Opinion
Index No. 158735/2016
05-19-2021
Paul IACOVACCI, Plaintiff, v. BREVET HOLDINGS, LLC, Brevet Short Duration Partners, LLC, Brevet Short Duration Holdings, LLC, Brevet Capital Partners, LLC, a Delaware Limited Liability Company, Brevet Captial Holdings, LLC, a Delaware Limited Liability Company, Douglas Monticciolo, Mark Callahan, John Tripp, Defendants.
Attorneys for Plaintiff Paul Iacovacci, Debra L. Wabnik, Esq., David R. Ehrlich, Esq., Stagg Wabnik Law Group, 401 Franklin Avenue, Suite 300, Garden City, New York 11530, Tel: (516) 812-4500, dwabnik@staggwabnik.com, dehrlich@staggwabnik.com, Scott A. Weiss, Esq., Weiss & Weiss LLC, 50 Main Street, 10th Floor, White Plains, New York 10606, Tel: (866) 277-2707 scott@weissnweiss.com, Jason Cyrulnik, Esq., Ted Normand, Esq., Paul Fattaruso, Esq., Jordana Haviv, Esq., Roche Cyrulnik Freedman LLP, 99 Park Avenue Suit 1910, New York, NY 10016, Tel.: 646-350-0527, jcyrulnik@cf-llp.com Attorneys for Defendants, Louis M. Solomon, Esq., Reed Smith LLP, 599 Lexington Avenue, New York, NY 10022, Tel.: 212-549-0400, lsolomon@reedsmith.com, Philip C. Semprevivo, Esq., Biedermann Hoenig Semprevivo, P.C., One Grand Central Place, 60 East 42nd Street, Suite 660, New York, NY 10165, Tel.: 218-7560, Philip.semprevivo@lawbhs.com
Attorneys for Plaintiff Paul Iacovacci, Debra L. Wabnik, Esq., David R. Ehrlich, Esq., Stagg Wabnik Law Group, 401 Franklin Avenue, Suite 300, Garden City, New York 11530, Tel: (516) 812-4500, dwabnik@staggwabnik.com, dehrlich@staggwabnik.com, Scott A. Weiss, Esq., Weiss & Weiss LLC, 50 Main Street, 10th Floor, White Plains, New York 10606, Tel: (866) 277-2707 scott@weissnweiss.com, Jason Cyrulnik, Esq., Ted Normand, Esq. , Paul Fattaruso, Esq., Jordana Haviv, Esq.*, Roche Cyrulnik Freedman LLP*, 99 Park Avenue Suit 1910, New York, NY 10016, Tel.: 646-350-0527, jcyrulnik@cf-llp.com
substituted by Cyrulnik & Fattaruso LLP
Attorneys for Defendants, Louis M. Solomon, Esq., Reed Smith LLP, 599 Lexington Avenue, New York, NY 10022, Tel.: 212-549-0400, lsolomon@reedsmith.com, Philip C. Semprevivo, Esq., Biedermann Hoenig Semprevivo, P.C., One Grand Central Place, 60 East 42nd Street, Suite 660, New York, NY 10165, Tel.: 218-7560, Philip.semprevivo@lawbhs.com
Alexander M. Tisch, J.
The following e-filed documents, listed by NYSCEF document number (Motion 026) 898, 899, 900, 901, 902, 903, 904, 905, 906, 907, 908, 909, 910, 911, 912, 913, 914, 915, 916, 917, 918, 919, 920, 921, 922, 923, 924, 925, 927, 928, 1005, 1006, 1007, 1008, 1009, 1010, 1011, 1012, 1013, 1014, 1015, 1016, 1017, 1018, 1019, 1020, 1021, 1022, 1023, 1024, 1025, 1026, 1027, 1028, 1029, 1030, 1031, 1032, 1033, 1034, 1066, 1067, 1068 were read on this motion to/for CONTEMPT.
Plaintiff Paul Iacovacci moves for an order holding defendants and their counsel in criminal and civil contempt pursuant to Judiciary Law § 753 (A) (3) and § 750 (A) (3) for violating this Court's order dated November 29, 2017 (Cohen, J.) (NYSCEF Doc. No. 62 [the Order]); striking defendants' answer pursuant to CPLR 3103(c) and/or directing that an evidentiary hearing be held to determine whether to do the same; disqualifying defendants' counsel Greenberg Traurig LLP (GT) and Biedermann, Hoenig, Semprevivo (BHS) based on their contemptuous acts and pursuant to the lawyer-witness rule.
BACKGROUND
Plaintiff was a founding member of some of the corporate defendants, Brevet Capital Partners III, LLC and Brevet Capital Holdings III, LLC (the LLCs), along with individually-named defendants Mark Callahan, Douglas Monticciolo, and John Tripp (see NYSCEF Doc. No. 1 at 29-73 [LLC Agreements]). Plaintiff alleges that he advised defendants he intended to withdraw and retire as a member from the LLCs in January 2016 (see NYSCEF Doc. No. 820 [proposed second amended verified complaint] [SAVC] at ¶ 3) and the parties began to negotiate a separation agreement (NYSCEF Doc. No. 899 [Weiss aff] at ¶¶ 4-5). Pursuant to the LLC Agreements, plaintiff claims he would be entitled to a portion of the net profits of the LLCs over the course of five to ten (5-10) years if he voluntarily withdrew as a member (SAVC at ¶ 4). According to plaintiff, the defendants insisted on an overly broad non-compete provision, and the negotiations eventually broke down (Weiss aff at ¶¶6-8). Plaintiff was discharged for cause on October 14, 2016, denying him payments he claimed entitlement to under the LLC Agreements (SAVC at ¶ 17; Weiss aff at ¶ 9), and plaintiff commenced the instant action on October 17, 2016 alleging breach of contract and related claims (see NYSCEF Doc. No. 1). On November 30, 2016, defendants served an answer with counterclaims asserting breach of contract, misappropriation of confidential and proprietary information, conversion of a computer and cellphone, and other related claims (NYSCEF Doc. No. 7).
The pleadings have been subsequently amended numerous times via motion practice (motion sequence nos. 9, 10, and 23) (see NYSCEF Doc. Nos. 294 [amended verified complaint]; 417 [defendants' verified answer and amended counterclaims to verified complaint]; 820 [proposed second amended verified complaint]; 930 [granting motion sequence no. 23 in part]).
I. Motion Sequence No. 1 and the November 29, 2017 Order
Shortly after the litigation commenced, plaintiff suspected defendants accessed a computer that he kept in his home — of which the ownership and scope of use are contested issues in this litigation. Plaintiff's belief was based on defendants' counterclaims that referenced plaintiff's e-mails and files stored on the computer to develop the facts alleged in their pleading, and defendants' discovery demands that used language relating to sub-files located on plaintiff's separate external hard drives that were used with the subject computer (NYSCEF Doc. Nos. 10 at ¶¶ 32-33; 13 at ¶ 11). Plaintiff also suspected that defendants had reviewed plaintiff's webmail account that included attorney-client communications (NYSCEF Doc. No. 10 at ¶ 33, n 5). Plaintiff obtained an access log to his LogMeIn account and retained experts that concluded that there were unauthorized entries into the computer, and that file-transferring and file-deleting softwares were installed (Weiss aff at ¶ 12; NYSCEF Doc. No. 10 at ¶¶ 35-40 [citing Demirkaya affidavit]).
At some point during the summer of 2017, plaintiff showed defendants the evidence about the intrusion and defendants provided plaintiff with the "transmission file" i.e., the data collected from the alleged computer intrusion (Weiss aff at ¶ 13 [hereinafter Transmission file]). Plaintiff's counsel reviewed the file and believed it contained privileged information, specifically attorney-client communications and his work product (id. at ¶ 14).
Accordingly, in motion sequence no. 1, plaintiff moved to compel further responses to his discovery requests that were directed at finding the source of the information upon which defendants formed their initial discovery requests and counterclaims. Defendants cross moved to compel the computer and preserve its contents.
Defendants' cross motion alleged that the computer (and cellphone) belonged to the corporate defendants. They also argued in opposition to plaintiff's motion that the remote access entries were lawful and plaintiff had no expectation of privacy in the company computer (see NYSCEF Doc. No. 52).
Defendants later admitted to logging into the subject computer twice on October 18, 2016 (less than a day after the instant action commenced) and backed up its contents, and claim they were lawfully permitted to do so (see NYSCEF Doc. No. 907 [defendants' response to plaintiff's fifth set of interrogatories dated October 15, 2019]). Defendants continue to maintain that plaintiff had no expectation of privacy in the computer (see NYSCEF Doc. No. 1016 [Semprevivo aff] at ¶¶ 9-10).
The motion and cross motion were resolved in open court at the preliminary conference held on November 29, 2017. In the "additional directives" section of the preliminary conference Order, the parties agreed to submit the disputed Dell computer and external hard drives to a third-party neutral expert to review and segregate plaintiff's personal information (e.g., information relating to plaintiff's family) and any privileged information that may be on the computer (see NYSCEF Doc. No. 62 [the Order]). It went on to provide details about the process the parties would undertake in relation to the third-party expert's examination and segregation (see id. ). The next page of the Order continued to separately state as follows:
Defendants will review plaintiff's discovery requests as to any requests relating to the computer and/or external hard drives and will supplement as necessary.
If a party is in possession of privileged information of the other side, which is then returned to the other party, the returning party will certify in writing that it has returned all such information, including all copies (Order at 4).
The parties also appeared to have entered into a Stipulation and Order for the Production and Exchange of Confidential Information in January 2017 (see NYSCEF Doc. No. 10 [Weiss affirmation in support of motion sequence no. 1] at ¶ 20). However, neither side has referenced the stipulation and/or order in conjunction with the alleged privileged information as it relates to the events forming the basis for this contempt motion.
II. Relevant Facts Post November 29, 2017 Order & the Certification
On or about December 7, 2017, counsel for defendants, Eric B. Sigda of GT provided plaintiff's counsel with a CD-ROM "containing potentially privileged files or information" pursuant to the Order (files on CD-ROM hereinafter referred to as the Privileged Transmission file or production). The letter accompanying the CD-ROM stated that all files "over which Plaintiff may potentially assert the attorney-client privilege or attorney work product doctrine" are on that CD and all other copies have been deleted and are no longer in their possession" (NYSCEF Doc. No. 914).
At plaintiff's counsel's request, Mr. Sigda provided an attorney affirmation to certify the same, which stated:
To our knowledge, the CD-ROM contains all files that have come into our possession over which Plaintiff may potentially assert the attorney-client privilege or attorney work product doctrine. I certify that all other copies of the material contained in the CD-ROM have been permanently deleted and are no longer in our possession (NYSCEF Doc. No. 916 [Sigda aff dated December 15, 2017]).
The parties continued with discovery and extensive motion practice regarding the same. As relevant here, motion sequence no. 9 involved CDS, the neutral expert selected to review and segregate the information on the computer and hard drives, which resulted in a stipulation placed on the record on November 5, 2018 (see NYSCEF Doc. No. 390). The stipulation apparently resulted a modification to the parties' protocol and/or the agreement with CDS, also known as the "statement of work" (SOW) (see NYSCEF Doc. Nos. 394-395 [parties' correspondence]; see also NYSCEF Doc. Nos. 403, 918 [the SOW]). The protocol and/or SOW was then further modified by stipulation dated December 18, 2018 (see NYSCEF Doc. No. 426) to amend the protocol as it concerned plaintiff's quality control review, which was issued to resolve motion sequence no. 13 (see NYSCEF Doc. No. 397 [plaintiff's notice of motion to compel defendants to "adhere to the stipulation made on the record on November 5, 2018, ... which encompassed the underlying directives of the [Order], with respect to how to conduct the computer discovery"]).
III. October of 2019
Approximately two years after the defendants exchanged the Transmission file, this issue resurfaced.
On or about October 15, 2019, Philip Semprevivo of BHS, as counsel to defendants, provided plaintiff with a USB drive containing additional documents that were "recently identified by counsel for Defendants as responsive to certain discovery demands" (NYSCEF Doc. No. 917) (hereinafter referred to as the Supplemental files or production). Mr. Semprevivo's letter enclosing the USB drive stated:
These documents were previously thought to be electronically corrupted, and thus unable to be read or produced.
Defendants' counsel is in the process of reviewing these recently identified documents, and, pursuant to the Court's November 29, 2017 Order, will segregate and reasonably return copies to Plaintiff of any documents covered by the Court Order (NYSCEF Doc. No. 917).
The parties raised the Supplemental production with the Court during a status conference on October 23, 2019, as plaintiff was concerned that this new information, which allegedly consisted of 110,000 pages, contained potentially privileged material (see NYSCEF Doc. Nos. 919-920). The resultant order from that status conference included a directive for defendants to "immediately cease from reviewing [the Supplemental production] ... Parties to meet and confer by end of day 10/25/2019 and report back to the court" (NYSCEF Doc. No. 919).
As it concerns the review and exchange of the Supplemental production (the material which was allegedly partially corrupted back in 2017), the parties met and conferred with each other, wrote several letters, and conferenced with the Court to implement an appropriate procedure to re-format, review, segregate privileged material, if any, and exchange the newly-discovered documents (see Weiss aff ¶¶ 25-26, 29; NYSCEF Doc. No. 1016 [Sepmrevivo aff] at ¶¶ 18-30; NYSCEF Doc. Nos. 920, 1017, 1019). The parties' efforts resulted in a joint protocol submitted by letter dated November 15, 2019, which has been adhered to and has not been at issue (see NYSCEF Doc. Nos. 1018 [11/15/2019 protocol], 1020 [status conference order dated 12/3/2019, reaffirming parties adherence to the same]).
It is around this time that defendants, seemingly for the first time, represented to plaintiff and the Court that they are not permitted to delete data from their servers as part of their obligations as a Registered Investment Advisor regulated by the United States Security and Exchange Commission (SEC) (see NYSCEF Doc. Nos. 920 [plaintiff's counsel's letter dated 10/30/2019 regarding 10/25/2019 meet-and-confer]; 907 [defendants' response to plaintiff's fifth set of interrogatories dated 10/15/2019]; 1017 [defendants' counsel's letter dated 10/31/2019]). Thus, plaintiff was concerned that, inter alia, "the previously identified attorney-client privileged material has remained not only in Defendants' counsel's possession, but in their client's possession for the last almost two years" (NYSCEF Doc. No. 920).
In defendants' counsel's letter to the Court dated October 31, 2019, counsel attempted to explain what happened (see NYSCEF Doc. No. 1017). Defendants first admitted that they kept an entire copy of what was extracted from the computer and two external hard drives, which included the Privileged Transmission file, on a separate USB and also on Brevet's servers (id. ). The letter goes on to state that:
Brevet was also never informed that it was required to return or delete any documents on the basis that the documents were purportedly subject to Plaintiff's attorney-client privilege, nor did (or could) Brevet undertake to delete any documents in light of SEC record keeping requirements.
* * *
Defendants were never informed of the Court's December 29, 2017 [sic] Order providing that the return of certain materials shall not be unreasonably withheld, nor of GT's subsequent affirmation certifying compliance with that Order. As noted above, Defendants vigorously contest Plaintiff's assertion of privilege over any of these materials. Moreover, in light of SEC regulations, Defendants cannot delete the materials over which Plaintiff claims privilege from their servers. If helpful to the Court, Defendants will submit a letter outlining these regulatory requirements and explaining why deletion is impracticable.
Nonetheless, Defendants have taken steps to restrict their and their counsel's access to these materials while Plaintiff's claims of privilege are resolved" (id. ).
Plaintiff filed the instant motion shortly thereafter, on or about December 9, 2019. That portion of the motion seeking a temporary restraining order and preliminary injunction was resolved pursuant to so-ordered stipulation dated December 11, 2019 referencing and incorporating the parties' joint protocol (see NYSCEF Doc. No. 927).
The temporary restraining order and preliminary injunction sought an order "restraining and enjoining Defendants and their attorneys until the hearing and deciding of this motion from: i) reviewing, accessing, copying, deleting and/or modifying (directly or indirectly) the data removed by Defendants from Plaintiff's computer and external hard drives located at his home (the "Data"); ii) accessing, copying, modifying, deleting, sanitizing or altering any information related to the ...; iii) authorizing or directing any other individual to access, copy, modify, delete, sanitize or alter any information related to the Data ...; iv) tampering with or disposing of the originals and/or copies of any and all records, including but not limited to any and all log files, in any form, related to the Data; and/or v) authorizing or directing any other individual to tamper with or dispose of the originals and/or copies of all records, in any form, related to the Data" (see NYSCEF Doc. No. 898 [plaintiff's proposed order to show cause]).
IV. Relevant Affidavits and Attorney Affirmation Submitted in Opposition to This Motion
Johnny Lan, Head of Technology at Brevet Capital Management, LLC (NYSCEF Doc. No. 1013 [Lan aff])
Lan states that in October 2016 he remotely downloaded files from a computer that was located in plaintiff's home onto a USB Drive (Lan aff at ¶ 3). He then placed those files from the USB Drive onto the Brevet's computer servers in two locations: an archive directory for plaintiff and co-defendant Mark Callahan's personal directory, save for a portion of corrupted files for which he encountered issues when trying to copy (id. at ¶ 4).
Lan states that the original USB Drive was given to GT and "[s]ometime afterward, an attorney from GT contacted [him] to ask about the corruption issue on the" USB Drive. He informed GT that the USB Drive "had experienced corruption issues since that time" and suggested GT hire a vendor to recover the corrupt files" (id. at ¶ 5). Lan affirmed, "From that time until October 2019, I do not recall ever being asked by GT or any other counsel whether I had made any copies of the files on the Download USB Drive" (id. at ¶ 5).
At another unspecified time, Lan copied the files from the Brevet system onto a second USB drive (the Back-up USB Drive) (id. at ¶6). He was asked to give the files downloaded in 2016 to Brevet's expert, Stoneturn, in August 2019 and was "surprised to learn that the material that [he] had provided to Stoneturn included material that Iacovacci had claimed was privileged" (id. at ¶¶ 7-8). Shortly thereafter, he was advised by counsel to restrict access to the files downloaded in 2016 that existed on the Brevet servers and did so (id. at ¶ 8).
Mark Callahan, Managing Director of Brevet Holdings, LLC (NYSCEF Doc. No. 1005 [Callahan aff])
In his affidavit, Callahan also admits Brevet remotely logged into the computer on October 17-18, 2016 and backed up portions of its contents onto a USB Drive "to try to comply with its regulatory record-keeping requirements" and "to back-up, and secure the return of, ... Brevet's own confidential and proprietary documents, as well as Plaintiff's work-product created on behalf of Brevet" (Callahan aff at ¶¶ 6, 16). He instructed Lan to copy files onto Brevet's servers, including his personal drive (id. at ¶ 18).
He further addresses ownership issues of the computer, which is not relevant here (see id. at ¶¶ 8-15).
Callahan denies knowing about the instant lawsuit that was commenced a day before the defendants remotely accessed and backed up the computer at the time of the alleged intrusion (id. at ¶ 17).
Out of a concern that plaintiff "misused his access to Brevet's computer system" and his belief that "the downloaded files might contain evidence of any such misconduct," he reviewed the files copied onto his personal drive on the Brevet system in late 2016 (id. at ¶ 18). When he finished his review, he prepared "two emails to Brevet's counsel identifying files that [he] believed showed Plaintiff's attempt to misappropriate Brevet's confidential information and to divert Brevet's business opportunities" (id. at ¶ 19). It is his understanding that the documents he referenced in the emails to counsel have already been disclosed through discovery in this litigation (id. at ¶ 19).
The affidavit further states in relevant parts as follows:
While I now understand that some of the material included in those files may have involved communications between Plaintiff and his lawyer, I had no interest in any such communications and did not review any of them, because that was not what I was concerned about. * * *
Other than the review I conducted in 2016, I have not looked at, examined or reviewed the files from the USB Drive. I understand that they have been moved out of my U: [personal] drive and are no longer accessible to me. To my knowledge, no one else at Brevet ever reviewed those files or their contents.
I understand that in 2017, after I conducted my review of the files from the USB Drive, Plaintiff asserted that they included material that was personal and confidential to Plaintiff and his family and material that was covered by the attorney-client privilege.
To my knowledge, GT never advised Brevet that it was returning and deleting any materials produced from the USB Drive to the Plaintiff as materials over which Plaintiff potentially asserted attorney-client privilege, nor did GT instruct Brevet to search for or delete any such materials. To my knowledge GT never advised Brevet of any court order that related to the files from the USB Drive. Since the Motion was made, Brevet has reviewed its email archive and found no record of the court order having been sent to Brevet prior to September 2019 (id. at ¶ 19-22).
Eric B. Sigda, Esq. of GT (NYSCEF Doc. No. 1015 [Sigda aff])
In his attorney affirmation, Sigda states that GT's work in the case "effectively ceased in February of 2018" and "GT is formally withdrawing as counsel in this matter" (Sigda aff at ¶ 2). He states that, shortly after the action commenced, GT received a USB Drive from Lan of the files extracted from the computer (id. at ¶ 3). "GT understood that it was receiving the original USB Drive. GT was not aware of any other copy of the USB Drive" (id. at ¶ 4). Sigda further states, "When GT received the USB Drive, it was noted to have a corruption issue such that not all of the documents could be accessed" (id. at ¶ 5). GT reached out to Lan about the issue, who suggested GT use a vendor or expert to extract the files (id. at ¶ 6). Sigda claims that, "We understood this to mean that GT was in possession of the only copy of the contents backed-up from the [computer], and we did not ask Brevet whether they possessed any other copies of the USB Drive" (id. at ¶ 7).
It is unclear whom is exactly referenced by the word "we." For sophisticated attorneys, misuse of "we" or "our" can have serious ramifications, as it potentially has done here.
Based on his mistaken assumption that GT had the only copy of the computer's contents, GT "believed that there were no other copies of the material over which Plaintiff could have asserted privilege in Defendants' possession. Consequently, we did not instruct Brevet that it was required to return or delete any documents. Furthermore, we did not send a copy of my Affirmation to Brevet" (id. at ¶ 12).
Regarding the corrupted files, GT did use the assistance of an outside vendor, Conduent, to try to extract the files but could not extract all of it because of the corruption issue (id. at ¶ 8).
DISCUSSION
V. Criminal & Civil Contempt
A "court's power to punish for civil and criminal contempt is found respectively in Judiciary Law § 753 (A) (3) and § 750 (A) (3)" ( Matter of Department of Envtl. Protection of City of NY v Department of Envtl. Conservation of State of NY , 70 NY2d 233 [1987] ). Judiciary Law § 753 (A) (3) provides that "[a] court of record has power to punish" a "party to the action" or "an attorney" "by fine and imprisonment, or either" for "disobedience to a lawful mandate of the court" where such conduct may defeat, impair, impede, or prejudice a party's rights. Judiciary Law § 750 (A) (3) states "[a] court of record has power to punish for a criminal contempt, a person guilty of ... [w]ilful disobedience to its lawful mandate."
To sustain a finding of either civil or criminal contempt based on an alleged violation of a court order it is necessary to establish" that (1) "a lawful order of the court clearly expressing an unequivocal mandate was in effect"; (2) "the order has been disobeyed"; and (3) "the party charged must have had knowledge of the court's order" ( Department of Envtl. Protection , 70 NY2d at 240 ; see Town of Southampton v R.K.B. Realty, LLC, 91 AD3d 628, 629 [2d Dept 2012] ; Town of Copake v 13 Lackawanna Properties, LLC, 73 AD3d 1308, 1309 [3d Dept 2010] ).
"Although the same act may be punishable as both a civil and a criminal contempt, the two types of contempt serve separate and distinct purposes" ( Department of Envtl. Protection , 70 NY2d at 239 ; see People ex rel. Stearns v Marr , 19 Bedell 463 [1905] ). "Civil contempt has as its aim the vindication of a private party to litigation and any sanction imposed upon the contemnor is designed to compensate the injured private party for the loss of or interference with the benefits of the mandate" ( McCain v Dinkins , 84 NY2d 216, 226 [1994] ). "A criminal contempt, on the other hand, involves an offense against judicial authority and is utilized to protect the integrity of the judicial process and to compel respect for its mandates" ( Department of Envtl. Protection , 70 NY2d at 239 ). "Allegations of willful disobedience of a proper judicial order strike at the core of the judicial process and implicate weighty public and institutional concerns regarding the integrity of and respect for judicial orders" ( Department of Envtl. Protection , 70 NY2d at 240 ; see People ex rel. Stearns , 19 Bedell at 466 [noting that a "willful contempt of a court of justice or its process is an offense against the People of the state," a "wrong done to the public," and brings "dishonor upon the law itself"]).
In line with the distinct and separate purposes of the two kinds of contempt, a movant seeking a criminal contempt has the additional requirement to demonstrate that the disobedience of an order was willful — an element that is noticeably absent from the civil contempt statute and case law (compare Jud L § 750 [A][3]and Jud L § 753 [A][3] ; see generally El-Dehdan v El-Dehdan, 114 AD3d 4 [2d Dept 2013], affd 26 NY3d 19 [2015] ; see also In re White , 478 BR 177, 183 [Bankr SDNY 2012] ). Additionally, a movant seeking to hold a party or attorney in civil contempt has the additional requirement to demonstrate that a right of a party "may be defeated, impaired, impeded, or prejudiced" by the mere disobedience of the order ( Hinkson v Daughtry-Hinkson, 31 AD3d 608 [2d Dept 2006] ; see El-Dehdan, 114 AD3d at 11 ["The element of prejudice to a party's rights is essential to civil contempt, which aims to vindicate the rights of a private party to litigation, but not criminal contempt, which aims to vindicate the authority of the court"]). Further, the two types of contempt have different standards of proof: a finding of criminal contempt requires proof beyond a reasonable doubt; whereas a finding of civil contempt requires proof by clear and convincing evidence (see Town of Southampton, 91 AD3d at 629-31 ; Town of Copake, 73 AD3d at 1309-10 ; In re White , 478 BR at 183 ).
"Once the movant establishes a knowing failure to comply with a clear and unequivocal mandate, the burden shifts to the alleged contemnor to refute the movant's showing, or to offer evidence of a defense, such as an inability to comply with the order" ( El-Dehdan, 114 AD3d at 17-18 ; Popelaski v Popelaski, 22 AD3d 735, 737 [2d Dept 2005] ; Ferraro v Ferraro, 272 AD2d 510, 511-12 [2d Dept 2000] ). "Inability to comply with an order is a defense to both civil and criminal contempt" ( Lueker v Lueker, 166 AD3d 603, 603-04 [2d Dept 2018] ). Similarly, in response to a prima facie showing of contempt, the contemnor may offer proof that "he or she has purged the contempt or that it is impossible for him or her to purge" ( Riverside Capital Advisers, Inc. v First Secured Capital Corp. , 57 AD3d 870, 871 [2d Dept 2008] ).
"[A]n application to adjudicate a party in contempt is treated in the same fashion as a motion and a hearing must be held if issues of fact are raised" ( Quantum Heating Services Inc. v Austern, 100 AD2d 843, 844 [2d Dept 1984] [internal citations omitted]). "Conversely, a hearing is not necessary when there is no ‘factual dispute as to [the party's] conduct unresolvable from the papers on the motion’ " (id. , quoting Siegel, NY Prac, § 484, p 649 ; see Automated Waste Disposal, Inc. v Mid-Hudson Waste, Inc. , 50 AD3d 1073 [2d Dept 2008] ; Riverside Capital Advisors, Inc. v First Secured Capital Corp., 28 AD3d 455, 456 [2d Dept 2006] ; El-Dehdan, 114 AD3d at 17 [noting that a "hearing is required only if the papers in opposition raise a factual dispute as to the elements of civil contempt, or the existence of a defense"]).
A. The Order & Violation
As noted above, the subject Order at issue specifically states: "If a party is in possession of privileged information of the other side, which is then returned to the other party, the returning party will certify in writing that it has returned all such information, including all copies" (Order at 4).
Plaintiff asserts that this order was violated by keeping the Privileged Transmission file (containing alleged privileged material), and falsely certifying that such information was returned, including all copies. The other alleged contemptuous act was the failure to exchange and/or disclose the existence of the corrupted file until the Supplemental production was made in 2019, as the Supplemental file also may have contained either attorney-client communications and/or documents protected under the attorney work product doctrine.
Initially, the Court finds that the acts taken with respect to the corrupted file and/or Supplemental production do not fall within the scope of the judicial mandate set forth in the Order. The operative words are "which is then returned to the other party" — triggering an obligation to return and certify that all copies have been destroyed. In this instance, the privileged information, if any, contained in the corrupted portion of the data had not yet been returned. As described above, the Court had fashioned a remedy and procedure to address the Supplemental production and the parties have, so far, abided by the same.
While it is generally agreed that such information should have been disclosed and exchanged in 2017, the failure to do so is not a contemptuous act under the Order at issue, except to the extent it is encompassed in the false certification act, as Mr. Sigda represented that he was returning all material over which the privilege may be asserted, notwithstanding potential knowledge of the corrupted portion, which will be addressed infra.
Accordingly, the Court's contempt discussion will focus on the failure to return and retain the privileged information from the Transmission file, and the false certification of the same. The language in the Order clearly and unambiguously speak to these acts (see, e.g. , Town of Copake, 73 AD3d at 1309 ).
Defendants claim in opposition to this motion that the Order was not unequivocal and the complained of acts do not constitute a violation of the Order. Defendants first cite to a different provision of the Order that states that if a party believes it is in possession of privileged material, the return of the material will not be unreasonably withheld (see Order at 3). However, that portion of the Order is irrelevant as it was part of a different section discussing the parties' proposed protocol per the agreement made in Court to turn the computer over to a neutral expert for examination. Indeed, the Court agrees with defendants wherein they argue that "there can be no violation of this portion of the 2017 Order, and Plaintiff does not even assert one" (NYSCEF Doc. No. 1034 [Defts mem] at 20). If plaintiff did not assert a violation of that part of the Order, it should not, consequently, be part of this discussion.
Defendants also argue that the second (and presumably only relevant) portion of the Order has not been violated because there has not been a formal determination that the documents are in fact privileged. This argument is unavailing as the parties and counsel have treated the information under the broader lens of information "over which Plaintiff may potentially assert the attorney-client privilege or attorney work product doctrine" (NYSCEF Doc. No. 916 [Sigda certification]; see NYSCEF Doc. No. 14). It would also make little sense for litigants to operate under the rubric of holding potentially privileged information until it is formally found to be designated as privileged — such an absurd result would lead to the slow "erosion of the long-standing policy which the privilege here in question exists to protect, namely, that of encouraging frank and open interchange between attorney and client" ( Matter of Beiny [Weinberg] , 129 AD2d 126, 138 [1st Dept 1987] ). As all parties are aware, whether plaintiff had a reasonable expectation of privacy and/or whether the computer belonged to defendants, and related issues, are in serious dispute and yet to be decided in this case.
"If the terms of an order are vague and indefinite as to whether or not a particular action by a party is required or prohibited, then of course that cannot be the basis of a criminal contempt" ( Department of Envtl. Protection , 70 NY2d at 241 ). However, that is not the case here as the defendants appear to clearly understand the Court's Order by recognizing that an obligation to certify the return of privileged information and all copies is triggered if the privileged information is returned to a party (see Defts mem at 21). Defendants argue that the obligation to return and certify destruction of all copies was not triggered as it concerned the Supplemental production because nothing had yet been returned. However, defendants are curiously silent when it comes to applying the same language in the same manner with respect to the privileged material in the Transmission file.
Moreover, defendants and GT clearly attempted to act in compliance with the Order by returning potentially privileged information and providing a certification — further demonstrating a lack of ambiguity of the Order's terms.
The Court also finds that GT and the defendants clearly violated the order. The record reflects that GT provided a certification that all privileged material, including the copies, were returned, when, in fact, copies of the same remained in the defendants' possession. Lan's and Callahan's affidavits clearly show that the copies of the USB Drive were stored in two places on Brevet's Back-up USB Drive (see Lan aff at ¶¶ 4, 6-7; Callahan aff at ¶¶ 18, 20; Sigda aff at ¶ 8).
The same findings cannot be made about BHS. Plaintiff alleges that BHS knew as early as August 2019 that additional data was in defendants' possession and they did not disclose its existence until October, nor return any privileged information. However, as found above, the Court does not read the Order as affirmatively requiring a return of privileged information.
But see supra , n 3.
BHS was not involved in turning over the Transmission file, the Privileged Transmission file or certifying that all potentially privileged information had been returned and destroyed. Inherent in in-coming counsel's obligation is the obvious need to be familiar with the prior proceedings and orders, and an on-going obligation to maintain compliance with the same. However, Mr. Semprevivo claims, and this Court credits his claim (absent any evidence to the contrary), that he and BHS had no reason to know that a back-up was kept in violation of an order or in violation of an attorney certification of the same until August 2019 (Semprevivo aff at ¶ 8). Indeed, BHS was not responsible for the false certification attesting to the notion that all privileged materials previously returned had been destroyed. As BHS was not involved in this regard, it cannot meet the basis for the contempt.
B. Knowledge
Initially, the Court finds that there is no doubt that GT had knowledge of the Order. GT was present when the Order was issued, and undeniably attempted to comply with it. However, the defendants, by way of the Callahan and Lan affidavits, deny having knowledge of the Order directing the return of privileged material, including all copies.
Lan's affidavit is indefinite and unclear as to whether he was ever asked by GT or other counsel about the existence of any copies of the USB Drive. His affidavit references a certain conversation with GT about the corruption issue, and then he states that he was never asked about making copies "[f]rom that time until October 2019" (Lan aff at ¶ 5) — leaving open the question of whether the question was ever asked before that conversation; let alone when the conversation took place — i.e., does "that time" reference 2016? 2017? Before or after the Order was issued?)
Mr. Callahan's affidavit leaves less room for guess-work, as he stated: "To my knowledge, GT never advised Brevet that it was returning and deleting any materials produced from the USB Drive to the Plaintiff as materials over which Plaintiff potentially asserted attorney-client privilege, nor did GT instruct Brevet to search for or delete any such materials. To my knowledge GT never advised Brevet of any court order that related to the files from the USB Drive ... [and there is] no record of the court order having been sent to Brevet prior to September 2019" (Callahan aff at ¶ 22).
To their aide, Sigda affirmed that he never asked "Brevet whether they possessed any other copies of the USB Drive"; "did not instruct Brevet that it was required to return or delete any documents"; and "did not send a copy of [his certification] to Brevet" (Sigda aff at ¶¶ 7, 12).
Plaintiff argues that it stretches credulity to think that defendants had no knowledge of this Order. This Court tends to agree.
Mr. Callahan's sweeping overgeneralization that "GT never advised Brevet of any court order that related to the files from the USB Drive" (Callahan aff at ¶ 22) is simply incredulous. The parties engaged in extensive motion practice right from the beginning about the computer, the extraction of data, and review of that data that included potentially privileged information. Plaintiff's memorandum of law in opposition to defendants' cross motion on motion sequence no. 1 specifically mentions the likelihood of privileged material on the computer. Mr. Lan himself submitted an affidavit in that motion (NYSCEF Doc. No. 36). Defendants cannot deny knowledge of the motion yet claim ignorance of the order resolving it (see, e.g. , McCormick v Axelrod , 59 NY2d 574, 585-86 [1983] ). The Order, wherein the parties agreed and the Court directed the computer to be turned over to a neutral expert, and the myriad of motions subsequently made regarding the same, would have no significance whatsoever if the defendants were permitted to simply keep all that information in their possession with unfettered access.
In support of the assertion that defendants had no knowledge of the Order, they argue that, had they known they had to search and delete data from their servers, they would have had to have had a discussion with counsel about complying with the Order whilst also complying with SEC requirements for record keeping. Interestingly enough, defendants and their counsel appeared to have been aware of their SEC obligations as early as 2017, prior to the Court issuing its order, by raising it as part of their justification for remotely accessing the computer in the first place (see NYSCEF Doc. No. 52 at 12, n 2 [Defts mem on mot seq 1]). In any event, the alleged inability to comply is discussed infra.
Notwithstanding the foregoing, it would be error for this Court to make an affirmative finding that the defendants had actual knowledge of the Order when they have disputed this element; accordingly, a hearing will have to be held on this issue (see Puro v Puro , 39 AD2d 873, 873 [1st Dept 1972], affd 33 NY2d 805 [1973] ; Mayfair Nursing Home v Neidhardt , 173 AD2d 794, 794-95 [2d Dept 1991] ; see also Dotzler v Buono , 144 AD3d 1512, 1513-14 [4th Dept 2016] ).
C. Willfulness & Claimed Defense
As to the element of "willfulness" for criminal contempt, a hearing will be required as to both GT and defendants. Although it is beyond comprehension that an attorney, an officer of the court, would certify (1) that all information over which plaintiff may assert the attorney client privilege has been returned, notwithstanding the knowledge of a corrupted portion of the entire back up; and (2) that all copies have been returned and destroyed, without asking their client if any copies existed, Mr. Sigda attempted to "offer an explanation" for GT's disobedience of the Order, thereby requiring a hearing (see Quantum Heating Services Inc. , 100 AD2d at 844 ).
"Proof of noncompliance established a prima facie case of criminal contempt and the burden [shifts to defendants] to establish good cause for his noncompliance, thereby [potentially] negating the inference of willfulness" ( Ferraro , 272 AD2d at 512 ). As noted above, defendants' inability to comply with the Order is asserted as a purported defense, such that the element of willfulness could not be satisfied. Defendants are required to demonstrate such inability to comply by clear and convincing evidence (see Riverside Capital Advisers, Inc. , 57 AD3d at 871, citing Matter of Nestler v Nestler , 125 AD2d 836, 836-37 [3d Dept 1986] ).
Defendants submit an affidavit from Ken C. Joseph, Managing Director and Global head of the Disputes Consulting practice at Duff & Phelps, LLC, who opines as to SEC record-keeping rules under Section 204 of the Investment Advisors Act of 1940 (see NYSCEF Doc. No. 1033). He states that Brevet is required "to make and keep true, accurate and current specified books and records relating to their investment advisory business" so that the SEC may fully and adequately examine and investigate Brevet when the SEC deems it necessary (id. at ¶¶ 11, 15). Joseph also avers that personal emails are subject to be investigated when used for business purposes and, therefore, had to be maintained and kept by Brevet. Accordingly, Joseph opined that "Brevet's action in downloading the documents and information was consistent with its obligation to maintain true and accurate books and records, wherever located or however stored" (id. at ¶ 23).
The Court is not satisfied with defendants' proof and argument that there was no way to comply with the Order and SEC requirements simultaneously and, as such, has not demonstrated its defense upon clear and convincing evidence.
Joseph further states, "To the extent Plaintiff claims any information had been improperly obtained and should not be retained by Brevet, that claim would need, at the very least, to be investigated and resolved before Brevet could remove the information from its system, otherwise risking a violation of Rule 204-2" (id. at ¶ 25). The idea that plaintiff's claims need first be investigated and resolved before, essentially, complying with a court order appears to place a choice about whether to comply in Brevet's hands. This cannot be so (see Dept. of Hous. Preserv. and Dev. of City of New York v Mill Riv. Realty, Inc. , 169 AD2d 665, 669-70 [1st Dept 1991] ["Obedience to a lawful order of the court is required even if the order is thereafter held ‘erroneous or improvidently made or granted by the court under misapprehension or mistake’ "], quoting State v Congress of Racial Equality , 92 AD2d 815, 817 [1st Dept 1983] ; see Bel-Aqua Pool Supply, Inc. v Ocean Blue Pools, Inc. , 28 Misc 2d 665, 665-66 [Sup Ct, Nassau County 1961] ["It would lead to legal chaos to have litigants decide in their sole discretion what orders of the court they will observe and when"]). Not only should have defendants made the Court and plaintiff aware of this specific SEC obligation but an application could have been made to modify the Order, rather than disobeying the Order continually for over two years before being "caught," so to speak.
Further, the fact that the Privileged Transmission file was copied and stored on multiple locations and given to various entities (within Brevet and to its experts) does not, in this Court's view, establish sufficient "good cause for [their] noncompliance" based on purported SEC record-keeping rules (see Ferraro , 272 AD2d at 512 ). Mr. Joseph and defendants papers fail to explain how storing the transmission file in multiple locations with access to various individuals is required by the SEC rules to the extent that it would effectively override and/or directly conflict with the Court's Order. Accordingly, such a defense would not necessarily "negat[e] the inference of willfulness" (id. ).
D. Prejudice
As set forth above, civil contempt may be found where the mere disobedience of an order results in prejudice to a party (see Hinkson , 31 AD3d 608 ).
CPLR 3101 (b) and (c) carve out certain privileged matter and an attorney's work product from the scope of disclosure (see Matter of Weinberg , 129 AD2d at 137 ["It is axiomatic that privileged material may not be disclosed"]). Here, the information kept in violation of the Order allegedly included "communications between Plaintiff and his counsel regarding the separation agreement negotiations, discussions about the Complaint, drafts of the Complaint with comments, discussions of the legal strategy and initial discovery proceedings" (NYSCEF Doc. No. 925 [plaintiff mem] at 7, 15, 35-36, citing, inter alia, Weiss aff at ¶ 14; see Weiss aff at ¶ 27).
As to GT, the Court deems the relevant inquiry as follows: Did the false certification — that the foregoing potentially privileged material and all its copies were destroyed — defeat, impair, impede, or prejudice plaintiff's rights? Specifically, here, the right to keep immune from disclosure attorney-client privileged material, or his attorney's work product pursuant to CPLR 3101 (b) and (c) ?
As to defendants, the Court deems the relevant inquiry as follows: Did the retention of the foregoing potentially privileged material defeat, impair, impede, or prejudice plaintiff's right to keep immune from disclosure attorney client privileged material, or his attorney's work product pursuant to CPLR 3101 (b) and (c) ?
As to both questions, the Court finds that it does.
The Order itself was issued in the vein of CPLR 3101(a) as it limited, conditioned, and regulated the use of discovery to be sought from the computer. For this type of order, the focus is more "upon the existence of a privilege which has not been waived" rather than the actual "prejudice which disclosure would cause a party" (see Matter of Weinberg , 129 AD2d at 137 ).
The Order, itself, sought to remedy the then-existing situation of a potential violation of attorney-client privilege, and provided a pathway forward for fair and just disclosure under the circumstances. The violation of that Order, however, as was done here, necessarily struck at the chords of basic principles of discovery and a party's right to assert the privilege to keep information unattainable to an adversary. The purpose behind CPLR 3101(b) and (c) is so widely known and understood that it is almost unimaginable that this Court would have to spell out or explain in further detail how plaintiff's rights have been violated (see, e.g. , Roberts v Corwin, 118 AD3d 571, 574 [1st Dept 2014] [distinguishing the Roberts situation with the "actual prejudice in Matter of Weinberg, where the information surreptitiously obtained was confidential attorney client communications"]). "Clearly, this sort of abuse of confidential information, whether by the original attorney or one to whom the information has been illicitly transferred, cannot be countenanced" ( Matter of Weinberg , 129 AD2d at 143 ).
Plaintiff also was prejudiced by the retention of the material as it concerns the CDS review. The incredibly burdensome time and expense of engaging in the review is practically meaningless, given that defendants had access to review the very material CDS, and the Court in its pending in camera review, sought to extract and carve out from permissible disclosure.
But whether plaintiff's right, defeated as it was, has resulted in actual harm (and, consequently, whether it could be remediated by the relief plaintiff seeks — to wit: striking the answer, directing defendants to pay for the entire CDS review, and/or attorneys' fees for the prior motions related to CDS (NYSCEF Doc. No. 925 [plaintiff mem] at 31-32) — necessarily depends on a demonstration of the extent of the actual harm done.
It is suggested by plaintiff that the defendants' review of privileged material impacted the litigation in this case by giving defendants an unfair advantage. Although, a distinction must be made between the prejudice and harm flowing from defendants' actions prior to the Order (remotely logging into the computer, reviewing its contents, and potentially using the same information to form the basis of their pleadings and discovery demands), and their actions after the Order was issued.
After the Order was issued, the defendants retained the material in violation of the Order. But the measure of damage or actual harm from the retention of the privileged information since the Order was issued is unclear. First, plaintiff never submitted the allegedly privileged material, in camera or otherwise. Thus, there is no way of knowing how the defendants' knowledge and review of its contents would necessarily and consequently result in an unfair disadvantage or irreparably taint the litigation. While true that "there is no way of assuring that the tainted knowledge will not subtly influence its future conduct of the litigation" ( Matter of Weinberg , 129 AD2d at 142 ; see Lipin v Bender , 84 NY2d 562, 573 [1994] ), there is no way for the Court to make a determination one way or the other as there is no basis from which to adequately gage or judge the potential harm.
Second, the prejudice would be substantial if there was evidence demonstrating that defendants viewed and used the privileged information, post-Order. Defendants contend that plaintiff did not prove that defendants accessed and/or reviewed any of the potentially privileged information kept on the servers in violation of the Order. Indeed, defendants' affidavits deny the same.
Thus, the Court finds that the plaintiff's evidence presented before the Court at this juncture is insufficient to demonstrate "actual harm" such that remedial measures are warranted, like striking the answer, or directing defendants to pay for the entire CDS review, and/or attorneys' fees for the prior motions related to CDS (see State v Unique Ideas, Inc., 44 NY2d 345, 349-50 [1978] ["Only a fine properly related to the scope of the injury rather than the potential scope of the offense will serve the compensatory purposes of the civil contempt fine"]).
In such cases, the Court may still impose a fine upon the contemnor "not exceeding the amount of the complainant's costs and expenses, and two hundred and fifty dollars in addition thereto" ( Jud L § 773 ; see Jamie v Jamie, 19 AD3d 330 [1st Dept 2005] ). Accordingly, as directed below, the Court will impose a statutory fine against GT but reserves directing the same until completion of the contempt hearing as to defendants' knowledge. Should defendants also be found in civil contempt, they may bear the attorneys' fees for making this motion jointly.
VI. Protective Order CPLR 3101 (c)
For the same reasons outlined above in the preceding section concerning prejudice, the branch of plaintiff's motion seeking to strike the answer pursuant to CPLR 3103 (c) is denied.
CPLR 3103 (c) states, "If any disclosure under this article has been improperly or irregularly obtained so that a substantial right of a party is prejudiced, the court, on motion, may make an appropriate order, including an order that the information be suppressed." The Court of Appeals noted that this statute confers broad authority to "to enter any order, including an order of dismissal, that is appropriate in the circumstances" ( Lipin , 84 NY2d at 571 [emphasis in original]). An order issued pursuant to this statute is meant to serve a remedial purpose and is not necessarily designed to be a sanction ( id. at 572 ; compare CPLR 3126 ; but see Roberts, 118 AD3d at 573 [describing Lipin as imposing a sanction under the statute]).
The egregious scenario presented in Lipin is not present here, and the Court finds that it would be inappropriate to strike defendants' pleading under this statute. In Lipin , the defendants were able to demonstrate irreparable prejudice by plaintiff's inappropriately taking, studying, retaining, and copying privileged documents (see Lipin , 84 NY2d at 572 ). It was also undeniable that the documents were used to her advantage (see id. ). Here, we do not know what documents were specifically at issue, whether they were privileged, or whether they were reviewed and used post-Order (see Roberts, 118 AD3d at 572-74 ; cf. Shawe v Elting, 169 AD3d 601, 602 [1st Dept 2019] [where plaintiff accessed "a privileged memorandum from defendant's counsel about his strategy concerning the incident underlying this action" and "plaintiff's counsel referred to the contents of some of the privileged communications during motion practice in this litigation"]).
As plaintiff has been unable to demonstrate substantial prejudice by the violation of the Order, this branch of the motion is denied.
VII. Lawyer Disqualification
Lastly, plaintiff seeks to disqualify GT and BHS as attorneys for defendants in this matter. Plaintiff relies on their individually contemptuous acts as well as Rule 3.7(a) of the Rules of Professional Conduct, providing that, unless certain exceptions apply, "a lawyer shall not act as advocate before a tribunal in a matter in which the lawyer is likely to be a witness on a significant issue of fact."
"The advocate-witness rules contained in the Code of Professional Responsibility, which has been superseded by the Rules of Professional Conduct, provide guidance for the courts, but are not binding authority, in determining whether a party's attorney should be disqualified during litigation" ( Fuller v Collins, 114 AD3d 827, 829 [2d Dept 2014] ). Indeed, "disqualification of an attorney is a matter that rests within the sound discretion of the Supreme Court" (Goldberg & Connolly v Upgrade Contr. Co., Inc., 135 AD3d 703, 704 [2d Dept 2016] ).
"Disqualification of a law firm during litigation implicates not only the ethics of the profession but also the substantive rights of the litigants. Disqualification denies a party's right to representation by the attorney of its choice. The right to counsel of choice is not absolute and may be overridden where necessary — for example, to protect a compelling public interest — but it is a valued right and any restrictions must be carefully scrutinized" ( S & S Hotel Ventures Ltd. Partnership v 777 S.H. Corp., 69 NY2d 437, 443 [1987], citing Matter of Abrams [John Anonymous], 62 NY2d 183 [1984] ; see Aryeh v Aryeh, 14 AD3d 634, 634 [2d Dept 2005] ["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"]).
The Court denies this branch of the motion as to BHS, as they were not found to have any contemptuous conduct and would not be needed to be called as witnesses on the remaining contempt issues.
As to GT, Sigda's affirmation states that GT "effectively ceased" working on this matter "in February of 2018" and "is formally withdrawing as counsel in this matter" (Sigda aff at ¶ 2). However, such a statement in an attorney affirmation does not comply with CPLR 321 (b) and therefore cannot serve as a formal withdrawal.
The Court finds that exceptions under the Rule 3.7 (a) are not present here and GT should be disqualified given the forthcoming contempt hearing. The elements of knowledge and willfulness are subject to the hearing and may have larger implications as to substantive issues in this matter. Further, the Court finds that the defendants would not be prejudiced by the ruling as Sigda advised the Court that GT is no longer actively representing defendants and essentially requested to withdraw as counsel. Thus, the kind of concern that may be implicated by moving to disqualifying a party's law firm to "stall and derail the proceedings, redounding to the strategic advantage of one party over another" are not present here ( S & S Hotel Ventures Ltd. Partnership, 69 NY2d at 443 ).
CONCLUSION
Accordingly, it is hereby ORDERED that the branch of the motion seeking to strike the defendants' pleadings and/or a hearing pursuant to CPLR 3101 (c) is denied; and it is further
ORDERED that the branch of the motion seeking to disqualify BHS is denied without prejudice; and it is further
ORDERED that the branch of the motion seeking to disqualify GT as attorneys for defendants is granted; and it is further
ORDERED that those branches of the motion seeking to hold BHS in criminal or civil contempt is denied; and it is further
ORDERED that the branch of the motion seeking to hold GT in criminal contempt is held in abeyance pending a hearing; and it is further
ORDERED that the branch of the motion seeking to hold GT in civil contempt is granted and the amount of the fine and direction to pay attorneys fees shall be set forth in subsequent order after the contempt hearing; and it is further
ORDERED that those branches of the motion seeking to hold defendants in criminal or civil contempt are held in abeyance pending a hearing; and it is further
ORDERED that the contempt hearing shall be held within sixty (60) days and dates to be determined at the next status conference scheduled in this matter.
This constitutes the decision and order of the Court.