| Campbell v McKeon |
| 2010 NY Slip Op 06148 [75 AD3d 479] |
| July 20, 2010 |
| Appellate Division, First Department |
| Thomas J. Campbell, Respondent-Appellant, v Robert B.McKeon et al., Appellants-Respondents. Veritas Capital Management, L.L.C., et al.,Respondents, v Thomas J. Campbell, Appellant. |
—[*1] Morvillo, Abramowitz, Grand, Iason, Anello & Bohrer, P.C., New York (Edward M. Spiroof counsel), for respondent-appellant/appellant.
Order, Supreme Court, New York County (Herman Cahn, J.), entered November 28, 2008,which, to the extent appealed from, denied defendant Thomas J. Campbell's motion to disqualifySchulte Roth & Zabel LLP (SRZ) and one of its partners, Benjamin M. Polk, Esq., fromrepresenting the Veritas plaintiffs, and order, same court and Justice, entered February 2, 2009,which, to the extent appealed from, granted Campbell's motion to disqualify SRZ fromrepresenting defendant Robert McKeon, and denied Campbell's motion to disqualify SRZ fromrepresenting the Veritas defendants, unanimously affirmed, without costs.
Campbell and McKeon founded the Veritas entities, which are investment funds andmanagement entities for the funds. McKeon was the majority member of the managemententities and Campbell was a minority member. When McKeon and the Veritas entities partedways with Campbell, the opposing sides brought these actions against each other. This appealconsolidates the review of orders deciding Campbell's motions, made in each action, todisqualify SRZ and Polk as legal counsel to the Veritas entities and McKeon.
The court correctly held, pursuant to rule 1.13 of the Rules of Professional Conduct (22NYCRR 1200.0) (former Code of Professional Responsibility DR 5-109 [22 NYCRR 1200.28][conflict of interest between an organizational client and an individual associated with suchclient]) that as counsel to the Veritas entities, SRZ and Polk could not also represent McKeon inan action in which his interests would be adverse to the Veritas entities and other members of theentities such as Campbell. Campbell's allegations include that McKeon violated fiduciary duties[*2]to the Veritas entities, including usurpation of an investmentopportunity. Counsel for an organizational client is required to act as is reasonably necessary inthe best interests of the client when an individual associated with the client may have violatedlegal duties which are likely to result in substantial injury to the organization. Any doubts as tothe sufficiency of the showing of an asserted conflict of interest were properly resolved in favorof disqualification (see Lammers v Lammers, 205 AD2d 432, 433 [1994]).
The motion court also correctly held, pursuant to rule 1.9 (a) of the Rules of ProfessionalConduct (22 NYCRR 1200.0) (former Code of Professional Responsibility DR 5-108 [a] [1] [22NYCRR 1200.27 (a) (1)] [conflict of interest involving a former client]) that SRZ and Polk werenot prohibited from representing the Veritas entities as against Campbell. On such motion todisqualify counsel, the moving party must prove, among other things, the existence of a priorattorney-client relationship between itself and opposing counsel (see Tekni-Plex, Inc. vMeyner & Landis, 89 NY2d 123, 131 [1996]; Pellegrino v Oppenheimer & Co., Inc., 49 AD3d 94, 97-98[2008]). Campbell failed to establish the existence of an attorney-client relationship betweenhimself, individually, and SRZ. The work SRZ performed was in connection with itsrepresentation of the various Veritas entities. A lawyer's representation of a business entity doesnot render the law firm counsel to an individual partner, officer, director or shareholder unlessthe law firm assumed an affirmative duty to represent that individual (see Polovy vDuncan, 269 AD2d 111, 112 [2000]; Omansky v 64 N. Moore Assoc., 269 AD2d336, 336 [2000]; Talvy v American Red Cross in Greater N.Y., 205 AD2d 143, 149[1994], affd 87 NY2d 826 [1995]). Campbell failed to present cogent evidenceestablishing that Polk had agreed to or acted as his personal attorney. In his affidavit, Polkunequivocally denies any individual representation of Campbell. Consequently, Campbell'smotion must also fail under rule 1.9 (c) of the Rules of Professional Conduct (22 NYCRR1200.0) (former Code of Professional Responsibility DR 5-108 [a] [2] [22 NYCRR 1200.27 (a)(2)] [use of confidential information disclosed by a former client]; see Jamaica Pub. Serv. Co.v AIU Ins. Co., 92 NY2d 631, 636-637 [1998]; Pellegrino, 49 AD3d at 98-99).
Finally, the motion court properly denied the motion as based on the advocate-witness rule(Rules of Professional Conduct [22 NYCRR 1200.0] rule 3.7 [former Code of ProfessionalResponsibility DR 5-102 (a) (22 NYCRR 1200.21 [a])]). The court correctly determined thatCampbell failed to meet the heavy burden of establishing that Polk's testimony was necessary(S & S Hotel Ventures Ltd. Partnership v 777 S. H. Corp., 69 NY2d 437, 445-446[1987]; Talvy, 205 AD2d at 152), since he failed to identify specific issues requiringPolk's testimony and to demonstrate the significance of the matters Polk would testify [*3]to, the weight of such testimony and the unavailability of othersources of such evidence (S & S Hotel Ventures Ltd. Partnership, 69 NY2d at 446).Concur—Andrias, J.P., Sweeny, Acosta and Richter, JJ.