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SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
Deutsche Bank National Trust Company as Trustee for
American Home Mortgage Assets Trust 2006-6 Index Nos: 105818/2009,
Mortgage-Backed Pass-Through Certificates, Series 107029/2009
2006-6,
Plaintiff,
-against-
Royal Blue Realty Holdings, Inc.; et al.,
Defendants.
Deutsche Bank National Trust Company as Trustee for
American Home Mortgage Assets Trust 2007-1 Index Nos: 105819/2009,
Mortgage-Backed Pass-Through Certificates, Series 107017/2009, 107028/2009,
2007-1, 107030/2009, 107031/2009,
Plaintiff, 110570/2010
-against-
Royal Blue Realty Holdings, Inc.; et al.,
Defendants.
Deutsche Bank National Trust Company as Trustee for Index No: 850071/2016
American Home Mortgage Assets Trust 2007-1
Mortgage-Backed Pass-Through Certificates, Series
2007-1,
Plaintiff,
-against-
Unknown Heirs of the Estate of Serge J. Souto, Royal Blue
Realty Holdings, Inc., et al.,
Defendants.
PLAINTIFFS'
MEMORANDUM_OF LAW IN SUPPORT OF MOTION TO
DISQUALIFY
GANFER SHORE LEEDS
& ZAUDERER LLP
360 Lexington Avenue
New York, New York 10017
(212) 922-9250
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TABLEOFCONTENTS
P.g,s
TABLE OF AUTHORITIES...........................................................................................................ii
PRELIMINARY STATEMENT.....................................................................................................1
FACTS.............................................................................................................................................5
ARGUMENT...................................................................................................................................8
SHAW SHOULD BE DISQUALIFIED AS DEFENDANT ROYAL BLUE'S COUNSEL
BECAUSE HE IS A WITNESS TO MATERIAL FACTS ............................................................8
CONCLUSION .............................................................................................................................15
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TABLE OF AUTHORITIES
Cases P_age
108th St. Owners Corp. v. Overseas Commodities Ltd.,
238 A.D.2d 324, 656 N.Y.S.2d 942 (2d Dep't 1997)....................................................................10
Aryeh v. Aryeh,
14 A.D.3d 634, 788 N.Y.S.2d 622 (2d Dep't 2005)........................................................................8
Catalanotto v. Abraham,
27 Misc. 3d 1205(A), 2010 WL 1340772,
at *5 (Sup. Ct. Suffolk Co. Mar. 29, 2010)...................................................................................13
Center v. Hampton Affiliates, Inc.,
66 N.Y.2d 782, 784, 497 N.Y.S.2d 898, 899 (1985)....................................................................13
Chang v. Chang,
190 A.D.2d 311, 317, 597 N.Y.S.2d 692, 696 (1st Dep't 1993)...................................................11
Falk v. Gallo,
73 A.D.3d 685, 686, 901 N.Y.S.2d 99,100 (2d Dep't 11
2010).....................................................9,
Flores v. Willard 1 Price Assocs., LLC,
20 A.D.3d 343, 344, 799 N.Y.S.2d 43, 44 (1st Dep't 2005)...........................................................8
Korfmann v. Kemper Nat'l Ins. Co.,
258 A.D.2d 508, 508, 685 N.Y.S.2d 282, 282 (2d Dep't 1999)....................................................11
People v. Berroa,
99 N.Y.2d 134, 140 753 N.Y.S.2d 12, 17 (2002)..........................................................................14
Scannapieco v. Scannapieco,
30 Misc. 3d 1226(A), 2011 WL 652750,
at *5 (Sup. Ct. Nassau Co. Feb. 17, 2011) ....................................................................................13
Shayne, Dachs, Stanisci & Corker v. Podell,
166 A.D.2d 521, 560 N.Y.S.2d 802 (2d Dep't 1990)....................................................................
10
Shiboleth v. Yerushalmi,
268 A.D.2d 300, 300, 702 N.Y.S.2d 32, 33 (1st Dep't 2000).......................................................13
Skiff-Murray v. Murray,
3 A.D.3d 610, 611, 771 N.Y.S.2d 230, 233 (3d Dep't 2004)........................................................12
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Sokolow, Dunaud, Mercadier & Carrerras v. Lacher,
299 A.D.2d 64, 74, 75, 747 N.Y.S.2d 441, 449-51 (1st Dep't 2002)............................................12
Stober v. Gaba & Stober, P.C.,
259 A.D.2d 554, 555, 686 N.Y.S.2d 440, 441 (2d Dep't 1999)....................................................10
Tru-Bite Labs, Inc. v. Ashman,
54 A.D.2d 345, 388 N.Y.S.2d 279, 280 (1st Dep't 1976).............................................................10
Warshaw Burstein Cohen Schlesinger & Kuh, LLP v. Longmire,
82 A.D.3d 586, 586, 920 N.Y.S.2d 23, 24 (1st Dep't 2011).........................................................14
Wensley & Partners, LLC v. Polimeni,
262 A.D.2d 311, 692 N.Y.S.2d 85 (2d Dep't 1999)......................................................................11
Wilmington Trust v MC-Five Mile Commercial Mtge. Fin. LLC,
171 A.D.3d 591, 591, 99 N.Y.S.3d 11, 12 (1st Dep't 2019).........................................................14
Statutes and Rules
CPLR 12
3211(a)............................................................................................................................5,
CPLR 321(c)..................................................................................................................................13
GBL § 6
352-eeee...........................................................................................................................5,
RPC 1.7(a).....................................................................................................................................14
RPC 3.7..........................................................................................................................................14
RPC 12
3.7(a)...............................................................................................................................11,
RPC 3.7(a)(1).................................................................................................................................12
RPC 3.7(a)(2)(4)............................................................................................................................12
RPC 3.7(a)(3).................................................................................................................................12
RPC 14
3.7(b)...............................................................................................................................13,
CPLR 14
3212(f)........................................................................................................................3,
9,
Other Authority
Restatement [Second] of Agency § 272, at 591 ............................................................................14
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Plaintiffs Deutsche Bank National Trust Company as Trustee for American Home
Mortgage Asset Trust 2006-6, Mortgage-Backed Pass-Through Certificates Series 2006-6 and
Deutsche Bank National Trust Company as Trustee for American Home Mortgage Asset Trust
("Plaintiffs"
2007-1, Mortgage-Backed Pass-Through Certificates Series 2007-1 or "Lenders")
submit this omnibus memorandum of law in support of their motions in these nine related actions
(the "Actions") to disqualify Martin Shaw, Esq. ("Shaw") from representing Defendant Royal Blue
("Defendants"
Realty Holdings, Inc. or "Royal Blue) in each of those nine related actions, (the
"Actions"), pursuant to Rules 3.7, 1.7, and 1.9 of the New York Rules of Professional Conduct
1200.1
("RPC"), 22 NYCRR Part Accompanying this memorandum is the Affirmation of Mark
A. Berman, dated February 7, 2020 (the "Berman Aff.") and the Affirmation of Jamie Krapf, dated
Aff.").2
February 4, 2020 (the "Krapf
PRELIMINARY STATEMENT
Documents recently obtained by Plaintiff show that Shaw, litigation counsel for Royal Blue
in the Actions, is a material and necessary fact witness to Royal Blue's affirmative defenses in
each of these nine Actions that foreclosure cannot proceed against the subject condominium units
"illegal" Act.3
because a sale of the subject properties would be allegedly under the Martin
At an appearance before the Court on March 21, 2019, Shaw (who was formerly transaction
and regulatory compliance counsel for Royal Blue) affirmatively misrepresented to the Court and
A chart listingeach of thenine actions by index number, plaintiff,
unit/lots,and originalprincipal amount
of each mortgage is attachedhereto as Addendum A.
2 The Amended Complaint for each respectiveAction is attachedas Exhibit A to the Berman Aff. in
filed
thatAction. The Answer for each respectiveAction is attachedas Exhibit B to the Berman Aff.filed inthatAction.
3 maintain valid and subject
Plaintiffs that,as a matterof law, thenotes and mortgage at issueare to
foreclosure regardlessof whether the units were allegedly not legallyformed under the Martin Act.
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Plaintiffs'
to attorneys the period when he previously represented Royal Blue. Specifically, while
Shaw acknowledged that he represented Royal Blue in connection with itsunwillingness to comply
with and thereby receive approval under the Martin Act from the New York State Attorney General
(the "NY AG") for the offering plan to sellthe units at issue to the public, Shaw orally represented
that such representation ceased in 2003-2004 and resumed when Shaw was re-
only allegedly
retained by Royal Blue long after the related foreclosures action had been commenced That,
however, has been proven to be incorrect.
In fact, documents recently obtained from the NY AG in October and December 2019,
pursuant to a Freedom of Information Law ("FOIL") Request demonstrate that Shaw continued
his legal representation of Royal Blue from 2002 into at least 2007, including during the precise
period when Royal Blue borrowed millions pursuant to the consolidated notes, secured by the
mortgages, that are the subject of the Actions, and which Royal Blue is now trying to avoid paying.
From these documents, incredibly, we also learned that Shaw was counsel to Royal Blue during
the time Serge Souto was allegedly mentally incapacitated, and yet Serge Souto signed the
documents that authorized his son, John Souto, to consummate such borrowings.
It is now evident that Shaw is a material and necessary witness as a result of his
representation of Royal Blue 2005 - 2007.
during
Each of these nine Actions seeks to foreclose on an individual condominium unit. These
nine units resulted from Royal Blue's subdivision of a commercial unit located at 130 Barrow
Street. Shaw was the one responsible for obtaining approval from the NY AG for the units to be
individually saleable and initially sought to do so by way of an amendment to the offering plan for
the 130 Barrow Street Condominium (the "Barrow Offering Plan"). The newly obtained
documents demonstrate that Shaw continued to represent Royal Blue after the Barrow Offering
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Plan was initially rejected and itsfailed attempts to meet certain requirements for a public offering
of the condominium units pursuant to an offering plan.
Thus, the newly obtained documents demonstrate that Shaw was continuing to represent
Royal Blue during the same period.that Royal Blue entered into the mortgage documents that are
the subject of the Actions, at which time he and Royal Blue had full knowledge that Royal Blue's
amendment to the Barrow Offering Plan had not been accepted because Royal Blue was unwilling
to accede to the NY AG's requirements. While Royal Blue now claims that the rejection of its
amendment means that the individual units could not be mortgaged, itdid not disclose this position
to the originating lender, when Royal Blue proceeded to borrow the millions of dollars at issue in
the Actions and execute the subject consolidated notes, CEMAs and new mortgages on each of
those units.
Neither Royal Blue's nor Shaw's document productions included any correspondence with
the NY AG that post-date the NY AG's January 22, 2003 letter denying Royal Blue's amendment
to the Barrow Offering Plan, despite being called for. Further, neither Royal Blue nor Shaw
indicated that such documents existed but were lost or destroyed. Ithard to conceive of how Royal
Blue or Shaw overlooked these documents or innocently lost them all because Royal Blue and
Shaw failed to disclose the existence of such documents. Plaintiff did not make and realistically
could not have previously made this motion. However, the documents received in response to the
FOIL request include multiple examples of written communications between Shaw and the NY
AG well after 2003 regarding the offering plan through 2007, at least one year after the subject
loans was made to Royal Blue.
Critically, it appears that Shaw is a necessary and material witness with respect to the
amendment of the offering plan. The principals of Royal Blue during the relevant time period,
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Serge and John Souto, are now deceased and despite numerous third party subpoenas served by
Plaintiff, no documents or information has been received by Plaintiffs indicating that anyone else
has personal knowledge as to the proposed amendment of the offering plan or of Souto's capacity
at the time of borrowing.
Thus, Shaw is the only witness who can testify with first-hand knowledge regarding the
relevant events pertaining to the affirmative defenses. For example, Shaw will be a required and
necessary witness in this action as to Royal Blue's attempt to amend the offering plan seeking to
comply with the Martin Act, Royal Blue's communications with the NY AG regarding itsrejection,
Royal Blue's refusal to correct the issues that lead to the rejection of its proposed amendment to the
offering plan and why Royal Blue proceeded to borrow millions of dollars, secured by the subject
mortgages (predicated on a mentally incapacitated principal of Royal Blue) in light of their (and
Shaw's) knowledge as to the status of the amendment of the offering plan, which had been rejected,
and their now current position that the subject properties could not be mortgaged, and thus
foreclosed upon.
It is well-settled, as a matter of law and ethics, that an attorney may not serve both as
counsel and as a necessary witness in the same action. The incompatibility of these two roles is
aggravated where counsel will not only be a required witness, as here because everyone else is
deceased, but the only witness who will be able to testify regarding, among other things, Royal
Blue's failure to comply with the Martin Act.
In light of the above, Shaw should be disqualified from representing Royal Blue in these
actions pursuant to Rules 3.7, 1.7, and 1.9 of the New York State Rules of Professional Conduct
and the case law applying those rules and their predecessors.
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Royal Blue would suffer no hardship from having to secure new counsel in these actions,
where CPLR 3211(a) motions to dismiss and motions for appointment of a receiver will not even be
argued until later February, and where discovery has not been completed and Shaw has more than
capable independent, co-counsel, Daniel Gammerman, working with him on these actions.
FACTS
The Actions seek to foreclose on multiple mortgages on nine different properties, collectively
securing millions of dollars of debt owed by Royal Blue to the Plaintiff.
In 2000, Royal Blue purchased the commercial unit owner of 130 Barrow Street
Condominium (the "Barrow Condominium"). In 2002, Royal Blue proceeded to gut renovate and
subdivide the commercial unit into twelve residential apartments, and since then has leased those
apartments. In 2002, Royal Blue sought to amend the Barrow Condominium's Offering Plan to
offer the resulting units, including the nine being foreclosed on in the Actions, for sale to the
public. However, in 2003, the NY AG rejected the amendment because it did not comply with
GBL § 352-eeee requiring notification to residents of their rights. (S_ee Attorney General's January
22, 2003 letter rejecting Royal Blue's proposed amendment to the Barrow Condominium's
Offering Plan, attached to the Berman Aff. as Exhibit "D"). Shaw represented Royal Blue in
proposing and seeking approval of the subject amendment to the Barrow Offering Plan. (See
Letters from Martin Shaw dated December 16 and 31, 2002, attached to the Berman Aff. as Exhibit
"C").
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2019,4
Shaw informed the Court at a conference held on March 21, that he ceased
representing Royal Blue in connection with the subject condominium conversion and offering plan
no later than 2003-2004. (Berman Aff. ¶ 3; Krapf Aff. ¶ 3). This statement has been proven false:
Plaintiff just learned through documentation obtained through a FOIL Request to the NY AG that
Shaw continued to represent Royal Blue in connection with itsdealings with the NY AG's Office
2007.5
regarding a mechanism to allow Royal Blue to offer the units for sale for years into
On March 26, 2004, Shaw wrote to the New York Real Estate Financing Bureau that each
lots"
of the 12 units in the Condominium "were issued their own tax and that the existing mortgage
units."
on each unit "will be satisfied upon the closing of each of the 12 (Berman Aff. Exhibit
"E"). In October 2004, Shaw wrote the NY AG regarding a proposed new offering plan for the
Condominium. (Berman Aff. Exhibit "F"). In March 2005, Shaw wrote to the New York State
Department of Law regarding the Condominium, stating, among other things, that "tax lots for the
billed."
12 newly renovated Units were also issued. These are now separately assessed and
(Berman Aff. Exhibit "G"). In May and July 2005, Shaw submitted red-lines of changes to the
new offering plan for the Condominium for review by the New York State Department of Law.
"H"
(Berman Aff. Exhibits and "I). The proposed plan stated that Royal Blue would comply with
GBL § 352-eeee regarding notification to residents of their rights. However, this plan was not
approved by the NY AG for a different reason, i.e.,that Royal Blue was unwilling to contribute
4
Unfortunately, this admission was done at a side bar and not transcribed, but was stated in
connection with assertions by Shaw, as counsel for Royal Blue, as towhy he did not possess any additional
documents responsive to a Subpoena served upon him by Plaintiff.
5 New
The correspondence between the law office of Martin Shaw and the various York State
agencies referenced herein was signed by either Shaw himself or his assistant Yolanda DeArteaga, who is
"Shaw."
not an attorney. For the purposes of this brief,we collectively refer toboth as This correspondence
is attached as Exhibits E-K to the Berman Aff.
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sufficient funds into a required escrow. (Berman Aff. Exhibit "J"). Shaw continued to have further
correspondence with the New York Department of State about concerning the Condominium's
"K").6
plan in September 2005. (Exhibit
In February 2007, Shaw continued to communicate with the NY AG on the telephone and
by email regarding the stillunapproved new offering plan. (S_ee Email dated February 14, 2007,
attached to Berman Aff. as Exhibit "L").
* * *
In the meantime, while Shaw was communicating with the NY AG regarding the offering
plan, on September 21, 2006, Royal Blue, by itsVice President John Souto, and Serge Souto (while
he was through John Souto pursuant to a recorded power-
allegedly mentally incapacitated), acting
of-attorney, executed multiple consolidated adjustable rate notes (the "Notes"), collectively
evidencing indebtedness for mortgage loans totaling approximately $8,000,000 (the "Loans"). Each
of the Notes was secured by one of nine different condominium units located at 130-132 Barrow
Street, New York, NY (the "Mortgaged Premises").
Also on September 21, 2006, Royal Blue (again by its Vice President, John Souto) granted
new mortgages encumbering the Mortgaged Premises to secure that portion of the Notes that
represented new funds advanced on that date.
In addition, on September 21, 2006, Royal Blue (again by itsVice President, John Souto) and
Serge Souto (again through John Souto pursuant to an but recorded power-of-
acting allegedly invalid,
attorney) (the "Borrowers") executed, acknowledged and delivered to the Originating Lender,
multiple Consolidation, Extension, and/or Modification Agreements ("CEMAs"). As fully explained
6 twelve
The letterexplains that the Condominium "received new tax lots for the newly renovated
UnitS."
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in Schedule A to the CEMAs, the CEMAs consolidated, extended, and modified a series of prior
mortgages granted by Royal Blue encumbering the Mortgaged Premises, including those arising from
a prior severance and splitting agreement, as well as the new mortgage (hereinafter, "Mortgage
Liens"). (Berman Aff. Exhibit "M"). The CEMAs were recorded in the Office of the City Register
on October 31, 2006.
The Borrowers defaulted under the terms of the Notes and CEMAs by failing to make
payments. (Am. Compl. ¶ 18). To-date, Royal Blue has not cured itsdefaults.
Accordingly, Plaintiff filed the Actions. Royal Blue's answer incredibly asserts as
affirmative defense that Plaintiff may not proceed against the units, due to, in pertinent part Royal
Blue's (acting through Shaw) own wrongful conduct, that foreclosure: (i)would be in violation of the
act.7
Martin Act, and (ii)a would be illegal and the Court may not order an illegal
ARGUMENT
SHAW SHOULD BE DISQUALIFIED AS DEFENDANT ROYAL BLUE'S
COUNSEL BECAUSE HE IS A WITNESS TO MATERIAL FACTS
It iswell-settled that the courts have authority to disqualify an attorney from representing
a party to a pending action where, as here, the attorney's participation would contravene the Rules
of Professional Conduct. See, e.g., Flores v. Willard J. Price Assocs., LLC, 20 A.D.3d 343, 344,
799 N.Y.S.2d 43, 44 (1st Dep't 2005). Whether or not to disqualify an attorney rests with the
sound discretion of the court. See Aryeh v. Aryeh, 14 A.D.3d 634, 788 N.Y.S.2d 622 (2d Dep't
2005). For the reasons set forth below, disqualification of Shaw is appropriate here.
New York's ethical rules governing the conduct of attorneys have always provided that an
attorney cannot act as an advocate and as a witness in the same case. "The advocate-witness rules
7 The affirmative defense inquestion is the FirstAffirmative Defense ineach answer except forIndex
Twenty
No. 850071/2016 where itis theTwenty Eighth Affirmative Defense.
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contained in the Code of Professional Responsibility, which have been superseded by the Rules of
Professional Conduct, provide guidance, but are not binding authority, for the courts in
litigation."
determining whether a party's attorney should be disqualified during Falk v. Gallo, 73
A.D.3d 685, 686, 901 N.Y.S.2d 99,100 (2d Dep't 2010).
Rule 3.7 of the New York State Rules of Professional Conduct, 22 NYCRR Part 1200,
provides:
LAWYER AS WITNESS
(a) 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.
(b) 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 isapparent that the
testimony may be prejudicial to the client; or
(2) the lawyer is precluded from doing so by Rule 1.7 or Rule 1.9
[governing conflicts of interest].
Under RPC 3.7, as under former Disciplinary Rule 5-102 which preceded it, the advocate
may not be a witness on a significant issue of fact. h Falk v. Gallo, 73 A.D.3d 685, 686, 901
N.Y.S.2d 99,100 (2d Dep't 2010). "It is axiomatic that the roles of advocate and witness are
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inconsistent."
inherently See Shayne. Dachs, Stanisci & Corker v. Podell, 166 A.D.2d 521, 560
N.Y.S.2d 802 (2d Dep't 1990). Moreover, when the issue of the attorney becoming a witness
arises, "doubts should be resolved in favor of the lawyer testifying and against his [or her]
advocate."
continuing as an Tru-Bite Labs. Inc. v. Ashman, 54 A.D.2d 345, 388 N.Y.S.2d 279,
280 (1st Dep't 1976). See also Stober v. Gaba & Stober, P.C., 259 A.D.2d 554, 555, 686 N.Y.S.2d
440, 441 (2d Dep't 1999) ("any doubts are to be resolved in favor of disqualification"); 108th St.
Owners Corp. v. Overseas Commodities Ltd., 238 A.D.2d 324, 656 N.Y.S.2d 942 (2d Dep't 1997).
Royal Blue's amended answers - signed Shaw - asserts an affirmative defense
Here, by
relying on Shaw 'sown conduct based on Royal Blue's failure to have an effective offering plan
governing the subject condominium units, allegedly rendering the mortgages in violation of the
Martin Act, and, thus, purportedly relieving itof all of itsobligation to repay the millions of dollars
itborrowed from its lenders. (Berman Aff. Ex. B).
Yet, it was Shaw who was transaction and regulatory counsel to Royal Blue in itsefforts
to have its amendment to the Barrow Offering Plan approved by the NY AG and the submission
thereafter of a new Offering Plan to the NYAG. Itwas also Shaw who was counsel to Royal Blue
when Royal Blue repeatedly refused to comply with the NY AG's demand with the Martin Act,
and who was actively involved in discussions with the NY AG and his client, Royal Blue, through
February 2007, before, during and after the subject mortgages were given on the units, concerning
Royal Blue's failure to comply with the Martin Act, and when Serge Souto was allegedly mentally
incapacitated.
Shaw will be a critical and necessary fact witness as to Royal Blue's failure to comply with
the Martin Act and what Shaw as well both Serge and John Souto knew and/or told any other
attorneys who represented Royal Blue or other individuals about Royal Blue's view of the impact
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of their failure to amend the Barrow Offering Plan when Royal Blue (through Serge and John
Souto) applied for the subject loans and
Preview
FILED: NEW YORK COUNTY CLERK 02/07/2020 04:19 PM INDEX NO. 107030/2009 NYSCEF DOC. NO. 214 RECEIVED NYSCEF: 02/07/2020 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK Deutsche Bank National Trust Company as Trustee for American Home Mortgage Assets Trust 2006-6 Index Nos: 105818/2009, Mortgage-Backed Pass-Through Certificates, Series 107029/2009 2006-6, Plaintiff, -against- Royal Blue Realty Holdings, Inc.; et al., Defendants. Deutsche Bank National Trust Company as Trustee for American Home Mortgage Assets Trust 2007-1 Index Nos: 105819/2009, Mortgage-Backed Pass-Through Certificates, Series 107017/2009, 107028/2009, 2007-1, 107030/2009, 107031/2009, Plaintiff, 110570/2010 -against- Royal Blue Realty Holdings, Inc.; et al., Defendants. Deutsche Bank National Trust Company as Trustee for Index No: 850071/2016 American Home Mortgage Assets Trust 2007-1 Mortgage-Backed Pass-Through Certificates, Series 2007-1, Plaintiff, -against- Unknown Heirs of the Estate of Serge J. Souto, Royal Blue Realty Holdings, Inc., et al., Defendants. PLAINTIFFS' MEMORANDUM_OF LAW IN SUPPORT OF MOTION TO DISQUALIFY GANFER SHORE LEEDS & ZAUDERER LLP 360 Lexington Avenue New York, New York 10017 (212) 922-9250 1 of 20 FILED: NEW YORK COUNTY CLERK 02/07/2020 04:19 PM INDEX NO. 107030/2009 NYSCEF DOC. NO. 214 RECEIVED NYSCEF: 02/07/2020 TABLEOFCONTENTS P.g,s TABLE OF AUTHORITIES...........................................................................................................ii PRELIMINARY STATEMENT.....................................................................................................1 FACTS.............................................................................................................................................5 ARGUMENT...................................................................................................................................8 SHAW SHOULD BE DISQUALIFIED AS DEFENDANT ROYAL BLUE'S COUNSEL BECAUSE HE IS A WITNESS TO MATERIAL FACTS ............................................................8 CONCLUSION .............................................................................................................................15 i 2 of 20 FILED: NEW YORK COUNTY CLERK 02/07/2020 04:19 PM INDEX NO. 107030/2009 NYSCEF DOC. NO. 214 RECEIVED NYSCEF: 02/07/2020 TABLE OF AUTHORITIES Cases P_age 108th St. Owners Corp. v. Overseas Commodities Ltd., 238 A.D.2d 324, 656 N.Y.S.2d 942 (2d Dep't 1997)....................................................................10 Aryeh v. Aryeh, 14 A.D.3d 634, 788 N.Y.S.2d 622 (2d Dep't 2005)........................................................................8 Catalanotto v. Abraham, 27 Misc. 3d 1205(A), 2010 WL 1340772, at *5 (Sup. Ct. Suffolk Co. Mar. 29, 2010)...................................................................................13 Center v. Hampton Affiliates, Inc., 66 N.Y.2d 782, 784, 497 N.Y.S.2d 898, 899 (1985)....................................................................13 Chang v. Chang, 190 A.D.2d 311, 317, 597 N.Y.S.2d 692, 696 (1st Dep't 1993)...................................................11 Falk v. Gallo, 73 A.D.3d 685, 686, 901 N.Y.S.2d 99,100 (2d Dep't 11 2010).....................................................9, Flores v. Willard 1 Price Assocs., LLC, 20 A.D.3d 343, 344, 799 N.Y.S.2d 43, 44 (1st Dep't 2005)...........................................................8 Korfmann v. Kemper Nat'l Ins. Co., 258 A.D.2d 508, 508, 685 N.Y.S.2d 282, 282 (2d Dep't 1999)....................................................11 People v. Berroa, 99 N.Y.2d 134, 140 753 N.Y.S.2d 12, 17 (2002)..........................................................................14 Scannapieco v. Scannapieco, 30 Misc. 3d 1226(A), 2011 WL 652750, at *5 (Sup. Ct. Nassau Co. Feb. 17, 2011) ....................................................................................13 Shayne, Dachs, Stanisci & Corker v. Podell, 166 A.D.2d 521, 560 N.Y.S.2d 802 (2d Dep't 1990).................................................................... 10 Shiboleth v. Yerushalmi, 268 A.D.2d 300, 300, 702 N.Y.S.2d 32, 33 (1st Dep't 2000).......................................................13 Skiff-Murray v. Murray, 3 A.D.3d 610, 611, 771 N.Y.S.2d 230, 233 (3d Dep't 2004)........................................................12 ii 3 of 20 FILED: NEW YORK COUNTY CLERK 02/07/2020 04:19 PM INDEX NO. 107030/2009 NYSCEF DOC. NO. 214 RECEIVED NYSCEF: 02/07/2020 Sokolow, Dunaud, Mercadier & Carrerras v. Lacher, 299 A.D.2d 64, 74, 75, 747 N.Y.S.2d 441, 449-51 (1st Dep't 2002)............................................12 Stober v. Gaba & Stober, P.C., 259 A.D.2d 554, 555, 686 N.Y.S.2d 440, 441 (2d Dep't 1999)....................................................10 Tru-Bite Labs, Inc. v. Ashman, 54 A.D.2d 345, 388 N.Y.S.2d 279, 280 (1st Dep't 1976).............................................................10 Warshaw Burstein Cohen Schlesinger & Kuh, LLP v. Longmire, 82 A.D.3d 586, 586, 920 N.Y.S.2d 23, 24 (1st Dep't 2011).........................................................14 Wensley & Partners, LLC v. Polimeni, 262 A.D.2d 311, 692 N.Y.S.2d 85 (2d Dep't 1999)......................................................................11 Wilmington Trust v MC-Five Mile Commercial Mtge. Fin. LLC, 171 A.D.3d 591, 591, 99 N.Y.S.3d 11, 12 (1st Dep't 2019).........................................................14 Statutes and Rules CPLR 12 3211(a)............................................................................................................................5, CPLR 321(c)..................................................................................................................................13 GBL § 6 352-eeee...........................................................................................................................5, RPC 1.7(a).....................................................................................................................................14 RPC 3.7..........................................................................................................................................14 RPC 12 3.7(a)...............................................................................................................................11, RPC 3.7(a)(1).................................................................................................................................12 RPC 3.7(a)(2)(4)............................................................................................................................12 RPC 3.7(a)(3).................................................................................................................................12 RPC 14 3.7(b)...............................................................................................................................13, CPLR 14 3212(f)........................................................................................................................3, 9, Other Authority Restatement [Second] of Agency § 272, at 591 ............................................................................14 iii 4 of 20 FILED: NEW YORK COUNTY CLERK 02/07/2020 04:19 PM INDEX NO. 107030/2009 NYSCEF DOC. NO. 214 RECEIVED NYSCEF: 02/07/2020 Plaintiffs Deutsche Bank National Trust Company as Trustee for American Home Mortgage Asset Trust 2006-6, Mortgage-Backed Pass-Through Certificates Series 2006-6 and Deutsche Bank National Trust Company as Trustee for American Home Mortgage Asset Trust ("Plaintiffs" 2007-1, Mortgage-Backed Pass-Through Certificates Series 2007-1 or "Lenders") submit this omnibus memorandum of law in support of their motions in these nine related actions (the "Actions") to disqualify Martin Shaw, Esq. ("Shaw") from representing Defendant Royal Blue ("Defendants" Realty Holdings, Inc. or "Royal Blue) in each of those nine related actions, (the "Actions"), pursuant to Rules 3.7, 1.7, and 1.9 of the New York Rules of Professional Conduct 1200.1 ("RPC"), 22 NYCRR Part Accompanying this memorandum is the Affirmation of Mark A. Berman, dated February 7, 2020 (the "Berman Aff.") and the Affirmation of Jamie Krapf, dated Aff.").2 February 4, 2020 (the "Krapf PRELIMINARY STATEMENT Documents recently obtained by Plaintiff show that Shaw, litigation counsel for Royal Blue in the Actions, is a material and necessary fact witness to Royal Blue's affirmative defenses in each of these nine Actions that foreclosure cannot proceed against the subject condominium units "illegal" Act.3 because a sale of the subject properties would be allegedly under the Martin At an appearance before the Court on March 21, 2019, Shaw (who was formerly transaction and regulatory compliance counsel for Royal Blue) affirmatively misrepresented to the Court and A chart listingeach of thenine actions by index number, plaintiff, unit/lots,and originalprincipal amount of each mortgage is attachedhereto as Addendum A. 2 The Amended Complaint for each respectiveAction is attachedas Exhibit A to the Berman Aff. in filed thatAction. The Answer for each respectiveAction is attachedas Exhibit B to the Berman Aff.filed inthatAction. 3 maintain valid and subject Plaintiffs that,as a matterof law, thenotes and mortgage at issueare to foreclosure regardlessof whether the units were allegedly not legallyformed under the Martin Act. 5 of 20 FILED: NEW YORK COUNTY CLERK 02/07/2020 04:19 PM INDEX NO. 107030/2009 NYSCEF DOC. NO. 214 RECEIVED NYSCEF: 02/07/2020 Plaintiffs' to attorneys the period when he previously represented Royal Blue. Specifically, while Shaw acknowledged that he represented Royal Blue in connection with itsunwillingness to comply with and thereby receive approval under the Martin Act from the New York State Attorney General (the "NY AG") for the offering plan to sellthe units at issue to the public, Shaw orally represented that such representation ceased in 2003-2004 and resumed when Shaw was re- only allegedly retained by Royal Blue long after the related foreclosures action had been commenced That, however, has been proven to be incorrect. In fact, documents recently obtained from the NY AG in October and December 2019, pursuant to a Freedom of Information Law ("FOIL") Request demonstrate that Shaw continued his legal representation of Royal Blue from 2002 into at least 2007, including during the precise period when Royal Blue borrowed millions pursuant to the consolidated notes, secured by the mortgages, that are the subject of the Actions, and which Royal Blue is now trying to avoid paying. From these documents, incredibly, we also learned that Shaw was counsel to Royal Blue during the time Serge Souto was allegedly mentally incapacitated, and yet Serge Souto signed the documents that authorized his son, John Souto, to consummate such borrowings. It is now evident that Shaw is a material and necessary witness as a result of his representation of Royal Blue 2005 - 2007. during Each of these nine Actions seeks to foreclose on an individual condominium unit. These nine units resulted from Royal Blue's subdivision of a commercial unit located at 130 Barrow Street. Shaw was the one responsible for obtaining approval from the NY AG for the units to be individually saleable and initially sought to do so by way of an amendment to the offering plan for the 130 Barrow Street Condominium (the "Barrow Offering Plan"). The newly obtained documents demonstrate that Shaw continued to represent Royal Blue after the Barrow Offering 2 6 of 20 FILED: NEW YORK COUNTY CLERK 02/07/2020 04:19 PM INDEX NO. 107030/2009 NYSCEF DOC. NO. 214 RECEIVED NYSCEF: 02/07/2020 Plan was initially rejected and itsfailed attempts to meet certain requirements for a public offering of the condominium units pursuant to an offering plan. Thus, the newly obtained documents demonstrate that Shaw was continuing to represent Royal Blue during the same period.that Royal Blue entered into the mortgage documents that are the subject of the Actions, at which time he and Royal Blue had full knowledge that Royal Blue's amendment to the Barrow Offering Plan had not been accepted because Royal Blue was unwilling to accede to the NY AG's requirements. While Royal Blue now claims that the rejection of its amendment means that the individual units could not be mortgaged, itdid not disclose this position to the originating lender, when Royal Blue proceeded to borrow the millions of dollars at issue in the Actions and execute the subject consolidated notes, CEMAs and new mortgages on each of those units. Neither Royal Blue's nor Shaw's document productions included any correspondence with the NY AG that post-date the NY AG's January 22, 2003 letter denying Royal Blue's amendment to the Barrow Offering Plan, despite being called for. Further, neither Royal Blue nor Shaw indicated that such documents existed but were lost or destroyed. Ithard to conceive of how Royal Blue or Shaw overlooked these documents or innocently lost them all because Royal Blue and Shaw failed to disclose the existence of such documents. Plaintiff did not make and realistically could not have previously made this motion. However, the documents received in response to the FOIL request include multiple examples of written communications between Shaw and the NY AG well after 2003 regarding the offering plan through 2007, at least one year after the subject loans was made to Royal Blue. Critically, it appears that Shaw is a necessary and material witness with respect to the amendment of the offering plan. The principals of Royal Blue during the relevant time period, 3 7 of 20 FILED: NEW YORK COUNTY CLERK 02/07/2020 04:19 PM INDEX NO. 107030/2009 NYSCEF DOC. NO. 214 RECEIVED NYSCEF: 02/07/2020 Serge and John Souto, are now deceased and despite numerous third party subpoenas served by Plaintiff, no documents or information has been received by Plaintiffs indicating that anyone else has personal knowledge as to the proposed amendment of the offering plan or of Souto's capacity at the time of borrowing. Thus, Shaw is the only witness who can testify with first-hand knowledge regarding the relevant events pertaining to the affirmative defenses. For example, Shaw will be a required and necessary witness in this action as to Royal Blue's attempt to amend the offering plan seeking to comply with the Martin Act, Royal Blue's communications with the NY AG regarding itsrejection, Royal Blue's refusal to correct the issues that lead to the rejection of its proposed amendment to the offering plan and why Royal Blue proceeded to borrow millions of dollars, secured by the subject mortgages (predicated on a mentally incapacitated principal of Royal Blue) in light of their (and Shaw's) knowledge as to the status of the amendment of the offering plan, which had been rejected, and their now current position that the subject properties could not be mortgaged, and thus foreclosed upon. It is well-settled, as a matter of law and ethics, that an attorney may not serve both as counsel and as a necessary witness in the same action. The incompatibility of these two roles is aggravated where counsel will not only be a required witness, as here because everyone else is deceased, but the only witness who will be able to testify regarding, among other things, Royal Blue's failure to comply with the Martin Act. In light of the above, Shaw should be disqualified from representing Royal Blue in these actions pursuant to Rules 3.7, 1.7, and 1.9 of the New York State Rules of Professional Conduct and the case law applying those rules and their predecessors. 4 8 of 20 FILED: NEW YORK COUNTY CLERK 02/07/2020 04:19 PM INDEX NO. 107030/2009 NYSCEF DOC. NO. 214 RECEIVED NYSCEF: 02/07/2020 Royal Blue would suffer no hardship from having to secure new counsel in these actions, where CPLR 3211(a) motions to dismiss and motions for appointment of a receiver will not even be argued until later February, and where discovery has not been completed and Shaw has more than capable independent, co-counsel, Daniel Gammerman, working with him on these actions. FACTS The Actions seek to foreclose on multiple mortgages on nine different properties, collectively securing millions of dollars of debt owed by Royal Blue to the Plaintiff. In 2000, Royal Blue purchased the commercial unit owner of 130 Barrow Street Condominium (the "Barrow Condominium"). In 2002, Royal Blue proceeded to gut renovate and subdivide the commercial unit into twelve residential apartments, and since then has leased those apartments. In 2002, Royal Blue sought to amend the Barrow Condominium's Offering Plan to offer the resulting units, including the nine being foreclosed on in the Actions, for sale to the public. However, in 2003, the NY AG rejected the amendment because it did not comply with GBL § 352-eeee requiring notification to residents of their rights. (S_ee Attorney General's January 22, 2003 letter rejecting Royal Blue's proposed amendment to the Barrow Condominium's Offering Plan, attached to the Berman Aff. as Exhibit "D"). Shaw represented Royal Blue in proposing and seeking approval of the subject amendment to the Barrow Offering Plan. (See Letters from Martin Shaw dated December 16 and 31, 2002, attached to the Berman Aff. as Exhibit "C"). 5 9 of 20 FILED: NEW YORK COUNTY CLERK 02/07/2020 04:19 PM INDEX NO. 107030/2009 NYSCEF DOC. NO. 214 RECEIVED NYSCEF: 02/07/2020 2019,4 Shaw informed the Court at a conference held on March 21, that he ceased representing Royal Blue in connection with the subject condominium conversion and offering plan no later than 2003-2004. (Berman Aff. ¶ 3; Krapf Aff. ¶ 3). This statement has been proven false: Plaintiff just learned through documentation obtained through a FOIL Request to the NY AG that Shaw continued to represent Royal Blue in connection with itsdealings with the NY AG's Office 2007.5 regarding a mechanism to allow Royal Blue to offer the units for sale for years into On March 26, 2004, Shaw wrote to the New York Real Estate Financing Bureau that each lots" of the 12 units in the Condominium "were issued their own tax and that the existing mortgage units." on each unit "will be satisfied upon the closing of each of the 12 (Berman Aff. Exhibit "E"). In October 2004, Shaw wrote the NY AG regarding a proposed new offering plan for the Condominium. (Berman Aff. Exhibit "F"). In March 2005, Shaw wrote to the New York State Department of Law regarding the Condominium, stating, among other things, that "tax lots for the billed." 12 newly renovated Units were also issued. These are now separately assessed and (Berman Aff. Exhibit "G"). In May and July 2005, Shaw submitted red-lines of changes to the new offering plan for the Condominium for review by the New York State Department of Law. "H" (Berman Aff. Exhibits and "I). The proposed plan stated that Royal Blue would comply with GBL § 352-eeee regarding notification to residents of their rights. However, this plan was not approved by the NY AG for a different reason, i.e.,that Royal Blue was unwilling to contribute 4 Unfortunately, this admission was done at a side bar and not transcribed, but was stated in connection with assertions by Shaw, as counsel for Royal Blue, as towhy he did not possess any additional documents responsive to a Subpoena served upon him by Plaintiff. 5 New The correspondence between the law office of Martin Shaw and the various York State agencies referenced herein was signed by either Shaw himself or his assistant Yolanda DeArteaga, who is "Shaw." not an attorney. For the purposes of this brief,we collectively refer toboth as This correspondence is attached as Exhibits E-K to the Berman Aff. 6 10 of 20 FILED: NEW YORK COUNTY CLERK 02/07/2020 04:19 PM INDEX NO. 107030/2009 NYSCEF DOC. NO. 214 RECEIVED NYSCEF: 02/07/2020 sufficient funds into a required escrow. (Berman Aff. Exhibit "J"). Shaw continued to have further correspondence with the New York Department of State about concerning the Condominium's "K").6 plan in September 2005. (Exhibit In February 2007, Shaw continued to communicate with the NY AG on the telephone and by email regarding the stillunapproved new offering plan. (S_ee Email dated February 14, 2007, attached to Berman Aff. as Exhibit "L"). * * * In the meantime, while Shaw was communicating with the NY AG regarding the offering plan, on September 21, 2006, Royal Blue, by itsVice President John Souto, and Serge Souto (while he was through John Souto pursuant to a recorded power- allegedly mentally incapacitated), acting of-attorney, executed multiple consolidated adjustable rate notes (the "Notes"), collectively evidencing indebtedness for mortgage loans totaling approximately $8,000,000 (the "Loans"). Each of the Notes was secured by one of nine different condominium units located at 130-132 Barrow Street, New York, NY (the "Mortgaged Premises"). Also on September 21, 2006, Royal Blue (again by its Vice President, John Souto) granted new mortgages encumbering the Mortgaged Premises to secure that portion of the Notes that represented new funds advanced on that date. In addition, on September 21, 2006, Royal Blue (again by itsVice President, John Souto) and Serge Souto (again through John Souto pursuant to an but recorded power-of- acting allegedly invalid, attorney) (the "Borrowers") executed, acknowledged and delivered to the Originating Lender, multiple Consolidation, Extension, and/or Modification Agreements ("CEMAs"). As fully explained 6 twelve The letterexplains that the Condominium "received new tax lots for the newly renovated UnitS." 7 11 of 20 FILED: NEW YORK COUNTY CLERK 02/07/2020 04:19 PM INDEX NO. 107030/2009 NYSCEF DOC. NO. 214 RECEIVED NYSCEF: 02/07/2020 in Schedule A to the CEMAs, the CEMAs consolidated, extended, and modified a series of prior mortgages granted by Royal Blue encumbering the Mortgaged Premises, including those arising from a prior severance and splitting agreement, as well as the new mortgage (hereinafter, "Mortgage Liens"). (Berman Aff. Exhibit "M"). The CEMAs were recorded in the Office of the City Register on October 31, 2006. The Borrowers defaulted under the terms of the Notes and CEMAs by failing to make payments. (Am. Compl. ¶ 18). To-date, Royal Blue has not cured itsdefaults. Accordingly, Plaintiff filed the Actions. Royal Blue's answer incredibly asserts as affirmative defense that Plaintiff may not proceed against the units, due to, in pertinent part Royal Blue's (acting through Shaw) own wrongful conduct, that foreclosure: (i)would be in violation of the act.7 Martin Act, and (ii)a would be illegal and the Court may not order an illegal ARGUMENT SHAW SHOULD BE DISQUALIFIED AS DEFENDANT ROYAL BLUE'S COUNSEL BECAUSE HE IS A WITNESS TO MATERIAL FACTS It iswell-settled that the courts have authority to disqualify an attorney from representing a party to a pending action where, as here, the attorney's participation would contravene the Rules of Professional Conduct. See, e.g., Flores v. Willard J. Price Assocs., LLC, 20 A.D.3d 343, 344, 799 N.Y.S.2d 43, 44 (1st Dep't 2005). Whether or not to disqualify an attorney rests with the sound discretion of the court. See Aryeh v. Aryeh, 14 A.D.3d 634, 788 N.Y.S.2d 622 (2d Dep't 2005). For the reasons set forth below, disqualification of Shaw is appropriate here. New York's ethical rules governing the conduct of attorneys have always provided that an attorney cannot act as an advocate and as a witness in the same case. "The advocate-witness rules 7 The affirmative defense inquestion is the FirstAffirmative Defense ineach answer except forIndex Twenty No. 850071/2016 where itis theTwenty Eighth Affirmative Defense. 8 12 of 20 FILED: NEW YORK COUNTY CLERK 02/07/2020 04:19 PM INDEX NO. 107030/2009 NYSCEF DOC. NO. 214 RECEIVED NYSCEF: 02/07/2020 contained in the Code of Professional Responsibility, which have been superseded by the Rules of Professional Conduct, provide guidance, but are not binding authority, for the courts in litigation." determining whether a party's attorney should be disqualified during Falk v. Gallo, 73 A.D.3d 685, 686, 901 N.Y.S.2d 99,100 (2d Dep't 2010). Rule 3.7 of the New York State Rules of Professional Conduct, 22 NYCRR Part 1200, provides: LAWYER AS WITNESS (a) 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. (b) 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 isapparent that the testimony may be prejudicial to the client; or (2) the lawyer is precluded from doing so by Rule 1.7 or Rule 1.9 [governing conflicts of interest]. Under RPC 3.7, as under former Disciplinary Rule 5-102 which preceded it, the advocate may not be a witness on a significant issue of fact. h Falk v. Gallo, 73 A.D.3d 685, 686, 901 N.Y.S.2d 99,100 (2d Dep't 2010). "It is axiomatic that the roles of advocate and witness are 9 13 of 20 FILED: NEW YORK COUNTY CLERK 02/07/2020 04:19 PM INDEX NO. 107030/2009 NYSCEF DOC. NO. 214 RECEIVED NYSCEF: 02/07/2020 inconsistent." inherently See Shayne. Dachs, Stanisci & Corker v. Podell, 166 A.D.2d 521, 560 N.Y.S.2d 802 (2d Dep't 1990). Moreover, when the issue of the attorney becoming a witness arises, "doubts should be resolved in favor of the lawyer testifying and against his [or her] advocate." continuing as an Tru-Bite Labs. Inc. v. Ashman, 54 A.D.2d 345, 388 N.Y.S.2d 279, 280 (1st Dep't 1976). See also Stober v. Gaba & Stober, P.C., 259 A.D.2d 554, 555, 686 N.Y.S.2d 440, 441 (2d Dep't 1999) ("any doubts are to be resolved in favor of disqualification"); 108th St. Owners Corp. v. Overseas Commodities Ltd., 238 A.D.2d 324, 656 N.Y.S.2d 942 (2d Dep't 1997). Royal Blue's amended answers - signed Shaw - asserts an affirmative defense Here, by relying on Shaw 'sown conduct based on Royal Blue's failure to have an effective offering plan governing the subject condominium units, allegedly rendering the mortgages in violation of the Martin Act, and, thus, purportedly relieving itof all of itsobligation to repay the millions of dollars itborrowed from its lenders. (Berman Aff. Ex. B). Yet, it was Shaw who was transaction and regulatory counsel to Royal Blue in itsefforts to have its amendment to the Barrow Offering Plan approved by the NY AG and the submission thereafter of a new Offering Plan to the NYAG. Itwas also Shaw who was counsel to Royal Blue when Royal Blue repeatedly refused to comply with the NY AG's demand with the Martin Act, and who was actively involved in discussions with the NY AG and his client, Royal Blue, through February 2007, before, during and after the subject mortgages were given on the units, concerning Royal Blue's failure to comply with the Martin Act, and when Serge Souto was allegedly mentally incapacitated. Shaw will be a critical and necessary fact witness as to Royal Blue's failure to comply with the Martin Act and what Shaw as well both Serge and John Souto knew and/or told any other attorneys who represented Royal Blue or other individuals about Royal Blue's view of the impact 10 14 of 20 FILED: NEW YORK COUNTY CLERK 02/07/2020 04:19 PM INDEX NO. 107030/2009 NYSCEF DOC. NO. 214 RECEIVED NYSCEF: 02/07/2020 of their failure to amend the Barrow Offering Plan when Royal Blue (through Serge and John Souto) applied for the subject loans and