The magistrate recommended that the attorney's motion to withdraw from further representation of the insured be granted when the insurer was liquidated and no longer paying for defense costs. U.S. v. Estate of Lillian Wiesner, 2017 U.S. Dist. LEXIS 38257 (E.D. N. Y March 15, 2017).
The United States sued the Estate of Lillian Weisner, John P. Maffei and 0.25 Acres of Land to recover damages under CERCLA. The New York State Liquidation Bureau (NYLB) retained London Fischer LLP to defend John Maffei pursuant to an insurance policy issued by The Home Insurance Company, which was insolvent.
The Estate owned the property, which included a two-story building that had housed a dry-cleaning facility for many years. Executeam Corp. executed two master leases for a 51-year period beginning in 1967. John Maffei was the president and sole shareholder of Executeam. In 1968, Executeam subleased the property to Stanton Cleaners, Inc. The sublease was later assigned to John Maffei in 1983. Thereafter, the master leases were also assigned to John Maffei in 1987.
In 2003, the EPA filed a CERCLA lien against the property and against John Maffei's leasehold interest. The Home insured the property but was declared insolvent on June 13, 2003. The NYLB became the ancillary receiver of the insurer and retained the law firm of London Fischer to represent John Maffei pursuant to the policy issued by the Home.
The parties eventually entered a Consent Judgment on August 17, 2012. The court entered the Consent Judgment, retained jurisdiction, and closed the case.
There was no further activity in the case until June 22, 2016, when the government filed a request for a pre-motion conference before moving to enforce the Consent Judgment. The government explained that the defendants had not made payment under the provisions of the Consent Judgment and were incurring significant penalties. London Fisher filed a response letter and argued that neither the Home nor the NYLB had any obligation to defend or indemnify John Maffei. Further, London Fischer was no longer authorized to represent John Maffei. London Fischer subsequently filed a motion to withdraw as attorney for Jon Maffei.
In the motion to withdraw, London Fischer argued that it had been notified that the Home was disclaiming coverage for any allegations arising from John Maffei's alleged violation of the Consent Judgment and that London Fischer was no longer authorized to represent John Maffei. The Home was the only source of funding for legal fees and non-payment of fees was a valid basis for the court to grant the motion to withdraw. In response, the government argued that the prosecution of the suit would likely be disrupted by the withdrawal of counsel since London Fischer was the firm that negotiated the terms of the Consent Judgment on behalf of John Maffei.
The court found little guidance in case law from either the Second Circuit or the state of New York, but the authority it did find favored London Fischer. Further, the Consent Judgment specifically noted that the Home was not obligated to defend or indemnify the defendants if they failed to comply with the Consent Judgment. At the time the Consent Judgment and settlement agreement were entered, the Home was in liquidation. NYLB had reviewed the policies at issue and determined that there was no coverage for the purported violations of the Consent Judgment.
In response to the government's argument that granting the motion to withdraw would delay the enforcement proceeding and therefore prejudice the government, the court noted that the case was not on the verge of trial because the the matter had concluded in 2012 with the entry of judgment. Permitting withdrawal at this juncture would not undermine the court's efforts to resolve the government's anticipated motion to enforce the Consent Judgment.
Therefore, the magistrate recommended that the motion to withdraw be granted.