583 F.Supp.3d 381
E.D.N.Y2022Background:
- Escon Construction Group PLC (a U.K. entity) sued Fastenal Company in E.D.N.Y., alleging a $2,540,891 sale of plumbing valves and that Escon paid a roughly $1.2M deposit which Fastenal failed to deliver or return.
- Attorney Richard Pu filed the complaint (Aug. 2, 2021) and, after receiving emails from Fastenal’s general counsel alleging the contract and claim were part of a fraud/scam, moved to withdraw as counsel. Fastenal never entered an appearance.
- Fastenal’s GC provided emails describing a “check kiting” / attorney-targeting scam and produced a near-identical contract Fastenal had with a different entity (Atlas) for the same price and terms, supporting the fraud allegation.
- The magistrate judge scheduled and held a hearing; Escon’s purported representative (Hipler) did not appear and stopped communicating with counsel.
- The court found counsel’s reasons to withdraw satisfied New York Rule of Professional Conduct 1.16 (withdrawal required/permitted where lawyer reasonably believes client’s matter is fraudulent), granted Pu’s motion, and sua sponte recommended dismissal under Fed. R. Civ. P. 41(b) for failure to prosecute.
- The R&R gave parties 14 days to object to the recommendation.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether counsel may withdraw under ethics rules | Pu: must withdraw because he reasonably believes the representation involves fraud | Fastenal (via GC): presented emails and duplicate contract evidence showing the suit is a scam | Withdrawal granted under N.Y. Rule 1.16 (permissive/mandatory bases satisfied) |
| Whether the complaint appears fraudulent | Escon: asserts existence of a legitimate contract and deposit | Fastenal: GC supplied emails explaining the scam and showed an identical contract with another entity | Court found strong indicia of fraud supporting withdrawal and skepticism about plaintiff’s legitimacy |
| Whether the case should be dismissed for failure to prosecute (Rule 41(b)) | Escon: did not appear at hearing and failed to retain counsel as ordered | Fastenal: did not appear in the action; otherwise relied on evidence of fraud | Court recommended dismissal for failure to prosecute based on lack of compliance with orders, notice of consequences, inability to advance the case, and likely futility given apparent fraud |
Key Cases Cited
- Whiting v. Lacara, 187 F.3d 317 (2d Cir. 1999) (district court discretion on counsel-withdrawal motions)
- Baptiste v. Sommers, 768 F.3d 212 (2d Cir. 2014) (five-factor framework for Rule 41(b) dismissal)
- LeSane v. Hall’s Sec. Analyst, Inc., 239 F.3d 206 (2d Cir. 2001) (affirming dismissal for failure to prosecute)
- Thomas v. Arn, 474 U.S. 140 (U.S. 1985) (failure to file timely objections to a magistrate judge’s report and recommendation precludes appellate review)
- Wagner & Wagner, LLP v. Atkinson, Haskins, Nellis, Brittingham, Gladd & Carwile, P.C., 596 F.3d 84 (2d Cir. 2010) (same principle re: objections and appellate review)
- Farmer v. Hyde Your Eyes Optical, Inc., 60 F. Supp. 3d 441 (S.D.N.Y. 2014) (withdrawal justified where client conduct makes representation unreasonably difficult)