American Tax Funding, LLC v. City of Schenectady

Filing 65

MEMORANDUM-DECISION & ORDER that Girvin and Ferlazzo will not be disqualified as the City of Schenectady's Counsel for the purpose of this litigation. Signed by Magistrate Judge Randolph F. Treece on 12/2/2014. (see)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
AMERICAN TAX FUNDING, LLC,
Plaintiff,
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Civ. No. 1:12-CV-1026
(MAD/RFT)

CITY OF SCHENECTADY
Defendant.
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RANDOLPH F. TREECE
United States Magistrate Judge
MEMORANDUM-DECISION and ORDER
In this breach of contract lawsuit, the current issue before the Court is whether
recent developments have created a non-waivable conflict of interest for the City of

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Schenectady’s recently retained lawyers. More specifically, the Court must determine
whether the confluence of its former law clerk’s presence during a settlement
conference presided over by this Court and his freshly minted employment by
Schenectady’s new attorneys consequently lead to the disqualification of the law firm
in this matter.

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A. Relevant Case History
Responding to the parties’ respective Requests, see Dkt. Nos. 29 & 30, on
January 10, 2014, the Court issued an Order setting up a settlement conference for
February 7, 2014. Dkt. No. 33. At the moment this Order was issued, Schenectady
was represented by its Corporation Counsel, John Polster, Esq., American Tax

Funding, LLX (hereinafter American Tax) was represented by the Camardo Law
Firm1, and Daniel S. Rubin, Esq., served as this Court’s term law clerk. Just prior to
the Conference, Schenectady filed on the Case docket a Letter-Brief serving as a
settlement proposal, while American Tax did not. Dkt. No. 34, Def.’s Lt.-Br., dated
February 3, 2014. A Settlement Conference was held on February 7, 2014.
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During the Settlement Conference, all parties were present and accompanied
by their respective attorneys. Also present during the Settlement Conference were the
Court’s two law clerks including Daniel Rubin, the courtroom deputy clerk, and
possibly a student intern. As a long-held practice, interns and law clerks are permitted
to shadow the Court during settlement conferences, and such occurred on February

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7, 2014. With the exception of a very brief separation between the parties, the
Conference was exclusively an extended, face-to-face negotiation between the parties.
With the understanding that nothing said between the parties would constitute an
admission against interest, the parties openly and candidly discussed the issues while
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endeavoring to arrive at an agreement. After nearly two hours of discussion, the Court
adjourned the Settlement Conference and issued an Order staying the case. Dkt. No.
35, Text Order, dated Feb. 7, 2014. That stay remained active for approximately three

Joseph A. Carmardo, Jr., Esq., and Justin Huffman, Esq., serve as the principal attorneys
for American Tax.
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months while the parties filed monthly status reports. The stay was lifted on May 13,
2014, and the Scheduling Order was amended. Dkt. No. 45, Text Order. However,
another stay of the litigation was invoked while the Honorable Mae A. D’Agostino,
United States District Judge, determined whether the Court had subject matter
jurisdiction. Dkt. No. 50, Text Order, dated July 15, 2014. After ruling that the Court
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has subject matter jurisdiction, the second stay was lifted on September 29, 2014.
Dkt. No. 59, Text Order.
In the interim, Schenectady’s Corporation Counsel and attorney of record, John
Polster, retired on or about August 30, 2014. In his stead, Schenectady retained the
law firm of Girvin and Ferlazzo, PC to represent it in this matter, and a Stipulation

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seeking Substitution of Attorney was filed on September 24, 2014. Dkt. Nos. 57.
Def.’s Stip., dated Sept. 24, 2014, & Consent Order, dated Sept. 24, 2014.
Coincidentally, on or about September 8, 2014, Daniel S. Rubin became an associate
of the Girvin Ferlazzo law firm. Shortly after filing a notice of appearance,
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Christopher P. Langois, Esq., of counsel to Girvin Ferlazzo, reported, “in the interest
of full disclosure,” Rubin’s employment status with the firm, and further stated that
“in accordance with Canon 3(D) of the Code of Conduct for Judicial Employees” and
“Advisory Opinion 109 of the Judicial Conference Committee on Codes of Conduct,”
Attorney Rubin “understands that he may not disclose any confidential information
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received in the course of his official duties as a former law clerk” nor will he “in any
way participate or assist, directly or indirectly, in this case.” Dkt. No. 60, Def.’s Lt.Br., dated Sept. 30, 2014.
This revelation, among other issues, provoked the Court to convene another
telephone conference. During the Conference, which was held on October 10, 2014,
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the potential conflict of interest relative to Schenectady’s new counsel was discussed.
Rather than having the parties engage in an extended motion practice on the issue, the
Court issued an Order directing the parties to simultaneously file Letter-Briefs and
further advising that the Scheduling Order will not be amended until the conflict of
interest matter is resolved. Dkt. Nos. 61, Text Order, dated Oct. 14, 2014, & 62,

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Clarification Text Order, dated, Oct. 14, 2014. As directed, the parties timely filed
their respective Letter-Briefs. Dkt. Nos. 63, Def.’s Lt.-Br., dated Oct. 31, 2014, & 64,
Pl.’s Lt.-Br., dated Oct. 31, 2014.
B. The Parties’ Letter-Briefs
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Other than what has been revealed via the Case docket, the parties’ respective
Letter Briefs disclose very few other salient facts, except to note that Girvin and
Ferlazzo is a law firm of twenty approximately (20) lawyers and that American Tax’s
CEO recognized Rubin from a photograph as one of the persons who attended the
Settlement Conference Def.’s Lt.-Br. at p. 2; Pl.’s Lt.-Br. at p. 2, ¶¶ 3 & 4. Regarding
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the potential conflict, Attorney Langlois provides that his September 30th Letter was
shared with Attorney Rubin who “confirmed his knowledge and acceptance of the
restriction” and that he would not participate nor assist in the representation of
Schenectady in this case. Def.’s Lt.-Br. at p. 2. More importantly, Attorney Langlois
states stating that he
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advised each of he firm’s other attorneys and staff members in writing
that Mr. Rubin is precluded from participating in, working on, or
discussing this case, and that he should not be engaged on the matter by
an attorney or staff member . . . . With the exception of research
performed by an associate (not Mr. Rubin) in connection with this letter
brief, no [Girvin and Ferlazzo] attorney other than myself has had any
involvement in this matter or the related proceeding currently pending
in the New York Supreme Court, Schenectady County. All of the files
pertaining to this matter are separately located and maintained in my
office, and no other [Girvin and Ferlazzo] attorney or staff member has
reviewed or been given access to those files. . . . [N]o [Girvin &
Ferlazzo] attorney or staff member has had any communication
whatsoever with Mr. Rubin regarding this matter.
Def.’s Lt.-Br. at p. 2.
Both parties concur that Canon 3D of the Code of Conduct for Judicial
Employees mandates that current and former judicial employees should never disclose

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any confidential information received in the course of official duties and that Advisory
Opinion 109 continues to state that former law clerks should isolate themselves from
pending matters and refrain from working on all cases in which he participated during
the clerkship. The parties differ as to whether, in this case, Girvin and Ferlazzo
should be disqualified as well. Although there is no formal motion, American Tax
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submits that Girvin and Ferlazzo should be disqualified as Schenectady’s Counsel.
Pl.’s Lt.-Br. at p. 7. Obviously deliberating upon a possible disqualification is a “factintensive endeavor.” Zalewski v. Sherloc Homes, LLC, 856 F. Supp. 426 (N.D.N.Y.
2012) (citing Miness v. Ahuja, 762 F. Supp. 2d 465, 478 (E.D.N.Y. 2010)).
C. Analysis
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A court’s authority to disqualify an attorney is derived from its inherent
authority to preserve the integrity of the adversarial process, thus bestowing it with
broad discretion. Hemsptead Video, Inc. v. Inc. Vill of Valley Stream, 409 F.3d 127,
132 (2d Cir. 2005); Purgess v. Sharrock, 33 F.3d 133, 134 (2d Cir. 1994). Because
disqualification may dangerously imperil a client’s right to the counsel of his

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choosing, it should only be imposed when there is a significant risk of taint upon the
trial. Glueck v. Jonathan Logan, Inc., 653 F.2d 746, 748 (2d Cir. 1981). Since
motion to disqualify are viewed with disfavor, the party seeking disqualification must
meet a high standard of proof before disqualification will be granted. Evans v. Artek
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Sys. Corp., 715 F.2d 788, 791 (2d Cir. 1983) (observing that there is “a particularly
trenchant reason for requiring a high standard of proof”).
When deciding an issue of disqualification, courts often seek guidance from the
American Bar Association (ABA) and/or state disciplinary rules, “though such rules
merely provide general guidance and not every violation of a disciplinary rule will
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necessary lead to disqualification.” Hempstead Video, 409 F.3d at 132. Appreciating
that a federal court is not bound by either the ABA’s Model Code or New York
State’s Code of Professional Conduct, the Court, nonetheless, calls upon the latter for
counseling. New York’s Code of Professional Conduct has a specific Rule addressing
conflicts of interest that may arise for former judges and consequently former law
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clerks. 22 NYCRR § 1200.1.12 (hereinafter “Rule 1.12"). It is axiomatic that a
“lawyer shall not accept private employment in a matter upon the merits of which the
lawyer has acted in a judicial capacity.” Rule. 1.12(a). Unless all parties to the
proceeding give informed consent, in writing, a former judge or law clerk “shall not
represent anyone in connection with a matter in which the lawyer participated

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personally and substantially[.]” Id. at 1.12(b)(2) & (c). Though it is debatable
whether Attorney Rubin, as this Court’s law clerk, “personally and substantially”
participated in the Settlement Conference, the parties agree that he should not
participate in any manner on behalf of Schenectady in this litigation.
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Accepting that Attorney Rubin is disqualified from representing Schenectady,
the question remains whether his disqualification is imputed to his new employer.
This imputation is based upon a presumption that if confidences were disclosed to one
member of a law firm, it is easy for each attorney of the firm to become privy to those
same confidences. Rule 1.12 provides further guidance as to an erstwhile judicial
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employee’s potential impact upon his current legal employer:

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When a lawyer is disqualified from representation under this Rule, no
lawyer in a firm with which that lawyer is associated may knowingly
undertake or continue representation in such a matter unless: (1) the firm
acts promptly and reasonably to: (i) notify, as appropriate, lawyers and
nonlawyer personnel within the firm that the personally disqualified
lawyer is prohibited from participating in the representation of the
current client; (ii) implement effective screening procedures to prevent
the flow of information about the matter between the personally
disqualified lawyer and the others in the firm; (iii) ensure that the
disqualified lawyer is apportioned no part of the fee therefrom; and (iv)
give written notice to the parties and any appropriate tribunal to enable
it to ascertain compliance with the provisions of this Rule; and (2) there
are no other circumstances in the particular representation that create an
appearance of impropriety.
Id. at 1.12(d).
The investigation of Rule 1.12(d) factors to determine if Girvin and Ferlazzo should

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be disqualified is warranted.
Before addressing these factors, a misconception must be corrected. American
Tax argues that Attorney Rubin participated personally and substantially as a law
clerk on this matter. Pl.’s Lt.-Br. at p. 3.2 Other than being present as an observer,
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Attorney Rubin played no role whatsoever in the Settlement Conference. This Court
solely and completely presided over the Settlement Conference without any assistance
from his law clerks. The negotiation were driven solely by the parties and the Court

Though Attorney Langlois was not present during the Settlement Conference, he assumes,
arguendo, that Rubin participated in order to that state Rubin should be disqualified. Dkt. No. 63,
Def.’s Lt., dated Oct. 31, 2014, at p. 3.
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did not have the benefit of his staff’s wisdom as to tax foreclosures, tax liens, and the
intricacies of the parties’ Purchase and Sales Agreement(s). Prior to Conference, this
Court neither conferred with Rubin about anything related to this litigation nor had
cause to do so. While the Settlement Conference proceeded, the Court never
consulted with Attorney Rubin nor used him as a sounding board. Because the parties
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negotiated this matter face-to-face, there was little if any opportunity to employ the
clerks as sounding boards. Frankly, under this scenario, Rubin did not acquire any
confidences that would jeopardize either party’s position in this case nor taint a jury
trial.3
Girvin and Ferlazzo opines that it has taken each step required by Rule

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1.12(d)(1) to avoid being disqualified. Def.’s Lt-Br. at p. 4. The first inquiry is
whether Girvin and Ferlazzo acted promptly and reasonably when learning of
Attorney Rubin’s potential connection to this matter and what was its solution.
Timeliness and effectiveness are essential. Girvin and Ferlazzo posits that once it
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learned of the potential conflict, it erected a screen around Rubin isolating him from
any contact with the case or the assigned litigator. In terms of timeliness, “[t]he law
firm must establish a screen either from the first moment the conflicted attorney

Plaintiff has not set forth any example of confidential and privileged information that
Attorney Rubin may have either gleaned or possessed while serving as a law clerk to this Court. See
Brown v. City of Syracuse, 2013 WL 2445050, at *3 (N.D.N.Y. June 4, 2013).
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transfers to the firm or when the firm first receives actual notice of the conflict.”
Human Elec., Inc. v. Emerson Radio Corp., 375 F. Supp. 2d 102, 107 (N.D.N.Y.
2004) (citations omitted) (emphasis in the original). Rubin joined the firm on
September 8, 2014, but there was no appearance of a conflict then because Girvin and
Ferlazzo were neither retained nor substituted as counsel until September 24. Within
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a week of that substitution of counsel, on September 30, 2014, Attorney Langlois
advised the Court of the issue and sketched out a basic screening mechanism to
resolve the appearance of any impropriety. See Dkt. No. 60 (“Mr. Rubin has not and
will not in any way participate or assist, directly or indirectly, in this case.”). And,
shortly thereafter, a telephone Conference was held to further address the issue.

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Under these circumstances, the Court finds that Girvin and Ferlazzo acted promptly.
Next, the Court must determine if the screening is reasonable and effective.
That screen must prevent the flow of information about the matter between the
personally disqualified lawyer and other members of the firm. Rule 1.12(d)(1)(ii).
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In order to establish that it has complied with the letter and spirit of Rule 1.12(d)(1),
Attorney Langlois advises4 this tribunal that (1) all lawyers and staff within the firm,

As an aside, American Tax raises that neither Attorney Langlois nor Attorney Rubin
provided an affidavit in support of Girvin and Ferlazzo’s posture that it should not be disqualified.
Pl.’s Lt.-Br. at p. 5, ¶ 13. As the parties know, briefing of this issue was expedited, dispensing with
a formal motion, affidavits, and memorandum of law. Nonetheless, attorneys who appear before the
Court are deemed to be officers of the Court and expected to address the Court truthfully at all times.
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(continued...)

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including Rubin, have been notified in writing that Mr. Rubin is prohibited from
participating, in any manner, in the representation of Schenectady in this case; (2)
Rubin has not shared any information about his time as a law clerk with Langlois; and
(3) Rubin will not share in any fee from this representation. See Rule 1.12(d)(1)(i)(iv); see generally Dkt. Nos. 60 & 63, Def.’s Lt.-Br. The elements of this screen seem
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to suffice as a sufficient rebuttal of any imputation of disqualification. However, there
may be one handicap that could cause some reservation.
Courts within this Circuit have, for some time, held reservations as to whether
small firms can erect an appropriate and adequate screen to deflect the exposure of a
party’s confidences. These courts have conservatively clung to the presumption of

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confidences being shared within a firm are much stronger within a small firm than a
large firm, and, moreover, have harbored doubts as to the sufficiency of such
preventive measures to shield those confidences. Fillippi v. Elmont Union Free Sch.
Dist. Bd. of Educ., 722 F. Supp. 2d 295, 308 (E.D.N.Y. 2010) (“It is possible that the
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circumstances of a small firm may be such that a court will not be able to determine
whether the proposed or implemented screening measures will effectively prevent
disclosure.”). As a generalization, these courts view small law firms as those with less
than thirty-five (35) lawyers. See e.g., Cheng v. GAF Corp., 631 F.2d 1052 (2d Cir.
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(...continued)

The Court accepts Attorney Langlois’s representation as truthful.
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1980) (noting that a thirty-five (35) member firm is a relatively small firm); Marshall
v. State of New York, Div. of State Police, 952 F. Supp. 103 (N.D.N.Y. 1997) (noting
that a firm of fifteen (15) lawyers was small). However, the Circuit’s dictum in Cheng
as to the size of the law firm in that case does not serve as a binding precedent, and
there is no per se rule or black letter law personifying the acceptable numerical size
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of a law firm when determining the efficaciousness of a screening protocol.
Hempstead Video, 409 F.3d at 137-38 & n.5 (first noting that lower courts have been
following the reasoning of Cheng when adjudicating disqualification as to small firms,
however, emphasizing that there is no broad categorical rule regarding the practices
and structure that protect confidences within a firm or the size of a law firm); Fillippi,

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722 F. Supp. 2d at 309 n.4 (noting that Cheng is not a binding precedent). With that
being said, “[c]ourts should inquire on the facts of the case before them whether the
practices and structures in place are sufficient to avoid disqualifying taint.”
Hempstead Video, 409 F.3d at 137. As long as the law firm exercises special care and
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vigilance, a small firm can erect a suitable and satisfactory quarantine or isolation of
an attorney to protect the sharing of confidential information. S.E.C. v. Ryan, 747 F.
Supp. 2d 355, 373 (N.D.N.Y. 2010); Brown v. Syracuse, 2013 WL 2445050 (N.D.N.Y
June 4, 2013) (refusing to disqualify a four-person law firm).
Girvin and Ferlazzo promptly and reasonable forewarned its entire operation
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as to how Attorney Rubin will be walled off from any role in this case, and
immediately alerted this Court of the appearance of a conflict. Attorney Langlois
advises that if Rubin possesses any of American Tax’s confidences, none has been
shared with him. Langlois advises that Rubin will not share in any of the fees that
may be generated in this matters. Distilled to its essential core and convincing facts,
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Attorney Rubin has not worked on the file, never will, and there has been no exchange
of confidences. In the final analysis, the measures implemented by Girvin and
Ferlazzo to isolate Attorney Rubin from any aspect of this matter rebuts the
presumption of any shared confidences that possibly could have come within his grasp
while serving as this Court’s law clerk. Any significance of Attorney Rubin’s

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presence during the Settlement Conference or his speculated access to American Tax’s
confidential information is minuscule, trivial, too remote, and to attenuated to merit
imputation of any purported conflict of interest. And, especially because another
judge, who was not present nor privy to the discourse during the Settlement
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Conference, will preside over the trial, there is no real risk that the trial will be tainted.
Hempstead Video, 409 F.3d at 138 (“We see no reason why, in appropriate cases and
on convincing facts, isolation – whether it results from the intentional construction of
a ‘Chinese Wall,’ or from de facto separation that effectively protects against any
sharing of confidential information – cannot adequately protect against taint.”); see
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also Bd. of Educ. of City of New York. v. Nyquist, 590 F.2d 1241, 1246 (2d Cir. 1979)
(noting that a court should be “quite hesitant” to disqualify unless there is a taint of
the underlying trial).
Here, the circumstances do not rise to the level of a nonwaivable or
irreconcilable conflict of interest. Girvin and Ferlazzo’s screening plan is prompt and
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reasonable. And based upon all of the foregoing, it is hereby Ordered that Girvin and
Ferlazzo will not be disqualified as the City of Schenectady’s Counsel for the purpose
of this litigation.
IT IS SO ORDERED.

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December 2, 2014
Albany, New York

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