Court Opinion

ID: 9942815
Source: CourtListenerOpinion
Date Created: 2024-02-21 21:08:49.990351+00
Date Added: 2024-06-11T13:44:43.162257
License: Public Domain

Zomongo.TV USA Inc. v Capital Advance Servs., LLC
               2024 NY Slip Op 30508(U)
                   February 15, 2024
             Supreme Court, Kings County
        Docket Number: Index No. 512735/2021
                Judge: Leon Ruchelsman
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 This opinion is uncorrected and not selected for official
                       publication.
  FILED: KINGS COUNTY CLERK 02/16/2024 10:37 AM                                           INDEX NO. 512735/2021
  NYSCEF DOC. NO. 264                                                             RECEIVED NYSCEF: 02/16/2024

           SUPREME COURT OF THE STATE OF NEW YORK
           COUNTY OF KINGS: CIVIL TERM: COMMERCIAL 8
           --·--. -·---· .. -- .. ---- ··-·-- ..------- . ·-· --.-----x
           ZOMONGO, TV USA INC. D/8/A ZOMONGO. TV
           USA, JOCELYNE LISA HUGHES-OSTROWSKI and
           JEREMY GENE OSTROWSKI,
                                                        Plaintiffs,           De~ision and order

                            - against -                                    Index No. 512735/2021

           CAPITAL ADVANCE SERVICES, LLC,
                                                      Defendant,               February 15, 2024
            . --· --------- . --·---·· ---· -·--.-.------· . --·· . --.x
            PRESENT: HON. LEON RUCHELSMAN                                  Motion Seq. #10 & #11

                  The defendant has moved seeking to disqualify plaintiff's

           counsel.      The plaintiff has cross-moved seeking sanctions.                     The

           motions have been opposed respectively.                   Papers were submitted by

           the parties and arguments held.                After reviewing all the

            arguments this court now makes thefollOwing determination.

                  As recorded ih prior Orders, the plaintiff, zornongo, a

            corporation involved in the advertising industry, entered into

            twomerchant cash agreements with the defendant.                      The first

            agreement was dated February 12, 2018 whereby the defendant

            purchased $449,700 of plaintiff's future receivables                    for
            $300,000.      The second agreement was dated April 11, 2018 whereby

            the defendant purchased $861,925 of plaintiff's future

            receivables for $575,000.            The complaint alleges the defendant

            fai.lec:i to deliv.er the purchased amounts pursµant to the

            a.gr¢ ement s a.Ii.ct improperly with drew da i 1 y amounts in exce s.s. o.f tr:ie

            amo.unts to which the parties agreed.                On December 22r 2023 the

            plaintiff filed a f.ourth proposed amended complaint .and asserted

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  FILED: KINGS COUNTY CLERK 02/16/2024 10:37 AM                         INDEX NO. 512735/2021
  NYSCEF DOC. NO. 264                                             RECEIVED NYSCEF: 02/16/2024

            claims based upori RICO (18 u.s.C. §1962}.    The cru~ of th~

            allegations assert that the defendant is really controlled by

            another entity called Yellowstone which is the parent company and

            which, really loaned the funds to the plaintiffs.    The defendants

            now assert that in 2017 ands 2018 the plaintiff's counsel worked

            as counsel on. behalf of Yellowstone and represented Yellowstone

            while the contracts in this case were entered into between the

            parties.    Thus, due to counsel's representation of Yellowstone at

            that time the defendant now seeks to disqualify that counsel.       As

            noted the motion is opposed.

                                     Conclusions of Law

                  It is well settled that a party in a civil action maintains

            an important right to select counsel of its choosing and that

            such right may not be abri_dged without some overriciing concern

             (Matter of Abrams, 62 NY2d 1"83, 476 NYS2d 494 [1984]).

            Therefore, the party seeking disqualification of an opposing
            party's couns.e.l must present sufficient proo.f supporting that

            determination (Rovner v. Rantzer, 145 AD3d 1016, 44 NYS3d 172 [2d

            Dept., 2016]).
                  The former client conflict of interest rule is codified in

            the New York Rules of Profe.ssi-onal Conduct, Ruli= 1.9 (22 NYCRR

            $1200.0 et. se~.).    Sp~cificall~, Rule 1,9(a) provide~: "a. lawyer

            who ha:s formerly tepr·esented a client in a mi3-tter s_hall not

                                              2.

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            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 ... "

            (id),     Although a hearing may be necessary where a substantial

            issue of fact exists as to whether there is a conflict of

            interest (Olmoz v. Town ·ot Fishkill, 258 AD2d 4 4 7,          684 NYS2d 611

            [2d Dept., 1999]) mere cortclusory assertions are insufficient to
            warrant a hearing (Legacy Builders/Developers Corp .• v. Hollis

            Care Group, Inc., 162 AD3d 64 9, 8 0 NYS3d 59 [2d Dept., 2018] ) .

                    Thus, a party seekirfg disqualification of counsel must

            demonstrate that:         (1)   there was a prior attorney client

            relationship;         (2J the matters involved in both representations

            are substantially related; and (3J the present interests of the

            attorney's past and present clients are materially adverse (Moray

            v. UFS Industries Inc., 156 AD3d 781, 67 NYS3d 256 [2d Dept.,

            2017]; see, also, Falk v. Chittenden, 11 NY3d73, 862 NYS2d 869

            [2008]; Jamaica Pub. Serv. Co. v. AIU Ins .. Co., 92 NY2d 631, 684

            NYS2d 4,59    [1998]).      Once the moving party demonstrates that thes'e

            three elements are satisfied "an "irrebuttablepresumption of

            disqualification follows''          (Mccutchen v. 3 Princesses and A P

            Trust Dated February 3, 2004, 138 AD3d 1223, 29 NYS3d 611 [2d

            Dept . , 2016 J ) •

                    Thtis, in int~~preting the piio~ rµle DR s~10B(A) (1) which i$
                                                                 •'•   .        .
            substantially. the same in import, disqualification would be

                                                      3.

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  FILED: KINGS COUNTY CLERK 02/16/2024 10:37 AM                             INDEX NO. 512735/2021
  NYSCEF DOC. NO. 264                                                 RECEIVED NYSCEF: 02/16/2024

            proper where i t is established that there is a substantial

            .relationship between the current litigation a_nd the prior one

            (Kubetzic:r v. Advanced Dermatology, P.C'., 260 AD2d 548,      688 NYS2d

            596 [2d Dept.,    1999]).   Thus,   coriccerning this substantial

            relationship prong, in Spano v. Tawfik, 271 AD2d 522, 705 NYS2d

            659 [2d Dept., 2000], the court held dis.qualification improper

            where. the plaintiff's attorney suing defendant for breach of

            contract once represented the defendant in a trademark

            infringement action when plaintiff and defendant were the sole

            shareholders bf the corporation that settled that trademark

            action.     The court noted.there was insufficient evidence the

            matters were substantially related.          Indeed, for the two matters

            to be viewed as substantially related they must be 'identical to 1

            each other or 'essentially the same'         (Lightning Park. Inc., v.

            Wise Lerman Katz, P. C., 197 Ao:2ct 52, 609 NYS2d 904 [ pt Dept.,

            1994]),

                 The parties concede that a similar motion to disqualify

            d~unsel Wa~ fil~d in an adtion in N~w York county ~nd that the

            motion to disqualify there was denied.         Indeed, in Gateway

            International 360 v. Richmond Capital Group, e_t al., Index Number

            654636/2018 the court held that the movants had failed to

            establ.ish a "supstantial re1ationship" between the counsel's. work

            for Yellowstone ahd the funder in that case (see, Decision and

            Order [NYSC:EF Qoc. No .. 2-36)).    The: defendant in this case argue..s

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            that decision does not foreclose disqualification in this case

            because in that case the denial was based upon the fact the work

            performed for Yellowstone was not related to the clairns of the

            lawsuit, however, in thi.s case the work performed for Yellowstone

            consist of the claims sought to be introduced in the proposed

            amended complaint.

                  However, in order to demonstrate the prior ahd current

            representations are substantially related the movant must pres-ent

            facts supporting any disqualification,      The case of Bloom v. St.

            Paul Travelers Companies Inc., 24 AD3d 58 4, 80 6 NYS2d 692     [2d

            Dept., .,2005]. is instructive.   In that case the defendants moved

            to disqualify plaintiff's counsel on the grounds plaintiff's

            counsel previously represented the defendants.      The court denied

            the request noting that defendants failed to meet their burden.

            The court explained that "the defendants' conclusory assertions

            that one of the Law Firm's attorneys 'worked closely with'

            certain unidentified employees .of one or more of the defendants

            in coririection with   a number of cases that were more cir less
            related to the general area of uninsured or underinsuredmotorist

            coverage failed to establish 'that information material to the

            evaluation, prosecution, settlement or accomplishment of the

            former representation[s] .given [their] .factual and legal issues

            [might.] also [.be] material to the evaluatiqn, pr9secution,

            settlement or accomplishment of the current representation given

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            its factual and legal issues'" (id).       The court further found

            that "not only is therE:c no evidence that the legal issue at the

            heart of the present action is 'essentially the same as' any of

            the various legal issues with respect to which the Law Firm's

            attorneys provided legal counsel to the defendants in the

            past. .. but the defendants failed to demonstrate that the present

            representation is 'substantially related' to the prior

            representation in any way" (id).

                  Iri this action,   the defendants do not explain how any prior

           'representations of plaintiff;s counsel are substantially similar

            to this action to demand disqualification.        It is true that prior

            matters where counsel represented Yellowstone involved merchant

            cash funding, however, other than that generali-zation, there is

            no specific evidence the matter-s are related at all.        Merely

            because this action concerns a merchant cash funder and the-

            previous matters also involved merchant cash funders does not

            mean the cases are related without any evidence demonstrating the

            similarities {see, Reem Contracting corp., v. Resnick Murray st.

            Associates, 4 3 AD'.3d 369, 8 4 3 NYS2d 3 [ pt Dept. , 20071) •    Thus,

            there is no evidence the issues ih this litigation are identical

            to or essentially the same     as the prior r-epres~ntations.       There

            is further no evidence the plaintiff's counsel received

            "specific, confidentiai information substantially related to the
            pre.s.~nt litigation" ( ~ , Sgromo v. St. Joseph's Hospital Health

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    NYSCEF DOC. NO. 264                                                                   RECEIVED NYSCEF: 02/16/2024

                                   Center, 245 AD2d 1096, 666 NYS2d 89 [4th Dept., 19971) .

                                         Therefore, based on the foregoing, the motion seeking

                                   disqualification is denied.    The cro·ss-rhotion seeking sanctions
                                   is denied ..

                                          So ordered.
                                                              ENTER:

                                   DATED: February 15, 2024
                                          Brooklyn N.Y.            Hon. Leon Ruchelsman
                                                                   JSC

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