A lawyer and his firm won’t be ousted as defense counsel for an entity in commercial litigation just because he has financial and business ties to it, a federal judge in New York decided Nov. 13.
There’s no real chance that the lawyer’s personal links to the defendant will undermine his professional judgment as its counsel, Judge William H. Pauley III said ( Power Play 1 LLC v. Norfolk Tide Baseball Club, LLC , 2017 BL 406147, S.D.N.Y., No. 17cv4831, 11/13/17 ).
The case indicates that a lawyer’s own financial ties to a client aren’t grounds for disqualification where the lawyer’s interests aren’t adverse to those of the client.
Power Play 1 LLC is suing Tides Baseball Club L.P. (Tides), claiming it made misrepresentations and committed fraud in a deal connected with its purchase of a minor league professional hockey team.
Power Play wanted the court to disqualify Kaufman & Canoles P.C. from representing Tides because a member of the firm, Vincent J. Mastracco Jr., has financial links to Tides.
Mastracco owns a limited partnership interest in Tides and is the registered agent for Tides in Virginia, and he has served as counsel for Tides and some of its limited partners for many years, the court said.
The court said “the mere existence of financial or business interests does not warrant disqualification.”
Under New York Rule of Professional Conduct 1.7(a)(2), there must be a significant risk that these interests will adversely affect the lawyer’s exercise of professional judgment on behalf of the client, the court said.
The court said that Power Play just called the arrangement “unseemly” without explaining how Mastracco’s financial and business interests in Tides would impair his professional judgment or how his interests are adverse to the interests of Tides.
If anything, their interests appear to be aligned, the court said.
Power Play also invoked the witness-advocate rule set out in Rule 3.7, saying that Mastracco and another lawyer in Kaufman & Canoles are material witnesses in light of certain statements they made after the transaction.
However, the court said that according to Mastracco’s declaration, he wasn’t involved in negotiating, drafting, or reviewing the disputed agreement, and the other lawyer didn’t have any relevant knowledge beyond what Mastracco told her. Power Play didn’t rebut those assertions, the court said.
It wasn’t clear at this stage that either lawyer will be called to testify at trial, or how necessary they may be as witnesses, or whether any potential testimony would be adverse to the client’s factual account, the court said.
The court also noted that according to Tides, Mastracco is a transactional attorney who will not be counsel of record. Any concern over “trial taint” was particularly remote because neither party requested a jury trial, the judge also said.
Burns & Levinson LLP and Morea Law LLC represented the plaintiffs, Power Play 1 LLC and Admirals ECHL Hockey LLC. Kaufman & Canoles represented the defendants, Tides Baseball Club L.P. and Norfolk Tide Baseball Club LLC.
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