Brown v. Kelton

• Decision Date: 03 March 2011
• Docket Number: No. 10–925.,10–925.
• Citation: 2011 Ark. 93,380 S.W.3d 361
• Parties: Stephen Toof BROWN, Mid–Central Plumbing Company, Inc., and John W. Rogers, Appellants, v. Brian KELTON, Appellee.
• Court: Arkansas Supreme Court

2011 Ark. 93

380 S.W.3d 361

Stephen Toof BROWN, Mid–Central Plumbing Company, Inc., and John W. Rogers, Appellants,

v.Brian KELTON, Appellee.

No. 10–925.

Supreme Court of Arkansas.

March 3, 2011.

Barber, McCaskill, Jones & Hale, P.A., by: Scott M. Strauss, Little Rock, and Cynthia W. Kolb, for appellants John Rogers and Mid–Central Plumbing.

Huckabay, Munson, Rowlett & Moore, P.A., by: Shane Strabala, Little Rock, for appellant Stephen Toof Brown.

Chaney Law Firm, P.A., Arkadelphia, by: Don P. Chaney, Nathan P. Chaney, and S. Taylor Chaney, for appellee.

Wright, Lindsey & Jennings LLP, Little Rock, by: Gregory T. Jones; and Akerman Senterfitt, by: Katherine E. Giddings and Kristen M. Fiore, for amici curiae American Insurance Association, The Property Casualty Insurers Association of America, and the Association of Corporate Counsel.

PAUL E. DANIELSON, Justice.

Appellants Mid–Central Plumbing Company, Inc., and John W. Rogers, Mid–Central's sole shareholder, along with separate appellant Stephen Toof Brown, bring this interlocutory appeal from an order of the Pulaski County Circuit Court disqualifying Brown from serving as the attorney for Mid–Central and Rogers in the case filed against them by appellee Brian Kelton. Appellants argue that the circuit court erred in disqualifying Brown because: (1) Ark.Code Ann. § 16–22–211 (Supp.2009) does not prohibit Farmer's Insurance Exchange from using an employee to defend its insureds; (2) alternatively, the circuit court erred by not holding Ark.Code Ann. § 16–22–211 unconstitutional for intruding on this court's exclusive authority to regulate the practice of law; (3) Kelton had no standing to object to an alleged conflict of interest; (4) it was not a conflict of interest for Brown to serve as the attorney for Mid–Central and Rogers; and (5) Mid–Central and Rogers gave proper informed consent to be represented by Farmer's Insurance Exchange's staff counsel. Brown also argues that he did not breach his duty to preserve Mid–Central's confidences. Mid–Central and Rogers additionally argue that the circuit court improperly disregarded their fundamental right to be represented by their chosen counsel. We affirm the circuit court's order disqualifying Brown in the instant case.

This case arose from a car accident in which Kelton's vehicle was struck by a vehicle owned by Mid–Central. Kelton filed suit against Mid–Central and Rogers alleging damages from the collision. Mid–Central and Rogers were insured by Truck Insurance Exchange (“TEI”) for $1,000,000, and TEI was reinsured by Farmer's Insurance Exchange (“FIE”).

Approximately three months after an answer was filed on behalf of Mid–Central and Rogers, their attorney filed a motion for substitution, seeking to name Stephen Brown, an attorney employed by FIE, as the new attorney on the case. The circuit court entered an order substituting counsel. However, Kelton filed a response in opposition to the motion for substitution shortly thereafter. The circuit court held a hearing and the parties agreed that because the response in opposition had been filed after the motion to substitute had already been granted, it would be treated as a motion to disqualify.

After the hearing, the circuit court found that Brown's representation of Mid–Central and Rogers would have constituted the unauthorized practice of law by FIE pursuant to Ark.Code Ann. § 16–22–211; that a conflict of interest existed for Brown because his undivided duty of loyalty and confidentiality would have been owed to Mid–Central and Rogers, not to the insurance company that employed him; and that no effective waiver of the inherent conflict had or could have taken place. Accordingly, the circuit court disqualified Brown from further participation in the case on behalf of FIE's insureds. The circuit court entered its order on June 2, 2010. This interlocutory appeal followed, and we now turn to the merits of the appeal.

Appellants first argue that Ark.Code Ann. § 16–22–211 does not prohibit an insurance carrier from assigning the defense of an insured's lawsuit to in-house counsel and that such is true in a majority of other jurisdictions as well. Kelton responds that the circuit court's application of section 16–22–211 was correct and that using in-house counsel to represent an insured equates to the insurance company unlawfully practicing law.

We review statutory interpretation de novo, as it is for this court to determine the meaning of a statute. See Dachs v. Hendrix, 2009 Ark. 542, 354 S.W.3d 95;Osborn v. Bryant, 2009 Ark. 358, 324 S.W.3d 687. Our rules of statutory construction are well settled:

The basic rule of statutory construction is to give effect to the intent of the legislature. Where the language of a statute is plain and unambiguous, we determine legislative intent from the ordinary meaning of the language used. In considering the meaning of a statute, we construe it just as it reads, giving the words their ordinary and usually accepted meaning in common language. We construe the statute so that no word is left void, superfluous or insignificant, and we give meaning and effect to every word in the statute, if possible.

Dachs, 2009 Ark. 542, at 7, 354 S.W.3d 95, at 100 (quoting City of Little Rock v. Rhee, 375 Ark. 491, 495, 292 S.W.3d 292, 294 (2009)).

Section 16–22–211 states, in relevant part:

(a) It shall be unlawful for any corporation or voluntary association to practice or appear as an attorney at law for any person in any court in this state or before any judicial body, to make it a business to practice as an attorney at law for any person in any of the courts, to hold itself out to the public as being entitled to practice law, to tender or furnish legal services or advice, to furnish attorneys or counsel, to render legal services of any kind in actions or proceedings of any nature or in any other way or manner, or in any other manner to assume to be entitled to practice law or to assume or advertise the title of lawyer or attorney, attorney at law, or equivalent terms in any language in such a manner as to convey the impression that it is entitled to practice law or to furnish legal advice, service, or counsel or to advertise that either alone or together with or by or through any person, whether a duly and regularly admitted attorney at law or not, it has, owns, conducts, or maintains a law office or any office for the practice of law or for furnishing legal advice, services, or counsel.

....

(d) This section shall not apply to a corporation or voluntary association lawfully engaged in the examination and insuring of titles to real property, nor shall it prohibit a corporation or a voluntary association from employing an attorney or attorneys in and about its own immediate affairs or in any litigation to which it is or may become a party.

Ark.Code Ann. § 16–22–211(a),(d) (Supp.2009).

Appellants argue that FIE falls into the exception created by subsection (d) because the insured's lawsuit is a matter that is “in and about its own immediate affairs.” However, they attempt to de-emphasize the language that follows. The exception created is two-fold. The plain language of the statute allows a corporation to employ an attorney in two scenarios: (1) for matters “in and about its own immediate affairs”; “ or (2) in any litigation to which it is or may become a party.” Id. (emphasis and numeral added).

Appellants argue that the language of section 16–22–211 should not be interpreted as creating disjunctive alternatives. However, “[i]n its ordinary sense, the word ‘or’ is a disjunctive particle that marks an alternative, generally corresponding to ‘either,’ as ‘either this or that’; it is a connective that marks an alternative.” McCoy v. Walker, 317 Ark. 86, 89, 876 S.W.2d 252, 254 (1994) (quoting Beasley v. Parnell, 177 Ark. 912, 918, 9 S.W.2d 10, 12 (1928)). Additionally, were we to hold that “in and about its own immediate affairs” includes litigation to which it is not a party, but to which it is closely connected or has an interest in the outcome, the language following would be superfluous. Obviously, litigation to which it is a party or could become a party would then be included in the first exception. As noted, “[w]e construe the statute so that no word is left void, superfluous or insignificant, and we give meaning and effect to every word in the statute, if possible.” Dachs, supra.

In the instant case, it is undisputed that FIE is not a party and will not become a party to the underlying lawsuit. Therefore, it was prohibited by Ark.Code Ann. § 16–22–211 from assigning appellant Brown, one of its in-house counsel, to defend the insureds in the litigation.

Appellants next argue that Ark.Code Ann. § 16–22–211 is unconstitutional because the statute conflicts with the exclusive power to regulate the practice of law vested on this court by amendment 28 of the Arkansas Constitution. Kelton avers that this statute, much like others upheld by this court, is simply an aid in regulating the practice of law and is not in derogation of it.

Amendment 28 of the Arkansas Constitution provides that “[t]he Supreme Court shall make rules regulating the practice of law and the professional conduct of attorneys at law,” and this court has recognized that amendment 28 “put to rest for all time any possible question about the power of the courts to regulate the practice of law in the state.” McKenzie v. Burris, 255 Ark. 330, 341, 500 S.W.2d 357, 364 (1973). However, as even the appellants recognize, this court considered and rejected the idea of a possible conflict between amendment 28 and the legislative act prohibiting corporations from practicing law. See Arkansas Bar Ass'n v. Union Nat'l Bank of Little Rock, 224 Ark. 48, 273 S.W.2d 408 (1954). While facts of that case differed, this court observed:

In many jurisdictions, as in this state, the judiciary has on occasions apparently given approval to certain enactments by the legislative...