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Dahl v. Montana First Judicial District Court, Lewis and Clark County

Supreme Court of Montana

February 5, 2019

GREGORY LEE DAHL, Petitioner,
v.
MONTANA FIRST JUDICIAL DISTRICT COURT, LEWIS AND CLARK COUNTY, HON. MIKE MENAHAN, Respondent.

          ORDER

         Petitioner Gregory Lee Dahl has asked us to exercise supervisory control over the First Judicial District Court, Lewis and Clark County, in that court's Cause No. ADV 2014-255. Specifically, Dahl asks us to reverse two orders of the District Court: one that denied his motion to disqualify counsel, and one that compelled arbitration. At our invitation, the defendants in the District Court case have filed a response objecting to the petition for supervisory control.

         BACKGROUND

         Dahl and Defendant Mark Runkle were business partners and were the principals in R&D Partners, LLC (R&D). Their business relationship deteriorated and Dahl filed this action in the District Court.

         Dahl moved the District Court to disqualify Runkle's counsel From 2003 until 2008, the law firm of Gough, Shanahan, Johnson, and Waterman ("Gough, Shanahan") represented R&D. At that time, KD Feeback was a partner in Gough, Shanahan. Feeback now represents Runkle and R&D in the present case. Dahl argued that Feeback should be disqualified because his earlier representation of R&D created a "multi-dimensional conflict of interest." The District Court denied Dahl's motion.

         Dahl and Runkle had signed two operating agreements for R&D-one in 2003 and one in 2008. Both operating agreements provided that Dahl and Runkle would arbitrate any disputes arising out of the agreements; however, the agreements each specified a different method for selecting an arbitrator in the event arbitration became necessary. Dahl argued that the 2008 operating agreement was void and thus the 2003 operating agreement-and its arbitration provision-would control. Runkle disagreed. The District Court found Dahl was estopped from arguing that the 2008 operating agreement was void and granted Runkle's motion to compel arbitration under the 2008 operating agreement, thereby selecting the arbitrator according to the method prescribed in the 2008 operating agreement.

         Dahl appealed the District Court's order denying his motion to disqualify counsel and its order compelling arbitration under the 2008 operating agreement. (Case No. DA 18-0553.) We dismissed the appeal as not properly before this Court. Dahl now petitions for a Writ of Supervisory Control, arguing that the District Court's rulings were in error and that the extraordinary remedy of supervisory control is warranted because he would be forced to arbitrate against an opponent whose counsel is tainted by a conflict of interest, and he would be precluded from challenging the validity of the 2008 operating agreement.

         DISCUSSION

         Supervisory control is an extraordinary remedy that is sometimes justified when urgency or emergency factors make the normal appeal process inadequate, the case involves purely legal questions and, in a civil case, the other court is proceeding under a mistake of law and is causing a gross injustice, or constitutional issues of state-wide importance are involved. M. R. App. P. 14(3).

         Consistent with Rule 14(3), it is the Court's practice to refrain from exercising supervisory control when the petitioner has an adequate remedy of appeal. E.g., Buckles v. Seventh Judicial Dist. Ct, No. OP 16-0517, 386 Mont. 393, 386 P.3d 545 (table) (Oct. 18, 2016); Lichte v. Mont. Eighteenth Judicial Dist. Ct., No. OP 16-0482, 385 Mont. 540, 382 P.3d 868 (table) (Aug. 24, 2016). "[A] writ of supervisory control is not to be used as a means to circumvent the appeal process. Only in the most extenuating circumstances will such a writ be granted." State ex rel. Ward v. Schmall, 190 Mont. 1, 617 P.2d 140 (1980). The Motion to Disqualify

         We first consider whether the District Court's denial of Dahl's motion to disqualify counsel warrants supervisory control. An erroneous ruling on a motion to disqualify could cause irreparable harm and thus may warrant supervisory control. Schuff v. A. T. Klemens & Son, 2000 MT 357, ¶¶ 49-50, 303 Mont. 274, 16 P.3d 1002. The existence of an attorney-client relationship is generally a question of fact, which we review for clear error. Krutzfeldt Ranch, LLC v. Pinnacle Bank, 2012 MT 15, ¶ 14, 363 Mont. 366, 272 P.3d 635 (citations omitted). We review a district court's denial of a motion to disqualify for abuse of discretion. Schuff, ¶ 26.

         Dahl's arguments rest on the premise that he, personally, was Feeback's client because the law firm at which Feeback was a partner represented R&D while Dahl was an officer of R&D. In support of this premise, Dahl relies on Jnter-Fluve v. Mont. Eighteenth Judicial Dist. Ct, 2005 MT 103, ¶ 35, 327 Mont. 14, 112 P.3d 258, in which we held:

[W]hile Inter-Fluve was the client with respect to the attorney-client communications at issue here, the directors were joint clients with Inter-Fluve. As corporate directors are jointly responsible for the proper management of a corporation, it is consistent with this joint obligation that they be treated as joint clients with the corporation when legal advice is rendered to the corporation through one of its officers or directors.

         The District Court found Dahl's reliance on Inter-Fluve misplaced, noting that Inter-Fluve's ultimate holding is that a corporation's directors are clients for the purposes of attorney-client privilege, and the case does not hold, as Dahl suggests, that a corporation's directors are considered individual clients of an attorney representing the corporation. The court reasoned that Inter-Fluve was inapplicable because it does not establish that Dahl was an individual client for the purpose of analyzing a conflict of interest. We agree with the District Court that, absent a showing that Gough, Shanahan, or Feeback himself, represented Dahl on an individual basis, Feeback's representation of Runkle and R&D in the present matter does not give rise to a conflict of interest. As a practical matter, any confidential business documents that R&D shared with counsel while Dahl was an officer could also be shared with any future counsel retained by R&D. Thus, any information Feeback obtained from Dahl as an officer of R&D-information that Dahl also had-does not now give rise to a conflict of interest.

         Dahl further argues that he still has "an interest" in R&D and thus Feeback cannot represent Runkle and R&D against him-a percentage interest R&D calculates as 0.00003571 and characterizes as "effectively zero." Under Dahl's theory, no attorney could represent R&D against Dahl so long as he ...


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