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Ultrapak, LLC v. Laninver USA, Inc.

United States District Court for the Western District of New York

January 17, 2019, Decided; January 17, 2019, Filed

18-CV-561V

Opinion

Decision and Order and Report and Recommendation

I. INTRODUCTION

Plaintiff Ultrapak LLC is a corporate entity that was created in 2015 and that formed its governing agreement on January 13, 2016. Defendant Laninver USA, Inc. owns 51 percent of Ultrapak. Plaintiff Khalid Khan owns the other 49 percent. Ultrapak has a Board of Directors comprising three people: Khan; defendant Enric Holzbacher, who is Laninver's CEO; and defendant Alain Zijlstra, who is the CEO of Laninver's parent company. Ultrapak corporate counsel Jason Schmidt has been the corporate counsel since Khan was the sole owner of Ultrapak's predecessor entity. From his history with Ultrapak, Schmidt almost certainly was involved in some way in whatever conversations and negotiations led to the creation [*2]  of the January 13, 2016 governing agreement.

Schmidt also is the sole counsel for plaintiffs here and the attorney who drafted the complaint (Dkt. No. 1) and put this case in suit. In light of the preceding paragraph, Schmidt's role as prosecuting attorney poses a problem. Schmidt put this case in suit because Ultrapak and Laninver are in the middle of a contract dispute. As the current complaint is structured, this case has split Ultrapak at two levels: A company is suing its majority owner; and one Director of that same company is suing the other two Directors. At the center of these two splits is the company's own corporate counsel, Schmidt. Defendants see a conflict of interest and have filed a non-dispositive1 motion (Dkt. No. 9) to disqualify Schmidt from representing plaintiffs in the litigation. The parties have traded arguments as to whether a conflict exists, including arguments as to whether Schmidt needed authority from the Board of Directors to litigate on behalf of Ultrapak.

District Judge Lawrence J. Vilardo has referred this case to this Court under 28 U.S.C. § 636(b). (Dkt. No. 11.) The Court has deemed the pending motions submitted on papers under Rule 78(b) of the Federal Rules of Civil Procedure. For the reasons below, the Court grants [*3]  the motion.

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2019 U.S. Dist. LEXIS 8596 *; 2019 WL 244492

Ultrapak, LLC and Khalid M. Khan, Plaintiffs, v. Laninver USA, Inc., Enric Holzbacher, and Alain Zijlstra, Defendants.

Subsequent History: Magistrate's recommendation at Khan v. Laninver United States, 2020 U.S. Dist. LEXIS 3759 (W.D.N.Y., Jan. 9, 2020)

CORE TERMS

corporate counsel, disqualification, customer, entity, plaintiffs', disqualify, motion to dismiss, packaging, shareholder, disqualification motion, ownership interest, pending motion, Recommendation, Defendants', allegations, appearance, percent, reasons, merger, shrink, sleeve