United States District Court, S.D. New York
May 9, 2005.
SECURITIES AND EXCHANGE COMMISSION, Plaintiff,
SAVE THE WORLD AIR, INC., JEFFREY ALAN MULLER and BILLY BLACKWELDER, Defendants. SAVE THE WORLD AIR, INC., Cross-Claimant, v. JEFFREY ALAN MULLER, LYN MULLER, MURRAY MULLER, GUY MULLER, ALAN MULLER, MELISSA MULLER, WINCHESTER CAPITAL CORP., CEDARVIEW INTERNATIONAL CORP., BOKSBERT UNTERNEHMEN, SAN BLAS DESARROLO, CANVASS PACIFIC LTD., REDGRAVE, INC., GREYON PROPERTIES, INC., DOUGLAS, INC., CASTEEN INTERNATIONAL LTD., PEREGUINE CORP., TROY INTERNATIONAL, INC., LOYALTY UNITED INTERNATIONAL, INC., AND DOES 1-10. Cross-Defendants.
The opinion of the court was delivered by: GEORGE DANIELS, District Judge
MEMORANDUM DECISION AND ORDER
Defendant Jeffrey Alan Muller moved to disqualify the law firm of Matthews
and Partners ("Matthews") as counsel for cross-claimant Save the World Air,
Inc. ("STWA"). The motion is denied.
Movant argues that disqualification of counsel is necessary because
Matthews had initially represented both Mr. Muller and STWA prior to the
Securities and Exchange Commission's ("SEC") filing the complaint at bar
against Mr. Muller and STWA and prior to counsel filing a cross-claim against Mr. Muller on behalf of
STWA. Additionally, Mr. Muller contends that it will likely be
necessary for counsel to be called as a witness at trial.
Matthews began representing STWA when it was under
investigation by the SEC. On August 24, 2000, Matthews sent the
SEC a letter stating that the law firm represented STWA. (STWA's
Mem. Opp'n Mot. Ex. A). On October 6, 2000, Mr. Muller, as
Chairman of STWA, authorized Matthews to act on STWA's behalf as
its attorney with regard to matters relating to the SEC and the
trading of STWA stock (Id. Ex. B at 1). Counsel's October 6,
2000 engagement letter specifically advised that the law firm was
retained to provide legal services for STWA. (Id. at 2-3). On
June 19, 2001, STWA's Board of Directors adopted a resolution for
the retention of Matthews' legal services on behalf of STWA.
(Id. Ex. C). The STWA minutes and corporate resolutions were
witnessed and signed by Mr. Muller, as STWA's Secretary. (Id.
at 2). The minutes state:
That Leodis C. Matthews is retained as separate
counsel for Save the World Air, Inc., ("STWA") and is
empowered to handle all issues related to the matter
pending before the Securities & Exchange Commission . . .
The Board will also enter into an agreement for
his continued services as Corporate counsel for STWA.
It is hereby resolved that any and all perceived
conflicts of interest by any dual representation and
advice between STWA and any present and former
officer or executive of STWA, after consultation with
separate counsel, is hereby waived. STWA acknowledges
that an explanation of any potential conflict [has]
been explained. All previous legal actions and
representations with the SEC by Mr. Matthews have
been ratified. (Id. at 1).
By e-mail dated January 17, 2002, Leodis Matthews wrote Mr.
Muller to clarify any questions Mr. Muller may have had regarding
a possible conflict of interest. (Id. Ex. D at 1). Therein, Mr.
Matthews explained that "[f]rom the beginning I have represented
STWA and my agreement is with the company in its corporate
status." (Id.). He further advised that "while I recognized you have consulted with separate counsel concerning
the issue of your resignation, unless your resignation is
forthcoming and any conflicts with the Company resolved before
litigation, I have to refuse to participate in your defense
before the SEC." (Id. at 2). In response to Mr. Matthews'
correspondence, Mr. Muller e-mailed him on January 22, 2002
stating, "[n]o conflict has ever existed between myself and this
company . . ." (Id. at 1).
In his declaration, Leodis Matthews denies that he or his law
firm has ever personally represented Mr. Muller aside from legal
services rendered on behalf of STWA. (Matthews Decl. ¶ 4). In
STWA's memorandum of law, it is indicated that in response to
subpoenas issued by the SEC, Matthews represented STWA's
corporate executive and employees, including Mr. Muller, solely
in their corporate capacity. (STWA's Mem. Opp'n Mot. at 3). STWA
claims that these witnesses were questioned about STWA's business
practices and operations. (Id.). STWA denies that Matthews
received any compensation from Mr. Muller. (Id.).
The SEC commenced this action on December 12, 2001. On July 2,
2002, STWA filed a cross-complaint against a number of defendants
including Mr. Muller. On November 29, 2004, Mr. Muller filed his
motion seeking to disqualify counsel who has continuously
represented STWA in this litigation for almost three years.
Although the Court finds Mr. Muller belatedly asserted his claim,
the Court is mindful that a party's delay in moving for
disqualification cannot justify the continued breach of an
attorney's professional responsibilities. Emle Indus., Inc. v.
Patentex, Inc., 478 F.2d 562, 574 (2d Cir. 1973). Nevertheless,
the Court finds that Mr. Muller's claim is meritless.
Disqualification motions are generally disfavored as "[t]hey
are often tactically motivated, they cause delay and add expense;
they disrupt attorney-client relationships sometimes of long standing; in short, they tend to derail the
efficient progress of litigation." See, Felix v. Balkin,
49 F.Supp.2d 260, 267 (S.D.N.Y. 1999); see also, Bd. of Educ.
v. Nyquist, 590 F.2d 1241, 1246 (2d Cir. 1979). Although the
right to counsel of one's own choosing is vital, that right can
be overridden where compelling reasons exist justifying
disqualification. Bottaro v. Halton Assocs., 680 F.2d 895, 897
(2d Cir. 1982). No such reasons exist in the case at bar.
The record is barren of any evidence that Matthews represented
Mr. Muller in his individual capacity or that Mr. Muller
reasonably believed this to be so. There has been no showing that
Mr. Muller communicated with Matthews as to matters that did not
concern STWA or its general affairs, or that he sought or
received personal legal advise from Matthews. Under such
circumstances, Mr. Muller's has failed to establish that Matthews
represented Mr. Muller in his individual capacity. See, United
States v. Int'l Bhd. of Teamsters, 119 F.3d 210, 215-17 (2d Cir.
1997); Evans v. Artek Sys. Corp., 715 F.2d 788, 793 (2d Cir.
1983). Moreover, Mr. Muller has no right to assert a
client-attorney privilege with regard to any communications he
may have had with Matthew regarding STWA's corporate matters.
Int'l Bhd. of Teamsters, 119 F.3d at 215 ("Recognizing that
entities can act through agents, courts have held that any
privilege that attaches to communications on corporate matters
between corporate employees and corporate counsel belongs to the
corporation, not to the individual employee, and that employees
generally may not prevent a corporation from waiving
attorney-client privilege arising from such communications."). In
light of the foregoing, there is no evidence to suggest that the
law firm of Matthews and Partners represented both Mr. Muller and
STWA, and hence no conflict of interest exists.
Furthermore, Mr. Muller sets forth no factual allegations to
support his conclusory assertion that it is likely that Mr. Matthews will testify at
trial. There is no basis to support a finding that Mr. Matthews
has any relevant, personal knowledge of the facts underlying this
dispute that would arguably make him a proper witness at trial.
Mr. Muller has made no showing that the law firm's investigation
or its representative conduct, on behalf of STWA, will be a
material issue at trial. Thus, Matthews continued representation
of STWA will not act as an impediment to the just litigation of
Accordingly, defendant Jeffrey Allen Muller's motion to
disqualify counsel is hereby denied.
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