Sea Trade Maritime Corporation et al v. Stelios Coutsodontis
Filing
64
OPINION AND ORDER re: 27 MOTION to Disqualify Counsel Poles Tublin. Accordingly, for all the foregoing reasons, plaintiffs' motion to disqualify counsel is granted in part. Within ten days of the date of this Order, plaintiffs' counsel is to identify no more than two Poles Tublin attorneys that they wish to call to testify concerning the arrests of the cargo ship Athena. Upon identification, these attorneys will be immediately disqualified. Plaintiffs' motion is denied in all other respects. (Signed by Magistrate Judge Henry B. Pitman on 7/25/11) Copies Sent By Chambers. (djc)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
-----------------------------------X
SEA TRADE MARITIME CORPORATION
and GEORGE PETERS,
:
:
Plaintiffs,
:
-against-
09 Civ. 488 (BSJ)(HBP)
:
STELIOS COUTSODONTIS, FRANCESA
ELENI COUTSODONTIS, GENERAL
MARITIME ENTERPRISES CORPORATION,
ATTIKA INTERNATIONAL NAVIGATION
SA, and IASON SHIPPING LTD.,
:
OPINION
AND ORDER
:
:
Defendants.
:
-----------------------------------X
PITMAN, United States Magistrate Judge:
I.
Introduction
By notice of motion dated February 11, 2011 (Docket
Item 27), plaintiffs Sea Trade Maritime Corporation ("Sea Trade")
and George Peters move for an Order disqualifying counsel Poles
Tublin Stratakis & Gonzalez, LLP ("Poles Tublin") from representing defendant Stelios Coutsodontis.
below, the motion is granted in part.
For the reasons set forth
Within ten days from the
date of this Order, plaintiffs are directed to identify no more
than two Poles Tublin attorneys that they wish to call to testify
on the issue of the advice of counsel defense asserted by
Coutsodontis with respect to the arrests of the cargo ship
Athena.
Upon being identified, these attorneys will be disquali-
fied.
II.
Facts
A.
Background
Since 2005, the parties have filed numerous state,
federal and international lawsuits with respect to the ownership
of plaintiff Sea Trade.
For the sake of brevity, I shall recite
only the facts necessary to an understanding of the present
motion.
Plaintiff Sea Trade is a maritime shipping company
whose principal asset was the cargo ship Athena, which was sold
in February 2009 (Amended Complaint, dated April 3, 2009
("Amended Compl.") (Docket Item 4), at ¶¶ 12, 29, 35, 100).
Defendant Stelios Coutsodontis owns fifty percent of the shares
of Sea Trade, although plaintiffs have appealed a judgment in
Greece recognizing his ownership (Amended Compl. at ¶¶ 15, 6162).
Coutsodontis is the uncle of plaintiff George Peters, who
is an undisputed part-owner of Sea Trade (Amended Compl. at ¶ 13;
Affirmation of Scott R. Johnston, dated March 4, 2011 ("Johnston
Aff.") (Docket Item 37), at ¶ 5).
Coutsodontis is the brother of
Anna Peters, George Peters' mother, and Athena Eliades, the
2
deceased widow of Sea Trade founder Elias Eliades (Amended Compl.
at ¶ 13; Johnston Aff. at ¶ 1).
1.
Formation
of Sea Trade
In or about July 1992, Elias Eliades formed Sea Trade
under the laws of the Republic of Liberia, and the company issued
500 "bearer" shares -– 475 to Elias Eliades, and 25 to George
Peters (Amended Compl. at ¶¶ 29-30).
Sea Trade's Articles of
Incorporation stated that no shareholder could "sell, assign,
transfer or otherwise dispose of" any shares to a non-shareholder
without the "unanimous written consent of all the other shareholders" (Amended Compl. at ¶ 31; Ex. M, annexed to Declaration
of Peter A. Halprin, dated February 11, 2011 ("Halprin Decl.")
(Docket Item 29)).
On August 18, 1992, George Peters took
control of Sea Trade's day-to-day operations through a written
power of attorney (Amended Compl. at ¶ 34).
On or about December
10, 1992, Sea Trade purchased the Athena (Amended Compl. at ¶
35).
On or about July 24, 1994, Elias Eliades cancelled the 475
bearer shares he owned and redistributed them as follows:
300 to
himself, 150 to Anna Peters and 25 to George Peters (Amended
Compl. at ¶¶ 37-38).
At the time of his death in September 1996,
Elias Eliades held 300 shares, Anna Peters held 150 shares and
3
George Peters held 50 shares of Sea Trade (Amended Compl. at
¶¶ 38-39).
2.
Transfer of
Elias Eliades' Shares
When Elias Eliades died, his wife, Athena Eliades,
inherited his 300 shares (Amended Compl. at ¶ 39).
On August 2,
2000, Athena Eliades attempted to execute a holographic will that
stated she owned 500 shares of Sea Trade and was devising 250
shares each to Anna Peters and Coutsodontis.
Coutsodontis v.
Peters, 11 Misc. 3d 1066(A), 816 N.Y.S.2d 694, 2006 WL 721255 at
*1 (Sup. Ct. Feb. 1, 2006) (unpublished) (citation omitted).
Plaintiffs claim that Athena Eliades was coerced into drafting
the holographic will by Coutsodontis, who they claim was unaware
that she only owned 300 shares (Amended Compl. at ¶¶ 42-46).
Defendants deny that any coercion occurred (Answer, dated August
19, 2010 (Docket Item 19) at ¶¶ 44-45).
In any event, Athena Eliades drafted a second holographic will on September 14, 2000, devising 250 of her 300
shares to Coutsodontis and the remaining 50 shares to Anna Peters
(English Translation of Letter by Athena Eliades, dated September
14, 2000, annexed as Ex. A to Johnston Aff.).
Plaintiffs also
allege this will was executed through coercion, which defendants
4
deny (Amended Compl. at ¶ 49; Answer at ¶ 49).
Athena Eliades
died on January 7, 2003 (Amended Compl. at ¶ 51).
Following her
death, Coutsodontis and Anna Peters retrieved the Sea Trade
shares from a safe and took possession of 250 shares and 50
shares, respectively (Amended Compl. at ¶¶ 53-54).
3.
Commencement
of Lawsuits
in Greece
and New York
In early 2005, the parties sought declaratory judgments
in different courts.
In January 2005, Anna Peters commenced an
action in Greek court seeking, inter alia, a declaratory judgment
that Athena Eliades' holographic wills "were null and void
because of fraud."
at *2.
Coutsodontis v. Peters, supra, 2006 WL 721255
On February 9, 2005, Coutsodontis commenced an action in
the Supreme Court of the State of New York seeking a declaratory
judgment that he was the rightful owner of 250 shares of Sea
Trade as a result of an inter vivos gift from Athena Eliades
(Amended Compl. at ¶ 55; Coutsodontis v. Peters, supra, 2006 WL
721255 at *2).
Although Anna Peters withdrew the action in
Greece after Coutsodontis filed the New York action, she subsequently commenced a second action in Greece for the same relief.
Coutsodontis v. Peters, supra, 2006 WL 721255 at *2.
5
Coutsodontis filed a counterclaim in Greece (Ex. B, annexed to
Johnston Aff., at 1).
On February 1, 2006, the Honorable Herman Cahn, Justice
of the New York Supreme Court, New York County, held that the
validity of Athena Eliades' holographic wills was "better left to
the Greek courts."
at *2.
Coutsodontis v. Peters, supra, 2006 WL 721255
However, Justice Cahn dismissed Coutsodontis' complaint
for failure to state a claim, because Athena Eliades' writings
were "not evidence of an inter vivos gift."
Coutsodontis v.
Peters, supra, 2006 WL 721255 at *2.
On January 16, 2009, the Multi-Member Court of First
Instance of Athens held that Athena Eliades' holographic wills
were valid and enforceable and that Coutsodontis was the rightful
owner of 250 shares of Sea Trade (Ex. B, annexed to Johnston
Aff., at 5-6).
Plaintiffs have appealed that decision (Amended
Compl. at ¶ 61).
4.
Arrests of
the Athena
On or about July 10, 2008, Coutsodontis brought an ex
parte petition in a court in Tarragona, Spain, for the arrest of
the Athena (Amended Compl. at ¶¶ 63-64).
The Athena was arrested
and confined to port on the same date (Amended Compl. at ¶ 65).
6
On or about August 4, 2008, a Spanish court vacated the arrest,
holding that the true dispute was over ownership in shares of Sea
Trade, which was not sufficient to support the arrest of the
Athena (Amended Compl. at ¶ 66; Decision in Issues 312/2008,
dated August 4, 2008, of Section 2 of the Commercial Court 1
Tarragona, annexed as Ex. C to Halprin Decl., at 3, 9-10).
Coutsodontis appealed the decision, and the appeal was
dismissed on February 19, 2009 (Amended Compl. at ¶ 68; Appeal of
Decision in Issues 312/2008, dated February 19, 2009, of Section
2 of the Commercial Court 1 Tarragona ("Spanish Appellate Decision"), annexed as Ex. C to Halprin Decl.).
The appellate court
held that "the application made by the appellant before the Greek
courts does not constitute a claim, let alone a maritime claim"
(Spanish Appellate Decision at 3).
The appellate court further
stated that it rejected the argument that a claim for an inherited share of a company that owns a ship was equivalent to a
maritime claim for the co-ownership of the ship (Spanish Appellate Decision at 3).
On or about August 27, 2008, Coutsodontis commenced an
action in the United States District Court for the Eastern
District of Louisiana again seeking to arrest the Athena, pursuant this time to Rule D of the Supplemental Rules for Certain
Admiralty and Maritime Claims of the Federal Rules of Civil
7
Procedure (Amended Compl. at ¶ 69).
In a verified complaint,
Coutsodontis argued "that by virtue of his 50% stock ownership in
Sea Trade, he is also the 50% owner of the M/V ATHENA."
Coutsodontis v. M/V ATHENA, Civil Action No. 08-4285, 2008 WL
4330236 at *1 (E.D. La. Sept. 16, 2008).
warrant authorizing the arrest.
supra, 2008 WL 4330236 at *1.
The court issued a
Coutsodontis v. M/V ATHENA,
On September 12, 2008, the court
vacated the arrest because Coutsodontis' claim was "not subject
to this court's admiralty jurisdiction."
ATHENA, supra, 2008 WL 4330236 at *2.
Coutsodontis v. M/V
The court held that "[i]t
is clear from plaintiff's verified complaint that the nature of
this dispute is over the division of profits that have been
earned by Sea Trade.
While this dispute concerns a vessel, that
alone does not color a maritime claim."
Coutsodontis v. M/V
ATHENA, supra, 2008 WL 4330236 at *2 (footnote omitted).
On June
18, 2009, the decision was affirmed by the Court of Appeals for
the Fifth Circuit.
Coutsodontis v. Sea Trade Mar. Corp., 571
F.3d 1341, 1341 (5th Cir. 2009).
In their memorandum of law supporting their motion to
dismiss the present action, defendants acknowledged that
Coutsodontis applied for the arrest of the Athena in Spain "upon
the advice of his counsel in New York and Tarragona, Spain"
(Memorandum of Law in Support of Defendant's Motion to Dismiss,
8
dated May 28, 2009 ("Defs.' Motion to Dismiss") (Docket Item 10),
at 7).
Manuel Gonzalez Rodriguez, Esq., represented Coutsodontis
in Spain, while Poles Tublin represented him in New York (Defs.'
Motion to Dismiss at 7 nn.20-21).
Rodriguez consulted Poles
Tublin attorneys Christ Stratakis and John G. Poles during the
Spanish arrest (Sworn Statement of Manuel Gonzalez, dated August
7, 2008, annexed as Ex. B to Halprin Decl., at 1-2).
also acknowledged that Coutsodontis
Defendants
applied for the arrest of
the Athena in New Orleans "upon advice of legal counsel in New
York and New Orleans" (Defs.' Motion to Dismiss at 8).
Chaffe
McCall LLP represented Coutsodontis in New Orleans, while Poles
Tublin represented him in New York (Defs.' Motion to Dismiss at 8
n.26).
Defendants reiterated that "[i]t is undisputed that
throughout both arrests of the vessel, Capt. Coutsodontis was
represented in New York, New York by Poles Tublin" (Defs.' Motion
to Dismiss at 14).
5.
Injunction in
Greece Preventing
Sale of Athena
On or about January 6, 2009, Sea Trade negotiated a
sale of the Athena for $2,625,000.00, with delivery scheduled for
January 20, 2009 (Amended Compl. at ¶ 87).
On or about January
14, 2009 -- two days before the court in Athens held that
9
Coutsodontis was the rightful owner of 250 shares of Sea Trade -–
Coutsodontis commenced an action in Piraeus, Greece, seeking a
declaratory judgment of his ownership rights to Sea Trade and an
injunction to maintain "the status quo" and prevent the sale of
the Athena (Amended Compl. at ¶ 89; Johnston Aff. at ¶ 31).
injunction was granted.
The
The Athena's buyer subsequently
cancelled the original sale and negotiated a new deal for a sale
price that was $250,000 lower (Amended Compl. at ¶¶ 90, 96).
On
January 27, 2009, plaintiffs and Coutsodontis entered into an
agreement to permit the sale of the vessel to go forward (Amended
Compl. at ¶ 99; Johnston Aff. at ¶ 34 and Ex. T).
On February
11, 2009, the Athena was sold, and Sea Trade received
$2,263,437.50, with the proceeds placed in escrow "until final
non-appealable judicial determination of Coutsodontis' ownership
rights in Sea Trade and Coutsodontis' entitlement to those funds,
if any" (Amended Compl. at ¶ 100; Ex. T, annexed to Johnston Aff.
at ¶ 6).
6.
Plaintiffs' Previous Motion
to Disqualify Poles Tublin
for Allegedly Adverse Statements
with Respect to Defamation Claim
On November 17, 2009, George Peters moved to disqualify
Poles Tublin from appearing for Coutsodontis in an action in New
10
York Supreme Court, New York County which Peters commenced for
libel per se and common law unfair competition (see Letter from
Peter A. Halprin to undersigned, dated February 25, 2011
("Halprin Letter"); Docket in Peters v. Coutsodontis,
0600482/2007; Peters v. Coutsodontis, 21 Misc. 3d 1141(A), 875
N.Y.S.2d 823 (Sup. Ct. Nov. 26, 2008) (unpublished)).
The
grounds for the motion were some allegedly contradictory statements made by Coutsodontis and his attorneys.
In a 2005 action
between the parties, Coutsodontis alleged that George Peters'
power of attorney was fraudulently obtained (see Affidavit of
Captain Stelios Coutsodontis in Coutsodontis v. Peters, 05600511, dated June 13, 2005, annexed as Ex. I to Halprin Decl.,
at ¶ 20 ("I have reviewed two different purported Powers of
Attorney, each of which I believe contains what I believe is an
erroneous and forged signature of my sister.")).
In a 2008
action between the parties filed in this district,1 Coutsodontis
1
On September 26, 2008, Sea Trade commenced an action in
this Court requesting an injunction preventing Coutsodontis from
arresting the Athena again (Complaint in Sea Trade Maritime
Corporation v. Coutsodontis, 08 Civ. 8299, dated September 26,
2008 (Docket Item 1), at ¶ 9). On September 26, 2008, the
Honorable Naomi Reice Buchwald, United States District Judge,
issued a temporary restraining order and Order to Show Cause
temporarily prohibiting Coutsodontis from effecting further
arrests of the Athena and directing Coutsodontis to show cause
why a preliminary injunction should not be issued against him
(Docket Item 8). The parties conducted oral argument before
(continued...)
11
subsequently stated, "[b]ased on a power of attorney signed by
Athena [Eliades] on August 18, 1992 . . . George Peters . . . was
authorized to manage the company's assets" (Affidavit of Stelios
Coutsodontis in Sea Trade Maritime Corporation v. Coutsodontis,
08 Civ. 8299, dated October 1, 2008 (Docket Item 6), at ¶ 6).
Plaintiffs claim that Coutsodontis' 2005 allegation that the
power of attorney was fraudulently obtained is defamatory and was
directly contradicted by Coutsodontis' 2008 statement (Pls.' Mem.
at 12-13).
Furthermore, plaintiffs alleged that Coutsodontis'
attorneys made statements during oral argument in a 2008 action
before Judge Buchwald that were also contradictory to
Coutsodontis' 2005 statement.2
In the 2008 action before Judge
Buchwald, attorney Christ Stratakis stated that "when the owner
of the ship was alive, she had given her nephew [George Peters]
powers to operate the ship . . . ." (Oral Argument Transcript in
Sea Trade Maritime Corporation v. Coutsodontis, 08 Civ. 8299,
dated October 2, 2008, annexed as Ex. A to Halprin Decl., at 20).
1
(...continued)
Judge Buchwald on October 2, 2008 (Minute Entry in Docket Sheet
in Sea Trade Maritime Corporation v. Coutsodontis, 08 Civ. 8299,
dated October 2, 2008). On March 26, 2009, Judge Buchwald issued
an Order dismissing the case as moot because the Athena had been
sold (Docket Item 20).
2
Plaintiffs have supplied only a partial transcript of the
oral argument, not the entire transcript.
12
Additionally, Coutsodontis' counsel Scott Johnston stated,
"George Peters has proceeded under a power of attorney, but
George Peters is . . . not a shareholder.
shareholder.
They claim he is a
This is news to us" (Oral Argument at 36).
Plain-
tiffs claim that these statements contradict Coutsodontis' 2005
statement that George Peters' power of attorney was fraudulently
obtained (Pls.' Mem. at 13).
On April 2, 2010, the Honorable Barbara R. Kapnick,
Justice of the New York Supreme Court, New York County, denied
the motion to disqualify as "premature" (Decision/Order, annexed
to Halprin Letter).
Justice Kapnick suggested that the parties
needed to conduct discovery on the issue (Transcript, annexed to
Halprin Letter, at 17).
Plaintiffs currently seek disqualifica-
tion here on the same grounds asserted before Justice Kapnick as
well as other grounds.
B.
The Present Action
Plaintiffs commenced the present action against
Coutsodontis on January 16, 2009 (Complaint (Docket Item 1)).
They seek equitable relief and compensatory and punitive damages,
alleging that Coutsodontis engaged in illegal, willful, wanton
and malicious acts "designed to cause the financial ruin of Sea
Trade" (Amended Compl. at ¶¶ 14, 20-23).
13
Specifically,
plaintiffs claim that Coutsodontis:
(1) interfered with Sea
Trade's operations through the arrests and injunction;
(2) defamed George Peters; (3) filed vexatious litigation;
(4) tortiously interfered with a contract, and (5) breached his
fiduciary duty to the shareholders (Amended Compl. at ¶¶ 63-128,
149-56).3
On May 28, 2009, Coutsodontis filed a motion to dis-
miss (Docket Item 9).
The Honorable Barbara S. Jones, United
States District Judge, denied the motion by Order dated August 5,
2010 (Docket Item 18).
C.
The Present Motion
Plaintiffs now move to disqualify counsel Poles Tublin
from representing Coutsodontis on the theory that the firm's
attorneys are necessary witnesses with respect to the following
issues:
(1) Coutsodontis' use of an advice of counsel defense to
support the two arrests of the Athena; (2) Coutsodontis' attorneys' alleged contradiction, in court, of their client's previous
defamatory statements; (3) Poles Tublin's initiation of "a sham
action" in New York state court in 2005 on behalf of
Coutsodontis; (4) Poles Tublin's assistance to Coutsodontis in
3
Although plaintiffs contest that Coutsodontis is a partowner of Sea Trade, they assume that he is a part-owner for the
purpose of alleging breaches of fiduciary duty.
14
the filing of an injunction prohibiting the sale of the Athena,
and (5) punitive damages (Plaintiffs' Memorandum of Law in
Support of Its Motion to Disqualify, dated February 11, 2011
("Pls.' Mem.") (Docket Item 28); Plaintiffs' Reply Memorandum of
Law in Further Support of Its Motion to Disqualify, dated March
11, 2011 ("Pls.' Reply") (Docket Item 40), at 11-12)).
In
response, defendants argue that all of the grounds for disqualification are without merit.
that:
Specifically, defendants assert
(1) disqualification is disfavored in the Second Circuit;
(2) Poles Tublin's attorneys will not testify to significant
issues of fact; (3) plaintiffs' arguments are subject to, and
fail, strict scrutiny; (4) disqualification would represent a
substantial hardship to Coutsodontis; (5) any testimony by Poles
Tublin's attorneys would not be prejudicial to Coutsodontis, and
(6) under no circumstances should the entire firm be disqualified
(Memorandum of Law in Opposition to Plaintiffs' Motion to Disqualify, dated March 4, 2011 ("Defs.' Mem.") (Docket Item 38)).
15
III.
Analysis
A.
Legal Standard
A motion to disqualify an attorney is committed to the
discretion of the District Court.
Cresswell v. Sullivan &
Cromwell, 922 F.2d 60, 72 (2d Cir. 1990), abrogated on other
grounds as recognized in In re Hunter, 66 F.3d 1002, 1005-06 (9th
Cir. 1995).
"While New York law governs the professional conduct
of attorneys in this state, '[t]he authority of federal courts to
disqualify attorneys derives from their inherent power to preserve the integrity of the adversary process.'"
Air Italy S.p.A.
v. Aviation Techs., Inc., 10-CV-20 (JG)(JMA), 2011 WL 96682 at *3
(E.D.N.Y. Jan. 11, 2011), quoting Hempstead Video, Inc. v. Inc.
Vill. of Valley Stream, 409 F.3d 127, 132 (2d Cir. 2005) (internal quotation marks omitted).
The Second Circuit has held that
"[a]lthough our decisions on disqualification motions often
benefit from guidance offered by the American Bar Association
(ABA) and state disciplinary rules . . . such rules merely
provide general guidance and not every violation of a disciplinary rule will necessarily lead to disqualification."
Hempstead
Video, Inc. v. Inc. Vill. of Valley Stream, supra, 409 F.3d at
132 (citations omitted); Solow v. Conseco, Inc., 06 Civ. 5988
(BSJ)(THK), 2007 WL 1599151 at *3 (S.D.N.Y. June 4, 2007) (Katz,
16
M.J.).
"Disqualification is only warranted in the rare circum-
stance where an attorney's conduct 'poses a significant risk of
trial taint.'"
Decker v. Nagel Rice LLC, 716 F. Supp. 2d 228,
231 (S.D.N.Y. 2010) (Scheindlin, D.J.), quoting Glueck v. Jonathan Logan, Inc., 653 F.2d 746, 748 (2d Cir. 1981).
However, "in
the disqualification situation, any doubt is to be resolved in
favor of disqualification."
Hull v. Celanese Corp., 513 F.2d
568, 571 (2d Cir. 1975) (citation omitted).
In view of their potential for abuse as a tactical
device, motions to disqualify opposing counsel are subject to
particularly strict scrutiny.
See Correspondent Servs. Corp. v.
J.V.W. Inv., Ltd., 99 Civ. 8934 (RWS), 2000 WL 1174980 at *14
(S.D.N.Y. Aug. 18, 2000) (Sweet, D.J.), citing Lamborn v.
Dittmer, 873 F.2d 522, 531 (2d Cir. 1989); Decora Inc. v. DW
Wallcovering, Inc., 899 F. Supp. 132, 135 n.2 (S.D.N.Y. 1995)
(Koeltl, D.J.).
Courts are also reluctant to grant motions to
disqualify because they inevitably result in delay and added
expense.
Evans v. Artek Sys. Corp., 715 F.2d 788, 791 (2d Cir.
1983) (disqualification motions "inevitably cause delay");
D.R.T., Inc. v. Universal City Studios, Inc., 02 Civ. 0958
(BSJ)(JCF), 2003 WL 1948798 at *2 (S.D.N.Y. Apr. 24, 2003)
(Francis, M.J.) (motions to disqualify "cause undue delay [and]
add expense").
For all these reasons, "the Second Circuit
17
requires a high standard of proof on the part of the party
seeking to disqualify an opposing party's counsel . . . ."
Kubin
v. Miller, 801 F. Supp. 1101, 1113 (S.D.N.Y. 1992) (Kram, D.J.),
citing Gov't of India v. Cook Indus., 569 F.2d 737, 739 (2d Cir.
1978); accord Occidental Hotels Mgmt. B.V. v. Westbrook Allegro
L.L.C., 440 F. Supp. 2d 303, 309 (S.D.N.Y. 2006) (Katz, M.J.);
Evans v. Artek Sys. Corp., supra, 715 F.2d at 791 (same); Paramount Commc'ns, Inc. v. Donaghy, 858 F. Supp. 391, 394 (S.D.N.Y.
1994) (Sweet, D.J.) (same).
It is the duty of the Court "to preserve, to the
greatest extent possible, both the individual's right to be
represented by counsel of his or her choice and the public's
interest in maintaining the highest standards of professional
conduct and the scrupulous administration of justice."
Celanese Corp., 513 F.2d 568, 569 (2d Cir. 1975).
Hull v.
"[T]he conclu-
sion in a particular case can be reached only after a painstaking
analysis of the facts and precise application of precedent."
Board of Ed. v. Nyquist, 590 F.2d 1241, 1246 (2d Cir. 1979),
citing Fund of Funds, Ltd. v. Arthur Andersen & Co., 567 F.2d
225, 227 (2d Cir. 1977), quoting United States v. Standard Oil
Co., 136 F. Supp. 345, 367 (S.D.N.Y. 1955) (Kaufman, D.J.).
18
B.
Advocate/Witness Rule
Effective April 1, 2009, New York adopted the Rules of
Professional Conduct ("Rules"), replacing the Code of Professional Responsibility ("Code").
Rule 3.7 provides guidance
concerning when a lawyer who will also be a witness should be
disqualified:
(a) A lawyer shall not act as advocate before a
tribunal in a matter in which the lawyer is likely to
be a witness on a significant issue of fact unless:
(1) the testimony relates solely to an uncontested
issue;
(2) the testimony relates solely to the nature and
value of legal services rendered in the matter;
(3) disqualification of the lawyer would work
substantial hardship on the client;
(4) the testimony will relate solely to a matter
of formality, and there is no reason to believe
that substantial evidence will be offered in opposition to the testimony; or
(5) the testimony is authorized by the tribunal.
(b) A lawyer may not act as advocate before a
tribunal in a matter if:
(1) another lawyer in the lawyer's firm is likely
to be called as a witness on a significant issue
other than on behalf of the client, and it is
apparent that the testimony may be prejudicial to
the client . . . .
22 N.Y.C.R.R. § 1200.0 (2009).
19
Rule 3.7(a) is "[c]ommonly referred to as the 'advocate-witness' rule."
Supp. 2d at 231.
Decker v. Nagel Rice LLC, supra, 716 F.
The Second Circuit has
identified four risks that Rule 3.7(a) is designed to
alleviate: (1) the lawyer might appear to vouch for
his own credibility; (2) the lawyer's testimony might
place opposing counsel in a difficult position when she
has to cross-examine her lawyer-adversary and attempt
to impeach his credibility; (3) some may fear that the
testifying attorney is distorting the truth as a result
of bias in favor of his client; and (4) when an individual assumes the role of advocate and witness both,
the line between argument and evidence may be blurred,
and the jury confused.
Murray v. Metro. Life Ins. Co., 583 F.3d 173, 178 (2d Cir. 2009),
citing Ramey v. Dist. 141, Int'l Ass'n of Machinists & Aerospace
Workers, 378 F.3d 269, 282-83 (2d Cir. 2004) (internal citations
and alterations omitted).
The Second Circuit has stated that Rule 3.7(a) "is
substantially the same as" Disciplinary Rule ("DR") 5-102(A) of
the Code.
2010).4
4
Ramchair v. Conway, 601 F.3d 66, 74 n.6 (2d Cir.
Under the Code, different standards for disqualification
[A]lthough the Canons of the Code of Professional
Responsibility in the State of New York have been
replaced with the newly implemented New York State
Rules of Professional Conduct, the Court notes
that the case authority interpreting the old
canons continues to be probative on issues that
are analyzed under the new rules, especially where
(as with the applicable rules in the instant case)
the new rule generally incorporates the substance
(continued...)
20
applied depending on whether an attorney was expected to testify
on behalf of a client or a party other than the attorney's
client.
In Lamborn v. Dittmer, supra, 873 F.2d at 531, the
Second Circuit analyzed DR 5-102(A), which stated that:
If, after undertaking employment in contemplated or
pending litigation, a lawyer learns or it is obvious
that he or a lawyer in his firm ought to be called as a
witness on behalf of his client, he shall withdraw from
the conduct of the trial and his firm, if any, shall
not continue representation in the trial. . . .
The Court then held that "[t]he test under subdivision
(A) is whether the attorney's testimony could be significantly
useful to his client.
If so, he should be disqualified regard-
less of whether he will actually be called."
supra, 873 F.2d at 531 (citation omitted).
Lamborn v. Dittmer,
Courts in this
Circuit have stated that "[w]hen considering the necessity of
testimony, '[a] court should examine factors such as the significance of the matters, weight of the testimony, and availability
4
(...continued)
of the old canons. See, e.g., Pierce & Weiss, LLP
v. Subrogation Partners LLC, 701 F.Supp.2d 245,
251 (E.D.N.Y.2010) ("Even though the Canons have
been replaced by the New York Rules of
Professional Conduct, the new rules still
incorporate much of the substance of the old
rules. Therefore, much of the precedent
interpreting the old rules still remains
applicable." (citation omitted)).
Finkel v. Frattarelli Bros., Inc., 740 F. Supp. 2d 368, 372 n.1
(E.D.N.Y. 2010).
21
of other evidence.'"
Finkel v. Frattarelli Bros., Inc., supra,
740 F. Supp. 2d at 373, quoting Kubin v. Miller, supra, 801 F.
Supp. at 1113 (internal quotation marks and citation omitted).
DR 5-102(B) addressed circumstances in which a lawyer
or a member of the lawyer's firm "may be called as a witness
other than on behalf of his client;" it provided that the lawyer
"may continue the representation until it is apparent that his
testimony is or may be prejudicial to his client."
Lamborn v.
Dittmer, supra, 873 F.2d at 531, quoting DR 5-102(B).
A party
bringing a motion under this subsection "carries the burden to
show both the necessity of the testimony and the substantial
likelihood of prejudice."
Ragdoll Prods. (UK) Ltd. v. Wal-Mart
Stores, Inc., 99 Civ. 2101 (DLC), 1999 WL 760209 at *2 (S.D.N.Y.
Sept. 27, 1999) (Cote, D.J.), citing Nat'l Union Fire Ins. v.
L.E. Myers Co. Grp., 937 F. Supp. 276, 281 (S.D.N.Y. 1996) (Kram,
D.J.); and Stratavest Ltd. v. Rogers, 903 F. Supp. 663, 667
(S.D.N.Y. 1995) (Sweet, D.J.).
Testimony is deemed prejudicial
where it is "sufficiently adverse to the factual assertions or
account of events offered on behalf of the client, such that the
bar or the client might have an interest in the lawyer's independence in discrediting that testimony."
Murray v. Metro. Life
Ins. Co., supra, 583 F.3d at 178, quoting Lamborn v. Dittmer,
supra, 873 F.2d at 531 (internal quotation marks omitted); Decker
22
v. Nagel Rice LLC, supra, 716 F. Supp. 2d at 231.
The Second
Circuit explained that DR 5-102(B) is implicated "where a lawyer's testimony would contradict or undermine his client's
factual assertions."
Lamborn v. Dittmer, supra, 873 F.2d at 531.
However, "[b]ecause the courts must guard against tactical use of
motions to disqualify counsel . . . they are subject to fairly
strict scrutiny, particularly motions under subdivision (B)."
Lamborn v. Dittmer, supra, 873 F.2d at 531 (citation omitted).
In the Second Circuit, an even stricter test governs
motions that seek to disqualify an entire firm through imputation.
In Murray v. Metro. Life Ins. Co., supra, 583 F.3d at 178,
the Second Circuit analyzed Rule 3.7(b) of the Rules, stating
that "[b]ecause the tribunal is not likely to be misled when a
lawyer acts as advocate in a trial in which another lawyer in the
lawyer's firm will testify as a necessary witness, [Model Rule
3.7(b)] permits the lawyer to do so except in situations involving a conflict of interest."
Murray v. Metro. Life Ins. Co.,
supra, 583 F.3d at 178, quoting A.B.A. Model Rules of Prof'l
Conduct § 3.7 cmt. 5.
The Second Circuit held that "a law firm
can be disqualified by imputation only if the movant proves by
clear and convincing evidence that [A] the witness will provide
testimony prejudicial to the client, and [B] the integrity of the
judicial system will suffer as a result.
23
This new formulation is
consistent with our prior efforts to limit the tactical misuse of
the witness-advocate rule."
Murray v. Metro. Life Ins. Co.,
supra, 583 F.3d at 178-79.
C.
Application of the Foregoing
Principles to the Present Case
Judged by the standards set forth above, I conclude
that disqualification of some Poles Tublin attorneys is necessary
in this action, but that there is no basis to disqualify the
entire firm.
As noted above, plaintiffs seek disqualification
because they argue that the testimony of Poles Tublin's attorneys
is necessary with respect to five issues.
I address these issues
in turn.
1.
Coutsodontis' Use of an
Advice of Counsel Defense
to Support the Athena's Arrests
Plaintiffs first allege that Coutsodontis twice effected ex parte arrests of the Athena in bad faith and in breach
of his fiduciary duty to Sea Trade's shareholders (Pls.' Mem. at
9).
Plaintiffs claim that these arrests were improper and
illegal because
[i]t is a fundamental principle of admiralty law
that a claim based upon ownership, or alleged ownership, of a company (Sea Trade) that owns a vessel (the
ATHENA) is not a valid basis for the arrest of a vessel
24
because (in admiralty jargon) no maritime lien is
present. There is no jurisdiction. This is black
letter admiralty law throughout the world. This law
was well-settled before the arrest of the ATHENA.
(Pls.' Mem. at 4-5 (citations omitted)).
Plaintiffs further note
that both arrests were vacated by the courts, and that those
vacaturs were affirmed by appellate courts (see Spanish Appellate
Decision; Coutsodontis v. M/V ATHENA, supra, 2008 WL 4330236 at
*1-*2; Coutsodontis v. Sea Trade Mar. Corp., supra, 571 F.3d at
1341).
In response, defendants assert an advice of counsel
defense to the arrests, which was first asserted in support of
their motion to dismiss the present action (Defs.' Motion to
Dismiss at 7-8, 14-15; Defs.' Mem. at 6-7).
Plaintiffs now seek
disqualification because of the asserted advice of counsel
defense, arguing that "the entire firm is implicated and all
members may be subject to examination as to their role in providing advice regarding the arrests" because there were only eight
attorneys in the firm as of February 2011 and four have worked on
the "various actions" in which Coutsodontis was a party (Pls.'
Mem. at 5 n.2).5
5
The four attorneys identified by plaintiffs are Scott R.
Johnston, John G. Poles, Christ Stratakis and John C. Stratakis.
However, in their reply brief, plaintiffs refer to "five senior
attorneys (out of eight total) that will actually be called to
(continued...)
25
In Frontera Fruit Co. v. Dowling, 91 F.2d 293, 297 (5th
Cir. 1937) -- a case cited by both parties -- the United States
Court of Appeals for the Fifth Circuit considered a claim for
wrongful seizure of a vessel.
The Court held that a showing of
"bad faith, malice, or gross negligence of the offending party"
was required.
Frontera Fruit Co. v. Dowling, supra, 91 F.2d at
297; accord Furness Withy (Chartering), Inc., Panama v. World
Energy Sys. Assocs., Inc., 854 F.2d 410, 411 (11th Cir. 1988);
Central Oil Co. v. M/V Lamma-Forest, 821 F.2d 48, 51 (1st Cir.
1987); Ocean Ship Supply, Ltd. v. MV Leah, 729 F.2d 971, 974 (4th
Cir. 1984); see also Walsh Transp. Co. v. Iroquois Transit Corp.,
16 F.2d 475, 475-76 (S.D.N.Y. 1926) (Thacher, D.J.) (gross
negligence or malice required for wrongful attachment of vessel).
The Fifth Circuit indicated that the advice of counsel
may be a defense to a wrongful seizure claim, specifically
stating that
the advice of competent counsel, honestly sought and
acted upon in good faith is alone a complete defense to
an action for malicious prosecution. Cragin v. De Pape
(C.C.A.) 159 F. 691. See, also, Staunton v. Goshorn
(C.C.A.) 94 F. 52, and Widmeyer v. Felton (C.C.) 95 F.
926. The same principle controls the case at bar. The
(...continued)
testify" (Pls.' Reply at 14). Plaintiffs do not identify the
fifth attorney, although Nathan C. Gaudio is listed as a lead
attorney in the Docket Sheet and is also listed on correspondence
to the undersigned with respect to this motion.
26
claim of the right to subrogation based on the advice
of its attorney, erroneous though it may have been,
honestly obtained and reasonably accepted, gave appellant access to the process of the court until that
claim of right could be adjudicated, and no damages can
be assessed against it for fairly submitting it for
determination.
Frontera Fruit Co. v. Dowling, supra, 91 F.2d at 297; see also
Michael H. Bagot, Jr. & Dana A. Henderson, Seize and Desist:
Damages for Wrongful Maritime Seizure, 25 Tul. Mar. L.J. 117,
128-31 (Winter 2000).
To invoke an advice of counsel defense in the Second
Circuit, a party must "show that he made complete disclosure to
counsel, sought advice as to the legality of his conduct, received advice that his conduct was legal, and relied on that
advice in good faith."
Markowski v. S.E.C., 34 F.3d 99, 105 (2d
Cir. 1994), citing S.E.C. v. Savoy Indus., Inc., 665 F.2d 1310,
1314 n.28 (D.C. Cir. 1981); Renner v. Townsend Fin. Servs. Corp.,
98 Civ. 926 (CSH), 2002 WL 1013234 at 8 n.8 (S.D.N.Y. May 20,
2002) (Haight, D.J.); LNC Inv., Inc. v. First Fid. Bank, 92 Civ.
7584 (MBM), 1997 WL 528283 at *22 (S.D.N.Y. Aug. 27, 1997)
(Mukasey, D.J.) ("Thus to prove reliance on advice of counsel and
satisfy the prudent person standard, a [party] must show the
advice it received and that it relied upon that advice, and that
it made complete disclosure to counsel.").
27
Because Frontera Fruit Co. v. Dowling, supra, has been
cited with approval by three other Circuits and I can find no
contrary authority in the Second Circuit, I assume that the
advice of counsel can be a valid defense to plaintiffs' wrongful
seizure claim.
Consequently, Coutsodontis' liability for the
wrongful seizures of the Athena will turn on whether he exhibited
bad faith, malice, or gross negligence.
The viability of an
advice of counsel defense will turn on whether Coutsodontis can
prove he honestly sought and acted upon "the advice of competent
counsel. . . in good faith."
supra, 91 F.2d at 297.
Frontera Fruit Co. v. Dowling,
Thus, Coutsodontis must establish that he
completely disclosed all material facts to his attorneys, sought
their advice as to the legality of his actions, received advice
that the arrests were legal, and relied on that advice in good
faith.
Markowski v. S.E.C., supra, 34 F.3d at 105 (citation
omitted).
I conclude that attorneys at Poles Tublin are "likely
to be [] witness[es] on a significant issue of fact," 22
N.Y.C.R.R. § 1200.0, and, thus, they must be disqualified.
attorneys who counseled Coutsodontis concerning the arrests
28
The
"could be significantly useful" witnesses.
Lamborn v. Dittmer,
supra, 873 F.2d at 531 (citation omitted).6
Attorneys from Poles Tublin can clearly provide relevant evidence for at least three aspects of the advice of counsel
defense.
Their testimony is relevant on the issues of whether
Coutsodontis provided all material facts, whether he sought
advice concerning the legality of the arrests and whether Poles
Tublin attorneys told him that the arrests were legal.
Further-
more, such testimony would create at least three of the four
risks that the Second Circuit concluded that Rule 3.7(a) was
designed to alleviate, namely (1) the lawyers might be vouching
for their own credibility; (2) some might fear that the attorneys
would distort the truth because of bias on behalf of
Coutsodontis, and (3) the line between argument and evidence
might be blurred and the jury confused.
See Murray v. Metro.
Life Ins. Co., supra, 583 F.3d at 178 (citation omitted).
Therefore, disqualification is appropriate.
In analyzing the necessity of these attorneys' testimony, I have examined "the significance of the matters,
6
In the absence of an express or implied overruling of
Lamborn v. Dittmer, supra, 873 F.2d at 531, I believe its test
remains controlling, particularly in light of the Second
Circuit's statement that Rule 3.7(a) "is substantially the same
as" DR 5-102(A). Ramchair v. Conway, supra, 601 F.3d at 74 n.6.
29
weight of the testimony, and availability of other evidence."
Finkel v. Frattarelli Bros., Inc., supra, 740 F. Supp. 2d at 373
(internal quotation marks and citation omitted).
factors favor plaintiffs.
All three
First, the matter is of the utmost
significance, because it involves a defense to one of plaintiffs'
principal claims in this action.
Second, the weight of the
testimony by the attorneys is substantial, because they have
first-hand knowledge of the conversations regarding the legality
of the arrests and are not interested in the outcome of this
case.
Third, defendants do not cite any other available evidence
-- beyond Coutsodontis' own testimony -- to address whether the
elements of the advice of counsel defense are met.
Finally, immediate disqualification is necessary.
See
Gorbaty v. Wells Fargo Bank, N.A., CV-10-3291 (NGG), 2011 WL
318090 at *3 (E.D.N.Y. Feb. 1, 2011) (finding that "efficiency
and the orderly progress of the case will be better served by
disqualification early in the proceedings, when there will be
time for plaintiff to find a new attorney to represent her
without delaying the trial, for any new attorney to become
familiar with the case now and not on the eve of trial, and for
counsel who will try the case to be involved in framing the
pleadings, taking discovery and bringing any appropriate pretrial
motions."); Soberman v. Groff Studios Corp., 99 Civ. 1005 (DLC),
30
1999 WL 349989 at *8 (S.D.N.Y. June 1, 1999) (Cote, D.J.) ("As
the sole witness to many of the relevant communications, counsel
for plaintiff is an essential witness and cannot also represent a
party to this lawsuit" and a failure to testify "would undoubtedly by prejudicial to the plaintiff."); Fulfree v. Manchester,
945 F. Supp. 768, 772 (S.D.N.Y. 1996) (Chin, D.J.) ("There is no
justification for allowing [the attorney] to represent plaintiff
during the pre-trial aspect of this litigation when it is clear
that he may be a material witness at trial, and it is clear that
he could be required to testify."); Gleason v. Zocco, 941 F.
Supp. 32, 35-36 (S.D.N.Y. 1996) (Rakoff, D.J.).
In Gleason v. Zocco, supra, 941 F. Supp. at 35-36, the
Honorable Jed S. Rakoff, United States District Judge, disqualified plaintiff's counsel at the beginning of the case.
There,
Judge Rakoff held that an attorney's "extensive personal involvement in every aspect of the underlying controversies that led to
this lawsuit require his disqualification," in part "because of
the likelihood that he will be a necessary witness."
Zocco, supra, 941 F. Supp. at 35.
Gleason v.
Similarly here, defendants
acknowledge Poles Tublin's attorneys' extensive involvement in
the two arrests, and I have determined that they are necessary
witnesses.
Therefore, immediate disqualification is appropriate.
31
Defendants have represented that Christ Stratakis and
Poles assisted Coutsodontis' Spanish counsel with respect to the
first arrest of the Athena (Sworn Statement of Manuel Gonzalez at
1-2).
However, plaintiffs may choose their witnesses.
There-
fore, I direct plaintiffs to identify no more than two Poles
Tublin attorneys who they wish to call to testify on the issue of
the advice of counsel defense.
I impose this limitation in order
to "guard against tactical use" of plaintiffs' motion.
Lamborn v. Dittmer, supra, 873 F.2d at 531.
See
Upon identification,
these attorneys will be immediately disqualified.7
7
Furthermore, it is of no matter that defendants believe
that the Poles Tublin attorneys advising Coutsodontis on the
arrests are not necessary witnesses, or that the defendants would
be unwilling to call them to testify. The Second Circuit has
stated that the test is whether an attorney "ought" to testify on
behalf of his client. J.P. Foley & Co., Inc. v. Vanderbilt, 523
F.2d 1357, 1359 (2d Cir. 1975) (per curiam); Ulster Scientific,
Inc. v. Guest Elchrom Scientific AG, 181 F. Supp. 2d 95, 103
(N.D.N.Y. 2001); Wickes v. Ward, 706 F. Supp. 290, 292 (S.D.N.Y.
1989) (Kram, D.J.) ("The test for disqualifying counsel under
this disciplinary rule is not whether the attorney will be called
as a witness, or whether the plaintiff presently plans to call
the attorney, but whether the attorney 'ought' to be called.");
Munk v. Goldome Nat'l Corp., 697 F. Supp. 784, 786-87 (S.D.N.Y.
1988) (Edelstein, D.J.); Sheldon Elec. Co. v. Blackhawk Heating &
Plumbing Co., 423 F. Supp. 486, 489 n.5 (S.D.N.Y. 1976)
(Cannella, D.J.). Moreover, in Sheldon Elec. Co. v. Blackhawk
Heating & Plumbing Co., supra, 423 F. Supp. at 489 n.5, the
Honorable John M. Cannella, United States District Judge, stated
that where an attorney ought to be called as a witness, the
failure to do so "will likely result in ineffective assistance of
counsel for his client. Such a result will not be tolerated."
32
While it is true that disqualification is disfavored in
the Second Circuit, "any doubt is to be resolved in favor of
disqualification."
Hull v. Celanese Corp., supra, 513 F.2d at
571 (citation omitted).
In their brief, defendants quote one of
my prior opinions, Interpharm, Inc. v. Wells Fargo Bank, N.A., 08
Civ. 11365 (RJH)(HBP), 2010 WL 1141201 at *4 (S.D.N.Y. Mar. 25,
2010), for the proposition that "disqualification under subdivision (a) [of Rule 3.7] is warranted only where the lawyer-witness
will actually advocate before the jury" (citing Murray v. Metro.
Life Ins. Co., supra, 583 F.3d at 179).
The facts in this case are distinguishable from both
Interpharm, Inc. v. Wells Fargo Bank, N.A., supra, and Murray v.
Metro. Life Ins. Co., supra.
In Interpharm, Inc. v. Wells Fargo
Bank, N.A., supra, 2010 WL 1141201 at *1, I denied plaintiff's
motion to disqualify an attorney and his former firm from representing defendant.
Plaintiff alleged breach of contract, breach
of the covenant of good faith and fair dealing, tortious interference with business expectations, unjust enrichment and breach
of fiduciary duty.
2010 WL 1141201 at *3.
Forbearance agree-
ments signed by the parties were at issue, and plaintiff moved to
disqualify the attorney because of his alleged involvement in the
agreements. 2010 WL 1141201 at *3.
However, the attorney in
question had apparently moved to another firm that was not
33
representing defendant in the action, 2010 WL 1141201 at *1 n.1,
and plaintiff offered "no evidence whatsoever that [the attorney]
will offer any testimony or has any information that would
warrant his disqualification under Rule 3.7(a) or the disqualification of his firm under rule 3.7(b)."
2010 WL 1141201 at *5.
I
concluded that "plaintiff has shown neither that [the attorney]
has admissible, non-privileged and non-cumulative testimony that
would even be of use to either side nor that the concerns underlying the disfavor of advocate-witnesses are implicated at this
early pre-trial stage."
2010 WL 1141201 at *6.
In Murray v. Metro. Life Ins. Co., supra, the Second
Circuit reversed a trial court's disqualification order and
reinstated the law firm Debevoise & Plimpton LLP ("Debevoise") as
trial counsel in the underlying securities litigation.
at 180-81.
583 F.3d
There, the trial court had disqualified Debevoise on
conflict of interest grounds.
583 F.3d at 175.
The trial court
held that Debevoise's prior representation of the corporate
defendant meant that it had also represented defendant's policyholders, who were now plaintiffs in a securities fraud class
action.
583 F.3d at 175.
The Second Circuit reversed, holding
that (1) Debevoise did not have an attorney-client relationship
with the policyholders by virtue of its prior representation of
the corporate defendant, and (2) that plaintiffs could not
34
establish a violation of the advocate-witness rule that would
warrant disqualification.
583 F.3d at 175.
In response to plaintiffs' statement that they wished
to call three Debevoise transactional attorneys and a member of
the trial team as witnesses, the Court of Appeals analyzed Rule
3.7 and determined that because none of the witnesses would be
advocates at trial, none of the witnesses were "properly considered trial counsel for purposes of Rule 3.7(a)."
(citation omitted).
583 F.3d at 179
The Court of Appeals identified the four
risks that Rule 3.7 was intended to alleviate and stated that
"the concerns motivating Rule 3.7 are attenuated where, as here,
the witness-'advocate' is not someone who will be trying the case
to the jury."
583 F.3d at 178-79.
The Second Circuit then
analyzed the facts and determined that disqualification of the
entire firm by imputation was not warranted under Rule 3.7(b).
583 F.3d at 179-80.
Here, plaintiffs seek to disqualify attorneys who are
current members of the firm presently representing defendants,
which makes this case completely distinguishable from Interpharm,
Inc. v. Wells Fargo Bank, N.A., supra.
Furthermore, in Murray v.
Metro. Life Ins. Co., supra, the Second Circuit stated that the
attorneys that plaintiffs wished to call would not be advocates – which is a conclusion I cannot draw here.
35
It is impossible to
tell whether the attorneys selected by plaintiffs would have been
defendants' trial counsel.
issue.
Neither party has addressed this
I note, however, that four attorneys' names appear on
Poles Tublin's opposition brief to the Court:
Scott Johnston,
Christ Stratakis, John G. Poles and Nathan Gaudio, and it appears, therefore, that any or all of these attorneys may take
some advocacy role.
It is simply unclear at this stage.
Moreover, while I acknowledge that "the concerns
motivating Rule 3.7 are attenuated" if a trial team member is not
trial counsel, Murray v. Metro. Life Ins. Co., supra, 583 F.3d at
179, these concerns are not eliminated.
The risk remains present
that "some may fear that the testifying attorney is distorting
the truth as a result of bias in favor of his client," in this
case, Coutsodontis.
F.3d at 178.
Murray v. Metro. Life Ins. Co., supra, 583
This consideration alone is sufficient to disqual-
ify the attorneys, as the Second Circuit's guiding principle is
whether "an attorney's conduct 'poses a significant risk of trial
taint.'"
Decker v. Nagel Rice LLC, supra, 716 F. Supp. 2d at
231, quoting Glueck v. Jonathan Logan, Inc., supra, 653 F.2d at
748.
As a final point, the Second Circuit has stressed that "the
ultimate reason for disqualification [is] harm to the integrity
of the judicial system." Murray v. Metro. Life Ins. Co., supra,
583 F.3d at 178.
36
Therefore, I conclude that the Poles Tublin attorneys
identified by plaintiffs should be disqualified from representing
Coutsodontis in this action.
Defendants also argue that disqualification would
represent a substantial hardship to Coutsodontis.
I disagree.
"Because of the strong policy considerations in support of the
advocate-witness rule, courts have given the 'substantial hardship' exception 'a very narrow reading.'"
United States v. Peng,
602 F. Supp. 298, 303 (S.D.N.Y. 1985) (Edelstein, D.J.), aff'd
766 F.2d 82 (2nd Cir. 1985), quoting United States v. Johnston,
690 F.2d 638, 642 n.9 (7th Cir. 1982).
"The exception expressly
qualifies the hardship that must be shown to permit continued
representation as one that arises because of the distinctive
value of the lawyer or his firm as counsel in the particular
case."
MacArthur v. Bank of N.Y., 524 F. Supp. 1205, 1210
(S.D.N.Y. 1981) (Sofaer, D.J.) (internal quotation marks omitted).
Indeed, "if the expense and delay routinely incident to
disqualification satisfied the substantial-hardship exception,
that exception would soon swallow the rule."
MacArthur v. Bank
of N.Y., supra, 524 F. Supp. at 1210.
Defendants argue that "disqualifying [Coutsodontis']
counsel so far along in representation would be detrimental,
substantial and unfair" (Defs.' Mem. at 21).
37
But elsewhere in
their brief, defendants acknowledge that no discovery had been
taken when the present motion was filed (Defs.' Mem. at 2).
It
is hard to conclude how, if no discovery had been taken, the
representation is "so far along."
While it is true that the
motion to disqualify was filed February 11, 2011, or more than
two years after the complaint was filed (see Docket Items 1, 27),
this is not determinative.
Rather, the pertinent issue is
whether defendants can demonstrate that their attorneys have
distinctive value as trial counsel, and they have not made this
showing.
See MacArthur v. Bank of N.Y., supra, 524 F. Supp. at
1210-11.
Defendants cite a New York State case where a disqualification motion was denied on the ground of laches (see Defs.'
Mem. at 21, citing Bluebird Partners, L.P. v. Bank of N.Y., 21
Misc. 3d 1140(A), 2008 WL 5131174 at *7 (Sup. Ct. Nov. 6, 2008)).
However, another court in this district rejected a laches argument even where the disqualification motion was not made until
the first day of trial, because "insofar as 'disqualification is
in the public interest, the court cannot act contrary to that
interest by permitting a party's delay in moving for disqualification to justify the continuance of a breach of the Code of
Professional Responsibility.'"
Sheldon Elec. Co. v. Blackhawk
Heating & Plumbing Co., Inc., supra, 423 F. Supp. at 490, citing
38
Emle Indus., Inc. v. Patentex, Inc., 478 F.2d 562, 574 (2d Cir.
1973).
Therefore, I reject defendants' substantial hardship
argument.
Defendants also argue that any testimony would not be
"prejudicial" to the relationship between Coutsodontis and Poles
Tublin (Defs.' Mem. at 15-17).
There is no requirement that
testimony be prejudicial in order to disqualify an individual
attorney.
See Rule 3.7(a); DR 5-102(A); Lamborn v. Dittmer,
supra, 873 F.2d at 531 (citation omitted).
However, this argu-
ment relates to defendants' final argument that disqualification
should not impute to the entire firm.
I agree that no showing
has been made that would justify the disqualification of the
entire law firm of Poles Tublin.
The Second Circuit clearly stated in Murray v. Metro.
Life Ins. Co., supra, 583 F.3d at 178-79, that "a law firm can be
disqualified by imputation only if the movant proves by clear and
convincing evidence that [A] the witness will provide testimony
prejudicial to the client, and [B] the integrity of the judicial
system will suffer as a result."
Plaintiffs offer no evidence
that Poles Tublin's attorneys' testimony about their advice to
Coutsodontis with respect to the Athena's arrests will be adverse, arguing only that the testimony "will be at least potentially adverse" (Pls.' Mem. at 18; see also Pls.' Reply at 3).
39
Therefore, a showing has not been made that the testimony would
be prejudicial to defendants.
Thus, disqualification of the
entire firm of Poles Tublin is not warranted.
2.
Coutsodontis' Attorneys'
Alleged Contradiction of Their
Client's Defamatory Statements
Plaintiffs argue that Poles Tublin attorneys Christ
Stratakis and Johnston are necessary and prejudicial witnesses
with respect to Coutsodontis' belief as to the validity of George
Peters' power of attorney.
Specifically, plaintiffs claim that
Coutsodontis made allegations that George Peters' power of
attorney was procured by fraud, and plaintiffs further claim that
Coutsodontis' attorneys subsequently accepted the validity of the
power of attorney during oral argument before Judge Buchwald in
2008.
Plaintiffs assert that Poles Tublin's attorneys will
provide adverse testimony that will be prejudicial to
Coutsodontis.
Plaintiffs argue that this testimony is necessary
to prove an element of plaintiffs' defamation claim -– specifically, that Coutsodontis knew that his allegations were false
(see Pls.' Mem. at 20-21).
Upon review of the oral argument transcript, I conclude
that these attorneys should not be disqualified on the basis of
this argument.
Plaintiffs have not established a "substantial
40
likelihood of prejudice" with respect to the testimony.
Ragdoll
Prods. (UK) Ltd. v. Wal-Mart Stores, Inc., supra, 1999 WL 760209
at *2 (citation omitted).
Specifically, they have not demon-
strated that the testimony would be "sufficiently adverse to the
factual assertions or account of events offered on behalf of the
client, such that the bar or the client might have an interest in
the lawyer's independence in discrediting that testimony."
Murray v. Metro. Life Ins. Co., supra, 583 F.3d at 178 (citation
omitted).
Plaintiffs supplied a partial transcript of the oral
argument before Judge Buchwald, and they argue that disqualification is warranted because of two statements.
The first statement
is Stratakis' acknowledgment that "when the owner of the ship was
alive, she had given her nephew [George Peters] powers to operate
the ship . . . ." (Oral Argument Transcript at 20).
I agree that
this statement suggests an acknowledgment that powers were
rightfully transferred.
Defendants made no challenge to the
legality or validity of the transfer during this statement.
Plaintiffs identify a second statement made by Johnston, who stated, "George Peters has proceeded under a power of
attorney, but George Peters is . . . not a shareholder.
claim he is a shareholder.
Transcript at 36).
They
This is news to us" (Oral Argument
I do not believe that this statement is
41
necessarily adverse to Coutsodontis.
Stating that someone has
proceeded under a power of attorney is not necessarily the same
as recognizing a power of attorney as valid.
statement itself is ambiguous.
I believe that the
Defendants argue that their
attorneys inadvertently omitted the word "alleged" during
Stratakis and Johnston's statements due to "the heat of oral
arguments" (Defs.' Mem. at 17).
Additionally, I identified a third statement in the
oral argument transcript that was not cited by plaintiffs and
which I conclude undercuts their argument.
Prior to the two
statements cited by plaintiffs, Stratakis stated –- in reference
to plaintiffs -– that "[a]ll they have here is George Peters
claiming to be an attorney in fact employed by Sea Trade . . . ."
(Oral Argument Transcript at 20).
This statement seems to
suggest that defendants did not accept George Peters' "claim[]"
that he was an attorney in fact.
Rather, it suggests that
defendants were calling that representation into question and
that the subsequent statements merely summarized or paraphrased
plaintiffs' arguments.
Because I believe that Johnston's statement is ambiguous, plaintiffs have not established that his testimony is
"sufficiently adverse to the factual assertions or account of
events offered on behalf of the client."
42
Murray v. Metro. Life
Ins. Co., supra, 583 F.3d at 178 (citation omitted).
Similarly,
because one of Christ Stratakis' statements appears to be adverse
to Coutsodontis' position but another statement undercuts plaintiffs' position, plaintiffs have not met the "sufficiently
adverse" standard with respect to this attorney, either.
There-
fore, disqualification is not warranted on the basis of plaintiff's second argument.
3.
Poles Tublin's Initiation
of 2005 "Sham Action"
in New York State Court
Plaintiffs next argue that Poles Tublin's attorneys are
necessary witnesses with respect to Coutsodontis' 2005 filing of
a "sham action" in state court seeking a declaratory judgment
that he was a rightful owner of 250 shares of Sea Trade as the
result of an inter vivos gift from Athena Eliades.
v. Peters, supra, 2006 WL 721255 at *1.
Coutsodontis
Plaintiffs argue that
the action was filed on a "knowingly false premise" (Pls.' Reply
at 8).
They argue that this issue relates to a claim that
Coutsodontis acted in bad faith "with the purpose of economically
coercing [George] Peters into surrendering one-half of Sea Trade"
(see Pls.' Mem. at 14-15).
Plaintiffs assert that "Poles Tublin attorneys are
witnesses to the issues relating to the stock restriction and to
43
the phony 'inter-vivos gift' argument and therefore should be
disqualified as they will be called to testify on this issue
[sic]" (Pls.' Mem. at 24 (citation omitted)).
However, the only
attorney mentioned by name with respect to this issue is Poles,
who issued the complaint in the action allegedly commenced in
"bad faith" action (Pls.' Mem. at 11-12).
In their supporting memo, plaintiffs argue that "Poles
Tublin undoubtedly reviewed the shares" (Pls. Mem. at 15).
Later, in their reply brief, they state that "Poles Tublin
presumably reviewed the shares" and add that "Poles Tublin either
knew of, and provided advice regarding, the documents contradicting the inter-vivos transfer allegation and the transfer restriction expressly printed on all Sea Trade stock certificates or
they did not bother to find out whether the allegations were true
before filing the bad faith action" (Pls.' Reply at 8-9).
I conclude that Poles, the only attorney identified by
name with respect to this issue, should not be disqualified on
this ground.
Plaintiffs have not established that Poles' testi-
mony "could be significantly useful to his client."
Dittmer, supra, 873 F.2d at 531.
Lamborn v.
They do not establish that
Poles "is likely to be a witness on a significant issue of fact."
22 N.Y.C.R.R. § 1200.0.
Plaintiffs merely mention Poles' name as
the attorney who filed a complaint in an action that plaintiffs
44
believe to be a "sham," and this is clearly an insufficient
showing.
While Justice Cahn granted George Peters' motion to
dismiss the 2005 action against Coutsodontis and held that
"Coutsodontis' allegations [were] contradicted by the documentary
evidence presented," Justice Cahn did not describe the action as
fraudulent, frivolous, phony, a "sham" or an action made in bad
faith.
Coutsodontis v. Peters, supra, 2006 WL 721255 at *2.
He
did not characterize the action in any of the terms plaintiffs
now use when he had the entire record of the action before him.8
Because plaintiffs have not made a more persuasive argument that
the 2005 action was a "sham" action made in bad faith, I cannot
conclude that Poles would likely be a witness on a significant
issue of fact.
Plaintiffs make inconsistent and conclusory
arguments without support, and they speculate as to possible
avenues of testimony.
Their assertions fall far short of the
burden they need to meet for disqualification.
Furthermore, the thrust of plaintiffs' argument seems
to be that Poles Tublin should be disqualified as a whole.
But
plaintiffs do not establish "by clear and convincing evidence"
8
The Appellate Division, First Department subsequently
stated that "the only determination made on the merits is that no
inter vivos gift was made to plaintiff under New York law."
Coutsodontis v. Peters, 39 A.D.3d 274, 275, 831 N.Y.S.2d 902, 902
(1st Dep't 2007).
45
that Poles' testimony "will provide testimony prejudicial to the
client," Murray v. Metro. Life Ins. Co., supra, 583 F.3d at 17879, and they mention no other attorneys by name for this issue.
Therefore, disqualification by imputation is also unwarranted.
4.
Poles Tublin's Assistance
in Filing Injunction in Greece
Plaintiffs next argue that Poles Tublin's attorneys are
necessary witnesses with respect to the action Coutsodontis filed
in 2009 in Piraeus, Greece, which sought to enjoin the sale of
the Athena (Amended Compl. at ¶¶ 89-90; Johnston Aff. at ¶ 31).
Plaintiffs claim this action "had no legal justification and was
filed in bad faith" (Pls.' Mem. at 3).
Plaintiffs argue that
Coutsodontis' attempt to block the sale was a breach of his
fiduciary duty to Sea Trade's shareholders, and "therefore a
conflict arises in that Poles Tublin may have committed a blatant
ethical violation in permitting such action" (Pls.' Mem. at 25).
Plaintiffs further state that "Poles Tublin was aware of the
motives behind Coutsodontis' actions and actively coordinated
these actions through its affiliated office in Greece," which was
listed on Poles Tublin's website (Pls.' Mem. at 15).
They state
that "Poles Tublin's testimony and 'advice' regarding this action
will be key on this bad faith action" (Pls.' Mem. at 16).
46
Defendants acknowledge that "at all times Plaintiffs
had been actively engaged and represented by counsel in all of
the afore-described Greek actions since their respective commencements," but they have not expressly asserted an advice of
counsel defense with respect to this issue (Defs.' Mem. at 9).
In the absence of an advice of counsel defense or proof that
counsel was consulted in furtherance of a crime or fraud, Poles
Tublin's communications with Coutsodontis are privileged.
I conclude that plaintiffs have not met their burden
here, either.
Therefore, I also decline to disqualify Poles
Tublin with respect to the commencement of the 2009 Piraeus
action.
Plaintiffs never mention a Poles Tublin attorney by name
with respect to the action.
Therefore, it is impossible for me
to analyze how an individual attorney "is likely to be a witness
on a significant issue of fact."
22 N.Y.C.R.R. § 1200.0.
Moreover, in order to disqualify the firm by imputation, the
burden remains with plaintiffs to establish by clear and convincing evidence how one of Poles Tublin's attorneys' testimony will
be prejudicial.
at 178-79.
Murray v. Metro. Life Ins. Co., supra, 583 F.3d
Plaintiffs' statement that the firm may have violated
ethical obligations is not sufficient.
Neither is plaintiffs'
conclusory statement that the firm's "testimony and 'advice' . .
. will be key."
Plaintiffs' allegations are otherwise unsup47
ported by evidence -- beyond a reference to Poles Tublin's
website -– and their arguments do not touch upon the relevant
standard for disqualification, either for an individual or for a
law firm.
5.
Punitive Damages
Plaintiffs' final argument is that Poles Tublin's
attorneys are necessary witnesses with respect to punitive
damages.
Plaintiffs first raise this argument in their reply
brief (compare Pls.' Reply at 11-12, with Pls.' Mem.).
It is
inappropriate to grant relief on new theories first raised in
reply where the non-moving party does not have an opportunity to
reply to such theories.
Scherer v. Equitable Life Assurance
Soc'y, 01 Civ. 10193 (CSH), 2004 WL 2101932 at *5 n.1 (S.D.N.Y.
Sept. 21, 2004) (Haight, D.J.), citing Ernst Haas Studio, Inc. v.
Palm Press, Inc., 164 F.3d 110, 112 (2d Cir. 1999) (per curiam);
Hughes v. J.P. Morgan Chase & Co., 01 Civ. 6087 (BSJ), 2004 WL
1403337 at *3 n.3 (S.D.N.Y. June 22, 2004) (Jones, D.J.); accord
Blake v. Fiit Int'l, Inc., 05 Civ. 6150 (HBP), 2007 WL 980362 at
*10 (S.D.N.Y. Mar. 30, 2007) (Pitman, M.J.).
Therefore, I refuse
to disqualify Poles Tublin or any of its attorneys with respect
to this issue.
48
IV.
Conclusion
Accordingly, for all the foregoing reasons, plaintiffs'
motion to disqualify counsel is granted in part.
Within ten days
of the date of this Order, plaintiffs' counsel is to identify no
more than two Poles Tublin attorneys that they wish to call to
testify concerning the arrests of the cargo ship Athena.
Upon
identification, these attorneys will be immediately disqualified.
Plaintiffs' motion is denied in all other respects.
Dated:
New York, New York
July 25, 2011
SO ORDERED
United States Magistrate Judge
Copies transmitted to:
Gregory S. Hansen, Esq.
Robert M. Keenan, Esq.
Anderson Kill & Olick, P.C.
1251 Avenue of the Americas
New York, New York 10020
Nathan C. Gaudio, Esq.
Scott R. Johnston, Esq.
Poles Tublin Stratakis & Gonzalez, LLP
46 Trinity Place
New York, New York 10006
49
Peter Skoufalos, Esq.
Brown Gavalas & Fromm LLP
355 Lexington Avenue
New York, New York 10017
50
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