An American Family
An Arizona attorney and his son-in-law employee were both sanctioned for a conflict of interest in civil litigation.
The senior attorney (Warnock) was suspended for six months and a day; the junior attorney (Carman) accepted an admonishment.
The law firm represented a person who had caused injuries in a car accident. The injured plaintiff was Ms. Hargrove.
Carman had provided advice to the clients (the Orlandos) in the transition of their business to corporate status.
One of the Orlandos was driving a company car that was only insured for $15,000 damages. Separate from the accident litigation, the Orlandos sued their insurer (American Family) for failure to provide proper advice on insurance coverage.
The story is told (in part) by the Arizona Court of Appeals Division One in a decision affirming the firm’s disqualification after the matters had taken a series of twists and turns
In September 2010, Hargrove’s personal injury claim proceeded to a jury trial. During trial, it was discovered that several jurors may have engaged in misconduct. To avoid a possible mistrial, the parties agreed to a settlement conditioned upon the following. If the jury returned a verdict in favor of Hargrove, judgment would be entered against the Orlandos, who would then assign all of their claims against their insurer in the American Family litigation to Hargrove. In exchange for the assignment, the Orlandos would not seek a mistrial and Hargrove would not execute on the judgment against the Orlandos. The superior court confirmed the agreement by all parties and counsel. Following a verdict in favor of Hargrove, the court entered judgment against the Orlandos in the amount of $655,776.12. The parties then formalized their agreement by executing an assignment and covenant not to execute (“the assignment and covenant”). The covenant provided in pertinent part that the Orlandos would “furnish full and complete communication, cooperation, documentation, and, as necessary, sworn testimony to support the assigned claims” against American Family and they would “execute such additional documents as may be necessary to carry out the intent” of the covenant.
Thus, Hargrove’s attorney (Jensen) became the Orlandos de facto attorney in pursuing the insurance claim. It was a bumpy ride that led to a bar complaint by the Orlandos against Jensen and his withdrawal.
In November 2010, in response to American Family’s discovery requests, [law firm] WMC identified WMC partner Andre Carman as the attorney who advised the Orlandos regarding the transition of their small business from a sole proprietorship to a corporation. Shortly thereafter, pursuant to the assignment and covenant, Jensen and WMC filed a joint motion requesting that Jensen be substituted for WMC as counsel of record for plaintiff(s) (Hargrove and/or Orlandos, depending upon the outcome of a motion to substitute) in the American Family litigation. At the same time, and also as provided by the assignment and covenant, Hargrove and the Orlandos filed a joint motion to substitute Hargrove in place of the Orlandos as the sole plaintiff or, in the alternative, as an additional plaintiff. The superior court granted the motion to substitute counsel but denied the motion to substitute or add Hargrove as a plaintiff.
In August 2012, a protracted dispute arose regarding the Orlandos’ obligation to cooperate and furnish documents to Hargrove under the assignment and covenant. Jensen repeatedly inquired as to Carman’s status as a possible nonparty at fault and witness, and requested access to WMC’s legal files for both the personal injury litigation and the American Family litigation. Although Jensen insisted the assignment and covenant permitted him to inspect all legal files relevant to claims and defenses in the American Family litigation, the Orlandos ultimately refused to authorize a release of the files. Jensen also asserted that WMC had a conflict of interest that precluded it from representing the Orlandos in the American Family litigation given the circumstances surrounding Carman’s advice to the Orlandos regarding their business. Jensen further asserted that if the Orlandos failed to comply with his requests for documents such inaction would constitute a breach of the assignment and covenant.
After the Orlandos informed Jensen they would seek his disqualification, Jensen moved to withdraw from the American Family litigation. The superior court granted the motion in February 2013. Three days later, the Orlandos (represented by WMC) initiated the instant litigation by filing a complaint in Yavapai County Superior Court (“current litigation”) seeking a declaration that Hargrove breached the assignment and covenant. In March 2013, through new counsel Timothy Ducar, Hargrove filed a counterclaim asserting that the Orlandos had breached the assignment and covenant. The Orlandos then filed a third-party claim against Jensen, alleging he was responsible for the breach of the parties’ agreements.
As to disqualification
At the August 1, 2014 hearing on the cross-motions for disqualification, Carman acknowledged that he was both a named witness and nonparty at fault in the American Family litigation. Carman argued, however, that his status as a named witness and nonparty at fault was moot because Hargrove “abandoned” the American Family litigation. Nonetheless, when questioned by the superior court, Carman admitted that he would have “a conflict of interest in this case” if Hargrove did not, in fact, abandon the litigation and the stipulation to dismiss was entered without her approval. Carman also acknowledged that the settlement was negotiated between Brian Warnock and counsel for American Family and further admitted, when pressed by the superior court, that he and the firm received a “significant benefit” when the American Family litigation was dismissed with prejudice and he and his firm were no longer exposed to potential liability in that matter.
Both attorneys conditionally admitted the conflict and consented to the discipline. The senior attorney had practiced for 40 years without blemish. (Mike Frisch)