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YARETSKY v. BLUM

April 8, 1981

William YARETSKY, et al., Plaintiffs, and Mary Foley, et al., Plaintiff-Intervenors,
v.
Barbara BLUM, et al., Defendants, and The Bronx Professional Standards Review Organization, Inc., et al., Defendants-Intervenors



The opinion of the court was delivered by: MOTLEY

MEMORANDUM OPINION AND ORDER

Plaintiff has moved for disqualification of the law firm currently representing various organizations which have intervened in this action as defendants. For the reasons given below, the motion is granted.

 Prior Proceedings and Factual Background

 The facts relevant to this disqualification motion must be prefaced by a description of the somewhat involved procedural posture of this action. This case is a class action brought on behalf of all recipients of aid under the New York State Plan for Medical Assistance To the Needy who are residents or patients of skilled nursing home facilities. Defendants are various state officials with responsibility for administering social services in New York State. The "intervenor-defendants" are four non-profit corporations established pursuant to the Social Security Act as professional standards review organizations (PSRO's), to monitor delivery of health care in long-term care nursing facilities. See 42 U.S.C. § 1320c-1 et seq.

 On May 26, 1979, plaintiffs and defendants entered into a Stipulation of Consent to Partial Final Judgment (the Stipulation). On October 17, 1979, plaintiffs and defendants entered into an Addendum Concerning Monitoring (the Addendum), which became part of the Stipulation. Together the Stipulation and the Addendum establish certain procedures governing the transfer of patients from a skilled nursing facility to a facility providing a lower standard of care. On that same day, October 17, 1979, this court ordered the entry of the Stipulation and Addendum as a partial final judgment.

 On September 17, 1979, before entry of the Stipulation and Addendum as a partial final judgment, the four PSRO's who would subsequently become the intervenor-defendants entered into Memoranda of Understanding (MOU's) with defendants. These MOU's concerned review of long-term care, including care rendered in skilled nursing facilities. See 42 U.S.C. § 1320c-20(a)(1). On March 25, 1980, plaintiffs moved this court for an order invalidating any MOU's which did not contain procedures similar to those found in the Stipulation. Plaintiffs also sought to permanently enjoin defendants from entering into any future MOU's which did not contain the procedures set forth in the Stipulation and Addendum.

 On April 16, 1980, the four PSRO's which entered into the disputed MOU's with defendants moved to intervene in this action. The motion to intervene was made as of right, and was unopposed. Plaintiffs then moved on May 1, 1980 for an order to declare the intervenor-defendants bound by the terms of the Stipulation and Addendum, as well as a permanent injunction prohibiting intervenor-defendants from entering into any future MOU's which did not contain the procedures found in the stipulation.

 On June 9, 1980, this court filed a memorandum decision which: (1) declared the existing MOU's invalid, and (2) enjoined defendants from entering into any further MOU's with intervenor-defendants without requesting incorporation of the terms contained in the Stipulation. The June 9, 1980, memorandum decision also explained this court's refusal to enforce the terms of the Stipulation against the intervenor-defendants, essentially because the PSRO's had not been party to any of the proceedings which resulted in the entry of a Partial Final Judgment embodying the terms of the Stipulation and the Addendum.

 Since their entry into this action, intervenor-defendants have been represented by the law firm of Epstein, Becker, Borsody & Green (EBB&G). In October, 1979, EBB&G hired Phillip Gassel as an associate. During the period from October, 1974, until shortly before his employment with EBB&G, Mr. Gassel was a staff attorney at Legal Services for the Elderly Poor (LSEP). LSEP has served as one of the primary sources of legal counsel for plaintiffs since the inception of this lawsuit, although they ceased to represent plaintiffs after Mr. Gassel went to EBB&G. While at LSEP, Mr. Gassel was directly involved in a very substantial fashion with the preparation for, and litigation of, this suit on plaintiffs' behalf.

 The Applicable Law

 Understandably, plaintiffs initially relied on the Second Circuit's recent decision in Cheng v. GAF Corporation, 631 F.2d 1052 (2d Cir. 1980) (Cheng), as legal support for the instant motion. Cheng bears a startling similarity to this case. It involved the same law firm, EBB&G, and the same associate at EBB&G, Mr. Gassel. In Cheng, plaintiff brought a suit in 1977 alleging employment discrimination by GAF Corp. Plaintiff was represented by LSEP. GAF Corp. was represented by EBB&G. As previously mentioned, Mr. Gassel left LSEP in October 1979, to become an associate at EBB&G. Cheng then moved to disqualify EBB&G from representing GAF Corp. The Second Circuit concluded that EBB&G should be disqualified, and Judge Meskill wrote a detailed opinion. Unfortunately, this court may no longer look to Cheng for guidance in deciding the instant motion because the judgment in Cheng was recently vacated by the Supreme Court. See 450 U.S. 903, 101 S. Ct. 1338, 67 L. Ed. 2d 327 (1981).

 The Order vacating the judgment in Cheng reads in its entirety:

 
The petition for a writ of certiorari is granted. The judgment is vacated and the case is remanded to the United States Court of Appeals for the Second Circuit with instructions that the appeal be dismissed. Firestone Tire and Rubber Co. v. Risjord, 449 U.S. 368, 101 S. Ct. 669, 66 L. Ed. 2d 571 (1981).

 A reading of Firestone Tire and Rubber Co. v. Risjord, 449 U.S. 368, 101 S. Ct. 669, 66 L. Ed. 2d 571 (1981), (Risjord ) demonstrates that the Supreme Court's action in vacating the Cheng judgment should not be interpreted as a decision on the merits. In Risjord the Supreme Court held that henceforth, lower court decisions granting motions to disqualify counsel would be considered unappealable interlocutory orders. Id. Thus, it seems clear that Cheng was reversed and remanded because Risjord compelled the conclusion that the Second Circuit did not have jurisdiction to consider the appeal of ...


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