Opinion
# 2015-040-023 Claim No. 122096 Motion No. M-86315
04-30-2015
DAVID E. SHAFFER v. THE STATE OF NEW YORK
Steven J. Borofsky, Esq. ERIC T. SCHNEIDERMAN Attorney General of the State of New York By: Paul F. Cagino, Esq., AAG
Synopsis
Defendant's motion to disqualify Claimant's counsel denied.
Case information
| UID: | 2015-040-023 |
| Claimant(s): | DAVID E. SHAFFER |
| Claimant short name: | SHAFFER |
| Footnote (claimant name) : | |
| Defendant(s): | THE STATE OF NEW YORK |
| Footnote (defendant name) : | Caption amended to reflect the State of New York as the proper defendant. |
| Third-party claimant(s): | |
| Third-party defendant(s): | |
| Claim number(s): | 122096 |
| Motion number(s): | M-86315 |
| Cross-motion number(s): | |
| Judge: | CHRISTOPHER J. McCARTHY |
| Claimant's attorney: | Steven J. Borofsky, Esq. |
| Defendant's attorney: | ERIC T. SCHNEIDERMAN Attorney General of the State of New York By: Paul F. Cagino, Esq., AAG |
| Third-party defendant's attorney: | |
| Signature date: | April 30, 2015 |
| City: | Albany |
| Comments: | |
| Official citation: | |
| Appellate results: | |
| See also (multicaptioned case) |
Decision
For the reasons set forth below, Defendant's motion to disqualify Claimant's counsel in this action, because he is involved in the transactions underlying the Claim and will be called as a witness by Defendant, is denied.
The Claim, which was filed with the Clerk of the Court on December 5, 2012, alleges, in relevant part, that Claimant entered into a Court Restitution Order (see Ex. A [hereinafter, the "Order"], attached to Affirmation of Steven J. Borofsky, Esq. [hereinafter, "Borofsky Affirmation"]) with Defendant in Queens County Criminal Court. Claimant states that the Order, by its terms, provides that he pay Defendant $13,440 in full by April 2, 2012, in monthly installments of $560 plus interest (id.; Claim, ¶ 2). Claimant states that restitution was made pursuant to the Order before April 2, 2012. The Claim alleges that Defendant contacted Claimant asserting that Dr. Shaffer owed the State an additional $24,000 for the same tax years covered by the Order (see Claim, ¶ 2).
The facts germane to Defendant's Motion are not in material dispute.
On or about January 7, 2010, Claimant was arrested on a criminal charge of failure to file personal income tax returns for the years 2002 through 2007 (Affirmation of Assistant Attorney General Paul F. Cagino, Esq. (hereinafter, "Cagino Affirmation"), ¶¶ 7, 8).
Claimant was prosecuted by the Queens County District Attorney's Office (hereinafter, the "Queens DA") in the case of People of the State of New York v David Shaffer (id., ¶ 9). A plea agreement was arranged by the Queens DA (id., ¶ 11). Assistant Queens DA, Neil Gitin, Esq., who prosecuted Mr. Shaffer, states that the Queens DA allowed Claimant to plead guilty to one misdemeanor count in order to resolve the matter and to pay back income tax owed under restitution. He further states that penalties and interest were not part of the plea agreement, explaining that it is the policy of his office in prosecuting such cases to seek restitution of the income tax owed, but that penalties and interest are left to the discretion of the New York State Department of Taxation and Finance (hereinafter, "NYS Tax") (Affirmation of Neil Gitin, Esq., Ex. B attached to Motion, ¶¶ 5, 6).
On March 2, 2010, the Queens Criminal Court held an allocution at which Claimant appeared with his attorney, Mr. Borofsky (Cagino Affirmation, ¶12). As noted above, and as a consequence of the allocution, Claimant was allowed to plead guilty to one count with restitution constituting one component of the plea agreement. Mr. Borofsky notes that the Queens DA initially stated a higher amount of restitution at the allocution, which, Mr. Borofsky asserts, included penalties and interest, but that the final amount was reduced to the $13,419 amount of the income tax owed (see Borofsky Affirmation, ¶ 9; id., Ex. B [Transcript of March 2, 2010 proceeding in Queens Criminal Court]).
Immediately after the allocution and plea, Claimant and Mr. Borofsky met with two representatives of NYS Tax, Francesann DiPietro, Esq. (a staff attorney), and Martha Perlson, CPA (a forensic accountant), at the Queens Criminal Courthouse to further discuss the income tax owed, as well as penalties and interest (Cagino Affirmation, ¶ 13; Borofsky Affirmation, ¶ 5; Affidavit of David Shaffer [hereinafter, "Claimant's Affidavit"], ¶¶ 3, 17). Ms. DiPietro informed Mr. Borofsky of NYS Tax's position that Claimant was required to pay the back income tax owed plus penalties and interest (see Cagino Affirmation, ¶ 15; Affirmation of Francesann DiPietro, Esq., Ex. D attached to Motion [hereinafter, "DiPietro Affirmation"], ¶ 8; Borofsky Affirmation, ¶6; Claimant's Affidavit, ¶ 16). The next day, NYS Tax wrote to Mr. Borofsky and forwarded a revised consent form to further reflect the income, penalties and interest NYS Tax asserted was owed by Claimant (see Cagino Affirmation, ¶ 16; DiPietro Affirmation, ¶ 10; Borofsky Affirmation, ¶ 8). Claimant never signed such a consent form (Borofsky Affirmation, ¶10; Claimant's Affidavit, ¶ 5; Significant Activity Report from Ms. Perlson to Mr. Gitin, dated August 19, 2013, Ex. E attached to Borofsky Affirmation).
On April 23, 2010, Ms. Perlson sent an e-mail to Ms. DiPietro noting that the payments contemplated by the plea agreement only covered the tax owed and asked whether penalties and interest would be taken into consideration in a final restitution agreement (Ex. D attached to Borofsky Affirmation). Mr. Borofsky states that the only agreement entered into by Claimant was the Order itself (Borofsky Affirmation, ¶ 12).
On or about June 15, 2010, the Order was entered into wherein the terms of the allocution and plea were memorialized that Claimant agreed to pay restitution of $13,419, as more fully described above (see Cagino Affirmation, ¶ 10; Borofsky Affirmation, Ex. A [the Order]). The parties agree that the plea agreement and Order did not incorporate penalties and interest (Cagino Affirmation, ¶¶ 10, 11; Borofsky Affirmation, ¶ 8).
Defendant now moves to have Mr. Borofsky disqualified as Claimant's counsel because: he and Ms. DiPietro were the primary participants in the discussions between the parties; Ms. DiPietro communicated NYS Tax's position viz. penalties and interest directly to Mr. Borofsky; and, Mr. Borofsky was obliged to convey that information to Claimant (see Cagino Affirmation, ¶¶ 14,17-18). Thus, Mr. Cagino argues that, if Claimant admits having received that information, such admission would fatally affect his Claim and, if he denies being advised of NYS Tax's position, then Claimant either will have to call Mr. Borofsky as a trial witness, or else Defendant will do so if he is present in the Courtroom (id., ¶¶ 24, 25, 28).
In opposition to the Motion, Claimant and Mr. Borofsky do not dispute: that Ms. Perlson had many communications with them; that the March 2, 2010 meeting with NYS Tax took place after the allocution and plea; that Ms. Perlson wanted Claimant to pay penalties and interest; and, that NYS Tax forwarded proposed consent forms (see Borofsky Affirmation, ¶¶ 5, 6, 8; Claimant's Affidavit, ¶¶ 3, 5, 16, 17).
Rather, Claimant and Mr. Borofsky argue that the Order Claimant entered into with the Queens DA constitutes a contract between the State and his client, and the State cannot attempt to impose additional penalties and interest that are not included in that Order (Borofsky Affirmation, ¶ 6; Claimant's Affidavit, ¶¶ 16, 18). Counsel states there was never an agreement or intent by Claimant to agree to pay for anything more than was required by the Order (Borofsky Affirmation, ¶ 7). Mr. Borofsky further argues that whether or not Ms. Perlson or Ms. DiPietro communicated demands that Dr. Shaffer pay penalties and interest is irrelevant because there is no written agreement and no signed consent by Claimant acceding to those demands (id., ¶ 10).
Thus, the issue to be decided at trial appears to be the scope and effect of the Order. Claimant contends that NYS Tax is bound by its terms so that Claimant cannot be required to pay penalties and interest because they were not included in that Order. Defendant argues, to the contrary, that the Order resolved only the criminal charges with the Queens DA and in no way limits NYS Tax from collecting penalties and interest.
"The advocate-witness rule requires an attorney to withdraw from pending litigation if it appears that his or her testimony is 'necessary' and he or she 'ought to be called as a witness' " [citations omitted] (Skiff-Murray v Murray, 3 AD3d 610, 611 [3d Dept 2004]; see Roche v Claverack Coop. Ins. Co., 59 AD3d 914, 918 [3d Dept 2009]). That may occur, for example, when a party's counsel has dealt directly with the other party, and conversed directly with the other party's counsel, concerning matters that are material to the litigation. In such a case, the counsel has become "intimately involved" in the transactions that are the subject of the claim (Kattas v Sherman, 32 AD3d 496, 497 [2d Dept 2006]). A lawyer should not act as an advocate in a matter in which he or she is likely to be a witness with information about relevant and material facts. Rather, he or she should be disqualified (see Fuller v Collins, 114 AD3d 827, 830 [2d Dept 2014], lv dismissed 24 NY3d 935 [2014]; Kattas v Sherman, supra; GRJH v State of New York, UID No. 2009-041-001 [Ct Cl, Milano, J., Jan. 22, 2009]; 22 NYCRR 1200.0 rule 3.7[a]).
At the same time, "[d]isqualification denies a party's right to representation by the attorney of its choice. The right to counsel of choice is not absolute [as noted above,] and may be overridden where necessary-for example, to protect a compelling public interest-but it is a valued right and restrictions must be carefully scrutinized" because "in the context of an ongoing lawsuit, disqualification of a [claimant's] law firm can stall and derail the proceedings, redounding to the strategic advantage of one party over another" [citations omitted] (S & S Hotel Ventures Ltd. Partnership v 777 S. H. Corp., 69 NY2d 437, 443 [1987]; see Matter of Advent Assoc., LLC v Vogt Family Inv. Partners, L.P., 56 AD3d 1023, 1024 [3d Dept 2008]).
"Although S & S Hotel Ventures was based upon the now outdated Code of Professional Responsibility, New York's current Rules of Professional Conduct, effective April 1, 2009, are substantively similar in all respects material to the instant motion" (Anderson & Anderson LLP- Guangzhou v North Am. Foreign Trading Corp., 45 Misc 3d 1210 [A], *2 [Sup Ct NY County 2014]; see 22 NYCRR 1200.0 rule 3.7[a]).
"Where, as here, a party moves to disqualify an opposing party's attorney on the ground that the attorney will be called as a witness at trial, the movant bears the burden of establishing that the attorney's testimony will be necessary" (Eisenstadt v Eisenstadt, 282 AD2d 570, 570 [2d Dept 2001]; see Zutler v Drivershield Corp., 15 AD3d 397 [2d Dept 2005]).
It is not dispositive of the Motion that Defendant has indicated that it intends to call Mr. Borofsky as a witness. "[T]he test is whether an attorney 'ought to be called' … not whether his adversary intends to call him" [citations omitted] (Lefkowitz v Mr. Man, 111 AD2d 119, 121 [1st Dept 1985], appeal dismissed 65 NY2d 1053 [1985]; see Bullard v Coulter, 246 AD2d 705, 706 [3d Dept 1998]; L & W Supply Corp. v Ruthman, 135 AD2d 877, 878 [3d Dept 1987]). Knowledge of relevant facts, or involvement in the transactions at issue, are not the sole criteria for determining whether or not a witness ought to testify. Rather, disqualification may be required only if the anticipated testimony is likely to be necessary (S & S Hotel Ventures Ltd. Partnership v 777 S. H. Corp., supra at 445- 446). "Testimony may be relevant and even highly useful but still not strictly necessary. A finding of necessity takes into account such factors as the significance of the matters, weight of the testimony, and availability of other evidence" (id. at 446; Matter of Advent Assoc., LLC v Vogt Family Inv. Partners, L.P., supra at 1024).
Taking those factors into consideration here, the Court determines that Defendant failed to sustain its burden of demonstrating that the testimony of Claimant's counsel will be necessary. The State argues that Mr. Borofsky's testimony will be required to confirm that meetings and conversations took place between the parties after the allocution and plea on March 2, 2010, during which NYS Tax pressed its view that Claimant owed penalties and interest on the taxes that were the subject of the Order, and, further, that NYS Tax provided consent agreements, which Dr. Shaffer never signed. Claimant does not dispute that narrative, however, so that any testimony Mr. Borofsky might share with the Court about those discussions and transactions does not concern matters that are in controversy. Moreover, any such testimony would merely be cumulative of testimony that other witnesses will be in a position to share with the Court.
In opposition to the Motion, Claimant also asserts that Defendant should have made this Motion earlier and that disqualification of his counsel would put him at an extreme disadvantage. Mr. Borofsky attended the depositions of witnesses, conducted discovery, and is fully familiar with the Claim, and it would require a great deal of time and money for Claimant to find and retain new counsel who would then need to prepare for trial (Borofsky Affirmation, ¶¶ 1- 4; Claimant's Affidavit, ¶¶ 7, 9).
A brief recitation of the history of this Claim is in order. As noted above, NYS Tax and the Queens DA both dealt with Mr. Borofsky as Claimant's counsel in the Spring of 2010. The Claim itself was filed with the Clerk of the Court on December 5, 2012, or nearly 28 months ago. In the Court's Preliminary Conference Order of July 11, 2013, the Note of Issue and Certificate of Readiness (hereinafter, "NOI") was due to be filed on or before April 1, 2014, which date was extended twice by stipulations executed by the Court, to a final date of July 31, 2014. That order directed that motions for summary judgement will be made no later than 45 days after filing of the NOI. The NOI was filed on July 28, 2014 so that the date by which any motion for summary judgment should have been made was on or before September 11, 2014. Nevertheless, more than two months after that date, Defendant's counsel requested an extension of the due date for a summary judgment motion, to December 28, 2014, a date which was one month beyond the 120-day time limit for such motions prescribed by statute (see letter of Assistant Attorney General Paul F. Cagino, Esq., dated November 14, 2014; CPLR 3212[a]). The Court denied the request of Defendant's counsel by letter dated November 19, 2014. Shortly thereafter, on November 24, 2014, the Court scheduled the trial of this Claim to commence on November 17, 2015. In Mr. Cagino's November 14, 2014 letter he asserted that "the case is mainly a question of law as most of the facts are not in dispute." Yet, three months later, on February 17, 2015, Defendant filed the instant Motion with the Clerk of the Court seeking to disqualify Claimant's counsel.
The Court further concludes that the disqualification of Mr. Borofsky at this point in the litigation would substantially prejudice Claimant (see Abselet v Satra Realty, LLC, 85 AD3d 1406, 1407 [3d Dept 2011]; Eisenstadt v Eisenstadt, supra at 571; Schonwit v Schonwit, 194 AD2d 780, 781 [2d Dept 1993]). Where a client "knowingly chooses to forego the testimony of its lawyer because it prefers to continue the representation of its law firm, it is curious indeed for the adversary to insist that the lawyer ought to be called as a witness for that client, and for a court on that basis to disqualify the firm" (S & S Hotel Ventures Ltd. Partnership v 777 S. H. Corp., supra at 445). Sometimes it is necessary to disqualify the lawyer. Under the circumstances presented by this Motion, however, this is not one of those times. The Motion is denied.
April 30, 2015
Albany, New York
CHRISTOPHER J. McCARTHY
Judge of the Court of Claims
The following papers were read and considered by the Court on Defendant's Motion to disqualify Claimant's counsel:
Papers Numbered
Notice of Motion, Affirmation in Support
and Exhibits attached 1
Affirmation in Opposition and Exhibits attached 2
Reply Affirmation 3
Filed Papers: Claim, Answer