Facts
- Steven’s Distributors, Inc. (Steven’s) rented commercial real estate and subleased the premises to a third party.
- Steven’s retained the law firm Gold, Rosenblatt & Goldstein to collect rent allegedly owed by the sublessee.
- The rent was not collected, and Steven’s became unable to pay its own landlord.
- Steven’s filed for bankruptcy.
- Steven’s then retained Robinson Brog as counsel and commenced a legal-malpractice action against Gold, Rosenblatt & Goldstein and related individuals, alleging that negligence by attorney Steven Goldstein contributed to Steven’s inability to pay the landlord.
- While representing Steven’s in the malpractice action, Robinson Brog also represented Winhall II Funding Associates (Winhall), a partnership, in a separate matter.
- David Gold and Randi Rosenblatt—associated with the defendant firm—were general partners of Winhall.
- Gold & Rosenblatt (a professional limited liability company) became the successor to Gold, Rosenblatt & Goldstein; David Gold and Randi Rosenblatt were its only members.
- Gold & Rosenblatt moved to disqualify Robinson Brog, arguing that Robinson Brog’s representation of Winhall meant Robinson Brog also represented Winhall’s general partners, and Robinson Brog could not simultaneously sue those partners (or sue parties identified with them) in the Steven’s malpractice case.
Issues
- Whether, under New York law, representation of a partnership constitutes representation of the partnership’s general partners for conflict-of-interest purposes.
- Whether Robinson Brog had an impermissible concurrent conflict by representing Winhall while prosecuting a malpractice action adverse to Winhall’s general partners (Gold and Rosenblatt) in another matter.
- Whether the conflict required disqualification of Robinson Brog from representing Steven’s in the malpractice action.
Decision
- The court granted the motion to disqualify Robinson Brog as counsel for Steven’s.
- The court treated Robinson Brog’s ongoing representation of Winhall as creating attorney-client duties to Winhall’s general partners, including Gold and Rosenblatt.
- Because Robinson Brog was simultaneously acting adversely to those same individuals in the Steven’s malpractice litigation, the court found a prohibited concurrent conflict under New York’s conflict rules.
- The court ordered Robinson Brog’s removal from the case.
Legal Principles
- A lawyer generally may not represent a client in a matter directly adverse to another current client unless the conflict is permissibly consented to under the governing ethics rules.
- In New York, for conflict analysis, a partnership is commonly treated as an aggregate of its partners; as a result, representing a partnership may be treated as representing its general partners.
- When a law firm is litigating against a current client, disqualification is strongly favored to protect the duty of loyalty and to avoid the appearance of divided loyalty, even if there is no showing that confidential information was misused.
- A party seeking disqualification must show a basis for conflict under the ethics rules; once a current-client conflict is shown, continued representation is generally not permitted absent a valid waiver.
Conclusion
Steven’s Distributors, Inc. v. Gold, Rosenblatt & Goldstein disqualified plaintiff’s counsel because counsel’s separate representation of a partnership was treated as representation of the partnership’s general partners, and counsel could not simultaneously prosecute a malpractice action adverse to those general partners consistent with New York’s rules on concurrent conflicts.