Defendant Satelozzi, Inc. d/b/a Nordwall Americas (Satelozzi) moves, pursuant to Rule 1.9 (a) of the New York Rules of Professional Conduct, 22 NYCRR 1200.0, to disqualify plaintiffs' counsel Pazer, Epstein & Jaffe, P.C. (Pazer), and related counsel, in this matter.

According to Satelozzi, prior to the commencement of the instant action, Pazer represented plaintiff Colebrook, Bosson and Saunders, Inc. (CBS), Thompson Contract, Inc. (Thompson) and Satelozzi in preparing an operating agreement for the creation of defendant International Showroom Associates, LLC (ISA). The [*2]operating agreement names CBS, Thompson and Satelozzi as the only members of ISA. Satelozzi also states that Pazer represented CBS, Thompson and Satelozzi in negotiating a lease for showroom space to be leased by ISA, including guarantees to the landlord, New York Design Center, by each of CBS, Thompson and Satelozzi for that lease. Satelozzi says that all three of these parties contributed to the fees charged by Pazer for such legal representation, and that Pazer also represented ISA prior to the instant litigation.

The current action concerns the operating agreement, lease and guarantees that were the subject of Pazer's earlier representation of the parties. Satelozzi objects to Pazer representing CBS and Thompson, plaintiffs in the instant action, against Satelozzi and ISA for breach of the operating agreement, unjust enrichment with respect to the lease of the commercial showroom, and loss of reputation/business income.

Satelozzi contends that, because Pazer was involved in representing both the plaintiffs and Satelozzi in the creation of the agreements which plaintiffs are now alleging were breached by Satelozzi, Pazer should be disqualified as plaintiff's counsel.

In support of its contentions, Satelozzi has provided several letters from Pazer to Satelozzi (demand letters), in which Pazer states that it represents ISA, and in which Pazer seeks to have Satelozzi execute and return the operating agreement, pay rent arrears for the showroom, and pay attorney's fees on behalf of work performed by Pazer in pursuing Satelozzi's referenced defaults. In addition, Satelozzi attaches the affidavit of Daniele Angelozzi (Angelozzi) the chief executive officer and president of Satelozzi, in which he avers that Pazer represented Satelozzi and the two plaintiffs in the instant action in the preparation of the operating agreement, lease and guarantees that are the subject of the present lawsuit.

In opposition to Satelozzi's motion, Pazer contends, by affirmation of Gerard A. Walters, that, on or about November 6, 2006, CBS retained the predecessor to the Pazer firm to represent it as general counsel in matters unrelated to the instant proceedings, prior to which Pazer had no business relationship with any of the parties to the current lawsuit.

Pazer further states that, in or about May of 2009, CBS and Thompson retained Pazer to represent them in an action against Satelozzi to recover for breach of the operating agreement and ancillary contracts involving ISA. Moreover, according to Pazer, Pazer never had any engagement agreement with Satelozzi, never provided any legal services to Satelozzi, either directly or indirectly, never received any confidential information from Satelozzi, never sent an invoice for legal services to Satelozzi, [*3]nor received any payment from Satelozzi for legal fees, and never had any engagement letter with ISA.

Pazer states that, as counsel to CBS, in or about March of 2007, CBS asked it to review and comment on a draft lease agreement and guaranty for the above-referenced showroom. Subsequently, Pazer sent its comments about the lease to CBS only, never sending any comments to Thompson or Satelozzi.

Thereafter, says Pazer, CBS directed it to negotiate the lease and guarantees with the showroom's landlord, and Pazer then sent copies to Thompson and Satelozzi, who, allegedly, sent those copies to their own attorneys for comment and review. The opposition papers include copies of e-mails between the parties that appear to reference all the parties having contacted their own attorneys for review of the lease and guarantees.

Pazer states that, after all of the parties agreed on the lease and the guarantees, the final versions were circulated to CBS, Thompson and Satelozzi, and Satelozzi's executed lease and guarantee went directly to the landlord, never passing through Pazer's office. Pazer insists that, at no time, did it take direction or instruction from any party except CBS. Moreover, Pazer says that it never had any arrangement, either written or oral, with ISA, Thompson or Satelozzi to represent those parties, and all billing for legal work was sent only to CBS.

Similarly, Pazer avers that, with respect to the operating agreement, CBS was the only entity that requested that it draft such document, that, at no time, did it receive instructions, directions or comments about the operating agreement from any entity except CBS, and that it never had any agreement regarding the operating agreement with any party except CBS. In support of this contention, Pazer has included the minutes of an ISA meeting taking place on February 22, 2008, in which it is indicated that Satelozzi was referring ISA bank forms to its own lawyers to review.

Moreover, with respect to the demand letters discussed above, sent by Pazer to Satelozzi, Pazer states that such correspondence categorically indicates that it is representing interests adverse to Satelozzi, demanding, on behalf of ISA, that Satelozzi fulfill its contractual obligations. In addition, Pazer has included an e-mail from Satelozzi, in which Satelozzi states it will hand over its ISA file to its attorneys for review prior to the execution of the operating agreement.

Lastly, Pazer contends that the demand letters sent to Satelozzi, in which it refers to itself as representing ISA, support its position insofar as those letters request that Satelozzi fulfill its obligations to CBS and Thompson by paying its share of the costs of the operating agreement and the lease, [*4]the exact same basis as the current lawsuit. Pazer maintains that the demand letters indicate that it is representing the interests of CBS and Thompson, not Satelozzi.

Pazer also argues that, after this action was commenced, it engaged in numerous settlement conferences with Satelozzi's attorneys, as well as conducted extensive discovery, without Satelozzi raising an issue of conflict of interest until the preliminary conference more than a year after the lawsuit was filed, and, as such, Satelozzi has waived any objections to Pazer's representation of the plaintiffs. Pazer also seeks sanctions against Satelozzi for instituting what it, Pazer, characterizes as a frivolous motion intended solely as a delaying tactic.

In reply, Satelozzi says that its motion is timely, since depositions have yet to take place and significant discovery has not occurred. Further, Satelozzi contends that it is not its burden to show that Pazer received confidential information from it provided that Satelozzi can establish that Pazer represented both parties in a substantially related matter. In addition, Satelozzi argues that the lease, which was entered into by ISA, could only have been negotiated on behalf of all of ISA's members, which include Satelozzi; hence, Pazer represented Satelozzi with respect to the lease and guarantee.

The court notes that none of the parties has provided any letter of engagement or retainer agreement with Pazer.

22 NYCRR 1200.0, Rule 1.9 states:

Rule 1.9 Duties to former clients.

(a) A lawyer who has formerly represented a client in a matter shall not 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 unless the former client gives informed consent, confirmed in writing.

(b) Unless the former client gives informed consent, confirmed in writing, a lawyer shall not knowingly represent a person in the same or a substantially related matter in which a firm with which the lawyer formerly was associated had previously represented a client:

(1) whose interests are materially adverse to that person; and

(2) about whom the lawyer had acquired information protected by Rule 1.6 or paragraph (c) of this Rule that is material to the matter. [*5]

(c) A lawyer who has formerly represented a client in a matter or whose present or former firm has formerly represented a client in a matter shall not thereafter:

(1) use confidential information of the former client protected by Rule 1.6 to the disadvantage of the former client, except as these Rules would permit or require with respect to a current client or when the information has become generally known; or

(2) reveal confidential information of the former client protected by Rule 1.6 except as these Rules would permit or require with respect to a current client.

The Court has held that

Disqualification pursuant to [22 NYCRR 1200.27 (a) (1)] requires a demonstration (1) that the attorney as to whom disqualification is sought had an attorney-client relationship with the movant . . . ; (2) that the matter in which the movant was represented is substantially related to the matter in which the attorney's disqualification is sought; and (3) that the interests of the former client movant are materially adverse to those of the present client. Where all three factors are established, disqualification is mandatory.

In situations in which there may be a conflict of interest because an attorney previously represented his current client's opposing party in a related matter, the opposing party may move to have the attorney disqualified. However, "[t]he disqualification of an attorney is a matter within the sound discretion of the court." Nationwide Associates, Inc. v Targee Street Internal Medicine Group, P.C., 303 AD2d 728, 728 (2d Dept 2003).

Satelozzi's motion to disqualify plaintiff's counsel shall be denied.

A party's entitlement to be represented in ongoing litigation by counsel of his or her own choosing is a valued right which should not be abridged absent a clear showing that disqualification is warranted. Disqualification of a party's chosen counsel ... is a severe remedy which should only be done in cases where counsel's conduct will probably taint the underlying trial."

In the instant matter, Satelozzi has failed to make the requisite showing that Pazer should be disqualified because Pazer previously represented Satelozzi in a substantially related matter.

Pazer has provided sufficient documentation evidencing that, at least with respect to the lease and guarantees that are the subject of the underlying litigation, Satelozzi made constant references to sending the documents forwarded to it by Pazer to its own counsel for review. Hence, Satelozzi cannot now claim that Pazer was representing it with respect to those matters.

Similarly, the court finds that Satelozzi has failed to meet its burden to disqualify Pazer based on the ISA operating agreement.

Satelozzi has not provided any evidence that Pazer directly represented it in drafting the operating agreement. On the other hand, Pazer has provided various e-mails and minutes that indicate, without explicitly stating, that Satelozzi has retained its own counsel to review the operating agreement documents. Moreover, Satelozzi has not alleged or included a retainer agreement or letter of engagement between it and Pazer, nor has it attached any bills or evidence of payment, or direct attorney-client communication between it and Pazer. In short, Satelozzi's primary argument is that, since there are only three members of ISA, Satelozzi being one of them, any work performed on behalf of ISA was therefore performed for each such member individually. Satelozzi asserts that, based on this representation of ISA, Pazer is in the position of having obtained confidential information from Satelozzi which it might now use against Satelozzi, and that, by representing ISA, Pazer, in effect, represented Satelozzi. The court disagrees.

It has long been established that

where the same lawyer jointly represents two clients with respect to the same matter, the clients have no expectation that their confidences concerning the joint matter will remain secret from each other, and those confidential communications are not within the privilege in subsequent adverse proceedings between the co-clients.

A lawyer's representation of a business entity does not render the law firm counsel to an individual partner, officer, director or shareholder unless the law firm [*7]assumed an affirmative duty to represent that individual. [Satelozzi] failed to present cogent evidence establishing that [Pazer] had agreed to or acted as [its] personal attorney.

The disqualification of a party's attorney is a severe measure that the court will not entertain absent a clear showing of merit. See Mancheski v Gabelli Group Capital Partners, Inc., 22 AD3d 532 (2d Dept 2005). In the case at bar, Satelozzi has failed to provide any evidence, except for self-serving affidavits (Ryfun v 406 W. 46th St. Corp., 288 AD2d 10 [1st Dept 2001] [conclusory and unsubstantiated allegations are insufficient to establish an attorney-client relationship]), and the demand letters, indicated above, which form the predicate for the current underlying action, that substantiate its claim that Pazer may possess confidential information or that Pazer had a separate attorney-client relationship with it in the matters that are the subject of the underlying lawsuit. Applehead Pictures LLC v Perelman, 55 AD3d 348 (1st Dept 2008).

Based on the record before the court, Satelozzi's motion to disqualify Pazer cannot be granted.

The court declines to impose sanctions against Satelozzi for bringing this motion as it is not wholly meritless.

It is hereby

ORDERED that defendant Satelozzi, Inc. d/b/a Nordwall Americas' motion to disqualify plaintiffs' counsel Pazer, Epstein & Jaffe, P.C., and related counsel is DENIED; and it is further

ORDERED that the parties are directed to attend a compliance conference on June 7, 2011 in IAS Part 59, Room 103, 71 Thomas Street, New York, NY 10013 at 2:30 P.M.

This is the decision and order of the court.

Dated: April 26, 2011