D Stadtler Tr. 2015 Tr. v. Gorrie
| Decision Date | 23 January 2023 |
| Docket Number | CV-22-00314-PHX-DWL |
| Parties | D Stadtler Trust 2015 Trust, et al., Plaintiffs, v. Pamela Gorrie, et al., Defendants. |
| Court | U.S. District Court — District of Arizona |
D Stadtler Trust 2015 Trust, et al., Plaintiffs,
v.
Pamela Gorrie, et al., Defendants.
No. CV-22-00314-PHX-DWL
United States District Court, D. Arizona
January 23, 2023
ORDER
DOMINIC W. LANZA UNITED STATES DISTRICT JUDGE
Plaintiffs in this action are Daniel Stadtler (“Stadtler”) in his individual capacity and in his capacity as trustee for the D. Stadtler Trust 2015 (“the Trust”). (Doc. 131 ¶¶ 1-2.) Defendants are Pamela Gorrie (“Gorrie”), Innovative Global Distributions, LLC (“IGD”), Natural Footprints Organic Farm LP (“NFOF”), and NFF Management LLC (“NFF”). (Id. ¶¶ 3-6.)[1] Pending before the Court is Plaintiffs' motion to disqualify Defendants' counsel. (Doc. 110.) For the following reasons, the motion is denied.
RELEVANT BACKGROUND
The facts underlying this dispute and much of the procedural history of this case are set out in a prior order. (Doc. 129.) Only a brief summary is necessary here.
In 2017, the Trust purchased a 540-acre parcel of agricultural land situated at 68562 56th Street, Salome, in La Paz County, Arizona (the “Farm”). (Doc. 131 ¶ 12.)
In May 2019, Stadtler hired William Dawson (“Dawson”) to “list the [Farm] for
sale and to act as broker.” (Id. ¶ 13.)
In late 2019, Gorrie became interested in purchasing the Farm for a hemp operation. (Doc. 131 ¶¶ 16-17; Doc. 77 ¶¶ 8-12.) On November 4, 2019, Dawson (on behalf of Stadtler)[2] and Gorrie began discussing the possibility of the Trust selling the Farm to IGD. (Doc. 131 ¶¶ 14-16; Doc. 77 ¶¶ 11-13.)
After various discussions, on January 17, 2020, the Trust and IGD executed a real estate purchase contract (the “Farm Purchase Agreement”), under which IGD would buy the Farm from the Trust for $1.4 million. (Doc. 131 ¶¶ 34-35; Doc. 77 ¶¶ 14-15.) The Trust provided seller carryback financing for a large portion of the purchase price. (Doc. 131 ¶¶ 34; Doc. 77 ¶ 17.)
For reasons that are disputed, the hemp operation struggled to obtain funding. (See, e.g., Doc. 131 ¶¶ 58, 66, 68; Doc. 77 ¶¶ 24-26.) Between April 2020 and May 2021, the parties executed various other documents related to the hemp operation, including several revenue sharing agreements, which provided that Plaintiffs would be entitled to a percentage of the hemp operation's revenue. (Doc. 131 ¶¶ 75-80, 96-103, 111-18; Doc. 77 ¶¶ 26-32, 37-42, 58-60.) The parties also discussed, but did not enter into, a joint venture agreement. (Doc. 131 ¶¶ 111-15; Doc. 121-6 ¶ 7 [Gorrie decl.].)
As relevant here, in late March 2021, Gorrie suggested that she, Stadtler, and Dawson meet with Timothy McCulloch (“Counsel”), an attorney at Dickinson Wright, PLLC (“Dickinson Wright”). (Doc. 110-1 ¶ 20; Doc. 110-3 at 2.) Text messages from Gorrie to Dawson and Stadtler describe Counsel as a “hemp attorney,” note his retainer and hourly rate, and discuss a potential escrow account for the hemp operation. (Doc. 110-3 at 2.)
On April 5, 2021, Gorrie, Stadtler, and Dawson met with Counsel in his office at Dickinson Wright. (Doc. 110-1 ¶¶ 21, 25; Doc. 110-2 ¶¶ 21-23 [Dawson decl.]; Doc. 121-6 ¶ 3.) The exact purpose of the meeting is disputed. (See, e.g., Doc. 110-1 ¶ 33 [Stadtler
decl.]; Doc. 121-7 ¶ 5 [McCulloch decl.].) At the meeting, the parties discussed the possibility of setting up an escrow account for revenue from the hemp sales and a draft joint venture agreement related to the hemp operation. (See, e.g., Doc. 110-1 ¶¶ 25-29.) The parties dispute whether the issue of joint representation was addressed. (Compare Doc. 110-1 ¶¶ 32-34 [according to Stadtler, “I had paid [Counsel] $5,000.00 for the consultation and to draw up the agreement for us and told [Counsel] ‘You're my lawyer.' . . . I understood that [Counsel] was representing all of our interests . . . and he never gave me anything in writing that stated he did not represent my interests”] and Doc. 110-2 ¶ 28 [according to Dawson, “As we were leaving, Mr. Stadtler told [Counsel] that he considered [Counsel] to be his lawyer and expected him to protect all of our interests”] with Doc. 1216 ¶¶ 8, 14 [according to Gorrie, “The first thing that [Counsel] discussed at the meeting was his belief that he was solely representing myself and my entities. . . .I never heard Stadtler or Dawson express to [Counsel] that Stadtler wanted to be represented by [Counsel]”] and Doc. 121-7 ¶¶ 6-7, 11 [according to McCulloch, “I did not view the representation as joint and discussed this with all three parties at the same time at the meeting. . . . In addition, I discussed that I did not believe that a joint representation would be appropriate because of the potential for a conflict to arise. . . . Stadtler never indicated to me that he wished for me to represent him”].)
On April 8, 2021, Stadtler issued a check to Dickinson Wright for $5,000. (Doc. 124-1 at 4.) In the memo line, Stadtler wrote “For IGD LLC & Pamela Gorrie.” (Id.)[3]
On April 11, 2021, Dawson and Gorrie exchanged a number of text messages in which the issue of legal representation was discussed. (Doc. 122-3.)[4] As relevant here, Dawson texted Gorrie: “So here goes the question[,] [Counsel] was to represent all three
of us in the agreement he was writing up[,] correct.” (Id. at 2.) In response, Gorrie texted: “You don't tell me what. I have to have lawyers. And you all didn't want joe n Blake but forced them to take this. I can't fix you fuking people over . . . That's on you. . . . They won't let you fuk me out of lawyers period . . . .” (Id.) The parties dispute the meaning of these texts.[5] The parties also dispute whether Stadtler was represented by other counsel (specifically, Herman C. Zickerman) during the negotiations of the draft joint venture agreement. (Doc. 120 at 6-8; Doc. 124 at 6-8.)
On April 28, 2021, Dawson and Gorrie again exchanged text messages about Counsel. Gorrie stated: “We were suppose[d] to hire [Counsel] to be working together. . . . . It was suppose[d] to be a contract. Together. . . .” (Doc. 110-3 at 12.) Dawson responded: “[Counsel] told me the other day he represented you not me or [Stadtler] he didnt [sic] care who paid him he said he cant [sic] represent all of us. It would get him in trouble with the bar[.] [Counsel] wanted [Stadtler] to use his own lawyer to ck out the contract he said so.” (Id.) Gorrie then said: “What about what I signed up for? . . . You all paying [Counsel] to fuk with you all? Cause that's not what I signed up for. Where we are. And [Zickerman] isn't a cannabis attorney. It's kind of fuking ridiculous. You'll have to get one next probably[.]” (Id.)
For reasons that are disputed, the parties' business relationship ultimately fell apart, leading to this litigation. On February 11, 2022, Plaintiffs filed a complaint in La Paz County Superior Court. (Doc. 1-2 at 10-27.) On February 27, 2022, Gorrie removed the action to this Court. (Doc. 1.)[6] The notice of removal was filed by Counsel, who identified himself as Gorrie's counsel. (Id.)
On May 2, 2022, Plaintiffs filed a First Amended Complaint (“FAC”). (Doc. 25.)
On May 27, 2022, Defendants filed an answer to the FAC and counterclaims against
Plaintiffs. (Doc. 38.) That same day, Defendants (via Counsel) filed a motion for a temporary restraining order (“TRO”) based on their counterclaims. (Doc. 39.) The TRO sought to block the Trust from pursuing a trustee's sale of the Farm, which was scheduled for June 9, 2022. (Id.) However, the parties later agreed to postpone the trustee's sale pending the resolution of the TRO request. (Doc. 60.)
On July 7, 2022, the TRO hearing took place. (Doc. 70.) As relevant here, Counsel served as counsel for Defendants at the hearing and examined Stadtler, Dawson, and Gorrie. (See generally Doc. 82.) At the conclusion of the hearing, the Court denied Defendants' TRO request. (Id. at 198-206.)
On October 31, 2022, Plaintiffs filed the pending motion to disqualify Counsel from representing Defendants in this litigation. (Doc. 110.) The motion is now fully briefed and neither side requested oral argument. (Docs. 120, 124, 132.)
On November 11, 2022, Defendants moved for Rule 11 sanctions. (Doc. 118.)[7]
On December 5, 2022, Plaintiffs filed their operative pleading, the Second Amended Complaint (“SAC”). (Doc. 131.) The SAC asserts claims for breach of contract, unjust enrichment, fraud, negligent misrepresentation, and conversion/replevin, all of which arise from the parties' previous interactions related to the sale of the Farm and the hemp operation. (Id. ¶¶ 123-72.) Defendants' operative pleading, filed on June 14, 2022, asserts ten counterclaims based largely on similar theories. (Doc. 77 ¶¶ 72-121.)[8]
DISCUSSION
I. Legal Standard
The Court “appl[ies] state law in determining matters of disqualification.” In re Cnty. of Los Angeles, 223 F.3d 990, 995 (9th Cir. 2000) (“[W]e must follow the reasoned view of the state supreme court when it has spoken on the issue.”). In Arizona, motions to disqualify opposing counsel are “view[ed] with suspicion.” Gomez v. Superior Court, 717 P.2d 902, 905 (Ariz. 1986). “Only in extreme circumstances should a party to a lawsuit be allowed to interfere with the attorney-client relationship of his opponent.” Alexander v. Superior Court, 685 P.2d 1309, 1313 (Ariz. 1984). “[T]he moving party . . . [must] 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.” Id.
The District of Arizona has adopted, by local rule, the Arizona Rules of Professional Conduct. See LRCiv 83.2(e). Accordingly, this Court must follow those rules when deciding whether disqualification is required. Unified Sewerage Agency of Wash. Cnty. v. Jelco Inc., 646 F.2d 1339, 1342 n.1 (9th Cir. 1981) (holding that Oregon's ethical rules governed disqualification because “the United States District Court...
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