SIGNATURE APPAREL GROUP LLC v. Studio IP Holdings LLC et al

NOT FOR PUBLICATION
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
In re:
SIGNATURE APPAREL GROUP LLC,
Debtor.
Case No. 09-15378 (JMP)
SIGNATURE APPAREL GROUP LLC,
Plaintiff,
v.
JOESEPH LAURITA, CHRISTOPHER LAURITA,
NEW STAR GROUP, LLC, ROC FASHIONS, LLC,
RVC ENTERPRISES, LLC, RUBEN AZRAK,
VICTOR AZRAK AND CHARLES AZRAK,
ICONIX BRAND GROUP, INC., STUDIO IP
HOLDINGS, LLC,
Defendants.
Adv. Proc. No. 11-02800 (JMP)
ROC FASHIONS, LLC,
Third-Party Plaintiff,
v.
STUDIO IP HOLDINGS, LLC,
Third-Party Defendant.
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MEMORANDUM OPINION DENYING THE MOTION OF STUDIO IP HOLDINGS,
LLC AND ICONIX BRAND GROUP, INC. TO DISQUALIFY OLSHAN FROME
WOLOSKY LLP
BLANK ROME LLP
Attorneys for Studio IP Holdings, LLC and Iconix Brand Group, Inc.
The Chrysler Building
405 Lexington Avenue
New York, New York 10174
(212) 885-5000
Harris N. Cogan, Esq.
Andrew B. Eckstein, Esq.
SILLS CUMMIS & GROSS P.C.
Attorneys for ROC Fashions, LLC, RVC Enterprises, LLC, Ruben Azrak, Victor Azrak, and
Charles Azrak
30 Rockefeller Plaza
New York, NY 10112
George R. Hirsch, Esq.
OLSHAN FROME WOLOSKY LLP
Attorneys for Plaintiff
Park Avenue Tower
65 East 55th Street
New York, New York 10022
Kyle C. Bisceglie, Esq.
Ellen V. Holloman, Esq.
JAMES M. PECK
UNITED STATES BANKRUPTCY JUDGE
Introduction
Studio IP Holdings, LLC and Iconix Brand Group, Inc. (“Iconix”) 1 have filed a motion
(the “Motion”) to disqualify counsel for plaintiff Signature Apparel Group, LLC (“Signature”).
1 Studio IP Holdings, LLC has been a third-party defendant in the Signature Adversary Proceeding (defined below)
since May 2012. See Third-Party Summons [ECF No. 24]. Pursuant to the Court’s July 3, 2013 Order granting
(Footnote continued on next page)
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See Notice of Motion to Disqualify Olshan Frome Wolosky LLP [ECF No. 68]. The Motion is a
lightweight litigation maneuver – a procedural tangent in this adversary proceeding that has
imposed wasteful burdens on other parties and the Court. For the reasons stated, the Motion
lacks merit and is denied.
Motions to disqualify are often prosecuted for tactical reasons to place an adversary at a
disadvantage. Because of the extreme consequences — potential sanctions for the disqualified
law firm or attorney, increased leverage over an adverse party that may be forced to find
substitute counsel and the delay and added expense in reaching the merits of the dispute — such
motions must be evaluated with care and properly are subjected to heightened judicial scrutiny.
Such motions have their place in appropriate cases, but this is not one of them.
Here, the Motion seeks to disqualify Olshan Frome Wolosky LLP (“Olshan”) as counsel
for Signature by relying on two separate but equally unavailing theories. Iconix asserts that
Olshan has a conflict resulting from its serial representations of (i) three petitioning creditors (the
“Petitioning Creditors”) who retained Olshan to commence an involuntary bankruptcy case
against Signature, (ii) the Official Committee of Unsecured Creditors (the “Committee”) that
was appointed during the Signature bankruptcy case and (iii) Anthony Labrosciano, the
individual who is empowered to act on Signature’s behalf in this litigation (the “Responsible
Person”). The Motion also contends that one of Olshan’s partners, Michael Fox, will be a
witness at trial. Olshan has opposed the Motion with a supporting declaration from Mr. Fox. A
hearing on the Motion was held on June 11, 2013. At the conclusion of that hearing, the Court
(Footnote continued from prior page)
leave to file an amended complaint, on July 10, 2013, plaintiff filed its First Amended Complaint. See Order [ECF
No. 88]; First Amended Complaint [ECF No. 89]. The First Amended Complaint names Studio IP Holdings and
Iconix Brand Group, Inc., which are affiliated entities, as defendants. The Court refers to the two entities
collectively as Iconix.
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requested additional submissions from the parties (including a statement from the Responsible
Person) and reserved decision.
Upon consideration of the issues presented, the Motion does not come close to
establishing that disqualification is appropriate. It alleges cause in the most general way but fails
to connect the dots. The multiple representations of the Petitioning Creditors, the Committee and
the Responsible Person are sequential rather than concurrent and do not give rise to any
disqualifying conflict of interest. Additionally, Mr. Fox has confirmed in his declaration that he
will not be a witness at trial. Thus, no grounds have been shown for disqualification of the
Olshan firm.
Background
The Signature Bankruptcy Case
On September 4, 2009 (the “Petition Date”), Olshan, on behalf of the Petitioning
Creditors, filed an involuntary petition under chapter 7 against Signature. [Case No. 09-15378,
ECF No. 1.] Thereafter, an order for relief was entered, the case was converted to a case under
chapter 11 and Olshan was retained as counsel to the Committee. The firm’s retention
application included a supporting declaration submitted by Mr. Fox that disclosed Olshan’s prior
representation of the Petitioning Creditors (the “Fox Retention Declaration”).2 [Case No. 09-
15378, ECF No. 53 Ex. B.] Olshan subsequently filed proofs of claim for two of the Petitioning
Creditors – Claim No. 48-1and Claim No. 49-1.
The Committee was active in the Signature case and proposed a plan of liquidation that
was confirmed on July 1, 2010 and became effective as of August 5, 2010. [Case No. 09-15378,
2 Olshan filed a supplemental declaration that clarified inconsistencies between its retention application and the Fox
Retention Declaration relating to monies received from the Petitioning Creditors and Signature for post-petition
services. [Case No. 09-15378, ECF No. 63.]
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ECF Nos. 131, 138.] The liquidating plan contemplated that the Responsible Person would
pursue litigation claims for the benefit of Signature’s unsecured creditors. [Case No. 09-15378,
ECF No. 107 Art. VI.]
The Adversary Proceedings
Consistent with the liquidating plan, Olshan, as counsel for the Responsible Person,
brought this adversary proceeding (the “ROC Adversary Proceeding”) against ROC Fashions,
LLC (“ROC Fashions”); RVC Enterprises, LLC; Ruben Azrak; Victor Azrak; and Charles Azrak
(the “ROC Defendants”). The complaint alleged wrongful termination and transfer of rights
under an existing licensing agreement between Signature and Iconix (the “Rocawear License”)
and challenged payments made by the ROC Defendants to former executives of Signature,
Joseph Laurita and Christopher Laurita (together, the “Laurita Brothers”). The claims include (i)
aiding and abetting breach of fiduciary duty, (ii) civil conspiracy, (iii) conversion, (iv) unjust
enrichment, and (v) constructive trust (the “ROC Complaint”). [ECF No. 1.] ROC Fashions
named Iconix as a third-party defendant. [ECF No. 23.] Signature also commenced a separate
adversary proceeding against the Laurita Brothers alleging misappropriation and dissipation of
corporate assets (the “Laurita Adversary Proceeding”). [Case No. 10-04207, ECF No. 1.]
Signature recently amended the ROC Complaint to combine claims from the Laurita
Adversary Proceeding and the ROC Adversary Proceeding and to make direct claims against
Iconix and related parties to recover damages associated with the loss of the Rocawear License.
See First Amended Complaint [ECF No. 89]. In substance, Signature complains that it was
stripped of valuable contract rights as a consequence of terminating the Rocawear License and
entering into a new license for the same branded goods with ROC Fashions. Id. ¶ 30. The
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activities and motivations of the parties in dealing with the rights governed by these two license
agreements are material questions of fact to be determined in the litigation.
The Motion to Disqualify
The Motion is based on two separate provisions of the New York State Unified Court
System Rules of Professional Conduct (the “Professional Rules”), 22 N.Y.C.R.R. Part 1200. The
first relates to Rule 1.7 and alleges a conflict of interest between Olshan and its clients growing
out of Olshan’s past or ongoing representations of the Petitioning Creditors, the Committee and
the Responsible Person. See Mem. Supp. Mot. Disqualify 16-20 [ECF No. 68]. Iconix asserts
that, as a consequence of these allegedly conflicting representations, Olshan elected not to name
the Petitioning Creditors as defendants in the ROC Adversary Proceeding.
Iconix relies on (i) certain communications from Mr. Fox before entry of the order for
relief suggesting that the Petitioning Creditors might be willing to withdraw the involuntary
petition in exchange for purchases of inventory at cost by ROC Fashions as the new Rocawear
licensee, and (ii) the fact that the involuntary petition suspiciously appears to have been filed
only twenty minutes before expiration of Signature’s cure period relating to the purported
termination of the Rocawear License. Tarshis Aff. 3 ¶¶ 13-15, 25-32, Ex. E. According to
Iconix, Mr. Fox must have been aware of facts relating to the effectiveness of the Rocawear
License before filing of the petition and entry of the order for relief. See id.
The second prong of the argument, referencing Professional Rule 3.7(b), assumes that
Mr. Fox is a necessary witness who will give testimony that will be prejudicial to the
Responsible Person. See Mem. Supp. Mot. Disqualify 10-16. Iconix alleges that Mr. Fox has
3 References to “Tarshis Aff.” are to the Affidavit of Andrew Tarshis in Support of Motion to Disqualify Olshan
Frome Wolosky LLP [ECF No. 68].
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knowledge of facts relevant to the status of the Rocawear License, including negotiations leading
to the loss of Signature’s contractual rights and the inability to locate any third party to assume
that license. See Tarshis Aff. ¶¶ 7-16.
Olshan’s Response to the Motion
Olshan has defended itself against these claimed ethical violations on procedural and
substantive grounds and submits that no grounds for disqualification have been shown, arguing
that Iconix lacks standing, has not carried its burden and no conflict exists because the
representation of the Petitioning Creditors, the Committee, and the Responsible Person was
successive rather than simultaneous. See Mem. Opp’n Mot. Disqualify ¶¶ 34-35, 39, 49-51, 76-
80 [ECF. No. 72]; Fox Aff. 4 ¶ 7. The firm also submits that Mr. Fox has no personal knowledge
regarding any significant issue, will neither be a witness nor serve as Signature’s trial counsel
and his testimony, even if presented, would not prejudice Signature. Mem. Opp’n Mot.
Disqualify ¶¶ 36, 56, 65-67; Fox Aff. ¶¶ 2-6.
The Responsible Person in his supplemental affidavit supports the various points made by
Olshan, stating that (i) the disqualification of Olshan would prejudice the estate, (ii) Signature
accepts and relies on Mr. Fox’s denial of knowledge of the status of the Rocawear License as of
the Petition Date, and (iii) the decision to pursue claims against Iconix and not to name the
Petitioning Creditors reflects the business judgment of the Responsible Person as a fiduciary.
See Labrosciano Aff. 5 ¶¶ 7, 9-13.
4 References to “Fox Aff.” are to the Affidavit of Michael S. Fox in Opposition to Motion to Disqualify Olshan
Frome Wolosky LLP [ECF No. 75].
5 References to “Labrosciano Aff.” are to the Affidavit of Anthony Labrosciano in Opposition to Motion to
Disqualify Olshan Frome Wolosky LLP [ECF No. 85].
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Discussion
The Motion, despite its lack of support in the record, still calls for a review of the
applicable authorities governing Olshan’s status as Signature’s counsel.
The Professional Rules inform a disqualification analysis.6 See Hempstead Video, Inc. v.
Inc. Vill. of Valley Stream, 409 F.3d 127, 132 (2d Cir. 2005) (internal quotation marks and
citation omitted) (“The authority of federal courts to disqualify attorneys derives from their
inherent power to preserve the integrity of the adversary process.”); see also S.D.N.Y. L.R.
1.3(a), 1.5(b)(5) (providing that the Professional Rules govern conduct of those appearing before
the courts and that violations of the Professional Rules can serve as grounds for attorney
discipline). The Second Circuit also relies on “guidance offered by the American Bar
Association … and state disciplinary rules” to “provide general guidance,” and has noted that
“not every violation of a disciplinary rule will necessarily lead to disqualification.” Hempstead
Video, 409 F.3d at 132 (citations omitted).
Background factors — the timing and the context of the motion and the weight of the
arguments — must be taken into account, and disqualification is only warranted in situations
where there is “a significant risk of trial taint.” Sea Trade Mar. Corp. v. Coutsodontis, No. 09
Civ. 488 (BSJ) (HBP), 2011 U.S. Dist. LEXIS 80668, at *41 (S.D.N.Y. July 25, 2011) (quoting
Decker v. Nagel Rice LLC, 716 F. Supp. 2d 228, 231 (S.D.N.Y. 2010) (internal citation
6 The Professional Rules, which took effect on April 1, 2009, are the primary basis for the Court’s analysis, but,
“[e]ven though the Canons have been replaced by the New York Rules of Professional Conduct, the new rules still
incorporate much of the substance of the old rules … [,] and … much of the precedent interpreting the old rules still
remains applicable.” All Star Carts & Vehicles, Inc. v. BFI Canada Income Fund, No. CV 08-1816 (LDW) (AKT),
2010 U.S. Dist. LEXIS 53290, at *9 n. 2 (E.D.N.Y. June 1, 2010) (quoting Pierce & Weiss, LLP v. Subrogation
Partners LLC, 701 F. Supp. 2d 245, 251 (E.D.N.Y. 2010)) (additional citation omitted). Also persuasive in
disqualification motions are decisions of New York State courts, the American Bar Association’s Code of
Professional Responsibility, and the Model Rules of Professional Conduct. See All Star Carts, 2010 U.S. Dist.
LEXIS 53290, at *8-9 (citations omitted); S.D.N.Y. L.R. 1.5(b)(5).
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omitted)); see also Universal City Studios, Inc. v. Reimerdes, 98 F. Supp. 2d 449, 455 (S.D.N.Y.
2000) (noting that reference to professional disciplinary bodies is an alternative remedy to
disqualification).
Given the concern relative to the “tactical use of motions to disqualify counsel,”
disqualification motions are subject to “fairly strict scrutiny.” Murray v. Metro. Life Ins. Co.,
583 F.3d 173, 178 (2d Cir. 2009) (internal quotation marks and citation omitted). Due to the
drastic nature of the disqualification remedy the “moving party bears a heavy burden of showing
that disqualification is warranted.” Pereira v. Vlachos (In re Allboro Waterproofing Corp.), 224
B.R. 286, 295 (Bankr. E.D.N.Y. 1998) (citing Evans v. Artek Sys. Corp., 715 F.2d 788, 794 (2d
Cir. 1983)) (additional citation omitted). The Court must evaluate the circumstances cited by
Iconix in light of this heavy burden.
Conflicts and Professional Rule 1.7
While the Bankruptcy Code contains specific provisions dealing with the
“disinterestedness” of estate professionals, state disciplinary rules also “provide[] guidance to
courts when asked to resolve a litigant’s request for a lawyer’s disqualification.” Allboro, 224
B.R. at 291. Rule 1.7 governs conflicts of interest and provides as follows:
(a) Except as provided in paragraph (b), a lawyer shall not represent a client if a
reasonable lawyer would conclude that either:
(1) the representation will involve the lawyer in representing differing
interests; or
(2) there is a significant risk that the lawyer’s professional judgment on
behalf of a client will be adversely affected by the lawyer’s own financial,
business, property or other personal interests.
(b) Notwithstanding the existence of a concurrent conflict of interest under
paragraph (a), a lawyer may represent a client if:
(1) the lawyer reasonably believes that the lawyer will be able to provide
competent and diligent representation to each affected client;
(2) the representation is not prohibited by law;
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(3) the representation does not involve the assertion of a claim by one
client against another client represented by the lawyer in the same
litigation or other proceeding before a tribunal; and
(4) each affected client gives informed consent, confirmed in writing.
N.Y. R. Prof’l Conduct 1.7.
In order to prevail under Rule 1.7, Iconix must demonstrate standing, establish either of
the prongs of subsection (a), and show that the exceptions listed in subsection (b) do not apply.
Ordinarily a party that has no present or former attorney-client relationship does not have
standing to seek disqualification. See, e.g., A.F.C. Enters., Inc. v. New York City Sch. Constr.
Auth., 823 N.Y.S.2d 433, 434 (2006) (citations omitted) (“Since the defendant is neither a
present nor a former client of the subject attorneys, it has no standing to seek disqualification
based on conflict of interest.”). However, regardless of standing, there is insufficient evidence to
support disqualification under Rule 1.7.
The Second Circuit has observed that disqualification typically is “ordered only in
essentially two kinds of cases” – conflicts in violation of the state disciplinary rules and
situations where an attorney gained potential access to privileged information concerning the
other side through a past representation. All Star Carts, 2010 U.S. Dist. LEXIS 53290, at *7-8
(quoting Board of Education v. Nyquist, 590 F.2d 1241, 1246 (2d Cir. 1979)). Because Iconix
has not alleged that Olshan gained access to any privileged information through prior
representation of the Committee or the Petitioning Creditors, the alleged conflict of interest fits
the first category and relates to the firm’s various representations of the Petitioning Creditors, the
Committee, and the Responsible Person. See Tarshis Aff. ¶¶ 16-20, 25-32.
The bankruptcy context matters when a court is asked to exercise the discretion to
disqualify counsel. See Cresswell v. Sullivan & Cromwell, 922 F.2d 60, 72 (2d Cir.1990)
(citations omitted) (explaining that “[t]he disqualification of an attorney in order to forestall
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violation of ethical principles is a matter committed to the sound discretion of the [trial] court”).
Although the Motion is being prosecuted within an adversary proceeding, it adverts to Olshan’s
prepetition, postpetition and post-effective date professional activities in representing individual
creditors, the Committee and the Responsible Officer. In each of these instances, the firm’s
services were being performed for clients with compatible goals (maximizing recoveries for
unsecured creditors). The professional conduct in question (consensually representing parties
whose interests are aligned) actually is fairly common.
Especially in smaller chapter 11 cases, bankruptcy counsel may serve in multiple roles
during the course of a bankruptcy case, and these roles are specifically sanctioned in the
Bankruptcy Code. See 11 U.S.C. § 327(c) (“[A] person is not disqualified for employment under
this section solely because of such person’s employment by or representation of a creditor,
unless there is objection by another creditor or the United States trustee, in which case the court
shall disapprove such employment if there is an actual conflict of interest.”); 11 U.S.C. § 1103(b)
(“An attorney or accountant employed to represent a committee appointed under section 1102 of
this title may not, while employed by such committee, represent any other entity having an
adverse interest in connection with the case.”).
Representation of one or more creditors of the same class that is being represented by the
committee is acceptable and routine. 11 U.S.C. § 1103(b); see also In re Oliver’s Stores, Inc., 79
B.R. 588, 595 (Bankr. D.N.J. 1987) (“[I]t is clear that the representation of a creditors’
committee and representation of individual creditors within that committee does not per se
constitute the representation of an adverse interest.”). While bankruptcy procedure tolerates
multiple representations that are not adverse, having the ability to represent parties within the
same class does not excuse an actual conflict. The main deficiency of the Motion, however, is its
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failure to show “an actual, as opposed to a potential, conflict of interest.” All Star Carts, 2010
U.S. Dist. LEXIS 53290, at *16 (quoting United States v. Schwarz, 283 F.3d 76, 91 (2d Cir.
2002) (internal citation omitted)).
No evidence of any actual conflict of interest has been presented by Iconix. The Motion
is predicated on speculation that prior or contemporaneous client relationships may have
improperly affected litigation judgments of the Olshan firm, but the Motion does not identify any
real conflict resulting from Olshan’s earlier representation of the Petitioning Creditors and the
Committee nor does it specify in what way Iconix is being harmed by the alleged conflict. The
complaints about Signature’s decision not to pursue claims in this litigation against the
Petitioning Creditors amount to little more than suspicions and appear designed as a platform to
cast aspersions at an opponent while also casting doubt on the strength of Signature’s claims.
Whatever may have been the motivation for bringing the Motion, it certainly does not establish a
basis for disqualification of plaintiff’s chosen counsel.
When it comes to professional planning for litigation and making judgments about who
to sue, counsel, in consultation with the client, routinely will decide which parties to name in
litigation, and that is precisely what happened here. Olshan and the Responsible Person decided
to sue those defendants who allegedly channeled value away from Signature and its creditors.
Because the Petitioning Creditors are members of the class of creditors that ultimately may share
in any recoveries to be realized from the adversary proceedings, it is hardly surprising that these
creditors were not named as defendants. The fact that Olshan filed proofs of claim for two of the
Petitioning Creditors is meaningless for purposes of this analysis. See Commercial Union Ins.
Co v. Marco Int’l Corp., 75 F. Supp. 2d 108, 113 (S.D.N.Y. 1999) (finding even that nominal
concurrent representation does not warrant disqualification).
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Professional Rule 3.7
Rule 3.7 of the Professional Rules provides guidance in situations where a lawyer for a
party is expected to testify with respect to significant facts in dispute. Rule 3.7(a) deals with the
individual attorney, rather than his or her law firm, and provides that
[a] lawyer shall not act as advocate before a tribunal in a matter in which the
lawyer is likely to be a witness on a significant issue of fact unless:
(1) the testimony relates solely to an uncontested issue;
(2) the testimony relates solely to the nature and value of legal services
rendered in the matter;
(3) disqualification of the lawyer would work substantial hardship on the
client;
(4) the testimony will relate solely to a matter of formality, and there is no
reason to believe that substantial evidence will be offered in opposition to
the testimony; or
(5) the testimony is authorized by the tribunal.
N.Y. R. Prof’l Conduct 3.7(a).
In applying Rule 3.7, the Second Circuit looks to the potential usefulness of the testimony
to be offered by the attorney witness considering “factors such as the significance of the matters,
weight of the testimony, and availability of other evidence.” Sea Trade, 2011 U.S. Dist. LEXIS
80668, at *23 (quoting Finkel v. Frattarelli Bros., Inc., 740 F. Supp. 2d 368, 373 (E.D.N.Y.
2010) (internal citation omitted)). Even if none of the exceptions of Rule 3.7(a) apply, the
decision to disqualify an attorney who is expected to testify at trial is discretionary. See
Hempstead Video, 409 F.3d at 132-33.
The general presumption of a client’s “well-recognized and entirely reasonable interest in
securing counsel of their choice” is weighed against the policy underlying Rule 3.7(a) and the
concern that
(1) the lawyer might appear to vouch for his own credibility; (2) the lawyer’s
testimony might place opposing counsel in a difficult position when she has to
cross-examine her lawyer-adversary and attempt to impeach his credibility;
(3) some may fear that the testifying attorney is distorting the truth as a result
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of bias in favor of his client; and (4) when an individual assumes the role of
advocate and witness both, the line between argument and evidence may be
blurred, and the jury confused.
Murray, 583 F.3d at 178, 180 (citing Ramey v. Dist. 141, Int’l Ass’n of Machinists & Aerospace
Workers, 378 F.3d 269, 282–83 (2d Cir. 2004)). These policy issues are inapplicable as to Mr.
Fox in his individual capacity because he will not be serving as Signature’s trial counsel and
Iconix is not seeking to disqualify him, just his firm.
The potential disqualification of an individual attorney for the reasons listed in Rule
3.7(a) is related to but distinct from the disqualification of a law firm by imputation under Rule
3.7(b). Rule 3.7(b) addresses the disqualification of the law firm of a lawyer-witness by
imputation and provides, in relevant part, that
[a] lawyer may not act as advocate before a tribunal in a matter if:
(1) another lawyer in the lawyer’s firm is likely to be called as a witness
on a significant issue other than on behalf of the client, and it is apparent
that the testimony may be prejudicial to the client ... .
N.Y. R. Prof’l Conduct 3.7(b)
Disqualification by imputation under Rule 3.7(b) requires the movant to prove “by clear
and convincing evidence that [A] the witness will provide testimony prejudicial to the client, and
[B] the integrity of the judicial system will suffer as a result.” Murray, 583 F.3d at 178-79.
“[P]laintiffs seeking disqualification under Rule 3.7(b) must make a considerably higher showing
of prejudice than would be required under Rule 3.7(a).” Id. at 179. When the attorney-witness is
not acting as trial counsel, the policy concerns stated previously are “absent or, at least, greatly
reduced.” Ramey, 378 F.3d at 283 (citation omitted).
A client’s desire to retain counsel weighs “strongly against a finding of prejudice,” and,
absent an objection by the client or a substantial showing of prejudice, disqualification of a law
firm typically is only appropriate in situations involving a conflict of interest. See Murray, 583
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F.3d at 178, 180 (citing M ODEL RULES OF PROF ’ L CONDUCT R. 3.7 cmt. 5) (“Because the tribunal
is not likely to be misled when a lawyer acts as advocate in a trial in which another lawyer in the
lawyer’s firm will testify as a necessary witness, [Model Rule 3.7(b)] permits the lawyer to do so
except in situations involving a conflict of interest.”)).
Iconix has used the Motion as a means to poke holes in the plaintiff’s case and to lay out
its version of the facts surrounding termination of the Rocawear License (a possible reason for
having filed the Motion in the first place). 	The Motion portrays Mr. Fox as someone deeply
involved in the subject matter with knowledge of material facts that may be prejudicial to
Signature’s litigation position.
Mr. Fox denies having such knowledge, and he has contradicted the underlying premise
of the Motion. Signature’s consistent theme is that Iconix misrepresented the status of the
Rocawear License to both Mr. Fox and the Petitioning Creditors. See Labrosciano Aff. ¶¶ 9-13;
Holloman Decl.7 ¶¶ 41-45. Such questions of fact no doubt will be presented at trial and should
not be decided now as part of a dispute framed by Iconix over the possible disqualification of
counsel.
Olshan’s ongoing role as counsel can be clarified easily without having to make any
ultimate factual determinations. To put it succinctly, the Responsible Person has relied upon
Olshan, accepts Mr. Fox’s version of the facts and is perfectly content with his choice of Olshan
as his counsel in this litigation. Most importantly for purposes of the current analysis under Rule
3.7, the Responsible Person, as a fiduciary, has confirmed that he wants Olshan to continue
7 References to “Holloman Decl.” are to the Declaration of Ellen V. Holloman in Opposition to Motion to
Disqualify Olshan Frome Wolosky LLP [ECF No. 74].
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prosecuting these cases on his behalf and sees no prejudice to his litigation position in having
Mr. Fox by his side. That is sufficient to end all further discussion.
Conclusion
A disqualification motion, especially one brought by an adverse party, will not be
sustained on the basis of “[m]ere speculation.” 	Paretti v. Cavalier Label Co., Inc., 722 F. Supp.
985, 987 (S.D.N.Y. 1989) (citing International Union v. National Caucus of Labor Comms., 466
F. Supp. 564, 570 (S.D.N.Y. 1979), aff’d mem., 607 F.2d 996 (2d Cir. 1979)). Iconix has not
met its burden of proving that disqualification of the Olshan firm is required under any of the
applicable Professional Rules. Accordingly, the Motion is denied. Olshan is directed to submit
an appropriate order that is consistent with this Memorandum Decision.
SO ORDERED.
Dated: New York, New York
September 10, 2013
/s/ James M. Peck
___________________________
Honorable James M. Peck
United States Bankruptcy Judge
11-02800-rg Doc 105 Filed 09/10/13 Entered 09/10/13 15:45:35 Main Document
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