On October 14, 2016, Justice Sherwood of the New York County Commercial Division issued a decision in Rahmani v. Venture Capital Properties LLC, 2016 NY Slip Op. 31927(U), holding that the decision whether to disqualify counsel is for the court, not the arbitrator, explaining:
[M]atters of attorney discipline are beyond the jurisdiction of arbitrators; issues of attorney disqualification similarly involve interpretation and application of Code of Professional Responsibility and Disciplinary Rules, as well as potential deprivation of counsel of client’s choosing, and cannot be left to determination of arbitrators selected by parties themselves for their expertise in particular industries engaged in. Rule 1.7 of the New York Rules of Professional Conduct prohibits an attorney from representing two clients concurrently where the representation will involve the lawyer in representing differing interests Rules of Professional Conduct. Disqualification of an attorney under this rule is virtually automatic when an attorney represents a client in a proceeding against another current client. Where an attorney simultaneously represents clients with adverse interests to each other, the so-called prima facie rule shifts the burden of proving actual or apparent conflict in loyalties or diminution in the vigor of his representation from the party seeking disqualifications to the attorney with the alleged conflict.
In this case, Mr. Castro seeks to represent plaintiffs in the JAMS arbitration against VCP while simultaneously representing VCP in three active litigations in this court. When an attorney represents a limited liability company, he is deemed as a matter of law to represent each of its members. Accordingly, by virtue of Castro’s representation of VCP, Castro also represents the individual defendants Ebi Khalili and Josh Rahmani because they are members of VCP. Thus, by representing plaintiffs in the arbitration against defendants, he is effectively suing his client, in violation of Rule 1.7.
(Internal citations and quotations omitted).