Opinion
Decided April 30, 2004.
Plaintiffs did not appear on the motion.
Defendant's counsel, Dubow and Smith, Esqs. by Steven J. Mines Esq.; appeared pro se.
Defendant appeared by Mark Bradley Roth, Esq.
Recitation in accordance with CPLR 2219(a) of the papers considered on Plaintiffs' counsel's motion for an order permitting them to withdraw as attorneys for Plaintiffs:
Notice of Motion
Affirmation in Support
Exhibits A-G
Affidavit in Opposition
Exhibits 1-3
Reply Affirmation
In Camera Submissions
This action, commenced in May 1998, seeks damages for personal injuries allegedly sustained by two infants on March 26, 1996 on premises owned by defendant Marie Varveris. In this motion, Dubow and Smith, Esqs., the attorneys retained to represent Ms. Varveris by Hermitage Insurance Company, seek to be relieved of that responsibility.
Counsel previously moved to withdraw by Order to Show Cause dated October 1, 2003. In an Affirmation in Support of that motion, dated September 26, 2003, the only basis stated by counsel for seeking to be relieved was a denial of coverage by Hermitage on August 18, 2003. (¶¶ 4, 5.) Counsel now state that they sought to withdraw "because we were no longer being paid." (Affirmation in Support dated January 27, 2004, ¶ 8.) Ms. Varveris failed to appear on the motion, and it was granted on October 15, 2003 by the Hon. Donald Scott Kurtz in a pre-printed order that recited "a complete lack of cooperation" from Ms. Varveris.
Ms. Varveris moved to vacate that order with a Notice of Motion dated December 4, 2003. In her Affidavit in Support of her motion, Ms. Varveris asserted that her counsel had "caused the entire problem and caused the disclaimer by the insurance company based upon their own actions which were improper" (¶ 22), and questioned, "Was there an intent to disclaim? Was this the intention all along? Where ( sic) my attorneys really representing the insurance company when their allegiance should have been to represent the client? Did my attorneys have my best interests in mind?" (¶ 26.)
In their Affirmation in Opposition to Ms. Varveris's motion, counsel stated as the bases for being relieved that "once the movant's insurance carrier disclaimed coverage they stopped paying for movant's defense" and that the "tenor of movant's supporting affidavit" demonstrated that "irreconcilable differences exist between movant and [counsel] that would also make it inappropriate for this firm to continue to represent movant" (¶ 5). In a Reply Affirmation by the attorney representing Ms. Varveris on these motions, the "allegiance" of Dubow and Smith, Esqs. was again questioned. (¶ 7.)
Ms. Varveris's motion was granted by the Hon. Peter Sweeney on January 13, 2004, and counsel were given thirty days to renew their motion to be relieved. Counsel apparently stressed to Judge Sweeney that they were "no longer being paid", but on renewal now stress "irreconcilable differences." (Affirmation in Support dated January 27, 2004, ¶ 5.) Counsel renewed their motion by Notice of Motion returnable March 1, 2004, when it was presented to this judge. Because moving counsel were reluctant to place on the record a full statement of their grounds for being relieved, the court invited and received in camera submissions from counsel and from Ms. Varveris's attorney on this motion.
The Court finds that the motion can be decided on the public record, without any reliance on any allegations made in the submissions in camera. One aspect of the submissions, however, requires resolution. On February 10, 2004, Ms. Varveris commenced a declaratory judgment action in Supreme Court, challenging the coverage disclaimer by Hermitage. Ms. Varveris contends that "it would be improper for this Court to render a decision" on the pending motion . . . until such time as there has been a determination in the declaratory judgment proceeding"; "[a] determination of this motion could certainly influence a determination in the declaratory judgment proceeding and severely affect and prejudice" Ms. Varveris. (Letter dated April 1, 2004 from Mark Bradley Roth, Esq. to Chambers.)
To appropriately assess Ms. Varveris's request, in effect for a stay of this action, which the Court undoubtedly has the power and discretion to grant ( see CPLR 2201), some examination of Hermitage's coverage disclaimer is warranted. Prior to August 18, 2003, the date of the disclaimer letter, Plaintiffs had moved to strike Ms. Varveris's answer because she failed to appear for examination before trial. In a Decision and Order of the Hon. Karen B. Yellen dated May 19, 2003, the motion was granted "on consent", and Ms. Varveris's examination was ordered to take place on or before August 19. The order continued: "If no appearance, Answer is stricken."
The deposition was scheduled for August 18, but did not proceed. Eileen T. Rohan, listed as "of counsel" to Dubow and Smith, accompanied Ms. Varveris to the deposition. According to Ms. Varveris, Ms. Rohan "refused to proceed with [the] deposition", and Ms. Varveris "was not allowed to be deposed by Ms. Rohan." (Affirmation in Opposition dated February 24, 2004, ¶¶ 7, 16.) But according to the transcript of the statement made by Ms. Rohan at the time, the deposition did not proceed because she had been "advised" by Ms. Varveris that she did "not wish to proceed today, because there is confusion concerning the date of the accident." (Statement dated August 18, 2003.)
In its disclaimer letter, dated the same day as the deposition, Hermitage disclaimed coverage "due to non-cooperation and interference with the litigation process." The letter alleges a "continuing failure to be deposed", and states, "Your failure to be deposed has forced the plaintiff's ( sic) counsel to file a motion for default, and for this failure we are now precluded from offering testimony from any insured." (Letter dated August 18, 2003 from James C. Corona, Claim Manager, to Marie Varveris.)
The Court has not been informed of any judicial ruling on the effect of Judge Yellen's May 19, 2003 order under the circumstances presented, or of any action taken by Plaintiffs to enforce it. Plaintiffs have not appeared on this motion, although they did appear on counsel's previous motion. In an Affirmation in Opposition dated October 8, 2003, which primarily challenged Hermitage's disclaimer, Plaintiffs' counsel asserted that "after having an argument with her defense counsel, Ms. Varveris refused to testify. Accordingly, the answer . . . is now stricken pursuant to the court order." (¶ 5.) Elsewhere, counsel states, "The sole reason that defendant's answer is stricken is based on the actions of her own defense counsel." (¶ 11.)
On this Court's view of the entire matter, determination of this motion will not unduly prejudice Ms. Varveris in the declaratory judgment action, nor will a determination of the declaratory judgment action obviate a decision on this motion. It is not necessary, nor would it be appropriate, for this Court to determine the propriety of Hermitage's disclaimer of coverage. ( See Pryer v. DeMatteis Organizations, Inc., 259 AD2d 476, 477 [2nd Dept 1999]; State of New York v. ELRAC, Inc., 192 Misc2d 78, 82 [Sup Ct, NY County 2002].) And, as will appear, it is not necessary that this Court determine the effect of Judge Yellen's order, or to determine whether counsel or Ms. Varveris, if either, were at fault in connection with the scheduled deposition, or whether, more generally, Ms. Varveris has failed to cooperate with counsel or interfered with the litigation process.
As to the merits of the motion, "[n]onpayment of counsel fees alone will not entitle an attorney to withdraw from representation." ( Cashdan v. Cashdan, 243 AD2d 598, 598 [2nd Dept 1997].) And, at oral argument, counsel acknowledged that Ms. Varveris possesses the financial means to pay their fees for continued defense of this action. Nor has counsel alleged any "irreconcilable differences", understood in the usual sense as disagreement about the course to pursue in the lawsuit. ( See Lake v. M.P.C. Trucking Inc., 279 AD2d 813, 814 [3rd Dept 2001].) There does appear to be disagreement about Eileen Rohan. Ms. Varveris "ha[s] a problem with" her. (Affidavit in Opposition, ¶ 7.) And counsel maintain that they are a small firm, requiring that "whatever attorney is available work on a particular case for a particular purpose." (Reply Affirmation, ¶ 3.) But were this the only ground for counsel's motion, the Court would not struggle long before denying it.
Other grounds, however, support, if not require, granting counsel's motion. An attorney may withdraw in the face of a potential conflict of interest. ( See Rivardeneria v. New York City Health and Hospitals Corp., 306 AD2d 394, 395 [2nd Dept 2003].) Specifically, "[w]hen an insurance carrier provides for the defense of its insured, counsel assigned owes a duty of paramount allegiance to the insured, and if there is a conflict of interest between the carrier and the insured, . . . he cannot represent both." ( Trieber v. Hopson, 27 AD2d 151, 153 [3rd Dept 1967]; see also Feliberty v. Damon, 72 NY2d 112, 120; Schwartz v. Sar Corp., 19 Misc2d 660, 667 [Sup Ct, Kings County], rev'd on other grounds 9 AD2d 910.)
A disclaimer of coverage by the insurer might reflect or create such a conflict of interest. ( See Torres v. Bratcher, 35 AD2d 922 [1st Dept 1970]; Impellizzeri v. Haug, 282 AD 742 [2nd Dept 1953]; Beedenbender v. State of New York, 100 Misc2d 482, 483 [Ct of Claims 1979].) An abandonment of the insured, however, rather than the insurer, is not the inevitable consequence of the conflict. ( See Wolff v. Farrell Lines Inc., 1980 US Dist LEXIS 11258, *3-*6 [SDNY 1980].)
Here, in addition, there is an apparent conflict of interest between the insured and counsel directly, as a result of Ms. Varveris's contention that counsel were responsible for the failure to commence her deposition and for any ultimate consequence. Putting aside the possibility of a claim for malpractice or other breach of duty, the conflict will arise if counsel are called to testify in the pending disclaimer action, which, it appears, they would be permitted to do. ( See Shafer v. Utica Mutual Ins. Co., 248 AD 279, 289 [4th Dept 1936]; see also Goldberg v. American Home Assurance Co., 80 AD2d 409, 412-13 [1st Dept 1981].)
Moreover, where, as here, a client "flatly challenge[s] [counsel's] loyalty and professional integrity", it is "as serious a charge as can be made against a member of the bar and surely provides the good and sufficient cause necessary for the grant of withdrawal." ( Hunkins v. Lake Placid Vacation Corp., Inc., 120 AD2d 199, 200-01 [3rd Dept 1986]; see also Lake v. M.P.C. Trucking Inc., 279 AD2d 813, 814 [3rd Dept 2001]; Matarrese v. Wilson, 202 Misc 994, 997 [Sup Ct, Bronx County 1952] ["an attorney may deem himself as effectively discharged by being falsely accused of a breach of his trust as if he were bluntly dismissed without cause"].)
This Court is not passing on the validity of either Ms. Varveris's charge that counsel were responsible for the disclaimer, or her charge of disloyalty. The fact that she has made them, not casually but in a sworn document submitted to this Court, is enough for the Court to conclude that the foundation of trust necessary to an effective attorney-client relationship is no longer present. Can there be much doubt that, should there be a resolution of this action or of the disclaimer action that is unsatisfactory to Ms. Varveris, counsel will be suspected as the cause?
In sum, although the insurance company's disclaimer might not in itself justify counsel's withdrawal when the insured is able and willing to pay for counsel's services, withdrawal is justified by a conflict of interest under the particular facts, created or exacerbated by the insured's allegations of disloyalty or other breach of duty.
The only prejudice alleged by Ms. Varveris is that "[t]o allow Dubow and Smith to withdraw would cause [her] substantial legal fees which will not, at this time, be paid by the insurance carrier and would put my subsequent counsel in a difficult position of trying to resurrect this file after three (3) years." (Affidavit in Opposition, ¶ 5.) (Emphasis added.) Ms. Varveris appears to recognize that, should she succeed in the disclaimer action, she should be entitled to reimbursement of her legal fees from the insurer. Ms. Varveris does not allege that trial in this action is imminent, and does not describe any aspect of this premises-liability case that would present a particular challenge to substitute counsel. The occurrence giving rise to the action took place more than eight years ago, and no justification appears to further delay a resolution.
The motion is granted, and Dubow and Smith shall be relieved as counsel for defendant Marie Varveris thirty (30) days after service of a copy of this order with Notice of Entry (i) upon Defendant by service upon her attorneys on this motion, (ii) upon the general clerk and the calender clerk, together with proof of service upon Defendant, and (iii) upon Plaintiffs. Service shall be made within twenty (20) days after entry.
All proceedings are stayed for sixty (60) days from the date of entry of this order. If substitute counsel does not file a notice of appearance, Defendant shall be deemed self-represented at the expiration of the stay, and the clerk shall place the action on the Part 11 calendar. ( See CCA § 1301.)