Title: Carlson v. Langdon

State: wyoming

Issuer: Wyoming Supreme Court

Document:

Carlson v. Langdon1988 WY 20751 P.2d 344Case Number: 87-133Decided: 02/26/1988Supreme Court of Wyoming
CARL O. CARLSON, JR., 
PETITIONER,

v.

HONORABLE JOHN LANGDON, 
JUDGE OF THE DISTRICT COURT OF THE EIGHTH JUDICIAL DISTRICT, 
RESPONDENT.

Paul B. Godfrey, 
Godfrey, Sundahl & Jorgenson, Cheyenne, for petitioner.

Michael E. 
Warren, Sawyer, Warren & Kautz, Torrington, for respondent.

Before BROWN, C.J., and THOMAS, CARDINE, URBIGKIT 
and MACY, JJ.

ORDER REVERSING 
RULING WHICH DENIED DISQUALIFICATION OF ATTORNEY AND ORDER DISQUALIFYING 
ATTORNEY

[¶1.]     This case came on 
before the court upon the Petition for a Writ of Prohibition or in the 
Alternative for Writ of Certiorari or Other Relief filed in this court on May 
26, 1987; the order which this court entered on June 10, 1987, directing the 
preparation and certification of a record for review pursuant to the power of 
this court to grant certiorari and staying further proceedings in the district 
court; the Response Brief to Petition for a Writ of Certiorari, filed herein on 
July 24, 1987 on behalf of the Respondent; the Reply Brief of Petitioner, Carl 
O. Carlson, Jr., filed in this court on July 31, 1987; and the oral arguments on 
behalf of the parties heard on August 27, 1987, and the court, having considered 
the file and record of the court, the several pleadings described above and the 
arguments of the parties, finds that:

[¶2.]     The court granted the 
writ of certiorari to consider whether the District Court of the Eighth Judicial 
District erred in denying a motion to disqualify an attorney from representing a 
defendant in a pending case. The pending case concerned a lease by the 
petitioner, Carl O. Carlson, Jr., of certain farm lands owned by his mother, 
Leva Carlson. Carl Carlson had leased, resided upon and conducted farming and 
ranching operations on the land since, at least, the death of his father in 
1971. In 1973, Carl Carlson determined that it was necessary to make certain 
improvements on the land to make the farming operations profitable. Leva Carlson 
agreed to Carl Carlson's request for the improvements, but she was financially 
unable to provide the necessary funds. Carl Carlson agreed to furnish the funds 
for the improvements, provided that his interest was protected. The record is 
not clear as to which of the Carlsons engaged A.B. to draft the agreement for 
them. Both Carl Carlson and Leva Carlson were present when A.B. was consulted to 
draft the agreement to implement their intentions with respect to the 
improvements. Carl Carlson had used the services of A.B. on several occasions 
prior to the drafting of the 1973 agreement, and, apparently, Leva Carlson also 
had consulted A.B. on several occasions. Carl Carlson testified that, when the 
1973 agreement was drafted, he considered A.B. to be the attorney for both Leva 
Carlson and himself. Because of this, they mutually sought A.B.'s assistance for 
the purpose of formalizing their agreement. A.B. represented Carl Carlson on 
several occasions following the preparation of the 1973 agreement, including 
matters relating to the land leased from Leva Carlson.

[¶3.]     Leva Carlson had an 
unsecured note at the Citizens National Bank & Trust Co. (Citizens). On 
January 4, 1985, Citizens wrote a letter to Leva Carlson advising her that it 
had reviewed the loan and other documents, including her agreement to sell the 
land to Carl Carlson. Citizens noted a poor record of repayment and the 
unsecured position that it held, and it advised Leva Carlson to pursue one of 
three alternative courses of action prior to the due date of the note which was 
March 11, 1985. One of those courses of action was that Leva Carlson sell the 
farm to pay Citizens. This was the course of action chosen by Leva Carlson. To 
accomplish the sale, she consulted a second attorney, C.D., who advised Carl 
Carlson that Leva Carlson intended to terminate the lease and that the 
provisions of the 1973 agreement would be invoked.

[¶4.]     Upon being contacted by 
C.D., Carl Carlson again consulted A.B. about the legal effect of the 1973 
agreement, and whether it permitted Leva Carlson to terminate the lease. A.B. 
advised Carl Carlson:

"It appears that your 
mother's position is correct that if the lease terminates then the option 
provided in Paragraph 3 on the death of your mother is cancelled. I suppose it 
could be argued that you have not ceased to rent the above-described property on 
your own volition, but I am not certain that would carry any weight in the court 
or is what was intended. "I don't have a copy of any lease agreement, so before 
I write to * * * [C.D.], I would ask that you drop by a copy of the lease so I 
can read it since it becomes important in evaluating the commencement or 
termination of certain rights under the agreement."

In a second 
letter, A.B. stated that, after reviewing the lease agreement, it was his 
opinion that the stance adopted by C.D. on behalf of Leva Carlson was correct 
and that Leva Carlson could terminate the lease.

[¶5.]     Carl Carlson then 
consulted a law firm in a different town about his rights. After reviewing the 
situation, E.F., one of the attorneys in the new firm, filed an action in which 
both Leva Carlson and Citizens were named as defendants. The complaint alleged 
that the defendants maliciously had conspired to interfere with the contractual 
relationship between Leva Carlson and Carl Carlson, and that, by their actions, 
they intentionally had inflicted emotional distress upon Carl Carlson. In 
addition, the complaint requested the court to declare that, under the terms of 
the lease, Leva Carlson could not terminate the lease, except in the event of 
her death. C.D., for Leva Carlson, answered the complaint, denying the several 
allegations and asserting counterclaims for affirmative relief. A.B., the 
attorney who prepared the 1973 agreement and furnished advice with respect to 
its legal effect to Carl Carlson, appeared and answered on behalf of 
Citizens.

[¶6.]     Concerned with a 
possible conflict of interest because of A.B.'s representation of Citizens, 
E.F., on behalf of Carl Carlson, requested A.B. to withdraw from the case. A.B. 
refused, advising that he did not perceive a conflict of interest to be present, 
unless he were called as a witness in the case, in which event he would 
withdraw. He further advised that, according to his records, the preparation of 
the 1973 agreement was accomplished for Leva Carlson only and that he had 
obtained her consent to represent Citizens in the case. Following this advice, 
Carl Carlson filed a motion in the district court requesting A.B.'s 
disqualification. The court set the motion for hearing, and Carl Carlson 
testified about his relationship with A.B. In the course of the hearing, the 
district court stated that it considered the matter of payment for A.B.'s 
services "of utmost importance." Carl Carlson contended that he, in fact, had 
paid for A.B's services in drafting the 1973 agreement, but the corroborating 
evidence he presented was a check to Leva Carlson which he testified was, in 
part, to pay for A.B.'s services in the drafting of that agreement. Carl Carlson 
could not produce any corroborating evidence to establish that he paid A.B. for 
advice in the two letters relating to his rights under the 1973 lease 
agreement.

[¶7.]     The district court 
denied the motion for disqualification. Four grounds were articulated for that 
denial: first, the court advised that it was reluctant to involve itself in 
disputes among attorneys; second, the court stated that there was doubt that 
A.B. had represented Carl Carlson formerly because of the absence of evidence of 
payment for services in connection with the 1973 agreement; third, the court 
articulated doubt that any confidential information was disclosed with respect 
to the preparation of the 1973 agreement, assuming arguendo that an 
attorney-client relationship did exist; and fourth, the district court stated 
that it would apply the parol evidence rule with respect to the agreements which 
made it likely that A.B. would not be permitted to testify in the case. The 
court did say that if A.B. were called to testify it would entertain a 
disqualification motion at the trial. Carl Carlson then sought relief in this 
court pursuant to a petition for a writ of prohibition or in the alternative a 
writ of certiorari.

[¶8.]     This court concluded 
that it was appropriate to review the question presented pursuant to the 
petition for writ of certiorari. A.B.'s representation of Citizens in the action 
pending in the district court is contrary to Rule 1.9 of the Rules for 
Professional Conduct for Attorneys at Law, and the district court erred in not 
granting the motion to disqualify A.B.A.B. should be disqualified from 
representation of Citizens in the pending action. Our conclusion that 
disqualification of A.B. is required by this rule makes it unnecessary to 
address other arguments asserted on behalf of Carl Carlson to support his claim 
of error.

[¶9.]     Rule 1.9 of the Wyoming 
Rules for Professional Conduct for Attorneys at Law 
provides:

"A lawyer who has 
formally represented a client in a matter shall not 
thereafter:

"(a) represent another 
person in the same or a substantially related matter in which that person's 
interests are materially adverse to the interests of the former client unless 
the former client consents after consultation except that when the former client 
is a governmental entity, consent is not permitted; or

"(b) use information 
relating to the representation to the disadvantage of the former client except 
as Rule 1.6 would permit with respect to a client or when the information has 
become generally known."

A.B. contends 
that there is no violation of Rule 1.9, W.R.P.C., because the record does not 
support formal representation of Carl Carlson by A.B. Reliance is placed upon 
the absence of evidence to refute A.B.'s records demonstrating that Carl Carlson 
did not pay for the services in connection with the preparation of the 1973 
agreement or for any advice which was furnished pertaining to that agreement. 
Payment may be an important consideration, but it is not essential to the 
existence of an attorney-client relationship, especially for purposes of 
applying Rule 1.9, W.R.P.C. This court said in Chavez v. State, Wyo., 604 P.2d 1341, 
1346, cert. denied 446 U.S. 984, 100 S. Ct. 2967, 64 L. Ed. 2d 841 
(1980):

"* * * [F]ormality is not 
an essential element of employment of an attorney. Although the attorney-client 
relationship ordinarily rests on contract, the contract need not be an express 
one. It may be implied from the conduct of the parties, such as the giving of 
advice or assistance, or such as failing to negate the relationship when the 
advice or assistance is sought if the attorney is aware of the reliance on the 
relationship. The general rules of agency apply to the establishment of the 
relationship. Whether the relationship exists depends on the facts and 
circumstances of each case."

See also Matter 
of McGlothlen, 99 Wn.2d 515, 663 P.2d 1330, 1334 (1983) ("An attorney-client 
relationship does not require the payment of a fee or formal retainer but may be 
implied from the conduct of the parties."); 7 Am.Jur.2d Attorneys at Law § 118 
at 188 (1980) (The attorney-client relationship is not dependent on a fee or 
formal contract but may be implied from the conduct of the parties.); The Bureau 
of National Affairs, Inc., Lawyer's Manual on Professional Conduct §§ 31:101 - 
31:104 (1984).

[¶10.]  The facts in this instance demonstrate 
the existence of a formal attorney-client relationship by implication. Both Carl 
Carlson and Leva Carlson consulted A.B., who was considered to be the family 
attorney, in formalizing the 1973 agreement. There is nothing to indicate that 
A.B. in any way dispelled Carl Carlson's belief that A.B. was representing both 
Carl Carlson and Leva Carlson. There is nothing to indicate that A.B. informed 
Carl Carlson that A.B. was representing Leva Carlson only and that Carl Carlson 
should seek separate counsel to protect his interest. A.B. contended otherwise 
at the hearing, but no evidence was presented to demonstrate that the advice 
given Carl Carlson in the two letters was not furnished in the relationship of 
an attorney and his client. A.B. provided an opinion as to the legal effect of 
the document and suggested that he would write to C.D., Leva Carlson's attorney, 
concerning Carl Carlson's rights under the 1973 agreement. The existence of the 
attorney-client relationship is not abrogated by the lack of evidence of payment 
for A.B.'s services.

[¶11.]  The interest served by Rule 1.9, 
W.R.P.C., is the protection of confidentiality. In that context, an 
attorney-client relationship is of particular importance, but it is 
inappropriate in applying this Rule of Professional Conduct to place emphasis on 
the existence of a formal contractual relationship. The contention that a formal 
contractual relationship is required assumes that the client will not disclose 
confidential information to an attorney, with whom he is consulting, until a 
formal contract has been prepared or until he agrees to a specified fee for the 
services. The burden of proof to show that it was unreasonable for a client to 
believe that an attorney-client relationship existed and that the information 
disclosed will be kept in confidence and not used against him later has to rest 
with the attorney. A.B. did not demonstrate any effort to dispel Carl Carlson's 
understanding, and it was reasonable for Carl Carlson to believe that the 
attorney-client relationship existed. The absence of evidence of payment for the 
services does not permit us to ignore the provisions of Rule 1.9, 
W.R.P.C.

[¶12.]  In its ruling, the trial court further 
indicated that disqualification was not required because, even if it assumed the 
existence of the attorney-client relationship, there was nothing to show that 
any confidential information had been communicated. Rule 1.9, W.R.P.C., and the 
cases out of which it evolved, do not require any showing of disclosure of 
confidential information. The correct interpretation is that the communication 
of confidential information is presumed once a showing is made that the matter 
in which an attorney formerly provided representation is substantially related 
to matters in the pending action. See 7A C.J.S. Attorney and Client § 160 at 
230-232 (1980), and cases cited therein; The Bureau of National Affairs, Inc., 
Lawyer's Manual on Professional Conduct, supra, §§ 51:204-51:206. In the seminal 
case of T.C. Theatre Corporation v. Warner Brothers Pictures, Inc., 113 F. Supp. 265, 268-269 (S.D.N.Y. 1953), Judge Weinfeld articulated the correct principle 
and its justification:

"I am not in accord with 
Mr. Cooke that Universal is required to show that during the Paramount litigation it disclosed matters to him related 
to the instant case. Rather, I hold that the former client need show no more 
than that the matters embraced within the pending suit wherein his former 
attorney appears on behalf of his adversary are substantially related to the 
matters or cause of action wherein the attorney previously represented him, the 
former client. The Court will assume that during the course of the former 
representation confidences were disclosed to the attorney bearing on the subject 
matter of the representation. I will not inquire into their nature and extent. 
Only in this manner can the lawyer's duty of absolute fidelity be enforced and 
the spirit of the rule relating to privileged communications be 
maintained."

[¶13.]  The cases are divided as to whether the 
presumption manifested in this rule is rebuttable and further whether a second 
stage (that is the communication of confidential information to other members of 
the attorney's law firm) presumption of imputed knowledge is rebuttable. The 
Bureau of National Affairs, Inc., Lawyer's Manual on Professional Conduct, 
supra, §§ 51:206-51:207. The majority rule is that the presumption of disclosure 
is not rebuttable when the interests of the previous client are adverse to a 
client whom the attorney now is representing. See Smith v. Whatcott, 757 F.2d 1098 (10th Cir. 1985), and cases cited therein. See also 7A C.J.S. Attorney and 
Client, supra, and cases cited therein. The irrebuttable presumption with 
respect to the individual attorney offers greater assurance that confidential 
information will be protected and assists in avoiding any appearance of 
impropriety. It also protects the former client from disclosing the very 
confidential information he seeks to protect in order to establish justification 
for disqualification in the later proceeding. We adopt the rule of irrebuttable 
presumption with respect to the individual attorney even though we recognize 
that disqualification of an attorney may prevent another client from obtaining 
the services of the attorney of his choice. Because of this interest of the 
later client, we choose not to carry the irrebuttable presumption any further 
than necessary, and while that is not this case, we would not adopt a 
second-stage irrebuttable presumption in cases involving imputed knowledge. See 
Smith v. Whatcott, supra; Cheng v. GAF Corporation, 631 F.2d 1052 (2d Cir. 
1980), vacated by GAF Corporation v. Cheng, 450 U.S. 903, 101 S. Ct. 1338, 67 L. Ed. 2d 327 (1981). But see In re Corrugated Container Antitrust 
Litigation, 659 F.2d 1341 (5th Cir. 1981); State of Arkansas v. Dean Food 
Products Company, Inc., 605 F.2d 380 (8th Cir. 1979), overruled on other 
grounds, In re Multi-Pierce Rim Products Liability Litigation, 612 F.2d 377 (8th 
Cir. 1980), vacated sub nom. Firestone Tire & Rubber Company v. Risjord, 449 U.S. 368, 101 S. Ct. 669, 66 L. Ed. 2d 571 (1981).

[¶14.]  It is consistent with the application of 
an irrebuttable presumption to focus the inquiry, pursuant to Rule 1.9, 
W.R.P.C., not on whether confidential information was disclosed but instead on 
whether the matters are related in some substantial way. The comment on Rule 
1.9, W.R.P.C., discloses that the true purpose of this rule is to protect 
confidential information. For this reason, the rule as couched encompasses 
merely a requirement that the matters be related in a substantial 
way.

[¶15.]  In determining the question of 
substantial relationship, two approaches have been taken by courts. Under one 
approach, the issues of the two cases are examined to determine whether there 
are common issues. See In re Corrugated Container Antitrust Litigation, supra; 
Government of India v. Cook Industries, Inc., 569 F.2d 737 (2d Cir. 1978); City 
of Cleveland v. 
Cleveland Electric Illuminating, 440 F. Supp. 193 (N.D.Ohio 1971) affirmed 573 F.2d 1310 (6th Cir. 1977), cert. denied 435 U.S. 996, 98 S. Ct. 1648, 56 L. Ed. 2d 85 (1978). This approach has been criticized because issues frequently do not 
develop until long after litigation has been instituted. General Electric 
Corporation v. Valeron Corporation, 608 F.2d 265 (6th Cir. 1979), cert. denied 
445 U.S. 930, 100 S. Ct. 1318, 63 L. Ed. 2d 763 (1980). The other approach, which 
we adopt, is to determine whether in the factual context the matters involving 
the two clients are related in some substantial way. See Smith v. Whatcott, 
supra; Kevlik v. Goldstein, 724 F.2d 844 (1st Cir. 1984); Trust Corporation of 
Montana v. 
Piper Aircraft Corporation, 701 F.2d 85 (9th Cir. 1983). If the two matters have 
common facts, the attorney is in a position to receive confidential information 
which possibly could be used to the detriment of the former client in the later 
proceeding. Trust Corporation of Montana v. Piper Aircraft Corporation, supra. 
See also Kevlik v. Goldstein, supra.

[¶16.]  The record in this case demonstrates that 
the factual context of the pending action has a substantial relationship to 
matters which were of concern in the drafting of the 1973 agreement and the 
letters addressed from A.B. to Carl Carlson with reference to that agreement. 
That prior representation and A.B.'s representation of Citizens in the pending 
action were both concerned with the existence, content and effect of the 1973 
agreement. Even though the district court stated that testimony from A.B. 
probably would not be admitted because of the parol evidence rule, the intent of 
the parties, as it was captured in the 1973 agreement, was important in the 
prior representation and is important in the pending case. Because there is a 
common factual relationship in the two matters, we must assume the disclosure of 
confidential information from Carl Carlson to A.B. That assumption makes it 
inappropriate for A.B. to represent any interest contrary to Carl Carlson in the 
present action, without first obtaining Carl Carlson's consent. It is clear, and 
no claim is made, that A.B. is not representing an adverse interest in his case, 
and no claim is made of consent by Carl Carlson. It is for these reasons that 
A.B.'s representation of Citizens in this pending case violates Rule 1.9, 
W.R.P.C., and the district court erred in not granting the motion for 
disqualification.

[¶17.]  Contrary to the intimations reflected in 
the decision of the district court in this instance, a trial court is charged 
with the responsibility of supervising the conduct of attorneys practicing 
before it. That responsibility includes a duty to disqualify an attorney when it 
is appropriate. Kevlik v. Goldstein, supra; Redd v. Shell Oil Company, 518 F.2d 311 (10th Cir. 1975). The decision of the trial court in such an instance should 
be reversed only when an abuse of discretion is demonstrated. Kevlik v. 
Goldstein, supra; Cheng v. GAF Corporation, supra; City of Cleveland v. 
Cleveland Electric Illuminating, supra; but see Cossette v. Country Style 
Donuts, Inc., 647 F.2d 526 (5th Cir. 1981); General Electric Company v. Valeron 
Corporation, supra (applying a clearly erroneous standard). We are satisfied 
that, under the facts of this case, there was an abuse of discretion on the part 
of the trial court in refusing to disqualify counsel.

[¶18.]  We pursued review pursuant to writ of 
certiorari in this case because the decision of the trial court with respect to 
disqualification of an attorney does not dispose of the merits of any pending 
claims and, for that reason, does not present a final order subject to appeal. 
Rule 1.05, W.R.A.P.; Kimbley v. City of Green 
River, Wyo., 663 P.2d 871 (1983); 
Public Service Commission v. Lower Valley Power & Light, Inc., Wyo., 608 P.2d 660 
(1980). In the federal arena, some courts had determined that even though a 
disqualification ruling was not a final order, the important considerations 
raised justified review under the collateral order doctrine developed in Cohen 
v. Beneficial Industrial Loan Corporation, 337 U.S. 541, 69 S. Ct. 1221, 93 L. Ed. 2d 1528 (1949). See Melamed v. ITT Continental Baking Company, 592 F.2d 290 
(6th Cir. 1979) (Melamed II), overruling Melamed v. ITT Continental Baking 
Company, 534 F.2d 82 (6th Cir. 1976) (Melamed I), and cases cited therein. In 
Firestone Tire & Rubber Company v. Risjord, 449 U.S. 368, 101 S. Ct. 669, 66 L. Ed. 2d 571 (1981), the Supreme Court of the United States resolved a division 
among the federal courts as to the finality of a denial of motions for 
disqualification holding that a decision to deny a disqualification motion was 
not appealable until the case had been resolved on its merits. The court 
specifically did not decide whether a motion granting disqualification would be 
a final order under the doctrine of Cohen v. Beneficial Industrial Loan 
Corporation, supra. Policy considerations involved in the granting of the 
disqualification motion (see Armstrong v. McAlpin, 625 F.2d 433 (2d Cir. 1980) 
has led several courts to conclude that an appeal should be entertained from an 
order granting the disqualification of an attorney. See EZ Paintr Corporation v. 
Padco, Inc., 746 F.2d 1459 (Fed. Cir. 1984); In re Corrugated Container 
Antitrust Litigation, supra.

[¶19.]  The question which this case presents is 
a serious and unsettled question in Wyoming jurisprudence. In view of what we have 
articulated, it is obvious that waiting until the conclusion of the case on the 
merits would not have been beneficial to the parties and could have resulted in 
injustice. Consequently, we exercise our discretion to review the question 
pursuant to the writ of certiorari. A writ of certiorari is even more 
appropriate because the question concerns an abuse of the trial court's 
discretion. SeeCity of Sheridan v. 
Cadle, 24 Wyo. 
293, 157 P. 892 (1916); 14 Am.Jur.2d Certiorari § 11 at 788 (1964), and the 
cases cited therein. Furthermore, we also are charged with the responsibility of 
supervising the conduct of members of the Wyoming State Bar; and it therefore 
is

[¶20.]  ORDERED that the ruling of the district 
court denying the disqualification of A.B. as counsel for Citizens is reversed; 
and it further is 

[¶21.]  ORDERED that A.B. is disqualified from 
representation of Citizens in the case of Carl O. Carlson, Jr. v. E. Leva 
Carlson and Citizens National Bank & Trust Co., Civil No. 23-24, in the 
District Court of the Eighth Judicial District in and for GoshenCounty, and a separate, specific, 
non-anonymous order shall issue to that effect.