Preview
FILED: ERIE COUNTY CLERK 12/22/2023 01:26 PM INDEX NO. 801061/2023
NYSCEF DOC. NO. 20 RECEIVED NYSCEF: 12/22/2023
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF ERIE
F. JAMES McGUIRE, Index No. 801061/23
Mot. Seq. 001
Plaintiff,
AFFIDAVIT IN SUPPORT
- against - OF MOTION TO
DISOUALIFY COUNSEL
THE McGUIRE GROUP,INC.,
Defendant.
STATE OF NEW YORK )
)ss.:
COUNTY OF NASSAU )
EDWARD FARBENBLUM,being duly sworn, deposes and states as follows:
1. I am over the age of 18 and a resident of Nassau County, New York. I make this
affidavit based on personal knowledge.
2. I submit this affidavit in support of the motion by The McGuire Group, Inc., the
defendant herein("TMG"),seeking an order disqualifying Harter Secrest & Emery LLP("HSE")
from representing plaintiff F. James McGuire ("Plaintiff') in this action.
3. HSE should be disqualified from continuing such representation because of a
conflict ofinterest arising from HSE's current representation ofTMG's corporate affiliates. Those
affiliates are six limited liability companies that own and operate skilled nursing facilities (the
"Facilities").'
4. I am the manager, and together with my wife, Orly Lieberman, owner of 100% of
the equity, of Vestra SPVl LLC, Vestra SPV2 LLC, the holding companies which own the
Facilities(the"SPY Entities"). I am also TMG's sole shareholder, which shares 100% overlapping
ownership and control with the Facilities and the SPY Entities.
'The Facilities are Autumn View Health Care Facility, LLC, Brookhaven Health Care Facility, LLC, Garden Gate
Health Care Facility, LLC, Harris Hill Nursing Facility, LLC, North Gate Health Care Facility, LLC and Seneca
Health Care Center, LLC.
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5. TMG is 100% both operationally and financially interdependent with the Facilities,
all of which HSE is currently representing in active litigation.
6. HSE currently represents the Facilities in multiple pending litigations in New York
State courts(the "Other Litigations").^ The engagement letters that the Facilities signed with HSE
did not include waivers related to the claims in this action, and none of them explicitly waive
TMG's objections to being sued directly by HSE.(See engagement letters attached as Exhibit D)
To the extent any of the engagement letters address waiver of conflicts of interest, they only
contemplate the "unlikely" event of a future conflict and offer, as an example, a transactional
matter between two or more ofthe parties involved in the Other Litigations.
7. As the manager of the Facilities and the sole shareholder of TMG,I am a leading
member ofthe plaintiffs/petitioners in the Other Litigations and have regular communications with
attorneys at HSE and other plaintiffs/petitioners in the Other Litigations.^
8. TMG - of which I am the sole shareholder - is a shared services company whose
sole purpose is to provide administrative and consulting services to the various McGuire-affiliated
facilities, many of which are HSE's clients.(See the organizational chart attached as Exhibit E,
and, for example, the attached agreement between TMG and HSE's client, Seneca Health Care
Center, attached as Exhibit F). The representation of the McGuire-affiliated facilities goes back
to at least 2004.
9. The Facilities rely entirely on TMG for all oftheir business-related needs.
10. As a prime example of this, I will note that twelve of the fourteen engagement
letters I attached here as Ex. D,are addressed to "Dan Cronmiller, Vice President ofFinance, The
^ Matters in which HSE currently represents the Facilities include, inter alia.In re Autumn View Health Care Facility,
CV-22-22%!',In re Woodside Manor Nursing Home, Inc., 901450/21 and App. Div. Case No. 534801.
^ All communication with respect to Facility litigation has been through myself(recently) and employees of TMG
(historically), and a search ofemails showed none between facility employees and HSE.
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McGuire Group,Inc." The thirteenth engagement letter is also addressed to Mr. Cronmiller at one
of the Facilities. Mr. Cronmiller was previously TMG's Vice President of Finance. And the
fourteenth engagement letter is addressed to "Michael Masur, Controller." Mr. Masur currently
leads TMG's finance department.
11. TMG provides services to the Facilities, all of which are HSE's clients, including
accounting, audit, cash management, employee benefits, finance, human resources, information
technology, insurance, and payroll. This corporate structure is commonly used in the New York
skilled nursing facility industry.
12. TMG also provides centralized billing services, accounts receivable, accounts
payable, and clinical consulting for each of the Facilities. Additionally, all cash for the Facilities
is held in a concentration account titled in the name ofTMG.
13. TMG also provides in-house legal services for the Facilities as well as managing
the Facilities outside legal counsel.
14. In this action, the claims and counterclaims between the parties concern Mr.
McGuire's performance as TMG's CEO with specific contractual responsibility for the oversight
and affairs of the Facilities, of which he was also the manager. TMG's employees and officers
will be providing documentary and testimonial evidence regarding the claims ^d counterclmms
in this action and HSE would be deposing employees and officers of its own clients' corporate
affiliate.
15. Further, in light of the operational and financial interdependence among these
entities, any judgment against one would impact the others. For example, the SPY Entities and
each of their respective subsidiary facilities are co-borrowers on a 2020 loan and TMG is a
guarantor.
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16. Even assuming this conflict could be waived, which TMG disputes, I did not
consent, nor will I, to a waiver ofthis conflict.
17. Finally, regardless ofthe outcome ofthis application, it is Defendant's intention to
move to add the Facilities as additional counterclaim-plaintiffs in this action. Plaintiff owed
fiduciary duties to the individual Facilities as well as to Defendant, and his breaches of fiduciary
duty against Defendant as set forth in Defendant's counterclaims also damaged the individual
Facilities.
18. For these reasons, the Court should grant the motion to disqualify HSE from
representing Plaintiff.
EDWARD FARBENBLUM
Sworn to before me on
theo^^day ofDecember,2023
Notary Public
DEANNA KRUEGER
Notary Public - State of New York
NO.01KR6129495
Qualified in Suffolk County
My Commission Expires Jun 27, 2025
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Preview
FILED: ERIE COUNTY CLERK 12/22/2023 01:26 PM INDEX NO. 801061/2023 NYSCEF DOC. NO. 20 RECEIVED NYSCEF: 12/22/2023 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF ERIE F. JAMES McGUIRE, Index No. 801061/23 Mot. Seq. 001 Plaintiff, AFFIDAVIT IN SUPPORT - against - OF MOTION TO DISOUALIFY COUNSEL THE McGUIRE GROUP,INC., Defendant. STATE OF NEW YORK ) )ss.: COUNTY OF NASSAU ) EDWARD FARBENBLUM,being duly sworn, deposes and states as follows: 1. I am over the age of 18 and a resident of Nassau County, New York. I make this affidavit based on personal knowledge. 2. I submit this affidavit in support of the motion by The McGuire Group, Inc., the defendant herein("TMG"),seeking an order disqualifying Harter Secrest & Emery LLP("HSE") from representing plaintiff F. James McGuire ("Plaintiff') in this action. 3. HSE should be disqualified from continuing such representation because of a conflict ofinterest arising from HSE's current representation ofTMG's corporate affiliates. Those affiliates are six limited liability companies that own and operate skilled nursing facilities (the "Facilities").' 4. I am the manager, and together with my wife, Orly Lieberman, owner of 100% of the equity, of Vestra SPVl LLC, Vestra SPV2 LLC, the holding companies which own the Facilities(the"SPY Entities"). I am also TMG's sole shareholder, which shares 100% overlapping ownership and control with the Facilities and the SPY Entities. 'The Facilities are Autumn View Health Care Facility, LLC, Brookhaven Health Care Facility, LLC, Garden Gate Health Care Facility, LLC, Harris Hill Nursing Facility, LLC, North Gate Health Care Facility, LLC and Seneca Health Care Center, LLC. 1 1 of 4 FILED: ERIE COUNTY CLERK 12/22/2023 01:26 PM INDEX NO. 801061/2023 NYSCEF DOC. NO. 20 RECEIVED NYSCEF: 12/22/2023 5. TMG is 100% both operationally and financially interdependent with the Facilities, all of which HSE is currently representing in active litigation. 6. HSE currently represents the Facilities in multiple pending litigations in New York State courts(the "Other Litigations").^ The engagement letters that the Facilities signed with HSE did not include waivers related to the claims in this action, and none of them explicitly waive TMG's objections to being sued directly by HSE.(See engagement letters attached as Exhibit D) To the extent any of the engagement letters address waiver of conflicts of interest, they only contemplate the "unlikely" event of a future conflict and offer, as an example, a transactional matter between two or more ofthe parties involved in the Other Litigations. 7. As the manager of the Facilities and the sole shareholder of TMG,I am a leading member ofthe plaintiffs/petitioners in the Other Litigations and have regular communications with attorneys at HSE and other plaintiffs/petitioners in the Other Litigations.^ 8. TMG - of which I am the sole shareholder - is a shared services company whose sole purpose is to provide administrative and consulting services to the various McGuire-affiliated facilities, many of which are HSE's clients.(See the organizational chart attached as Exhibit E, and, for example, the attached agreement between TMG and HSE's client, Seneca Health Care Center, attached as Exhibit F). The representation of the McGuire-affiliated facilities goes back to at least 2004. 9. The Facilities rely entirely on TMG for all oftheir business-related needs. 10. As a prime example of this, I will note that twelve of the fourteen engagement letters I attached here as Ex. D,are addressed to "Dan Cronmiller, Vice President ofFinance, The ^ Matters in which HSE currently represents the Facilities include, inter alia.In re Autumn View Health Care Facility, CV-22-22%!',In re Woodside Manor Nursing Home, Inc., 901450/21 and App. Div. Case No. 534801. ^ All communication with respect to Facility litigation has been through myself(recently) and employees of TMG (historically), and a search ofemails showed none between facility employees and HSE. 2 2 of 4 FILED: ERIE COUNTY CLERK 12/22/2023 01:26 PM INDEX NO. 801061/2023 NYSCEF DOC. NO. 20 RECEIVED NYSCEF: 12/22/2023 McGuire Group,Inc." The thirteenth engagement letter is also addressed to Mr. Cronmiller at one of the Facilities. Mr. Cronmiller was previously TMG's Vice President of Finance. And the fourteenth engagement letter is addressed to "Michael Masur, Controller." Mr. Masur currently leads TMG's finance department. 11. TMG provides services to the Facilities, all of which are HSE's clients, including accounting, audit, cash management, employee benefits, finance, human resources, information technology, insurance, and payroll. This corporate structure is commonly used in the New York skilled nursing facility industry. 12. TMG also provides centralized billing services, accounts receivable, accounts payable, and clinical consulting for each of the Facilities. Additionally, all cash for the Facilities is held in a concentration account titled in the name ofTMG. 13. TMG also provides in-house legal services for the Facilities as well as managing the Facilities outside legal counsel. 14. In this action, the claims and counterclaims between the parties concern Mr. McGuire's performance as TMG's CEO with specific contractual responsibility for the oversight and affairs of the Facilities, of which he was also the manager. TMG's employees and officers will be providing documentary and testimonial evidence regarding the claims ^d counterclmms in this action and HSE would be deposing employees and officers of its own clients' corporate affiliate. 15. Further, in light of the operational and financial interdependence among these entities, any judgment against one would impact the others. For example, the SPY Entities and each of their respective subsidiary facilities are co-borrowers on a 2020 loan and TMG is a guarantor. 3 of 4 FILED: ERIE COUNTY CLERK 12/22/2023 01:26 PM INDEX NO. 801061/2023 NYSCEF DOC. NO. 20 RECEIVED NYSCEF: 12/22/2023 16. Even assuming this conflict could be waived, which TMG disputes, I did not consent, nor will I, to a waiver ofthis conflict. 17. Finally, regardless ofthe outcome ofthis application, it is Defendant's intention to move to add the Facilities as additional counterclaim-plaintiffs in this action. Plaintiff owed fiduciary duties to the individual Facilities as well as to Defendant, and his breaches of fiduciary duty against Defendant as set forth in Defendant's counterclaims also damaged the individual Facilities. 18. For these reasons, the Court should grant the motion to disqualify HSE from representing Plaintiff. EDWARD FARBENBLUM Sworn to before me on theo^^day ofDecember,2023 Notary Public DEANNA KRUEGER Notary Public - State of New York NO.01KR6129495 Qualified in Suffolk County My Commission Expires Jun 27, 2025 4 of 4