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Current Developments in the Commercial Divisions of the
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Posted: May 10, 2014

Former Counsel for Business Associates Disqualified from Representing One Former Client Against Another

On May 7, 2014, the Second Department issued a decision in Gordon v. Ifeanyichukwu Chuba Orakwue Obiakor, 2014 NY Slip Op. 03232, disqualifying trial counsel because of a conflict.

In Gordon, the plaintiff moved to disqualify the defendants’ counsel on the ground that counsel previously had represented her. The trial court denied the plaintiff’s motion. The Second Department reversed, explaining:

Where the Rules of Professional Conduct (22 NYCRR 1200.0) are invoked in litigation, courts are not constrained to read the rules literally or effectuate the intent of the drafters, but look to the rules as guidelines to be applied with due regard for the broad range of interests at stake. It is the Supreme Court’s responsibility to balance the competing interests, and the disqualification of an attorney is a matter that rests within the sound discretion of the Supreme Court.

Here, prior to the commencement of this action, the defendant’s attorney had provided legal advice to both the appellant, Barbara Gordon, and the defendant in their capacity as business partners and members of several limited liability companies. There was a substantial relationship between the involvement of the defendants’ attorney in the formation of those limited liability companies, and his involvement as general counsel to those limited liability companies in connection with the instant action for an accounting. In his capacity as general counsel, the defendant’s attorney was in a position to receive relevant confidences regarding several of those limited liability companies, in which the plaintiff’s interests are now adverse to the defendant’s interests. Thus, under the circumstances of this case, the Supreme Court improvidently exercised its discretion in denying the appellant’s motion to disqualify the defendants’ attorney.

(Internal quotations and citations omitted).

In a divorce, a couple’s friends sometimes feel as if they must choose between the members of the couple. In a business divorce, as this decision shows, former counsel for all the parties may be asked to make such a choice. This decision shows the result.

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