In this action concerning a lease of billboard space in Times Square, defendants Times Square JV LLC (Times Square JV) and the City Investment Fund, L.P. (CIF) move to disqualify Herrick Feinstein LLP (Herrick Feinstein), counsel for plaintiff Clear Channel Spectacolor Media LLC (Clear Channel), on the ground that, pursuant to Disciplinary Rule (DR) 5-105 (22 NYCRR 1200.24), Herrick Feinstein has a conflict of interest. Defendants also seek to impose sanctions [*2]against plaintiff. As discussed herein, the motion is denied.^[FN1]

According to defendants, CIF is a private equity investment fund which creates special purpose entities (SPEs) that are wholly-owned subsidiaries of CIF, which, in turn become a member of a joint venture (JV) that makes real estate investments. Defendants submit that Herrick Feinstein was involved in the formation of three such JVs of CIF, to wit, 141 Acquisition Associates LLC (formed in 2005), Veritas Group IX-NYC, LLC (formed in 2006), and 131 West 33rd Fee LLC (formed in 2007), and that, on some level, Herrick Feinstein continues to represent one or more of these three JVs. Defendants submit that "Herrick Feinstein's representation of the CIF JVs is ongoing, as it has rendered an invoice to at least [sic] of the CIF JVs as recently as June 2007, last month, and has never sent a notice to any of the CIF JVs that it has ceased its representation of any of the JVs" (see affidavit of Nan Molofsky, Vice President of CIF, sworn to July 17, 2007, ¶ 11).

Times Square JV is also a CIF JV. Pursuant to a lease, dated as of January 1, 1996, Times Square JV's predecessor-in-interest (Broadway 48th and 49th Street Associates), as landlord, granted Clear Channel's predecessor-in-interest (CPH Signs Company, LLC), as tenant, certain rights to erect and place media on two billboard spaces on the fa ade of the Crowne Plaza Hotel for a term of 10 years (the Lease). Under the Lease, the tenant has the option to renew for three successive additional terms "by giving the Landlord at least 90 days prior written notice of Tenant's election to extend the current term of this Lease" (Lease, ¶ 2.02). The parties dispute what date constitutes the "Commencement Date" under the Lease, and therefore, also dispute, the expiration date, as well as the date for Clear Channel to give notice of its election to renew the Lease.

By letter, dated April 26, 2007, Clear Channel purported to give notice of its election to renew the Lease. Defendants rejected Clear Channel's notice on the ground that it was untimely. This action ensued.

On July 10, 2007, Clear Channel commenced this action seeking, inter alia, a permanent injunction, enjoining defendants from terminating the Lease. At or about the same time, Clear Channel obtained a TRO to maintain the status quo. Apparently, Clear Channel admits that the notice was untimely, but seeks enforcement of its election to renew the Lease based upon equitable principles.

Defendants maintain that, although Herrick Feinstein never actually represented CIF or Times Square JV (or Time Square JV's predecessor-in-interest), applying partnership law, Herrick Feinstein is deemed to have represented CIF and all of the CIF JVs, and may not now represent a party in an action adverse to CIF or the CIF JVs. Defendants thus submit that Herrick Feinstein, by representing Clear Channel in a litigation adverse to CIF and while simultaneously representing CIF JVs on a variety of matters, has violated its ethical obligations under DR 5-105. Defendants maintain that, since these conflicting interests prevent Herrick Feinstein from honoring its duty of undivided loyalty to CIF, and at the very least create a disturbing appearance of impropriety, it must be disqualified as counsel to Clear Channel.

DR 5-105 provides, in pertinent part: [*3]

(a) A lawyer shall decline proffered employment if the exercise of independent professional judgment in behalf of a client will be or is likely to be adversely affected by the acceptance of the proffered employment, or if it would be likely to involve the lawyer in representing differing interests, except to the extent permitted under subdivision (c) of this section.

(b) A lawyer shall not continue multiple employment if the exercise of independent professional judgment in behalf of a client will be or is likely to be adversely affected by the lawyer's representation of another client, or if it would be likely to involve the lawyer in representing differing interests, except to the extent permitted under subdivision (c) of this section.

(c) In the situations covered by subdivisions (a) and (b) of this section, a lawyer may represent multiple clients if a disinterested lawyer would believe that the lawyer can competently represent the interest of each and if each consents to the representation after full disclosure of the implications of the simultaneous representation and the advantages and risks involved.

Herrick Feinstein maintains that it never represented CIF or Times Square JV, and that, even if there is a basis from which it could be found that CIF is a "vicarious" client of Herrick Feinstein, disqualification is still unwarranted because the matters on which Herrick Feinstein has represented entities in which CIF has an interest are not "substantially related" to this matter. Herrick Feinstein submits affidavits in support of its contention that, although it has represented two CIF JVs, it never represented CIF itself, and that, in any event, the subject matters upon which it represented these JVs were unrelated to the subject matter of this action. Herrick Feinstein's affiants further aver that Herrick Feinstein did not receive confidential information from CIF, nor provide legal advice to CIF, as an individual client.

Clear Channel and Herrick Feinstein rely on AMBAC Indemnity Corp. v Bankers Trust Co. (145 Misc 2d 52 [Sup. Ct, NY Cty 1989]). In AMBAC, as here, the law firm in question did not directly represent the movant. Instead the moving party insisted that it was a client of the attorney because of its close relationship with another entity that the law firm did represent. The court explored the issue also presented here - - when does concurrent representation adverse to a "vicarious" client require disqualification? In reaching its conclusion, the court examined two seminal Second Circuit cases: Cinema 5 Ltd. v Cinerama, Inc. (528 F2d 1384 [2d Cir 1976]) and Glueck v Jonathon Logan, Inc. (653 F2d 746 [2d Cir 1981]).

Cinema 5 established the rule that where an attorney represents a client, the attorney is per se disqualified from concurrently representing a party adverse to that client. In Glueck, the rule was narrowed as it relates to the situation where the client is not directly represented by the attorney, but is instead "vicariously" represented through a related entity. The Second Circuit, in Glueck, held that, in the case of "vicarious" representation, the standard is not the per se rule of Cinema 5, but rather the "substantial relationship" test normally applied to prior representations.

"[A] party seeking to disqualify an attorney or a law firm on the ground of prior representation must establish '(1) the existence of a prior attorney-client relationship and (2) that the former and current representations are both adverse and substantially related,' " (Talvy v American Red Cross in Greater New York, 205 AD2d 143, 148 [1st Dept 1994], affd 87 NY2d 826 [1995], quoting Solow v W.R. Grace & Co., 83 NY2d 303 [1994] see also Jamaica Public Serv. Co. Ltd. v [*4]AIU Insurance Co., 92 NY2d 631 [1998]).

The AMBAC court denied the motion for disqualification, reasoning that "[t]he time and circumstances, the locus of the activity, the nature of the work. . . .and the nature of the allegations made in the complaint" regarding the relationship being claimed to create a conflict "have little resemblance to the subject matter" of the work being done by the attorneys for the entity through which the vicarious client claimed an attorney-client relationship (id., 145 Misc 2d at 62; see also Nicola v Barrett, __ AD3d __ , 840 NYS2d 677 {43 AD3d 583} [3d Dept 2007] [IAS court properly denied disqualification motion because "defendants failed to demonstrate a substantial relationship between the current and prior representation"]; Gandhi v Filler, 15 Misc 3d 1124 [A], 2007 NY Slip Op 50824 [U] [Sup. Ct, Nassau Cty 2007, Austin, J.] [relationship between work performed by collection counsel in two prior matters to the subject matter of the lawsuit was "so attenuated . . . that it provides no cause for disqualification"]).

Here, CIF is not a direct client of Herrick Feinstein, but is at most a "vicarious" client through its ownership interests in the JVs that Herrick Feinstein does represent. Defendants have not shown that the subject matter of this action is related, let alone "substantially related" to the subject matter of Herrick Feinstein's representation of the CIF JVs (see Nicola v Barrett, supra ; Gandhi v Filler, supra ; AMBAC Indemnity Corp. v Bankers Trust Co., supra ).

The cases relied upon by defendants (Finkelman v Greenbaum, 14 Misc 3d 1217 (A), 2007 NY Slip Op 50063 [U] [Sup. Ct, Nassau Cty 2007, Austin, J.] and Dembitzer v Chera, 285 AD2d 525 [2d Dept 2001]) are distinguishable, and, in any event, in this case (unlike Finkelman and Dembitzer), Herrick Feinstein has adequately demonstrated the lack of a relationship between the subject matter of its representation of the three CIF JVs and the subject matter of this action.

Accordingly, defendants' motion for disqualification is denied, as is its request for an order imposing sanctions against Clear Channel and/or Herrick Feinstein pursuant to 22 NYCRR 130-1.1.

It is ORDERED that defendants' motion to disqualify Herrick Feinstein LLP from representing plaintiff Clear Channel Spectacolor Media LLC is denied; and it is further

ORDERED that defendants' request for the imposition of sanctions is denied.

Dated:

ENTER:

______________________

J.S.C.