In re Kalla, No. A10–1906.

• Decision Date: 25 January 2012
• Docket Number: No. A10–1906.
• Parties: In re Petition for DISCIPLINARY ACTION AGAINST Christopher Thomas KALLA, a Minnesota Attorney, Registration No. 0325818.
• Court: Minnesota Supreme Court

811 N.W.2d 576

In re Petition for DISCIPLINARY ACTION AGAINST Christopher Thomas KALLA, a Minnesota Attorney, Registration No. 0325818.

No. A10–1906.

Supreme Court of Minnesota.

Jan. 25, 2012.

Syllabus by the Court

Public reprimand and two years of supervised probation is the appropriate discipline when a lawyer: (1) simultaneously represents a plaintiff and a third-party defendant in the same lawsuit; and (2) after withdrawing from representation of the third-party defendant client, continues to represent the plaintiff without obtaining written, informed consent from the former client.

Martin A. Cole, Director, Julie E. Bennett, Senior Assistant Director, Office of Lawyers Professional Responsibility, St. Paul, MN, for petitioner.

Christopher Kalla, St. Louis Park, MN, pro se.

OPINION

PER CURIAM.

The Director of the Office of Lawyers Professional Responsibility (OLPR) served and filed a petition for discipline in September 2010 alleging that Christopher Kalla engaged in a conflict of interest prohibited by the Minnesota Rules of Professional Conduct. Following a hearing, a referee concluded that Kalla had engaged in a conflict of interest as alleged, and recommended that Kalla be publicly reprimanded and receive supervised probation for two years. We conclude that the referee's findings are not clearly erroneous and publicly reprimand Kalla and order that he serve supervised probation for two years.

Kalla was admitted to the practice of law in Minnesota in 2003. He has no previous disciplinary history. The conflict of interest at issue arose from Kalla's representation of two clients, whom we refer to in the opinion as “Client A” and “Client B.”

In 2006, Client A borrowed money from an individual lender (“the Lender”) to use as a down payment for the purchase of a home. The loan was secured by a mortgage on the real property. The mortgage was arranged by Future Mortgage, a company owned by Client B. Client B, who was also a real estate agent, assisted Client A with the purchase of her home and connected Client A to the Lender. When Client A later tried to refinance her loans, her mortgage broker identified potential legal problems with the Lender's loan and referred Client A to Kalla for legal assistance.

Kalla reviewed Client A's loan from the Lender and reached the conclusion that the loan was usurious. In October 2007, Kalla filed a lawsuit on Client A's behalf, seeking to invalidate the loan and mortgage between Client A and the Lender. During his investigation of Client A's claim, Kalla discovered that Client B had also borrowed money from the Lender and advised Client B about the potential usury issues with the Lender's loans.

The Lender filed an answer and counterclaim to the lawsuit, in which he identified Future Mortgage as the broker of his loan to Client A. The answer and counterclaim therefore identified Client B and Future Mortgage as key players in the lawsuit. Thereafter, Kalla undertook representation of Client B, filing a usury lawsuit on behalf of Client B against the Lender on December 21, 2007. Kalla did not inform Client B before he undertook her representation that Client B or her company, Future Mortgage, were in any way implicated in Client A's lawsuit.

In February 2008, the Lender filed a third-party complaint in Client A's lawsuit naming Client B and Future Mortgage as defendants. The third-party complaint alleged that Future Mortgage and Client B were obligated to the Lender for contribution and indemnity because they drafted the note and mortgage between the Lender and Client A. Prior to serving the third-party complaint, the Lender's attorney, Joseph Kantor, talked to Kalla about the problem for Kalla in representing both Clients A and B, who would be on opposing sides of the case after the third-party complaint was served. After receiving the Lender's third-party complaint, Kalla asked both clients to sign conflict-of-interest waivers. Client A signed the waiver but Client B did not. Kalla continued to represent both clients without a signed conflict-of-interest waiver from Client B.

Later in February 2008, the Lender brought a motion to disqualify Kalla in the lawsuit based on the belief that Kalla was engaging in a conflict of interest by representing both Clients A and B. On March 28, 2008, Kalla withdrew from representing Client B, but continued to represent Client A. Kalla did not obtain consent from Client B, as a former client, to continue to represent Client A.

Chanel Melin took over as Client B's attorney when Kalla withdrew. In June 2008, Melin had a conversation with Kalla in which Kalla expressed a willingness to use information against Client B obtained during his representation of Client B in Client A's lawsuit. Based on this conversation, Melin believed Kalla's continued representation of Client A was a conflict of interest with Client B. Thus, Melin joined the Lender's motion to disqualify Kalla. On June 27, 2008, the district court issued an order disqualifying Kalla from continued representation of Client A based on the conflict of interest between Clients A and B.

The district court stayed the order to disqualify for ten days to allow Kalla to obtain a written waiver of the conflict from Client B. When Kalla did not obtain a written waiver, the court issued a second order disqualifying Kalla from representation. The court stated that there was a “substantial, relevant relationship and overlap between the subject matters of the two representations” of the two clients. The court concluded it was “abundantly clear” that Rule 1.9 ¹ required a waiver from Client B as a former client before Kalla could continue to represent Client A. The court noted that Kalla obtained confidential information from Client B during his representation, that “ Rule 1.9 [exists] to prevent the use of former client confidences in a pending manner,” and that there were “valid and serious concerns” about Kalla using information against Client B. Client B then filed a complaint against Kalla with the OLPR in August of 2008.

Kalla appealed the district court's disqualification order. The court of appeals affirmed the order in an unpublished opinion on June 16, 2009. The court of appeals found that the interests of Kalla's current client (A) and former client (B) were materially adverse. The court noted that the Lender's counterclaims “pitted [Client B's] financial interests directly against those of [Client A].”

On September 29, 2010, the Director filed a petition for disciplinary action against Kalla.² Kalla challenged the petition for disciplinary action, and the matter came before the referee on February 18, 2011, at which Kalla, Client B, Melin, and Kantor testified. The referee made the following findings. Client B was involved with Client A's loans as her real estate agent and through Future Mortgage. Kalla undertook representation of Client A regarding her loan and, in the process of investigating the claim, Kalla discovered that Client B had a similar loan from the Lender. Kalla undertook representation of Client B in a usury lawsuit against the Lender. Kalla knew Client B and Future Mortgage were implicated in Client A's lawsuit but failed to advise Client B that she and Future Mortgage were implicated in the lawsuit before he undertook representation. The Lender's attorney discussed Kalla's potential conflict with Kalla before serving the third-party complaint. After receiving the third-party complaint, Kalla sought conflict waivers from both clients but received only a conflict waiver from Client A. Kalla continued to represent both clients after receiving the third-party complaint naming Client B as a defendant in Client A's lawsuit. Kalla withdrew from representing Client B after the Lender brought a motion to disqualify Kalla. Kalla thereafter continued to represent Client A without informed consent from Client B. Chanel Melin believed that Kalla expressed a willingness to use information obtained from Client B against Client B in Client A's lawsuit. Finally, the referee found that Kalla lacked insight into his misconduct, took no responsibility for his misconduct, and exhibited little or no remorse for his misconduct.

The referee concluded that Kalla's simultaneous representation of Clients A and B violated Minn. R. Prof. Conduct 1.7(a) ³ and that Kalla's continued representation of Client A after withdrawing from representation of Client B violated Minn. R. Prof. Conduct 1.9(a). Kalla contested the findings, conclusions, and recommendation, arguing that twenty of the referee's findings of fact were not supported by clear and convincing evidence, that the interests of the two clients were neither directly adverse nor was his representation of one materially limited by the other, and that the referee did not recommend the appropriate level of discipline because a private admonition would have been more appropriate.

Attorney misconduct must be proven by “full, clear, and convincing evidence.” See In re Gillard, 271 N.W.2d 785, 805 n. 3 (Minn.1978). This standard is met where the “truth of the facts asserted is highly probable.” In re Miera, 426 N.W.2d 850, 853 (Minn.1988) (internal quotation marks omitted). When a hearing transcript is ordered, the referee's findings are not conclusive and are subject to review on the record. See In re Moeller, 582 N.W.2d 554, 556 (Minn.1998). We will not set aside the referee's findings of fact unless they are clearly erroneous. In re Stanbury, 614 N.W.2d 209, 213 (Minn.2000). To find that a referee's findings were clearly erroneous, we must be “left with the definite and firm conviction that a mistake has been made.” In re Wentzell, 656 N.W.2d 402, 405 (Minn.2003). The referee's findings are given great deference. In re Barta, 461 N.W.2d 382, 382 (Minn.1990).

I.

Kalla disputes numerous factual findings. Kalla disputes some findings on the ground that they are irrelevant or immaterial. For instance, Kalla disputes findings...