Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_07-cv-00457/USCOURTS-azd-2_07-cv-00457-5/pdf.json

Nature of Suit Code: 380
Nature of Suit: Other Personal Property Damage
Cause of Action: 28:1332 Diversity-Tort/Non-Motor Vehicle

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1

 Also pending is the plaintiffs’ Motion for Limited Case Management

Order Setting Law and Motion Schedule and Staying Disqualification Motion (doc.

#124). In light of the Court’s ruling on the motion to disqualify, the Court finds

that the motion to stay should be denied as moot; the Court will issue an

amended scheduling order in due course.

 The Court notes that there is no issue properly pending before it at this

WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Karlsson Group, Inc., et al.,

Plaintiffs, 

vs.

Langley Farms Investments, LLC, et

al.,

Defendants.

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No. CV-07-0457-PHX-PGR 

 

 ORDER

Pending before the Court is the Langley and Van Wagner-related

defendants’ Motion to Disqualify Plaintiffs’ Counsel (doc. #116), wherein the

defendants seek to disqualify the plaintiffs’ lead counsel, Meir Westreich, and the

plaintiff’s local co-counsel, Norman Keyt, from serving as counsel at trial or in any

deposition in this case for the reason that they are necessary witnesses in this

action.1

 Having considered the parties’ memoranda in light of the record in this

Case 2:07-cv-00457-PGR Document 128 Filed 09/01/09 Page 1 of 12
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time concerning the propriety of Albert E. Van Wagner, Jr.’s dual role as both a

named defendant and counsel for his co-defendants in this action.

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action, the Court finds that the disqualification motion should be denied in its

entirety.

Background

This action is one of several related lawsuits that have arisen from the

disputed sale of 5,075 acres of land known as the Petrified Forest Ranch in

Apache County (“the property”.) PFR, LLC, (“PFR”), the seller of the property,

entered into a brokerage agreement in December, 2003 with real estate broker

Millard “Mickey” Oksner, operating as Rensko, Inc. (collectively “Oksner”), to sell

the property. In October, 2004, Oksner signed a letter agreement with the

Karlsson Group, through its president, Anders Karlsson (collectively “Karlsson”),

regarding Karlsson’s purchase of the property. Meir Westreich was Karlsson’s

counsel during the negotiations with PFR. When the parties could not thereafter

agree on the terms of a formal contract, Karlsson, through Westreich, asserted

that the letter agreement was a valid contract while PFR, through its lead counsel

Richard Keyt, asserted that it was not because Oksner lacked the authority to

enter into a binding agreement and because PFR’s membership had not

approved the transaction.

Meanwhile, in November, 2004, PFR entered into a contract to sell the

property to ACRES4U Land & Development, LLC (“ACRES4U”), which was

operating on behalf of Langley Farm Investments, LLC (“Langley”). Given PFR’s

dispute with Karlsson, PFR’s contract with ACRES 4U contained a provision,

known as paragraph 20, that made the sale to ACRES4U conditional on PFR not

being obligated to sell the property to anyone else and no other party claiming

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2

 Norman Keyt is the brother of PFR’s lead counsel, Richard Keyt. The

brothers have separate law practices.

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that PFR was obligated to sell the property to anyone else.

On January 11, 2005, Karlsson, through Westreich, filed a diversity of

citizenship-based lawsuit in the U.S. District Court for the Central District of

California, Karlsson v. Petrified Forest Ranch, LLC, 2:05-cv-00238-R-RC

(“Karlsson I”), against PFR, two individuals associated with PFR, and Oksner.

The complaint, which alleged that the defendants had breached the letter

agreement signed by Oksner, sought specific performance of the letter

agreement and to enjoin PFR from selling the property to anyone else. The

complaint also alleged that Oksner was estopped from denying his agency

authority from PFR and, to the extent that he lacked the authority to enter into the

letter agreement on PFR’s behalf, that he had defrauded Karlsson; it further

alleged that PFR and Oksner had conspired to stop Karlsson from buying the

property.

In February, 2005, PFR notified ACRES4U that it was cancelling their

contract pursuant to paragraph 20. ACRES4U refused to accept the cancellation,

and thereafter assigned its interest in the contract to Langley. On February 28,

2005, an ACRES4U representative telephoned PFR’s attorney Richard Keyt and

threatened litigation if PFR did not sell the property to it or its assignee Langley. 

Karlsson, through Westreich, and PFR, then represented in part by

Norman Keyt (“Keyt”)2

, Karlsson’s current co-counsel, entered into a stipulated

settlement of Karlsson I and the California district court entered an order on

March 18, 2005 that dismissed the entire action with prejudice pursuant to

Fed.R.Civ.P. 41. 

Case 2:07-cv-00457-PGR Document 128 Filed 09/01/09 Page 3 of 12
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Pursuant to the settlement agreement, PFR agreed to sell the property to

Karlsson and Karlsson agreed to indemnify PFR against litigation by ACRES4U

and Langley; the settlement agreement also provided that any indemnified claims

would be assigned to Karlsson. PFR conveyed the property to Karlsson on

March 3, 2005 and the deed was recorded in Apache County on March 10, 2005.

On March 11, 2005, Langley, through its counsel and current defendant

Albert Van Wagner, Jr., filed a action against PFR in the Apache County Superior

Court wherein it alleged claims for specific performance of the November, 2004

land sale agreement, breach of contract, breach of implied duty of good faith, and

consumer fraud; Langley recorded a notice of lis pendens on the property in

Apache County on March 15, 2005. The superior court subsequently entered

summary judgment for PFR, finding that paragraph 20 of the contract permitted

PFR to cancel the contract given Karlsson’s contention that it had the priority

claim to the property. The Arizona Court of Appeals affirmed the summary

judgment to PFR on December 31, 2007. Langley released the notice of lis

pendens on February 7, 2008.

On April 4, 2005, Karlsson, through Westreich, filed a second action in the

U.S. District Court for the District of California against Langley, ACRES4U, and

Oksner arising from ACRES4U and Langley’s attempt to purchase the property

from PFR. The complaint alleged claims for interference with contract and/or

business opportunity, extortion, abuse of process, interference with quiet

enjoyment of property, and conspiracy. The action was dismissed by the

California district court on October 3, 2005 for lack of prosecution. 

Langley, through Van Wagner, filed a second suit on February 28, 2007 in

Apache County Superior Court, alleging claims against Karlsson and his attorney

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3

 The remaining defendants are Langley Farm Investments, LLC, Langley

Petrified Forest Ranch, LLC, Langley Land, LLC, Largo Ventures, LLC, Steven G.

Rees, Stacy J. Brimhall, Parshelle S. Brimhall, Albert E. Van Wagner, Jr., P.C.,

and Albert E. Van Wagner.

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Westreich for intentional interference with contract and to quiet title to the

property. Langley voluntarily dismissed the action after the Arizona Court of

Appeals decided in favor of PFR in Langley’s earlier state court action. 

Karlsson, through Westreich and Keyt, commenced the instant action on

February 28, 2007 against Langley, Van Wagner, and ACRES4U and various

related companies and individuals, and Oksner. As a result of stipulations, all of

Karlsson’s claims against the Oksner-related defendants and the ACRES4Urelated defendants have been dismissed with prejudice. The Langley and Van

Wagner-related defendants (collectively “Langley”) are the sole remaining

defendants.3

In an opinion entered on September 8, 2008 (doc. #106), the Court in part

dismissed Karlsson’s First Amended Complaint against Langley with the

exception of Claim No. 1 (Interference with Contracts and/or Business

Opportunities). According to Karlsson, this claim, as it applies to Langley, asserts

Karlsson’s personal claims against Langley for interfering with Karlsson’s

contract/business opportunities with PFR commencing on February 28, 2005. 

The gist of the claim is that ACRES4U’s threat to PFR, made on behalf of

Langley, to sue PFR if PFR did not sell the property to it substantially increased

the price of Karlsson’s purchase of the property and its legal expenses because

PFR conditioned the sale to Karlsson in part on Karlsson’s agreement to

indemnify it against any ACRES4U/Langley lawsuit, and that Langley’s

subsequent suit against PFR in state court and its filing of the lis pendens further

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4

 ER 3.7, entitled “Lawyer as Witness” states in relevant part:

(a) A lawyer shall not act as advocate at a trial in which the lawyer is

likely to be a necessary witness unless:

(1) the testimony relates to an uncontested issue;

(2) the testimony relates to the nature and value of legal

services rendered in the case; or

(3) disqualification of the lawyer would work substantial

hardship on the client.

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increased Karlsson’s costs related to the property and interfered with its

economic exploitation of the property.

Discussion

The disqualification motion filed by the Langley is predicated solely upon

Ethical Rule 3.7(a) of the Arizona Rules of Professional Conduct, which is

applicable to attorneys appearing before this Court pursuant to LRCiv 83.2(e).4

Langley has informed Karlsson that it intends to call Karlsson’s attorneys

Meir Westreich and Norman Keyt as witnesses regarding the events leading up to

and during the events underlying this action; Karlsson states that it intends to

present its case without relying on the testimony of either attorney.

In order to avoid the misuse of the advocate-witness rule for improper

tactical reasons, Arizona law mandates that “[o]nly in extreme circumstances

should a party to a lawsuit be allowed to interfere with the attorney-client

relationship of his opponent.” Alexander v. Superior Court, 685 P.2d 1309, 1313

(Ariz.1984). As the Ninth Circuit has noted, disqualification motions should be

subjected to “particularly strict scrutiny” because of their potential for abuse. Optyl

Eyewear Fashion International Corp. v. Style Companies, Ltd., 760 F.2d 1045,

1050 (9th Cir.1985); cf. Gomez v. Superior Court, 717 P.2d 902, 905 (Ariz.1986)

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5

 The elements of a claim of intentional interference with contract or

business expectancy against Langley are (1) the existence of a valid contractual

relationship or business expectancy on Karlsson’s part, (2) Langley’s knowledge

of the relationship or expectancy, (3) intentional interference by Langley inducing

or causing a breach or termination of the relationship or expectancy, (4) resultant

damage to Karlsson caused by the disruption of its relationship or expectancy,

and (5) that Langley acted improperly. Snow v. Western Savings & Loan Ass’n,

730 P.2d 204, 211 (Ariz.1986); Dube v. Likins, 167 P.3d 93, 98 (Ariz.App.2007).

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(Court stated that it “view[s] with suspicion” motions to disqualify opposing

counsel based on conflict of interest or appearance of impropriety.) As the

moving party, Langley has the burden of sufficiently showing why the Court

should not uphold the presumption against disqualifying opposing counsel.

Alexander, 685 P.2d at 1313. In order to meet that high burden, Langley must

establish, individually as to Westreich and Keyt, (1) that the attorney will give

evidence material to the determination of the issues being litigated, (2) that such

evidence is unobtainable elsewhere, and (3) that the testimony is or may be

prejudicial to the testifying attorney’s client. Cottonwood Estates, Inc. v. Paradise

Builders, Inc., 624 P.2d 296, 302 (Ariz.1981) (discussing DR 5-102, the

predecessor to ER 3.7).

A. Meir Westreich

As to the first element, the attorneys’ expected testimony must be relevant

and material to one or more of the five elements of the only relevant remaining

claim against Langley, which is Karlsson’s claim for intentional interference with

contract or business expectancy.5

 Langley supports its contention that

Westreich’s testimony is necessary by listing numerous activities that Westreich

engaged in during the underlying events in his allegedly pervasive role as

Karlsson’s attorney and agent; it elaborates to some extent regarding Westreich’s

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6

 Langley argues in its reply that the Court should at the very least strike

Karlsson’s separate “objections and proffers” memorandum, if not both it and

Karlsson’s response, for impermissibly exceeding the allowable page limits set

forth in LRCiv 7.2(e). While the much preferable course of action would have

been for Karlsson to have sought the Court’s permission to file what is in effect an

oversize brief, the Court will not strike either of the documents because they add

to the Court’s ability to resolve the pending motion on its merits. 

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expected testimony by stating, for example, that it wants to cross-examine him

concerning such matters as Karlsson’s claimed damages, including the

reasonableness of Westreich’s attorney’s fees from the underlying litigation and

his communications with the defendants concerning the plaintiffs’ damages, and

his knowledge regarding the timing of the indemnification clause contained in

Karlsson’s settlement agreement with PFR. While Westreich undoubtedly has

relevant knowledge of the underlying events, the Court is not persuaded by

Langley’s arguments because Langley has made little effort to explain how any

testimony by Westreich concerning the activities it has specified is material to the

issues relevant to the intentional interference claim. As Karlsson points out in a

detailed response to the noted activities, many of these activities involve

undisputed issues, legal issues, and issues unrelated to the remaining claim.6

 

As to the second element, Langley conclusorily asserts that it wants to be

able to present “the evidence from the beginning to the end, and Westreich is the

only person who can testify as to what and why certain actions were taken by the

Karlsson Parties.” But the only significant elaboration Langley provides as to why

the content of Westreich’s testimony is unobtainable from other sources is limited

to Anders Karlsson, and it only contends as to Karlsson that cross-examining him

“would only lead to his inability to testify as to those events in which he did not

participate, privilege objections as to what his attorney told him, and lack of any

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understanding as to legal claims and maneuvers made by Westreich.” Not only

does Langley fail to explain what material events Karlsson could not testify about,

it also fails to explain how any attorney-client privilege issues applicable to

Karlsson, Westreich’s client, would also not be applicable to Westreich, see ER

1.6(a), nor does it persuasively discount the existence of all other potential

witnesses, including possible expert witnesses, or existing documentary evidence

relevant to the remaining claim. For example, while Langley states that

Westreich is the only real witness who can testify as to the reasonableness of his

attorney’s fees in the underlying litigation that Karlsson is attempting to recoup as

damages, it makes no effort to explain why such evidence cannot be obtained

from documentary evidence in the form of Westreich’s time sheets and expert

testimony analyzing those time sheets.

As to the third element, Langley merely states that it will seek admissions

from Westreich which may be detrimental to Karlsson. The only elaboration that

it provides is that it wants Westreich to agree that “attorneys generally plead

broader complaints for two basic reasons: 1) by a broader pleading, a party

seeking discovery will be less likely to confront a relevance objection, and 2) it is

far easier to dismiss a cause of action than to add one which is especially true the

longer the suit has been around.” Langley does not, however, made any real

effort to discuss how this admission is detrimental to Karlsson - although it is not

entirely clear to the Court, apparently the purpose of the noted admission is to

counter Karlsson’s allegations in the pending complaint in this action that

Langley’s inclusion of breach of duty of good faith and consumer fraud claims in

its state court lawsuit against PFR was frivolous and added a substantial amount

to Karlsson’s litigation expenses in that action. The Court is unpersuaded by this

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argument because even if Westreich were in effect to act as an expert witness for

Langley and make such an admission, it is simply not sufficiently detrimental to

Karlsson to be a reason for disqualifying Westreich.

B. Norman Keyt

As to the first element, Langley’s cursory explanation as to why Keyt’s

testimony is relevant and material to the remaining claim is unpersuasive. 

Langley has listed a number of actions that Keyt undertook, or allegedly should

have undertaken, regarding the underlying events, and it has somewhat

elaborated upon what it wants Keyt to testify about by stating that it wants to hear

what he has to say about his prior role as one of PFR’s counsel during the

negotiations concerning the sale of the property, including why he opined that

Karlsson’s letter of intent regarding the purchase of the property was a valid

contract and why he gave contradictory statements regarding when the KarlssonPFR indemnification provision was added to their settlement agreement, and

what he has to say about his subsequent responsibilities as Westreich’s local

counsel after the indemnification provision went into effect, including what advice

he gave Westriech in the state court action as to preserving of the issue of

attorney’s fees and seeking to quash the lis pendens. The Court concludes that

these arguments are insufficient to meet the defendants’ substantial burden

regarding Keyt’s disqualification inasmuch as Langley neither discusses how

Keyt’s noted activities are material and relevant to the intentional interference

claim, nor sufficiently explains how Keyt would be able to testify about many of

the listed matters given attorney-client privilege and work product issues, and his

apparently limited role in PFR’s negotiations with Karlsson.

As to the second element, Langley’s argument regarding its inability to

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obtain elsewhere the evidence it wants to obtain from Keyt is also too cursory and

insufficient to be persuasive. It does not, for example, explain why the members

of PFR, who were then Keyt’s clients, and/or Mickey Oksner, PFR’s real estate

agent, cannot testify about the sale of the property and other events underlying

the intentional interference claim, or why the documentary evidence of the

various versions of the Karlsson-PFR settlement agreement cannot establish the

date the indemnification provision was added to the settlement agreement.

As to the third element, Langley fails to make any mention in its motion why

any expected testimony from Keyt would be detrimental to Karlsson. In its reply,

Langley only states that it wants to cross-examine Keyt regarding contrary

statements noted in his affidavit submitted with Karlsson’s response regarding the

timing of the inclusion of the indemnification agreement in the Karlsson-PFR

settlement agreement; Langley contends that Keyt’s credibility is at issue

because Keyt stated in his affidavit that he had mistakenly stated in an August 2,

2007 letter that the indemnification agreement was in the settlement agreement

version dated February 5, 2005, whereas in fact the indemnification agreement

was included in the final March 4, 2005 settlement agreement. Langley asserts,

without any elaboration, that Keyt’s former version benefits it while his latter

version benefits Karlsson. The Court presumes that Langley’s implied contention

is that some prejudice to Karlsson’s intentional interference claim would arise if

Keyt were to testify that the indemnification agreement between Karlsson and

PFR was actually entered into prior to ACRES4U’s litigation threat to PFR made

in late February, 2005. Even if such evidence constitutes a sufficient detriment, it

is in effect irrelevant in light of Langley’s failure to establish that Keyt is a

necessary witness.

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7

 Because the Court concludes that Westreich and Keyt have not been

shown to be necessary witnesses, the Court does not reach the issue of whether

the “substantial hardship” exception to ER 3.7 bars the disqualification of either

Westreich or Keyt.

8

 The Amended Joint Case Management Report shall be in the format

set forth in the Court’s Supplemental Order Setting Scheduling Conference (doc.

# 107), entered on September 9, 2008.

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After carefully scrutinizing the record presented to it, the Court concludes

that disqualification is not required for either Westreich or Keyt under ER 3.7

because Langley has not established the existence of the extreme circumstances

necessary for such a disqualification.7

 Therefore,

IT IS ORDERED that the defendants’ Motion to Disqualify Plaintiffs’

Counsel (doc. #116) is denied.

IT IS FURTHER ORDERED that the plaintiffs’ Motion Staying

Disqualification Motion (part of doc. #124) is denied.

IT IS FURTHER ORDERED that the plaintiffs’ Motion for Limited Case

Management Order Setting Law and Motion Schedule (part of doc. #124) is

granted to the extent that the parties’ shall file an Amended Joint Case

Management Report no later than October 16, 2009.

8

IT IS FURTHER ORDERED that a Scheduling Conference shall be held on

Tuesday, November 3, 2009, at 11:30 a.m. in Courtroom 601 of the Sandra Day

O’Connor United States Courthouse, 401 West Washington St., Phoenix, AZ.

DATED this 31st day of August, 2009.

Case 2:07-cv-00457-PGR Document 128 Filed 09/01/09 Page 12 of 12