terms that 'clearly evidence[ ] an intent to permit enforcement by the third party' in question," quoting Fourth Ocean Putnam Corp. v. Interstate Wrecking Co., 66 N.Y.2d 38, 45, 495 N.Y.S.2d 1, 485 N.E.2d 208 (1985)). Here, there is nothing in the Miness Employment Agreement that suggests that the defendants have a right to enforce the contract as third parties.
Moreover, even if the defendants did have standing to enforce the Miness Employment Agreement, the Court finds that its plain language requires arbitration of disputes between Miness and the Operating Companies, but does not require arbitration of disputes among other parties. (Miness Employment Agreement, ¶ 13(h) ("If any dispute arises between the parties hereto [that is, between Miness and the Operating Companies], it shall be settled by arbitration . . . .") (emphasis added).) The present dispute is between the plaintiff and the defendants, not between the plaintiff and the Operating Companies. While it is true that the defendants now own the Operating Companies, there is no indication from ...