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SPV-LS LLC v. Transamerica Life Insurance Co.

United States District Court, D. South Dakota

September 23, 2016

SPV-LS, LLC, Plaintiff,
v.
TRANSAMERICA LIFE INSURANCE COMPANY, Defendant and Third-Party Plaintiff,
v.
NACHMAN BERGMAN, as Trustee of The N Bergman Insurance Trust dated December 18, 2006; MALKA SILBERMAN, as Successor Trustee of The N Bergman Insurance Trust dated December 18, 2006; LIFE TRADING TRUST, dated August 8, 2007; T-LEG, LLC, a/k/a TLEG LLC; FINANCIAL LIFE ERVICES, LLC;SPVII LLC; and THE REPRESENTATIVE OF THEESTATE OF NANCY BERGMAN, Third-Party Defendants.

          ORDER

          Lawrence L. Piersol United States District Judge.

         This case involves who gets the $10 million that Transamerica Life Insurance Company deposited with the Court because in view of conflicting claims it did not know who to pay those proceeds to following the death of the insured, Nancy Bergman. At issue are the Motions of the current counsel for Malka Silberman, the Successor Trustee of The N Bergman Insurance Trust, to withdraw as counsel of record. This is the third set of lawyers that have asked to withdraw from representing this Third-Party Defendant.

         The first counsel, the firm of Johnson, Janklow, Abdallah, Bollweg & Parsons LLP, in Sioux Falls, South Dakota, appeared of record on September 25, 2014, and were allowed to withdraw by the Court's Order of October 20, 2015. The primary reason given for the withdrawal was because of conflicts of interest that arose in the joint representation of the former and the successor trustees of The N Bergman Insurance Trust, that being Nachman Bergman and Malka Silberman, respectively.

         Next, on November 19, 2015, Attorney Matthew Dorothy, of Dorothy & Krause Law Firm, PC, in Sioux Falls, South Dakota, made his appearance, and on February 12, 2016, made a Motion to Withdraw, and on April 8, 2016, was allowed to withdraw from representing Malka Silberman, as Successor Trustee of The N Bergman Insurance Trust. Although another lawyer from New York, Andrew Citron, was communicating with Mr. Dorothy, Mr. Citron never made an appearance in this Court and no request was made to admit Mr. Citron pro hac vice. The reason given for the request for authorization to withdraw was that the client relationship had deteriorated to the point where it was threatening the adequacy of representation to the client.

         Next, Attorney James Moore of Woods, Fuller, Shultz & Smith in Sioux Falls, South Dakota, and Aaron Twersky of Twersky PLLC, in New York, New York, made their appearances on April 8, 2016, with Sheila Sadovnik of the Twersky firm, making her appearance pro hac vice on June 6, 2016. Those lawyers now request that they be allowed to withdraw as counsel for Malka Silberman, as Successor Trustee of The N Bergman Insurance Trust. Their withdrawal has been resisted by the Plaintiff SPV-LS, LLC, primarily on the basis that their withdrawal would prejudice SPV by impeding the progress of the case and would delay the discovery still to be had from Malka Silberman, as Successor Trustee. The request reflects that Attorney Moore and his firm have not been paid for their services and that although the Twersky firm has been paid $95, 00000 to date for legal work, their unpaid billings exceed $200, 000.00. The Court notes that there have been numerous collateral proceedings to this case in federal district court in the Eastern and Southern Districts of New York and with one such proceedings now in the Central District of California. The New York proceedings have been brought by Plaintiff SPV. The Twersky firm as a small firm of three lawyers cannot sustain the level of work necessary in this case without payment and it is averred that their continued involvement without pay may result in the closing of the firm.

         DISCUSSION

         Under Local Rule of Civil Practice 83.7 C. withdrawal without substitution may be granted only upon a showing of good cause. When determining whether good cause exists for an attorney to withdraw, the Court applies the State's professional ethics rules where the Federal Court is located. Native American Council of Tribes v. Weber, No. 09-4182, 2011 WL 2898081. The South Dakota Rules of Professional Conduct provide the lawyer may withdraw from representing his client if:

(1) Withdrawal can be accomplished without material adverse effect on the interests of the client;
(2) The client persists in a course of action involving the lawyer's services that the lawyer reasonably believes is criminal or fraudulent;
(3) The client has used the lawyer's services to perpetrate a crime or fraud;
(4) The client insists upon taking action that the lawyer considers repugnant or with which the lawyer has a fundamental disagreement;
(5) The client fails substantially to fulfill an obligation to the lawyer regarding the lawyer's services and has been given reasonable warning that the lawyer will withdraw unless the obligation is fulfilled;
(6) The representation will result in an unreasonable financial burden on the lawyer or has been rendered ...

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