Arkansas Valley State Bank v. Phillips

• Decision Date: 16 October 2007
• Docket Number: No. 104,021.,104,021.
• Citation: 171 P.3d 899,2007 OK 78
• Parties: ARKANSAS VALLEY STATE BANK, an Oklahoma corporation, Appellee, v. John W. PHILLIPS, Jr., an individual, and Wilbanks Securities, Inc., an Oklahoma corporation, Defendants, and Bill V. Wilkinson, attorney, Appellant.
• Court: Oklahoma Supreme Court

171 P.3d 899

2007 OK 78

ARKANSAS VALLEY STATE BANK, an Oklahoma corporation, Appellee, v. John W. PHILLIPS, Jr., an individual, and Wilbanks Securities, Inc., an Oklahoma corporation, Defendants, and Bill V. Wilkinson, attorney, Appellant.

No. 104,021.

Supreme Court of Oklahoma.

October 16, 2007.

APPEAL FROM THE DISTRICT COURT OF TULSA COUNTY; J. MICHAEL GASSETT, DISTRICT JUDGE.

¶ 0 Arkansas Valley State Bank (Bank/Appellee) filed suit for breach of an employment agreement against Wilbanks Securities, Inc. and John W. Phillips, Jr. (Defendants). Subsequently, the Bank filed a motion to disqualify the defendants' counsel, Bill V. Wilkinson (Appellant), alleging that he had received confidential work product information from one of the Bank's former employees. The trial court, Honorable J. Michael Gassett, granted the motion to disqualify Wilkinson, and he appealed. Because the trial court applied the "appearance of impropriety" standard, resolved all doubt in favor of disqualification and failed to make the proper finding of fact that Wilkinson had knowledge of material and confidential information, the motion to disqualify counsel was improperly granted.

DISTRICT COURT ORDER VACATED; CAUSE REMANDED.

Ron D. Martinek, Topeka, KS, for Appellee.

Bill Wilkinson, Tulsa, OK, for Appellant/Defendants.

KAUGER, J.

¶ 1 The issue presented is whether the district court properly granted the motion to disqualify the defendants' counsel. We find that it did not.

FACTS

¶ 2 The Appellee, Arkansas Valley State Bank (Bank) had contracted with Wilbanks Securities, Inc. (Wilbanks Securities) to provide customers of the Bank with investment counseling and services, which the Bank could not provide legally on the Bank's premises.¹ While the record is unclear, apparently when Wilbanks Securities sought to terminate its relationship with the Bank, a dispute arose between the parties about the ownership of certain records. On May 27, 2004, the Bank brought an action in the District Court of Tulsa County against Wilbanks Securities and John W. Phillips (Phillips), a dual employee of Wilbanks Securities and the Bank, for breach of the employment agreement. On June 21, 2004, Phillips and Wilbanks Securities filed counterclaims against the Bank and its Chief Executive Officer, Terry M. Almon (Almon). In November and December of 2005, Phillips and Wilbanks Securities conducted depositions of several officers, directors, and employees of the Bank. In January of 2006, the Bank corrected the deposition testimony of nine witnesses by filing errata sheets.

¶ 3 On February 8, 2006, one of the deposed witnesses, Daniel G. Witham (Witham), a dual employee of the Bank and UVEST Financial Services, Inc., an investment center that had replaced Wilbanks Securities on the Bank's premises, was terminated. Witham retained Phillips and Wilbanks Securities' attorney, Bill V. Wilkinson (Attorney/Appellant), to represent him in a wrongful termination suit against the Bank and Almon. Witham filed suit in the United States District Court for the Northern District of Oklahoma on February 22, 2006.

¶ 4 On March 17, 2006, Phillips and Wilbanks Securities filed a Motion for Protective Order and Application for Sanctions by Defendants in this cause, alleging that the errata sheets filed in the Banks' action were improper attempts to alter testimony. On May 26, 2006, the Bank sought to disqualify the attorney and his law firm from representing Phillips and Wilbanks Securities. The Bank alleged that the attorney had received confidential work product information about the Bank's breach of the employment agreement suit against Phillips and Wilbanks Securities from Witham during his representation of Witham in the wrongful termination suit against the Bank. Phillips and Wilbanks Securities countered that the motion to disqualify counsel was merely a tactic to prevent the district court from uncovering the alleged improprieties in the errata sheets.

¶ 5 On September 8, 2006, the district court granted the Bank's motion to disqualify the attorney, finding there was "beyond a nagging suspicion" that Witham had disclosed confidential work product information to the attorney.² The district court explicitly declined to make a finding that the attorney had conducted himself in an improper or unethical manner. On October 27, 2006, the district court's order was memorialized and filed.³

¶ 6 On November 22, 2006, the attorney, Phillips and Wilbanks Securities filed an Application to Assume Original Jurisdiction, Petition for Writ of Mandamus, and Petition for Writ of Prohibition. On December 11, 2006, this Court recast the application as a timely appeal from the district court's order. The cause was assigned to the Court of Civil Appeals on April 4, 2007, and on June 12, 2007, we withdrew the assignment and retained the cause.

¶ 7 BECAUSE THE DISTRICT COURT APPLIED THE "APPEARANCE OF IMPROPRIETY" STANDARD, RESOLVED ALL DOUBT IN FAVOR OF DISQUALIFICATION AND MADE NO FINDING IN ITS ORDER THAT WILKINSON HAD

KNOWLEDGE OF MATERIAL AND CONFIDENTIAL INFORMATION, THE MOTION TO DISQUALIFY COUNSEL WAS IMPROPERLY GRANTED.

¶ 8 An order granting a motion to disqualify counsel is a final order subject to appellate review.⁴ Before the trial court can determine that an attorney should be disqualified based on conflict of interest or improper possession of confidential information, it must hold an evidentiary hearing and make a specific factual finding in its order of disqualification that the attorney had knowledge of material and confidential information.⁵ When reviewing the order, we review the trial court's findings of fact for clear error and carefully examine de novo the trial court's application of ethical standards.⁶

¶ 9 The central point of contention in this cause is determining the proper test a trial court must apply when faced with a motion to disqualify counsel. The Bank contends that an "appearance of impropriety" test, based on Canon Nine of the ABA Model Code of Professional Responsibility,⁷ should be employed. The Bank argues that while the phrase "appearance of impropriety" does not appear in the Oklahoma Rules of Professional Conduct, the concept still survives as an element of Rule 8.4 of the Oklahoma Rules of Professional Conduct.⁸ The Bank further contends that any doubt about the appearance of the propriety of an attorney's actions is to be resolved in favor of disqualification. Wilkinson argues that the "appearance of impropriety" test was abrogated by the adoption of the Oklahoma Rules of Professional Conduct in 1988 and that the heavy burden to establish the necessity of disqualifying counsel rests with the movant. We agree with Wilkinson.

¶ 10 The due process clauses of the United States⁹ and the Oklahoma Constitutions¹⁰ provide that certain substantive rights — life, liberty and property — cannot be deprived except by constitutionally adequate procedures. Once it is determined that due process applies, the question becomes: what process is due?¹¹ At a minimum, deprivation of a property right by adjudication must be preceded by notice and an opportunity for hearing appropriate to the nature of the case.¹²

¶ 11 The United States¹³ and Oklahoma Constitutions¹⁴ provide that accused parties in criminal prosecutions have the right to the assistance of counsel. These guarantees do not extend to civil proceedings.¹⁵ A right to counsel may have its constitutional basis in the general constitutional guarantees of due process found in the United States¹⁶ and Oklahoma¹⁷ Constitutions. The right to counsel mandated by due process of law is generally confined to criminal prosecutions.¹⁸

¶ 12 The right to counsel may also be based on statutory authority.¹⁹ However, even when there is no constitutional or statutory right to be furnished counsel, a party litigant in a civil proceeding still has a fundamental right to employ and be heard by counsel of his or her own choosing.²⁰ The right to select counsel without state interference is implied from the nature of the attorney-client relationship in our adversarial system of justice, where an attorney acts as the personal agent of the client and not the state.²¹ It is also grounded in the due process right of an individual to make decisions affecting litigation placing his or her property at risk. An individual's decision to employ a particular attorney can have profound effects on the ultimate outcome of litigation.²² Legal practitioners are not interchangeable commodities.²³ Personal qualities and professional abilities differ from one attorney to another, making the choice of a legal practitioner critical both in terms of the quality of the attorney-client relationship and the type and skillfulness of the professional services to be rendered.²⁴

¶ 13 Nevertheless, the right to select one's own counsel is not absolute.²⁵ A litigant's choice of counsel may be set aside under limited circumstances, where honoring the litigant's choice would threaten the integrity of the judicial process.²⁶ This most often arises where an attorney's compliance with ethical standards of professional responsibility are challenged.²⁷ It is this Court's nondelegable, constitutional responsibility to regulate both the practice and the ethics, licensure, and discipline of the practitioners of the law, and in doing so, to preserve public confidence in the bar and the judicial process.²⁸ However, motions to disqualify counsel for failure to comply with the Rules of Professional Conduct are not to be used as procedural weapons.²⁹ Disqualification is such a drastic measure that it should be invoked if, and only if, the Court is satisfied that real harm is likely to result.³⁰

¶ 14 The Bank's first argument supporting its motion to disqualify counsel is an allegation that although the attorney knew Witham was represented by counsel, the attorney elicited from him information about the Bank's suit against Phillips and Wilbanks Securities....