Commercial Division Blog

Posted: August 8, 2014 / Categories Commercial, Law Firms and Professional Ethics

Prior Representation Not Grounds For Disqualification of Attorney Where Former Client Waived Conflict In Engagement Letter

On August 6, 2014, the Second Department issued a decision in Grovick Properties, LLC v. 83-10 Astoria Blvd., LLC, 2014 NY Slip Op. 05627, reversing the trial court's disqualification of plaintiff's attorney based on a prior related representation of the defendant, where the defendant had expressly waived the conflict.

In Grovick Properties, an attorney (Brooks) represented the buyer (Grovick) in a commercial real estate transaction in which Grovick purchased a property from Astoria that had previously been contaminated by petroleum. After the closing, Brooks was retained by Astoria to represent it in connection with 'certain claims made by the State for reimbursement of the cleanup and removal costs." The engagement letter contained the following language, disclosing the possibility of a potential conflict between Astoria and the attorney's existing client, Grovick, and providing that in the event of such a conflict, Brooks could continue to represent Grovick:

Astoria now desires to engage this firm to represent it against potential claims made by the State arising from or relating to the discharge of petroleum at or from the [property]. Prior to accepting this engagement, we informed you that we continue to represent GROVICK with regard to the now-closed transaction between Astoria and GROVICK, as well as other matters. Notwithstanding this information, and the potential conflict contained therein, you requested and instructed this firm to proceed in its representation of Astoria and each of its members for the purposes stated in the letter of engagement.

In connection therewith, Astoria and each of its Members hereby waive any and all claims of conflict of interest or potential conflict of interest that may arise out of the [sic] our representation of Astoria on the one hand, and any work we have performed, now perform, or may perform for GROVICK or its principals (including Jeffrey Novick). Furthermore, in the event Astoria at any time for any reason elects to discontinue its engagement of this firm, or should an adverse relationship arise between ASTORIA and GROVICK, you acknowledge and agree that we may continue without restriction to represent GROVICK and its principals in any and all matters, including those that arise from or relate to the [property].

After Astoria terminated the representation, Brooks brought suit against Astoria on behalf of Grovick seeking to recover costs for remediating the property. Justice Driscoll of the Nassau County Commercial Division granted Astoria’s motion to disqualify Brooks as counsel for Grovick based on Brooks' prior related representation of Astoria. The Second Department reversed, holding that Astoria had waived any objection to the representation in the engagement letter:

The disqualification of an attorney is a matter which rests within the sound discretion of the court. A party's entitlement to be represented in ongoing litigation by counsel of his or her own choosing is a valued right which should not be abridged absent a clear showing that disqualification is warranted, and the movant bears the burden on the motion. Here, the Supreme Court improvidently exercised its discretion in granting the motion to disqualify Brooks and Phillip Nizer, LLP, as counsel for the plaintiff. Pursuant to the written waiver, the Astoria defendants specifically waived any conflict of interest that might arise from Brooks's representation of the plaintiff. The waiver fully informed the Astoria defendants of the potential conflict of interest and, by executing the waiver, the Astoria defendants consented to have Brooks represent them notwithstanding that conflict. Under the facts of this case, the Astoria defendants should not be permitted to compel the disqualification of Brooks and Phillips Nizer, LLP, simply because the representation to which they consented now involves litigation.

(Citations omitted). This decision serves as a reminder to counsel representing multiple parties to consider potential conflicts issues in preparing engagement letters.