The opinion
1101-43 Ave Acquisition LLC v Sonder Hospitality
USA Inc.
2024 NY Slip Op 30383(U)
February 1, 2024
Supreme Court, New York County
Docket Number: Index No. 653840/2020
Judge: Andrea Masley
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.
INDEX NO. 653840/2020
NYSCEF DOC. NO. 178 RECEIVED NYSCEF: 02/01/2024
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK: COMMERCIAL DIVISION PART 48
----------------------------------------------------------------------------------- X
1101-43 AVE ACQUISITION LLC, INDEX NO. 653840/2020
Plaintiff,
MOTION DATE
- V -
MOTION SEQ. NO. 005
SONDER HOSPITALITY USA INC., SONDER HOLDINGS
INC., SONDER USA, INC., and SONDER CANADA INC.,
DECISION+ ORDER ON
Defendants. MOTION
----------------------------------------------------------------------------------- X
HON. ANDREA MASLEY:
The following e-filed documents, listed by NYSCEF document number (Motion 005) 146, 147, 148, 149,
150, 151, 152, 153, 154, 155, 156, 157, 158, 159, 160, 161, 162, 163, 164, 165, 166, 167, 168, 169,
170,171,172,173,174,175,176, 177 1
were read on this motion to/for DISQUALIFY COUNSEL
In motion sequence number 005, plaintiff moves, pursuant to Rule 1.9 of the
Rules of Professional Conduct (22 NYCRR 1200.0), to disqualify Sher Tremonte LLP
(Sher) from representing defendants in this action 2 on the ground that Sher previously
represented plaintiff's principals Abraham Merchant and Richard Cohn, plaintiff's
affiliate Merchants Hospitality Inc. (MHl), 3 and MHl's affiliates in several interrelated
actions that involved the facts and issues relevant here (MHI actions4 ). Specifically,
Cohn and Merchant retained Sher on behalf of themselves, MHI and MHl's affiliates to
1 The court has read, and where appropriate considered additional documents
mentioned in the parties' papers, but omitted in this autogenerated caption.
2
Sher was substituted as attorneys for defendants in April 2023. (NYSCEF Doc. No.
[NYSCEF] 141, Consent to Substitution of Counsel)
3
Cohn is a 50% owner and general counsel of MHI. (NYSCEF 149, Cohn aff ,i 1.)
4
The MHI actions are: (i) Merchants Hospitality, Inc. v Fruhling, Index No. 653606/2020,
(ii) Award Holdings LLC v Hochfelder, Index. No. 653607/2020, (iii) US Partners, LLC v
Pavo/, Index. No. 608682/2020, (iv) US Partners, LLC v Fruhling, Index. No.
654137/2020, and (v) Merchants Hospitality, Inc. v Hochfelder, Index. No. 655048/2020.
(NYSCEF 149, Cohn aff ,I 13.)
653840/2020 1101-43 AVE ACQUISITION LLC vs. SONDER HOSPITALITY USA INC. Page 1 of 6
Motion No. 005
1 of 6
[* 1]
INDEX NO. 653840/2020
NYSCEF DOC. NO. 178 RECEIVED NYSCEF: 02/01/2024
resolve a dispute regarding the purported ownership in various MHl-affiliated entities,
including the Z Hotel, which resulted in the commencement of the MHI actions.
(NYSCEF 149, Cohn aff ,i,i 6, 9-10, 13; see also NYSCEF 150, Retainer Agreement.)
In this action, plaintiff alleges, that defendants breached a commercial lease for space
in the Z Hotel, which plaintiff ultimately surrendered to its lender. (NYSCEF 75,
Amended Complaint ,i,i 43-44.)
"A movant seeking disqualification of an opponent's counsel faces a heavy
burden. A party has a right to be represented by counsel of its choice,
and any restrictions on that right must be carefully scrutinized. Courts
should also examine whether a motion to disqualify, made in ongoing
litigation, is made for tactical purposes, so as to delay litigation and
deprive an opponent of quality representation. The decision whether to
grant a motion to disqualify rests in the discretion of the motion court."
(Skanska USA Bldg. Inc. v At/. Yards B2 Owner, LLC, 146 AD3d 1, 13 [1st Dept 2016]
[internal quotation marks and citations omitted].) On motion to disqualify counsel
pursuant to Rule 1.9(a), "the moving party must prove ... the existence of a prior
attorney-client relationship between itself and opposing counsel." (Campbell v McKean,
75 AD3d 479,480 [1st Dept 2010] [citation omitted].) "[A]n attorney-client relationship is
established where there is an explicit undertaking to perform a specific task. While the
existence of the relationship is not dependent upon the payment of a fee or an explicit
agreement, a party cannot create the relationship based on his or her own beliefs or
actions." (Pellegrino v Oppenheimer & Co., Inc., 49 AD3d 94, 99 [1st Dept 2008]
[internal quotation marks and citations omitted].) A party does not have standing to
bring a disqualification motion if it did not have an attorney-client relationship with the
law firm it seeks to disqualify. (HSBC Bank USA, N.A. v Santos, 185 AD3d 475, 477
[1st Dept 2020].)
653840/2020 1101-43 AVE ACQUISITION LLC vs. SONDER HOSPITALITY USA INC. Page 2 of 6
Motion No. 005
2 of 6
[* 2]
INDEX NO. 653840/2020
NYSCEF DOC. NO. 178 RECEIVED NYSCEF: 02/01/2024
In support of its motion, plaintiff submits the Sher Engagement Agreement, which
states in relevant part, "you have chosen Sher Tremonte LLP (the 'Firm') to represent
you - Richard Cohn, Abraham Merchant, Merchants Hospitality, Inc., US Partners LLC,
and certain other affiliated entities (collectively, 'you') - in connection with your dispute
with Adam Hochfelder, the Mailman Trust, Awards Holdings LLC, Mailman Holdings
LLC, and certain other affiliated entities." (NYSCEF 150, Sher Engagement Agreement
at 1.) However, plaintiff fails to present any evidence that it, in fact, had an attorney-
client relationship with Sher. In his affirmation, Cohn avers that he and Merchant
retained Sher "on behalf of ourselves individually, as well as on behalf of MHI and other
affiliated entities." (NYSCEF 149, Cohn aff ,i 6.) Cohn never states that Sher was ever
retained on plaintiff's behalf; in fact, he repeatedly omits plaintiff when discussing the
representation. (Id. ,i,i 2 ["representation of MHI and other entities affiliated with MHI", 5
[Sher "previously represented the MHI Parties"], 6 ["my partner Abraham Merchant
('Merchant') and I retained Sher Tremonte on behalf of ourselves individually, as well as
on behalf of MHI and other affiliated entities ('MHI Parties')"], 9 ["ultimately the MHI
Parties retained Sher Tremonte"].) This leaves the court with only the conclusory and
unsupported statement in plaintiff's reply brief that "certain other affiliated entities"
included plaintiff.
Plaintiff asserts that the absence of a waiver of the representation of any other
entity not named or a definition of client expressly excluding plaintiff in the Sher
Engagement Agreement clearly evidences that plaintiff is among the "certain other
affiliated entities." The court finds this argument without merit.
653840/2020 1101-43 AVE ACQUISITION LLC vs. SONDER HOSPITALITY USA INC. Page 3 of 6
Motion No. 005
3 of 6
[* 3]
INDEX NO. 653840/2020
NYSCEF DOC. NO. 178 RECEIVED NYSCEF: 02/01/2024
Justin Sher, Esq. 5 explains that
"[a]t the time the engagement letter was executed, Sher Tremonte had not
completed its investigation of the facts and was not yet certain which
entities would need to be parties to any actions arising from the dispute
with the Hochfelder Parties. For this reason, the engagement letter
allowed Sher Tremonte to represent 'certain other affiliated entities' that
had not yet been named. However, the Plaintiff, 1101-43 Ave Acquisition
LLC, was not such an entity and was never represented by Sher
Tremonte."
(NYSCEF 162, Sher aff ,i 8''].) Plaintiff fails to rebut or address this assertion. Further,
the court takes judicial notice that plaintiff was not a party to any of the MHI actions in
which Sher represented MHI and certain other non parties (Matter of Allen v Strough,
301 AD2d 11, 18 [2d Dept 2002].)
Plaintiff also argues that confidential information shared with Sher about the
interrelated companies necessarily revealed confidential information about all of them,
including plaintiff. Specifically, Cohn avers that he "shared detailed confidential financial
information, corporate formation documents including organizational structure and
member information for the various MHI Parties, tax returns for various MHI entities, as
well as detailed factual and background memoranda that I prepared as counsel to MHI
specifically to assist Sher Tremonte in its drafting" as well as "financial summaries,
balance sheets, and income statements for the MHI Parties and other affiliated entities,
including for the Plaintiff." (NYSCEF 149, Cohn aff ,i,i 28-29.) However, plaintiff fails to
explain how sharing such information created an attorney-client relationship between
plaintiff and Sher. 6 Nevertheless, plaintiff fails to identify "how any such information
5
Justin Sher is defendants' counsel and an attorney at Sher. (NYSCEF 162, Sher aff ,i
1 .)
6
In its reply, plaintiff argues for the first time that it should be considered Sher's client
for disqualification purposes because (i) plaintiff is affiliated with MHI, which Sher
653840/2020 1101-43 AVE ACQUISITION LLC vs. SONDER HOSPITALITY USA INC. Page 4 of 6
Motion No. 005
4 of 6
[* 4]
INDEX NO. 653840/2020
NYSCEF DOC. NO. 178 RECEIVED NYSCEF: 02/01/2024
would not be discoverable in this action," deeming it not confidential. (Matter of Segal v
Five Star Elec. Corp., 165 AD3d 613, 613 [1st Dept 2018].)
Finally, the court permitted the parties post-argument submissions comprising of
an email exchange between Cohn and Sher. 7 On August 16, 2020, Cohn emailed Sher
that plaintiff was "looking for a ... firm to represent us in either workout or prosecution
of our lender liability claims." Sher's August 19, 2020 responsive email includes a
preliminary assessment of plaintiff's potential claims against the lender. However,
plaintiff provides no evidence that Sher explicitly undertook to perform a specific task on
behalf of plaintiff, as is required to create an attorney-client relationship. (Pellegrino, 49
AD3d at 99.) To the contrary, in his August 19, 2020 email, Justin Sher not only stated
that he is "confident [Sher is] the right firm for this," but also offered names of two
alternative counsel "who are highly qualified to guide [plaintiff] through this." Sher's
response did not create an attorney-client relationship; it was a pitch to hire his firm. 8
Accordingly, it is
ORDERED that plaintiff's motion to disqualify Sher Tremonte LLP is denied; and
it is further
represented, and (ii) plaintiff and MHI are managed and indirectly owned by Cohn and
Merchant, whom Sher also represented. Arguments raised for the first time in a reply
brief will not be considered. (Givoldi, Inc. v UPS, 286 AD2d 220 [1st Dept 2001].)
7 The parties are directed toe-file a copy of the emails.
8 Although a perspective client may, under certain circumstances, obtain disqualification
of an attorney with whom it consulted pursuant to Rule 1.18 (c) of the Rules of
Professional Conduct (see Mayers v Stone Castle Partners, LLC, 126 AD3d 1, 7 [1st
Dept 2015]), the present motion is brough solely pursuant to Rule 1.9 of the Rules of
Professional Conduct. (See NYSCEF 159, OSC at 2 [mot. seq. no. 005]; NYSCEF 158,
Plaintiff MOL.) Accordingly, the court will not consider whether disqualification pursuant
to Rule 1.18 (c) of the Rules of Professional Conduct is warranted.
653840/2020 1101-43 AVE ACQUISITION LLC vs. SONDER HOSPITALITY USA INC. Page 5 of 6
Motion No. 005
5 of 6
[* 5]
INDEX NO. 653840/2020
NYSCEF DOC. NO. 178 RECEIVED NYSCEF: 02/01/2024
ORDERED that stay of discovery imposed pursuant to the May 23, 2023 Order to
Show Cause is lifted. The parties shall submit a discovery schedule setting deadlines
for expert depositions and the note of issue.
2/1/2024
DATE ANDREA MASLEY, J.S.C.
~
CHECK ONE: CASE DISPOSED NON-FINAL DISPOSITION
GRANTED 0 DENIED GRANTED IN PART □ OTHER
APPLICATION: SETTLE ORDER SUBMIT ORDER
CHECK IF APPROPRIATE: INCLUDES TRANSFER/REASSIGN FIDUCIARY APPOINTMENT □ REFERENCE
653840/2020 1101-43 AVE ACQUISITION LLC vs. SON DER HOSPITALITY USA INC. Page 6 of 6
Motion No. 005
6 of 6
[* 6]