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Under these circumstances, Mandel should be disqualified to eliminate any appearance of

impropriety.

THE ARBITRATIONSHOULDBE STAYED PENDING A RULING ON DISQUALIFICATION

69.

To protect Petitioners from any prejudice and avoid any further taint to the

proceedings, the Arbitration should be immediately stayed pursuant to CPLR 2201

pending the Court's ruling on disqualification: Discovery is now beginning in the

Arbitration and it cannot proceed while Respondents continue to be represented by K&K

(EI

and Mandel. Given the amounf of damages Respondents seek in the Arbitration -- in

excess of $285 million -- the potential prejudiceto Petitioners is substantial.

70.

Any possible prejudice to Respondents resulting from a stay would be dc

discovery IS lust beginning. The hearing i s scheduled to begin on February 72,

i

more than ten months from now.

71.

Moreover, Respondents can hardly complain about any delay that might

be occasioned by a stay as it was Respondents themselves who stayed the proceedings for

a year while deciding whether to pursue the claims against Petitioners a f h Lehman's

filing in bankruptcy court.

DISCOVERY

72.

Based on the foregoing, Petitioners have demonstrated why K&K's and

Mandel's disqualification is required. However, should the Court believe there are any

issues of fact that need to be further developed, Petitioners respectfully request leave to

conduct discovery pursuant to CPLR 408 as to those issues.

17

Supreme Court Records OnLine Library - page 20 of 22

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