Maiden Lane Hospitality Group LLC v. Beck, 1:18-cv-07476

MLHG managed portions of 180 Maiden Lane; David Beck was a Manager and later sole Manager per MLHG's Operating Agreement.
In March 2017 Beck (on behalf of MLHG) allegedly induced Potentis to invest via an Acquisition Agreement; plaintiffs allege Beck hid financial information, diverted MLHG funds, and committed fraud, harming both MLHG and Potentis.
Defendants (Beck, By David, Opal) answered and counterclaimed seeking indemnification, commissions, and rescission; they later moved to disqualify plaintiffs' counsel (who represent both MLHG and Potentis) and to require MLHG to advance Beck's attorneys’ fees under the Operating Agreement.
Plaintiffs argue both MLHG and Potentis blame Beck personally for the alleged fraud and thus have aligned interests; Potentis also agreed not to pursue MLHG if MLHG were found liable for Beck’s conduct.
The Operating Agreement contains an indemnification and advancement clause (§5.8) but also a separate intramural-dispute/arbitration provision (§11.15).
The Court denied defendants’ motion to disqualify counsel and denied Beck’s demand for advancement of attorneys’ fees.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether counsel for MLHG and Potentis must be disqualified for concurrent representation	MLHG and Potentis share aligned interests in proving Beck’s personal fraud; any contrary theory is a defense, not a conflict; clients knowingly consent	Counsel is conflicted because MLHG may be held vicariously liable for Beck, creating an unwaivable adverse interest that makes concurrent representation prima facie improper	Denied — no actual/apparent conflict shown; parties’ interests are largely aligned and any intra-plaintiff conflict is hypothetical or waivable
Whether Operating Agreement requires MLHG to advance Beck’s attorneys’ fees in this intra-party suit	Advancement clause applies broadly, and Beck provided required undertaking	Advancement/indemnification does not clearly apply to litigation between contracting parties; §11.15 shows intramural disputes are handled separately (arbitration)	Denied — New York law requires unmistakably clear contract language to advance fees in suits among parties; §5.8 is not so clear and §11.15 indicates intramural disputes were treated differently

Hempstead Video, Inc. v. Incorporated Village of Valley Stream, 409 F.3d 127 (2d Cir.) (concurrent representation and risk of using client confidences can require disqualification)
Cinema 5, Ltd. v. Cinerama, Inc., 528 F.2d 1384 (2d Cir. 1976) (concurrent representation of directly adverse interests is prima facie improper)
Murray v. Metropolitan Life Insurance Co., 583 F.3d 173 (2d Cir. 2009) (motions to disqualify receive strict scrutiny to guard against tactical use)
Como v. Commerce Oil Co., 607 F. Supp. 335 (S.D.N.Y. 1985) (defenses that attribute wrongdoing to a plaintiff do not automatically warrant disqualification of counsel)
Hooper Associates, Ltd. v. AGS Computers, Inc., 74 N.Y.2d 487 (N.Y. 1989) (New York requires unmistakably clear language to waive the ordinary rule that each party bears its own attorney’s fees; applies to indemnification/advancement clauses)
Sequa Corp. v. Gelmin, 851 F. Supp. 106 (S.D.N.Y. 1994) (indemnification language must unequivocally refer to intra-party claims to compel indemnity/advancement for disputes among parties)
Bourne Co. v. MPL Communications, Inc., 751 F. Supp. 55 (S.D.N.Y. 1990) (similar rule: ambiguous indemnity language does not clearly cover claims between contracting parties)