Smart Industries Corp., Mfg. v. Superior Court In and For County of Yuma

• Decision Date: 07 April 1994
• Docket Number: No. 1,CA-SA,1
• Citation: 876 P.2d 1176,179 Ariz. 141
• Parties: SMART INDUSTRIES CORP., MFG., and Lutes Enterprises, Inc., Petitioners, v. SUPERIOR COURT of the State of Arizona, In and For the COUNTY OF YUMA, The Honorable H. Stewart Bradshaw, a judge thereof, Respondent Judge, Darryl and Marilyn ST. GERMAINE, Real Parties in Interest. 93-0320.
• Court: Arizona Court of Appeals

Page 1176

876 P.2d 1176

179 Ariz. 141

SMART INDUSTRIES CORP., MFG., and Lutes Enterprises, Inc., Petitioners, v. SUPERIOR COURT of the State of Arizona, In and For the COUNTY OF YUMA, The Honorable H. Stewart Bradshaw, a judge thereof, Respondent Judge Darryl and Marilyn ST. GERMAINE, Real Parties in Interest.

No. 1 CA-SA 93-0320.

Court of Appeals of Arizona Division 1, Department E.

April 7, 1994.

Review Denied July 28, 1994.

[179 Ariz. 142] Mower, Koeller, Nebeker, Carlson & Haluck by Constance J. Miller, Yuma, for petitioner Smart Industries Corp.

Jones, Skelton & Hochuli by Mark D. Zukowski, Phoenix, for joined petitioner Lutes Enterprises, Inc.

Don B. Engler, Yuma, for real parties in interest.

OPINION

JACOBSON, Presiding Judge.

Petitioner Smart Industries, a defendant in the underlying personal injury suit, seeks review of the trial court's denial of its motion to disqualify plaintiffs' lawyer after defendant's counsel's former legal assistant was hired by plaintiffs' lawyer. ¹ This special action requires us to decide whether the same rules of imputed disqualification that apply to lawyers also apply to nonlawyer personnel who change employment between law firms.

Acceptance of special action jurisdiction in this matter is appropriate because it involves a question of law that could not be satisfactorily remedied by appeal. See Towne Dev. of Chandler, Inc. v. Superior Court, 173 Ariz. 364, 366, 842 P.2d 1377, 1379 (App.1992) (accepting special action jurisdiction from an order denying a motion to disqualify); see also Carlson v. Langdon, 751 P.2d 344, 350 (Wyo.1988) (certiorari granted to review refusal to disqualify because "waiting until the conclusion of the case on the merits would not have been beneficial to the parties and could have resulted in injustice"). Moreover, this is an issue of first impression in Arizona that has statewide ramifications for the practice of law. See Alexander v. Superior Court, 141 Ariz. 157, 161, 685 P.2d 1309, 1313 (1984).

Factual Background

In December 1990, real parties in interest Darryl and Marilyn St. Germaine (collectively, "the St. Germaines" or "plaintiffs"), through their former lawyer Richard D. Engler, filed a personal injury suit alleging products liability and premises liability against Smart and other defendants. The St. Germaines subsequently retained their present counsel, Don B. Engler, the brother of Richard D. Engler, to represent them in this action. Don Engler is a sole practitioner in Yuma.

Smart retained the law firm of Mower, Koeller, Nebeker, Carlson & Haluck ("Mower, Koeller") to defend it in that litigation. The Yuma office of Mower, Koeller consists of two lawyers and three support staff. Co-counsel Constance Miller and William A. Nebeker of that firm worked on the case. Ms. Miller also worked with her secretary, Janet Gregston, who has been employed "in a secretarial/paralegal capacity" at Mower, Koeller since September 1991. According to Ms. Miller's affidavit, Ms. Gregston's paralegal duties involved extensive work on the St. Germaine/Smart litigation:

[Ms. Gregston] worked extensively [on this case] in numerous confidential settings.... [She] was privy to exhaustive client confidences, correspondences between counsel and clients, strategic planning, litigation preparation and documentation, pretrial conferences with clients, lay and expert witnesses. She participated in the preparation of trial exhibits and is shown in one test video which may be presented at trial.

According to counsel for Lutes, Ms. Gregston participated in numerous discussions with co-defendants, clients, and experts, involving strategic planning for a cooperative defense.

On October 8, 1993, approximately 60 days prior to the firm trial date, Ms. Gregston suddenly terminated her employment at Mower, Koeller. ² On October 18, 1993, she began new employment as a legal secretary for plaintiffs' lawyer Don Engler. According to Mr. Engler's avowal to the court:

[C]ontrary to Mrs. Gregston's duties while in Ms. Miller's employ ... her duties [in Engler's employ] do not include a broad spectrum of "paralegal" tasks. To the contrary, Mrs. Gregston was employed to perform the specific professional duties of a legal secretary.

This means that Mrs. Gregston is responsible only to prepare those pleadings, motions and correspondence which [Engler] dictates, in conformance with [his] directions. Mrs. Gregston's contact with clients generally, and in this case in particular, is limited to receipt of telephone messages and placing of telephone calls for the undersigned.

Mr. Engler also avowed that he had given "specific and segregated authority" to a separate paralegal with her own secretary for "[a]ll matters relating to discovery, client conferences, preparation of discovery motions for final review ..., trial exhibits, and pretrial statements ..." and that "Mrs. Gregston has no responsibility in regards to these matters whatsoever." Similarly, Ms. Gregston's affidavit states that, prior to her employment with Mr. Engler, she was informed that she would not be asked to reveal any confidences she had learned in her prior employment, and to report to Mr. Engler if she were ever questioned by anyone in the office regarding her knowledge gained from her employment at Mower, Koeller. However, Ms. Gregston's initials and signature appear on several pleadings in this case, both in the underlying litigation and in special action papers filed in this court. Thus, it is apparent she is presently performing secretarial work on this case.

On November 15, 1993, Smart filed a motion to disqualify Engler as plaintiffs' counsel, based on imputed disqualification of Engler's firm under ER 1.10, Rule 42, Rules of the Arizona Supreme Court, ³ because of Ms. Gregston's employment by Engler. ⁴ The motion relied heavily on the California case of In re Complex Asbestos Litigation, 232 Cal.App.3d 572, 283 Cal.Rptr. 732 (Dist. 1 1991).

In response, Mr. Engler argued that ER 1.10 had no application in a nonlawyer context, and that California case law was distinguishable. Furthermore, he contended, he had met the requirements of the applicable ethical rule, ER 5.3, ⁵ by instructing Ms. Gregston not to divulge confidences. Thus, he concluded, disqualification was not required.

At a hearing on the motion, the trial court questioned its authority to order disqualification based on the conduct of a nonlawyer. The court subsequently ruled as follows:

The issue covered by this order is whether the plaintiffs' attorney must be disqualified to continue to act by reason of the fact that he has hired a secretary/legal assistant who formerly worked for counsel for a defendant and who, it is contended, did a great deal of work on this case and has considerable "inside information" about the case.

....

Plaintiffs' counsel has contended that he has studiously insulated himself from any possible knowledge his employee might have, and the court accepts this as true.

Were this an attorney there would be absolutely no doubt in the court's mind that disqualification would be proper. This is not an attorney.

Not being an attorney, two thoughts are raised.

The first is that the court really has no method of protecting the privilege of confidentiality which Ms. Miller's client is entitled to enjoy.

The second is that there is no code of conduct in place which would guide a lawyer. The code of conduct is that of the employer.

The upshot of all of this is that the continued representation of the plaintiff by her attorney and a defendant attorney's former employee looks bad. It cannot be but perceived by the public that something fishy is going on. Thus, it smells bad, too.

However bad it may appear, mere appearance of evil is not a sufficient basis for the court to disqualify an attorney. While it may be that he should, ethically, withdraw, the court is not in a position to force the issue.

ORDERED that the motion to disqualify plaintiffs' counsel is overruled.

Smart petitioned for special action from this order.

Discussion

A. Standard of Review

Rulings on disqualification motions are within the discretion of the trial court, limited only by the applicable legal principles. See, e.g., In re Complex Asbestos Litigation, 283 Cal.Rptr. at 739. Our review is thus limited to a determination whether the trial court abused its discretion. Id.

B. Application of Ethical Rules to Disqualification Motions

The trial court apparently questioned its authority to disqualify a lawyer based on the conduct of a nonlawyer, when that conduct falls outside the scope of the disciplinary system. Smart argues that the court's ruling therefore may have constituted a failure to exercise discretion, as much as an abuse of discretion. As a preliminary matter, then, we determine the basis for the trial court's authority to disqualify a lawyer based upon employment of nonlawyer personnel.

The relationship between ethical rules and litigation motions is usually not addressed by cases reviewing litigation disqualification motions that are based on ethical breaches. In 1983, our supreme court enacted Rule 42, Rules of the Arizona Supreme Court, which adopts the Model Rules of Professional Conduct (Model Rules), for the following purpose:

The rules are designed to provide guidance to lawyers and to provide a structure for regulating conduct through disciplinary agencies. They are not designed to be a basis for civil liability. Furthermore, the purpose of the rules can be subverted when they are invoked by opposing parties as procedural weapons. The fact that a rule is a just basis for a lawyer's self-assessment, or for sanctioning a lawyer under the administration of a disciplinary authority, does not imply that an antagonist in a collateral proceeding or transaction has standing to seek enforcement of the rule. Accordingly, nothing in the rules should be deemed to augment any substantive legal duty of lawyers or the...