Court Opinion

ID: 9857872
Source: CourtListenerOpinion
Date Created: 2023-09-24 16:04:49.086965+00
Date Added: 2024-06-11T09:47:12.749599
License: Public Domain

MOORE, Chief Justice
(dissenting).
I concur in the majority opinion except that part of Division III B. which holds the trial court must appoint independent counsel for LeMars and DeWitt. That holding is entirely unsupported by any statute or reported case law.
Research reveals only two reported decisions directly deciding the issue of who shall *917appoint counsel for the corporation when a potential conflict is found by virtue of dual representation of corporate and individual defendants.
In Yablonski v. United Mine Workers, 1971, 145 U.S.App.D.C. 252, 448 F.2d 1175, counsel for union officers were disqualified from representing the union, but appointment of new counsel was left to the union officers. The court recognized the problem addressed by the majority here, but was not inclined to interfere with the selection of counsel. At page 1182 of 448 F.2d the court says:
“We are cognizant that any counsel to represent the UMWA selected by President Boyle will be to some degree under his control. But such counsel will still only have one client — the UMWA — to represent in matters growing out of the union’s affairs. Such counsel would never be professionally obligated to consider Boyle’s personal interests, because they would not be representing him individually in related matters. And the extent of their labors would be gauged by the need to protect the UMWA position in this litigation.”
Lewis v. Shaffer Stores Co., S.D.N.Y.1963, 218 F.Supp. 238, involved appointment of independent counsel for the corporation in a stockholders’ derivative action against corporate directors and insiders. Regarding dual representation by the law firm of Breed, Abbott & Morgan the court at pages 239, 240 states:
“The question, however, is whether Breed, Abbott & Morgan should also appear for the corporation. The answer admits that the defendant stockholder owns a majority of Williams Stock and that there are approximately 1,137 common stockholders of the corporation.
“The interests of the officer, director and majority stockholder defendants in this action are clearly adverse, on the face of the complaint, to the interests of the stockholders of Williams other than defendants. I have no doubt that Breed, Abbott & Morgan believe in good faith that there is no merit to this action. Plaintiff, of course, vigorously contends to the contrary. The court cannot and should not attempt to pass upon the merits at this stage. Under all the circumstances, including the nature of the charges, and the vigor with which they are apparently being pressed and defended, I believe that it would be wise for the corporation to retain independent counsel, who have had no previous connection with the corporation, to advise it as to the position which it should take in this controversy. See Garlen v. Green Mansions, Inc., 9 A.D.2d 760, 193 N.Y.S.2d 116 (1st Dept. 1959); Marco v. Dulles, supra [169 F.Supp. 622 (S.D.N.Y.1959)].
“The fact that the selection of such independent counsel will necessarily be made by officers and directors who are defendants does not seem to me to present any insuperable difficulty. Plaintiff’s motion is therefore granted to the extent of striking out the answer of Williams and the appearance of Breéd, Abbott & Morgan as attorneys for Williams.”
In 74 Yale Law Journal 525 the editor in “Independent Representation For Corporate Defendants in Derivative Suits” observes and discusses the scant number of cases on the subject. At page 533 the editor writes:
“ * * * the question of how a court can implement a decree barring dual representation remains. The only solution presented by decisions to date is illustrated by the order of the Lewis case: the corporation was simply advised to ‘retain independent counsel who have had no previous connections with the corporation.’ ”
Relying on the unreported case of Niedermeyer v. Niedermeyer, [1973 Transfer Binder] CCH Fed.Sec.L.Rep. ¶ 94,123 (D.Ore. Aug. 21, 1973), the majority orders the trial court to select independent counsel for each corporation, LeMars and DeWitt.
*918In Niedermeyer plaintiffs asserted defendants, some as principals and others as aiders and abettors, were liable for an alleged fraudulent scheme in connection with the sale of American Timber and Trading Co., Inc. (ATT) stock. On trial, Judge Sko-pil denied plaintiffs any recovery. However the court observed the evidence revealed some of the parties may have wasted corporate assets. He found a substantial conflict of interest between some plaintiffs and ATT. He announced, “I intend to appoint an independent attorney to represent the interest of ATT in this case.” No authority was cited for this su a sponte decision. Judge Skopil delayed further trial to afford new counsel time to prepare and present any further evidence. Subsequent disposition of the case is not shown in the opinion.
Judge Skopil’s opinion includes, “ATT has been liquidated and is not a going corporation.” Therefore it is clear if the issue of wasted assets was to be determined appointment of counsel could only be made by the court.
Niedermeyer is no authority for the majority opinion order to the trial court to appoint counsel for LeMars and DeWitt. Each is in full operation. DeWitt is a substantive defendant. This case is only in the pleading stage.
The majority states, “The court is faced with a dilemma.” If so, it should not be made worse. Who pays the court appointed counsel in this civil litigation? Must each corporation be denied choice of counsel and be required to pay expenses and fees? They may well run into several thousand dollars. Should plaintiffs be required to post a cost bond to secure payment?
The majority order for trial court appointment of counsel for each of the two corporations ignores the safeguards of the adversary process. It may be constitutionally infirm, raising questions of deprivation of property without due process of law and infringement upon right to choose counsel.
The majority holding is unprecedented, unwarranted and unwise. I would hold each corporation should select counsel having no previous connection with the corporation or any of its officers or directors.
LeGRAND, J., joins in this dissent.