Killian v. Iowa Dist. Court for Linn County, 88-1651

• Decision Date: 21 March 1990
• Docket Number: No. 88-1651,88-1651
• Citation: 452 N.W.2d 426
• Parties: John Richard KILLIAN and Jan B. Killian, Plaintiffs, v. IOWA DISTRICT COURT FOR LINN COUNTY, Defendant.
• Court: Iowa Supreme Court

Page 426

452 N.W.2d 426

John Richard KILLIAN and Jan B. Killian, Plaintiffs, v. IOWA DISTRICT COURT FOR LINN COUNTY, Defendant.

No. 88-1651.

Supreme Court of Iowa.

March 21, 1990.

Tom Riley of the Tom Riley Law Firm, P.C., Cedar Rapids, for plaintiffs.

Patrick M. Roby, Richard S. Fry, and Diane Kutzko of Shuttleworth & Ingersoll, P.C., Cedar Rapids, for the trustee bank, on behalf of defendant district court.

James R. Snyder, Iris E. Muchmore, and James A. Gerk of Simmons, Perrine, Albright & Ellwood, Cedar Rapids, for trustee Hess, on behalf of defendant district court.

John H. Carlin of Carlin, Hellstrom & Bittner, Davenport, for defendant R. Richard Bittner.

Considered by HARRIS, P.J., and SCHULTZ, LAVORATO, SNELL, and ANDREASEN, JJ.

HARRIS, Justice.

We granted certiorari to consider this challenge to a trial court ruling which disqualified an attorney from further participation in probate litigation. The court reasoned that the attorney's representation of a trust beneficiary conflicted with his representation of another beneficiary. We annul the writ.

The case revolves around the relationship between attorney Tom Riley and his clients Joan Killian Hunter (Joan) and John Richard Killian (John). ¹ Joan and John were sister and brother and beneficiaries of the Anne Killian trust, an inter vivos trust created by their mother.

In 1983 Joan filed suit in federal court against the Merchants National Bank and Russell Hess, then co-trustees of the trust, alleging mismanagement and breach of fiduciary duty. Tom Riley represented Joan in that action. After extensive discovery the parties agreed upon a settlement. A settlement memorandum was signed by Joan, Riley, Hess and others.

John became implicated in the settlement at the insistence of the Merchants National Bank. The bank would settle with Joan only if there were to be no further litigation involving the Anne Killian trust. Because John obviously was the only other potential litigant the trust filed a report of its doings, including the settlement with Joan, and had the matter set for hearing in probate court. John was given notice.

Joan's settlement provided that, if the trust report were not approved, the settlement was voidable at the bank's option. The report was approved by an order entered April 30, 1987. The settlement agreement contained a provision (paragraph eight) ² which provides for confidentiality. It also stated that the agreement did not "bar or otherwise limit" the representation of others by Riley. Within a few days of the settlement Riley was retained by John Killian, and Jan his wife, to bring another action against the same defendants, also arising out of the bank's administration of the Killian trust. By letter dated July 30, 1987, Riley advised Thomas Collins, attorney for the Merchants National Bank, that he was representing John and Jan Killian for the purpose of bringing the claim. The claim was similar to the one earlier asserted on behalf of Joan: breach of fiduciary duty and mismanagement of the trust.

Attorney Riley filed the suit for John and Jan in September of 1987. He also filed a petition to vacate (as to John) the probate court's order of April 30, 1987, approving Joan's settlement. This was of course a necessary condition for proceeding with John's suit against the bank but raises the spector of the bank exercising its option to void its settlement with Joan. Riley remains Joan's attorney of record in the trust and represents her in an unrelated probate matter in Linn County.

The bank later filed a motion to disqualify Riley from representing John. The motion was supported by a number of documents, including a copy of a letter from Joan to attorney Riley, strongly protesting his representation of John and Jan, especially in view of her fear that his representation of his new clients would "prejudice" her settlement agreement.

Attorney Riley, joined by his new clients, vigorously resisted the effort to disqualify him. He sincerely contends that the effort--the motion to disqualify was filed several months after the bank's lawyers knew Riley had begun work on the case--is merely tactical and not prompted as a matter of professional ethics. They suggest that the effort is an unfair attempt to deprive the new plaintiffs of effective and well-informed counsel. Riley points out that the money for Joan's settlement has been paid over and the matter closed. He insists that any attempt to disturb Joan's settlement is certain to fail.

I. We seem never to have established our scope of review in attorney disqualification matters. Authorities elsewhere make it clear that a motion to disqualify an attorney is addressed to the discretion of the trial court and that a court's ruling on the motion will not be disturbed in the absence of abuse. Grahams Serv. Inc. v. Teamsters Local 975, 700 F.2d 420, 423 (8th Cir.1982); Cheng v. GAF Corp., 631 F.2d 1052, 1055 (2d Cir.1980); Central Milk Producers Coop. v. Sentry Food Stores, 573 F.2d 988, 991 (8th Cir.1978). We agree and think trial court discretion should be especially broad when a disqualification motion arises during trial, or when trial is imminent, because substitution of counsel will immediately impact on case flow management. The trial court shall find the facts surrounding the disqualification motion and our review of those facts is on error. Attorney disqualification matters are ancillary to the main case whether the main case is at law, in equity, or is a special proceeding. Hence the trial court's factual findings in disqualification cases will not be disturbed on appeal if they are supported by substantial evidence.

II. Attorney disqualification challenges derive from ethical principles outlined in the code of professional responsibility for lawyers, especially canon 4 (preservation of confidences and secrets of a client), canon 5 (lawyer must exercise independent professional judgment on behalf of client), canon 7 (zealous representation within the bounds of the law), and canon 9 (avoidance of even the appearance of impropriety). Central to the present dispute is disciplinary rule 5-105, ³ which prohibits an attorney from representing interests which conflict.

The letter written by Joan to attorney Riley specifically sets out her objections to his representation of John. In the letter she stated: "I believe that your first obligation is to me. My position is that it is your obligation to insure that nothing prejudices my settlement agreement." Even though the settlement agreement did not "bar or otherwise limit" Riley from representing others it is clear that Joan believed she could withhold her consent and attempted to prevent him from representing interests adverse to her.

We have stated:

Canon 5 is at once important and crystal clear: in the absence of client consent after full disclosure, a lawyer cannot represent a client whose business interests conflict with the lawyer's own. Neither can a lawyer represent clients whose interests conflict with each other. Indeed, any...