Belue v. Leventhal

• Decision Date: 13 May 2011
• Docket Number: Nos. 10–1300,10–1438.,s. 10–1300
• Citation: 640 F.3d 567
• Parties: Ansel O. BELUE; Johnny Luke Little, as the duly appointed personal representative of the Estate of Linda Gail Little; Joel J. Hill; James W. Lyle, Jr., as the duly appointed personal representative of the Estate of Peggy Jean Reynolds, Plaintiffs–Appellees,v.Markham R. LEVENTHAL; Julianna Thomas McCabe; Irma Reboso Solares, Appellants,andAegon USA, Incorporated; Transamerica Insurance Company; Life Investors Insurance Company of America; Transamerica Life Insurance Company, Defendants.Ansel O. Belue; Johnny Luke Little, as the duly appointed personal representative of the Estate of Linda Gail Little; Joel J. Hill; James W. Lyle, Jr., as the duly appointed personal representative of the Estate of Peggy Jean Reynolds, Plaintiffs–Appellees,v.Markham R. Leventhal; Julianna Thomas McCabe; Irma Reboso Solares, Appellants,andAegon USA, Incorporated; Transamerica Insurance Company; Life Investors Insurance Company of America; Transamerica Life Insurance Company, Defendants.
• Court: U.S. Court of Appeals — Fourth Circuit

640 F.3d 567

Ansel O. BELUE; Johnny Luke Little, as the duly appointed personal representative of the Estate of Linda Gail Little; Joel J. Hill; James W. Lyle, Jr., as the duly appointed personal representative of the Estate of Peggy Jean Reynolds, Plaintiffs–Appellees,

v.Markham R. LEVENTHAL; Julianna Thomas McCabe; Irma Reboso Solares, Appellants,andAegon USA, Incorporated; Transamerica Insurance Company; Life Investors Insurance Company of America; Transamerica Life Insurance Company, Defendants.Ansel O. Belue; Johnny Luke Little, as the duly appointed personal representative of the Estate of Linda Gail Little; Joel J. Hill; James W. Lyle, Jr., as the duly appointed personal representative of the Estate of Peggy Jean Reynolds, Plaintiffs–Appellees,

v.Markham R. Leventhal; Julianna Thomas McCabe; Irma Reboso Solares, Appellants,andAegon USA, Incorporated; Transamerica Insurance Company; Life Investors Insurance Company of America; Transamerica Life Insurance Company, Defendants.

Nos. 10–1300

10–1438.

United States Court of Appeals, Fourth Circuit.

Argued: Jan. 25, 2011.Decided: May 13, 2011.

ARGUED: Conrad M. Shumadine, Willcox & Savage, PC, Norfolk, Virginia, for Appellants. Andrew Joseph Johnston, Spartanburg, South Carolina, for Appellees. ON BRIEF: Gary A. Bryant, David A. Kushner, Willcox & Savage, PC, Norfolk, Virginia, for Appellants. Patrick E. Knie, Patrick E. Knie, PA, Spartanburg, South Carolina; Susan F. Campbell, William E. Hopkins, Jr., Hopkins & Campbell, LLP, Columbia, South Carolina; Gary E. Clary, Central, South Carolina, for Appellees.Before TRAXLER, Chief Judge, and WILKINSON and GREGORY, Circuit Judges.Vacated and remanded by published opinion. Judge WILKINSON wrote the opinion, in which Chief Judge TRAXLER and Judge GREGORY joined.

OPINION

WILKINSON, Circuit Judge:

Irma Solares, Julianna McCabe, and Markham Leventhal (“the attorneys”) appeal an order revoking their pro hac vice admissions in connection with a putative class action suit. The suit alleged that the attorneys' clients breached supplemental cancer insurance policies that they had issued. The revocation was based on motions the defense attorneys filed in response to the plaintiffs' request for class certification. Chief among them was the attorneys' motion to recuse the district judge based on his comments during an earlier hearing.

The district court's comments and conduct at that hearing reflected its strong feelings about the merits of the case before it, but those feelings simply did not constitute grounds for recusal. Even though the recusal motion had little merit, we nonetheless conclude that the district court erred in revoking the attorneys' pro hac vice admissions because it did not afford them even rudimentary process. Accordingly, we vacate the revocation order of the district court.

I.

In 2007, purchasers of supplemental cancer insurance policies issued and administered by Transamerica Life Insurance Company and its predecessor, Life Investors Insurance Company, filed a number of class actions alleging that the insurers had breached the policies. Markham Leventhal, a partner in the law firm Jorden Burt LLP, served as lead counsel for the insurance companies in at least 15 of these lawsuits. Julianna McCabe and Irma Solares, two other Jorden Burt partners, joined Leventhal in representing Transamerica and Life Investors.

Three of those lawsuits are germane here. The first is Pipes v. Life Investors Insurance Company of America, filed in 2007 in the U.S. District Court for the Eastern District of Arkansas. The parties in that case initially decided to engage in confidential mediation, and on November 25, 2008, the Arkansas district court entered an order denying class certification. The parties subsequently negotiated for several months and ultimately reached a preliminary understanding regarding the terms of a global class action settlement.

In March 2009, the plaintiffs' counsel in Pipes filed a second lawsuit in Arkansas circuit court: Runyan v. Transamerica Life Insurance Company. This suit consolidated the claims of eight plaintiffs in six prior lawsuits pending in Arkansas and three other states. The parties finalized a class action settlement agreement, filed it with the court, and obtained a preliminary approval on April 23, 2009.

This lawsuit—the third of importance—was filed in November 2008 in the U.S. District Court for the District of South Carolina. Like before, the defendants were represented by Leventhal, McCabe, and Solares (“the attorneys”). Because none of the attorneys were licensed to practice in South Carolina, they appeared in the district court pro hac vice—meaning that they were admitted to the jurisdiction “temporarily for the purpose of conducting a particular case.” Black's Law Dictionary 1331 (9th ed. 2009). Here, Kevin Bell—an attorney admitted to the South Carolina bar—moved to have the attorneys temporarily admitted to practice in the district court and then stayed on to assist them as local counsel.

In May of 2009, the defendants—represented by the attorneys—filed a notice of settlement and a motion to stay class-related proceedings pending a decision from the Arkansas court approving the Runyan settlement. According to the defendants, the Runyan settlement encompassed the South Carolina claims alleged in the South Carolina lawsuit. The court scheduled a hearing on that motion for July 13, 2009.

That hearing forms the crux of the dispute in this case. The court began the hearing by characterizing the Runyan settlement as potentially collusive, stating that it might be one “of those buddy settlements that we have to watch out for.” The court then took note of the Pipes case, making less than favorable comments about the Arkansas district court and criticizing the defendants' approach to the litigation. The court also observed that the settlement on the table was “considerably” less than a settlement the court had presided over that involved the same issues.

When McCabe informed the court that the Runyan settlement was actually a national settlement, the court suggested that the settlement was improper. As a result, the court denied the defendants' motion to stay the class related proceedings and instead advised the plaintiffs to quickly file for class certification before the Arkansas court finally approved the Runyan settlement.

At the court's urging, the plaintiffs filed their motion for class certification the next day (July 14). The plaintiffs argued that an expedited schedule was proper because the defendants had already prepared and filed briefs responding to such motions in the other related cases, and that they had basically conceded—by agreeing to the Runyan settlement—to treat the case as a class action. Within 24 hours, the court expedited the class certification proceedings, ordering the defendants to file their opposition to certification by 9:00 AM on July 21.

The attorneys filed not one, but three motions on July 21. First, before 8:00 AM, they filed a motion to exceed the 35–page limitation imposed by the local rules for their opposition motion, contending that the briefs they had filed on that topic in related cases were far longer. Their motion did not reflect that they had conferred in good faith with the plaintiffs' lawyers before filing it, even though the local rules mandated such a conference. Before the 9:00 AM deadline, the court informed the attorneys' local counsel that the motion to exceed the page limitation would be denied. The attorneys accordingly edited their brief to 35 pages and filed it shortly after noon instead.

Next, the attorneys filed an emergency motion to vacate the expedited scheduling order, to continue the class certification hearing, and to establish a discovery period to examine the propriety of class treatment. Finally, and perhaps most importantly, the attorneys moved to recuse the judge pursuant to 28 U.S.C. §§ 144 and 455 on the theory that his comments and actions at the prior hearing, taken as a whole, displayed prejudice and bias against the defendants.

The court did not respond favorably. At the motions hearing on July 22, the court threatened to disbar the attorneys and local counsel for making such “serious allegations.” The court also warned that he would “disbar the whole firm in Miami, Florida” if the attorneys did not appear at a second hearing a few days later. Not only that, the court expressed frustration that the defense had “los[t] the case and attack[ed] the judge.” Finally, the court chided plaintiffs' counsel for failing to allege the number of plaintiffs involved in the suit, accusing them of being “highly incompetent in this case from the beginning.” Other than making the comment about the attorneys “attack [ing] the judge,” the court did not offer any reason for revoking the attorneys' pro hac vice status.

The revocation hearing took place a few days later, on July 27. The court began the proceedings by noting that it had perused the attorneys' website and discovered that they advertised themselves as specializing in “cases involving difficult jurisdictions” or “trouble spot jurisdictions.” After asking McCabe to explain that feature of the website, the court elucidated the reasons for convening the hearing. First, the court observed that it had set a 9:00 AM deadline on July 21 for the defendants' response to the plaintiffs' class certification motion and that the attorneys had waited until 7:30 AM on the 21st to seek permission to file an overlong brief. Moreover, the court observed that the attorneys had only filed a brief of appropriate length after the 9:00 AM deadline had passed. In the court's view, the attorneys had also disregarded the local rules by failing to confer with plaintiffs' counsel before filing their motions.

The court also concluded that the attorneys had filed their motions in bad faith. The court suggested that the defendants' opposition to class certification...