Richman v. Dist. Ct. (Haines & Krieger, LLC) ( 2013 )

 Realty. Haines and Krieger requested that Fenn and Howard obtain
advice on behalf of all the named defendants in the Merit complaint. On
December 17, 2010, Fenn and Howard met with Adam Levine of the Law
Office of Daniel Marks to discuss the demand letter and Merit complaint.
The parties dispute many of the facts surrounding this consultation. The
real parties in interest allege that Fenn and Howard provided Levine with
confidential and in-depth details regarding facets of H&K Realty. The
petitioners allege that Fenn and Howard never indicated they were
seeking advice on the behalf of Haines and Krieger. After Merit Realty
filed its complaint, all of the defendants chose different representation
than Levine and the Law Office of Daniel Marks.
A year later, Levine, on behalf of Michael Richman, a former
client of the H&K Law Firm; Luzviminda 0. Dapat; and Michael Richman
Marketing Company, LLC, (collectively, the Richman Parties) filed a
complaint against Haines, Krieger, the H&K Law Firm, and Haines &
Krieger Loan Modifications, LLC (collectively, the H&K Parties). The
Richman Parties had been involved in a joint venture regarding loan
modifications with Haines and Krieger that dissolved in November 2010.
On July 20, 2011, the H&K Parties filed a motion to disqualify
the Law Office of Daniel Marks based on their status as prospective
clients to Levine and an alleged conflict of interest under Nevada Rule of
Professional Conduct (NRPC) 1.18. The H&K Parties alleged that the
Richman Parties' complaint included specific allegations arising out of
Fenn and Howard's discussion with Levine during their initial
consultation about the formation and operation of H&K Realty.
On January 30, 2012, the district court entered its order
granting the motion to disqualify and nearly four months later, denied the
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Richman Parties' motion for rehearing. It did not hold an evidentiary
hearing regarding the contested issues of fact surrounding the information
disclosed during Fenn and Howard's initial consultation with Levine. The
Richman Parties filed an original petition for writ of mandamus
challenging the district court's orders, arguing that the district court
manifestly abused its discretion by disqualifying their counsel under
NRPC 1.18 and abused its discretion by failing to hold an evidentiary
hearing as to contested issues of fact.
The district court did not manifestly abuse its discretion in disqualifying
the Richman Parties' counsel pursuant to NRPC 1.18
"A writ of mandamus is properly used to challenge a district
court's order disqualifying counsel." Brown v. Eighth Judicial Dist. Court,
116 Nev. 1200, 1206, 14 P.3d 1266, 1271 (2000). "A writ of mandamus is
available to compel the performance of an act that the law requires or to
control an arbitrary or capricious exercise of discretion." Nevada Yellow
Cab Corp. v. Eighth Judicial Dist. Court, 123 Nev. 44, 49, 152 P.3d 737,
740 (2007); see also NRS 34.160.
The district court has broad discretion in attorney
disqualification matters, and we will not overturn the district court's
decision absent a manifest abuse of that discretion. Nevada Yellow Cab
Corp., 123 Nev. at 54, 152 P.3d at 743. Disqualification may be necessary
to prevent disclosure of confidential information that may be used to an
adverse party's disadvantage. Id. at 53, 152 P.3d at 743. "[D]oubts should
generally be resolved in favor of disqualification." Brown, 116 Nev. at
1205, 14 P.3d at 1270. District courts are faced with a "difficult task of
balancing competing interests: the right to be represented by counsel of
one's choice, each party's right to be free from the risk of even inadvertent
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disclosure of confidential information, and the public's interest in the
scrupulous administration of justice." Id. at 1205, 14 P.3d at 1269-70.
To prevail on a motion for disqualification, the moving party
must establish: (1) "at least a reasonable possibility that some specifically
identifiable impropriety did in fact occur,' and (2) 'the likelihood of public
suspicion or obloquy outweighs the social interests which will be served by
a lawyer's continued participation in a particular case." Brown, 116 Nev.
at 1205, 14 P.3d at 1270 (quoting Cronin v. Eighth Judicial Dist. Court,
105 Nev. 635, 641, 781 P.2d 1150, 1153 (1989), disapproved of by Nevada
Yellow Cab Corp., 123 Nev. at 54 n.26, 152 P.3d at 743 n.26).
NRPC 1.18(b) states that even when no attorney-client
relationship is formed, a lawyer shall not use or reveal information
learned in a consultation with a prospective client, "except as Rule 1.9
would permit with respect to information of a former client." NRPC
1.18(c) prohibits lawyers from representing clients with interests that are
materially adverse to those of prospective clients in the same or
substantially related matters when the lawyer receives "information from
the prospective client that could be significantly harmful to that person in
the matter. . . ." Further, NRPC 1.18(c) disqualifies all lawyers in the
'Rule 1.9 prohibits an attorney's representation of a new client if the
matter is (1) substantially similar to that of a former client, (2) materially
adverse to that former client, and (3) the attorney acquired confidential
information from the former client that is relevant to the new matter. In
these cases, the former client must give informed, written consent before
the attorney can represent the new client. See NRPC 1.9(a) and (b)(3).
NRPC 1.9(c) prohibits lawyers from using or revealing information
relating to a former client except as the "Rules would permit or require
with respect to a client." In other words, the former client would need to
provide informed, written consent.
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firm of the disqualified lawyer, except for narrow exceptions. These
exceptions allow representation if: (1) the affected client and prospective
client give informed, written consent; or (2) the lawyer who received the
information took reasonable measures to avoid exposure to more
disqualifying information, is timely screened, and written notice is given
to the prospective client. See NRPC 1.18(d).
Given the similarities between NRPC 1.9 and NRPC 1.18, we
turn to case law discussing disqualification under NRPC 1.9 for guidance.
In Nevada Yellow Cab Corp., we concluded that disqualifications under
NRPC 1.9 require the moving party to show: "(1) that it had an attorney-
client relationship with the lawyer, (2) that the former matter and the
current matter are substantially related, and (3) that the current
representation is adverse to the party seeking disqualification." 123 Nev.
at 50, 152 P.3d at 741. Thus, disqualifications under NRPC 1.18 should
require the moving party to show that (1) it was a prospective client of the
lawyer, (2) the current matter and the former matter are substantially
related, (3) the current representation is adverse to the party seeking
disqualification, and (4) the lawyer received confidential information that
could be significantly harmful to the moving party. See NRPC 1.18(c); see
also Factory Mut. Ins. Co. v. APComPower, Inc., 662 F. Supp. 2d 896, 900
(W.D. Mich. 2009) (concluding that motions to disqualify premised on RPC
1.18 "should be analyzed the same as a motion to disqualify pursuant to a
former client relationship with the additional requirement that the lawyer
receive information that could be 'significantly harmful"); Sturdivant v.
Sturdivant, 241 S.W.3d 740, 746-47 (Ark. 2006) (applying Arkansas'
version of RPC 1.18, a wife's lawyer in a custody matter was disqualified
because the husband had consulted with a member of the lawyer's firm
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and disclosed confidential information concerning the children and former
wife that could be significantly harmful to the husband, the moving party).
Substantial evidence supported the district court's finding that the
H&K Parties were prospective clients for purposes of NRPC 1.18
The Richman Parties argue that the H&K Parties were not
prospective clients, and NRPC 1.18 does not recognize a prospective client
by agency. We disagree.
We review a . district court's factual determinations
deferentially and will not overturn such findings if supported by
substantial evidence, unless clearly erroneous. Ogawa v. Ogawa, 125 Nev.
660, 668, 221 P.3d 699, 704 (2009). NRPC 1.18(a) defines a prospective
client as "[a] person who discusses with a lawyer the possibility of forming
a client-lawyer relationship with respect to a matter is a prospective
client." We have previously recognized third-party standing in
disqualification matters and numerous jurisdictions recognize prospective
clients by agency or through third-parties. See Liapis v. Second Judicial
Dist. Court, 128 Nev. „ 282 P.3d 733, 737-38 (2012) (citations
omitted) (concluding that standing to bring a motion to disqualify based on
a third-party conflict of interest involves establishing that (1) the lawyer's
representation impacts a legal interest because a "specifically identifiable
impropriety has occurred," (2) an ethical breach "infects the litigation," or
(3) there is a "breach of the duty of confidentiality owed to the complaining
party, regardless of whether a lawyer-client relationship existed"); see also
Jack Eckerd Corp. v. Dart Grp. Corp., 621 F. Supp. 725, 732 (D. Del.
1985); Matter of King Res. Co., 20 B.R. 191, 198 (D. Colo. 1982); In re
Modanlo, 342 B.R. 230, 235-36 (D. Md. 2006); Harkobusic v. Gen. Am.
Transp. Corp., 31 F.R.D. 264, 266 (W.D. Pa.1962); Grand Jury Proceedings
Under Seal v. United States, 947 F.2d 1188, 1191 (4th Cir. 1991).
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We conclude that substantial evidence supported the district
court's finding that Fenn and Howard consulted with Levine regarding the
potential liability of the defendants in the Merit complaint, which included
Fenn and Howard as well as the H&K Law Firm, H&K Realty, Haines,
and Krieger. The parties dispute what was actually discussed at the
initial consultation, but, at the initial consultation, Fenn produced the
Merit complaint and demand letter that alleged wrongdoing by Fenn,
Howard, Haines, Krieger, H&K Realty, and the H&K Law Firm. Fenn
also listed his place of employment as H&K Realty on the new client
information sheet during the initial consultation, and Levine sent the
draft retainer agreement to Fenn's H&K Realty email address. Levine
should have been aware of the potential for representing all defendants
involved. Haines and Krieger attest that they asked Fenn and Howard to
obtain legal advice because the Merit demand letter required a response
by December 17, 2010. Haines and Krieger did not seek the advice of
separate counsel before this deadline. The H&K Law Firm reimbursed
Fenn for the consultation. These facts provided substantial evidence to
support the district court's finding that all defendants became prospective
clients of Levine and the Law Office of Daniel Marks.
Substantial evidence supported the district court's findings, under
NRPC 1.18, that the current matter is substantially similar to the
former matter, the current representation would be adverse to the
H&K Parties, and confidential information was received and could
be harmful to the H&K Parties
The Richman Parties argue that their interests were not
materially adverse to Fenn or Howard and did not involve the "same or
substantially-related matter" to the Merit action. The Richman Parties
further argue that respondents have failed to demonstrate how any
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information communicated by Fenn or Howard would be significantly
harmful or that an impropriety occurred. 2 We disagree.
Whether two matters are substantially related requires the
district court to make a factual determination. See Waid v Eighth
Judicial Dist. Court, 121 Nev. 605, 610, 119 P.3d 1219, 1223 (2005)
(discussing how to determine whether two matters were substantially
related as it relates to disqualification under former SCR 159, equivalent
to NRPC 1.9). In Waid, we adopted a three-part test for determining
whether a former and present matter are substantially related: the
district court must "(1) make a factual determination concerning the scope
of the former representation, (2) evaluate whether it is reasonable to infer
that the confidential information allegedly given would have been given to
a lawyer representing a client in those matters, and (3) determine whether
the information is relevant to the issues raised in the present litigation."
Id.The district court, here, found that "[i]t is 'reasonable to infer'
that Mr. Levine received confidential information from Messrs. Fenn and
Howard during the meeting on December 17, 2010 [sic] related to the
2 The Richman Parties argue that the H&K Parties waived their
right to seek disqualification by waiting too long to seek disqualification.
However, the H&K Parties could not adequately file a motion for
disqualification before the Richman Parties filed their complaint because
its contents would have been unknown. The H&K Parties filed their
motion to disqualify just over a month after the Richman Parties filed
their complaint on June 10, 2011. Delay alone is insufficient to establish a
waiver and the H&K Parties did not relinquish a known right. See
Nevada Yellow Cab Corp., 123 Nev. at 48-50, 152 P.3d at 740-41 (holding
hat a delay of two years was not sufficient to waive rights when counsel's
conduct did not demonstrate a clear intent to relinquish its right to
challenge the potential conflict).
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MAW &AV '
formation and operation of H&K Realty," and such information "is
relevant to the issues raised in this litigation."
The H&K Parties contend that there were at least five
allegations in the Richman complaint directly relating to the confidential
information regarding the formation and operation of H&K Realty that
Fenn and Howard conveyed to Levine. The Richman complaint alleges
that the Richman Parties "developed the idea that they could become a
one-stop shop for shorts [sic] sales, residential loan modifications and
commercial loan modifications" and approached the H&K Parties about
the idea. The complaint also alleges that "[f]rom February 2010 through
approximately September 2010 Plaintiffs Richman and Dapat organized
and created the Haines and Krieger short sale department. Defendant
Haines informed Plaintiffs that they wanted Dapat to do all of the listings
and pay the Defendants a kick back in the form of a marketing fee." The
Richman complaint further alleges that "[the H&K Parties] gave control of
the short sale department to someone other than Plaintiff Dapat." The
H&K Parties assert that this reference to "someone other" is H&K Realty,
Fenn, and Howard. The Richman complaint's cause of action for quantum
merit alleges that the Richman Parties provided uncompensated services
to the H&K Parties, including the creation of the H&K short sale
department and loan modification department in Arizona.
There is sufficient information to support the district court's
determination that Fenn and Howard consulted with Levine regarding the
potential liability regarding all defendants in the Merit complaint, that
the information given to Levine would have related to the formation and
operation of H&K Realty, that this information would have been given to
the H&K Parties' counsel in the Merit action, and that it is relevant to the
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present litigation. There is sufficient evidence to support a conclusion that
the Merit action is substantially similar to the Richman Parties' action.
See Waid, 121 Nev. at 610, 119 P.3d at 1223.
The district court also found that "[i]nformation learned by
Mr. Levine and the Marks Law Office from Messrs. Fenn and Howard
could be significantly harmful to the Defendants [the H&K Parties] . . . if
used in this matter." Specifically, information related to the formation
and operation of H&K Realty could be harmful. The district court further
found that Levine, the Law Office of Daniel Marks, and the Richman
Parties did not provide informed, written consent regarding the
representation. We conclude that substantial evidence supported the
district court's finding that the Richman Parties' interests are materially
adverse, and the information learned could be significantly harmful to the
H&K Parties.
Based on the record, the district court also weighed the
varying interests of the parties and that of the public as required by
Brown. See Brown v. Eighth Judicial Dist. Court, 116 Nev. 1200, 1205, 14
P.3d 1266, 1269-70 (2000). Therefore, we conclude that the district court
did not manifestly abuse its discretion when it granted the H&K Parties'
motion to disqualify because it properly considered the competing
interests involved. See Nevada Yellow Cab Corp., 123 Nev. at 54, 152 P.3d
at 743 (noting that the district court was more familiar with the case than
this court and had the best opportunity to evaluate the validity of a
disqualification) . 3
3 The
Richman Parties also argue that Levine can still be timely
screened from this matter, so this court should not impute disqualification
to the Law Office of Daniel Marks. We conclude that it is too late to
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The district court did not abuse its discretion in determining that an
evidentiary hearing was not required
The Richman Parties argue that the district court should have
conducted an evidentiary hearing to resolve disputed issues of material
fact prior to the disqualification to determine what Fenn and Howard
actually told Levine. The Richman Parties argue that NRPC 1.18 requires
at least some disclosure of the information discussed at the prospective
client consultation. We disagree.
A district court, in determining the nature of a hearing, should
ensure that the parties present sufficient information to support its
decision. Bahena v. Goodyear Tire & Rubber Co., 126 Nev. , 235
P.3d 592, 601 (2010). 4 Under NRPC 1.9, we have explained that "[i]n
proving that a prior representation is substantially related to present
litigation . . . the moving party is not required to divulge the confidences
actually communicated, nor should a court inquire into whether an
...continued
properly screen Levine. See Ryan's Express v. Amador Stage Lines, 128
Nev. , 279 P.3d 166, 172 (2012) (discussing that "the timing of
implementation of screening measures in relation to the occurrence of the
disqualifying event is relevant in determining whether the screen was
properly erected"). Levine has already worked on substantive portions of
the case, made multiple appearances, and filed motions on behalf of the
Richman Parties. The record also does not indicate that Levine took any
reasonable steps to avoid exposure to disqualifying information.
4 Recently, we concluded that an evidentiary hearing was required
when determining whether a lawyer has been properly screened. Ryan's
Express, 128 Nev. at , 279 P.3d at 173. This case is distinguishable
because screening determinations are not as likely to involve confidential
attorney-client communications. Therefore, the determination of whether
to hold an evidentiary hearing involving disqualifications based on
prospective clients remains in the district court's discretion.
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attorney actually acquired confidential information in the prior
representation which is related to the current representation." Robbins v.
Gillock, 109 Nev. 1015, 1018, 862 P.2d 1195, 1197 (1993); see also NRPC
1.6(a) (a "lawyer shall not reveal information relating to representation of
a client unless the client gives informed consent."). "The court should
instead undertake a realistic appraisal of whether confidences might have
been disclosed in the prior matter that will be harmful to the client in the
later matter." Robbins, 109 Nev. at 1018, 862 P.2d at 1197.
We conclude that the district court acted within its discretion
in declining to hold an evidentiary hearing since the disqualificationL
matter is not case-concluding. See Bahena, 126 Nev. at , 235 P.3d at
600-01. Prospective clients meeting with an attorney must have the
"utmost confidence" that confidential information disclosed to an attorney
will remain confidential. See Ryan's Express, 128 Nev. at , 279 P.3d at
169. "One purpose of disqualification is to prevent disclosure of
confidential information that could be used to a former client's
disadvantage." Nevada Yellow Cab Corp., 123 Nev. at 53, 152 P.3d at 743.
Forcing prospective clients to divulge confidential information at a hearing
could lessen a client's ability and willingness to candidly communicate
with his or her attorney during initial consultations.
The district court was very aware of the importance of client
confidences and the attorney-client privilege; and hesitant to force a client,
former client, or prospective client to take the stand under oath and testify
to confidential matters and the substance of their interactions. It made its
findings based on substantial evidence, including numerous declarations
and affidavits, pleadings, the information sheet, unsigned retainer
agreement, notes from the initial consultation, emails, and letters. Among
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these, the district court found that it was reasonable to infer that: (1) Fenn
and Howard consulted with Levine regarding the liability of the draft
complaint in the Merit action on behalf of the H&K Parties, and (2) Levine
received confidential information from Fenn and Howard regarding the
formation and operation of H&K Realty that was relevant to the issues
raised in this litigation. It further found that information Levine and the
Law Office of Daniel Marks learned from Fenn and Howard could be
significantly harmful to the H&K Parties if used by the Richman Parties
in this matter. Conducting an evidentiary hearing to determine specifics
regarding what Fenn and Howard said to Levine would run counter to our
analysis that opposing counsel under NRPC 1.9 are not required to divulge
confidences actually communicated. See Robbins, 109 Nev. at 1018, 862
P.2d at 1197.
Accordingly, we ORDER the petition DENIED. 5
Gibbons
J.
Saitta
5 We have considered the parties' remaining arguments and conclude
they are without merit.
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cc: Hon. Kenneth C. Cory, District Judge
Law Office of Daniel Marks
Bailey Kennedy
Ogletree Deakins Nash Smoak & Stewart
Eighth District Court Clerk
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