Gates Rubber v. BANDO CHEMICAL INDUSTRIES, Civ. A. No. 92-S-136.

• Citation: 855 F. Supp. 330
• Decision Date: 09 June 1994
• Docket Number: Civ. A. No. 92-S-136.
• Parties: The GATES RUBBER COMPANY, a Colorado corporation, Plaintiff, v. BANDO CHEMICAL INDUSTRIES, LIMITED, a Japanese company, Bando American, Inc., an Illinois corporation, Bando Manufacturing of America, Inc., a Kentucky corporation, Bando U.S.A., Inc., a Delaware corporation, Allen Hanano, an individual, Steven R. Piderit, an individual, Ron Newman, an individual, Denise Hanano, an individual, and John Does 1-93, Defendants.
• Court: United States District Courts. 10th Circuit. United States District Court of Colorado

855 F. Supp. 330

The GATES RUBBER COMPANY, a Colorado corporation, Plaintiff, v. BANDO CHEMICAL INDUSTRIES, LIMITED, a Japanese company, Bando American, Inc., an Illinois corporation, Bando Manufacturing of America, Inc., a Kentucky corporation, Bando U.S.A., Inc., a Delaware corporation, Allen Hanano, an individual, Steven R. Piderit, an individual, Ron Newman, an individual, Denise Hanano, an individual, and John Does 1-93, Defendants.

Civ. A. No. 92-S-136.

United States District Court, D. Colorado.

June 9, 1994.

Rodger Wilson, Wilson, Godin & Baity, LLC Daniel Hoffman, Holmes, Robert Owen, Denver, CO, for plaintiff.

Shelley Don, Don & Hiller, P.C., Stephen Dunham, Morrison & Foerster, Denver, CO, for defendants.

ORDER DENYING MOTION TO DISQUALIFY COUNSEL

SPARR, District Judge.

THIS MATTER is before the Court on Plaintiff's motion to disqualify the law firm of Don, Hiller & Galleher (hereafter "DH & G") from further representation of any Defendants in this action. Plaintiff filed its motion on April 21, and Defendants filed their responses to the motion on April 29, 1994. A response was also filed on that date by Mr. Gary Kessinger, a former employee of Bando Manufacturing of America. Oral argument was heard on May 2, 1994. The Court now makes the following Findings and Conclusions with respect to the Plaintiff's motion to disqualify DH & G.

Factual Background

The facts in this matter are basically undisputed. DH & G presently represents Defendants Bando American, Bando Manufacturing, and Bando USA (hereafter collectively referred to as the "Bando companies"), and is former counsel for the named individual defendants Allen Hanano (hereafter "Hanano"), Ron Newman, Steven Piderit, and Denise Hanano. The law firm of DH & G also represented Gary Kessinger, a nonparty, by virtue of a conversation between Mr. Kessinger and Mr. Shelly Don, lead counsel for DH & G. Defendant Bando Chemical Industries, Ltd., is represented by the firm of Morrison & Foerster.

This action was originally filed against Bando American and Bando Manufacturing, and several Bando employees, including the Defendants Allen Hanano, Ron Newman, Denise Hanano, and Steven Piderit. At that time Allen Hanano was president of Bando American and served as a director of Bando Manufacturing. Ron Newman was an employee of Bando American as were Steven Piderit and Denise Hanano. At the time of the permanent injunction hearing on the copyright issues, DH & G was not counsel in this case. In August 1992, upon withdrawal of previous counsel, the DH & G firm entered its appearance as counsel for these parties. When DH & G entered its appearance, Allen Hanano was President of Bando American. He remained an officer throughout the time that DH & G represented him.

Subsequent to the entry of the permanent injunction, Plaintiff filed its first motion for sanctions in late 1992. The sanctions matter was heard by Magistrate Judge Schlatter on September 20 through 29, 1993. As a result of the filing of the motion for sanctions, each individual defendant retained separate counsel, who generally served as co-counsel with DH & G for a time before DH & G withdrew its representation of any individuals. Gates moved for sanctions against Mr. Hanano. As a result of this personal allegation, Mr. Hanano consulted Mr. Jeffrey Springer in May 1993 and on July 13, 1993, Mr. Springer entered an appearance to represent Mr. Hanano personally in the subsequent proceedings. Mr. Springer was counsel for Mr. Hanano at his deposition on August 27, 1993 and was present representing Mr. Hanano during the hearing on sanctions before Magistrate Judge Schlatter in September 1993. DH & G continued to represent Allen Hanano after he obtained individual counsel. Ron Newman, an employee of Bando Manufacturing, was also represented by DH & G. In August 1992, Mr. Newman contacted attorney Gary Lozow regarding his part in this litigation. Mr. Lozow entered his appearance for and in connection with the sanctions proceedings on July 16, 1993. Mr. Lozow has participated in various depositions as Mr. Newman's counsel and has represented him in the deposition on August 30, 1993 and throughout the September 1993 sanctions hearing. DH & G also continued to represent Defendant Ron Newman after he had obtained individual counsel. As indicated above, DH & G also represented Defendant Steven Piderit, and he later obtained independent counsel, David Savitz. Mr. Piderit is not particularly involved in the ethical considerations triggered by this motion as the motion does not articulate any conflict between DH & G and Piderit. He nonetheless has an interest in the outcome of the case and has urged the Court to deny the motion to disqualify DH & G. The motion in question likewise fails to indicate any conflict between DH & G and Denise Hanano. Ms. Hanano has also obtained her own attorney, Patrick Burke, and has responded to the motion to disqualify DH & G by consenting to their continued representation of the Bando Defendants.

Discussion of Issues Raised in the Motion

I. Defendants and Others Affected By This Motion

For purposes of this order, the Court does not consider Gates' motion to address any potential conflicts between DH & G and either Denise Hanano or Steven Piderit. The motion does, however, address a conflict between DH & G and a non-party, one Gary Kessinger, who is a former employee of Bando American. Mr. Kessinger was represented very briefly by Mr. Shelley Don of DH & G on a single occasion arising out of an incident in the fall of 1993. This Court had a hearing on September 13, 1993, and characterized the relationship between Mr. Don and Mr. Kessinger as follows:

"It is ... tenuous as to whether or not Mr. Don was at the time representing Mr. Kessinger, although he was clearly representing Bando Manufacturing. Again, based upon the facts, the Court will find that Mr. Don was in fact at one point in time, albeit brief perhaps, representing or acting or counseling Mr. Kessinger personally with respect to the matters in question."

The issue that arose at the time of the September hearing regarded Mr. Kessinger's conduct at a site inspection in Bowling Green, Kentucky, which gave rise to a claim of fifth amendment privilege by Mr. Kessinger. Since August 1993, Kessinger has been represented by Lawrence J. Zielke of the firm of Pedley, Ross, Zielke, and Gordinier of Louisville, Kentucky. The only potential representation of Kessinger by Mr. Don or DH & G occurred in the single brief incident referred to by the Court in the September 13, 1993 hearing.

The Court is also aware from in camera disclosures at the September 13, 1993 hearing that the subject of the communication between Kessinger and Don referred to at that time is unrelated to the specific issues raised by Gates in their motion to disqualify. It is further noted that Kessinger, through his Kentucky counsel, has filed a response in opposition to the motion to disqualify DH & G, and Kessinger has consented, after consultation, to the continued representation by DH & G of Bando and stated through his counsel that any conflict between DH & G and Gary Kessinger is not substantially related to the matters for which Kessinger sought advice from Shelley Don and DH & G. Accordingly, the scope of the motion is limited to conflict — potential or otherwise — which DH & G might have with its former clients Hanano and Newman. Both Defendants Hanano and Newman have filed, on April 29, 1994, responses to the Plaintiff's motion to disqualify in which it is indicated (in Hanano's response, evidenced by a separate signature) that their consent is given to DH & G's continued representation.

II. Factual Background Relating to the Motion

In November 1993, Bando American discovered evidence that Hanano had falsified corporate records regarding reimbursement of expenses. When confronted with this information by corporate officers, Hanano apparently alleged that certain falsely claimed expenses had been used to purchase gifts for a former Gates employee in exchange for information regarding this litigation. Apparently Hanano has since, through counsel, retracted this statement. The disclosures and statements attributed to Hanano were made to Mr. Richard Browsky, the President of Bando American, and Craig Cero, the controller of the company. (Disclosure of Defendant Bando American, Bando Manufacturing, and Bando USA filed April 19, 1994.)

On April 15, 1994, Hanano's counsel¹ filed a disclosure of Defendant Allen Hanano. This disclosure revealed the existence of the conflict between Bando American and Hanano concerning the alleged fraudulent expense claims and embezzlement of funds from Bando American. The Hanano disclosure further revealed that he had recorded a conversation between himself and Newman at which time Newman had stated that he and Kessinger saw individuals shredding documents at Bando Manufacturing's Bowling Green facility shortly before the Bowling Green site inspection. This document shredding issue had been a paramount issue in the sanctions hearing before Magistrate Judge Schlatter. In response to a question from Allen Hanano, Ron Newman indicated that if he were asked, he would say nothing about the incident and if the matter were discovered, he would stick to that story and say he didn't notice it, and didn't see anything.

Shortly after Hanano's disclosure, DH & G filed the Bando disclosure. In this disclosure, the Bando Companies indicated that Hanano, Newman, and Kessinger were acting outside the scope of their employment, and the actions occurred without the knowledge or authorization of the corporations. The disclosure also revealed that such acts were repudiated and that Hanano's resignation was accepted in lieu of terminating his employment. The employment action was based upon Bando American's determination that Hanano had falsified corporate records for reimbursement of business expenses and had engaged in related...