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Eurocom, S. A. v. Mahoney, Cohen & Co.

United States District Court for the Southern District of New York

September 30, 1981

No. 81 Civ. 116-CSH



Defendant originally moved pursuant to Rule 14(a), F.R.Civ.P., for leave to add the firm of Cleary, Gottlieb, Steen & Hamilton ("Cleary, Gottlieb"), attorneys for plaintiff, as third-party defendants. Plaintiff and Cleary, Gottlieb resisted that motion. As the arguments developed, defendant's motion became transformed, at least in the alternative, into a motion that Cleary, Gottlieb be disqualified from representing plaintiff, pursuant to Code of Professional Responsibility, Appendix to the Judiciary Law, 29 McKinney's Consol. Laws of New York (1975). For the reasons stated, that alternative motion is granted.

Plaintiff Eurocom, S. A., the successor in interest to a French corporation called Compagnie Univas, brought this suit against defendant Mahoney, Cohen & Company, an accounting firm, to recover damages allegedly sustained by Univas as the result of its investment in the common [**2]  stock of Kelly, Nason, Incorporated, a New York advertising agency. At the pertinent times, the defendant acted as certified public accountant to Kelly, Nason. Plaintiff alleges that Univas relied upon certain false and fraudulent representations made to Univas by defendant with respect to Kelly, Nason's financial condition. Causes of action are asserted under the federal securities laws, and by pendent jurisdiction, under principles of common law fraud, contract and negligence. Jurisdiction is also asserted on the basis of diversity of citizenship.

Defendant sought to implead the Cleary, Gottlieb firm because Cleary, Gottlieb represented Univas in connection with the underlying transaction. Defendant's theory is that Cleary, Gottlieb, in its capacity as legal representative of Univas, was reckless or negligent in failing to discover or advise Univas of those facts which plaintiff alleges defendant concealed from Univas, to the latter's detriment.

The motion papers debate at length the legal sufficiency of defendant's claims for indemnity or contribution against Cleary, Gottlieb. But I need not resolve those interesting questions.  Plaintiff concedes that if the Cleary, Gottlieb [**3]  firm was negligent as alleged in its performance of legal services rendered to plaintiff, such negligence would be imputable to Univas, and that, in the circumstances of this case, plaintiff's recovery may be subject to reduction under the New York comparative negligence doctrine. Thus, plaintiff argues, there is no practical necessity for defendant to implead plaintiff's attorneys. Plaintiff cites Hercules Chemical Co., Inc. v. North Star Reinsurance Corp., 72 A.D.2d 538, 421 N.Y.S.2d 67 (1st Dept. 1979), for that proposition, and the citation appears to be apt.

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522 F. Supp. 1179 *; 1981 U.S. Dist. LEXIS 16134 **

EUROCOM, S. A., Plaintiff, v. MAHONEY, COHEN & COMPANY, Defendant



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