Ex parte AmSouth Bank, N.A.

• Citation: 589 So.2d 715
• Parties: Ex parte AmSOUTH BANK, N.A., as Trustee, et al. (In re John H. MARTIN, et al. v. DRUMMOND COMPANY, INC., Drummond Coal Sales, Inc., Charles W. Adair, Elbert A. Drummond, Garry N. Drummond, Joseph E. Nicholls, Jr., and R. Weaver Self). 1901490.
• Decision Date: 04 October 1991
• Court: Alabama Supreme Court

Page 715

589 So.2d 715

60 USLW 2298

Ex parte AmSOUTH BANK, N.A., as Trustee, et al.

(In re John H. MARTIN, et al. v. DRUMMOND COMPANY, INC., Drummond Coal Sales, Inc., Charles W. Adair, Elbert A. Drummond, Garry N. Drummond, Joseph E. Nicholls, Jr., and R. Weaver Self).

1901490.

Supreme Court of Alabama.

Oct. 4, 1991.

Alton B. Parker, Jr., Kenneth O. Simon and Steve R. Burford of Spain, Gillon, Grooms, Blan & Nettles, Birmingham, for AmSouth Bank, N.A.

Oakley Melton, Jr. of Melton, Espy, Williams & Hayes, Montgomery, and Michael L. Edwards of Balch & Bingham, Birmingham, for respondents Drummond Co., Inc. and Drummond Coal Sales, Inc.

J. Mark White, Birmingham, for respondents Charles W. Adair and R. Weaver Self.

William Anthony Davis III and W. Stancil Starnes of Starnes & Atchison, Birmingham, for respondents Elbert A. Drummond and Garry N. Drummond.

HOUSTON, Justice.

The plaintiff, AmSouth Bank, N.A., has petitioned this Court for a writ of mandamus directing the Honorable William J. Wynn, judge of the Jefferson County Circuit Court, to disqualify the law firm of Arnold & Porter from representing the defendants, Drummond Company, Inc.; Drummond Coal Sales, Inc.; Elbert A. Drummond; Garry N. Drummond; Joseph E. Nicholls, Jr.; Charles W. Adair; and R. Weaver Self, in this suit alleging breach of fiduciary duties and fraud on the part of the defendants in effectuating the merger of Alabama By-Products Corporation ("ABC") and Drummond Holding Corporation. (The defendants are hereinafter collectively referred to as "Drummond.") ¹ The writ is denied.

The pertinent facts are as follows: On or about December 3, 1990, AmSouth retained the New York law firm of Arnold & Porter to represent it in connection with certain banking and corporate matters, including certain transactions known as "interest rate swaps." On March 13, 1991, Drummond retained Arnold & Porter to assist its Alabama counsel, the law firm of Maynard, Cooper, Frierson & Gale, P.C. ("Maynard, Cooper"), in defending it against a suit that had been filed by John H. Martin, a minority stockholder of ABC, challenging the manner in which Drummond had effectuated the merger with ABC. On May 6, 1991, AmSouth, as trustee of a number of trusts that had also owned stock in ABC prior to the merger, sued Drummond, alleging breach of fiduciary duties and fraud on the part of Drummond in purchasing the ABC stock that had been owned by the trusts. AmSouth's suit was consolidated with Martin's suit for trial. Because AmSouth was a client of Maynard, Cooper, that firm withdrew from representing Drummond after AmSouth refused to waive the apparent conflict of interest. Shortly thereafter, realizing that it, too, had a conflict of interest (i.e., that it was defending one of its clients, Drummond, against a suit filed by another of its clients, AmSouth), Arnold & Porter requested that AmSouth and Drummond waive the conflict. Drummond agreed to waive the conflict, but AmSouth refused, stating that its fiduciary responsibilities to the trusts prohibited it from consenting to Arnold & Porter's continued representation of Drummond. AmSouth filed a motion to disqualify Arnold & Porter. Arnold & Porter promptly withdrew from its representation of AmSouth, but continued to represent Drummond. On June 5, 1991, Judge Wynn held a hearing on AmSouth's motion to disqualify Arnold & Porter and, after considering the evidence, denied the motion, stating, in part, as follows:

"... I'm not the bar association to enforce ethical considerations or loyalty considerations or rules of disciplinary conduct or enforcement and, aside from those considerations and those rules and that branch of our judiciary that enforces those things, I don't really feel that it is my place. So I am going to deny [AmSouth's] motion to disqualify and allow Arnold & Porter to continue in this case."

The parties have stipulated that the corporate work that Arnold & Porter did for AmSouth is not related to its representation of Drummond. The parties have also stipulated that Arnold & Porter was not privy to any confidential information while it was retained by AmSouth that could be used against AmSouth in the present suit. Furthermore, it appears that Arnold & Porter had worked approximately 19 1/2 hours for AmSouth at the time it withdrew from its representation and that it had completed all of its pending work for AmSouth before it withdrew. It also appears that at the time Arnold & Porter discovered it had a conflict of interest, it had done approximately 300 hours of work toward the preparation of Drummond's defense.

The sole issue before this Court is whether AmSouth was entitled to have Arnold & Porter disqualified from continuing to represent Drummond in the present suit.

It is well established that mandamus is a drastic and extraordinary writ to be issued only where there is 1) a clear legal right in the petitioner to the order sought; 2) an imperative duty upon the respondent to perform, accompanied by a refusal to do so; 3) the lack of another adequate remedy; and 4) properly invoked jurisdiction of the court. Ex parte Alfab, Inc., 586 So.2d 889 (Ala.1991).

Relying primarily on an unpublished opinion of the Alabama State Bar Disciplinary Commission, RO-91-08, AmSouth contends that Judge Wynn should have disqualified Arnold & Porter under Rule 1.7 of the new Alabama Rules of Professional Conduct, which became effective January 1, 1991. Rule 1.7 provides, in pertinent part, as follows:

"(a) A lawyer shall not represent a client if the representation of that client will be directly adverse to another client, unless:

"(1) the lawyer reasonably believes the representation will not adversely affect the relationship with the other client; and

"(2) each client consents after consultation."

Drummond contends that Arnold & Porter acted properly under the circumstances by withdrawing from its representation of AmSouth and continuing with its representation of Drummond. Drummond argues that Arnold & Porter owed a duty of loyalty to Drummond, as well as to AmSouth; that Arnold & Porter made a difficult, but proper, decision to withdraw from its representation of AmSouth, in that Drummond would have suffered more prejudice than AmSouth suffered had Arnold & Porter withdrawn from its representation of Drummond and continued to represent AmSouth; and that, because the corporate work that Arnold & Porter had done for AmSouth is not related to its representation of Drummond, and, further, because Arnold & Porter was not privy to any confidential information while it was retained by AmSouth that could be used against AmSouth in the present suit, it was proper to permit Arnold & Porter to continue its representation of Drummond under Rule 1.9, supra, which provides:

"A lawyer who has formerly represented a client in a matter shall not thereafter:

"(a) represent another person in the same or a substantially related matter in which that person's interests are materially adverse to the interests of the former client, unless the former client consents after consultation; or

"(b) use information relating to the representation to the disadvantage of the former client except as Rule 1.6 or Rule 3.3 would permit or require with respect to a client or when the information has become generally known."

As a threshold matter, we note that mandamus will lie to review Judge Wynn's ruling on AmSouth's motion. In Ex parte Taylor Coal Co., 401 So.2d 1 (Ala.1981), this Court recognized that a first impression issue arising under the Rules of Professional Conduct that could taint the trial of the case below, such as the issue presented in this case, is too important to await resolution on appeal. See, also, Ex parte America's First Credit Union, 519 So.2d 1325, 1326 (Ala.1988).

We also note at this point that Judge Wynn had the authority to rule on the merits of AmSouth's disqualification motion. In Ex parte Taylor Coal Co., this Court, quoting Jones v. Alabama State Bar, 353 So.2d 508, 509 (Ala.1977), quoting In re Evans, 42 Utah 282, 130 P. 217 (1913), stated:

"The summary jurisdiction which the court has over its attorneys as officers of the court is also invoked. That jurisdiction is inherent, continuing, and plenary, and exists independently of statute or rules of equity, and ought to be assumed and exercised as the exigencies and necessity of the case require, not only to maintain and protect the integrity and dignity of the court, to secure obedience to its rules and process, and to rebuke interference with the conduct of its business, but also to control and protect its officers, including attorneys."

401 So.2d at 3. See, also, Roberts v. Hutchins, 572 So.2d 1231 (Ala.1990), wherein this Court held that the trial court should have disqualified the law firm representing the plaintiff because of the previous involvement of one of the law firm's attorneys as counsel for the defendants.

We proceed now to review the merits of AmSouth's motion. As previously noted, AmSouth does not take the position that Arnold & Porter should have been disqualified because Arnold & Porter had access to confidential information that could be used against AmSouth in the present suit. AmSouth concedes that the corporate work that Arnold & Porter did for it is not related in any way to Arnold & Porter's representation of Drummond. Therefore, unless Arnold & Porter was required under the new Rules of Professional Conduct to withdraw from its representation of Drummond, as AmSouth contends it was, Arnold & Porter's continued representation of Drummond was proper under Rule 1.9.

Although a client has a strong interest in retaining the counsel of its choice, Rule 1.7, with certain exceptions not applicable here, prohibits a lawyer from representing two or more clients with conflicting interests. Under Rule 1.7, a lawyer ordinarily may not act as an advocate against a client in another matter even if the other matter is wholly...