The attorney and the sex club

A gay S&M sex club, closed down in November by New York City health authorities for allegedly constituting a criminal nuisance, operated for seven years out of a small Lower East Side building co-owned by a Milberg Weiss attorney, who also lived on the premises.

The attorney, Paul D. Young, 48, was a partner at Milberg Weiss until late January or early February 2005, when his status at the firm changed to “of counsel,” which is what it remains today. Neither he nor the firm would comment on why his status changed — or, indeed, on any other aspect of this article. (“Of counsel” is a grab-bag term with many meanings; sometimes it refers to partners who are retired or semi-retired, or phasing out their practices.)

Young, a Fulbright scholar who graduated from Yale college and Columbia Law School, handles shareholder and consumer class actions for the firm. He has been involved in cases against such defendants as Tyco International (TYC), Bear Stearns (BSC), electronics manufacturer Flextronics (FLEX), and uranium supplier USEC Inc. (USU).

(Milberg Weiss and two of its name partners were indicted in May 2006 on unrelated federal charges of secretly paying plaintiffs in at least 180 cases and lying about that fact to courts. See prior posts here and here, for instance, and a Fortune feature story by editor at large Peter Elkind here. The firm and one indicted partner, Steven Schulman, have pleaded not guilty, while the other indicted partner, David Bershad, pled guilty earlier this month.)

In 1998, Young and another man, Peter H. Hochschild, 50, bought a small, three-story tenement at 253 East Houston Street. Both men live on the premises, according to voter registration records. (Reached by cell phone, Young hung up after I identified myself and said that I was calling about the sex club, called El Mirage. He has not responded to voice messages left at his home and office numbers. Through a spokesperson, the Milberg Weiss firm also declined to comment on any aspect of this article.)

In 1999, Young and Hochschild leased out the basement and first floor to a newly formed tenant called the El Mirage, which held itself out to be a male nudist club. According to health authorities, it was a place where men went to have anonymous sex with one other. A club membership cost $40, each admission cost $22, and the fee for the mandatory clothes-check was $3, according to the affidavit of an undercover health inspector that was later filed in court.

Since 1985 the New York State and City health laws have forbidden commercial establishments from making “facilities available for the purpose of sexual activities where anal intercourse . . . or fellatio take place.” In the context of the AIDS epidemic, the state’s Public Health Council had determined these to be high-risk activities posing a “threat to the public health.” (In 1994 “vaginal sex” was added to the list of “high-risk” activities.)

That the El Mirage was a sex club was a fairly open secret, and blog entries and online gay tourism guides have been describing it as such since at least 2001. Several pornographic gay S&M movies have been promoted as having been filmed there. Culture critic Michael Musto of the Village Voice reviewed the El Mirage as a “sex club” in December 2005. See here. Musto wrote that upon paying his fees he was handed a “frequent f—er’s card” that would entitle him to one free admission after 18 visits. (Musto reviewed the club poorly, complaining that “every single guy there seems to be a five.”)

In March 2006 the New York City Department of Health and Mental Hygiene sent an undercover inspector into the club, who later described it in an affidavit as having been equipped with such features as a “tree-house,” two “swings” (I think they are more often called “slings”) and “an enclosed corner dungeon room.” He observed multiple acts of anal sex and fellatio occurring there, as he did on each of about 15 subsequent inspections throughout March, April, and May. The patrons also often used “inhalants (poppers)” while having sex, he noted.

In early June 2006, the department sent warnings to Young, Hochschild, the club, and its manager warning them of what they had observed, advising them these such activities violated state and city laws, and demanding abatement of the nuisance. The El Mirage’s attorney responded to the department on June 20, stating that his client would address the situation. (There is no record in the court file of any response to the warning specifically from Young or Hochschild, who were both later represented by Young.)

The inspector then resumed his undercover visits. Throughout June, July, August, September, and October, he continued to observe fellatio and anal sex occurring there “at an alarming rate,” according to his affidavit. In all, after about 30 visits (for the sake of the City’s taxpayers, one hopes he used his “frequent f—er’s card”) he reported observing 228 acts of anal sex or fellatio involving 232 people. I suspect that “228” was a typo and that “128” is what he meant to write, but it obviously doesn’t really matter. At least as much sex was occurring at the club after the warning as before it.

On November 3, 2006, the City and the health department sued Young, Hochschild, the premises, the El Mirage, and the El Mirage’s manager in state supreme court in Manhattan. The city sought to close down the club. The complaint accused all defendants of maintaining a criminal nuisance under Penal Law 240.45 (a misdemeanor) and threatening the public health.

The health laws in question make no distinction between unprotected sex and protected sex, but in his affidavit the undercover inspector stated that virtually all acts of fellatio were unprotected (i.e., without condoms), while about 20% of the anal sex acts were unprotected. After the club was shut down in November, its attorney, Paul O’Dwyer, argued to a gay newspaper, see here, that this data actually reflected well on the club, since he regarded unprotected anal sex as the only truly high-risk activity, and 80% of the anal sex going on at the club was protected.

On November 15 the court granted a temporary restraining order shutting down the club until a hearing could be held. Two weeks later, the day before the hearing was to take place, the parties settled, with the defendants agreeing to essentially all of the city’s requested relief ­- expelling the tenant, shutting down the commercial space for a year, and requiring Young and Hochschild to obtain the City’s approval of any new tenant before reopening.

New York’s professional conduct rules forbid attorneys from engaging in “illegal conduct that adversely reflects on the lawyer’s honesty, trustworthiness or fitness as a lawyer” or, even more open-endedly, “any other conduct that adversely reflects on the lawyer’s fitness as a lawyer.”

“This conduct could fall within either rule,” says Stephen Gillers, a law professor and professional responsibility expert at New York University, “but I think that is only likely based on the conduct of continuing the activity following notice of its illegality” — i.e., after the City sent out its letter of warning in June 2006.

As for the firm’s responsibilities upon learning of the situation — if it ever did learn of the situation — Gillers says it would mainly face a practical business decision: weighing the need to protect itself “against adverse publicity” against that attorney’s value to the firm. He continues: “A firm is not required to police a lawyer’s private life. This is not a client-related activity. . . . I don’t think this conduct, even if conscious, would trigger a reporting duty” — referring to the obligation that an attorney sometimes has to, basically, rat out a fellow attorney to the bar disciplinary authorities if the latter’s ethical violations are serious enough.

The closest analogy to this situation that I could find from a quick look at the case law was a situation that the New Jersey Supreme Court considered in 1987. There an attorney had co-owned a strip club in New York where, once a year, on Mardi Gras night, performers would interact sexually with patrons in exchange for tips. The court approved a two-year suspension of the attorney’s license.

So, readers, I think the case tees up at least three issues ripe for comment, though you may see others:

1. Do the health department’s accusations against Young have any bearing on an attorney’s fitness to practice?

2. Does Milberg Weiss, once it finds out about the situation, have any obligation to act in any way?

3. Should I have written this story at all?

Subscribe to Well Adjusted, our newsletter full of simple strategies to work smarter and live better, from the Fortune Well team. Sign up today.