National Union Fire Insurance v. Alticor, Inc. ( 2007 )

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 07a0001p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
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NATIONAL UNION FIRE INSURANCE COMPANY OF
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PITTSBURGH, PENNSYLVANIA and ILLINOIS
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NATIONAL INSURANCE COMPANY,
Plaintiffs-Appellees, -
No. 05-2479
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v. -
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ALTICOR, INC., AMWAY CORPORATION, and
Defendants-Appellants. -
QUIXTAR, INC.,
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Appeal from the United States District Court
for the Western District of Michigan at Grand Rapids.
No. 05-00015—Richard A. Enslen, District Judge.
Decided and Filed: January 3, 2007
Before: GILMAN and GRIFFIN, Circuit Judges; GWIN, District Judge.*
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ORDER ON REHEARING
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GRIFFIN, Circuit Judge. Both plaintiffs-appellees, National Union Fire Insurance Company
of Pittsburgh, Pennsylvania, and Illinois National Insurance Company (collectively “National
Union”) are represented by the law firm of Plunkett & Cooney, P.C. (“Plunkett”). All three
defendants-appellants, Alticor, Inc., Amway Corporation, and Quixtar, Inc., are represented by the
law firm of Wilson Young PLC (“Wilson”).
Attorney John Egan was employed by plaintiff National Union’s law firm, Plunkett, from
September 2003 into July 2006. During that time, Egan represented this same plaintiff in this very
case, and in other insurance-coverage cases involving defendant Alticor. Egan spent 40% of his
billable time representing the present plaintiff in insurance-coverage disputes against defendant
Alticor. Egan participated in depositions, document production and strategy sessions, and he drafted
pleadings, motions, briefs, and reports for this plaintiff. In this very action, Egan drafted plaintiff’s
complaint for declaratory judgment and the Rule 26 initial disclosures. In July 2006, Egan left the
employ of Plunkett and became an associate with defendants’ law firm, Wilson.
National Union moved to disqualify the Wilson firm from representing Alticor. National
Union’s motion proceeds on the theory of imputed disqualification, under which an attorney’s
*
The Honorable James S. Gwin, United States District Judge for the Northern District of Ohio, sitting by
designation.
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No. 05-2479 Nat’l Union Fire Ins., et al. v. Alticor, Inc., et al. Page 2
conflict of interest may be imputed to his law firm under certain circumstances. Specifically,
National Union relied on two Michigan Rules of Professional Conduct (“MRPC”), MRPC 1.9
(“Conflict of Interest: Former Client”) and MRPC 1.10 (“Imputed Disqualification: General Rule”).
By memorandum order dated October 18, 2006, we granted National Union’s motion and
disqualified the Wilson firm from representing defendants-appellants on this appeal. See Nat’l
Union Fire Ins. Co. of Pittsburgh, Penn., et al. v. Alticor, Inc., et al., 466 F.3d 456 (6th Cir. Oct. 18,
2006). For the reasons that follow, we grant rehearing and vacate in part our October 18, 2006,
order. On rehearing, we grant National Union’s motion to disqualify the Wilson firm on a different
ground.
In our October 18, 2006, order, we first relied on MRPC 1.9, which provides, in part,
(a) A lawyer [Egan] who has formerly represented a client in a matter [plaintiff
National Union] shall not thereafter represent another person [defendant Alticor] 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
consents after consultation.
(b) Unless the former client consents after consultation, a lawyer shall not
knowingly represent a person in the same or a substantially related matter in which
a firm with which the lawyer formerly was associated has previously represented a
client.
MRPC 1.9(a) and (b). We concluded that MRPC 1.9(a) applied here, because Egan himself formerly
represented National Union in this very matter. (We also concluded that MRPC 1.9(b) did not apply
because, by its terms, it governs situations where the lawyer’s former firm – but not the lawyer
himself – represented the now-opposing party.) We reasoned that, because National Union refused
to consent to Egan representing defendants, MRPC 1.9(a) prohibited Egan himself from representing
defendants.
We then considered whether Egan’s new firm, Wilson, must suffer imputed disqualification,
even though Egan is not personally counsel for Alticor in this matter. We concluded that MRPC
1.10 squarely governed the instant situation. At that time, MRPC 1.10(a) provided, in its entirety,
(a) While lawyers are associated in a firm, none of them shall knowingly represent
a client when any one of them practicing alone would be prohibited from doing so
by Rules 1.7, 1.8(c), 1.9(a) or (c), or 2.2.
Former MRPC 1.10(a) (emphasis added). We ended our inquiry there, stating:
As discussed above, MRPC 1.9(a) prohibits Egan from representing Alticor or the
other defendants-appellants against his former client National Union in this same
matter. Therefore, MRPC 1.10(a) states without qualification that no lawyer in
Egan’s new firm may represent Alticor or the other defendants-appellants against
National Union in this matter. Under these circumstances, Wilson Young cannot
avoid imputed disqualification by “screening” Egan from this matter, no matter how
diligently. See generally, Manning, 849 F.2d at 226-27.
Therefore, we GRANT plaintiffs-appellees’ motion to disqualify the law firm of
Wilson Young PLC from representing defendants-appellants in this matter.
National Union, 466 F.3d at 459. We also cancelled oral argument on the merits of the appeal,
which had been scheduled for November 1, 2006.
No. 05-2479 Nat’l Union Fire Ins., et al. v. Alticor, Inc., et al. Page 3
By order dated November 14, 2006, however, the Michigan Supreme Court amended MRPC
1.10(a), effective immediately. The amendment makes clear that the instant situation is governed
by MRPC 1.10(b), not by MRPC 1.9(a) and MRPC 1.10(a).
The new MRPC 1.10(a) reads as follows, with new text underlined:
(a) While lawyers are associated in a firm, none of them shall knowingly
represent a client when any one of them practicing alone would be prohibited from
doing so by Rules 1.7, 1.8(c), 1.9(a) or (c), or 2.2. If a lawyer leaves a firm and
becomes associated with another firm, MRPC 1.10(b) governs whether the new firm
is imputedly disqualified because of the newly hired lawyer’s prior services in or
association with the lawyer’s former law firm.
Thus, we are obligated to apply MRPC 1.10(b) to rule on National Union’s motion to disqualify.
See In re Dow Corning Corp., 419 F.3d 543, 549 (6th Cir. 2005) (“In applying state law, we
anticipate how the relevant state’s highest court would rule in the case and are bound by controlling
decisions of that court.”) (citing Allstate Ins. Co. v. Thrifty Rent-A-Car Sys., Inc., 249 F.3d 450, 454
(6th Cir. 2001)).
In turn, MRPC 1.10(b), which has not been amended, provides as follows:
(b) When a lawyer becomes associated with a firm, the firm may not knowingly
represent a person in the same or a substantially related matter in which that lawyer,
or a firm with which the lawyer was associated, is disqualified under Rule 1.9(b),
unless:
(1) the disqualified lawyer is screened from any participation in
the matter and is apportioned no part of the fee therefrom; and
(2) written notice is promptly given to the appropriate tribunal
to enable it to ascertain compliance with the provisions of this rule.
MRPC 1.10(b) (emphasis added).
Defendants-appellants’ counsel, Wilson Young PLC, never notified this court in writing of
attorney John Egan’s change in employment and former representation of National Union as
required by MRPC 1.10(b)(2). That failure requires Wilson’s disqualification. See Town & Country
Apts. v. City of Wixom, No. 238471, 2003 WL 1861113, at *4 (Mich. App. Apr. 8, 2003) (per
curiam) (affirming the Michigan Tax Tribunal’s disqualification of petitioner’s counsel because,
inter alia, “there was no evidence that petitioner provided written notice to the MTT concerning the
issue of a conflict of interest as required by MRPC 1.10(b)(2)”), app. denied, 673 N.W.2d 100,
recon. denied, 683 N.W.2d 141 (Mich. 2004) (table); Cobb Pub., Inc. v. Hearst Corp., 891 F. Supp.
388, 389 (E.D. Mich. 1995) (denying reconsideration of disqualification of defendants’ law firm
where, inter alia, defense counsel “had violated MRPC 1.10(b)(2), in failing to provide the required
prompt written notice of Cohen’s hiring to [the district judge], to whom this case was originally
assigned, to enable him to ascertain compliance with the provisions of this rule. Thus, for a period
of two weeks after Cohen had been working at [defense counsel’s firm], encompassing a date when
[the district judge] held a hearing . . . , the Court was unaware of Cohen’s change of employment,
and therefore unable to carry out its function of ascertaining whether MRPC 1.10(b), had been
complied with by [defense counsel’s firm].”) (emphasis added).
Accordingly, we grant National Union’s motion to disqualify the law firm of Wilson Young
PLC from representing defendants-appellants in this appeal. Alticor and the other defendants-
appellants must secure new counsel. Defendants-appellants should notify this court in writing when
No. 05-2479 Nat’l Union Fire Ins., et al. v. Alticor, Inc., et al. Page 4
they have secured new counsel; this court will then schedule oral argument on the merits of the
appeal, allowing a suitable time for new counsel to familiarize themselves with the case.
It is so ordered.
ENTERED BY ORDER OF THE COURT
/s/ Leonard Green
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Clerk