United States District Court, S.D. New York
OPINION AND ORDER
KATHERINE POLK FAILLA, United States District Judge
2013, Plaintiff John Sohei Akagi brought this
housing-discrimination lawsuit, claiming that he had been
denied the opportunity to purchase an apartment because of
his race. Plaintiff named several entities and individuals as
defendants, and those defendants fall into two groups: (i)
Turin Housing Development Fund, Co., Inc.
(“Turin”), the housing co-operative that owns the
building where the apartment in question is located, and
several past and present members of Turin's co-op
board (together with Turin, the “Turin
Defendants”); and (ii) Turin's managing agent,
Douglas Elliman, LLC a/k/a Douglas Elliman Property
Management (“DE”), former DE employee Dorothy
Kern, and current DE employee Lawrence Vitelli (together with
DE, the “DE Defendants”). After extensive
discovery and failed settlement efforts, the parties have
filed cross-motions for summary judgment.
Opinion, however, does not resolve the parties'
summary-judgment motions on their merits. Rather, it
addresses an issue that arose only after summary-judgment
briefing concluded: Plaintiff's motion to disqualify the
Turin Defendants' counsel, Adam Leitman Bailey, P.C.
balance of this litigation, the Turin Defendants and the DE
Defendants shared counsel. At first, they jointly retained
the law firm Schneider Mitola LLP (“Schneider
Mitola”). On May 30, 2014, this Court granted the Turin
Defendants and DE Defendants' motion to substitute ALB in
place of Schneider Mitola. And ALB continued to represent the
Turin Defendants and the DE Defendants up until last summer,
when it filed summary-judgment briefs on behalf of both
groups of defendants.
July 21, 2016, Turin, represented by ALB, sued DE in New York
State Supreme Court, alleging that DE negligently mismanaged
Turin's property and failed to obtain insurance to cover
Turin's legal costs in the instant case. The Court
learned about Turin's state-court suit against DE (the
“State-Court Action”) on July 29, 2016, when
Plaintiff moved to disqualify ALB from representing
any defendant in this case. On September 9, 2016,
ALB, on behalf of the Turin Defendants, submitted a
memorandum in opposition to Plaintiff's motion to
disqualify and simultaneously moved to withdraw as the DE
Defendants' counsel. After the Court granted ALB's
withdrawal motion, the DE Defendants retained new counsel and
joined in Plaintiff's motion to disqualify.
suing DE on Turin's behalf, Plaintiff and the DE
Defendants argue, ALB has conflicted itself out of this
lawsuit. ALB retorts that the DE Defendants waived their
right to object to this very contingency when they executed a
Joint Defense Agreement (the “JDA”) with
Schneider Mitola in 2013.
and the DE Defendants have the better arguments. Between July
and September 2016, ALB simultaneously represented and sued
the same client: DE. And because ALB did not cure this
concurrent-representation conflict by obtaining DE's
prior informed consent, ALB cannot represent the DE
Defendants or the Turin Defendants in this case.
Accordingly, and for the reasons set forth below, the Court
grants Plaintiff's motion to disqualify ALB.
the Court will provide a comprehensive overview of the law
governing attorney disqualifications infra, one
tenet bears mention at the outset: Resolving a
disqualification motion requires a “painstaking
analysis of the facts” of a case. HLP Props., LLC
v. Consol. Edison Co. of N.Y., No. 14 Civ. 1383 (LGS),
2014 WL 5285926, at *5 (S.D.N.Y. Oct. 16, 2014) (quoting
Fund of Funds, Ltd. v. Arthur Andersen & Co.,
567 F.2d 225, 227 (2d Cir. 1977)).
that principle in mind, the Court approaches this part of the
Opinion in two sections. First, the Court will recount the
facts relevant to Plaintiff's disqualification motion.
The Court will begin by considering the claims Plaintiff
raised in his September 30, 2013 First Amended Complaint (the
“FAC”), the operative complaint in this case (the
“Federal Action”). The Court will then review the
terms of the JDA into which Turin, the DE Defendants, and
Schneider Mitola entered. Next, the Court will explain how
ALB came to represent both the Turin Defendants and the DE
Defendants, and review the submissions the parties filed
after ALB became involved in this case. And finally, the
Court will describe the complaint ALB filed against DE in the
State-Court Action (the “State-Court Complaint”),
which triggered Plaintiff's disqualification motion.
the Court will review the procedural history of the
disqualification motion. The Court will focus on the
arguments that the parties have raised in their briefs, and
also address ALB's motion to withdraw as the DE
Plaintiff's Claims in the FAC
29, 2013, Plaintiff brought his initial Complaint against the
Turin Defendants and the DE Defendants. (Dkt. #1). Plaintiff
also named Emmet Wechsler - the owner of the apartment
Plaintiff wished to purchase - as a Nominal Defendant.
(Id.). On September 26, 2013, Schneider Mitola
entered a notice of appearance on behalf of the Turin
Defendants and the DE Defendants. (Dkt. #9). And on September
30, 2013, Plaintiff filed his FAC, the operative complaint in
this case. (Dkt. #16).
FAC, Plaintiff alleged the following: Turin is a housing
cooperative that owns a 188-residential-unit apartment
building on the Upper West Side of New York City (the
“Property”). (FAC ¶ 9). Since 1997, DE has
managed the Property. (Id. at ¶
develop the Property, Turin obtained loans from the federal
government pursuant to Section 221(d)(3) of the National
Housing Act, 12 U.S.C. § 1715l (d)(3). (FAC
¶ 9). Construction of the Property concluded in 1972,
and in that year Turin began selling cooperative shares
“allocated to apartments in the” Property.
(Id. at ¶ 25). Because it constructed the
Property with proceeds of a 40-year federal-government
mortgage, Turin “was subject to the regulatory
oversight of the United States Department of Housing and
Urban Development (‘HUD')” between 1972 and
2012. (Id. at ¶¶ 24-26). On March 29,
2012, Turin satisfied fully its mortgage obligations, at
which point it “was formally released by HUD from all
federal regulatory oversight and statutory
obligations.” (Id. at ¶ 26).
Turin first offered its apartments for sale in 1972,
“four families … of Asian Ancestry”
purchased apartments. (FAC ¶ 34). But at the time
Plaintiff filed the FAC, just two of the Property's 188
apartments were “owned by persons of Asian
ancestry.” (Id.). Moreover, Plaintiff alleged,
“there ha[d] been no transfers or resales of
[apartments] at the [Property] to individuals or families of
Asian or Japanese ancestry or descent since [Turin's]
creation in 1972 other than to members or relatives of the
original Asian families” who purchased apartments in
the Property. (Id. at ¶ 35).
trend, Plaintiff alleged, was not an accident, but rather was
the product of Turin's stated preference for increasing
the number of Caucasian residents of the Property while
simultaneously decreasing “the number of shareholders
of Asian and Japanese descent and ancestry.” (FAC
¶¶ 37-39). Turin's co-op board members (i.e.,
the Turin Defendants apart from Turin itself) perpetuated
this discrimination through “racist policies,
practices, procedures[, ] and rules.” (Id. at
¶ 40). And DE, Plaintiff alleged, was complicit in this
discrimination: Among other alleged misdeeds, DE marketed and
sold Property apartments in a way that maintained a
“de minimis percentage of persons of Asian and
Japanese descent.” (Id. at ¶¶ 44,
53, 57-58, 62-69).
additionally alleged that the Turin Defendants and DE
Defendants' discrimination violated federal housing laws.
As a condition of receiving a mortgage from the federal
government, Turin was bound to follow the Fair Housing Act
and the National Housing Act for the mortgage's term
(1972 through 2012). (FAC ¶ 45). And those statutes
required Turin to “carry out an affirmative program to
attract buyers or tenants … of all minority and
majority groups, ” and to ensure that diversity by
“maintain[ing] an affirmative marketing program
… throughout the life of the mortgage.”
(Id.). But the Turin Defendants and DE Defendants
failed to follow these housing laws. (Id. at
¶¶ 47-48). Worse still, “they adopted rules,
practices, and/or procedures” in order “to avoid
and circumvent … statutory and regulatory
requirements.” (Id. at ¶ 49).
an elderly man “of Asian and Japanese descent and
ancestry, ” (FAC ¶ 8), alleged that he fell victim
to the Turin Defendants and DE Defendants'
discrimination. In 2012, Plaintiff wished to purchase
Apartment 6-I of the Property from Wechsler. (Id. at
¶¶ 74-75). The Turin Defendants and DE Defendants,
however, forbade Wechsler from transferring his cooperative
shares in Apartment 6-I to Plaintiff. (Id. at ¶
79). And the various “grounds” that the Turin
Defendants and DE Defendants advanced for refusing the sale
were just “pretexts to try to mask their unlawful
discriminatory purposes.” (Id. at ¶ 81).
Their goal, Plaintiff alleged, was to ensure that Apartment
6-I would not be sold to an individual “of Japanese or
Asian descent and ancestry.” (Id. at
brought seven causes of action in the FAC, and it appears
that he brought all of them against both the Turin Defendants
and the DE Defendants. (FAC ¶¶ 99-150). Plaintiff
sought recovery under several federal housing and
civil-rights statutes: the Fair Housing Act, 42 U.S.C.
§§ 3601-3619 (Count One); 42 U.S.C. §§
1981 and/or 1982 (Count Two); 42 U.S.C. § 1985 (Count
Three); and 42 U.S.C. § 1986 (Count Four). (Id.
¶¶ at 99-129). Plaintiff's remaining claims
(Counts Five, Six, and Seven) arose under state or local law.
(Id. at ¶¶ 130-50).
The Turin Defendants and DE Defendants' JDA with
September 26, 2013, Schneider Mitola entered a notice of
appearance on behalf of the Turin Defendants and the DE
Defendants. (Dkt. #9). Between September and October 2013
(the parties executed multiple counterparts), Schneider
Mitola, Turin, and the DE Defendants entered into the JDA.
(Geller Decl., Ex. 1). Because the JDA anchors ALB's argument
that it should not be disqualified in the Federal
Action, the Court will review with great care the JDA's
terms. And in particular, the Court will scrutinize three
types of provisions in the JDA: (i) the JDA's provision
outlining how the parties would split the costs of litigating
the Federal Action; (ii) the JDA's provisions about
sharing confidential information; and (iii) the JDA's
terms, the JDA “memorialize[d] [an]
understanding” between Turin, Schneider Mitola, and the
DE Defendants; although the President of Turin's Board of
Directors executed the JDA, the JDA does not appear to have
bound any of the Turin Defendants other than Turin itself.
(Geller Decl., Ex. 1 at 1, 12). However, the JDA provides
that Schneider Mitola would serve as counsel for Turin
“and other Defendants therein, ” and the Court
assumes that these “other Defendants” are the
individual Turin Defendants. (Id. at ¶ 1).
to the JDA, Turin and the DE Defendants agreed that Schneider
Mitola would represent both groups of defendants, with Turin
covering the totality of the legal costs “on the
condition that the DE Defendants … provide all
reasonable and customary assistance and cooperation to
[Turin] in connection with the [Federal Action].”
(Geller Decl., Ex. 1 at ¶ 1). However, the parties
agreed that Turin would not “indemnify, defend[, ] and
hold harmless the DE Defendants if it is determined, after
the exhaustion of all appellate rights, that the DE
Defendants acted in a grossly negligent manner or perpetrated
willful misconduct with respect to the issues raised in
the” Federal Action. (Id. at ¶ 2).
parties also agreed that they could, but would not be
required to, share confidential information. A section of the
JDA titled “Treatment of Shared Confidential,
Privileged[, ] or Protected Information” provided:
Each Party, in its sole discretion, may provide confidential,
privileged or other protected information to the other
Parties to this Agreement which the providing Party believes
will further the joint and common efforts in the [Federal
Action]. This Agreement permits, but does not require, the
Parties' outside counsel to share any information.
(Geller Decl., Ex. 1, ¶ 3). The record in this case does
not suggest that either Turin or the DE Defendants ever
retained “outside counsel” beyond Schneider
Mitola, ALB, and the DE Defendants' current attorney.
provisions of the JDA added additional terms and conditions
to this confidentiality provision. Turin and the DE
Defendants agreed, for example,
that all past and future information and communications which
are confidential, privileged or protected as to any Party
will be held in confidence by all other Parties (unless that
information ceases to be confidential through no violation of
this Agreement), and will remain privileged or protected when
communicated among the Parties.
(Geller Decl., Ex. 1, ¶ 3(a)). But the following
provision added an important caveat to this confidentiality
The Parties agree that all information provided by one Party
to any other Party may be used by counsel for such other
Party solely in connection with the [Federal Action] unless
such information being provided by any DE Defendant is the
property of [Turin] or was obtained by any DE Defendant
during [DE's] management of [Turin] and is regarding
[Turin] affairs in which event [Turin] may direct how the
document may be utilized or otherwise[.]
(Id. at ¶ 3(b)).
the JDA contained a “Waiver of Conflicts”
provision, which stated:
In the event of any litigation or other dispute between or
among the Parties, each Party hereby waives any claim that
counsel for any other Party is or should be disqualified from
representing any other Party by reason of receipt of
confidential, privileged or protected information or
documents pursuant to this Agreement or any work performed or
representation in furtherance of this Agreement.
(Geller Decl., Ex. 1, ¶ 5). Like the JDA's provision
concerning confidential information, its conflicts waiver was
followed by several sub-paragraphs. Turin and the DE
Defendants acknowledged “that there could be a
potential or actual conflict of interest arising out of
[Schneider Mitola's] representation of [Turin] and the DE
Defendants, ” but agreed that as of the date of signing
the JDA, no such “potential or actual conflict of
interest” existed in the Federal Action and “the
Parties' interest[s] [were] … fully
aligned.” (Id. at ¶ 5(a)). Turin and the
DE Defendants further agreed “that the potential
conflict ha[d] been explained to them, that they underst[ood]
such potential conflicts, and that to the extent such
conflicts [were] waivable, they [were] waived.”
(Id. at ¶ 5(b)). Importantly, the JDA provides
no explanation of what this “potential conflict”
(or “potential conflicts”) might be.
provision of the JDA that bears most directly on
Plaintiff's disqualification motion planned for a
different contingency: What would Schneider Mitola do if a
non-waivable conflict arose? Turin and the DE
Defendants agreed that
[i]n the event that an actual non-waivable conflict arises as
between any of the Parties represented by [Schneider Mitola]
which would render it inappropriate for [Schneider Mitola] to
continue as counsel for all the Parties or if such conflict
could be resolved by one or more of the Parties obtaining
separate counsel, the DE Defendants agree that the DE
Defendants will obtain new counsel, at [Turin's] expense
(subject to [Turin's] right to make a good faith claim,
that based on the facts, [Turin] is not obligated to pay the
expense of counsel for the DE Defendants), and [Schneider
Mitola] may continue to represent all of the other Defendants
named in the litigation (other than the DE Defendants).
(Geller Decl., Ex. 1, ¶ 5(c)). Nothing in the JDA
defined what type of “non-waivable conflict”
could trigger this provision. But the following sub-paragraph
provided that Schneider Mitola would not advocate a position
in the Federal Action that was adverse to either Turin or the
It is further agreed by the Parties that, with respect to any
issue that may arise in the [Federal Action] which you
disagree and/or which one of you may wish to pursue a course
that benefits one but is detrimental to the interest of the
other, [Schneider Mitola] cannot advise or assist any of you
in pursuing such course and cannot advocate for any
Parties' separate interest at the expense of the other
Parties as long as [Schneider Mitola] is representing you.
(Id. at ¶ 5(d)).
the JDA's conflicts waiver contained provisos about Turin
and the DE Defendants exchanging confidential information.
And unlike the earlier, more permissive terms of the JDA,
these provisos obligated the parties to exchange
confidential information. One sub-paragraph confirmed that
the parties would “be required to share confidential
information … for the common purpose and benefit of
the defense in the [Federal Action] and any and all
third-party claims by the Parties to [the JDA] against any
others responsible for damage alleged in the [Federal
Action].” (Geller Decl., Ex. 1, ¶ 5(e)). And it
added that Schneider Mitola “owe[d] an equal duty of
loyalty and communication with each” party to the JDA,
which required Schneider Mitola to “share all relevant
information as it pertain[ed] to the [Federal Action]”
and forbade Schneider Mitola from “withhold[ing]
relevant information from” any party at any other
party's request. (Id.).
October 17, 2013, Schneider Mitola, Turin, and the DE
Defendants had all signed the JDA. (Geller Decl., Ex. 1 at
ALB's Representation of the “Turin
Defendants” and the Parties' Subsequent
April 14, 2014, ALB filed a “Consent to Change
Attorneys” form on behalf of the Turin Defendants and
the DE Defendants. (Dkt. #52). The form provided that both
groups of defendants wished to substitute ALB in place of
Schneider Mitola. (Id.). On April 29, 2014, ALB (on
the Turin Defendants and DE Defendants' behalf) filed a
letter announcing its intention to move to disqualify
Plaintiff's counsel and counsel for Wechsler (who was
still a Nominal Defendant at that point). (Dkt. #57).
Court held a pre-motion conference on the Turin Defendants
and DE Defendants' motion to disqualify on May 30, 2014.
(Dkt. #72). At this conference, the Court formally
substituted ALB in place of Schneider Mitola as counsel for
both groups of defendants. (Id. at 18-19). Following
extensive briefing (see Dkt. #78-82, 86-90, 94-98,
100-01, 103-06), the Court denied the motion to disqualify in
an Order dated February 10, 2015 (Dkt. #115). That same Order
terminated Wechsler as a party to the Federal Action.
March 10, 2015, the Turin Defendants and ALB Defendants filed
their Answer to the First Amended Complaint. (Dkt. #118).
They denied flatly all seven causes of action Plaintiff
brought in the FAC. (Id. at ¶¶ 99-150).
from Plaintiff's disqualification motion, the latest
round of briefs in this case concerned the parties'
cross-motions for summary judgment. On April 6, 2016, the
Turin Defendants and DE Defendants moved for summary judgment
dismissing all seven of Plaintiff's claims. (Dkt. #166).
Plaintiff cross-moved on May 13, 2016, seeking a converse
ruling - summary judgment in favor of his claims. (Dkt.
#183). The Turin Defendants and DE Defendants filed their
reply on June 25, 2016 (Dkt. #200), and briefing concluded
when Plaintiff submitted his reply on July 13, 2016 (Dkt.
Turin's State-Court Complaint Against DE
21, 2016, Turin, represented by ALB, sued DE, several related
Douglas Elliman entities, and Douglas Elliman employee Debora
Hassell-Dobies (together, the “DE State-Court
Defendants”) in New York State Supreme Court. (Bierman
Decl., Ex. D). Turin raises a number of clams in its
State-Court Complaint, including claims that arise out of the
thrust of Turin's State-Court Complaint is that the DE
State-Court Defendants “[i]ntentionally, knowingly,
recklessly and/or negligently mismanage[ed] the
Property.” (Bierman Decl., Ex. 4, ¶ 3(a)). The
State-Court Complaint's allegations are ...