Fullmer v. State Farm Ins. Co.

• Decision Date: 06 April 1994
• Docket Number: No. 18404,18404
• Citation: 514 N.W.2d 861
• Parties: Rita E. FULLMER, Plaintiff and Appellee, v. STATE FARM INSURANCE COMPANY, Petitioner and Appellant, and Mona Drolc and Joyce Hamond (Beuning), Defendants and Appellees.
• Court: South Dakota Supreme Court

Page 861

514 N.W.2d 861

Rita E. FULLMER, Plaintiff and Appellee, v. STATE FARM INSURANCE COMPANY, Petitioner and Appellant and Mona Drolc and Joyce Hamond (Beuning), Defendants and Appellees.

No. 18404.

Supreme Court of South Dakota.

Argued Jan. 10, 1994.

Decided April 6, 1994.

Rexford A. Hagg of Whiting, Hagg and Hagg, and Gary D. Jensen of Lynn, Jackson, Shultz and Lebrun, Rapid City, for plaintiff and appellee Fullmer.

Curt Ireland and Suzanne M. Feist, Rapid City, for petitioner and appellant State Farm Ins. Co.

Ronald R. Kappelman, Rapid City, for defendant and appellee Drolc.

Jean M. Cline of Bettmann, Feehan and Cline, Rapid City, for defendant and appellee Hamond.

WUEST, Justice.

Appellant State Farm Insurance Company (State Farm) brings this intermediate appeal, raising two issues. First, State Farm asks that we reverse the circuit court's denial of attorney Curt Ireland's (Ireland) motion to withdraw as counsel for defendant Joyce Hamond Beuning (Beuning). Second, State Farm asks that we remove Judge Grosshans as trial judge. We reverse the trial court on the first issue, but deny the request to remove Judge Grosshans.

FACTS

The basic facts underlying this action are thoroughly recounted in our opinion on an earlier appeal in this matter. See Fullmer v. State Farm Ins. Co., 498 N.W.2d 357 (S.D.1993) (hereinafter Fullmer I ). In Fullmer I, we affirmed the trial court's decision granting new trials when it concluded that it had made a mistake when it granted State Farm's motion to bifurcate the two trials, allowing one trial (held in April 1991) for the "automobile collision" action, and a second trial (held in July 1991) for the "arm raising" or "battery" action (hereinafter "battery" action or trial). Fullmer I, 498 N.W.2d at 360-62.

The record shows that in the original action, Ireland filed an answer to the complaint on behalf of all three defendants: (1) State Farm; (2) the State Farm claims representative Mona Drolc (Drolc) who allegedly raised the arm of the plaintiff Rita Fullmer (Fullmer); and (3) the individual whose vehicle allegedly collided with the rear end of Fullmer's vehicle, Beuning. This tripartite representation continued until February 1991, when attorney Ron Kappelman (Kappelman) made his first appearance on behalf of Drolc. Apparently, Drolc requested, and State Farm agreed to supply and pay for separate counsel, as well as pay any judgment entered against Drolc. Ireland continued to defend both Beuning and State Farm. However, at the battery trial in July 1991, Ireland elicited testimony from a witness engaged by State Farm (Dr. Boyer) that was adverse to the position of State Farm's insured, Beuning. See Fullmer I, 498 N.W.2d at 359-60 (noting that State Farm argued in the second trial that Fullmer's injuries were caused by the automobile collision). Thus, shortly after our decision in Fullmer I was announced, Ireland filed a motion to withdraw as attorney for defendant Beuning (dated Apr. 8, 1993), citing a "potential conflict of interest" in the positions of State Farm and Beuning. Prior to any hearing on the motion, State Farm hired attorney Jean Cline (Cline) as separate counsel for Beuning. Cline made her first appearance of record on May 5, 1993. Following a hearing, Ireland's motion to withdraw was denied. The record shows that Beuning consented to Ireland's withdrawal as her counsel of record. Plaintiff Fullmer consented to the withdrawal only if several conditions were met: (1) No undue delay; and (2) that the jury, in the retrial, be informed of the facts detailing the case history of representations and admissions. ¹

The court listed twelve reasons for denial of Ireland's motion to withdraw, which can be consolidated into several points: (1) State Farm could adequately protect Beuning's interests by the court's allowing Cline to remain "in the background during the balance of the case" as counsel for Beuning; (2) State Farm could adequately protect Beuning by agreeing to be responsible for any money judgment against her, in the same manner that it has already agreed to be responsible for any judgment against its former employee Drolc; and (3) the addition of a third defense attorney would result in additional delay, expense and prejudice to the plaintiff Fullmer. In sum, the court stated that granting the motion to withdraw "would interfere with the efficient and proper functioning of the Court in the remand of this case for retrial."

Following the trial court's denial of Ireland's motion to withdraw, Ireland filed, on behalf of State Farm, a motion for change of judge. Attorney Kappelman joined that motion on behalf of defendant Drolc. The motion came before circuit Judge Fitzgerald, who refused to rule on it. State Farm and Drolc ask this court to rule on said motion.

ANALYSIS AND DECISION

1. Ireland's Motion to Withdraw as Counsel for Beuning

The South Dakota Rules of Professional Conduct, SDCL Sec. 16-18 Appx., Rule 1.7 (1993) provide in pertinent part:

(b) A lawyer shall not represent a client if the representation of that client may be materially limited by the lawyer's responsibilities to another client or to a third person, or by the lawyer's own interests, unless: (1) the lawyer reasonably believes the representation will not be adversely affected; and (2) the client consents after consultation. When representation of multiple clients in a single matter is undertaken, the consultation shall include explanation of the implications of the common representation and the advantages and risks involved.

S.D. RULES OF PROFESSIONAL CONDUCT Rule 1.7(b). The Comment to the rule explains its application:

Simultaneous representation of parties whose interests in litigation may conflict, such as ... co-defendants, is governed by paragraph (b). An impermissible conflict may exist by reason of substantial discrepancy in the parties' testimony, incompatibility in positions in relation to an opposing party or the fact that there are substantially different possibilities of settlement of the claims or liabilities in question.

Rule 1.7 cmt. Thus, it appears that under the facts of this case, a conflict has developed. When Ireland, on behalf of State Farm, elicited testimony from Dr. Boyer that Fullmer's RSD was caused by Beuning's negligence, this resulted in an "incompatibility in positions in relation to an opposing party," quoting the language of the comment to the rule. This is an impermissible conflict, and Ireland's motion to withdraw should be granted.

In light of our examination of the voluminous record in this case, continued analysis is in order. Other possible conflicts may exist, as the following pertinent history reveals.

As stated previously, on July 14, 1989, Ireland answered the complaint on behalf of all three defendants--State Farm, Drolc and Beuning. On February 11, 1991, Kappelman first appeared for Drolc, paid by State Farm, who has also agreed to pay any judgment against Drolc. Throughout the proceedings, Drolc maintained that she "never touched" Fullmer. After listening to the opening statements on July 24, 1991, the first day of the battery trial, court reporter Pamela McMahon (McMahon) came forward to inform the trial court that she recalled overhearing a conversation between Cline and Drolc, wherein Drolc admitted to Cline that she (Drolc) had raised Fullmer's arm. McMahon was deposed that night; and stated that on February 23, 1989, she overheard that conversation. Following the deposition, Ireland angrily stated, to McMahon's employer and in McMahon's presence, that "from now on, under no circumstances, is Pam to ever be a court reporter in any case that I'm involved in." Five days later, on July 29, 1991, McMahon testified at trial to her recollections of the overheard admissions of Drolc. During direct examination, the record reveals that McMahon appeared to be rather emotional, and the jury was sent from the courtroom. The trial court was then informed of Ireland's statement, which the court described as "intimidation of a prospective witness." ² Although Ireland apologized and waived cross-examination of McMahon, there was no other sanction. Then, also on July 29, Kappelman called Cline as a witness for Drolc in the battery trial, so that Cline could testify as to her recollections (or lack thereof) of the conversation between herself and Drolc. Also as stated previously, Ireland's motion to withdraw was filed on April 8, 1993; and on May 10, 1993, Cline filed a notice of appearance on behalf of Beuning.

As a result of our opinion in Fullmer I, the new trial is limited to the medical causation of Fullmer's RSD and resulting damages, plus whatever punitive damages, if any, should be awarded against defendants State Farm and Drolc; and the issue of whether Drolc was acting within the scope of her employment. ³ Because the issues are so limited, it appears that the issue of whether Drolc raised Fullmer's arm will not be presented in the retrial; thus, it should not be necessary for Cline to again be called as a witness. However, Cline has already served as a witness for Drolc--a co-defendant in a position adverse to Beuning--in the first battery trial. Further, there is no indication in the record that Beuning has any knowledge that Cline was a witness for Drolc. Obviously, before Beuning consents to having Cline serve as her lawyer, Beuning should be informed that Cline served as a witness for State Farm and Drolc in the earlier trial.

We continue our analysis of this situation by noting additional comments to Rule 1.7. In regard to payment of lawyers, the Comment continues:

A lawyer may be paid from a source other than the client, if the client is informed of that fact and consents and the arrangement does not compromise the lawyer's duty of loyalty to the client. See Rule 1.8(f). For example, when an insurer and its insured have conflicting interests in a matter arising from a liability insurance agreement, and the...