Alexander v. Superior Court In and For Maricopa County, 17343-SA

• Decision Date: 29 May 1984
• Docket Number: No. 17343-SA,17343-SA
• Citation: 685 P.2d 1309,141 Ariz. 157
• Parties: William Stewart ALEXANDER and Constance Jean Alexander, husband and wife, Petitioners, v. SUPERIOR COURT of the State of Arizona, In and For the COUNTY OF MARICOPA; Honorable Peter D'Angelo, Judge thereof; State of Arizona, ex rel., Robert K. Corbin, Attorney General; and the Arizona Corporation Commission, real parties in interest, Respondents.
• Court: Arizona Supreme Court

Page 1309

685 P.2d 1309

141 Ariz. 157

William Stewart ALEXANDER and Constance Jean Alexander, husband and wife, Petitioners, v. SUPERIOR COURT of the State of Arizona, In and For the COUNTY OF MARICOPA; Honorable Peter D'Angelo, Judge thereof; State of Arizona, ex rel., Robert K. Corbin, Attorney General; and the Arizona Corporation Commission, real parties in interest, Respondents.

No. 17343-SA.

Supreme Court of Arizona In Banc.

May 29, 1984.

Reconsideration Denied July 10, 1984.

Farley, Robinson & Lee by James J. Farley, R. Chip Larsen and Harris & Peacock by Donald W. Harris, Phoenix, for petitioners.

Robert K. Corbin, Atty. Gen. by Patrick M. Murphy, Ronald W. Collett, Michael W. Sillyman, Asst. Attys. Gen., Phoenix, for respondents.

CAMERON, Justice

This is a petition for special action taken from an order of the trial court disqualifying petitioners' attorneys, Farley, Robinson & Lee, from further representation of the petitioners, William Stewart Alexander and Constance Jean Alexander. We have jurisdiction pursuant to Art. 6, § 5(4) of the Arizona Constitution and Rule 8, Arizona Rules of Procedure for Special Actions, 17A A.R.S.

We must answer one question:

Does the State have standing to object to petitioners' representation by Farley, Robinson and & Lee?

The facts necessary for a determination of this matter on appeal follow. Prior to November, 1982, the Alexanders were engaged in selling tax shelters in greyhound racing dogs. The Internal Revenue Service disallowed most of the investment tax credits, depreciation, and other deductions claimed by the investors who had purchased greyhound racing dogs from the Alexanders.

In November of 1982, Alexander asked his legal counsel, Greg Robinson of Farley, Robinson & Lee, to represent the investors in Tax Court for the purpose of obtaining a reversal of the IRS rulings. Robinson sent a form letter to over seventy investors, advising them that he had been retained by Mr. Alexander to file petitions in Tax Court. The letter read:

Dear __________:

I have been retained by Mr. William S. Alexander to file United States Tax Court petitions with respect to the Notices of Deficiency issued by the Internal Revenue Service relating to greyhound investments. I will be filing a group petition on behalf of you and other investors.

Mr. Alexander has provided me with a copy of the Notice of Deficiency mailed to you. I have not received a copy of the A & A Kennels file on your greyhound investment.

Enclosed is a checklist of inv formation which will enable me to pursue this matter on your behalf. Please complete the form and return it to me in the enclosed envelope no later than November 15, 1982.

Investors interested in being represented by Robinson in the Tax Court were asked to complete a checklist of information so that Robinson could pursue the matter on their behalf. Thereafter, Robinson filed petitions on behalf of most of the investors who were contacted based upon the information submitted by the investors and the Alexanders' kennel file on each investor's greyhound. Robinson did not bill the investors for these services but did, as the letters indicated, look to the Alexanders for his attorney fees in the matter. Robinson did not meet personally with any of the investors, and his only contact with them, with one exception, was limited to phone inquiries by the investors as to the status of the petitions. Robinson also advised the investors to settle with the IRS because the prospects of success in Tax Court were not promising. The only exception was Perry Johnson, who called Robinson to inquire about the status of the petitions. In the course of this conversation, Johnson disclosed to Robinson that, on the advice of Alexander, he had backdated a document relating to his investment. Johnson's affidavit (obtained by the State) read:

41. That I received a letter dated November 2, 1982, from Gregory A. Robinson (Robinson) of Farley, Robinson & Lee, attorneys for William S. Alexander * * *. In this letter Mr. Robinson advised me that he was retained by Alexander to file petitions on behalf of investors in greyhound dogs with the IRS in respect to the Notices of Deficiency. I completed a form authorizing him to represent me in this action.

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43. That I did not hear anything further from Mr. Robinson regarding the status of the IRS case. On approximately October 6, 1983, I called Mr. Robinson to find out the status of the case. I informed him that I had been advised by Mr. Alexander that if I paid for the dog before April, 1980, I would be able to obtain a tax credit for 1979 and 1980; that Alexander had filled out the Bill of Sale * * *, back-dating it to March 31, 1979 and signed it in my presence.

44. That Mr. Robinson responded that "quite candidly" the IRS was looking for that type of information and if they found out about it they could criminally prosecute Alexander and myself. He implied that I should not pass this information on to anyone else. He also told me that because my dog was dead I did not have a good case to support the tax credits and deductions which I took on my 1979 and 1980 tax returns. I asked Mr. Robinson if he was still representing me and he was very evasive.

45. That Mr. Robinson has given me no legal advice concerning my tax audit as to whether I should pay my tax liabilities, proceed with the tax audit, appeal from an adverse determination or whether I have a cause of action against Alexander.

In September of 1983, after the last petition was filed in the Tax Court, the State served the Alexanders a summons and complaint alleging violations of the Arizona Securities Act, A.R.S. § 44-1841, et seq., the Arizona Consumer Fraud Act, A.R.S. § 44-1521, et seq., and the Arizona Racketeering Act, A.R.S. § 13-2301, et seq. The case was denominated a "priority case" pursuant to A.R.S. § 13-2314(H), which requires that the matter be expedited. Simultaneously, a temporary restraining order without notice was issued and the Alexanders' assets and accounts were seized. The next day the Alexanders were served with twenty-three separate pleadings and papers.

Before the Alexanders could respond, the State filed a motion to disqualify Farley, Robinson & Lee from further representation of the Alexanders. The State contended that the law firm's representation of the investors in Tax Court would place it directly in conflict with its representation of the Alexanders in the present action. The State also alleged that the information given by investor Johnson was a client confidence and that its disclosure would violate Canon 4 of the Model Code of Professional Responsibility.

On 5 January 1984 the Superior Court, after a hearing, issued an order to the effect that (1) while an apparent mutuality of interests existed between the Alexanders and the investors, one exception was the communication to Robinson from investor Johnson regarding backdating, (2) such communication was a client confidence under DR 4-101, and (3) this circumstance alone constituted a sufficient conflict of interest to disqualify Farley, Robinson & Lee from further representation of the Alexanders. Disqualification of counsel was ordered and the Alexanders sought relief by filing a special action in this court. We granted oral argument and a stay of proceedings in the Superior Court. After oral argument we accepted jurisdiction because there is no plain, speedy, or adequate remedy by appeal and because it is a matter of statewide importance. See State v. Superior Court of Arizona, In And For the County of Maricopa, 129 Ariz. 156, 159, 629 P.2d 992, 995 (1981).

Only in extreme circumstances should a party to a lawsuit be allowed to interfere with the attorney-client relationship of his opponent, e.g., Board of Education of New York City v. Nyquist, 590 F.2d 1241, 1246 (2d Cir.1979); Trinity Ambulance Service, Inc. v. G & L Ambulance Services, Inc., 578 F.Supp. 1280, 1282 (D.Conn.1984). The burden should be upon the moving party to show sufficient reason why an attorney should be disqualified from representing his client. Whenever possible the courts should endeavor to reach a solution that is least burdensome upon the client or clients.

The State's allegations bring into play three Canons from the American Bar Association's Model Code of Professional Responsibility: Canon 4 ("A Lawyer Should Preserve the Confidences and Secrets of a Client"), Canon 5 ("A Lawyer Should Exercise Independent Professional Judgment on Behalf of a Client"), and Canon 9 ("A Lawyer Should Avoid Even the Appearance of Professional Impropriety"). We have adopted the Model Code as part of the Arizona Rules of the Supreme Court, with some modifications. Rule 29(a), Arizona Rules of the Supreme Court, 17A A.R.S. The Canons themselves do not appear in our Rules. Instead, our Rules consist of Disciplinary Rules (DR's) derived from the Model Code's rules. The confidence rule states:

Preservation of Confidences and Secrets of a Client

(A) "Confidence" refers to information protected by the attorney-client privilege under applicable law, and "secret" refers to other information gained in the professional relationship that the client has requested be held inviolate or the disclosure of which would be embarrassing or would be likely to be detrimental to the client.

(B) Except as permitted by DR 4-101(C), a lawyer shall not knowingly:

(1) Reveal a confidence or secret of his client.

(2) Use a confidence or secret of his client to the disadvantage of the client.

(3) Use a confidence or secret of his client for the advantage of himself or of a third person, unless the client consents after full disclosure.

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DR 4-101, Rule 29(a), Arizona Rules of the Supreme Court, 17A A.R.S. The conflict of interest rule reads:

Refusing to Accept or Continue Employment if the Interests of Another Client May Impair the Independent Professional Judgment of the Lawyer

(A) A lawyer shall decline...