S&S Hotel Ventures Ltd. Partnership v. 777 S.H. Corp., 69 N.Y.2d 437 (1987)
The advocate-witness disqualification rules in the Code of Professional Responsibility provide guidance, but not binding authority; courts must consider the party’s right to counsel and the fairness of disqualification in the specific factual context.
Summary
S&S Hotel Ventures sued 777 S.H. Corp, alleging breach of contract and tortious interference related to a loan agreement. 777 S.H. Corp. moved to disqualify S&S Hotel’s counsel, Bell, Kalnick, Beckman, Klee & Green, because Herman Sassower, “of counsel” to the firm, and Stephen Seldin, a real estate partner, allegedly ought to be called as witnesses. The trial court granted the motion, but limited the disqualification to trial, and the appellate division affirmed. The New York Court of Appeals reversed, holding that the lower courts improperly applied the Code of Professional Responsibility mechanically without considering the client’s right to counsel and the specific circumstances of the case, finding no basis for disqualification on the record.
Facts
S&S Hotel Ventures owned a hotel and office building complex. In 1981, they obtained a $15 million loan from 777 S.H. Corp., secured by a deed of trust. The deed stipulated the loan would become due immediately if S&S Hotel transferred title without 777 S.H. Corp.’s consent, but such consent would not be unreasonably withheld. S&S Hotel alleged that 777 S.H. Corp. unreasonably withheld and delayed consent to proposed purchasers to favor another purchaser and improve its terms, leading to a reduced sale price. Herman Sassower, formerly a general partner of S&S Hotel and later “of counsel” to Bell Kalnick, was involved in negotiating the loan agreement. Philip Sassower, Herman’s brother, replaced Herman as general partner and handled communications regarding the sale.
Procedural History
S&S Hotel Ventures sued 777 S.H. Corp. in March 1984. 777 S.H. Corp.’s motion to dismiss the tort claim was denied by both Special Term and the Appellate Division. Nine months after the action began, 777 S.H. Corp. moved to disqualify Bell Kalnick. Special Term ordered disqualification based on the advocate-witness rule, limited to the trial. The Appellate Division affirmed. The New York Court of Appeals granted leave to appeal.
Issue(s)
Whether the lower courts erred in disqualifying S&S Hotel’s counsel based on the advocate-witness rule without properly considering the client’s right to counsel of choice and the specific factual context of the case.
Holding
No, because the advocate-witness rules in the Code of Professional Responsibility provide guidance, but not binding authority, for courts. The courts must consider other factors, including the client’s right to choose their own counsel, and the fairness and effect of granting disqualification in the specific factual setting.
Court’s Reasoning
The Court of Appeals emphasized that the Code of Professional Responsibility offers ethical guidance, not binding law, when disqualification is sought in litigation. Disqualification implicates the client’s right to counsel, which is a valued right. The Court recognized that disqualification can be a strategic tactic. Here, the plaintiff repeatedly stated it would not call Sassower as a witness, and that the witness’ testimony wasn’t necessary. The Court found neither court below had found Sassower’s testimony "necessary" to plaintiff’s case. "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." The Court concluded that disqualification was improper because: (1) plaintiff, a sophisticated business entity, knowingly chose to forego Sassower’s testimony; (2) neither lower court found Sassower’s testimony necessary; (3) Philip Sassower had first-hand knowledge of relevant conversations. The Court reversed the order of the Appellate Division and denied defendant’s motion to disqualify plaintiffs counsel.