New York Supreme Court, Kings County, 2024

Zomongo.TV USA Inc. v. Capital Advance Servs., LLC

New York Supreme Court, Kings County · Decided February 15, 2024

2024 NY Slip Op 30508(U)

Opinion

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 Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service.

This opinion is uncorrected and not selected for official publication.

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

1 of 7 [* 1] 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.

2 of 7 [* 2] FILED: KINGS COUNTY CLERK 02/16/2024 10:37 AM INDEX NO. 512735/2021 NYSCEF DOC. NO. 264 RECEIVED NYSCEF: 02/16/2024 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 of 7 [* 3] 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 4 of 7 [* 4] FILED: KINGS COUNTY CLERK 02/16/2024 10:37 AM INDEX NO. 512735/2021 NYSCEF DOC. NO. 264 RECEIVED NYSCEF: 02/16/2024 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

5 of 7 [* 5] FILED: KINGS COUNTY CLERK 02/16/2024 10:37 AM INDEX NO. 512735/2021 NYSCEF DOC. NO. 264 RECEIVED NYSCEF: 02/16/2024 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

6 of 7 [* 6] FILED: KINGS COUNTY CLERK 02/16/2024 10:37 AM INDEX NO. 512735/2021 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

[* 7] . .... _. ........... _,_,.,, __ .,_ ._ __ ,,. ,. ----------------------------------------- of 7

Case-law data current through December 31, 2025. Source: CourtListener bulk data.