Court Opinion

ID: 1032647
Source: CourtListenerOpinion
Date Created: 2013-07-09 18:54:24.924261+00
Date Added: 2024-06-11T09:19:13.057250
License: Public Domain

Realty. Haines and Krieger requested that Fenn and Howard obtain
                advice on behalf of all the named defendants in the Merit complaint. On
                December 17, 2010, Fenn and Howard met with Adam Levine of the Law
                Office of Daniel Marks to discuss the demand letter and Merit complaint.
                The parties dispute many of the facts surrounding this consultation. The
                real parties in interest allege that Fenn and Howard provided Levine with
                confidential and in-depth details regarding facets of H&K Realty. The
                petitioners allege that Fenn and Howard never indicated they were
                seeking advice on the behalf of Haines and Krieger. After Merit Realty
                filed its complaint, all of the defendants chose different representation
                than Levine and the Law Office of Daniel Marks.
                           A year later, Levine, on behalf of Michael Richman, a former
                client of the H&K Law Firm; Luzviminda 0. Dapat; and Michael Richman
                Marketing Company, LLC, (collectively, the Richman Parties) filed a
                complaint against Haines, Krieger, the H&K Law Firm, and Haines &
                Krieger Loan Modifications, LLC (collectively, the H&K Parties). The
                Richman Parties had been involved in a joint venture regarding loan
                modifications with Haines and Krieger that dissolved in November 2010.
                            On July 20, 2011, the H&K Parties filed a motion to disqualify
                the Law Office of Daniel Marks based on their status as prospective
                clients to Levine and an alleged conflict of interest under Nevada Rule of
                Professional Conduct (NRPC) 1.18. The H&K Parties alleged that the
                Richman Parties' complaint included specific allegations arising out of
                Fenn and Howard's discussion with Levine during their initial
                consultation about the formation and operation of H&K Realty.
                            On January 30, 2012, the district court entered its order
                granting the motion to disqualify and nearly four months later, denied the

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                Richman Parties' motion for rehearing. It did not hold an evidentiary
                hearing regarding the contested issues of fact surrounding the information
                disclosed during Fenn and Howard's initial consultation with Levine. The
                Richman Parties filed an original petition for writ of mandamus
                challenging the district court's orders, arguing that the district court
                manifestly abused its discretion by disqualifying their counsel under
                NRPC 1.18 and abused its discretion by failing to hold an evidentiary
                hearing as to contested issues of fact.
                The district court did not manifestly abuse its discretion in disqualifying
                the Richman Parties' counsel pursuant to NRPC 1.18
                            "A writ of mandamus is properly used to challenge a district
                court's order disqualifying counsel." Brown v. Eighth Judicial Dist. Court,
                116 Nev. 1200, 1206, 14 P.3d 1266, 1271 (2000). "A writ of mandamus is
                available to compel the performance of an act that the law requires or to
                control an arbitrary or capricious exercise of discretion."   Nevada Yellow
                Cab Corp. v. Eighth Judicial Dist. Court, 123 Nev. 44, 49, 152 P.3d 737,
                740 (2007); see also NRS 34.160.
                            The district court has broad discretion in attorney
                disqualification matters, and we will not overturn the district court's
                decision absent a manifest abuse of that discretion.    Nevada Yellow Cab
                Corp., 123 Nev. at 54, 152 P.3d at 743. Disqualification may be necessary
                to prevent disclosure of confidential information that may be used to an
                adverse party's disadvantage. Id. at 53, 152 P.3d at 743. "[D]oubts should
                generally be resolved in favor of disqualification."    Brown, 116 Nev. at
                1205, 14 P.3d at 1270. District courts are faced with a "difficult task of
                balancing competing interests: the right to be represented by counsel of
                one's choice, each party's right to be free from the risk of even inadvertent

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                 disclosure of confidential information, and the public's interest in the
                 scrupulous administration of justice." Id. at 1205, 14 P.3d at 1269-70.
                               To prevail on a motion for disqualification, the moving party
                 must establish: (1) "at least a reasonable possibility that some specifically
                 identifiable impropriety did in fact occur,' and (2) 'the likelihood of public
                 suspicion or obloquy outweighs the social interests which will be served by
                 a lawyer's continued participation in a particular case."    Brown, 116 Nev.
                 at 1205, 14 P.3d at 1270 (quoting Cronin v. Eighth Judicial Dist. Court,
                  105 Nev. 635, 641, 781 P.2d 1150, 1153 (1989), disapproved of by Nevada
                  Yellow Cab Corp., 123 Nev. at 54 n.26, 152 P.3d at 743 n.26).
                               NRPC 1.18(b) states that even when no attorney-client
                 relationship is formed, a lawyer shall not use or reveal information
                 learned in a consultation with a prospective client, "except as Rule 1.9
                 would permit with respect to information of a former client." NRPC
                  1.18(c) prohibits lawyers from representing clients with interests that are
                 materially adverse to those of prospective clients in the same or
                 substantially related matters when the lawyer receives "information from
                 the prospective client that could be significantly harmful to that person in
                 the matter. . . ." Further, NRPC 1.18(c) disqualifies all lawyers in the

                        'Rule 1.9 prohibits an attorney's representation of a new client if the
                 matter is (1) substantially similar to that of a former client, (2) materially
                 adverse to that former client, and (3) the attorney acquired confidential
                 information from the former client that is relevant to the new matter. In
                 these cases, the former client must give informed, written consent before
                 the attorney can represent the new client. See NRPC 1.9(a) and (b)(3).
                 NRPC 1.9(c) prohibits lawyers from using or revealing information
                 relating to a former client except as the "Rules would permit or require
                 with respect to a client." In other words, the former client would need to
                 provide informed, written consent.

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                iNIER11   COMMESMEE   ENM   MEI4NE
                firm of the disqualified lawyer, except for narrow exceptions. These
                exceptions allow representation if: (1) the affected client and prospective
                client give informed, written consent; or (2) the lawyer who received the
                information took reasonable measures to avoid exposure to more
                disqualifying information, is timely screened, and written notice is given
                to the prospective client. See NRPC 1.18(d).
                            Given the similarities between NRPC 1.9 and NRPC 1.18, we
                turn to case law discussing disqualification under NRPC 1.9 for guidance.
                In Nevada Yellow Cab Corp., we concluded that disqualifications under
                NRPC 1.9 require the moving party to show: "(1) that it had an attorney-
                client relationship with the lawyer, (2) that the former matter and the
                current matter are substantially related, and (3) that the current
                representation is adverse to the party seeking disqualification." 123 Nev.
                at 50, 152 P.3d at 741. Thus, disqualifications under NRPC 1.18 should
                require the moving party to show that (1) it was a prospective client of the
                lawyer, (2) the current matter and the former matter are substantially
                related, (3) the current representation is adverse to the party seeking
                disqualification, and (4) the lawyer received confidential information that
                could be significantly harmful to the moving party.              See NRPC 1.18(c); see
                also Factory Mut. Ins. Co. v. APComPower, Inc., 662 F. Supp. 2d 896, 900
                (W.D. Mich. 2009) (concluding that motions to disqualify premised on RPC
                1.18 "should be analyzed the same as a motion to disqualify pursuant to a
                former client relationship with the additional requirement that the lawyer
                receive information that could be 'significantly harmful"); Sturdivant v.
                Sturdivant, 241 S.W.3d 740, 746-47 (Ark. 2006) (applying Arkansas'
                version of RPC 1.18, a wife's lawyer in a custody matter was disqualified
                because the husband had consulted with a member of the lawyer's firm

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                                  and disclosed confidential information concerning the children and former
                                  wife that could be significantly harmful to the husband, the moving party).
                                        Substantial evidence supported the district court's finding that the
                                        H&K Parties were prospective clients for purposes of NRPC 1.18
                                                   The Richman Parties argue that the H&K Parties were not
                                  prospective clients, and NRPC 1.18 does not recognize a prospective client
                                  by agency. We disagree.
                                                   We review a . district court's factual determinations
                                  deferentially and will not overturn such findings if supported by
                                  substantial evidence, unless clearly erroneous. Ogawa v. Ogawa, 125 Nev.
                                  660, 668, 221 P.3d 699, 704 (2009). NRPC 1.18(a) defines a prospective
                                  client as "[a] person who discusses with a lawyer the possibility of forming
                                  a client-lawyer relationship with respect to a matter is a prospective
                                  client." We have previously recognized third-party standing in
                                  disqualification matters and numerous jurisdictions recognize prospective
                                  clients by agency or through third-parties. See Liapis v. Second Judicial
                                  Dist. Court, 128 Nev. „ 282 P.3d 733, 737-38 (2012) (citations
                                  omitted) (concluding that standing to bring a motion to disqualify based on
                                  a third-party conflict of interest involves establishing that (1) the lawyer's
                                  representation impacts a legal interest because a "specifically identifiable
                                  impropriety has occurred," (2) an ethical breach "infects the litigation," or
                                  (3) there is a "breach of the duty of confidentiality owed to the complaining
                                  party, regardless of whether a lawyer-client relationship existed"); see also
                                  Jack Eckerd Corp. v. Dart Grp. Corp., 621 F. Supp. 725, 732 (D. Del.
                                  1985); Matter of King Res. Co., 20 B.R. 191, 198 (D. Colo. 1982); In re
                                  Modanlo, 342 B.R. 230, 235-36 (D. Md. 2006); Harkobusic v. Gen. Am.
                                  Transp. Corp., 31 F.R.D. 264, 266 (W.D. Pa.1962); Grand Jury Proceedings
                                  Under Seal v. United States, 947 F.2d 1188, 1191 (4th Cir. 1991).
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                            We conclude that substantial evidence supported the district
                court's finding that Fenn and Howard consulted with Levine regarding the
                potential liability of the defendants in the Merit complaint, which included
                Fenn and Howard as well as the H&K Law Firm, H&K Realty, Haines,
                and Krieger. The parties dispute what was actually discussed at the
                initial consultation, but, at the initial consultation, Fenn produced the
                Merit complaint and demand letter that alleged wrongdoing by Fenn,
                Howard, Haines, Krieger, H&K Realty, and the H&K Law Firm. Fenn
                also listed his place of employment as H&K Realty on the new client
                information sheet during the initial consultation, and Levine sent the
                draft retainer agreement to Fenn's H&K Realty email address. Levine
                should have been aware of the potential for representing all defendants
                involved. Haines and Krieger attest that they asked Fenn and Howard to
                obtain legal advice because the Merit demand letter required a response
                by December 17, 2010. Haines and Krieger did not seek the advice of
                separate counsel before this deadline. The H&K Law Firm reimbursed
                Fenn for the consultation. These facts provided substantial evidence to
                support the district court's finding that all defendants became prospective
                clients of Levine and the Law Office of Daniel Marks.
                      Substantial evidence supported the district court's findings, under
                      NRPC 1.18, that the current matter is substantially similar to the
                      former matter, the current representation would be adverse to the
                      H&K Parties, and confidential information was received and could
                      be harmful to the H&K Parties
                            The Richman Parties argue that their interests were not
                materially adverse to Fenn or Howard and did not involve the "same or
                substantially-related matter" to the Merit action. The Richman Parties
                further argue that respondents have failed to demonstrate how any

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                   information communicated by Fenn or Howard would be significantly
                   harmful or that an impropriety occurred. 2 We disagree.
                                 Whether two matters are substantially related requires the
                   district court to make a factual determination.            See Waid v Eighth
                   Judicial Dist. Court, 121 Nev. 605, 610, 119 P.3d 1219, 1223 (2005)
                   (discussing how to determine whether two matters were substantially
                   related as it relates to disqualification under former SCR 159, equivalent
                   to NRPC 1.9). In Waid, we adopted a three-part test for determining
                   whether a former and present matter are substantially related: the
                   district court must "(1) make a factual determination concerning the scope
                   of the former representation, (2) evaluate whether it is reasonable to infer
                   that the confidential information allegedly given would have been given to
                   a lawyer representing a client in those matters, and (3) determine whether
                   the information is relevant to the issues raised in the present litigation."
                   Id.
                                 The district court, here, found that "[i]t is 'reasonable to infer'
                   that Mr. Levine received confidential information from Messrs. Fenn and
                   Howard during the meeting on December 17, 2010 [sic] related to the

                         2 The Richman Parties argue that the H&K Parties waived their
                   right to seek disqualification by waiting too long to seek disqualification.
                   However, the H&K Parties could not adequately file a motion for
                   disqualification before the Richman Parties filed their complaint because
                   its contents would have been unknown. The H&K Parties filed their
                   motion to disqualify just over a month after the Richman Parties filed
                   their complaint on June 10, 2011. Delay alone is insufficient to establish a
                   waiver and the H&K Parties did not relinquish a known right.              See
                   Nevada Yellow Cab Corp., 123 Nev. at 48-50, 152 P.3d at 740-41 (holding
                   hat a delay of two years was not sufficient to waive rights when counsel's
                   conduct did not demonstrate a clear intent to relinquish its right to
                   challenge the potential conflict).

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                     formation and operation of H&K Realty," and such information "is
                     relevant to the issues raised in this litigation."
                                   The H&K Parties contend that there were at least five
                     allegations in the Richman complaint directly relating to the confidential
                     information regarding the formation and operation of H&K Realty that
                     Fenn and Howard conveyed to Levine. The Richman complaint alleges
                     that the Richman Parties "developed the idea that they could become a
                     one-stop shop for shorts [sic] sales, residential loan modifications and
                     commercial loan modifications" and approached the H&K Parties about
                     the idea. The complaint also alleges that "[f]rom February 2010 through
                     approximately September 2010 Plaintiffs Richman and Dapat organized
                     and created the Haines and Krieger short sale department. Defendant
                     Haines informed Plaintiffs that they wanted Dapat to do all of the listings
                     and pay the Defendants a kick back in the form of a marketing fee." The
                     Richman complaint further alleges that "[the H&K Parties] gave control of
                     the short sale department to someone other than Plaintiff Dapat." The
                     H&K Parties assert that this reference to "someone other" is H&K Realty,
                     Fenn, and Howard. The Richman complaint's cause of action for quantum
                     merit alleges that the Richman Parties provided uncompensated services
                     to the H&K Parties, including the creation of the H&K short sale
                     department and loan modification department in Arizona.
                                   There is sufficient information to support the district court's
                     determination that Fenn and Howard consulted with Levine regarding the
                     potential liability regarding all defendants in the Merit complaint, that
                     the information given to Levine would have related to the formation and
                     operation of H&K Realty, that this information would have been given to
                     the H&K Parties' counsel in the Merit action, and that it is relevant to the

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                  present litigation. There is sufficient evidence to support a conclusion that
                  the Merit action is substantially similar to the Richman Parties' action.
                  See Waid, 121 Nev. at 610, 119 P.3d at 1223.
                                 The district court also found that "[i]nformation learned by
                  Mr. Levine and the Marks Law Office from Messrs. Fenn and Howard
                  could be significantly harmful to the Defendants [the H&K Parties] . . . if
                  used in this matter." Specifically, information related to the formation
                  and operation of H&K Realty could be harmful. The district court further
                  found that Levine, the Law Office of Daniel Marks, and the Richman
                  Parties did not provide informed, written consent regarding the
                  representation. We conclude that substantial evidence supported the
                  district court's finding that the Richman Parties' interests are materially
                  adverse, and the information learned could be significantly harmful to the
                  H&K Parties.
                                 Based on the record, the district court also weighed the
                  varying interests of the parties and that of the public as required by
                  Brown. See Brown v. Eighth Judicial Dist. Court, 116 Nev. 1200, 1205, 14
                  P.3d 1266, 1269-70 (2000). Therefore, we conclude that the district court
                  did not manifestly abuse its discretion when it granted the H&K Parties'
                  motion to disqualify because it properly considered the competing
                  interests involved. See Nevada Yellow Cab Corp., 123 Nev. at 54, 152 P.3d
                  at 743 (noting that the district court was more familiar with the case than
                  this court and had the best opportunity to evaluate the validity of a
                  disqualification) . 3

                         3 The
                             Richman Parties also argue that Levine can still be timely
                  screened from this matter, so this court should not impute disqualification
                  to the Law Office of Daniel Marks. We conclude that it is too late to
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                The district court did not abuse its discretion in determining that an
                evidentiary hearing was not required
                            The Richman Parties argue that the district court should have
                conducted an evidentiary hearing to resolve disputed issues of material
                fact prior to the disqualification to determine what Fenn and Howard
                actually told Levine. The Richman Parties argue that NRPC 1.18 requires
                at least some disclosure of the information discussed at the prospective
                client consultation. We disagree.
                            A district court, in determining the nature of a hearing, should
                ensure that the parties present sufficient information to support its
                decision. Bahena v. Goodyear Tire & Rubber Co., 126 Nev.             , 235
                P.3d 592, 601 (2010). 4 Under NRPC 1.9, we have explained that "[i]n
                proving that a prior representation is substantially related to present
                litigation . . . the moving party is not required to divulge the confidences
                actually communicated, nor should a court inquire into whether an

                ...continued
                properly screen Levine. See Ryan's Express v. Amador Stage Lines, 128
                Nev. , 279 P.3d 166, 172 (2012) (discussing that "the timing of
                implementation of screening measures in relation to the occurrence of the
                disqualifying event is relevant in determining whether the screen was
                properly erected"). Levine has already worked on substantive portions of
                the case, made multiple appearances, and filed motions on behalf of the
                Richman Parties. The record also does not indicate that Levine took any
                reasonable steps to avoid exposure to disqualifying information.

                      4 Recently, we concluded that an evidentiary hearing was required
                when determining whether a lawyer has been properly screened. Ryan's
                Express, 128 Nev. at , 279 P.3d at 173. This case is distinguishable
                because screening determinations are not as likely to involve confidential
                attorney-client communications. Therefore, the determination of whether
                to hold an evidentiary hearing involving disqualifications based on
                prospective clients remains in the district court's discretion.

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                    attorney actually acquired confidential information in the prior
                    representation which is related to the current representation."    Robbins v.
                    Gillock, 109 Nev. 1015, 1018, 862 P.2d 1195, 1197 (1993); see also NRPC
                    1.6(a) (a "lawyer shall not reveal information relating to representation of
                    a client unless the client gives informed consent."). "The court should
                    instead undertake a realistic appraisal of whether confidences might have
                    been disclosed in the prior matter that will be harmful to the client in the
                    later matter." Robbins, 109 Nev. at 1018, 862 P.2d at 1197.
                                We conclude that the district court acted within its discretion
                    in declining to hold an evidentiary hearing since the disqualificationL
                    matter is not case-concluding.    See Bahena, 126 Nev. at , 235 P.3d at
                    600-01. Prospective clients meeting with an attorney must have the
                    "utmost confidence" that confidential information disclosed to an attorney
                    will remain confidential. See Ryan's Express, 128 Nev. at , 279 P.3d at
                    169. "One purpose of disqualification is to prevent disclosure of
                    confidential information that could be used to a former client's
                    disadvantage." Nevada Yellow Cab Corp., 123 Nev. at 53, 152 P.3d at 743.
                    Forcing prospective clients to divulge confidential information at a hearing
                    could lessen a client's ability and willingness to candidly communicate
                    with his or her attorney during initial consultations.
                                The district court was very aware of the importance of client
                    confidences and the attorney-client privilege; and hesitant to force a client,
                    former client, or prospective client to take the stand under oath and testify
                    to confidential matters and the substance of their interactions. It made its
                    findings based on substantial evidence, including numerous declarations
                    and affidavits, pleadings, the information sheet, unsigned retainer
                    agreement, notes from the initial consultation, emails, and letters. Among

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                these, the district court found that it was reasonable to infer that: (1) Fenn
                and Howard consulted with Levine regarding the liability of the draft
                complaint in the Merit action on behalf of the H&K Parties, and (2) Levine
                received confidential information from Fenn and Howard regarding the
                formation and operation of H&K Realty that was relevant to the issues
                raised in this litigation. It further found that information Levine and the
                Law Office of Daniel Marks learned from Fenn and Howard could be
                significantly harmful to the H&K Parties if used by the Richman Parties
                in this matter. Conducting an evidentiary hearing to determine specifics
                regarding what Fenn and Howard said to Levine would run counter to our
                analysis that opposing counsel under NRPC 1.9 are not required to divulge
                confidences actually communicated.      See Robbins, 109 Nev. at 1018, 862
                P.2d at 1197.
                             Accordingly, we ORDER the petition DENIED. 5

                                                    Gibbons

                                                                                     J.
                                                     Saitta

                      5 We have considered the parties' remaining arguments and conclude
                they are without merit.

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                cc: Hon. Kenneth C. Cory, District Judge
                     Law Office of Daniel Marks
                     Bailey Kennedy
                     Ogletree Deakins Nash Smoak & Stewart
                     Eighth District Court Clerk

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