Miami Bus. Servs., LLC v. Davis

• Decision Date: 02 April 2013
• Docket Number: No. 111,141.,111,141.
• Citation: 299 P.3d 477
• Parties: MIAMI BUSINESS SERVICES, LLC, an Oklahoma Limited Liability Company, Petitioner, v. The Honorable Lisa DAVIS, Respondent, and Asset Group, INC., a California Corporation; J2ES, Inc., an Oklahoma Corporation; Jennifer Fogg, individually, and Jeanna Sellmeyer, Real Parties In Interest.
• Court: Oklahoma Supreme Court

299 P.3d 477

MIAMI BUSINESS SERVICES, LLC, an Oklahoma Limited Liability Company, Petitioner,

v. The Honorable Lisa DAVIS, Respondent,andAsset Group, INC., a California Corporation; J2ES, Inc., an Oklahoma Corporation; Jennifer Fogg, individually, and Jeanna Sellmeyer, Real Parties In Interest.

No. 111,141.

Supreme Court of Oklahoma.

April 2, 2013.

APPLICATION TO ASSUME ORIGINAL JURISDICTION AND PETITION FOR WRIT OF MANDAMUS; LISA DAVIS, TRIAL JUDGE.

¶ 0 After petitioner filed suit it moved to disqualify counsel of real parties in interest on the grounds of conflict of interest. The trial judge denied petitioner's motion and it appealed. We recast petitioner's appeal as an application for original jurisdiction and petition for mandamus. We hold that denial of a motion to disqualify is immediately appealable as a final order affecting the substantial rights of a party pursuant to 12 O.S.2011 § 953 and that the addition of Comment 3 to Rule 1.9 of the Oklahoma Rules of Professional Conduct did not alter the requirement for an evidentiary hearing on motions to disqualify counsel for conflicts of interest based upon possession of confidential information.

ORIGINAL JURISDICTION IS ASSUMED; PETITION FOR WRIT OF MANDAMUS GRANTED.

Conly J. Schulte, Martha L. King, Eduardo A. Provencio, Louisville, Colorado, for Petitioner/Appellant.

Samuel R. Fulkerson, Oklahoma City, Oklahoma, for Petitioner/Appellant.

Thomas G. Wolfe, Catherine L. Campbell, Oklahoma City, Oklahoma, for Respondents/Appellees.

Michael D. Germain, Irvine, California, for Respondents/Appellees.

KAUGER, J:

¶ 1 Petitioner, Miami Business Services LLC (Miami), and Real Parties in Interest were involved in a joint venture. The law firm of Phillips Murrah, P.C. (Phillips) served as general counsel for Miami as well as Real Parties in Interest and their joint venture. Over the course of that joint venture, Fogg, one of the defendants, acted as the Chief Operating Officer (COO) of Miami and acted as the principal in the real party in interest business entities. While COO of Miami, Fogg sought counsel from Phillips regarding issues affecting Miami's operations and for work undertaken by Real Parties in Interest and the joint venture.

¶ 2 Miami terminated Fogg from her role as its COO in October, 2010. Subsequent to Fogg's termination, Miami brought suit against Real Parties in Interest, including Fogg, for breach of fiduciary duty, fraud, breach of contract, and civil conspiracy. Phillips entered its appearance in the suit on behalf of the Real Parties in Interest. Miami then filed a motion to disqualify Phillips, claiming that Phillips had a conflict of interest which violated Rules 1.7 ¹ and 1.9 ² of the Oklahoma Rules of Professional Conduct, stemming from Phillips' involvement with both Miami and Real Party in Interest AGI.

FACTS AND PROCEDURAL HISTORY

¶ 3 The trial court held a hearing on Miami's Motion for Disqualification of Phillips on August 17, 2012. Prior to the hearing, the parties filed several briefs on the disqualification issue. The affidavits, documents, and other factual materials attached to the parties' motions were discussed during the hearing. The trial court decided to take the matter under advisement and requested an in camera inspection of Phillips' billing records for the time that Fogg served as COO of Miami.

¶ 4 After reviewing the submitted documents, the judge overruled Miami's motion to disqualify Phillips in an order filed on September 11, 2012. The order did not contain any findings of fact or conclusions of law, but it did list the briefs and documents reviewed by the trial court prior to making its decision.³

¶ 5 Miami appealed the trial court's denial of its motion on October 10, 2012. The Real Parties in Interest filed a motion to dismiss the appeal, contending that an order denying a motion to disqualify counsel was a non-appealable interlocutory order. On October 15, 2012, this Court issued an Order directing Miami to show cause why the appeal should not be dismissed for lack of an appealable order, because an order denying a motion to disqualify an attorney appeared to be a non-appealable interlocutory order.

¶ 6 In response to this Court's show cause order, Miami argued that: 1) the order affected a substantial part of the merits of the case and thus qualified as a final order under 12 O.S.2011 § 953; ⁴ 2) that statutes granting a right to appeal must be liberally construed, and they should be construed for uniform application; and 3) the denial of the disqualification motion affected Miami's substantial right as much as an order granting disqualification would affect the party who loses its attorney. Miami contends that if an order disqualifying an attorney is appealable, then an order which refuses to disqualify an attorney should also be appealable.

¶ 7 On December 10, 2012, this Court issued an order denying Appellees' motion to dismiss the appeal, and recast the cause as an application to assume original jurisdiction and petition for writ of mandamus. This court ordered Miami to file an application, brief, and appendix in accordance with Rule 1.191 ⁵ of the Oklahoma Supreme Court Rules and ordered the case to proceed in accordance with that rule.

¶ 8 In its Application to Assume Original Jurisdiction and Petition for Writ of Mandamus, Miami argues that this Court possesses original jurisdiction over this matter based on its power over the practice of law in the state and over promulgating the Rules which set forth the standards for the practice of law in Oklahoma. Miami argues that a comment in the current version of Rule 1.9 ⁶ of the Oklahoma Rules of Professional Conduct is at odds with current Oklahoma case law regarding the necessity of an evidentiary hearing on a Motion for Disqualification of counsel. Miami contends that without findings or a detailed basis for the trial court's order denying disqualification of counsel, Miami is deprived of any substantive basis for appeal, and is left with no meaningful way to challenge the veracity of the process the district court employed, and no way to challenge the factual and legal findings that serve as the basis for the Court's ruling.

¶ 9 Arguing that no other remedy or relief is available, Miami asks this Court to issue a Writ of Mandamus to overturn the district court's September 11, 2012, Order Overruling Motions denying Miami's Motion for Disqualification and to direct the district court on the proper application of the current version of the Oklahoma Rules of Professional Conduct regarding the necessity of an evidentiary hearing on a motion to disqualify.

I.THE DENIAL OF A MOTION TO DISQUALIFY OPPOSING COUNSEL IS IMMEDIATELY REVIEWABLE BECAUSE IT IS A FINAL ORDER PURSUANT TO 12 O.S.2011 § 953.

¶ 10 This Court has previously ruled that an order granting a motion to disqualify counsel is a final order subject to appellate review under the terms of 12 O.S.2011 § 953.⁷ Historically under Oklahoma law, before the trial court can determine that an attorney should be disqualified based on conflict of interest or improper possession of confidential information, it must hold an evidentiary hearing and make a specific factual finding in its order of disqualification that the attorney had knowledge of material and confidential information.⁸ When reviewing the order, we review the trial court's findings of fact for clear error and carefully examine de novo the trial court's application of ethical standards.⁹

¶ 11 This court has long recognized the importance of a litigant's ability to hire and select her or his own counsel for legal services, acknowledging in Bancroft v. Board of Governors of Registered Dentists, 1949 OK 216, ¶ 7, 202 Okla. 108, 210 P.2d 666, that even in a non-criminal matter respondent was still entitled to have counsel of his own choosing.¹⁰ In Arkansas Valley State Bank v. Phillips, 2007 OK 78, ¶ 12, 171 P.3d 899, we stated regarding this right:

... [A] party litigant in a civil proceeding still has a fundamental right to employ and be heard by counsel of his or her own choosing. The right to select counsel without state interference is implied from the nature of the attorney-client relationship in our adversarial system of justice, where an attorney acts as the personal agent of the client and not the state. It is also grounded in the due process right of an individual to make decisions affecting litigation placing his or her property at risk. An individual's decision to employ a particular attorney can have profound effects on the ultimate outcome of litigation. Legal practitioners are not interchangeable commodities. Personal qualities and professional abilities differ from one attorney to another, making the choice of a legal practitioner critical both in terms of the quality of the attorney-client relationship and the type and skillfulness of the professional services to be rendered. (Citations omitted).

However, this court has additionally emphasized that the right to select one's own counsel is not absolute.¹¹ As we explained in Arkansas, supra:

A litigant's choice of counsel may be set aside under limited circumstances, where honoring the litigant's choice would threaten the integrity of the judicial process. This most often arises where an attorney's compliance with ethical standards of professional responsibility are challenged. It is this Court's nondelegable, constitutional responsibility to regulate both the practice and the ethics, licensure, and discipline of the practitioners of the law, and in doing so, to preserve public confidence in the bar and the judicial process. However, motions to disqualify counsel for failure to comply with the Rules of Professional Conduct are not to be used as procedural weapons. Disqualification is such a drastic measure that it should be invoked if, and only if, the Court is satisfied that real harm is likely to result. (Citations omitted).

¶ 12 While disqualification of counsel is a...