In re Corwin Place, LLC
| Decision Date | 19 December 2016 |
| Docket Number | Case No. 16–bk–750 |
| Citation | 562 B.R. 663 |
| Court | U.S. Bankruptcy Court — Northern District of West Virginia |
| Parties | IN RE: CORWIN PLACE, LLC, Debtor. |
David Lucas Fuchs, Robert O. Lampl, Robert O. Lampl Law Office, Pittsburgh, PA, Michael Andrew Jacks, Jacks Legal Group P.L.L.C., Morgantown, WV, for Debtor.
On November 17, 2016, Corwin Place LLC (the "Debtor") filed a motion to disqualify the law firm representing Premier Bank's ("Premier"), its principal creditor. Premier filed a response in opposition to the Debtor's motion and the court conducted a hearing on the matter on November 30, 2016. At the hearing, the court requested supplemental briefing regarding the standards federal courts employ in addressing motions to disqualify and seeking clarification on certain factual points. Having received the additional submissions from the parties, the matter is now ripe for disposition.
The Debtor asserts that the court should disqualify Premier's counsel, Bailey & Glasser, based upon a conflict of interest stemming from the Debtor's principal, Charles Corwin, previously consulting with Bailey & Glasser regarding potential lender liability claims that he wished to bring on behalf of the Debtor against Premier. In response, Premier alleges that the scope of the consultation was limited such that Corwin was merely a prospective client of Bailey & Glasser's. Thus, Premier asserts that West Virginia Rule of Professional Conduct 1.18 controls and was not violated because no significantly harmful information was shared between Charles Corwin and Bailey & Glasser.
For the reasons set forth hereinafter, the court will deny the Debtor's motion to disqualify Bailey & Glasser.
Charles Corwin is the principal of the Debtor. On December 9, 2015, Corwin contacted Bailey & Glasser by telephone, at which time he discussed his potential case against Premier Bank with a paralegal for the firm. During the course of that conversation, Corwin informed the paralegal that he was interested in pursuing lender liability claims against Premier. He speculated that his claims were worth $12 to $15 million. Tony Clackler, an associate attorney for Bailey & Glasser, attempted to return Corwin's telephone call, but left a voicemail after failing to reach Corwin. On December 14, 2015, Corwin returned Clackler's phone call and left a voicemail after the call went unanswered. On December 15, 2015, Corwin and Clackler spoke for the first time. During the telephone conversation, they scheduled an appointment on December 22, 2015 to meet and discuss the case.
On December 22, 2015, Clackler and Corwin did not meet. Corwin mistakenly traveled to the Morgantown office of Bailey & Glasser where he spoke with a different attorney while Clackler worked in the Charleston, West Virginia office. On that same day, Corwin emailed1 Clackler the Fifth Amendment to the Forbearance Agreement between the Debtor and Premier. On the same day, Clackler responded that he would be away on holiday until January 4, 2016, but that Corwin should send the note indicating the loan obligation the Debtor owed to Premier and any additional forbearance agreements between the same. This email also contained a reminder that Bailey & Glasser had not agreed to represent Corwin or the Debtor at that time.
On January 11, 2016 Corwin forwarded an email from an attorney associated with the law firm of Bowles Rice, LLP, who represented Premier at that time that included the second, third, and fourth amendments to the forbearance agreement between the Debtor and Premier. On January 14, 2016, Corwin followed up, inquiring as to whether Clackler had reviewed the materials supplied on the 11th. Clackler informed Corwin, again by email, that he was reviewing the documents and discussing the potential for entering into representation of the Debtor with his supervisor. On January 15, 2016, Corwin emailed Clackler that he had more information to share with him. Corwin then called Clackler on January 27, 2016, leaving a voicemail indicating the same. Corwin again reached out to Clackler on January 29, 2016 stating that he was anxious to hear back from the firm because Premier was contemplating demanding payment in full under the note. Clackler responded by arranging a phone call for that afternoon.
On February 1, 4, and 8, 2016, Corwin sent emails to Clackler which included pictures of the real estate development central to the dispute between the Debtor and Premier, email conversations between Corwin and representatives of Premier, and contact information for an attorney involved in the matter. On February 9, 2016, Clackler informed Corwin he was reviewing all of the materials supplied. On February 16, 2016, Corwin forwarded an email to Clackler which indicated that Bailey & Glasser represented him in this matter. On February 18, 2016, Clackler sent a final email indicating that Bailey & Glasser did not represent the Debtor or Corwin and would not do so going forward. No further communication occurred between the parties.
While Bailey & Glasser was contemplating representing the Debtor it did not represent and had not previously represented Premier. Premier approached Bailey & Glasser about representing it in the Corwin litigation in October 2016. It then entered an appearance on behalf of Premier in this case on November 4, 2016. Shortly thereafter, on November 17, 2016, the Debtor filed its motion to disqualify.
The West Virginia Rules of Professional Conduct apply in this court. N.D.W. Va. L.R. Gen. P. 84.01. "A failure to adhere to those rules may require disqualification." CSX Transp. Inc. v. Gilkison , Doc. No. 05–202, 2006 WL 3203419, at *1 (N.D.W. Va. Nov. 3, 2006). However, "disqualification is a drastic measure which courts should hesitate to impose except when absolutely necessary." University of West Virginia Bd. o f Trustees v. VanVoorh i es , 33 F.Supp.2d 519, 520 (N.D.W. Va. 1998).
Motions to disqualify are not favored because of the overwhelming preference to permit litigants to elect their own counsel and the potential "of opposing parties to misuse disqualification motions for strategic reasons." Shaffer v. Farm Fresh, Inc. , 966 F.2d 142, 146 (4th Cir. 1992). Thus, courts are to "avoid overly-mechanical adherence to disciplinary canons" so as to preserve "litigants' rights freely to choose their counsel." Id. "Nevertheless, the guiding principle in considering a motion to disqualify counsel is safeguarding the integrity of the court proceedings." Zachair, Ltd. v. Driggs , 965 F.Supp. 741, 750 (D. Md. 1997). Thus, courts "must not weigh the circumstances with hairsplitting nicety but, in the proper exercise of its supervisory power over the members of the bar and with a view of preventing an appearance of impropriety," resolve all doubts in favor of disqualification. U.S. v. Clarkson, 567 F.2d 270, 273 fn. 3 (4th Cir. 1977) (citing Gas–A–Tron of Arizona v. Union Oil Co. of California , 534 F.2d 1322, 1324–25 (9th Cir. 1976) ). However, a "stronger objective indicator ... than simple judicial intuition is needed to warrant the drastic step of disqualification of counsel." Shaffer , 966 F.2d at 145.
Although courts must consider the specific factual circumstances surrounding a motion to disqualify, evidentiary hearings are not necessary in every instance. United States v. Philip Morris Inc. , 312 F.Supp.2d 27, 34–35 (D.D.C. 2004). Rather, courts must gather enough evidence to fairly make a decision and preserve the record for appellate review. Id. If a court receives adequate facts through affidavits, documents, or other submissions, it has discretion to determine that discovery is unnecessary. Id.2
The Model Rules of Professional Conduct, as adopted by the West Virginia Supreme Court of Appeals (hereinafter "Rule") differentiate between prospective, current, and former clients when assessing conflicts of interest. In matters dealing with a prospective client, Rule 1.18 governs, whereas Rule 1.09 applies for conflicts with former clients, and Rules 1.07 and 1.08 apply for current clients. The nature of the attorney-client relationship governs which rule applies: if no such relationship formed, but an attorney and a prospective client interacted on a specific matter, then Rule 1.18 applies; if an attorney-client relationship applies but has since been terminated, the client is a former client and 1.09 applies; and if an attorney-client relationship formed and was not terminated, the rules for current representation apply.
West Virginia law has long held an attorney-client relationship forms when a client expresses "a desire to employ" an attorney and the attorney consents "to act for him in a professional matter." Keenan v. Scott , 64 W.Va. 137, 61 S.E. 806, 809 (1908). If no such meeting of the minds occurs, but an attorney willingly interacts with an individual about undertaking potential representation of that individual, then a prospective attorney-client relationship forms and Rule 1.18 governs any potential conflicts of interest. W. Va. R.P.C. 1.18(a).
Rule 1.18 provides that attorneys owe two clear duties to prospective clients: (1) they must not use or reveal information provided by the prospective client except as would be permitted in cases involving former clients and (2) they "shall not represent a client with interests materially adverse to those of a prospective client in the same or a substantially related matter if the lawyer received information from the prospective client that could be significantly harmful to that person in the matter." W. Va. R.P.C. 1.18(b) and (c). Notably, the standards set forth in this rule are liberalized from the conflicts rules involving former or current clients. W. Va. R.P.C. 1.18 cmt. 6 ( that a "lawyer is not prohibited from representing a client with interests adverse to those of the prospective client in the same or a substantially related matter...
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