Summary
In Glover, this Court noted that disqualification of counsel did not implicate a party's fundamental right to counsel in part because the additional counsel was added to the case "not [as] lead counsel, but only local courtesy counsel."
Summary of this case from Residential Funding Co. v. Impac Funding Corp. (In re RFC & Rescap Liquidating Tr. Litig.)Opinion
Civil No. 97-2068 (DWF/SRN)
March 6, 2001
Hart Robinovitch, Esq., and Barry Reed, Esq., Zimmerman Reed, Minneapolis, MN, and C. Neal Pope, Esq., and Teresa Pike Tomlinson, Esq., Pope, McGlamry, Kilpatrick Morrison, L.L.P., Columbus, Georgia, for Plaintiffs.
Margaret Savage, Esq., and Robert Pratte, Esq., Briggs Morgan, Minneapolis, MN, for Defendant Standard Federal Bank.
Eldon Spencer, Jr., Esq., Leonard O'Brien Wilford Spencer Gale, Saint Paul, MN, for Defendant Heartland Mortgage.
Nancy Wiltgen, Esq., Leonard, Street and Deinard, Minneapolis, MN, and Joseph Strubbe, Esq., Vedder, Price, Kaufman Kammholz, Chicago, IL, for Defendant ABN AMRO Mortgage Group, Inc.
MEMORANDUM OPINION AND ORDER
Introduction
The above-entitled matter is before the Court pursuant to Plaintiffs' Motion to Disqualify Leonard, Street and Deinard as Local Counsel for Defendant ABN AMRO Mortgage Group, Inc.
For the reasons set forth below, Plaintiffs' motion is granted.
Background
In this litigation, the Plaintiff Class alleges various violations of the Real Estate Settlement Procedures Act (RESPA), 27 U.S.C. § 2601, et seq. The litigation has already had a long and tumultuous history: certification of the class was originally denied, then it was granted, and finally-just this last fall-it was expanded to a nation-wide class. Indeed, an appeal on the expansion of the class is currently pending before the Eighth Circuit Court of Appeals. Similarly, the discovery process in this litigation has, by all accounts, been contentious. Especially since the class was expanded, there has been significant controversy about the scope and timing of discovery matters. During this most contentious period of this highly complex litigation, from the pretrial scheduling conference in September of 2000 until the date for hearing the most recent round of discovery motions in February of 2001, Magistrate Judge Susan Richard Nelson has been responsible for moving the case along.
One of the issues which has arisen during this time period is the involvement and legal status of the newly-added Defendant, ABN AMRO Mortgage Group, Inc. ("ABN AMRO"). According to Plaintiffs, Defendant Standard Federal Bank revealed, in the context of the pretrial scheduling conference, that much, if not all, of its business funding wholesale home loans had been transferred to its wholly owned subsidiary, ABN AMRO, sometime before December of 1998. Plaintiffs brought a motion for leave to amend the Complaint to add ABN AMRO as a Defendant and to allege that ABN AMRO is merely a corporate alter ego for Defendant Standard Federal Bank. Leave to amend was granted by Magistrate Judge Nelson on January 29, 2001; the First Amended Complaint was filed on January 30, 2001; and Defendant ABN AMRO was served on February 1, 2001.
The import of the transfer of business to ABN AMRO is that, assuming that ABN AMRO and Standard Federal Bank are truly separate corporate entities, the Plaintiff Class will potentially be limited to those mortgages funded by Standard Federal Bank before the transfer of business. Thus, Plaintiffs contention that Standard Federal Bank and ABN AMRO are really one and the same is significant to the scope of this litigation.
Magistrate Judge Nelson was scheduled to hear a number of discovery motions on February 23, 2001. According to Plaintiffs, timely resolution of these discovery disputes is critical to Plaintiffs' continuing ability to abide by the March 16, 2001, deadline for disclosing expert witnesses and the May 1, 2001, discovery deadline.
On the evening of February 22, 2001, ABN AMRO's lead counsel, Joseph Strubbe with Vedder Price in Chicago, notified the Court and opposing counsel of his intent to represent ABN AMRO in the litigation. The notice also provided that Leonard, Street and Deinard would serve as "local counsel." Magistrate Judge Nelson's husband is a partner at Leonard, Street and Deinard; upon learning of their involvement in the case, she promptly and appropriately indicated that she would be compelled to recuse herself.
Plaintiffs have brought the instant motion alleging that Leonard, Street and Deinard should be disqualified from serving as local counsel to ABN AMRO. Defendants Standard Federal Bank and ABN AMRO have both objected to this motion. Standard Federal Bank objects, first, because Plaintiffs suggest some collusion or wrong-doing on their part and, second, because part of Plaintiffs' argument rests on the as-yet-unproven contention that Standard Federal Bank and ABN AMRO are really the same party. Defendant ABN AMRO contests the motion on the grounds that disqualification would obviously impede ABN AMRO's right to hire their counsel of choice.
Discussion
Plaintiffs suggest that Defendants Standard Federal Bank and ABN AMRO may have "conspired" to select Leonard, Street and Deinard for the purpose of forcing Magistrate Judge Nelson's recusal. Plaintiffs suggest that Defendants have been unhappy with the direction of Magistrate Judge Nelson's rulings and may wish to "roll the dice," hoping that the case will be reassigned to a more sympathetic Magistrate Judge. Plaintiffs further suggest that the Defendants, who requested and were refused a stay pending the Eighth Circuit's ruling, have an interest in stalling this litigation until the Court of Appeals speaks on the appropriate scope of the Plaintiff Class. While the Court admits that the timing here is enough to raise a few eyebrows, there is certainly no concrete evidence that either or both Defendants are attempting to manipulate the system as Plaintiffs allege. Certainly the Court is loathe to accept such serious allegations as true when there is no hard evidence and when the Defendants have posited equally plausible and perfectly innocent reasons for their actions and the timing of such. Still, even assuming as the Court does that neither Defendant harbors an improper motive, the Court nevertheless concludes that disqualification of Leonard, Street and Deinard is appropriate.
Defendant ABN AMRO notes that the timing of its selection and announcement of local counsel is entirely consistent with the timing of the First Amended Complaint. ABN AMRO further notes that Joseph Strubbe has a professional acquaintance at Leonard, Street and Deinard and that Leonard, Street and Deinard have previously represented ABN AMRO in one other lawsuit (specifically, Leonard, Street and Deinard represented a corporation with which ABN AMRO later merged).
It is true that there is a "fundamental right to counsel"; in civil cases, that right springs generally from the protections of the Due Process Clause. See generally Robinson v. Boeing Co., 79 F.3d 1053 (11th Cir. 1996); McCuin v. Texas Power Light Co., 714 F.2d 1255 (5th Cir. 1983). Generally speaking, that fundamental right to counsel includes the right of the party to retain the counsel of his or her choosing. "[D]isqualification of counsel `is an extreme remedy that will not be imposed lightly.'" McCuin, 714 F.2d at 1262-63 (citations omitted).
However, the right to select counsel is not absolute, and it may be overridden when "compelling reasons exist." Id. at 1263. In particular, in determining whether to allow substitute or additional counsel or to disqualify a firm or attorney from participation in particular litigation, the Court may consider not only the potential for manipulation and impropriety, but also the Court's docket, the judicial time invested, and other factors relevant to the efficient administration of justice. See Robinson, 79 F.3d at 1055 ("The factors the trial court can fairly consider . . . include . . . the court's docket, the injury to the plaintiff, the delay in reaching decision, [and] the judicial time invested. . . ."); McCuin, 714 F.2d at 1263 ("The right to counsel of one's choice . . . cannot be exercised without thought also to the needs of effective administration of justice.").
Given the factors the Court should weigh in assessing the Plaintiffs' motion, several issues deserve particular attention. First, the Court reiterates that it does not assume any improper motive on the part of Defendant Standard Federal Bank and/or Defendant ABN AMRO. The Court is operating under the assumption that the Defendants' motives are entirely innocent and sees no reason, at this juncture and based upon the record before it, to suppose anything different. In short, the Court declines to engage in any further inquiry on the issue of ethics and propriety; such an inquiry is simply not necessary.
Second, the Defendants note that Magistrate Judge Nelson has only been involved in this matter since September of 2000; as such, she is a relative newcomer to this 3 1/2-year-old litigation. The Defendants suggest that, as a result, there is little merit to a claim of prejudice or delay if Magistrate Judge Nelson were to recuse herself now. The Court cannot agree. In terms of the overall length of the litigation, Magistrate Judge Nelson's involvement has been relatively brief. However, Magistrate Judge Nelson became involved in the matter shortly after this Court granted the Plaintiffs' motion for class certification, thereby dramatically changing the tenor and scope of the litigation. Furthermore, Magistrate Judge Nelson has been intimately involved in the ongoing discovery disputes, which involve issues of tremendous complexity and contentiousness, almost from the outset of those disputes. In other words, Magistrate Judge Nelson may have only recently been assigned to this case, but her tenure on this matter has required a far greater expenditure of time and judicial resources than did Magistrate Judge Boylan's earlier involvement in the case. It is simply the nature of the beast that not all months of litigation are created equally; Magistrate Judge Nelson's investment in this litigation cannot be underestimated.
Similarly, Defendant ABN AMRO makes much of their own late inclusion in the case. The cases relied upon by Plaintiffs all involve substitution of counsel or additional counsel for a party which has itself been a part of protracted litigation; in contrast, here the litigation itself has a long history, but ABN AMRO has only recently joined the fray. If ABN AMRO had itself had a long-standing presence in the litigation, its recent attempt to add Leonard, Street and Deinard as counsel would certainly smack of manipulation and impropriety and add weight to Plaintiffs' motion. However, the fact that ABN AMRO is new to the litigation does not itself entirely insulate ABN AMRO's choice of counsel from disqualification. To the extent that the Court has an interest in protecting the rights of all parties to a speedy and efficient resolution to this litigation and an interest in protecting the Court's own economy of resources, ABN AMRO's tenure in the litigation is irrelevant.
Finally, the Court notes that the counsel in controversy is not lead counsel, but only local courtesy counsel. When the Court undertakes its balancing-the right of the Defendant to counsel of choice against the interests of justice and judicial economy-the fact that Leonard, Street and Deinard is not lead counsel suggests that ABN AMRO's "fundamental right to counsel" is not so heavily implicated.
Ultimately, when the Court weighs the various factors mentioned above, the Court concludes that it is appropriate to provide that "extreme remedy" and disqualify Leonard, Street and Deinard from participation in this litigation.
For the reasons stated, IT IS HEREBY ORDERED:
1. Plaintiff's Motion to Disqualify Leonard, Street and Deinard (Doc. No. 227) is GRANTED.