Opinion ID: 2464796
Heading Depth: 2
Heading Rank: 1

Heading: Disqualification/Conflict of Interest

Text: [¶ 10] A district court's ruling on a motion to disqualify for a conflict of interest is reviewed for abuse of discretion. Carlson v. Langdon, 751 P.2d 344, 350 (Wyo.1988). Ms. Magin's motion was based upon Rule 1.9(a): (a) A lawyer who has formerly represented a client in a matter shall not thereafter 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 makes an informed decision to waive the conflict, confirmed in writing signed by the client. Although Mr. Ford did not formerly represent Ms. Magin, another member of his firm, Mr. Moore, did. Rule of Professional Conduct for Attorneys at Law 1.10(a) imputes a conflict of interest to all members of a law firm: (a) While lawyers are associated in a firm, none of them shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so by Rules 1.7 or 1.9, unless the prohibition is based on a personal interest of the prohibited lawyer and does not present a significant risk of materially limiting the representation of the client by the remaining lawyers in the firm. Thus, Mr. Ford was disqualified from representing Solitude to the same extent as Mr. Moore. [¶ 11] In Simpson Performance Prods., Inc., v. Robert W. Horn, P.C., 2004 WY 69, ¶ 16, 92 P.3d 283, 287 (Wyo.2004), we identified four elements which must be proven to establish a Rule 1.9 violation: First, there must have been a valid attorney-client relationship between the attorney and the former client. . . . Second, the interests of the present and former clients must be materially adverse. . . . Third, the former client must not have consented, in an informed manner, to the new representation. . . . Finally, the current matter and the former matter must be the same or substantially related. Sullivan County Regional Refuse Disposal Dist. v. Town of Acworth, 141 N.H. 479, 686 A.2d 755, 757 (1996). [¶ 12] Solitude concedes that all of the elements of the test are met in this case, with the exception of the last element. It contends that the current matter is not the same as or substantially related to the former matter. Comment 3 to Rule 1.9 discusses the definition of substantially related: [3] Matters are substantially related for purposes of this Rule if they involve the same transaction or legal dispute or if there otherwise is a substantial risk that confidential factual information as would normally have been obtained in the prior representation would materially advance the client's position in the subsequent matter. . . . [For example,] a lawyer who has previously represented a client in securing environmental permits to build a shopping center would be precluded from representing neighbors seeking to oppose rezoning of the property on the basis of environmental considerations; however, the lawyer would not be precluded, on the grounds of substantial relationship, from defending a tenant of the completed shopping center in resisting eviction for nonpayment of rent. . . . Information acquired in a prior representation may have been rendered obsolete by the passage of time, a circumstance that may be relevant in determining whether two representations are substantially related. . . . A former client is not required to reveal the confidential information learned by the lawyer in order to establish a substantial risk that the lawyer has confidential information to use in the subsequent matter. A conclusion about the possession of such information may be based on the nature of the services the lawyer provided the former client and information that would in ordinary practice be learned by a lawyer providing such services. [¶ 13] As the comment makes clear, the determination of whether the current and former matters are substantially related is inherently factual. In light of the factual nature of the issue, the Tenth Circuit Court of Appeals has stated the following with regard to the necessity of an evidentiary hearing: If the moving party makes a non-frivolous allegation that he has had an attorney-client relationship in a substantially related matter, a district court must investigate the allegation further through an evidentiary hearing before denying a motion to disqualify. Failure to do so constitutes an abuse of discretion. United States v. LaVallee, 439 F.3d 670, 681-82 (10th Cir.2006), citing United States v. Stiger, 413 F.3d 1185, 1196 (10th Cir.2005). See also, Simpson, ¶ 20, 92 P.3d at 288 (indicating that the determination of whether a conflict of interest exists requires a fact-intensive analysis). [¶ 14] Solitude argued that the present matter was not substantially related to Mr. Moore's prior representation of Ms. Magin. It insisted that Mr. Moore's representation of Ms. Magin involved a dispute with the seller of the property over covenant violations and was resolved years ago, while the current matter involves different violations of the covenants and was brought by the homeowners' association. All of that is true. However, the materials submitted by Ms. Magin establish that the genesis of the first dispute was a claim by Solitude and her neighbors that certain structures and fences constructed on her property by her predecessor violated the covenants. [1] Ms. Magin's submissions showed that Mr. Moore advised her with regard to interpretation of some of the same covenants at issue here and negotiated with Solitude with regard to the covenant violations. [¶ 15] Ms. Magin certainly presented a non-frivolous allegation that the matters were substantially related. As such, the district court was obligated to conduct an evidentiary hearing. The court's failure to do so amounted to an abuse of discretion. See LaVallee, 439 F.3d at 681-82. Although we would normally remand to the district court to hold an evidentiary hearing on the issue of whether the current and former matters were substantially related, the record contains sufficient information for us to make a determination. In any event, a remand is unnecessary because, as explained infra, the motion to disqualify was untimely. [¶ 16] The interest served by Rule 1.9 is the protection of the confidentiality of the client's information. [P]reservation of a client's confidences has been described as the `bedrock principle of the Anglo-American legal system.' Bevan v. Fix, 2002 WY 43, ¶ 50, 42 P.3d 1013, 1028 (Wyo.2002), quoting Mallen and Smith, Legal Malpractice, Adverse Representation § 17.3 Ethical Considerations (5th ed. 2000), which quoted In re Complex Asbestos Litigation, 232 Cal.App.3d 572, 283 Cal.Rptr. 732 (1991). In Carlson, 751 P.2d at 348, we stated 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. We adopted a broad test for determining whether a substantial relationship exists between the two matters. 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. Id. at 349 (citation omitted). [¶ 17] Carlson is an example of where disqualification was required. There, Carl Carlson and his mother retained attorney A.B. to draft a lease agreement which apparently gave Mr. Carlson the option to purchase property belonging to his mother after her death in return for his leasing the property and making improvements upon it. Id. at 345-46. Citizens National Bank & Trust Co. had loaned Ms. Carlson money and urged her to sell the property to pay off the loan. She advised Mr. Carlson she was terminating the lease and selling the property, and Mr. Carlson retained another attorney, E.F., to file suit against Ms. Carlson and the bank, alleging conspiracy to interfere with the contractual relationship between the Carlsons and intentional infliction of emotional distress. Id. at 346. A.B. appeared and answered on behalf of Citizens. Id. On appeal, this Court held that the district court abused its discretion by denying Mr. Carlson's motion to disqualify A.B. from acting as Citizens' attorney. We ruled that A.B.'s prior representation of Mr. Carlson and later representation of Citizens were substantially related because they both concerned the existence, content and effect of the lease agreement between Mr. Carlson and his mother. Id. at 349-50. [¶ 18] Solitude attempts to distinguish Carlson from the present case by stating that Mr. Moore did not draft the agreement at issue, i.e. the covenants, and the earlier dispute was between Ms. Magin and the seller. As we stated above, the documents submitted by Ms. Magin showed that, while the earlier dispute involved the seller, it started with assertions by Solitude and Ms. Magin's neighbors that her property was in violation of the covenants. [¶ 19] The present proceeding involves conditions which Ms. Magin herself created several years after the first matter was resolved. Nevertheless, the interpretation and application of the covenants were directly at issue in both proceedings. Mr. Moore provided advice to Ms. Magin about the covenants which went beyond the violations alleged at that time including specific advice on how to vote on proposed amendments to the covenants, some of which are directly at issue in this case. The circumstances here are similar to the example provided in Rule 1.9, Comment 3, where an attorney who represented a client in securing environmental permits to build a shopping center would be precluded from representing neighbors seeking to oppose rezoning of the property on the basis of environmental considerations. Despite the passage of time between the two proceedings, they involved common facts including the interpretation and application of the covenants. The matters were, therefore, substantially related and Mr. Moore, Mr. Ford and their firm were prohibited, under Rule 1.9, from representing Solitude against Ms. Magin. [¶ 20] Our inquiry does not, however, end with the conclusion that a conflict of interest existed. Solitude argues that Ms. Magin surrendered her right to disqualify Mr. Ford because she did not file a motion to disqualify within a reasonable time after she discovered the conflict. The district court did not state its reasons for denying Ms. Magin's motion to disqualify; thus, it may have determined that the motion was untimely. In any event, we can affirm a district court's ruling on any basis appearing in the record. See, e.g., Walker v. Karpan, 726 P.2d 82, 89 (Wyo.1986). [¶ 21] If the client does not file a motion to disqualify within a reasonable time, she is deemed to have waived her objection to the conflict. Trust Corp. of Montana v. Piper Aircraft Corp., 701 F.2d 85, 87-88 (9th Cir.1983). See also, Central Milk Producers Coop. v. Sentry Food Stores, Inc., 573 F.2d 988, 992 (8th Cir.1978); Redd v. Shell Oil Co., 518 F.2d 311, 315 (10th Cir.1975); J. Burman, Conflicts of Interest in Wyoming, 35 Land & Water L.Rev. 79, 100 (2000). Because of the potential for use of a late motion to disqualify as a technique of harassment, courts particularly frown upon clients waiting until significant work has been performed in a case to request disqualification. See id. [¶ 22] Mr. Ford entered his appearance on September 5, 2008; Ms. Magin did not file her motion to disqualify until over a year later, on October 9, 2009. Ms. Magin's attorney, Mr. Bosch, explained the delay by stating that when Mr. Moore contacted him before Mr. Ford entered his appearance and asked for a waiver of conflict, Ms. Magin verbally agreed to waive the conflict provided Mr. Moore did not participate in the current matter. Shortly after Mr. Moore attended the September 29, 2009, hearing allegedly in violation of the verbal agreement, Ms. Magin filed her motion to disqualify. [¶ 23] Mr. Moore offered a different explanation. He filed an affidavit in which he stated that he had not sought a waiver of conflict because no conflict existed. Arguing on appeal that Ms. Magin's motion was untimely, Mr. Ford asserts that because her attorney initially consented to Mr. Ford's representation of Solitude, [2] she should not be allowed to seek disqualification at this late date. [¶ 24] As we concluded above, a conflict did exist and Mr. Ford and Mr. Moore were obligated to obtain a waiver from Ms. Magin. Rule 1.9(a) does not allow verbal waivers of conflicts and specifically requires that the former client make[] an informed decision to waive the conflict, confirmed in writing signed by the client. See, e.g., Boldridge v. State, 289 Kan. 618, 215 P.3d 585, 593 (2009) (indicating that unless there are special circumstances, such as a waiver made on the record after informed consent, a verbal waiver will not satisfy the written waiver requirement). An obvious purpose of the rule requiring a written waiver is to have the parameters of the parties' waiver agreement formalized to prevent precisely this type of dispute from arising later. Therefore, Ms. Magin's verbal waiver was not effective under Rule 1.9(a) to waive the conflict of interest. [¶ 25] Ms. Magin was aware of Mr. Ford's conflict of interest when he entered his appearance on behalf of Solitude and she did not effectively waive the conflict. Consequently, she had an obligation to demand Mr. Ford's disqualification in a timely manner. She did not file her motion for disqualification until over a year after Mr. Ford began representing Solitude. During that time, the parties performed significant work on the case, including conducting discovery, locating expert witnesses and filing dispositive motions. An order by the district court requiring Mr. Ford to withdraw at that late date would have wasted judicial resources and prejudiced Solitude by requiring it to find new counsel costing additional time and money and unnecessarily delaying resolution of the matter. See, e.g., Central Milk, 573 F.2d at 992 (holding [a] motion to disqualify should be made with reasonable promptness after a party discovers the facts which lead to the motion); Redd, 518 F.2d at 315 (holding motion to disqualify should be filed as soon as conflict becomes known to avoid the very kind of disorder which resulted from the delay); Trust Corp. of Montana, 701 F.2d at 87 (It is well settled that a former client who is entitled to object to an attorney representing an opposing party on the ground of conflict of interest but who knowingly refrains from asserting it promptly is deemed to have waived that right.). We conclude, therefore, that Ms. Magin surrendered her right to request the disqualification of Mr. Ford because she delayed in filing her motion and the district court did not abuse its discretion by denying the motion or refusing to reconsider its denial.