Avra Surgical, Inc. v. Dualis Medtech GmbH et al
OPINION AND ORDER. Defendants' March 27, 2014 motion for disqualification of Jared B. Stamell is granted. If a new attorney (who is not part of the law firm of Jared B. Stamell) does not file a notice of appearance on behalf of plaintiff by June 14, 2014, the action will be dismissed without prejudice. (Signed by Judge Denise L. Cote on 5/27/2014) (gr)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
AVRA SURGICAL, INC.,
DUALIS MEDTECH GmbH and THOMAS SCHMID, :
as Managing Director,
13 Civ. 7863 (DLC)
OPINION AND ORDER
For the Plaintiff:
Jared B. Stamell
Andrew R. Goldenberg
Stamell & Schager, LLP
One Liberty Plaza, 23rd Floor
New York, NY 10006
For the Defendants:
Law Offices of Imke Ratschko
30 Broad Street, 14th Floor
New York, NY 10004
DENISE COTE, District Judge:
This case concerns a dispute arising out of a contract
negotiated between the plaintiff and defendants on one side, and
a third party on the other side.
Plaintiff’s counsel, Jared B.
Stamell (“Stamell”), has taken the position that he negotiated
the contract on behalf of both plaintiff and defendants.
Stamell now represents plaintiff, against defendants, in this
dispute involving the same contract.
Defendants have moved to disqualify Stamell arguing, inter
alia, that he is barred from litigating this case due to his
conflict of interest.
For the following reasons, the
disqualification request is granted.
The following facts are taken from the allegations in the
complaint, from judicially noticeable materials, or from the
affidavits submitted with Stamell’s opposition papers.
facts are assumed to be true for purposes of the present motion
Dualis MedTech GmbH (“Dualis”) is based in Germany and owns
technology with potential applications in medical devices.
HeartWare International Inc. (“HeartWare”) is based in
Massachusets and is a manufacturer of heart assist devices.
AVRA Surgical, Inc. (“Avra”) had relationships with both Dualis
In early 2011, Avra’s Chairman, Barry F. Cohen (“Cohen”),
put the companies in touch, believing that HeartWare could take
advantage of Dualis’s technology.
In March 2011, HeartWare
agreed to enter into a collaboration agreement with Avra to
license Dualis technology and to employ Dualis to integrate its
technology with HeartWare’s products. (“Agreement”).
Agreement involved Avra and Dualis on one side, and HeartWare on
the other side.
Stamell was Avra’s general counsel.
(“Schmid”), the Managing Director of Dualis, agreed that Stamell
should negotiate the Agreement on behalf of both Avra and Dualis
because Dualis had no lawyers or experience in the United
Negotiations between Avra/Dualis and HeartWare over the
Agreement lasted until January 2012.
Over the course of these
neogiations, Stamell worked closely with both Cohen and Schmid,
communicating with them by email, telephone, and in-person.
Cohen and Schmid together instructed Stamell on how to proceed.
In January 2012, the Agreement was completed and signed by
By mid-2013, however, the relationship between
Avra and Dualis had broken down.
On or around October 2013, Avra filed this suit against
Dualis and Schmid in New York state court, contending that
Dualis and Schmid had violated the terms of the Agreement and
that Avra was entitled to 50% of Dualis’s revenues from the
Avra was represented by Stamell.
removed the suit to this Court on November 5.
Dualis and Schmid
Two other actions are relevant for present purposes.
October 10, 2013, Stamell’s law firm filed suit against Dualis
and Schmid in New York state court, seeking outstanding legal
fees from the negotiation of the Agreement.
On February 19,
2014, Stamell’s law firm sued Dualis in Massachusetts state
court, also seeking outstanding legal fees from the negotiation
of the Agreement.
On March 27, 2014, defendants in this action moved to
dismiss on multiple grounds and moved to disqualify Stamell on
two grounds, including conflict of interest from his prior
representation of Dualis.
On April 4, at the initial pretrial
conference, it was determined that the conflict issue must be
resolved as a threshold issue, and the parties were directed to
brief just that issue.
The briefing on the conflict issue was
fully submitted on May 12.
“The authority of federal courts to disqualify attorneys
derives from their inherent power to preserve the integrity of
the adversary process.”
Hempstead Video, Inc. v. Inc. Vill. of
Valley Stream, 409 F.3d 127, 132 (2d Cir. 2005) (citation
“In deciding whether to disqualify an attorney, a
district court must balance a client’s right freely to choose
his counsel against the need to maintain the highest standards
of the profession.”
GSI Commerce Solutions, Inc. v. BabyCenter,
L.L.C., 618 F.3d 204, 209 (2d Cir. 2010) (citation omitted).
Motions to disqualify counsel are subject to strict
scrutiny because of their potential to be used for tactical
Murray v. Metropolitan Life Ins. Co., 583 F.3d 173,
178 (2d Cir. 2009).
“[E]ven when made in the best of faith,
such motions inevitably cause delay” in the litigation.
Educ. v. Nyquist, 590 F.2d 1241, 1246 (2d Cir. 1979).
Second Circuit has explained:
[D]isqualification has been ordered only in
essentially two kinds of cases: (1) where an
attorney’s conflict of interests . . . undermines the
court’s confidence in the vigor of the attorney’s
representation of his client, or more commonly (2)
where the attorney is at least potentially in a
position to use privileged information concerning the
other side through prior representation.
Bobal v. Rensselaer Polytechnic Inst., 916 F.2d 759, 764–65 (2d
Cir. 1990) (citation omitted).
Although “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.”
Inc., 409 F.3d at 132 (citation omitted).
adjudicating questions involving the ethics of attorneys look to
the local rules of professional conduct for guidance.
e.g., id. at 133 (relying on a previous version of the New York
attorney professional conduct rules); Pierce & Weiss, LLP v.
Subrogation Partners LLC, 701 F. Supp. 2d 245, 255–56 (E.D.N.Y.
2010) (relying on the current New York Rules of Professional
Conduct in adjudicating an attorney disqualification motion).
New York Rule of Professional Conduct 1.9 (“Rule 1.9”)
addresses the type of conflict-of-interest question presented
here, and can provide guidance.
duties to former clients.
Rule 1.9 governs an attorney’s
(a) A lawyer who has formerly represented a client in
a matter shall not thereafter represent another person
in the same or a substantially related matter in which
that person’s interests are materially adverse to the
interests of the former client unless the former
client gives informed consent, confirmed in writing.
(b) Unless the former client gives informed consent,
confirmed in writing, a lawyer shall not knowingly
represent a person in the same or a substantially
related matter in which a firm with which the lawyer
formerly was associated had previously represented a
(1) whose interests are materially adverse to
that person; and
(2) about whom the lawyer had acquired
information protected by Rules 1.6 or paragraph
(c) of this Rule that is material to the matter.
(c) A lawyer who has formerly represented a client in
a matter or whose present or former firm has formerly
represented a client in a matter shall not thereafter:
(1) use confidential information of the former
client protected by Rule 1.6 to the disadvantage
of the former client, except as these Rules would
permit or require with respect to a current
client or when the information has become
generally known; or
(2) reveal confidential information of the former
client protected by Rule 1.6 except as these
Rules would permit or require with respect to a
N.Y. Rules of Prof’l Conduct § 1.9.
Rule 1.9(a) squarely governs the present situation and
establishes that Stamell may not represent Avra against Dualis.
All of the requirements in Rule 1.9(a) are met here.
Stamell has taken the position -- both in the legal fees
litigation in other courts and in his affidavit filed here -that he represented Dualis in negotiating the Agreement.
Second, Stamell now represents Avra in a substantially related
This is a contractual dispute between Avra and Dualis
arising out the Agreement, i.e., the contract that Stamell
negotiated in his prior representation of Dualis.
because Avra is suing Dualis, Avra’s interests are necessarily
materially adverse to those of Daulis.
Fourth, there is no
written, informed consent, as reflected in Dualis’s motion to
Finally, the existence of such a direct
conflict of interest meets the high bar necessary to grant a
Stamell’s sole response is to assert, citing older Second
Circuit law regarding successive representation, that a lawyer
is only prohibited from suing a former client when the lawyer
has, or is likely to have, acquired confidential information
from the prior client in the course of the prior relationship.
Stamell then argues that no confidentiality exists among coclients, and thus he is not prohibited from suing his former
This response fails for three reasons.
relies entirely on Circuit case law discussing Canon 4 of the
Code of Professional Responsibility, which New York repealed in
2009 and replaced with the New York Rules of Professional
Conduct, which are based on the Model Rules of Professional
Thus, Rule 1.9(a) informs this inquiry, not the
outdated law cited by Stamell.
Second, to the extent that Stamell is arguing that the
previous case law’s requirement of confidentiality should be
read into Rule 1.9(a), such an argument is not supported by the
Rule 1.9(a) makes no mention of confidentiality.
Rules 1.9(b) and 1.9(c) make reference to confidentiality is
strong evidence that its absence in Rule 1.9(a) was an
intentional decision by the drafters of the New York Rules of
Third, this conclusion is confirmed by the historical
understanding of the prohibition against a lawyer suing his
Stamell’s argument assumes that this
prohibition reflects solely a lawyer’s duty of confidentiality
to his clients.
A lawyer also has, however, a duty of loyalty
to his clients.
See Tekni-Plex, Inc. v. Meyner & Landis, 674
N.E.2d 663, 666 (N.Y. 1996) (“Attorneys owe fiduciary duties of
both confidentiality and loyalty to their clients.”).
prohibition reflects the duty of loyalty to one’s former
clients, independent of the duty of confidentiality, as the New
York Court of Appeals observed nearly thirty-five years ago:
The proscription against taking a case against a
former client is predicated, however, on more than the
possibility of use in the second representation of
information confidentially obtained from the former
client in the first representation. The limitation
arises simply from the fact that the lawyer, or the
firm with which he was then associated, represented
the former client in matters related to the subject
matter of the second representation. Accordingly, it
is no answer that the lawyer did not in fact obtain
any confidential information in connection with the
first employment, or even that it was only other
members of his firm who rendered the services to the
client. Irrespective of any actual detriment, the
first client is entitled to freedom from apprehension
and to certainty that his interests will not be
prejudiced in consequence of representation of the
opposing litigant by the client’s former attorney.
The standards of the profession exist for the
protection and assurance of the clients and are
demanding; an attorney must avoid not only the fact,
but even the appearance, of representing conflicting
interests. With rare and conditional exceptions, the
lawyer may not place himself in a position where a
conflicting interest may, even inadvertently, affect,
or give the appearance of affecting, the obligations
of the professional relationship.
Cardinale v. Golinello, 372 N.E.2d 26, 30 (N.Y. 1977) (citation
omitted); see also Tekni-Plex, 674 N.E.2d at 667 (citing
Cardinale for this proposition).
Thus, it is Stamell’s duty of
loyalty that prevents him for representing Avra against Dualis
here, irrespective of any confidentiality concerns.
Defendants’ March 27, 2014 motion for disqualification of
Jared B. Stamell is granted.
If a new attorney (who is not part
of the law firm of Jared B. Stamell) does not file a notice of
appearance on behalf of plaintiff by June 14, 2014, the action
will be dismissed without prejudice.
See Pridgen v. Andresen,
113 F.3d 391, 393 (2d Cir. 1997) (holding that a corporation
cannot proceed pro se in federal court).
New York, New York
May 27, 2014
United States District Judge
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