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Alliance Industries, Inc. v. Long Year Holdings

January 29, 2009


The opinion of the court was delivered by: Hon. Hugh B. Scott


Before the Court is defendant motion for admission pro hac vice of Brian A. Berkley, Esq., and Larry R. Wood, Jr., Esq. (Docket No. 9*fn1 ). Judge Skretny issued a briefing schedule for this application (Docket No. 10, text Order of July 31, 2008) and then referred this case to the undersigned for disposition of pretrial matters (Docket No. 16, Sept. 4, 2008), normally including such matters as pro hac vice admission applications.

After the parties wrote seeking to initiate mediation (see letter Michael Ferdman to Chambers, Dec. 15, 2008), the Court initially set a Scheduling Conference for January 13, 2009 (Docket No. 18), noting that the question about pro hac vice admission was still open and before Judge Skretny. After further correspondence from counsel (see letter Michael Ferdman to Judge Skretny, Dec. 30, 2008), on January 9, 2009, this admission application was also referred to the undersigned. Following that referral, the Scheduling Conference was adjourned pending resolution of this application (Docket No. 20) and the application was argued on January 23, 2009 (see Docket Nos. 22 (minute entry), 21), and deemed submitted on January 23, 2009.


This is a diversity stockholders suit arising from the purchase of stock in a corporation to acquire its subsidiary and subsequent disposition of funds in an escrow account created as part of the transaction (see Docket No. 1, Compl.). As summarized in its opposition to this pro hac vice application, plaintiff alleges that defendant "has articulated two claims against millions of dollars in escrow funds that were due to be released to [plaintiff] Alliance on or about April 30, 2008. In wrongfully asserting its claim to the escrow funds, the defendant has maintained that Alliance failed to make it aware of certain facts and information during the course of the due diligence phase prior to the consummation of the underlying transaction on December 6, 2006" (Docket No. 11, Pl. Atty. Affirm. ¶ 7). Defendant negotiated to acquire plaintiff's subsidiary, Prosonic Corporation. Through its attorneys, defendant was given access to an online "data room" of documents produced during the due diligence phase and negotiation of the deal. One set of documents disclosed Prosonic's employee health care costs were capped at one figure but after acquiring Prosonic defendant learned that Prosonic paid an employee twice the capped maximum to care for that employee's child due to a catastrophic illness. (Docket No. 1, Compl. ¶¶ 10-12, 20, 44-52; Docket No. 12, Ans. ¶¶ 87-91, 93-95, 97, Ex. C; Docket No. 11, Pl. Memo. at 6-7; cf. Docket No. 15, Def. Reply Memo. at 1-2, 8, Ex. A.)

Defendant answered and asserted a counterclaim (Docket No. 12); plaintiff in turn answered the counterclaim (Docket No. 17).

Plaintiff's Objection to the Pro Hac Vice Application

Defendant retained Berkley and Wood, trial attorneys of the Pepper Hamilton LLP firm of Philadelphia, to represent it before this Court in this action and filed the ususal moving papers for these attorneys to appear pro hac vice (Docket No. 9).

Unusually, plaintiff filed opposition papers (Docket No. 11; cf. id. Pl. Atty. Affirm. ¶ 4 (conceding unusual nature of the opposition to this application)), arguing that the Pepper Hamilton firm "is or will be disqualified from representing the defendant herein" (id., Pl. Atty. Affirm. ¶ 3). Plaintiff charges that Pepper Hamilton was "integrally related in the due diligence phase of the transaction" at issue in this case, leading plaintiff to believe that the firm or some of its attorneys may be called as witnesses (id. ¶ 4; see id., Hill Aff. ¶ 6). Pepper Hamilton had access to information during the due diligence phase of the transaction that is now at issue in this case, hence making Pepper Hamilton attorneys potential witnesses (id., Pl. Atty. Affirm. ¶¶ 4-8, Hill Aff. ¶¶ 6-9, Ex. (describing online "data room"); those firm lawyers identified by plaintiff that had access to due diligence materials did not include Berkley or Wood (see id. Pl. Atty. Affirm. ¶¶ 9, 10), but other attorneys (some with that access) may become involved in this case with Berkley and Wood. Plaintiff concludes that lawyers from Pepper Hamilton will be required to testify in this case and New York State professional ethics would require the firm to be disqualified if it served as counsel and witness, thus Berkley and Wood's application to appear pro hac vice in this case should be denied (Docket No. 11, Pl. Memo. at 2-4, citing 22 N.Y.C.R.R. § 1200.21).

During oral argument, plaintiff stated that it also made this motion to preserve the disqualification issue from any possible waiver arguments if raised later in the proceedings.

Defendant's Reply

Defendant replies that plaintiff does not claim that Berkley or Wood would become witnesses (Docket No. 15). First, defendant contends that the New York Code of Professional Responsibility is not binding upon this Court to require disqualification in all instances (id. at 2 n.1). Requests to disqualify are disfavored and the opponent seeking disqualification has a high burden of proof to obtain that relief (id. at 2, 3-4), Paramount Commc'ns, Inc. v. Donaghy, 858 F. Supp. 391, 394 (S.D.N.Y. 1994); Evans v. Artek Sys. Corp., 715 F.2d 788, 791 (2d Cir. 1983). Defendant argues that "to meet the strict standard of proof, the party seeking disqualification must establish that (1) the attorney's testimony is necessary; and (2) with specificity as to 'how' and on 'what issues,' that such testimony will be 'substantially likely to be prejudicial to the party represented by his firm'" (id. at 4, quoting Parke-Hayden, Inc. v. Loews Theatre Mgmt. Corp., 794 F. Supp. 525, 527 (S.D.N.Y. 1992) (court denying motion to disqualify firm). Defendant concludes that plaintiff has not established that Pepper Hamilton's testimony will be necessary or prejudicial to defendant (id. at 5-6, 8 n.6, 9).

In Michael Ferdman's December 30, 2008, letter, he notes that the delay in deciding the pro hac vice issue has hindered the Rule 26 conference prior to the January 13, 2009, Scheduling Conference, despite plaintiff's ...

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