Don Sanford v. Larkin Hoffman Daly & Lindgren , 816 F.3d 546 ( 2016 )

United States Court of Appeals
For the Eighth Circuit
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No. 15-2424
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Don Sanford; Noreen Sanford; Don's Crumble Beef Sandwich Shoppe, LLC,
formerly known as Maid-Rite of Crossroads, LLC; Paula Quam; Donavon Quam;
Detroit Lakes Maid-Rite, LLC; Scott Suhr; Roxanna Suhr; ROSCO, LLC;
Randolph Shermo; Cindy Shermo; Dana Rosenberg; Evan & Dana's Maid-Rite,
LLC; Evan & Dana's Maid-Rite II, LLC; Vance Skinner; Brendan Barrett;
Skinner-Barrett Enterprises, Inc.; Marvin Collier; Cynthia Collier; Allison Collier;
Collier Family Maid-Rite Diner, Inc.; RACI, Inc.
lllllllllllllllllllll Plaintiffs - Appellees
v.
Maid-Rite Corporation; Bradley L. Burt; Tania Burt
lllllllllllllllllllll Defendants
Larkin, Hoffman, Daly & Lindgren, Ltd.
lllllllllllllllllllllMovant - Appellant
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Minnesota Defense Lawyers Association
lllllllllllllllllllllAmicus on Behalf of Appellant(s)
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Appeal from United States District Court
for the District of Minnesota - Minneapolis
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Submitted: March 8, 2016
Filed: March 11, 2016
[Published]
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Before MURPHY, BEAM, and GRUENDER, Circuit Judges.
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PER CURIAM.
Larkin, Hoffman, Daly & Lindgren, Ltd. (Larkin) was retained to represent
Maid-Rite Corporation (Maid-Rite), Bradley L. Burt, and Tania Burt in this franchise
dispute. Larkin moved to withdraw as counsel after the franchisor failed to pay for
its legal fees and to provide important information related to its defense. The district
court denied Larkin's motion and the firm appeals. We reverse.
I.
Current and former franchisees and their owners filed this action in 2013
against franchisor Maid-Rite, its President and CEO Bradley L. Burt, and Executive
Vice President Tania Burt. Plaintiffs allege that defendants made unlawful
representations regarding the company's profitability that induced them into
purchasing franchises and opening Maid-Rite restaurants. Plaintiffs allege losses in
excess of $4 million.
Defendants retained Larkin as counsel in September 2014 and agreed to the
terms of its engagement letter and general conditions of representation which
explained that defendants "would be billed on a regular basis, usually monthly, for the
services performed and costs incurred" and that "[i]nvoices would be payable upon
receipt." Defendants also agreed that Larkin "reserve[d] the right to withdraw from
this representation for good cause" which could include "failure to pay amounts billed
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in a timely manner" and "failure to cooperate or follow [Larkin's] advice on a material
matter."
Larkin sent invoices to defendants every month from September 2014 through
January 2015. Although defendants paid the September invoice, they failed to make
any subsequent payments. Larkin repeatedly advised them that the firm would seek
to withdraw unless their outstanding bills were paid. Although defendants promised
several times to pay the invoices, they did not and a significant unpaid balance
resulted. Defendants also repeatedly failed to provide Larkin with information critical
for its defense.
As a result, Larkin moved to withdraw on January 28, 2015. This was over six
months prior to the close of discovery and more than one year before the earliest
possible trial date. The motion was denied without prejudice on March 6, 2015
because defendants had not yet secured substitute counsel, communication had not
entirely broken down, and withdrawal would delay the case. On April 16, 2015 the
magistrate judge stayed discovery while the district court considered the motion. The
district court affirmed on June 5, 2015, and Larkin filed this interlocutory appeal. On
July 20, 2015 the firm's motion to stay pending its interlocutory appeal was granted.
II.
We have "jurisdiction of appeals from all final decisions of the district courts
of the United States" under 28 U.S.C. § 1291. There are, however, a "small class" of
cases which are considered "final" even though they do not end the litigation. See
Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 545–47 (1949). In order to fit
within the Cohen exception, an order must "[1] conclusively determine the disputed
question, [2] resolve an important issue completely separate from the merits of the
action, and [3] be effectively unreviewable on appeal from a final judgment." Coopers
& Lybrand v. Livesay, 437 U.S. 463, 468 (1978).
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The district court's order denying Larkin's motion to withdraw satisfies each of
these three requirements. First, it conclusively determined whether the firm must
continue to represent its client. Whiting v. Lacara, 187 F.3d 317, 320 (2d Cir. 1999).
Second, the withdrawal issue was "completely separate from the merits of the
underlying action." Id.; see also Brandon v. Blech, 560 F.3d 536, 537 (6th Cir. 2009).
Finally, the order would have been unreviewable on appeal from a final judgment
because "having to go through trial is itself a loss of the right involved." Whiting, 187
F.3d at 320; see also Brandon, 560 F.3d at 537. Further, every circuit court to
consider the issue has concluded that the denial of a motion to withdraw is an
appropriate basis for an interlocutory appeal. See, e.g., Ohntrup v. Makina Ve Kimya
Endustrisi Kurumu, 760 F.3d 290, 293 (3d Cir. 2014); Brandon, 560 F.3d at 537; Fid.
Nat'l Title Ins. Co. v. Intercounty Nat'l Title Ins. Co., 310 F.3d 537, 539–40 (7th Cir.
2002); Lieberman v. Polytop Corp., 2 Fed. App'x 37, 38 (1st Cir. 2001); Whiting, 187
F.3d at 320.
III.
We review a district court's denial of counsel's motion to withdraw for abuse
of discretion. Allen v. United States, 590 F.3d 541, 544 (8th Cir. 2009). In cases of
withdrawal for failure to pay fees, every circuit court to address the question "has
looked to the rules governing professional conduct for guidance." Brandon, 560 F.3d
at 538 (collecting cases). The District of Minnesota has adopted the Minnesota Rules
of Professional Conduct as the standards governing lawyers who appear in its courts.
D. Minn. LR 83.6(a). The Minnesota Rules of Professional Conduct provide that a
lawyer may withdraw from representing a client if:
(5) the client fails substantially to fulfill an obligation to the lawyer
regarding the lawyer's services and has been given reasonable warning
that the lawyer will withdraw unless the obligation is fulfilled;
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(6) the representation will result in an unreasonable financial burden on
the lawyer or has been rendered unreasonably difficult by the client; or
(7) other good cause for withdrawal exists.
Minn. R. Prof'l Conduct 1.16(b)(5)–(7). The Local Rules additionally require an
attorney seeking withdrawal to "show good cause" and "notify his or her client of the
motion." D. Minn. LR 83.7(c). If the requirements of these rules are satisfied,
"withdrawal is presumptively appropriate." Brandon, 560 F.3d at 538; see also
Whiting, 187 F.3d at 321.
Larkin met the requirements of both the Minnesota Rules of Professional
Conduct and the Local Rules before seeking withdrawal. Defendants' refusal to pay
was "undoubtedly a substantial failure to fulfill an obligation to the lawyer" and
"supplied good cause for withdrawal." See Brandon, 560 F.3d at 538 (internal
quotation marks omitted). Defendants' failure to provide the firm with important
information related to their defense also failed to fulfill an obligation to the firm.
Moreover, the firm had warned defendants several times that if their outstanding bills
were not paid, it would be required to withdraw. Finally, the record is clear that
defendants were notified of the motion to withdraw. We conclude on this record that
it was presumptively appropriate for Larkin to seek withdrawal.
The presumption favoring withdrawal in similar circumstances should be
disregarded, however, if it would severely prejudice the client or third parties. See
Brandon, 560 F.3d at 538. Such prejudicial conduct might include "waiting until the
client is over a barrel and then springing a demand for payment (perhaps enhanced
payment)." Fidelity, 310 F.3d at 540. Larkin did not engage in such conduct and
provided defendants with notice at least four weeks prior to filing its motion to
withdraw. This was "in a quiet period before trial," over six months prior to the close
of discovery, and over one year from the earliest possible trial date. See id. at 541; see
also Brandon, 560 F.3d at 538 (three weeks notice to withdraw while "the case
remained inactive, with no impending deadlines").
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Furthermore, the record does not show severe prejudice to any third parties
from the firm's withdrawal. Neither party has identified any prejudice to third parties,
and the plaintiffs did not oppose Larkin's motion before the district court nor its
current appeal. While the magistrate judge "correctly noted that withdrawal would
leave [defendants] without counsel, this does not amount to severe prejudice" to third
parties when there are no "imminent deadlines" and defendants have time to secure
new counsel. See Brandon, 560 F.3d at 538. Since a corporate entity cannot proceed
pro se, the magistrate judge was aware that a delay might result. Nevertheless, the
plaintiffs would be entitled to default judgment against Maid-Rite if it were unable to
secure substitute counsel. See Fidelity, 310 F.3d at 541. That would expedite the
case, rather than delay it. See id.; Erie Molded Plastics, Inc. v. Nogah, LLC, 520
Fed. App'x 82, 85 (3rd Cir. 2013).
IV.
For these reasons the case is reversed and remanded to the district court.
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