Production Credit Ass'n of Mankato v. Buckentin

• Decision Date: 14 August 1987
• Docket Number: C2-86-1356,No. C7-86-1255,C7-86-1255
• Parties: PRODUCTION CREDIT ASSOCIATION OF MANKATO, petitioner, Appellant, v. Lester BUCKENTIN and Marlys Buckentin, Respondents. Myron HARBERTS and Lois Harberts, Respondents, v. PRODUCTION CREDIT ASSOCIATION OF WORTHINGTON and Federal Intermediate Credit Bank of St. Paul, petitioner, Appellants.
• Court: Minnesota Supreme Court

Page 820

410 N.W.2d 820

PRODUCTION CREDIT ASSOCIATION OF MANKATO, petitioner, Appellant, v. Lester BUCKENTIN and Marlys Buckentin, Respondents.

Myron HARBERTS and Lois Harberts, Respondents, v. PRODUCTION CREDIT ASSOCIATION OF WORTHINGTON and Federal

Intermediate Credit Bank of St. Paul, petitioner,

Appellants.

No. C7-86-1255, C2-86-1356.

Supreme Court of Minnesota.

Aug. 14, 1987.

Syllabus by the Court

1. A lawyer's prior employment by a governmental agency, in and of itself, is insufficient to sustain a claim that the lawyer be disqualified from representing a private person in a specific dispute with the agency or governmental body.

2. A lawyer, formerly employed by a governmental agency, is not disqualified from representing citizens having legal disputes with that agency unless it has been established that the lawyer has provided to the governmental body, during the course of the employment, legal advice relative either to the present pending dispute or to matters so closely related thereto as to be substantially and essentially akin to the pending matter.

Robert M. Halvorson, New Ulm, for PCA of Mankato, PCA of Worthington, and FICB of St. Paul.

Scott J. Strouts and James M. Corum, Minneapolis, for Harberts and buckentin.

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

OPINION

KELLEY, Justice.

In each of two separate cases venued in different courts involving claims between local Production Credit Associations (PCA's), lenders, and farmer-debtors, each trial judge entered an order disqualifying attorney James Corum, a former senior attorney and general counsel for the St. Paul Federal Intermediate Credit Bank (FICB), from representing the farmer-debtors. The court of appeals reversed both trial courts. ¹ We affirm the court of appeals' opinion insofar as it holds that Corum is not disqualified from representing the debtors in their legal disputes against the PCA's, but in the Harberts' case (No. C2-86-1356), we reverse the court of appeals and sustain the trial court holding that Corum be disqualified from representing the Harberts against the FICB in that action.

In creation of the national Farm Credit System, 12 U.S.C. Secs. 2001-2260 (1982), the United States has been divided into 12 farm credit districts. The Seventh Farm Credit District covering several midwestern states is headquartered in St. Paul, Minnesota. In each district a Federal Intermediate Credit Bank exists to loan money to independent cooperative corporations, denominated Production Credit Associations, who, in turn, are owned by, and loan money to, farmers. The FICB in each district has general supervision over the PCA's in its district to ensure that the congressional policy of improving the well-being of farmers is achieved. This supervision extends to internal management of PCA's to the extent that the FICB can remove officers and directors and set salaries of local PCA officers. At all material times the PCA of Mankato, Minnesota, and the PCA of Worthington, Minnesota, were subject to that supervision and control by the St. Paul FICB.

From 1968 until 1984, James M. Corum was an attorney employed by the St. Paul FICB, ultimately serving for a time as its general counsel. By the nature of, and in the course of, his employment, with some regularity Corum came in contact with the various local PCA's in the district. Some of these contacts arose from seminars programmed and conducted by him for officers of local PCA's concerning, among other topics, potential legal issues likely to arise between the local PCA's and their member-borrowers relative to the administration of farm loans. Also, as part of his duties, Corum, working with other FICB officers, in fact, had, on occasion, taken adverse positions to local PCA's and their employees in termination, removal, or like supervisory proceedings. In 1984, Corum's employment with FICB was terminated. His termination was followed by litigation between himself and FICB in federal court. Following ultimate settlement of that litigation, Corum reentered the private practice of law.

In 1985 appellant PCA (Mankato) sued respondents Buckentin in Sibley County District Court in an attempt to foreclose a defaulted farm loan. Sometime after an answer and counterclaim had been interposed by one attorney, the law firm of Nicklaus and Fahey undertook the defense on behalf of the Buckentins. That firm interposed an amended answer and counterclaim in which new and additional "causes of action" were alleged. ² Corum was associated with Nicklaus and Fahey "of counsel." In fact, he was the attorney who had prepared the amended answer and counterclaim and thereafter took part in the representation of the Buckentins.

In April 1986 Nicklaus and Fahey (again with Corum "of counsel") commenced a lawsuit in Nobles County District Court on behalf of the Harberts against appellant PCA (Worthington). That complaint contained assertions of "causes of action" substantially similar to those alleged in the Buckentin counterclaim. In addition, FICB was named a party defendant. ³

Following the appearance of Nicklaus and Fahey, with Corum "of counsel", in each lawsuit representing farmer-debtors, each PCA moved the appropriate trial court for an order to disqualify both Corum and the law firm from further representation of the farmer-debtors. Each motion asserted that when Corum had been attorney for FICB, he had "represented" the PCA's and that an attorney-client relationship had existed between him and the PCA's arising from legal advice given by him to the St. Paul FICB. Each motion also claimed the same relationship existed between Corum and the PCA and its officers concerning matters substantially related to issues in the pending lawsuit between the PCA's and the farmer-debtor. In resisting each motion, Corum denied the existence of any attorney-client relationship between himself and the PCA's; contended that his job was to see that the local PCA's were adequately represented by their own attorneys; and asserted that his relationship as senior attorney and general counsel vis-a-vis the local PCA's was adversarial in that his responsibility as attorney for FICB was to ensure that each PCA was in compliance with federal farm credit statutes and regulations. Each district court trial judge rejected Corum's contentions. Each directed entry of an order disqualifying Corum from representing the farmer-debtors in the pending claim. However, in each case the trial judge permitted the continued representation of the debtors by the law firm of Nicklaus and Fahey. In reversing the trial court in each case, the court of appeals concluded that Corum's representation of the debtor in the current litigation was not "substantially related" to his prior work as an attorney employed by the St. Paul FICB or to any attorney-client relationship between himself and either PCA.

While this court has never specifically enunciated the review standard to be employed by appellate courts in reviewing dispositions of motions seeking attorney disqualification, we assume that normally the "clearly erroneous" standard will be applied in reviewing strictly factual findings. In each of these cases the trial judge made a factual finding that an attorney-client relationship had previously existed between each PCA and Corum. Affidavits furnished to each court by Corum, PCA officials, officers of the St. Paul FICB and officials of other farm credit agencies presented each trial court with conflicting word descriptions of Corum's professional relationship with the PCA's while he was employed by the St. Paul FICB. Because we are unable to conclude that the resulting fact findings of the trial courts are clearly erroneous--even though had we in the first instance been the finder of fact we might have arrived at a different conclusion--they will not be disturbed. ⁴ But a factual determination that a prior attorney-client relationship had once existed is not dispositive of the issue posed by these cases.

Additionally, legal rules governing attorney representation have a bearing on the ultimate resolution. In 1985 this court promulgated the Minnesota Rules of Professional Conduct as part of its ultimate responsibility to set the standards for, and to regulate, professional conduct of lawyers admitted to practice in the state. Obviously, to ensure uniform application of the rules of lawyer conduct, by necessity, this court must retain the final independent interpretive authority to define the scope and application of those rules. See e.g., In re Daly, 291 Minn. 488, 490, 189 N.W.2d 176, 178-79 (1971). Though trial court interpretation of the rules are informative, and may be helpful, we do not give to them the same deference we are inclined to afford to factual findings. Thus, we turn to independently examine the relationship that had existed between Corum and the PCA's while he was employed by FICB.

The rule governing resolution of disqualification assertions based upon alleged conflicts of interest, Rule 1.9, Minnesota Rules of Professional Conduct (MRPC), provides: "A lawyer who has formerly represented a client in a matter shall not thereafter: (a) represent another person in the same or a substantially related matter in which that person's interests are materially adverse to the interests of the former client unless the former client...