I would consult with an attorney who concentrates in legal malpractice issues. Your statement has a lot of different issues that need to be addressed by someone well-versed in this area.
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Contact an attorney from your state who answers this question. Each attorney's contact information is found on their Avvo profile. This case definitely warrants further investigation.
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Well, it's certainly possible that it's not an ethics violation -- my personal view on this, with the caveat that I don't practice in NY, would be that a consulting attorney for some kinds of cases (say, e.g., a med-mal case) wouldn't create a conflict of interest in the kinds of cases outside the scope of the consulting (say, if yours was a nuisance lawsuit). The consulting attorney isn't a member of the firm that's representing you for purposes of that case.
Note that if you no longer trust your attorney to represent you . . . even if there IS no conflict, you can fire him or her at any time, and pay them the fees owed to date.
Whether or not (1) this is a conflict that would prevent your lawyer from representing you and (2) whether this conflict should have been disclosed to you (or required your informed consent to proceed) is an ethics question that, at this point, should probably be addressed. Start by talking with your current attorney first, and let him explain. If it's not resolved to your satisfaction, you can fire your attorney, hire a new one, and file an ethics complaint (in that order).
Ethics complaint information (in NY) can be found here: http://www.nysba.org/Content/NavigationMenu/PublicResources/UnhappywithaNYAttorney/Unhappy_with_a_NY_At.htm
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It is unclear why he would agree to set aside a default judgment in that amount although he may think there is no basis to oppose it. There may be an ethical violation in the arrangement you describe between the attorneys, based upon analogous cases.
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The fact that they work on matters together needed to be disclosed to you when you retained them. You needed to waive the potential conflict in writing. You now need to seek the advice of another lawyer who is not similarly situated.Ask a similar question