United States v. Flood

• Decision Date: 09 May 2013
• Docket Number: No. 12–4094.,12–4094.
• Citation: 713 F.3d 1281
• Parties: UNITED STATES of America, Plaintiff–Appellee, v. Frances M. FLOOD, Defendant–Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

713 F.3d 1281

UNITED STATES of America, Plaintiff–Appellee,

v.Frances M. FLOOD, Defendant–Appellant.

No. 12–4094.

United States Court of Appeals, Tenth Circuit.

May 9, 2013.

Elizabeth Hunt (and Andrew H. Parnes, Ketchum, ID, with her on the briefs), Salt Lake City, UT, for Defendant–Appellant.

Stewart Walz, (David B. Barlow, United States Attorney, and Diana Hagen, Assistant United States Attorney, on the brief), Salt Lake City, UT, for Plaintiff–Appellee.

Before KELLY, O'BRIEN, and TYMKOVICH, Circuit Judges.

PAUL KELLY, JR., Circuit Judge.

Frances M. Flood, a federal inmate, sought a certificate of appealability (COA) from this court to appeal the denial of her 28 U.S.C. § 2255 motion. We granted a COA on two issues: 1) whether Ms. Flood's trial counsel labored under a conflict of interest that deprived her of effective assistance of counsel; and 2) whether the district court erred in denying Ms. Flood's motions for an evidentiary hearing, discovery, and judicial notice. Exercising our jurisdiction under 28 U.S.C. §§ 1291 and 2255(d), we now affirm the district court's denial of Ms. Flood's § 2255 motion. We also decline to expand the COA.

Background

In January 2003, the Securities and Exchange Commission (SEC) filed a civil suit against ClearOne Communications (ClearOne), as well as the company's CEO, Ms. Flood, and CFO, Susie Strohm, based upon an improper revenue recognition scheme. App. 9, 493. The SEC alleged that Ms. Flood and her codefendants had employed a scheme to defraud, falsely filed with the SEC, committed securities fraud, kept false records, and aided and abetted false bookkeeping. Id. at 9. According to Ms. Flood, ClearOne “selected” the law firm of Snow Christensen & Martineau (SCM) to represent her in the SEC litigation. Aplt. Br. 4. The parties were at all times represented by separate counsel.

During the SEC proceedings, Ms. Flood, Ms. Strohm, and ClearOne entered into a Joint Defense Privilege and Confidentiality Agreement (Joint Defense Agreement), which enabled them to share documents, litigation strategies, and other information without waiving attorney-client privilege. App. 67–73. The Joint Defense Agreement prohibited the parties from using shared information against one another, or revealing information obtained under the agreement to outside parties. Id. However, the agreement made clear that it did not create attorney-client relationships between the attorneys and their clients' co-defendants. Id. at 71. Similarly, the agreement provided that it did “not in any way preclude [an] attorney from representing any interest that may be construed to be adverse to any other party.” Id.

Ultimately, Ms. Flood settled with the SEC. Id. at 9, 498. Without admitting fault, she agreed to the entry of a permanent injunction and the imposition of a financial penalty. Id. Around the same time, Ms. Flood executed an Employment Separation and Indemnification Agreement (Separation Agreement) with ClearOne. Id. at 61–66. Under the Separation Agreement, Ms. Flood agreed to resign as CEO and surrender her stock options in exchange for $350,000 and ClearOne's promise to indemnify her “for any liability and all reasonable attorneys' fees and costs incurred by her in connection with the SEC Action or any Related Proceedings,” subject to limitations under Utah law (i.e., Utah Code Ann. § 16–10a–902(1), which prohibits indemnification of directors who have acted in bad faith). Id. SCM represented Ms. Flood in negotiating and drafting the agreement. Id.

Subsequently, the government brought criminal charges against Ms. Flood and Ms. Strohm. According to Ms. Flood, ClearOne was initially a target of the investigation, but was ultimately cast as a victim of the crimes. Aplt. Br. 3–4. Ms. Flood was indicted for conspiracy to commit various securities offenses, making false statements to accountants, securities fraud, and perjury. App. 426–39.

SCM continued to represent Ms. Flood, sending invoices for its attorney's fees to ClearOne. In order to justify the defense costs, SCM provided ClearOne with information regarding the basis of its fees. See, e.g., id. at 97–99, 110–14.

Initially, ClearOne paid SCM's invoices as they became due. Id. at 198. However, in October 2007, ClearOne requested detailed information pertaining to Ms. Flood's representation. Id. at 31, 95. SCM had recently learned that ClearOne was sharing materials prepared under the Joint Defense Agreement with the government. Accordingly, SCM refused ClearOne's request, explaining that it would not “disclose work product and attorney-client information.” Id. at 102. SCM did, however, assure ClearOne that it had “[c]ost-saving devices [ ] in place.” Id. at 99. Specifically, SCM worked with Ms. Strohm's lawyers to cull through the vast quantity of discovery. Id. SCM also availed itself of Ms. Flood's “intimate knowledge concerning many of the documents.” Id.

During preparation for trial, SCM contacted ClearOne about utilizing a mock trial “for the purpose of identifying key issues and strategies for presentation to the jury.” Id. at 93. In response, ClearOne asked why the criminal case could not be settled. Id. at 107. SCM then sent ClearOne an email, without copying Ms. Flood, explaining that mock trials are a “very effective way to get parties in a lawsuit to see things the way they really are,” and frequently lead to settlement. Id.

Nevertheless, ClearOne refused to pay for the mock trial. Id. at 108. In response,SCM told ClearOne that the refusal was an “improper interference with [SCM's] obligation to effectively defend charges against [Ms. Flood].” Id. SCM also stated that it had only asked ClearOne “as a courtesy,” and emphasized that “ClearOne and its officers [were] in no position to make decisions about the defense ... or to veto decisions made by the defense lawyers.” Id. ClearOne replied that it “ha[d] not and d[id] not intend to substitute its decisions for those of defense counsel.” Id. at 115. But ClearOne did advise that it would continue supervising Ms. Flood's legal expenses to ensure their reasonableness. Id.

In April 2008, ClearOne ceased paying Ms. Flood's attorney's fees. Id. at 119, 353. Ms. Flood, represented by SCM, brought suit against ClearOne to compel payment. Id. at 478–79. Although SCM represented Ms. Flood in both the civil and criminal matters, it employed different lead counsel. Id. at 195–96.

Initially, SCM and Ms. Strohm's counsel obtained a continuance of over three months in the criminal trial. Id. at 166. However, the court indicated that it would be unwilling to grant another continuance. Id. at 193–94, 298–99. The court advised that if counsel for Ms. Flood or Ms. Strohm wished to withdraw, they needed to do so promptly. The court also discussed the possibility of appointing counsel for Ms. Flood under the Criminal Justice Act (CJA), or converting current counsel to a CJA appointment. Id. at 159–60, 166–67, 193–95. However, the court did not appoint counsel, SCM did not withdraw, and Ms. Flood did not seek a change in representation. Thus, SCM continued to represent Ms. Flood in the criminal proceedings.

In January 2009, the court granted a preliminary injunction against ClearOne in the civil suit. ClearOne was ordered to pay Ms. Flood's attorney's fees, with 40% to be placed in escrow pending the court's review for reasonableness. Id. at 350–62. ClearOne initially complied with the injunction. Id. at 482. However, after Ms. Flood's trial began, ClearOne stopped making payments. Id. at 41, 482. In response, SCM filed a motion on Ms. Flood's behalf to compel payment. Id. Shortly before the criminal trial concluded, ClearOne complied with the injunction by making another payment. Id. at 41, 483.

During Ms. Flood's criminal trial, the court made several comments, outside the jury's presence, related to SCM's unpreparedness and disorganization. See, e.g., id. at 376–78. After a three-week trial, the jury found Ms. Flood guilty on all counts. Id. at 455. ClearOne then sought $17 million in restitution, which the court denied based on ClearOne's alleged involvement in the fraud. Id. at 3873.

Ms. Flood proceeded to file a motion for acquittal and a motion to vacate, both of which were denied. Id. at 456–58. Ms. Flood then changed counsel and filed a second motion to vacate, claiming she received ineffective assistance of counsel. Id. at 458–61. The court denied the second motion as untimely, as well as on the merits. On appeal, we affirmed the denial of the post-trial motions but remanded with instructions for the district court to vacate its ruling on the merits of the ineffective assistance claim. United States v. Flood, 635 F.3d 1255, 1261 (10th Cir.2011). We envisioned that Ms. Flood could bring her claim in a § 2255 proceeding with a properly developed record.

Ms. Flood then filed her § 2255 motion, arguing that she received ineffective assistance of counsel because her attorneys labored under a conflict of interest. App. 6–52. She subsequently filed motions for an evidentiary hearing, discovery, and judicial notice. The district court denied her § 2255 motion on the merits, holding Ms. Flood had failed to establish that an actual conflict adversely affected her representation. Flood v. United States, No. 2:11–CV–960, 2012 WL 2025255, at *10 (D.Utah June 5, 2012). The court also denied Ms. Flood's remaining motions. Id. at * 10 n. 3.

Ms. Flood appeals, arguing that: 1) conflicts of interest adversely affected her trial counsel's performance; 2) the district court abused its discretion by denying her motions for an evidentiary hearing, discovery, and judicial notice; and 3) she was denied effective assistance of counsel under Strickland. We granted a COA limited to issues one and two. United States v. Flood, No. 12–4094 (10th Cir. Nov. 5, 2012).

Discussion

The district court denied Ms. Flood's § 2255 motion without an evidentiary hearing, therefore our review is de novo. United States v....