NEW YORK, Jan 19 (Reuters) - In a case of deja vu, a Long Island law firm has lost a fight to undo a deal to buy out a partner who was suspended from practice for violating ethics rules.

In a decision written by Nassau County Supreme Court Justice Ira Warshawsky, who retired last month, the court found that three partners at Glinkenhouse Floumanhaft & Queen could not rescind a contract with former partner Stephen Silver, even though Silver was suspended one day after the deal was struck. Silver was disciplined for co-mingling client funds, maintaining faulty retainer agreements and improperly loaning money to a client.

The plaintiffs are Alan Glinkenhouse, Philip Floumanhaft and Alan Queen.

Glickenhouse and Floumanhaft in 2006 tried to undo a similar deal they had struck with a different attorney, Selwyn Karp, after he, too, was suspended from practice. Karp pleaded guilty to second-degree bribery a month after he sold his portion of the partnership, and was suspended from practice two years later. A trial court ruled that Karp was entitled to compensation for his contributions to the firm prior to suspension or disbarment.

In the latest case, Silver, a former name partner at Glinkenhouse, Floumanhaft & Queen, sold his portion of the firm for $750,000 on June 6, 2001, according to Warshawsky's Jan. 5 decision. When he sold his stake, Silver had not been suspended, although the Appellate Division, Second Department, already had ordered the sanction against him, which became effective on June 7, 2001. Five years later, after the firm had paid Silver $375,000, the partners tried to invalidate the agreement, claiming that they did not realize until then that the deal violated public policy.

'FULLY AWARE'

The plaintiffs tried to distinguish the case against Silver from the action against Karp by arguing that Silver was closer to the "brink" of suspension when he struck the deal.

While Warshawsky wrote in his decision that "the law firm plaintiff has been doubly snake bit," he nonetheless held that the pact could not be rescinded.

"Plaintiffs have failed to establish any of the traditional bases for the rescission of a contract," he wrote. "The parties were all fully aware of the circumstances, and there is no contention that Silver in any way fraudulently induced plaintiffs to enter the contract."

The judge ordered the attorneys to pay Silver the balance of the contract.

Attorneys at Glinkenhouse, Floumanhaft & Queen were not available for comment. The law firm identified by a court official as representing the attorneys did not return a call seeking comment.

Neither Silver nor Karp could be reached for comment. Representing Silver, according to court records, was V. Elizabeth Grayson, who did not return a phone call seeking comment.

The case is Glinkenhouse v. Silver, No. 015268/2006, Nassau County Supreme Court.

For the plaintiffs: Moss & Kalish, New York.

For the defendant: V. Elizabeth Grayson, New York.

(Reporting by Leigh Jones)

Follow us on Twitter: @ReutersLegal