Mahn v. Allegis Group, Inc.

District Court, S.D. New York·Decided May 12, 2025·No. 1:24-cv-08326·Unknown

Opinion

UNITED STATES DISTRICT COURT ELECTRONICALLY FILED DOC #: _________________ SOUTHERN DISTRICT OF NEW YORK DATE FILED: 5/12/25 ------------------------------------------------------------------X : SHARON MAHN, : : Plaintiff, : 1:24-cv-8326-GHW -against- : : MEMORANDUM OPINION & ALLEGIS GROUP, INC., et al., : ORDER : Defendants. : : ------------------------------------------------------------------X

GREGORY H. WOODS, United States District Judge: This action is the latest in a fifteen-year-long series of disputes between Plaintiff Sharon Mahn (“Plaintiff”) and Defendants Major, Lindsey, & Africa LLC (“MLA”) and Allegis Group, Inc. (“Allegis,” and together with MLA, “Defendants”). Plaintiff worked for MLA as a legal recruiter until 2009, when MLA terminated her for allegedly misappropriating confidential information about MLA’s clients and selling that information to its competitors. Plaintiff and MLA disputed the termination in various forums for the next nine years—first in federal court, then in arbitration, then in New York state court—culminating finally in a multi-million-dollar judgment against Plaintiff for misappropriation of MLA’s confidential information and trade secrets. Plaintiff later filed for Chapter 7 bankruptcy, MLA sought to prevent her from discharging her debt in bankruptcy, and Plaintiff’s trustee in bankruptcy sued MLA and several of its employees for an alleged sexual assault that occurred while Plaintiff was still working at MLA in 2006. In this most recent action, Plaintiff alleges, among other things, that Defendants defamed her in their legal briefs in bankruptcy and state court. In bankruptcy court, MLA alleged that Plaintiff’s debt could not be discharged because the Bankruptcy Code excepts debts from discharge if they are obtained through “fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny.” 11 U.S.C. § 523(a)(4). In state court, MLA stated in a reply brief that it pursued arbitration against Plaintiff because it wanted to recover damages arising from Plaintiff’s “criminal conduct.” Plaintiff alleges that these statements were false because her conduct at MLA did not constitute “fraud,” “defalcation,” “embezzlement,” “larceny,” or otherwise “criminal conduct.” Plaintiff now seeks to disqualify Defendants’ counsel in this action because the same counsel represented Defendants in connection with the allegedly defamatory briefs. Plaintiff contends that

testimony from Defendants’ counsel will be necessary at a trial regarding her defamation claims, and accordingly, that Defendants’ counsel must be disqualified under the “witness-advocate rule,” which prevents lawyers from advocating before a tribunal in which they are likely to be a witness on a significant issue of fact. Plaintiff’s motion for disqualification is, at a minimum, premature. The witness-advocate rule only requires disqualification of an attorney if the movant establishes that the attorney’s testimony is necessary at trial and is substantially likely to be prejudicial to their client. At this early stage in the case, there is little, if any, evidence on the record to suggest that testimony from Defendants’ counsel would be materially inconsistent with Defendants’ case at trial. Because Plaintiff has not carried her burden of demonstrating that testimony from Defendants’ counsel would prejudice Defendants’ case, Plaintiff’s motion to disqualify Defendants’ counsel is DENIED. I. BACKGROUND1 A. The Parties

MLA is a legal-recruitment firm. See Dkt. No. 24 ¶¶ 14, 185 (“Amended Complaint” or

1 The following facts are drawn from Plaintiff’s Amended Complaint and the parties’ submissions in connection with this motion to disqualify. See Dkt. No. 26 at 2 (“Memorandum”) (incorporating allegations in Amended Complaint); Arenson Off. Furnishings, Inc. v. Kopelman, No. 20-cv-10497 (MKV), 2021 WL 1758806, at *1 n.1 (S.D.N.Y. May 4, 2021) (taking facts from “the Complaint and the parties’ submissions in connection with the pending motion to disqualify”). Facts are also drawn from public filings in the various other courts where the parties have litigated against each other, “not for the truth of the matters asserted in the other litigation[s], but rather to establish the fact of such litigation[s] and related filings.” Fecteau v. City of Mount Vernon, No. 23-cv-9173 (KMK) (JCM), 2025 WL 754043, at *8 (S.D.N.Y. Mar. 10, 2025) (quotation omitted); accord Glob. Network Commc’ns, Inc. v. City of New York, 458 F.3d 150, 157 (2d Cir. 2006). “FAC”); Dkt. No. 29 at 3 (“Opposition”). It helps attorneys find jobs. See FAC ¶ 85; Opposition at 3. Allegis is MLA’s parent company. See id. ¶¶ 68, 141. Plaintiff Sharon Mahn worked for MLA as a legal recruiter from 2006 until she was terminated in 2009. Dkt. No. 29 at 3 (“Opposition”); see FAC ¶ 185. She was allegedly terminated for disclosing MLA’s proprietary information to a competitor firm. Partial Final Award at 5; State Court Judgment at 1; see FAC ¶¶ 186, 188. B. The Underlying Proceedings

In September 2010, MLA brought an arbitration proceeding against Plaintiff in connection with her alleged misappropriation of its proprietary information. Partial Final Award at 1–2; Final Award at 1; State Court Judgment at 1; see FAC ¶ 49. In 2014, after four years of proceedings, the arbitrator found, among other things, that Plaintiff had breached her employment agreement with MLA and misappropriated MLA’s confidential information and trade secrets by divulging proprietary information regarding MLA’s clients to its competitors. Partial Final Award at 5, 9; Final Award at 1. It awarded MLA $1,535,338 in disgorgement of Plaintiff’s commissions, $232,288 in lost-opportunity damages, and $945,765.39 in “Arbitrator-adjusted litigation costs.” Final Award at 24–25; see also State Court Judgment at 4 (confirming award and entering judgment in those amounts), aff’d, Mahn, 159 A.D.3d at 547. On November 4, 2022, Plaintiff filed for Chapter 7 bankruptcy. See FAC ¶¶ 294–97; In re

Among the public filings that the Court has considered are the two arbitration awards that Defendants submitted in connection with their opposition brief. Dkt. No. 30 (“Goldstein Declaration”); Dkt. No. 30-1 (“Final Award”); Dkt. No. 30-2 (“Partial Final Award”); see also Dkt. No. 34 at 6–8 (“Reply”) (Plaintiff discussing substance of arbitration awards without disputing that they may be considered in connection with this motion). The awards were issued in 2013 and 2014. Partial Final Award at 1 (issued on May 7, 2013); Final Award at 1 (issued on July 9, 2014). Both awards were submitted to the Supreme Court for the State of the New York, New York County in a proceeding in which Plaintiff petitioned to vacate the awards and MLA cross-petitioned to confirm them. Mahn v. Major, Lindsey, & Afr., LLC, Case No. 653048/2014, Dkt. Nos. 39 & 40. On May 26, 2015, the New York Supreme Court confirmed the awards, denied Plaintiff’s petition for vacatur, and entered judgment in favor of Defendants. Id., Dkt. No. 60 (the “State Court Judgment”). The judgment was affirmed on appeal. Mahn v. Major, Lindsey, & Afr., LLC, 159 A.D.3d 546, 547 (1st Dep’t 2018). Mahn, Case No. 22-11466 (MG) (Bankr. S.D.N.Y. 2022), Dkt. No. 1 (the “Bankruptcy Action”). On November 21, 2023, Plaintiff’s trustee in bankruptcy brought suit against MLA and several of its employees in New York state court, alleging, among other things, that Plaintiff was sexually assaulted by an MLA employee in 2006 and that MLA was negligent in hiring and supervising the employee.2 FAC ¶ 23 (citing Mahn v. Lawrence N. Mullman, Major, Lindsey & Africa, LLC and Laurie Ann Caplane, Case No. 952263/2023 (the “ASA Action”)); see ASA Action, Dkt. No.

1 ¶¶ 95–120, 192–221.

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