Opinion ID: 2823854
Heading Depth: 1
Heading Rank: 2

Heading: The Trial Courtâs Findings of Material Adversity Are Sufficiently Supported by the Record

Text: Â¶52Â Â Â Â Â I agree with the majority that, for purposes of Colo. RPC 1.9(a), the current criminal matter involving PMW as Petitionerâs counsel constitutes âthe same or a substantially related matterâ as the underlying DOR investigation. Additionally, it is undisputed that All Care, as a former client of PMWâs in that investigation, has not consented to PMWâs representation of Petitioners. Therefore, the outcome of this case turns on whether the trial courtâs conclusionâthat All Careâs interests are âmaterially adverseâ to Petitionersâ interestsâwas so manifestly arbitrary, unreasonable, or unfair so as to constitute an abuse of discretion. Contrary to the majority, I would hold that the People met their burden to show that All Careâs interests were materially adverse to Petitionersâ. Accordingly, the trial court did not exceed the bounds of rationally available choices in finding there was âan inherent and substantial riskâ of PMW violating its duty of loyalty to All Care in violation of Colo. RPC 1.9. See Frisco, 119 P.3d at 1096. Â¶53Â Â Â Â Â The majority concludes that it is âmere speculationâ that Hoskins will seek to shift blame to other All Care employees because Hoskins was All Careâs only âhigh managerial agentâ who was specifically named in the indictment. Maj. op. Â¶Â¶33â34. In other words, it concludes that there are no other individuals to whom Hoskins can shift the blame for All Careâs alleged criminal malfeasance and, thus, that there is no conflict of interest because Hoskinsâs interests are aligned with All Careâs. See id. Â¶54Â Â Â Â Â The record, however, does not support this conclusion; rather, it shows there is a significant risk that Hoskins will attempt to exculpate himself at the expense of All Careâs employees. For example, both Nathan Newman and Ryan Tripp, two All Care managers, were indicted along with Hoskins. Specifically, the indictment alleges that Newman, Tripp, and Hoskins, along with other All Care employees, engaged in a complex criminal conspiracy which involved receiving, buying, selling, cultivating, and/or distributing marijuana. It was not manifestly arbitrary, unreasonable, or unfair for the trial court to conclude that one of Hoskinsâs best defense strategies would be to shift blame away from himself and onto Newman and Tripp (or, for that matter, onto other indicted or unindicted All Care employees) by claiming that they acted at their own behest in committing any alleged crimes rather than at his direction. Â¶55Â Â Â Â Â The majority also relies on section 18-1-606(1)(b), C.R.S. (2013), which provides that a business entity is guilty of an offense when that offense was âengaged in, authorized, solicited, requested, commanded, or knowingly tolerated by . . . a high managerial agent acting within the scope of his or her employment or in behalf of the business entity.â It notes that there were no âhigh managerial agentsâ for All Care named in the indictment besides Hoskins. Maj. op. Â¶Â¶31â32. However, the majority fails to acknowledge that there was specific evidence presented at the disqualification hearing indicating that Newman and Tripp might well qualify as âhigh managerial agentsâ for All Care, even if they were not also specifically designated âhigh managerial agentsâ in the indictment. Section 18-1-606(2)(a) defines a âhigh managerial agent,â in relevant part, as âan officer of a business entity or any other agent in a position ofcomparable authority with respect to . . . the supervision in a managerial capacity of subordinate employees.â Craveiro, who was a witness for the People at the disqualification hearing, testified that Newman and Tripp were traditional store managers for All Care and that they had unfettered access to the marijuana and the money in All Careâs store. The prosecution need not have identified these individuals as âhigh managerial agentsâ in the indictment in order for All Care to be held criminally responsible for their conduct, making them an obvious target for Hoskinsâs blame shifting. Â¶56Â Â Â Â Â Moreover, the record also establishesâas the trial court correctly notedâthat Hoskins had already begun to point fingers and did so well in advance of trial. Specifically, during the DORâs pre-indictment investigation, PMW attorney Stephen Peters sent a letter to a Senior Assistant Attorney General entitled âInvestigation of Conley Hoskins.â In that letter, Peters explained that he initially began representing Hoskins âin response to tax and employment issues arising from the malfeasance of key managerial employees.â Peters also offered, in the very same paragraph, to show the DOR copies of tax- and withholding-related paperwork prepared by an accountant in response to this âmalfeasanceâ â[b]ecause the taxes are one stated theory of your proposed securities prosecution.â Although the majority acknowledges the existence of this letter, it completely disregards it for purposes of the material adversity analysis, apparently because the letter did not specifically mention All Care. See maj. op. Â¶7. However, given that the letter was sent in the context of the pre-indictment investigation of Hoskinsâs businesses, including All Care, it was not manifestly arbitrary, unreasonable, or unfair for the trial court to rely on the letter as a piece of evidence in support of the Peopleâs motion to disqualify. Indeed, the letter concretely demonstrates that, at least when it comes to the indictmentâs charges of securities fraud and tax evasion, Hoskins was already directing blame away from his own malfeasance, if any, to the âmalfeasance of key managerial employees.â Â¶57Â Â Â Â Â The majorityâs conclusion that Hoskins has no motive to blame All Careâs employees or managers is also premised on its problematic assumption that Hoskins is motivated solely by his narrow financial interests in preserving All Care as a viable future entity. See maj. op. Â¶34. Significantly, the majority makes this assumption without pointing to a single piece of evidence in the record. See id. However, it was not manifestly arbitrary, unreasonable, or unfair for the trial court to conclude that Hoskins was likely to employ a blame-shifting defense, even at the expense of losing future financial benefits from All Care, because doing so might allow him to avoid jail time or other forms of criminal sanction. If Hoskins were to successfully demonstrate that All Careâs employees were serving their own prerogatives by engaging in unlawful activityâand not because Hoskins âauthorized, solicited, requested, commanded, or knowingly toleratedâ such activityâhe could escape personal culpability, even at the risk of losing his investment in All Care. Â¶58Â Â Â Â Â Moreover, at the disqualification hearing, the trial court correctly noted that if Hoskins loses his ownership stake in All Care in the pending arbitration proceeding, he would also lose his financial interest in ensuring that All Care escapes criminal sanctions. In this respect, the majorityâs holding that there was no material adversity iscontingent on a future third-party arbitratorâs decision to preserve Hoskinsâs ownership share. In contrast, the trial courtâs decision to grant the Peopleâs motion to disqualify ensures that even if Hoskins loses his ownership share, this loss will not affect All Careâs ability to defend itself. Â¶59Â Â Â Â Â The trial courtâs decision was justified not only because it reasonably concluded that Hoskins had obvious incentives to shift the blame onto All Care; it also was justified because the record establishes that PMW obtained confidential information 2 about All Care in the course of the pre-indictment investigation, and this information would compromise All Careâs ability to defend itself and could force PMW into a position of divided loyalties. As PMWâs correspondence with the Senior Assistant Attorney General makes clear, PMW took a very active approach in managing the DORâs pre-indictment interviews with All Careâs employees. The trial court rationally presumed that PMW became privy to confidential information about All Careâs business dealings when it (1) prepared employees for the DORâs interviews, as it was presumed to do in competently representing All Care as an entity, and (2) attended theinterviews. Additionally, the prosecution indicated that it will call an All Care employee to testify against Hoskins. 3 Accordingly, in the event the trials were not severed, PMW would immediately be placed in an untenable position. On the one hand, it would have a duty to cross-examine any All Care employee effectively in representing Hoskins, and doing so could redound to the benefit of Hoskins personally. On the other hand, it could not use any confidential information learned during the course of the investigatory interviews without violating continuing duties to All Care as a former client. See Colo. RPC 1.9(c) (stating that a lawyer who has formerly represented a client in a matter cannot âuse information relating to the representation to the disadvantage of the former clientâ and also cannot âreveal information relating to the representationâ); see also Dunlap v. People, 173 P.3d 1054, 1070 (Colo. 2007) (âAn attorney has a continuing duty to keep confidential any information learned during the prior representation of the witness. This duty creates the possibility that the attorney will be hindered in cross-examining the witness, which thus impedes the attorneyâs ability to zealously represent the current client.â (internal citation omitted)). Â¶60Â Â Â Â Â The trial court also fully considered whether a remedy short of disqualification would be effective. It noted that severing the trials would not necessarily eliminate the conflict of interest implicated here because PMW was already exposed to confidential information about All Care and there was nothing the trial court could do to ensure that PMW did not use that information in defending Petitioners. Such a conclusion was justified given its finding that Hoskins would have an incentive to blame other All Care employees in his own defense. II. Conclusion Â¶61Â Â Â Â Â Contrary to the majority, I believe that the record presented here was more than sufficient for the trial court to find that Petitionersâ interests were âmaterially adverseâ to All Careâs interests. Although it purports to apply an abuse of discretion standard in reviewing the trial courtâs decision, the majority actually applies a far more stringent standard and fails to recognize the substantial latitude and broad discretion afforded trial courts in making the difficult decision to disqualify counsel. Accordingly, I respectfully dissent. 1 The trial courtâs order granting the Peopleâs motion to dismiss attached excerpts of these communications. The excerpts included over a dozen emails exchanged between PMW and the Senior Assistant Attorney General, as well as two letters sent from PMW to the Senior Assistant Attorney General. 2 Petitionersâ expert opined that this information was not truly âconfidential,â insofar as any successor law firm hired by Hoskins would have access to the information in PMWâs possession because Hoskins would simply provide this information to his new counsel. Although Hoskins might well know a significant amount about the inner workings of All Care and the activities of its employees, it is undisputed that Hoskins did not attend every single investigatory interview with All Careâs employees. Accordingly, Hoskins would not be able to provide replacement counsel with precisely the same kind of confidential, and damning, information about All Care as that which was provided to PMW during the pre-indictment interview process of All Careâs employees. 3 The majority asserts that the People did not meet their burden to show material adversity in part because they did not identify precisely by name which witness they intended to call to testify against Petitioners and did not explain precisely why that witnessâs testimony would be adverse. See maj. op. Â¶ 29. It cites, however, no authority requiring such precision in identification. Additionally, it is a perfectly logical assumption that the testimony offered by any such employee would be adverse to Hoskins personally because the prosecution would be introducing it in support of their case against him. In any case, it was not manifestly arbitrary, unreasonable, or unfair for the trial court to rely on the Peopleâs representations about its trial plans. These opinions are not final. They may be modified, changed or withdrawn in accordance with Rules 40 and 49 of the Colorado Appellate Rules. Changes to or modifications of these opinions resulting from any action taken by the Court of Appeals or the Supreme Court are not incorporated here. Colorado Supreme Court Opinions || September 8, 2014 Back