Humphrey on Behalf of State v. McLaren, C4-86-1150

• Court: Minnesota Supreme Court
• Writing for the Court: SIMONETT
• Citation: Humphrey on Behalf of State v. McLaren, 402 N.W.2d 535 (Minn. 1987)
• Decision Date: 29 May 1987
• Docket Number: No. C4-86-1150,C4-86-1150
• Parties: Attorney General Hubert H. HUMPHREY, III, Attorney General of the State of Minnesota, on Behalf of the STATE of Minnesota and the Public Employees Retirement Fund, Respondent, v. C. Michael McLAREN, defendant and third party plaintiff, Petitioner, Morris J. Anderson, et al., Third Party Defendants.

Page 535

402 N.W.2d 535

Attorney General Hubert H. HUMPHREY, III, Attorney General of the State of Minnesota, on Behalf of the STATE of Minnesota and the Public Employees Retirement Fund, Respondent, v. C. Michael McLAREN, defendant and third party plaintiff, Petitioner Morris J. Anderson, et al., Third Party Defendants.

No. C4-86-1150.

Supreme Court of Minnesota.

May 29, 1987.

Syllabus by the Court

1. The attorney general has authority to sue for recovery of monies allegedly improperly paid to the executive director of the Public Employees Retirement Association (PERA).

2. A special assistant attorney general representing the PERA has the PERA, not its executive director, as a client.

3. The disqualification of a special assistant attorney general from acting as trial counsel because a likely necessary witness in the pending lawsuit is not to be imputed to the entire attorney general's staff where, as here, the presumed indivisibility of the various divisions of the attorney general's staff has been rebutted.

Theodore J. Collins, John R. Schulz, St. Paul, for petitioner.

Mark B. Levinger, Sp. Asst. Atty. Gen., St. Paul, for respondent.

Heard, considered, and decided by the court en banc.

Upon petition for rehearing, the opinion in this matter filed March 20, 1987, is withdrawn and this opinion is substituted therefor.

SIMONETT, Justice.

The trial court denied defendant's motion to disqualify the entire legal staff of the attorney general's office as counsel for plaintiff in this case. The court of appeals granted defendant's petition for discretionary review and certified the matter to us for accelerated consideration. We affirm the trial court.

Attorney General Humphrey, as the named plaintiff and on behalf of the State of Minnesota and the Public Employees Retirement Fund (PERA), brings this lawsuit against defendant C. Michael McLaren former executive director of PERA. ¹ Plaintiff's complaint seeks recovery from defendant of public funds allegedly improperly paid to defendant during his tenure as director for severance pay and reimbursement of educational expenses, for expenses of a fishing trip and relocation expenses, and for the value of free-flight coupons. Defendant's answer alleges the payments were approved by the PERA Board of Trustees and that the suit is politically motivated. In addition, defendant counterclaims for other payments due him and for damages for defamation and infliction of emotional distress.

After issue was joined, defendant McLaren moved to disqualify Attorney General Humphrey or any member of his office from representing the plaintiff and further moved for an order requiring the attorney general, pursuant to Minn.Stat. Sec. 481.09 (1986), to show proof of authority to appear as counsel. It is the trial court's denial of these motions that is now before us.

Public employees of the various political subdivisions in this state are members of and contributors to the Public Employees Retirement Association. Management of the association and its pension fund is vested in a board of nine trustees. Minn.Stat. Sec. 353.03 (1986). An executive director, appointed by the board, acts as secretary and advisor to the board and is designated the administrative head of the association. Minn.Stat. Sec. 353.03, subd. 3(a) (1986). From late 1979 through September 30, 1984, defendant McLaren was the executive director. By statute, the attorney general is the legal advisor to the board of trustees. Minn.Stat. Sec. 353.08 (1986). During McLaren's tenure, Special Assistant Attorney General Jon Murphy was legal advisor to the PERA, and he continues today in that role.

After McLaren announced in August 1984 that he was resigning to accept a position elsewhere, the Minnesota Senate Committee on Governmental Operations and the legislative auditor examined expenditures by the PERA under McLaren's administration. Both examiners issued reports questioning certain payments made to McLaren. The senate committee recommended that the attorney general consider proceedings to recover these sums. The attorney general assigned Special Assistant Attorney General Mark B. Levinger to make an investigation. Levinger had never represented the PERA. Levinger is from the Solicitor General's division, while Murphy, the regular PERA attorney, is in the Department of Agriculture division, and the two attorneys report to different supervisors. Levinger is representing the plaintiff in this litigation and Murphy is taking no part.

Based on the recommendations of the senate committee and the legislative auditor and on his own investigation, the attorney general determined that the McLaren payments were improper and recovery should be attempted. Meanwhile, in April 1985, the legislature made major changes in the structure of the PERA. The terms of the existing trustees were ended, and the interim director was given the temporary powers of the board of trustees and of the executive director. See Act of April 10, 1985, ch. 11, 1985 Minn.Laws 17. On April 22, 1985, interim director Allen Eldridge signed a letter, drafted by attorney Levinger, requesting the attorney general to collect the McLaren payments.

Defendant McLaren contends that if attorney Murphy were to handle this litigation, he would be disqualified from acting as counsel, both because he would have a conflict of interest and because he will be a necessary witness at trial. (Defendant also claims several other members of the attorney general's office are necessary witnesses.) From this premise, McLaren argues that Murphy's disqualification must be imputed to the firm of attorneys of which he is a member, namely the attorney general's staff. The attorney general, on the other hand, denies attorney Murphy would be personally disqualified to represent the plaintiff, but even if he were, his disqualification is not imputable to the entire staff. Although not separately stated as an issue in his brief, McLaren also contends the attorney general lacks authority to represent the state and the PERA in this lawsuit.

I.

Defendant-appellant argues that the attorney general lacks authority to bring this lawsuit because the action has never been authorized by the PERA Board of Trustees. Defendant argues the attorney general cannot bring an action on behalf of a board that does not want action taken on its behalf and that to caption the lawsuit as being brought on behalf of a "fund" rather than the association or its board (see footnote 1, supra ) is a subterfuge to legitimize an unauthorized lawsuit.

Minn.Stat. Sec. 8.01 (1986) gives the attorney general broad authority to represent the state in lawsuits. It provides in part:

The attorney general shall appear for the state in all causes in the supreme and federal courts wherein the state is directly interested; also in all civil cases of like nature in all other courts of the state whenever, in the attorney general's opinion, the interests of the state require it.

See also Minn.Stat. Sec. 3.975 (1986) (imposes on the attorney general, after receiving a report from the legislative auditor, the duty to institute such civil proceedings as are appropriate against delinquent employees "to secure to the state the recovery of any funds"). In addition,

As the chief law officer of the state, the attorney general possesses all of the powers inherent in that office at common law. * * * The attorney general may institute, conduct, and maintain all such actions and proceedings as he deems necessary for the enforcement of the laws of this state, the preservation of order, and the protection of legal right.

Head v. Special School District No. 1, 288 Minn. 496, 503, 182 N.W.2d 887, 892 (1970); see State v. Northwestern Bell Telephone Co., 304 N.W.2d 872, 877 (Minn.1981).

We conclude the attorney general has ample authority to bring this action on behalf of the PERA and the fund it administers. While plaintiff argues that no PERA board has authorized this lawsuit, the fact is that interim director Eldridge, acting with full powers of the board, did request in writing that the attorney general, as the board's statutory legal adviser, seek reimbursement of the McLaren payments. See Act of April 10, 1985, ch. 11, Sec. 12, 1985 Minn.Laws 17, 25 (giving interim director full powers of the board of trustees until a new board is appointed).

II.

Is there a conflict of interest between a lawyer on the attorney general's staff and defendant McLaren that should disqualify the attorney general's staff? We do not think so.

Minn.R.Prof.Conduct 1.10 provides:

(a) While lawyers are associated in a firm, none of them shall knowingly represent a client when any of them practicing alone would be prohibited from doing so by Rules 1.7, 1.8(c), 1.9 or 2.2.

Defendant McLaren claims that if Special Assistant Attorney General Jon Murphy had been practicing alone he would be barred from representing the plaintiff in this lawsuit because of a conflict of interest based on Minn.R.Prof.Conduct 1.9. ²

Disqualification of the entire attorney general's office is appropriate if: (1) McLaren is a former client of Special Assistant Attorney Jon Murphy; (2) Murphy's former representation of McLaren involved matters substantially related to the current lawsuit, or confidential information given to Murphy could be used to McLaren's disadvantage; and (3) the attorney general's office is a "firm" under Rule 1.10. The first and third requirements are at issue here.

The problem with defendant's argument is McLaren has never been Murphy's client. Murphy's client has always been the PERA, i.e., the association and its board of trustees. Minn.Stat. Sec. 353.08 ("The attorney general shall be the legal adviser of the board of trustees."). The bill for Murphy's legal services is sent to and paid by the PERA.

Minn.R.Prof.Conduct 1.13(a) provides: "A lawyer employed or retained by an organization represents the organization acting through its duly...