Opinion ID: 1272032
Heading Depth: 1
Heading Rank: 15

Heading: disqualification of united's counsel

Text: GAC contends that the trial court erred in denying its motion to disqualify United's counsel, the law firm of Bigbee, Stephenson, Carpenter & Crout, now known as Bigbee, Stephenson, Carpenter, Crout & Olmsted (hereinafter referred to as the Bigbee firm), and that all orders entered by the court subsequent to the filing of its disqualification motion  including the sanctions order and default judgment  are therefore invalid and must be reversed. This issue first arose on February 23, 1977  almost fourteen months after the filing of the complaint in this case  when GAC suggested that the Bigbee firm would have to be disqualified if Gulf documents regarding its separate non-partnership uranium activities in New Mexico had to be produced. On March 21, 1977  two weeks after the court ordered such production for at least the second time  at the direction of Gulf, GAC filed a motion to disqualify the Bigbee firm. The issue was submitted to the trial court on affidavits and depositions. [140] The court denied the motion without making specific findings. The trial court refused to certify the issue for an interlocutory appeal. GAC thereafter sought unsuccessfully to have the denial of its motion of disqualification reviewed by this Court, either as an appeal from a final judgment under the collateral order doctrine of Cohen v. Beneficial Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949), (No. 11469, June 29, 1977), or as a petition for an extraordinary writ. (No. 11484, July 1, 1977.) GAC renewed the motion in November 1977, which the court again denied. In 1961, the Bigbee firm began to represent United in connection with its uranium activities in New Mexico. It has continuously represented United since that time. In 1971, Gulf hired the Bigbee firm to represent it on legal matters relating to Gulf's uranium operations in New Mexico, particularly the large reserves at Mt. Taylor it was then in the process of acquiring. The Bigbee firm had continued to represent Gulf until November 1976, ten months after the complaint in this case was filed. The principal services performed by the Bigbee firm for Gulf during this period were perfecting and protecting Gulf's title to mining rights  including maintenance of possessory rights, application for mineral patents, defense of mining claims, and representation in quiet title suits  and representing Gulf before the New Mexico State Legislature on a variety of issues. GAC contends that because Gulf's uranium production activities in New Mexico became an issue in this case, there is a substantial relationship between the Bigbee firm's past representation of Gulf and its present representation of United in this case, and a concomitant danger that confidential information given to the Bigbee firm in its prior representation might be used against Gulf's interests in the present action. United argues that there was no substantial relationship between its representation of Gulf and United; that Gulf consented to any conflicting representation; and that by delaying raising the disqualification issue, Gulf and GAC were estopped from asserting it. We believe that the substantial relationship test is the proper standard by which motions to disqualify counsel are to be judged under Canon 4 of the Code of Professional Responsibility, which provides that a lawyer must preserve the confidences and secrets of a client. Simply stated, the substantial relationship standard requires disqualification where an attorney's represents a party in a matter in which the adverse party is that attorney's former client, [and] the subject matter of the two representations are `substantially related.' Westinghouse Elec. Corp. v. Gulf Oil Corp., 588 F.2d 221, 223 (7th Cir.1978), rev'g Westinghouse Elec. Corp. v. Rio Algom, Ltd., 448 F. Supp. 1284, 1310-12 (N.D. Ill. 1978). In the Westinghouse decision, the Seventh Circuit Court of Appeals found that the substantial relationship test had been satisfied, and reversed the district court's denial of Gulf's motion to disqualify the Bigbee firm from representing United in the Westinghouse uranium litigation. We think that the approach taken by the Seventh Circuit was the proper one. Because the facts and law are fully set forth in its decision, we will not further elaborate on the substantial relationship question. The substantial relationship standard does not, however, entirely dispose of the question of the propriety of the Bigbee firm's professional conduct in this affair. From the filing of the predecessor to this case on August 8, 1975, to the present time, United has alleged that GAC and Gulf have committed various tortious acts in New Mexico and have violated the New Mexico Antitrust Act. United, represented at all times by the Bigbee firm, has repeatedly asserted that by its action in acquiring, and allegedly delaying production from, its Mt. Taylor reserves, Gulf has committed antitrust violations. For the Bigbee firm to be making these accusations on behalf of United, at the same time that it was continuing to represent Gulf with respect to these very reserves, raises a second ethical question of serious dimensions. The propriety of an attorney making such allegations against a current, rather than a former client, must be measured not so much against the similarities in litigation, as against the duty of undivided loyalty which an attorney owes to each of his clients.       Under the Code, the lawyer who would sue his own client, asserting in justification the lack of substantial relationship between the litigation and the work he has undertaken to perform for that client, is leaning on a slender reed indeed. [141] Cinema 5, Ltd. v. Cinerama, Inc., 528 F.2d 1384, 1386 (2nd Cir.1976). See Canon 5-105 of the Code of Professional Responsibility; [142] State v. Aguilar, 87 N.M. 503, 504, 536 P.2d 263, 264 (Ct.App. 1975); Fund of Funds, Ltd. v. Arthur Andersen & Co., 567 F.2d 225, 232-35 (2nd Cir.1977). United argues that the Bigbee firm's conduct in this litigation was in accord with both the letter and spirit of the highest ethical standards of the bar. We do not agree. However, a violation of professional ethics does not ... automatically result in disqualification of counsel. [143] [E]thical problems cannot be resolved in a vacuum. [144] In disqualification cases, judges cannot exclude from their minds realities of which fair decision would call for judicial notice. [145] Because a disqualification motion is of an equitable nature, [146] it is appropriate to consider the prior conduct and statements of the movant and its attorneys on the question of the movant's good faith and credibility in connection with the motion to disqualify. [147] A motion to disqualify opposing counsel should be filed at the onset of the litigation, [148] or with promptness and reasonable diligence once the facts upon which the motion is based have become known. [149] A failure to act promptly may warrant denial of the motion. [150] GAC's delay in raising the disqualification issue  considered in the context of United's allegations against it and GAC's conduct throughout the proceedings in the trial court  casts serious doubt on the good faith with which the motion was made. GAC's motion to disqualify the Bigbee firm was filed after twenty months of litigation with United. During this period very extensive pretrial proceedings were conducted in the trial court, and GAC had sought appellate review of several of its decisions both in this Court and the United States Supreme Court. E.g. General Atomic Co. v. Felter, supra, 90 N.M. 120, 560 P.2d 541, rev'd, General Atomic Co. v. Felter, supra, 434 U.S. 12, 98 S.Ct. 76, 54 L.Ed.2d 199, and United Nuclear Corp. v. General Atomic Co., supra, 90 N.M. 97, 560 P.2d 161. At no time during any of these proceedings was the disqualification issue raised. GAC finally moved to disqualify the Bigbee firm only after two actions it had filed against United in federal court had been dismissed ( see n. 84, supra ); after the trial court in this case had found GAC's answers to the First Set of Interrogatories to be deficient; after United had twice moved for a default judgment for GAC's discovery failures; after the trial court had twice warned that sanctions would be imposed for further failures; after the court had held on at least five separate occasions in as many months that the partners were subject to discovery; after this Court had upheld the trial court's personal jurisdiction over GAC; and after United had raised Gulf's participation in the international uranium cartel as an issue. In this context, GAC's disqualification motion would seem to have been motivated more by a desire to fragmentize the [opposition] than by any sensitivity to the ethical considerations involved. Aetna Cas. & Sur. Co. v. United States, 570 F.2d 1197, 1201, n. 7 (4th Cir.1978), cert. denied, 439 U.S. 821, 99 S.Ct. 87, 58 L.Ed.2d 113 (1978). [151] The delay in raising the issue could hardly be ascribed to a lack of understanding. GAC and its constituent partners have been represented in this case by large and experienced law firms from throughout the country. [152] GAC seeks to excuse its delay in raising the disqualification issue by asserting that the legal basis for the Bigbee firm's conflict did not become clear until the court had held that Gulf and Scallop were subject to its discovery orders. Under the terms of United's original discovery requests of December 1975, to which GAC made no objection, the partners were required to provide discovery. Contrary to GAC's representation, it was not in January 1977, but in November 1976, when the court first held that the partners were subject to its discovery orders. GAC waited almost four months after the November order before moving to disqualify the Bigbee firm. GAC further seeks to excuse its delay by asserting that Gulf's Mt. Taylor uranium operations did not become an issue until early 1977. This excuse is also without merit. The complaint in this case alleged that GAC and Gulf had violated the antitrust laws of New Mexico by restricting trade in, and attempting to monopolize, the uranium market. [153] In light of the fact that the Mt. Taylor reserves are the most significant of Gulf's proven domestic uranium reserves and are the largest single body of uranium ore in the United States, it is clear that these reserves were pertinent to these antitrust allegations. [154] In pleadings filed over one year before the motion to disqualify the Bigbee firm was filed, United charged that Gulf's huge uranium reserves ... in New Mexico ... are part and parcel of the antitrust violations with which General Atomic is charged. United's counsel also alleged that GAC was trying with this partner Gulf to monopolize uranium in New Mexico. He said: That is what this suit is all about. United's reply to GAC's counterclaim, filed in June 1976, directly tied its antitrust allegations to Gulf's Mt. Taylor reserves. In the Westinghouse litigation there was no evidence that Gulf belatedly raised the issue of the disqualification of the Bigbee firm. Furthermore, in that case there was a continuing possibility of the misuse of confidential information against Gulf by the Bigbee firm. [155] In the present case there is no such prospect. GAC nevertheless contends that the judgment entered against it for its discovery failures must be reversed  including all discovery orders entered after the disqualification motion was filed  in order to uphold standards of ethics for the bar. To accept GAC's position would permit a party to virtually ignore its obligation to follow the rules of discovery and the specific orders of the court, and then entirely escape liability for such misconduct by belatedly asserting a motion to disqualify opposing counsel. In such circumstances, we decline to reverse a judgment that is not tainted by the Bigbee firm's conflict and is otherwise supported by the record. See W.T. Grant Co. v. Haines, supra, 531 F.2d at 677.