Travco Hotels, Inc. v. Piedmont Natural Gas Co., Inc.

• Decision Date: 04 September 1992
• Docket Number: No. 281A91,281A91
• Citation: 420 S.E.2d 426,332 N.C. 288
• Court: North Carolina Supreme Court
• Parties: TRAVCO HOTELS, INC. v. PIEDMONT NATURAL GAS COMPANY, INC. and K & W RESTAURANT, INC., v. PIEDMONT NATURAL GAS COMPANY, INC., v. TRAVCO HOTELS, INC.

Page 426

420 S.E.2d 426

332 N.C. 288

TRAVCO HOTELS, INC. v. PIEDMONT NATURAL GAS COMPANY, INC. and K & W RESTAURANT, INC., v. PIEDMONT NATURAL GAS COMPANY, INC., v. TRAVCO HOTELS, INC.

No. 281A91.

Supreme Court of North Carolina.

Sept. 4, 1992.

Appeal of right by defendant pursuant to N.C.G.S. § 7A-30(2) from the decision of a divided panel of the Court of Appeals, 102 N.C.App. 659, 403 S.E.2d 593 (1991), dismissing defendant's appeal of the denial of its motion to disqualify plaintiff's counsel by Freeman (William H.), J., on 11 January 1990 in Superior Court, Forsyth County. Heard in the Supreme Court on 11 December 1991.

Womble Carlyle Sandridge & Rice, by Grady Barnhill, Jr., and William C. Raper, Bailey & Thomas, by David W. Bailey, Jr., Winston-Salem, Wyatt, Early, Harris, Wheeler & Hauser, by Kim R. Bauman, High Point, for plaintiff-appellee, TRAVCO Hotels, Inc.

Hedrick, Eatman, Gardner & Kincheloe, by John A. Gardner, III, Scott M. Stevenson and Brian D. Lake, Charlotte, for defendant-appellant, Piedmont Natural Gas, Inc.

EXUM, Chief Justice.

The issue before us is whether the Court of Appeals erred in dismissing, as interlocutory, defendant's appeal of an order denying its motion to disqualify opposing counsel.

This action is one of a multitude of lawsuits arising out of an 18 January 1988 natural gas explosion in Winston-Salem. The explosion destroyed a hotel and restaurant building owned by TRAVCO Hotels, Inc. ("Travco") and leased by K & W Cafeterias, Inc. The complaint alleges that the explosion was caused by the negligence of defendant Piedmont Natural Gas Company, Inc. ("Piedmont"). Numerous lawsuits have been filed, and are currently pending, against Piedmont. On 12 May 1989 the cases stemming from the explosion were declared exceptional pursuant to Rule 2.1 ¹ of the General Rules of Practice for the Superior and District Courts. With the consent of all parties, the two cases comprising this action were consolidated and treated as "flagship" cases to be tried first. Judge William H. Freeman, Resident Superior Court Judge in Forsyth County, was designated to preside over the cases arising from the explosion.

On 11 September 1989, attorneys for Piedmont moved to disqualify the law firm of Womble Carlyle Sandridge & Rice ("Womble"), one of several firms representing plaintiff Travco. The motion alleged that Womble had obtained confidential information during representation of Piedmont in a previous matter, in which Piedmont had sought damages when one of its gas lines was broken during construction work. A lawsuit, Piedmont Natural Gas Co. v. Blue Ridge Concrete ("Blue Ridge"), was filed by Womble on Piedmont's behalf on 28 August 1985 in Forsyth County (No. 85-CVS-4041). Womble's involvement in that matter concluded in August 1987, shortly after the trial of the case. The incident that precipitated the Blue Ridge litigation is unrelated to the 18 January 1988 natural gas explosion.

On 11 January 1990 Judge Freeman in an order supported by thorough and detailed findings, denied Piedmont's motion to disqualify Womble. Piedmont filed notice of appeal with the Court of Appeals. Travco moved to dismiss Piedmont's appeal on the ground that the order appealed from was interlocutory. A divided panel of the Court of Appeals agreed and dismissed the appeal. Travco Hotels v. Piedmont Natural Gas Co., 102 N.C.App. 659, 403 S.E.2d 593 (1991) (Phillips, J., dissenting).

I.

The first question to be addressed is whether the Court of Appeals correctly concluded that Judge Freeman's order denying Piedmont's motion to disqualify Womble was not appealable. We think the Court of Appeals was correct. We affirm its decision and remand the matter for further proceedings.

Generally, there is no right of immediate appeal from interlocutory orders and judgments. Goldston v. American Motors Corp., 326 N.C. 723, 725, 392 S.E.2d 735, 736 (1990). However, N.C.G.S. §§ 1-277 and 7A-27 set forth certain exceptions to the general rule. Id. at 725, 392 S.E.2d at 736; Waters v. Qualified Personnel, Inc., 294 N.C. 200, 207, 240 S.E.2d 338, 343 (1978). N.C.G.S. § 1-277(a) (1983) provides that:

An appeal may be taken from every judicial order or determination of a judge of a superior or district court, upon or involving a matter of law or legal inference, whether made in or out of session, which affects a substantial right claimed in any action or proceeding....

N.C.G.S. § 7A-27(d) (1989) provides that:

From any interlocutory order or judgment of a superior court or district court in a civil action or proceeding which affects a substantial right ... appeal lies of right directly to the Court of Appeals.

This Court has consistently found "that no appeal lies to an appellate court from an interlocutory order or ruling of the trial judge unless such ruling or order deprives the appellant of a substantial right which he would lose if the ruling or order is not reviewed before final judgment." Waters, 294 N.C. at 207, 240 S.E.2d at 343 (quoting Consumers Power v. Duke Power Co., 285 N.C. 434, 437, 206 S.E.2d 178, 181 (1974)). "Essentially a two-part test has developed--the right itself must be substantial and the deprivation of that substantial right must potentially work injury ... if not corrected before appeal from final judgment." Goldston v. American Motors Corp., 326 N.C. at 726, 392 S.E.2d at 736; see also Wachovia Realty Investments v. Housing, Inc., 292 N.C. 93, 232 S.E.2d 667 (1977). However, as we have previously noted, the "substantial right" test is more easily stated than applied. Waters, 294 N.C. at 208, 240 S.E.2d at 343. In determining which interlocutory orders are appealable and which are not, we must consider the particular facts of each case and the procedural history of the order from which an appeal is sought. Id. at 208, 240 S.E.2d at 343; Patterson v. DAC Corp., 66 N.C.App. 110, 112, 310 S.E.2d 783, 785 (1984).

Piedmont contends that because Womble previously represented it in a matter involving the rupture of one of its gas lines, Womble may not represent Travco in the present action against Piedmont. Piedmont contends that during the course of the Blue Ridge litigation Womble became privy to confidential information which it may use to Piedmont's detriment and to give Travco an unfair advantage in this litigation. Piedmont argues it has a right to prevent Womble from using any confidential information against it which may have been gleaned from the prior representation; this right is substantial; and the only way it can be vindicated is by removal of Womble as counsel for Travco. Failure, therefore, to review the order denying Piedmont's motion before final judgment at trial would mean that Piedmont's substantial right would be forever lost if, indeed, the denial of its motion was error.

We agree with Piedmont that the use against it by Womble's client in this trial of confidential information gained by Womble when it represented Piedmont would deprive Piedmont of a substantial right not to have its attorney-client confidences breached to its detriment. We disagree, however, with the argument that the order denying Piedmont's motion to disqualify Womble cannot be effectively reviewed and Piedmont's rights protected after final judgment at trial. The order denying the motion to disqualify counsel fails the second prong of the two-part "substantial right" test.

Piedmont can adequately protect its right not to have its confidences used against it to its detriment by appealing any adverse final judgment. In this appeal Piedmont may assign error to the denial of its motion to disqualify Womble and the improper use, should there be any, of its confidences by Womble in the representation of Piedmont's adversary. If reversible error was committed in the denial of the motion or in the improper use of confidences, or both, then Piedmont will be given a new trial at which these errors would not occur.

We recognize that in Goldston v. American Motors Corp., 326 N.C. 723, 392 S.E.2d 735, we held that an interlocutory order granting a motion to disqualify counsel was immediately appealable. The granting of a motion to disqualify counsel, unlike a denial of the motion, has immediate and irreparable consequences for both the disqualified attorney and the individual who hired the attorney. The attorney is irreparably deprived of exercising his right to represent a client. The client, likewise, is irreparably deprived of exercising the right to be represented by counsel of the client's choice. Neither deprivation can be adequately redressed by a later appeal of a final judgment adverse to the client.

Other courts have persuasively concluded that the denial of a motion to disqualify counsel is not immediately appealable but must be addressed on an appeal from a final judgment at trial. The United States Supreme Court resolved the issue as it applies to federal civil litigation when it held "that a district court's order denying a motion to disqualify counsel is not appealable under § 1291 prior to final judgment in the underlying litigation." Firestone Tire & Rubber Co. v. Risjord, 449 U.S. 368, 379, 101 S.Ct. 669, 676, 66 L.Ed.2d 571, 581 (1981). The Court in Firestone stated the three-pronged federal test for immediate appealability of "final 'collateral orders' " as follows: "[T]he order must conclusively determine the disputed question, resolve an important issue completely separate from the merits of the action, and be effectively unreviewable on appeal from a final judgment." Id. at 375, 101 S.Ct. at 674, 66 L.Ed.2d at 579. Conceding that an order denying a motion to disqualify counsel met the first prong of the test and assuming that it also met the second, the Court concluded that it did not meet the third prong, saying, "petitioner is unable to demonstrate that an order denying disqualification is 'effectively unreviewable on appeal from a final judgment' within the meaning of our cases."...