## Facts

- Stratagem Development Corp. sued Heron International N.V. and Heron Properties, Inc. for breach of a joint venture agreement relating to development of midtown Manhattan properties, including an unbuilt project known as Heron Tower II.
- Stratagem was represented in the joint-venture dispute by Epstein, Becker & Green.
- At the same time, Epstein Becker represented Fidelity Services Corporation (FSC), a wholly owned subsidiary of Heron Properties, in separate labor litigation and related arbitration involving security guards at Heron Tower I (the “Bevona matters”).
- The labor matters were procedurally active (appeal held in suspense pending settlement discussions and arbitration in discovery), but were factually and legally unrelated to the joint-venture dispute.
- Epstein Becker notified FSC of its intent to withdraw from the Bevona matters in connection with filing suit against the Heron entities on Stratagem’s behalf and arranged for substitute counsel and transfer of files.
- Defendants moved to disqualify Epstein Becker, arguing the firm concurrently represented a Heron subsidiary while suing Heron, creating a conflict based on the duty of loyalty rather than alleged misuse of confidential information.

## Issues

1. Whether Epstein Becker should be disqualified from representing Stratagem against the Heron entities due to a conflict of interest arising from the firm’s contemporaneous representation of FSC, a wholly owned Heron subsidiary, in unrelated labor litigation and arbitration.
2. Whether the subsidiary relationship and the timing/effectiveness of counsel’s withdrawal from the subsidiary representation required treating the conflict as a disqualifying concurrent conflict.

## Decision

- The court denied defendants’ motion to disqualify Stratagem’s counsel.
- The court found the two representations were essentially unrelated (joint-venture development dispute concerning Heron Tower II versus labor/union matters concerning Heron Tower I).
- The court declined to treat representation of FSC as automatically equivalent to representation of the Heron parent entities for disqualification purposes on the record presented.
- The court credited counsel’s withdrawal efforts and the limited risk to the fairness and integrity of the proceedings.
- The court emphasized the absence of a showing that confidential information would be used against FSC/Heron or that any concrete prejudice would result from continued representation.

## Legal Principles

- A lawyer generally may not represent a current client while simultaneously representing another party directly adverse to that client absent informed consent; concurrent adversity triggers heightened scrutiny and a strong presumption favoring disqualification.
- Disqualification is a drastic remedy, disfavored and examined with caution because it can be used for delay or tactical advantage; it is warranted only when necessary to protect the integrity of the adversary process and public confidence in the bar.
- Representation of a corporate subsidiary does not automatically make the corporate parent a client for conflicts purposes; whether a parent-subsidiary relationship creates a disqualifying conflict depends on the alignment of interests and the facts of the matters at issue.
- In assessing disqualification, courts consider, among other factors, relatedness of the matters, the risk of divided loyalties, the likelihood of misuse of confidential information, the effectiveness of withdrawal steps, and prejudice to the party whose chosen counsel would be removed.

## Conclusion

The court refused to disqualify Stratagem’s counsel where the firm’s work for a wholly owned subsidiary involved unrelated labor disputes, the firm undertook to withdraw from that representation, and defendants failed to show a concrete threat to loyalty, misuse of confidences, or harm sufficient to justify the severe remedy of disqualification.


Stratagem Dev. Corp. v. Heron Int'l N.V., 756 F. Supp. 789 (S.D.N.Y. 1991)