McVey v Etscheit [2006] FMSC 40; 14 FSM Intrm. 268 (Pon. 2006) (14 June 2006)

FEDERATED STATES OF MICRONESIA
SUPREME COURT TRIAL DIVISION
Cite as McVey v. Etscheit, [2006] FMSC 40; 14 FSM Intrm. 268 (Pon. 2006)

ERINE McVEY and TIM McVEY,
Plaintiffs,

vs.

AGNES ETSCHEIT, AGNES ETSCHEIT d/b/a
LEO’S STORE, ETSCHEITS ENTERPRISES, ACE
COMMERCIAL, ACE CONSTRUCTION, A-1
FASHION, RONALD ETSCHEIT, ROBERT
ETSCHEIT, JR., and POHNPEI TRUE VALUE, INC.,
Defendants.

CIVIL ACTION NO. 2005-011

-------------------------------------------------

AGNES P. ETSCHEIT and POHNPEI TRUE VALUE,
INC.,
Third-Party Plaintiffs,

vs.

KEHAU RAMP, individually and d/b/a POHNPEI
ACCOUNTING AND BOOKKEEPING SERVICES
("PABS") and DO IT BEST HARDWARE, INC.,
Third-Party Defendants.

-------------------------------------------------

AGNES P. ETSCHEIT and POHNPEI TRUE VALUE,
INC.,
Plaintiffs,

vs.

ERINE McVEY, individually and doing business as
DO IT BEST HARDWARE,
Defendant.

CIVIL ACTION NO. 2005-016

ORDER DENYING MOTION FOR PARTIAL STAY

Andon L. Amaraich
Chief Justice

Decided: June 14, 2006

[14 FSM Intrm. 275]

[14 FSM Intrm. 276]

APPEARANCE:

For the Defendants:
Daniel J. Berman, Esq.
Sipos & Berman
P.O. Box 2069
Kolonia, Pohnpei FM 96941

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HEADNOTES

Appellate Review - Stay - Civil Cases; Mandamus and Prohibition
A motion to stay proceedings pending consideration of a petition for a writ of mandamus concerning a lawyer’s representation is denied when there: 1) is no substantial possibility that an appellate panel would grant the writ, 2) is no showing of irreparable harm if the stay is denied, and 3) are no equities presented that favor a stay. McVey v. Etscheit, [2006] FMSC 40; 14 FSM Intrm. 268, 271 (Pon. 2006).

Attorney and Client - Disqualification of Counsel
The court has not "qualified" an attorney to remain as a party’s counsel in litigation when the court’s order only noted that that counsel remained that party’s counsel because no one had moved to disqualify him as her counsel. McVey v. Etscheit, [2006] FMSC 40; 14 FSM Intrm. 268, 271 (Pon. 2006).

Attorney and Client - Disqualification of Counsel
Whether opposing counsel is disqualified from representing his wife, has no effect on whether moving counsel is disqualified from representing his clients. McVey v. Etscheit, [2006] FMSC 40; 14 FSM Intrm. 268, 271 (Pon. 2006).

Appellate Review - Stay - Civil Cases; Attorney and Client - Disqualification of Counsel
When the court’s alleged errors only raise further grounds to disqualify opposing counsel and that counsel already is disqualified, even if the appellate court were to find the arguments on those alleged errors persuasive, it could not possibly grant the relief sought - moving counsel’s appearance as counsel for his clients. McVey v. Etscheit, [2006] FMSC 40; 14 FSM Intrm. 268, 271 (Pon. 2006).

Appellate Review - Stay - Civil Cases; Attorney and Client - Disqualification of Counsel
When not only was there never an explicit consent by a client to an adverse representation, but the law firm also never explicitly requested such a consent and the only explicit communication regarding consent came after it became apparent that the representation was becoming very adverse to the client and that client explicitly refused to consent to the representation, the law firm cannot show prejudice from an "original consent" that they cannot show existed. McVey v. Etscheit, [2006] FMSC 40; 14 FSM Intrm. 268, 271 (Pon. 2006).

Attorney and Client - Disqualification of Counsel
When a lawyer was prohibited from representing the clients by Rule 1.7, his disqualification was imputed to his partner because, while lawyers are associated in a firm, none of them shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so by Rules 1.7, 1.8(c), 1.9 or 2.2. McVey v. Etscheit, [2006] FMSC 40; 14 FSM Intrm. 268, 272 (Pon. 2006).

Appellate Review - Stay - Civil Cases; Attorney and Client - Disqualification of Counsel
When attorneys now contend that the consent to the adverse representation was part of a quid pro quo - the adverse client would not object to the representation and in return the attorneys’ other clients would not sue the adverse client - but cannot show any explicit request for the adverse client to consent to such a quid pro quo, they thus have not shown a substantial possibility of success on this ground entitling them

[14 FSM Intrm. 277]

to a stay. McVey v. Etscheit, [2006] FMSC 40; 14 FSM Intrm. 268, 272 (Pon. 2006).

Attorney and Client - Disqualification of Counsel
A balance-the-equities analysis found in two U.S. is not required when in attorney disqualification cases involving adverse representation because other cases to the contrary are more persuasive. McVey v. Etscheit, [2006] FMSC 40; 14 FSM Intrm. 268, 272 (Pon. 2006).

Attorney and Client - Disqualification of Counsel
The court obeyed Rule 1.10(a)’s clear command and imputed a lawyer’s disqualification to his partner, rather than trying the law firm’s proposal to erect a Chinese wall between them. Because the law firm is a private firm, motivated by the profit incentive and, unlike government law offices, a "Chinese wall" is not an appropriate remedy for a private law office. The different treatment for private and government law offices is considered to stem, in part, from government agency attorneys not being bound by a common profit motive as are lawyers in private practice; thus, unlike private law firms, the disqualification of all government attorneys in an office is not required when one is disqualified. McVey v. Etscheit, [2006] FMSC 40; 14 FSM Intrm. 268, 272 (Pon. 2006).

Appellate Review - Stay - Civil Cases; Attorney and Client - Disqualification of Counsel
When a law firm was disqualified from representing all of the defendants on other grounds, a claim that the conflict between the corporate defendant and the other defendants was waived does not have a substantial possibility of success entitling a petitioner for a writ of prohibition to a stay because the trial court never ruled on the issue. McVey v. Etscheit, [2006] FMSC 40; 14 FSM Intrm. 268, 273 (Pon. 2006).

Appellate Review - Stay - Civil Cases
When there does not appear to be a substantial possibility that the appellate division will grant the writ of prohibition, the circumstances and the equities do not require a stay. McVey v. Etscheit, [2006] FMSC 40; 14 FSM Intrm. 268, 273 (Pon. 2006).

* * * *

COURT’S OPINION

ANDON L. AMARAICH, Chief Justice:

On May 19, 2006, Daniel J. Berman, of Sipos & Berman, as attorney for Agnes Etscheit, personally and d/b/a Leo’s Store, Etscheits Enterprises, Ace Commercial, Ace Construction, A-1 Fashion, Ronald Etscheit, Robert Etscheit, Jr., [hereinafter "Etscheits"] and Pohnpei True Value, Inc. ("PTVI"), filed a Motion for Partial Stay. The motion asks for a partial stay of the court’s April 25, 2006 order disqualifying the law firms of Sipos & Berman and Berman O’Connor Mann & Shklov from representing the Etscheits. The Etscheits state that they will seek appellate review of the disqualification order by filing a petition for a writ of mandamus and attach a draft copy of the petition to their motion. (The petition was later filed on May 23, 2006 and docketed as P1-2006.) That petition seeks an appellate division order that the trial court admit Daniel J. Berman as counsel for all Etscheit defendants.

The motion asks that, while the petition for a writ of mandamus is pending, the court stay all claims and discovery against all Etscheit defendants except PTVI; stay all claims and discovery on the Etscheits’ third-party complaint against Kehau Ramp; but permit the litigation (claims, counterclaims, and discovery) between the McVeys and PTVI to continue. (The motion also states that PTVI will be seeking new counsel.) In the alternative, it asks that the disqualification order’s application to Berman be stayed until the appellate division has ruled. Or, in another alternative, it asks for a stay of all litigation and discovery by all parties until the mandamus petition and the appellate process is complete.

[14 FSM Intrm. 278]

A motion to stay proceedings pending consideration of a petition for a writ of mandamus concerning a lawyer’s representation is denied when there: 1) is no substantial possibility that an appellate panel would grant the writ, 2) is no showing of irreparable harm if the stay is denied, and 3) are no equities presented that favor a stay. Office of the Public Defender v. Trial Division, [1990] FMSC 11; 4 FSM Intrm. 252, 255 (App. 1990).

The petitioners assert eight alleged trial court errors as a basis for the writ and grounds to reinstate Daniel J. Berman as the Etscheits’ counsel in this matter. A brief review of the alleged errors follows.

Error No. 1 asserts that the court should not have qualified Fredrick Ramp to remain as Kehau Ramp’s counsel in litigation against the Etscheits. That misreads the order. The order only noted that Fredrick Ramp remained her counsel because no one had moved to disqualify him as her counsel. Any error made was the Etscheits’ failure to move to disqualify Fredrick Ramp from representing Kehau Ramp once they had added her as a party and Fredrick Ramp had appeared on her behalf. Moreover, this issue is now moot because on May 23, 2006, Andrea Hillyer entered her appearance as counsel for Kehau Ramp as well as for Erine McVey and Tim McVey.

Furthermore, Error No. 1 has no bearing on the relief sought. Whether Fredrick Ramp is disqualified from representing his wife, Kehau Ramp, has no effect on whether Berman is disqualified from representing the Etscheits. This is also true of asserted Errors No. 6 and 7. Those asserted errors argue that the Etscheits did not abandon as a ground for disqualifying Fredrick Ramp as the McVeys’ attorney that Kehau Ramp was PTVI’s bookkeeper during times relevant to this litigation (Error No. 6) and that the sublease issues in the land lease case Ramp handled for Agnes Etscheit and the land lease involved in this case are the same^[1] although the leaseholds are for different land (Error No. 7). These alleged errors only raise further grounds to disqualify Fredrick Ramp and Ramp already is disqualified. Thus even if the appellate court were to find the Etscheits’ arguments on these alleged errors persuasive, it could not possibly grant the relief sought (Berman’s appearance as Etscheits’ counsel) on the basis of Errors No. 1, 6, and 7.

Error No. 2 asserts that Dateline’s original consent (and its later withdrawal) for Daniel Berman and Michael Sipos to represent the Etscheits in this litigation has caused them substantial prejudice. This court, however, did not find that Dateline had originally consented to the representation. Sipos did keep Dateline informed of the events in this litigation and took Dateline’s silence as consent. But, not only was there never an explicit consent by Dateline to the representation, Sipos & Berman also never explicitly requested such a consent in any of the communications provided to the court by Sipos & Berman as evidence of consent. The only explicit communication regarding consent came after it became apparent that the Etscheit representation was becoming very adverse to Dateline and it explicitly refused to consent to the representation. The Etscheits and Sipos & Berman cannot show prejudice from an "original consent" that they cannot show existed. They now contend that the consent was part of a quid pro quo - Dateline would not object to the Etscheit representation and in return the Etscheits would not sue Dateline. They, however, cannot show any explicit request for Dateline to consent to such a quid pro quo. The Etscheits have thus shown no substantial possibility of success on this ground.

Error No. 3 contends that a lesser and more appropriate remedy would have been to permit Sipos to "withdraw" from the Etscheit representation and permit Berman to continue the representation. This contention ignores two points. Sipos was prohibited from representing the Etscheits by Rule 1.7, and his disqualification was imputed to his partner, Berman. "While lawyers are associated in a firm, none of them shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so by Rules 1.7, 1.8(c), 1.9 or 2.2." FSM MRPC R. 1.10(a). Rule 1.10(a) is clear - both Sipos and his partner Berman are disqualified. The Etscheits have no substantial possibility of success on this alleged error.

[2006] FMSC 24; [14 FSM Intrm. 279]

Error No. 4 asserts that the court failed to use a balance-the-equities analysis which the Etscheits assert was required by two U.S. cases. (Both cited cases involve the application of the Model Code of Professional Responsibility while in the FSM the Model Rules of Professional Conduct are applicable.) One, an unreported case, Rockwell Graphic Sys., Inc. v. DEV Indus. Inc., 1991 WL 127592 (N.D. Ill. 1991), the Etscheits assert stands for the proposition that counsel cannot be disqualified for the mere appearance of impropriety when a small law firm merged with a 300-lawyer firm and the larger firm represented a party in a federal case in which the smaller firm’s client had been a party, but had settled, although they were still opponents in an unrelated state court case for which the smaller firm’s client was hiring new counsel. The other, In re T’Challa D., 766 N.Y.S.2d 500 (Fam. Ct. 2003), involved a large public service law firm,^[2] the New York Legal Aid Society, where the court permitted its Juvenile Rights Division to continue (as it had for four years) to represent a child whose guardian was seeking to terminate the mother’s parental rights although that mother had, due to the mother’s deception, been represented by the Legal Aid Society’s Criminal Defense Division in a different borough for eight months before the Legal Aid Society discovered the dual representation and withdrew from representing the mother and put a "Chinese wall" in place between the Criminal Defense Division and the Juvenile Rights Division.

Neither case is particularly analogous to the situation in this case. Other cases to the contrary are more persuasive. See Santacroce v. Neff, 134 F. Supp. 2d 366, 370 (D.N.J. 2001) (lawyer must withdraw from even a long-standing, more remunerative client when that representation becomes adverse to another, newer client even if the law firm terminated its representation of the newer client in an attempt to avoid a conflict as soon as it knew that a conflict would arise); see also Unified Sewerage Agency v. Jelco Inc., [1981] USCA9 773; 646 F.2d 1339, 1345 n.4 (9th Cir. 1981) (attorney cannot avoid a conflict and represent a more favored client by turning the disfavored client into a former client); Picker Int’l, Inc. v. Varian Assoc., Inc., 670 F. Supp. 1363, 1365-66 (N.D. Ohio 1987) (attorney cannot drop a client or claim that client is no longer a client in order to represent a better-paying client), aff’d[1989] USCAFED 330; , 869 F.2d 578 (Fed. Cir. 1989). The Etscheits’ possibility of success on this ground is not substantial.

Error No. 5 asserts that the Etscheits’ proposed Chinese wall remedy was ignored. This court, however, obeyed Rule 1.10(a)’s clear command and imputed Sipos’s disqualification to his partner, Berman, rather than trying to erect a Chinese wall between them. Berman & Sipos is a private firm, motivated by the profit incentive. Unlike government law offices, a "Chinese wall" is not an appropriate remedy for a private law office. The different treatment for private and government law offices is considered to stem, in part, from government agency attorneys not being bound by a common profit motive as are lawyers in private practice; thus, unlike private law firms, the disqualification of all government attorneys in an office is not required when one is disqualified. FSM v. Wainit, [2004] FMSC 15; 12 FSM Intrm. 376, 380 & n.2 (Chk. 2004); see also In re Extradition of Jano, 6 FSM Intrm. 26, 27 (App. 1993); FSM v. Wainit, [2003] FMSC 69; 12 FSM Intrm. 172, 179 (Chk. 2003); Kaminanga v. FSM College of Micronesia, [1998] FMSC 26; 8 FSM Intrm. 438, 440-41 (Chk. 1998). The Etscheits do not have a substantial possibility of success on this "error."

Error No. 8 asserts that the court should have ruled that the conflict between PTVI and the other Etscheit defendants was waived and that under Nix v. Etscheit, [2001] FMSC 34; 10 FSM Intrm. 391, 398 (Pon. 2001) Berman’s representation of PTVI was permissible. There is no substantial possibility of success on this ground because this court never reached or decided this issue. The Sipos & Berman firm was disqualified from representing all of the Etscheit defendants on other grounds. If the Etscheits should prevail on some other ground in their petition and a writ issues, this court then might need to rule on this issue and the applicability of Nix v. Etscheit. However, since the motion states that other counsel is being sought for PTVI,

[14 FSM Intrm. 280]

this ground may be moot before any mandamus might issue.

Lastly, Berman several times refers to a need for the appellate court to remove the cloud over his representation of the Etscheits. There is no cloud. He is disqualified from representing them in this case. He is not disqualified from representing them in any other case where there are no conflicts of the nature present in this case.

Accordingly, there does not appear to be a substantial possibility that the appellate division will grant the writ. The Etscheits assert irreparable prejudice in having to hire a new attorney for this case because of the tremendous legal time and work spent preparing the case. Considering that all of the opposing parties are in substantially the same situation, the court cannot say that this constitutes irreparable harm requiring a stay. Nor, under the circumstances, do the equities require a stay. The motion is therefore denied.

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^[1] No authority has been cited for the proposition that an attorney should be disqualified in a case because the issue involved is the same as in another case.

^[2] Similar to Micronesian Legal Services Corporation in the FSM.