Court Opinion

ID: 4284565
Source: CourtListenerOpinion
Date Created: 2018-06-15 00:00:22.30513+00
Date Added: 2024-06-11T14:35:21.862674
License: Public Domain

Case: 17-40609      Document: 00514513182         Page: 1    Date Filed: 06/14/2018

           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT   United States Court of Appeals
                                                                               Fifth Circuit

                                                                              FILED
                                                                           June 14, 2018
                                      No. 17-40609
                                                                           Lyle W. Cayce
                                                                                Clerk
DIAMOND CONSORTIUM, INCORPORATED, doing business as Diamond
Doctor; DAVID BLANK,

               Plaintiffs - Appellees

v.

MARK HAMMERVOLD; HAMMERVOLD, P.L.C.,

               Defendants - Appellants

                   Appeal from the United States District Court
                        for the Eastern District of Texas
                              USDC No. 4:16-CV-94

Before HIGGINBOTHAM, SMITH, and CLEMENT, Circuit Judges.
PER CURIAM:*
       Mark Hammervold filed an interlocutory appeal, requesting that this
court reverse the district court’s denial of his motion to represent himself and
his firm, Hammervold PLC. Also implicit in the appeal is whether the district
court erred in denying defense counsel’s motion to withdraw. For the reasons
that follow, we AFFIRM.

       * Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
    Case: 17-40609    Document: 00514513182        Page: 2   Date Filed: 06/14/2018

                                    No. 17-40609
                               Facts & Proceedings
      In the dispute underlying this appeal, diamond wholesaler, Diamond
Consortium, Inc. (“Diamond Doctor”), claimed that Mark Hammervold and his
law firm, Hammervold PLC, conspired with attorneys Brian Manookian and
Brian Cummings to tarnish its reputation and to force it to enter settlement
agreements    in   violation   of   the   Racketeer    Influenced   and    Corrupt
Organizations Act (“RICO”) and Texas civil conspiracy common law. As part of
that litigation, Diamond Doctor sought and obtained a protective order
designating certain discovery materials “Attorneys’ Eyes Only” due to concerns
that Hammervold and Manookian would publicize customer information.
      On May 2, 2017, Manookian and Cummings filed an application to
appear pro hac vice before the district court. On May 9, 2017, Manookian and
Cummings then requested that the district court modify the protective order
and remove the “Attorneys’ Eyes Only” designation because the Attorney
Defendants appeared as counsel in the case and were entitled to fully
participate in their own defense. Diamond Doctor objected. Hammervold,
Hammervold PLC, and Hammervold’s defense counsel, Varant Yegparian,
then filed a motion seeking permission for Yegparian to withdraw as counsel
and for Hammervold to take over as counsel for himself and Hammervold PLC.
      The motion argued that there was good cause for Yegparian to withdraw
because “Hammervold has instructed Counsel that there are not sufficient
resources to pay Counsel’s fee through trial.” Hammervold contended that
nearly all of his professional liability insurance policy was exhausted, so
continued representation by Yegparian would strain both Yegparian’s and
Hammervold’s resources. The district court denied the motion to withdraw,
reasoning that Yegparian had failed to show good cause for withdrawal
because he failed to produce evidence that Hammervold’s insurance proceeds
were depleted or to show Hammervold’s individual inability to pay. The district
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                                 No. 17-40609
court also explained that Yegparian failed to demonstrate that withdrawal
would not prejudice other parties or the administration of justice, especially
with respect to the information covered by the protective order.
      The district court also denied Hammervold’s request to appear on behalf
of Hammervold PLC, citing case law denying a similar request due to the
advocate-witness rule. Finally, the court acknowledged that Hammervold
timely sought to appear pro se, but it denied the request because allowing him
to represent himself would result in “hybrid representation.”
                             Standard of Review
      The motion to withdraw as counsel “is a ‘matter entrusted to the sound
discretion of the [district] court and will be overturned on appeal only for an
abuse of that discretion.’” In re Wynn, 889 F.2d 644, 646 (5th Cir. 1989)
(quoting Streetman v. Lynaugh, 674 F. Supp. 229, 234 (E.D. Tex. 1987)). The
court reviews the district court’s application of the advocate-witness rule to
disqualify Hammervold from representing Hammervold PLC de novo. See
Horaist v. Doctor’s Hosp. of Opelousas, 255 F.3d 261, 266 (5th Cir. 2001).
Because the right to proceed pro se is a statutory right, and because the court
reviews a district court’s interpretation of a statute de novo, we review its
denial of Hammervold’s motion to proceed pro se de novo. T.B. ex rel. Debbra
B. v. Bryan Indep. Sch. Dist., 628 F.3d 240, 243 (5th Cir. 2010).
                                  Discussion
                                       1.
      The district court denied Hammervold’s motion to represent his law firm,
Hammervold PLC. It determined that Hammervold would supply nearly all of
the critical testimony for the case and found that he would be a necessary
witness. To allow Hammervold to play the roles of corporate counsel, pro se
party, and witness would create a substantial risk of jury confusion. See Tex.

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                                     No. 17-40609
Disciplinary Rules Prof’l Conduct R. 3.08 cmt. 4. 1 In denying Hammervold’s
corporate representation request, the district court’s decision ensured that the
bulk of the testimonial evidence was not tainted by Hammervold’s multi-
faceted participation in the case. Insofar as the district court suspected—as
seemingly apparent from the proceedings and the parties’ behavior—that the
substitution of counsel was an attempted end-run around the protective order,
disqualifying Hammervold was an appropriate measure to preserve the
integrity of the proceedings and to uphold order. See McCuin v. Tex. Power &
Light Co., 714 F.2d 1255, 1263 (5th Cir. 1983). We affirm the district court’s
determination that the ethical concerns outweighed the corporation’s right to
counsel and therefore it did not err in holding that Hammervold PLC must be
represented by a licensed attorney other than Hammervold.
                                            2.
       The district court similarly denied Hammervold’s request to proceed pro
se. Hammervold immediately sought to proceed pro se in response to the
motion for a protective order modification. This was likely a tactical move to
gain access to sensitive information Diamond Doctor sought to protect from
Hammervold in particular. That Diamond Doctor had to file the underlying
lawsuit to protect its business interest and stop Hammervold’s exploitation of

       1Rule 3.08(a) of the Texas Disciplinary Rules of Professional Conduct—adopted by
the Eastern District of Texas as an ethics guide, see Local Rule AT-2, provides:

      A lawyer shall not accept or continue employment as an advocate before a
      tribunal in a contemplated or pending adjudicatory proceeding if the lawyer
      knows or believes that the lawyer is or may be a witness necessary to establish
      an essential fact on behalf of the lawyer’s client[.]

One of the comments to this Rule explains that this is particularly important when “the
lawyer’s testimony concerns a controversial or contested matter” because “combining the
roles of advocate and witness can unfairly prejudice the opposing party.” Tex. Disciplinary
Rules Prof’l Conduct R. 3.08 cmt. 4.

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                                      No. 17-40609
its client base is evidence enough of Hammervold’s motive to gain access to the
sensitive documents. Hammervold’s attempt to make himself counsel of record
is forbidden “obstructionist misconduct.” Faretta v. California, 422 U.S. 806,
834 n.46 (1975). As such, the district court did not err when it denied
Hammervold’s motion to proceed pro se. 2
                                            3.

       Finally, we address the district court’s denial of counsel’s motion to
withdraw. “An attorney may withdraw from representation only upon leave of
the court and a showing of good cause and reasonable notice to the client.” In
re Wynn, 889 F.2d at 646. Under the Texas Disciplinary Rules of Professional
Conduct, good cause may exist if, among other factors, withdrawal will not
adversely affect the client, the client fails to pay the lawyer’s fee, or continued
representation will result in financial hardship to the lawyer. See Tex.
Disciplinary Rule Prof’l Conduct R. 1.15(b).
       Hammervold’s motion failed to include any evidence regarding the
amount remaining on Hammervold’s insurance policy or other ability to pay
for representation. The motion acknowledged that Yegparian bears the burden
of showing good cause, but it did not state that Hammervold had discharged
Yegparian. The motion similarly failed to address the prejudice to Diamond
Doctor and the effects on the administration of justice that would likely result
by the substitution of Hammervold as counsel. See McCuin, 714 F.2d at 1263.
The district court appropriately weighed the prejudicial effects of Hammervold
taking over as counsel in denying the motion.

       2 The district court also discussed that Hammervold’s pro se representation would
lead to prohibited “hybrid representation.” The court refrains from adopting the district
court’s determination that Hammervold PLC is legally indistinguishable from Hammervold
as an individual defendant. Instead, the court reiterates the long-accepted principle that a
corporation is separate from its shareholders, even where the corporation has a sole
shareholder.
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Case: 17-40609   Document: 00514513182   Page: 6   Date Filed: 06/14/2018

                          No. 17-40609
                              ***
 AFFIRMED.

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