Pro-Hand Services Trust v. Monthei , 310 Mont. 165 ( 2002 )

No. 01-473
IN THE SUPREME COURT OF THE STATE OF MONTANA
2002 MT 134PRO-HAND SERVICES TRUST,
an Irrevocable Trust,
Plaintiff and Respondent,
v.
DAVID MONTHEI and MARY GABRIEL-DUNCAN,
Defendants and Appellants.
APPEAL FROM: District Court of the Eighteenth Judicial District,
In and for the County of Gallatin,
The Honorable Mike Salvagni, Judge presiding.
COUNSEL OF RECORD:
For Appellants:
Geoffrey C. Angel, Angel Law Firm, Bozeman, Montana
For Respondent:
J. David Penwell, Attorney at Law, Bozeman, Montana
Submitted on Briefs: November 29, 2001
Decided: June 18, 2002
Filed:
__________________________________________
Clerk
Justice Jim Regnier delivered the Opinion of the Court.
¶1 Mary Gabriel-Duncan (“Duncan”) appeals from the March 13,
2001, Order entered by the Montana Eighteenth Judicial District
Court, Gallatin County, denying her motion to disqualify David J.
Penwell (“Penwell”), attorney for Pro-Hand Services Trust (“Pro-
Hand”). We affirm.
¶2 The following issue is presented on appeal:
¶3 Did the District Court err in denying Duncan’s motion to
disqualify Penwell?
BACKGROUND
¶4 On or about April 9 and April 10, 1998, Duncan called
Penwell’s office and spoke with Marion Austin (“Austin”), Penwell’s
legal secretary at the time. Duncan inquired into hiring Penwell
as counsel in this action. Austin informed Duncan that Penwell was
planning to close his office, was not accepting new cases, and
referred her to contact Parker Leach, another attorney in the
building. Duncan never personally spoke to Penwell pertaining to
hiring him as counsel.
¶5 Pro-Hand, represented by other counsel, initiated this action
against Duncan and David Monthei for breach of contract in the
District Court on February 25, 1999. Pro-Hand then substituted
attorneys and Penwell entered his appearance on Pro-Hand's behalf
on February 24, 2000.
¶6 On July 18, 2000, Duncan filed a motion to disqualify Penwell
as counsel for Pro-Hand. A pretrial conference was held on July
19, 2000, wherein the parties agreed to conduct depositions
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regarding the allegations stated in Duncan’s motion. Subsequently,
Duncan filed a brief in support of her motion to disqualify Penwell
on October 2, 2000. Therein, Duncan alleged that she disclosed
confidential information concerning this case to Austin during
their phone conversations and such information was thereby imputed
to Penwell creating an attorney-client relationship between herself
and Penwell.
¶7 The District Court heard the motion on March 6, 2001.
Thereafter, the court denied the motion in its March 13, 2001,
Order concluding that Duncan failed to meet her burden “in
conclusively establishing the existence of an attorney-client
relationship between herself and Penwell.”
¶8 Duncan filed a motion to certify the District Court’s March
13, 2001, Order as final for purposes of appeal pursuant to Rule
54(b), M.R.Civ.P., on March 19, 2001. On April 30, 2001, the
District Court certified its March 13, 2001, Order in accordance
with Rule 54(b), M.R.Civ.P. Duncan filed a notice of appeal in the
District Court on May 22, 2001.
STANDARD OF REVIEW
¶9 The denial of a motion to disqualify an attorney is within a
district court’s discretionary powers. See Schuff v. A.T. Klemens
& Son, 2000 MT 357, ¶ 26, 303 Mont. 274, ¶ 26, 16 P.3d 1002, ¶ 26
(citing In re Guardianship of Mowrer, 1999 MT 73, ¶ 24, 294 Mont.
35, ¶ 24, 979 P.2d 156, ¶ 24). Therefore, we will review such
decision for an abuse of discretion. See Schuff, ¶ 26.
DISCUSSION
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¶10 Did the District Court err in denying Duncan’s motion to
disqualify Penwell?
¶11 Relying upon In re Johore Investment Co., Inc. (D. Hawaii
1985), 157 B.R. 671, and Westinghouse Electric Corp. v. Kerr-McGee
Corp. (7th Cir. 1978), 580 F.2d 1311, 1319, cert. denied (1978), 439
U.S. 955, Duncan asserts that an implied attorney-client
relationship may arise when prospective clients divulge
confidential information during consultation with an attorney for
the purpose of retaining the attorney in his or her professional
capacity as a legal advisor, even if actual employment does not
result. Duncan alleges that such an implied attorney-client
relationship was formed between herself and Penwell when she
disclosed confidential information to Austin during their phone
conversation on April 9, 1998, for purposes of hiring Penwell as
legal counsel in this matter. Duncan further asserts, citing In re
Rules of Professional Conduct and Insurer Imposed Billing Rules and
Procedures, 2000 MT 110, 299 Mont. 321, 2 P.3d 806, that the
confidential information she disclosed to Austin was imputed to
Penwell. Duncan therefore contends Penwell’s representation of
Pro-Hand in this matter is a conflict of interest in violation of
the Montana Rules of Professional Conduct requiring Penwell’s
disqualification.
¶12 In response, Penwell asserts that an attorney-client
relationship was never established between himself and Duncan since
Duncan did not disclose confidential information to Austin during
their phone conversations on April 9 or April 10, 1998. Instead,
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Penwell insists that Duncan merely provided Austin with “basic”
information, such as her name, telephone number, and that she
wished to file a counterclaim. Penwell contends Austin informed
Duncan during both phone conversations that he was closing his
office and referred her to contact another attorney. Penwell thus
claims that disclosure of confidential information cannot be
imputed to him as such disclosure was never made. Moreover,
Penwell points out that he never personally spoke or met with
Duncan.
¶13 We have held that a lawyer may be disqualified from appearing
in an action because he or she has previously represented an
adverse party. See Mowrer, ¶ 20. Rule 1.9 of the Montana Rules of
Professional Conduct states:
Conflict of Interest: Former Client. A lawyer who has
formerly represented a client in a matter shall not
thereafter:
(a) represent another person 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; or
(b) use information relating to the representation to the
disadvantage of the former client except as Rule 1.6
would permit with respect to a client or when the
information has become generally known.
Accordingly, we must determine if an attorney-client relationship
was formed between Duncan and Penwell. If an attorney-client
relationship was not formed, there is no conflict of interest.
¶14 An implied attorney-client relationship may result when a
prospective client divulges confidential information during a
consultation with an attorney for the purpose of retaining the
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attorney, even if actual employment does not result. See
Westinghouse, 580 F.2d at 1319. Also see Johore, 157 B.R. at 676.
In determining whether an implied attorney-client relationship
exists, we will examine whether the alleged client reasonably
believed that such relationship was formed. See Mowrer, ¶ 21.
¶15 In determining whether an attorney should be disqualified, the
Ninth Circuit focuses on whether there is a “reasonable
probability” that confidences were disclosed. See Trone v. Smith
(9th Cir. 1980), 621 F.2d 994, 998. The Ninth Circuit stated:
[T]he underlying concern is the possibility, or
appearance of the possibility, that the attorney may have
received confidential information during the prior
representation that would be relevant to the subsequent
matter in which disqualification is sought. The test
does not require the former client to show that actual
confidences were disclosed. That inquiry would be
improper as requiring the very disclosure the rule is
intended to protect.
Trone, 621 F.2d at 999 (citation omitted).
¶16 Consequently, we hold that an alleged client should not be
required, at a disqualification hearing, to reveal actual
confidences that he or she maintains were disclosed to establish an
attorney-client relationship. Such a procedure would violate the
very disclosure the rule is designed to protect. However, simply
making a representation to the court that confidential information
was disclosed offers nothing to assist the court in making a
reasoned judgment. The alleged client must at least inform the
court of the nature of the confidential information disclosed. For
example, the alleged client can testify that she informed the
prospective counsel of the nature of the transaction, her position
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regarding the claim or defense, witnesses who support or oppose her
claim, the nature and amount of any damages suffered and other
relevant personal information. This type of testimony, without
getting specific, would alert the court of the possibility that
confidential information had been previously disclosed.
¶17 Here, Duncan testified that she disclosed confidential
information to Austin during their telephone conversation on April
9, 1998, and was then told that Penwell would not represent her.
In contrast, Austin states that Duncan provided only “basic”
information, such as her name and phone number. Further, Austin
asserts that she advised Duncan to contact another attorney since
Penwell was closing his office and was not accepting new cases. At
no time in her testimony, however, did Duncan ever alert the court
of the type of confidential information she allegedly disclosed to
Austin, but relied on her conclusory statement that what she
disclosed was confidential. Faced with the dilemma, the District
Court resolved the matter in favor of Penwell, determining that
Duncan “failed to provide the Court with anymore than the
conclusory statement that she provided ‘confidential’ information.”
Accordingly, we conclude that the District Court did not abuse its
discretion in determining that Duncan “failed to meet her burden in
conclusively establishing the existence of an attorney-client
relationship between herself and Penwell.”
¶18 Additionally, based upon the circumstances presented in this
case, we conclude that Duncan could not have reasonably believed
that an attorney-client relationship was formed between herself and
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Penwell. Duncan had two telephone conversations with a legal
secretary which form the basis of her claim. She never personally
spoke or met with attorney Penwell and was advised that Penwell
could not take her case.
¶19 Finally, we have advised alleged clients of their duty to
alert the trial court of conflict of interest problems “as early
as possible so that a determination may be made that does not
unduly prejudice any party.” See Mowrer, ¶ 23. Here, Penwell
filed a notice of entry of appearance on behalf of Pro-Hand on
February 24, 2000. Thereafter, Duncan litigated the action without
mention of the alleged conflict. She filed a motion for summary
judgment on March 14, 2000. Subsequently, she filed her lay and
expert witness disclosure as well as exhibit list on May 15, 2000.
On May 23, 2000, the court held a hearing on Duncan’s motion for
summary judgment. It was not until July 18, 2000, some five months
after Penwell entered his appearance, that Duncan filed her motion
to disqualify.
¶20 With the facts presented, we conclude that the District Court
did not abuse its discretion in denying Duncan’s motion to
disqualify Penwell.
¶21 Affirmed.
/S/ JIM REGNIER
We Concur:
/S/ KARLA M. GRAY
/S/ TERRY N. TRIEWEILER
/S/ PATRICIA COTTER
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/S/ JIM RICE
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