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United States v. Manlove

United States District Court, D. Montana

December 20, 2016


          Dana L. Christensen, Chief Judge

         Before the Court is Defendant's Motion to Disqualify Counsel (Doc. 142). For the reasons given below, the Court denies Defendant's motion.

         Factual Background

         Defendant George Leslie Manlove is the former CEO of Vann's, Inc. ("Vann's"), a Montana corporation that owned and operated retail electronics and appliance stores throughout the state before declaring bankruptcy in 2012. On December 21, 2015, Manlove was indicted on two hundred twenty-one felony criminal counts. The government alleges that Manlove, along with CFO Paul Nisbet, conspired to defraud their former employer.

         Before Manlove's indictment, Vann's employees brought a civil action against Manlove and Nisbet, alleging responsibility for the corporation's bankruptcy. Three members of the Vann's Board of Directors-William Honzel, Cameron Lawrence, and Chris Abess-were deposed in the civil matter as nonparties. The same three former Board members are now expected to testify in the criminal proceeding on behalf of the government.

         Manlove bases his motion to disqualify on the fact that W. Adam Duerk, one of the two Assistant United States Attorneys prosecuting the case, formerly worked at the law firm that represented Honzel, Lawrence, and Abess as non-party witnesses in the civil matter. While the civil matter was pending, Duerk was a shareholder at Milodragovich, Dale & Steinbrenner, P.C. ("Milodragovich"). However, Duerk was not personally involved in the representation of Honzel, Lawrence, and Abess, and he did not work on the civil matter. (Doc. 156-1 at 5-6; 156-4 at 2-3.) Nor has Duerk had any contact with Honzel, Lawrence, and Abess on behalf of the government; his co-counsel, Zeno Baucus, has handled communications with the three former Board members and will conduct their direct examination at trial. (Doc. 156-1 at 6.)


         Manlove argues that Duerk's prosecution of this matter presents an "ethical dilemma which cannot be resolved in a manner to adequately assure the constitutional rights of Mr. Manlove are protected." (Doc. 143 at 1-2.) He contends that Milodragovich's representation of the former Board members is imputed to Duerk, leading to violations of Montana Rules of Professional Conduct 1.6, 1.7, 1.9, 1.10, and 1.11. He has asked the Court to schedule a hearing before resolving the issue. The government makes three responsive arguments: (1) that Manlove lacks standing; (2) that the motion should be denied as untimely; and (3) that there is no conflict with the Rules. The Court determines that a hearing is unnecessary, and it agrees with the government on all three points, any one of which would be sufficient to deny Defendant's motion.

         This Court's determination of whether to disqualify an attorney is reviewed for abuse of discretion. Paul E. Iacono Structural Engr., Inc. v. Humphrey, 722 F.2d 435, 438 (9th Cir. 1983). The issue of standing raises a question of this Court's authority under the United States Constitution and is therefore governed by federal law. The second and third issues raised by the government, which concern whether disqualification is necessary and appropriate, are governed by state law. In re County of Los Angeles, 223 F.3d 990, 995 (9th Cir. 2000).

         I. Standing

         Manlove lacks standing to call for Duerk's disqualification. Because neither Duerk nor his former law firm ever represented Manlove, Duerk has no duty to Manlove under the cited Montana Rules of Professional Conduct.

         This Court's powers are limited by the Constitution. It may decide only "Cases" or "Controversies." U.S. Const, art. Ill. § 2, cl. 1. It has no power to adjudicate a dispute brought by one who lacks standing. See Lujan v. Defs. of Wildlife, 504 U.S. 555, 560 (1992) ("[T]he core component of standing is an essential and unchanging part of the case-or-controversy requirement of Article III."). Standing may be found only where where a party has "suffered an 'injury in fact'-an invasion of a legally protected interest...." Id. (citations omitted). Thus, a litigant generally may not raise another person's legal rights. Worth v. Seldin, 422 U.S. 490, 499 (1975).

         Here, Manlove has no "legally protected interest." In the words of the Second Circuit, "[a]s a general rule, courts do not disqualify an attorney on the grounds of conflict of interest unless the former client moves for disqualification." United States v. Rogers, 9 F.3d 1025, 1031 (2d Cir. 1993) (quoting In re Yarn Processing Patent Validity Litig, 530 F.2d 53, 88 (5th Cir. 1976)). As the annotation to Model Rule 1.9 states: "The majority view is that only the former client has standing to move for disqualification, unless an 'unethical change of sides [is] manifest and glaring' or an ethical violation is open and obvious." Ellen J. Bennett et al., Annotated Model Rules 173 (7th ed. 2011) (citing Yarn Processing, 530 F.2d at 83). The Rules of Professional Conduct governing conflicts of interest protect former and concurrent clients, not third parties such as Manlove, and Manlove cannot enforce those clients' rights. Nor can there be any violation so severe that it may interfere with Manlove's constitutional rights. As a partner at Milodragovich, Duerk received no confidential client information; as a prosecutor, he has avoided contact with the former clients. (Docs. 156-1 at 5-7, 156-2, 156-3, 156-4 at 2-3.)

         Although the Court's resolution of the issue of standing is dispositive of Defendant's motion, the Court nonetheless addresses the remaining two issues raised by the parties in their briefs.

         II. Timeliness

         Under Montana law, "a former client who is entitled to object to an attorney representing an opposing party based on a conflict of interest but who knowingly refrains from asserting it promptly is deemed to have waived that right." Schujf v. A.T. Klemens & Sons, 16 P.3d 1002, 1013 (Mont. 2000). "Alleged lawyer conflict of interest problems should be brought up as early as possible so that a determination may be made that does not unduly prejudice any party." In re Guardianship of Mowrer,979 P.2d 156, 160 (Mont. 1999). Even where a ...

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