Court Opinion

ID: 9930967
Source: CourtListenerOpinion
Date Created: 2024-02-07 21:09:07.042107+00
Date Added: 2024-06-11T12:13:40.344802
License: Public Domain

1101-43 Ave Acquisition LLC v Sonder Hospitality
                        USA Inc.
               2024 NY Slip Op 30383(U)
                    February 1, 2024
           Supreme Court, New York County
        Docket Number: Index No. 653840/2020
                  Judge: Andrea Masley
Cases posted with a "30000" identifier, i.e., 2013 NY Slip
 Op 30001(U), are republished from various New York
 State and local government sources, including the New
  York State Unified Court System's eCourts Service.
 This opinion is uncorrected and not selected for official
                       publication.
                                                                                                                        INDEX NO. 653840/2020
  NYSCEF DOC. NO. 178                                                                                             RECEIVED NYSCEF: 02/01/2024

            SUPREME COURT OF THE STATE OF NEW YORK
            COUNTY OF NEW YORK: COMMERCIAL DIVISION PART 48
            ----------------------------------------------------------------------------------- X

                1101-43 AVE ACQUISITION LLC,                                                        INDEX NO.         653840/2020

                                                          Plaintiff,
                                                                                                    MOTION DATE
                                                - V -
                                                                                                    MOTION SEQ. NO.        005
                SONDER HOSPITALITY USA INC., SONDER HOLDINGS
                INC., SONDER USA, INC., and SONDER CANADA INC.,
                                                                                                     DECISION+ ORDER ON
                                                          Defendants.                                      MOTION
            ----------------------------------------------------------------------------------- X

            HON. ANDREA MASLEY:

            The following e-filed documents, listed by NYSCEF document number (Motion 005) 146, 147, 148, 149,
            150, 151, 152, 153, 154, 155, 156, 157, 158, 159, 160, 161, 162, 163, 164, 165, 166, 167, 168, 169,
            170,171,172,173,174,175,176, 177 1
            were read on this motion to/for                                              DISQUALIFY COUNSEL

                      In motion sequence number 005, plaintiff moves, pursuant to Rule 1.9 of the

            Rules of Professional Conduct (22 NYCRR 1200.0), to disqualify Sher Tremonte LLP

            (Sher) from representing defendants in this action 2 on the ground that Sher previously

            represented plaintiff's principals Abraham Merchant and Richard Cohn, plaintiff's

            affiliate Merchants Hospitality Inc. (MHl), 3 and MHl's affiliates in several interrelated

            actions that involved the facts and issues relevant here (MHI actions4 ). Specifically,

            Cohn and Merchant retained Sher on behalf of themselves, MHI and MHl's affiliates to

            1 The court has read, and where appropriate considered additional documents

            mentioned in the parties' papers, but omitted in this autogenerated caption.
            2
               Sher was substituted as attorneys for defendants in April 2023. (NYSCEF Doc. No.
            [NYSCEF] 141, Consent to Substitution of Counsel)
            3
               Cohn is a 50% owner and general counsel of MHI. (NYSCEF 149, Cohn aff ,i 1.)
            4
               The MHI actions are: (i) Merchants Hospitality, Inc. v Fruhling, Index No. 653606/2020,
            (ii) Award Holdings LLC v Hochfelder, Index. No. 653607/2020, (iii) US Partners, LLC v
            Pavo/, Index. No. 608682/2020, (iv) US Partners, LLC v Fruhling, Index. No.
            654137/2020, and (v) Merchants Hospitality, Inc. v Hochfelder, Index. No. 655048/2020.
            (NYSCEF 149, Cohn aff ,I 13.)
                653840/2020 1101-43 AVE ACQUISITION LLC vs. SONDER HOSPITALITY USA INC.                                 Page 1 of 6
                Motion No. 005

                                                                            1 of 6
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                                                                                             INDEX NO. 653840/2020
  NYSCEF DOC. NO. 178                                                                  RECEIVED NYSCEF: 02/01/2024

            resolve a dispute regarding the purported ownership in various MHl-affiliated entities,

            including the Z Hotel, which resulted in the commencement of the MHI actions.

            (NYSCEF 149, Cohn aff ,i,i 6, 9-10, 13; see also NYSCEF 150, Retainer Agreement.)

            In this action, plaintiff alleges, that defendants breached a commercial lease for space

            in the Z Hotel, which plaintiff ultimately surrendered to its lender. (NYSCEF 75,

            Amended Complaint ,i,i 43-44.)

                   "A movant seeking disqualification of an opponent's counsel faces a heavy
                   burden. A party has a right to be represented by counsel of its choice,
                   and any restrictions on that right must be carefully scrutinized. Courts
                   should also examine whether a motion to disqualify, made in ongoing
                   litigation, is made for tactical purposes, so as to delay litigation and
                   deprive an opponent of quality representation. The decision whether to
                   grant a motion to disqualify rests in the discretion of the motion court."

            (Skanska USA Bldg. Inc. v At/. Yards B2 Owner, LLC, 146 AD3d 1, 13 [1st Dept 2016]

            [internal quotation marks and citations omitted].) On motion to disqualify counsel

            pursuant to Rule 1.9(a), "the moving party must prove ... the existence of a prior

            attorney-client relationship between itself and opposing counsel." (Campbell v McKean,

            75 AD3d 479,480 [1st Dept 2010] [citation omitted].) "[A]n attorney-client relationship is

            established where there is an explicit undertaking to perform a specific task. While the

            existence of the relationship is not dependent upon the payment of a fee or an explicit

            agreement, a party cannot create the relationship based on his or her own beliefs or

            actions." (Pellegrino v Oppenheimer & Co., Inc., 49 AD3d 94, 99 [1st Dept 2008]

            [internal quotation marks and citations omitted].) A party does not have standing to

            bring a disqualification motion if it did not have an attorney-client relationship with the

            law firm it seeks to disqualify. (HSBC Bank USA, N.A. v Santos, 185 AD3d 475, 477

            [1st Dept 2020].)

             653840/2020 1101-43 AVE ACQUISITION LLC vs. SONDER HOSPITALITY USA INC.         Page 2 of 6
             Motion No. 005

                                                            2 of 6
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                                                                                               INDEX NO. 653840/2020
  NYSCEF DOC. NO. 178                                                                  RECEIVED NYSCEF: 02/01/2024

                   In support of its motion, plaintiff submits the Sher Engagement Agreement, which

            states in relevant part, "you have chosen Sher Tremonte LLP (the 'Firm') to represent

            you - Richard Cohn, Abraham Merchant, Merchants Hospitality, Inc., US Partners LLC,

            and certain other affiliated entities (collectively, 'you') - in connection with your dispute

            with Adam Hochfelder, the Mailman Trust, Awards Holdings LLC, Mailman Holdings

            LLC, and certain other affiliated entities." (NYSCEF 150, Sher Engagement Agreement

            at 1.) However, plaintiff fails to present any evidence that it, in fact, had an attorney-

            client relationship with Sher. In his affirmation, Cohn avers that he and Merchant

            retained Sher "on behalf of ourselves individually, as well as on behalf of MHI and other

            affiliated entities." (NYSCEF 149, Cohn aff ,i 6.) Cohn never states that Sher was ever

            retained on plaintiff's behalf; in fact, he repeatedly omits plaintiff when discussing the

            representation. (Id. ,i,i 2 ["representation of MHI and other entities affiliated with MHI", 5

            [Sher "previously represented the MHI Parties"], 6 ["my partner Abraham Merchant

            ('Merchant') and I retained Sher Tremonte on behalf of ourselves individually, as well as

            on behalf of MHI and other affiliated entities ('MHI Parties')"], 9 ["ultimately the MHI

            Parties retained Sher Tremonte"].) This leaves the court with only the conclusory and

            unsupported statement in plaintiff's reply brief that "certain other affiliated entities"

            included plaintiff.

                   Plaintiff asserts that the absence of a waiver of the representation of any other

            entity not named or a definition of client expressly excluding plaintiff in the Sher

            Engagement Agreement clearly evidences that plaintiff is among the "certain other

            affiliated entities." The court finds this argument without merit.

             653840/2020 1101-43 AVE ACQUISITION LLC vs. SONDER HOSPITALITY USA INC.           Page 3 of 6
             Motion No. 005

                                                            3 of 6
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                                                                                                INDEX NO. 653840/2020
  NYSCEF DOC. NO. 178                                                                     RECEIVED NYSCEF: 02/01/2024

                      Justin Sher, Esq. 5 explains that

                      "[a]t the time the engagement letter was executed, Sher Tremonte had not
                      completed its investigation of the facts and was not yet certain which
                      entities would need to be parties to any actions arising from the dispute
                      with the Hochfelder Parties. For this reason, the engagement letter
                      allowed Sher Tremonte to represent 'certain other affiliated entities' that
                      had not yet been named. However, the Plaintiff, 1101-43 Ave Acquisition
                      LLC, was not such an entity and was never represented by Sher
                      Tremonte."

            (NYSCEF 162, Sher aff ,i 8''].) Plaintiff fails to rebut or address this assertion. Further,

            the court takes judicial notice that plaintiff was not a party to any of the MHI actions in

            which Sher represented MHI and certain other non parties (Matter of Allen v Strough,

            301 AD2d 11, 18 [2d Dept 2002].)

                      Plaintiff also argues that confidential information shared with Sher about the

            interrelated companies necessarily revealed confidential information about all of them,

            including plaintiff. Specifically, Cohn avers that he "shared detailed confidential financial

            information, corporate formation documents including organizational structure and

            member information for the various MHI Parties, tax returns for various MHI entities, as

            well as detailed factual and background memoranda that I prepared as counsel to MHI

            specifically to assist Sher Tremonte in its drafting" as well as "financial summaries,

            balance sheets, and income statements for the MHI Parties and other affiliated entities,

            including for the Plaintiff." (NYSCEF 149, Cohn aff ,i,i 28-29.) However, plaintiff fails to

            explain how sharing such information created an attorney-client relationship between

            plaintiff and Sher. 6 Nevertheless, plaintiff fails to identify "how any such information

            5
              Justin Sher is defendants' counsel and an attorney at Sher. (NYSCEF 162, Sher aff ,i
            1 .)
            6
               In its reply, plaintiff argues for the first time that it should be considered Sher's client
            for disqualification purposes because (i) plaintiff is affiliated with MHI, which Sher
                653840/2020 1101-43 AVE ACQUISITION LLC vs. SONDER HOSPITALITY USA INC.         Page 4 of 6
                Motion No. 005

                                                               4 of 6
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                                                                                             INDEX NO. 653840/2020
  NYSCEF DOC. NO. 178                                                                  RECEIVED NYSCEF: 02/01/2024

            would not be discoverable in this action," deeming it not confidential. (Matter of Segal v

            Five Star Elec. Corp., 165 AD3d 613, 613 [1st Dept 2018].)

                    Finally, the court permitted the parties post-argument submissions comprising of

            an email exchange between Cohn and Sher. 7 On August 16, 2020, Cohn emailed Sher

            that plaintiff was "looking for a ... firm to represent us in either workout or prosecution

            of our lender liability claims." Sher's August 19, 2020 responsive email includes a

            preliminary assessment of plaintiff's potential claims against the lender. However,

            plaintiff provides no evidence that Sher explicitly undertook to perform a specific task on

            behalf of plaintiff, as is required to create an attorney-client relationship. (Pellegrino, 49

            AD3d at 99.) To the contrary, in his August 19, 2020 email, Justin Sher not only stated

            that he is "confident [Sher is] the right firm for this," but also offered names of two

            alternative counsel "who are highly qualified to guide [plaintiff] through this." Sher's

            response did not create an attorney-client relationship; it was a pitch to hire his firm. 8

                    Accordingly, it is

                    ORDERED that plaintiff's motion to disqualify Sher Tremonte LLP is denied; and

            it is further

            represented, and (ii) plaintiff and MHI are managed and indirectly owned by Cohn and
            Merchant, whom Sher also represented. Arguments raised for the first time in a reply
            brief will not be considered. (Givoldi, Inc. v UPS, 286 AD2d 220 [1st Dept 2001].)
            7 The parties are directed toe-file a copy of the emails.
            8 Although a perspective client may, under certain circumstances, obtain disqualification

            of an attorney with whom it consulted pursuant to Rule 1.18 (c) of the Rules of
            Professional Conduct (see Mayers v Stone Castle Partners, LLC, 126 AD3d 1, 7 [1st
            Dept 2015]), the present motion is brough solely pursuant to Rule 1.9 of the Rules of
            Professional Conduct. (See NYSCEF 159, OSC at 2 [mot. seq. no. 005]; NYSCEF 158,
            Plaintiff MOL.) Accordingly, the court will not consider whether disqualification pursuant
            to Rule 1.18 (c) of the Rules of Professional Conduct is warranted.
             653840/2020 1101-43 AVE ACQUISITION LLC vs. SONDER HOSPITALITY USA INC.         Page 5 of 6
             Motion No. 005

                                                            5 of 6
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                                                                                                      INDEX NO. 653840/2020
  NYSCEF DOC. NO. 178                                                                           RECEIVED NYSCEF: 02/01/2024

                    ORDERED that stay of discovery imposed pursuant to the May 23, 2023 Order to

            Show Cause is lifted. The parties shall submit a discovery schedule setting deadlines

            for expert depositions and the note of issue.

                     2/1/2024
                      DATE                                                         ANDREA MASLEY, J.S.C.

                                     ~
             CHECK ONE:                   CASE DISPOSED                     NON-FINAL DISPOSITION

                                          GRANTED         0    DENIED       GRANTED IN PART          □ OTHER
             APPLICATION:                 SETTLE ORDER                      SUBMIT ORDER

             CHECK IF APPROPRIATE:        INCLUDES TRANSFER/REASSIGN        FIDUCIARY APPOINTMENT    □ REFERENCE

             653840/2020 1101-43 AVE ACQUISITION LLC vs. SON DER HOSPITALITY USA INC.                 Page 6 of 6
             Motion No. 005

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