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Inc. v. Junkermier, Clark, Campanella, Stevens, P.C.

Supreme Court of Montana

May 30, 2017

DRAGGIN' Y CATTLE COMPANY, INC., and ROGER and CARRIE PETERS, Plaintiffs and Appellants,
v.
JUNKERMIER, CLARK, CAMPANELLA, STEVENS, P.C., Defendant, NEW YORK MARINE and GENERAL INSURANCE COMPANY, Intervenor and Appellee.

          Submitted on Briefs: April 5, 2017

         Appeal From: District Court of the Eighteenth Judicial District, In and For the County of Gallatin, Cause No. DV 11-87AX Honorable Russell C. Fagg, Presiding Judge

          For Appellant: Timothy B. Strauch, Strauch Law Firm, PLLC, Missoula, Montana Donald L. Harris, Harris, Gannett & Varela, PLLC, Billings, Montana (Counsel for Draggin' Y Cattle Co. and Peters) Thomas Marra, Marra, Evenson & Bell, PC, Great Falls, Montana (Counsel for Junkermier, Clark, Campanella, Stevens, P.C.)

          For Appellee: Gary M. Zadick, Ugrin, Alexander, Zadick & Higgins, PC, Great Falls, Montana (Counsel for New York Marine and Gen. Ins. Co.)

          OPINION

          Beth Baker Justice.

         ¶1 Roger and Carrie Peters and Draggin' Y Cattle Company, Inc., (collectively Peters) entered into a stipulated settlement with Junkermier, Clark, Campanella, Stevens, P.C., and Larry Addink (collectively Junkermier). The presiding judge-Judge George Huss- determined that the stipulated settlement was reasonable and entered judgment against Junkermier's insurer, New York Marine and General Insurance Company. New York Marine appealed and questioned Judge Huss's impartiality.

         ¶2 We concluded in that appeal that Judge Huss should have disclosed a potential conflict of interest. We referred the case to the District Court to determine whether Judge Huss should have been disqualified for cause. The District Court concluded that Judge Huss was required to recuse himself and should have been disqualified. The District Court also vacated all orders that Judge Huss issued after he should have been disqualified. Peters contend that the District Court erred in ruling that Judge Huss should have been disqualified and in vacating Judge Huss's orders.

         ¶3 We affirm.

         PROCEDURAL AND FACTUAL BACKGROUND

         ¶4 This is the third time this matter has been before this Court. Draggin' Y Cattle Co. v. Addink, 2016 MT 98, 383 Mont. 243, 371 P.3d 970 (hereafter Draggin' Y II); Draggin' Y Cattle Co. v. Addink, 2013 MT 319, 372 Mont. 334, 312 P.3d 451 (hereafter Draggin' Y I). We restate the relevant facts briefly.

         ¶5 Peters sued Junkermier in January 2011 for damages related to tax services Junkermier performed for Peters. Junkermier requested that New York Marine defend and indemnify them against Peters's claims. New York Marine defended Junkermier subject to a reservation of rights throughout the suit. In the first appeal, we reversed a grant of summary judgment in Junkermier's favor and remanded. Draggin' Y I, ¶ 51. Judge Huss assumed jurisdiction of this underlying action following remand.

         ¶6 Peters and Junkermier entered into a settlement agreement and stipulation for entry of judgment without New York Marine's participation or authorization in November 2014. On December 5, 2014, New York Marine filed a motion to intervene and requested additional discovery and a stay of the scheduled reasonableness hearing. Ten days later, Judge Huss granted New York Marine's motion to intervene, denied its motions for additional discovery and to stay, and held the reasonableness hearing. New York Marine contested the stipulated settlement's reasonableness and denied liability for the settlement. Judge Huss concluded that the stipulated settlement was reasonable and entered judgment in the amount of $10, 000, 000 in Peters's favor. New York Marine appealed, and Peters cross-appealed.

         ¶7 For the first time on appeal, New York Marine asserted that Judge Huss had an apparent conflict of interest stemming from a sexual harassment complaint that his former court reporter filed against him. New York Marine alleged that Judge Huss had individually entered into a stipulated settlement without the participation or authorization of the Office of the Court Administrator (OCA), which acted as Judge Huss's insurer by paying for his defense under a reservation of rights. New York Marine alleged further that the OCA had filed a declaratory judgment action in which it contested the stipulated settlement amount's reasonableness.[1] Judge Huss's potential conflict of interest, New York Marine contended, violated the Montana Code of Judicial Conduct and should have resulted in Judge Huss's disqualification.

         ¶8 We concluded that Rule 2.12, M. C. Jud. Cond., required that Judge Huss disclose his participation in his personal stipulated settlement to the parties because the circumstances "could potentially cause the judge's impartiality reasonably to be questioned." Draggin' Y II, ¶ 31. But we declined to determine whether Rule 2.12 required Judge Huss to disqualify himself because such a determination "requires findings of fact and conclusions of law following the presentation of evidence." Draggin' Y II, ¶ 31. We therefore "determine[d] that the appropriate course of action [was] to refer the disqualification issue to a district judge to hear the matter pursuant to § 3-1-805, MCA." Draggin' Y II, ¶ 31. In a subsequent order, this Court assigned the Honorable Russell C. Fagg to preside over the disqualification proceeding.

         ¶9 Upon referral, Judge Fagg set a disqualification hearing, at which Judge Huss testified. The court's ensuing order concluded that Judge Huss was required to recuse himself and should have been disqualified from presiding over the stipulated settlement. The District Court concluded further that the new judge assigned to the case would need to decide the issues raised by the parties after New York Marine intervened in the case. The court's order therefore had the effect of vacating all of Judge Huss's orders after New York Marine intervened.

         STANDARD ...


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