This is an action to collect almost $700,000 in legal fees.

Motion sequence numbers 003, 004, 005 and 006 are consolidated for disposition.

In motion sequence number 003 third-party defendants David Goldsmith ("Goldsmith") and Susan Chin ("Chin") move to consolidate the action commenced under Index Number 104013/07 ("Action 1") and the action commenced under Index Number 106060/07 ("Action 2") and to dismiss all claims against them. At oral argument on November 14, 2007, Justice Moskowitz granted consolidation to the extent of directing joint discovery and a joint trial. Nov. 14, 2007 Transcript [*2]("11/14 Tr."), at 34.

In motion sequence number 004, defendant Penquin Tenants Corporation ("Penquin"or "the cooperative") moves to terminate a "joint defense agreement" among plaintiff pro se Schlam Stone & Dolan ("SS & D"), defendants/third party defendants Goldsmith and Chin and defendants'/third party defendants' attorney, Wilson, Elser, Moskowitz, Edelman & Dicker ("Wilson Elser"); to enjoin SS & D from assisting Goldsmith and Chin in the defense of the claims asserted against them and to disqualify Wilson Elser from representing Goldsmith and Chin. The request for a continued deposition of Jeffery Eilender is moot.

In motion sequence number 005 Goldsmith and Chin move to vacate Pullman letters sent to each of them and to vacate a termination notice sent to Goldsmith. By letter dated October 5, 2007, Penquin withdrew the termination notice, but the issue regarding the Pullman letter remains. Additionally, on November 14, 2007 Justice Moskowitz issued a temporary injunction enjoining Penquin from interfering with Goldsmith and Chin's use and occupancy of their residences . 11/14 Tr., at 51.

In motion sequence number 006, SS & D moves to restrain Penquin from witness tampering.

Penquin is a residential cooperative located at 19-23 West 9th Street in New York City. SS & D was introduced to the cooperative's board of directors ("Board") by Goldsmith, one of its members.

In 2003, Penquin retained SS & D to represent it in a dispute with Shepherd Ellenberg ("Ellenberg"), the cooperative's commercial tenant who, pursuant to a long term lease, rents the sub-grade commercial space. Since around 1980, Ellenberg has subleased the commercial space to various restaurants that have allegedly created a nuisance, which disturbs the cooperative's residential owners.

In January 2004, on the advice of SS & D, Penquin promulgated certain "house rules" that were intended to curb Ellenberg's abuses with respect to the restaurant premises. Later that month, with the Board's approval, SS & D commenced an action against Ellenberg to enforce the new house rules. That litigation spawned at least two additional lawsuits in New York County and an arbitration in Westchester County that involved 25 days of hearings.^[FN1] Between February 2004 and December 2006, SS & D billed the attorneys' fees for the Supreme Court litigation and the arbitration under one file number and allegedly regularly sent invoices to Penquin, which were accepted without objection. In Action 1, SS & D alleges that despite due demand, Penquin has failed to pay more than $691,000.00 in legal fees and disbursements for SS & D's work on the Ellenberg matter.

In the third-party complaint, Penquin alleges that Goldsmith was elected president of the cooperative's Board and that Chin became an officer of the Board and that together, Goldsmith and Chin embarked on a scheme to terminate Ellenberg's lease of the sub-grade commercial premises so that Goldsmith could reclaim the area in the rear of the restaurant as backyard space for his apartment, thereby increasing the value of his investment. Penquin alleges that Goldsmith failed to [*3]advise the Board that SS & D was his personal attorney in related litigation against Ellenberg; that, in violation of the cooperative's by-laws, Goldsmith and Chin named themselves as the only functioning members of the litigation committee and that they directed the course of the litigation by fostering and escalating disputes with Ellenberg and that Goldsmith had SS & D's invoices sent directly to him so that he could conceal the cost of the litigation from the Board.

Penquin claims that once its shareholders discovered the financial consequences of this battle and Goldsmith's and Chin's alleged personal agenda, they voted Goldsmith and Chin off the Board and shortly thereafter dismissed SS & D as the cooperative's attorney. The third-party complaint states causes of action against Goldsmith and Chin for corporate waste and fraud and demands punitive damages.

When the new Board members assumed their positions they demanded that Goldsmith and Chin turn over the books and records of the cooperative. When Goldsmith and Chin denied that they had such records, the new Board instituted an Article 78 proceeding against them to obtain access. SS & D represented Goldsmith and Chin in the Article 78 proceeding until May or June of 2007 when Wilson Elser took over the defense. Cohen Affidavit dated September 24, 2007 ("Cohen Aff."), Ex. B, at 236.

Joint-Defense Agreement

It is undisputed that SS & D, Goldsmith, Chin and Wilson Elser are parties to a joint-defense agreement. See, e.g., Cohen Aff, Ex. B, at 238 (deposition testimony of Jeffery Eilender, a principal in SS & D, disclosing that "there is a joint defense agreement and we view ourselves as aligned against the co-ops [sic] in the various litigations"). Penquin argues that the joint-defense agreement must be terminated and Wilson Elser must be disqualified because SS & D actually represented Goldsmith and Chin in a related Article 78 proceeding and is actually representing Goldsmith and Chin in this litigation under the guise of the joint defense agreement. They argue that because SS & D once represented Penquin in connection with the very claims that are at the heart of the cooperative's claims against Goldsmith and Chin, SS & D cannot render assistance to litigants whose interests are adverse to Penquin—its former client. Penquin contends that not only must the joint-defense agreement be terminated but also that Wilson Elser must be disqualified because it is tainted by SS & D's alleged ethical violation and may have improperly received confidential information and secrets.

In opposition, SS & D argues that because its interests and those of Goldsmith and Chin are aligned against Penquin, the joint-defense agreement is simply a device that permits them to exchange information vital to their common defense without waiving any applicable privileges; that SS & D is not counsel to Goldsmith and Chin in these actions and that by placing SS & D's representation in the Ellenberg litigations in dispute, Penquin may not now seek to preclude SS & D, Goldsmith and Chin from obtaining information that is critical to their defense. In addition, SS & D contends that Penquin has failed to demonstrate that Wilson Elser actually received "confidential information" from SS & D that was not in any event already known by Goldsmith and Chin.

Wilson Elser joins SS & D's arguments in opposition to the disqualification motion.

A joint-defense agreement is designed to enable multiple defendants with common interests [*4]to "to protect the confidentiality of communications passing from one party to the attorney for another party where joint defense or strategy has been decided upon or undertaken by the parties and their respective counsel." U.S. v. Schwimmer, 892 F.2d 237, 243 (2d Cir. 1989) (citations omitted).

However, Disciplinary Rule ("DR") 5-108, codified as 22 N.Y.C.R.R. 1200.27(a), states:

"Except as provided in section 1200.45(b) [DR 9-101] with

respect to current or former government lawyers, a lawyer

who has represented a client in a matter shall not without

the consent of the former client after full disclosure:

"(1) Thereafter represent another person in the same or a

substantially related matter in which that person's interests

are materially adverse to the interests of the former client.

"(2) Use any confidences or secrets of the former client except

as permitted by section 1200.19(c) [DR 4-101] or when the confidence

or secret has become generally known."

Here, SS & D correctly argues that it is not attorney of record for Goldsmith or Chin in Action 1 or Action 2 and that it has the right to appear pro se in these proceedings. See, e.g., Bronstein, Van Veen & Bronstein, P.C. v. Taylor, 161 AD2d 328 (1st Dept 1990). SS & D does not dispute, however, that it represented Goldsmith and Chin in a related Article 78 proceeding while Action 1 was pending and that it represented Goldsmith, in his individual capacity, in connection with Goldsmith's disputes with Ellenberg prior to representing Penquin in litigation against Ellenberg. Thus, it appears from the motion papers and the transcript of the November 14, 2007 oral argument that SS & D may have had a relationship with Goldsmith and Chin—Penquin's adversaries—in substantially related matters prior to and during the pendency of these proceedings.

Moreover, the motion papers and the transcript raise a question as to whether, under the circumstances, the joint-defense agreement among SS & D, Goldsmith and Chin creates a "de facto" or nominal co-counsel arrangement between SS & D and Wilson Elser and its clients that could taint the information sharing among the parties.^[FN2] Further, there is a question about whether the joint-defense agreement would permit SS & D to disclose Penquin's confidences and secrets, if, indeed SS & D possesses any such information that is unknown to Goldsmith, Chin and Wilson Elser. See, Tekni-Plex, Inc. v. Meyner & Landis, 89 NY2d 123, 131 (1996).

This Court cannot resolve these factual issues simply on the papers without any findings.

Accordingly, it is

ORDERED that the questions of whether the "joint-defense agreement" should be terminated; whether SS & D should be restrained from assisting Goldsmith and Chin in defense of their claims and whether Wilson Elser should be disqualified from representing Goldsmith and Chin are referred to a Special Referee to hear and report with recommendations, except that, in the event [*5]of and upon the filing of a stipulation of the parties, as permitted by CPLR 4317, the Special Referee, or another person designated by the parties to serve as referee, shall determine the aforesaid issue; and it is further

ORDERED that motion sequence numbers 003, 004, 005 and 006, to the extent that they have not already been decided, are held in abeyance pending receipt of the report and recommendations of the Special Referee and/or a motion pursuant to CPLR 4403 at which time the motions will be marked resubmitted.; and it is further

ORDERED that a copy of this order with notice of entry shall be served by Penquin's attorney on the Clerk of the Judicial Support Office ( Room 119M) within 30 days of the date of entry of this Decision and Order to arrange a date for the reference to a Special Referee: and it is further

ORDERED that the temporary injunction restraining Penquin from interfering with Goldsmith and Chin's use and quiet enjoyment of their residences is continued pending decisions on the motions.

This constitutes the Decision and Judgment of the Court.

Dated: New York, New York

April ___, 2008

E N T E R

______________________

Hon. Eileen Bransten