The opinion of the court was delivered by: Spatt, District Judge.
MEMORANDUM OF DECISION AND ORDER
On July 18, 2012, plaintiff Annette Lorber ("the Plaintiff") commenced this action by filing a Complaint against multiple defendants, which was thereafter reduced to the following: Jonathan Winston ("Winston"); Sheldon M. Ganz ("Ganz"); Sheldon M. Ganz, CPA, P.C.; Eva Tehrani ("Tehrani"); HSBC Bank USA, National Association; and HSBC Securities (USA) Inc. (collectively, "the Defendants"). The Plaintiff seeks compensatory and punitive damages under the federal Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961, et seq. ("RICO"), as well as for common law fraud under New York law; fraudulent inducement under New York law; conversion under New York law; aiding and abetting conversion under New York law; negligence under New York law; unauthorized signatures under the New York Uniform Commercial Code Article III; breach of contract under New York law; and commercial bad faith under New York law.
Specifically, the Plaintiff alleges that the defendants Winston and Ganz, in furtherance of a fraudulent real estate scheme, defrauded the Plaintiff through an enterprise known as Winhaven, which included Winhaven Realty LLC; Winhaven Development Corp.; Winhaven Development of New York Inc.; Winhaven Group LLC; Winhaven Holdings LLC; Winhaven Management Corp.; Winhaven Management of New York Inc.; Winhaven of New York City LLC; Winhaven Associates LLC; Winhaven Associates II LLC; Winhaven Capital Partners; Winhaven 640 Broadway LLC; 640 Broadway Owners LLC; Winhaven Mattituck LLC; Winhaven Boerum LLC; and Winhaven Westhampton Beach Plaza LLC (collectively, "Winhaven").
The Plaintiff subsequently filed a First Amended Complaint on September 14, 2012. The First Amended Complaint asserted new claims for breach of fiduciary duty and aiding and abetting breach of fiduciary duty under New York law. The First Amended Complaint also withdrew the Plaintiff's previous claim for aiding and abetting conversion under New York law.
Presently before the Court are two motions. The first is a motion by Winston to disqualify counsel for the Plaintiff, Ira Lee Sorkin, Esq., on the grounds that (1) Sorkin previously represented Winston in proceedings before the National Association of Securities Dealers ("the NASD") and (2) Winston had consulted with Sorkin about Sorkin representing him when he was being investigated for matters connected with his criminal indictment for securities fraud, which occurred prior to his alleged defrauding of the Plaintiff. The second is a motion by Winston to dismiss or, in the alternative, to disqualify counsel for the Plaintiff, Ira Lee Sorkin, Esq., based on Sorkin's alleged used of privileged material related to Winston's above-mentioned criminal case. For the reasons set forth below, the Court grants the first motion and grants in part and denies in part the second motion.
The underlying action in this case arises from the following facts alleged in the Plaintiff's
In or about January 1999, Winston began dating the Plaintiff's youngest daughter, Eve. More than a year later, in April 2000, Eve and Winston married. At about this time, Winston learned that he and his securities brokerage firm, First United Equities Corporation ("First United"), were under federal investigation for securities fraud. Following this investigation, in or about March 2001, Winston was indicted and faced criminal charges before the United States District Court for the Eastern District of New York (Garaufis, J.) for securities fraud and money laundering, among other crimes. Winston subsequently pleaded guilty to conspiracy to commit securities fraud and conspiracy to commit money laundering and was sentenced on May 25, 2005 to ten years of probation. He was also ordered to make restitution in the amount of approximately $108,988,825.50 and was barred for life by the United States Securities and Exchange Commisssion from associating with a broker or dealer.
The Plaintiff claims that Winston convinced her, Eve and the rest of their family into believing that the criminal case against him was unjust and that he was a victim of his business partners' fraud. He also allegedly convinced the Plaintiff that his probation sentence meant that he was released from his criminal charges. According to the Plaintiff, she was not aware of the restitution order.
On August 13, 2003, the Plaintiff's husband, Martin Lorber, died after a year-long battle with lung cancer. One month later, in or about September 2003, the Plaintiff went to Munich, Germany, for a one-month period in order to provide her mother, who lived in Munich, with full-time care during her recovery from emergency hip surgery. The Plaintiff alleges that about this time Winston "saw the opportunity for which he had been waiting to reap the benefits of his marriage to Eve and his years spent charming her family." (First Amend. Compl., ¶ 55.) He thus offered to help the Plaintiff by (1) managing the Plaintiff's finances, including but not limited to her checking account, securities and brokerage accounts and her credit line with the defendant HSBC Bank; (2) maintaining oversight of certain household needs, including collecting the Plaintiff's mail; and (3) winding down and dissolving WorldWide Footwear, Inc. ("Worldwide"), which was Martin Lorber's business.
According to the Plaintiff, once Winston assumed management of her finances, he abused his position to fraudulently borrow or outright steal funds from her in the aggregate amount of approximately $10,000,000. In this regard, Winston allegedly "conspired" with Ganz, Tehrani and others "to engage in a fraudulent scheme conducted through Winston's enterprise, Winhaven, with the objective of purchasing, developing and selling millions of dollars['] worth of real estate assets while hiding the same from the federal government and defrauding numerous lenders, banks, investors and the Internal Revenue Service in the process." (First Amend. Compl., ¶ 7.)
This fraudulent scheme involved (1) deceptively inducing the Plaintiff to loan money to Winston and to Winhaven from her credit lines with the defendant HSBC Bank; (2) fraudulently advancing money from the Plaintiff's credit lines to Winhaven by forging her signature without her knowledge or consent; (3) manipulating securities in the Plaintiff's brokerage accounts; (4) knowingly providing false financial and tax advice to the Plaintiff in order to disguise and conceal the fraudulent use of her credit lines; (5) operating checking accounts in the Plaintiff's name without her knowledge; (6) completing false statements of net worth for the Plaintiff without her knowledge or consent in order to secure a sizeable mortgage on a yacht; (7) continuing to operate WorldWide and using it as a shell to take tax deductions based on business losses associated with the interest on the funds that were fraudulently advanced from the Plaintiff's credit line; (8) deceptively inducing the Plaintiff to loan Winston $500,000 to post a bond for Winhaven's purchase of a building in Manhattan; and (9) using at least some of the Plaintiff's own money without her knowledge or consent to purchase the Plaintiff's home for Winston's personal use. (First Amend. Compl., ¶ 8.)
On September 18, 2012, Winston moved to dismiss the Plaintiff's First Amended Complaint pursuant to Fed. R. Civ. P. 12(b)(6) on the grounds that (a) the Plaintiff's action was barred by the statute of limitations, (b) the Plaintiff failed to state a claim upon which relief may be granted, and (c) the Plaintiff failed to comply with the requirements of Fed. R. Civ. P. 9(b). The defendants Eva Tehrani; Sheldon Ganz; Sheldon Ganz, CPA, P.C.; HSBC Bank USA, National Association; and HSBC Securities (USA) Inc. have also filed motions to dismiss the First Amended Complaint.
B. As to Attorney Sorkin's Previous Representation of the Defendant Winston
The following facts, which underlie Winston's motion to disqualify attorney Sorkin based on Sorkin's previous representation of Winston, are derived from Winston's moving and reply papers and the Plaintiff's opposition.
In 1998, the NASD entered a $625,000 arbitration award against Winston in favor of Jules and Florine Wachter ("the Wachters"). The arbitration award stemmed from Winston's conduct and that of First United in selling Ashton Technologies stock to the Wachters.
As a result of this award, in or about 1999, the NASD began a regulatory investigation into Winston's conduct and that of First United. In 1999, Winston retained Sorkin in connection with this inquiry, and, during the course of this representation, Sorkin allegedly engaged in extensive discussions with Winston concerning the latter's business practices at First United. These discussions also touched upon the conduct that was the subject of Winston's 2001 criminal indictment for securities fraud and money laundering, among other crimes.
Sorkin appeared with Winston on two separate occasions for questioning by the NASD, first on September 22, 1999, and again on October 12, 1999. The scope of the NASD's questioning went beyond the Wachters' case and involved allegations that later appeared in Winston's 2001 criminal indictment. Sorkin advised Winston to invoke his Fifth Amendment privilege against self-incrimination in response to a great number of the NASD's questions.
Subsequently, Winston learned he was the subject of a criminal investigation. Winston consulted with Sorkin concerning whether he would represent him and discussed with Sorkin his understanding of the potential charges against him and the related facts. Sorkin did not immediately reject the representation, but later called Winston to advise him that he had a conflict of interest and, thus, could not represent him.
On March 8, 2001, Winston was indicted. The indictment included allegations about Winston's conduct concerning the Wachters and Ashton Technologies, as well as the sales of other stocks, and misrepresentations related to these matters. Winston allegedly discussed these allegations with Sorkin in connection with the NASD proceedings. He also claims that he discussed these allegations when he consulted with Sorkin about the criminal investigation against him.
Although Sorkin does not remember representing Winston at the NASD, he does not dispute that he represented Winston during the above-mentioned NASD proceedings. Further, Sorkin never represented Winston in his criminal case in any capacity or at any time after the 1999 NASD proceedings.
C. As to the Allegations Concerning Attorney Sorkin's Use of Privileged Material
The following facts which underlie Winston's motion to dismiss or, in the alternative, to disqualify attorney Sorkin based on his alleged use of a privileged document, are derived from Winston's moving and reply papers and the Plaintiff's opposition.
From 2006 through 2012, Winston was represented by the law firm of Gerald B. Lefcourt, P.C. ("Lefcourt") on a number of matters, including securing the termination of his probation arising from his prior criminal conviction. Faith A. Friedman, Esq., an attorney with Lefcourt, worked on this matter. As part of their efforts, Lefcourt prepared a "Memorandum of Law in Support of Defendant's Motion for Termination of Probation Pursuant to 18 U.S.C. § 3564(c) and Fed. R. Crim. P. Rule 32.1 and Discharge from Supervision" ("the Probation Memo"). According to attorney Friedman, her firm had contemplated filing the Probation Memo with the sentencing court, but in fact, never filed it with the court.
The Probation Memo is attached as an exhibit to both the papers of Winston and the Plaintiff. Both parties filed it under seal. Although the Probation Memo appears to be formatted like a memorandum of law that would be filed with a court, there are two blanks on page 3 and one blank page 5, which have not been filled in. The Probation Memo also contains a signature line but is unsigned. In addition, the Probation Memo is dated May 26, 2010. However, a review of the docket in Winston's criminal case, E.D.N.Y. Case No. 00-CR-01248, indicates that the Probation Memo was never filed with the court either on that date or on any other date. In fact, the only document filed on May 26, 2010 was a sealed order by the court (Garaufis, J.), which appears to have been endorsed on a May 17, 2010 letter of Friedman. That letter requested that the court order the court reporter to release to Lefcourt a copy of the transcript from Winston's May 25, 2005 sentencing.
According to Winston, to the best of his recollection, he never authorized Lefcourt to provide any third party with a copy of the Probation Memo. Winston also claims, to the best of his recollection, that he did not share the Probation Memo with anyone except his wife, Eve, at a time prior to their pending divorce and when he believed that their marriage was still a successful one. Moreover, Winston asserts that he gave the Probation Memo to Eve as a strictly confidential communication and never authorized her to share it with anyone. However, Eve has no recollection of ever seeing the Probation Memo or of having a conversation with Winston concerning its contents until after the Complaint in this case was filed.
On July 18, 2012, the Plaintiff filed her Original Complaint in this action. This Complaint included a single reference to the Probation Memo. Specifically, paragraph 15 of the Original Complaint stated:
Defendant Jonathan Winston is a citizen of the State of New York. He maintains a residence at 59 Cornwells Beach Road, Sands Point, New York 11050 and an apartment located in the Plaza Hotel at 768 5th Avenue, Apartment 513, New York, New York 10019. Winston is a recidivist; indeed, he pleaded guilty before this Court to one count of conspiracy to commit securities fraud and one count of conspiracy to commit money laundering for his role as a principal in the boiler-room broker-dealer fraud involving First United (Case No. 1:00-cr-01248 (NGG)). Winston was sentenced on May 25, 2005 to a total of 10 consecutive years of probation and ordered to make restitution in the amount of $108,988,825.50. Upon information and belief, Winston has satisfied none of his multi-million-dollar restitution order. Upon further information and belief, Winston's probation was lifted by this Court following the submission of a memorandum of law in support ...