Healey v. Chelsea Resources Ltd.

133 F.R.D. 449, 18 Fed. R. Serv. 3d 918, 1990 U.S. Dist. LEXIS 16801, 1990 WL 205998
District Court, S.D. New York·Decided December 10, 1990·No. No. 88 Civ. 6957 (RLC)·Published·Cited by 4 cases

Opinion

OPINION

ROBERT L. CARTER, District Judge.

The underlying facts of this case are set forth in the court’s opinion of August 31, 1990, with which familiarity is assumed. Healey v. Chelsea Resources Ltd., 132 F.R.D. 346 (S.D.N.Y.1990) (Carter, J.).

Michael S. Press, plaintiff’s attorney at trial, has moved through his own attorney for enlargement of the record and reargument of the court’s decision to impose sanctions against him under Rule 11, F.R.Civ.P, and under § 11(e) of the Securities Act of 1933. 15 U.S.C. § 77k(e) (last sentence). Plaintiff John A. Healey has moved separately for reargument of the decision to impose Rule 11 and § 11(e) sanctions against him. Defendants Dominick & Dominick Securities, Inc. (“Dominick Canada”) and Dominick & Dominick, Incorporated (“Dominick U.S.”) (collectively “Dominick”) have opposed the motions for reargument.1

Pursuant to the court’s August 31 opinion, Richard J. Wiener of Cadwalader, Wickersham & Taft (“Cadwalader”), attorneys for Dominick, has also filed an affidavit (cited as “Wiener Aff.”) verifying fees and expenses claimed by Dominick for this action. After Healey and Press filed memoranda in opposition to that affidavit, Wiener filed a so-called reply affidavit (cited as “Reply Aff.”) supplying additional information.

I. MOTIONS FOR REARGUMENT

A motion to reargue is not simply an opportunity for counsel to be more persuasive. Bozsi Ltd. Partnership v. Lynott, 676 F.Supp. 505, 509 (S.D.N.Y.1987) (Carter, J.). Rather, “[t]he only proper ground on which a party may move to reargue an unambiguous order is that the court has overlooked ‘matters or controlling decisions’ which, had they been considered, might reasonably have altered the result reached by the court.” Adams v. United States, 686 F.Supp. 417, 418 (S.D.N.Y.1988) (Carter, J.) (quoting Bozsi, supra, 676 F.Supp. at 509). A belief that the court erred in its findings of fact or conclusions of law is not, by itself, sufficient ground for counsel to move for reargument. See Chambless v. Masters, Mates & Pilots Pension Plan, 697 F.Supp. 642, 644 (S.D.N.Y.1988) (Carter, J.), aff'd, 885 F.2d 1053 (2d Cir.1989), cert. denied, — U.S. -, 110 S.Ct. 2587, 110 L.Ed.2d 268 (1990).

In accordance with this principle, the local rules of this district forbid the parties from submitting affidavits on a motion to reargue. Rule 3(j), Local Civil Rules, S. & E.D.N.Y. A party cannot avoid this limitation, as Press has attempted to do, merely by joining the motion to reargue with a motion to “enlarge the record,” and submitting affidavits therewith. Hence, the court may not grant the motions to reargue unless it is apparent, without regard to the affidavits submitted by Press, that the court has overlooked matters or controlling decisions that might affect the outcome.

A. Healey’s Motion for Reargument

Healey alleges that he is entitled to reargument because of a conflict of interest between himself and Press, who initially represented him in his opposition to the fees motion. The court abides by its earlier determination that there was no substantial conflict between Healey and Press. Healey, supra, 132 F.R.D. at 353. It was “altogether clear that this case [was] frivolous,” but Press adopted Healey’s story as his own, and continued to advance Healey’s case, although he must have acted as counsel in this case “with full knowledge that it had no merit.” Id. Hence, if Healey was liable for attorneys’ fees, then so was Press. Their interests were the same.

[453]*453Even assuming for the sake of argument that there was an actual conflict of interest, the court is convinced that allowing Healey to retain independent counsel could not reasonably have altered the result. Any conflict of interest could not have prejudiced Healey because it is clear from the facts apparent at trial and from the court’s own observation of Healey’s testimony, independent of the arguments of counsel, that the case was frivolous and that Healey brought the action in bad faith.

B. Press’s Motion for Reargument

Much of Press’s argument, intended to show that after reasonable inquiry he was ignorant of the frivolous nature of his client’s claims, must be disregarded because it relies on affidavits improperly submitted with the motion or on facts that have been fully considered by the court. See Press Mem. re Motion for Rearg. 22-45. The court need detain itself with only three issues: (1) whether the court’s denial of Dominick’s motion for summary judgment, Healey v. Chelsea Resources, Ltd., 736 F.Supp. 488 (S.D.N.Y.1990) (Carter, J.), establishes that Healey’s claim was not frivolous or that Press could not reasonably have known of its meritlessness, (2) whether the court erred in considering the sanctions motion together with the merits of the case, and (3) whether the sanctions against Press are authorized by law.

The court’s denial of summary judgment in no way establishes that this suit had any basis in fact. On the summary judgment motion, the court had before it only those facts and allegations that the parties chose to present in their affidavits. The court’s denial of the motion does not undercut the court’s conclusion that facts in Press’s possession, which first became apparent to the court at trial, made clear that the suit had no reasonable factual basis. See Calloway v. Marvel Entertainment Group, 854 F.2d 1452, 1472-73 (2d Cir.1988) (denial of defendants’ motions for summary judgment does not shield plaintiff’s attorney from Rule 11 sanctions), rev’d in part on other grounds sub nom. Pavelic & Leflore v. Marvel Entertainment Group, — U.S.-, 110 S.Ct. 456, 107 L.Ed.2d 438 (1989).

Next, Press urges that it was unfair for the court to consider the merits and the sanctions motion together, because it created a conflict of interest between him and Healey, his client. He argues that he sacrificed his own interests for Healey’s, and that he therefore was unable to introduce evidence that would have exonerated him from liability for sanctions.

Representation free from conflicts of interest is the attorney’s duty and the client’s right, and so the potential existence or non-existence of any conflict of interest must be determined in view of any potential prejudice to the client. See, e.g., Oneida of Thames Band v. New York, 757 F.2d 19, 22 (2d Cir.), cert. denied, 474 U.S. 823, 106 S.Ct. 78, 88 L.Ed.2d 64 (1985). As discussed above in connection with Healey’s motion for reargument, the court does not believe that there was an actual conflict of interest between Press and Healey.

Even if Press is correct that a conflict existed, he failed to avail himself of the opportunities that he had to protect both his own interests and those of his client. Press should have fully disclosed any conflict to Healey and advised him to seek independent representation. See Calloway, supra, 854 F.2d at 1471; Eastway Constr. Corp. v. City of New York, 637 F.Supp. 558, 570 (E.D.N.Y.1986), modified, 821 F.2d 121 (2d Cir.), cert. denied, 484 U.S. 918, 108 S.Ct. 269, 98 L.Ed.2d 226 (1987); 5A C. Wright & A. Miller,

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Healey v. Chelsea Resources Ltd., 133 F.R.D. 449, 18 Fed. R. Serv. 3d 918, 1990 U.S. Dist. LEXIS 16801, 1990 WL 205998 (S.D.N.Y. 1990).

133 F.R.D. 449 (Healey v. Chelsea Resources Ltd.) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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