Byrd v. Maricopa Cty Sher Of, et al

Filing 156

ORDER: On or before 09/01/11, each side shall file a notice stating whether or not it waives the conflict described above. See order for complete details. Signed by Judge Neil V Wake on 8/25/11. (NKS)

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1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 Charles Edward Byrd, Plaintiff, 10 11 vs. 12 Joseph M. Arpaio, et al., 13 Defendants. 14 15 ) ) ) ) ) ) ) ) ) ) ) ) ) No. CV04-02701-PHX-NVW ORDER 16 This case has been pending before me for several years, and there have been extensive 17 proceedings, including a full trial and appeal. A final pretrial conference is set for September 18 14, 2011. 19 Since the previous trial, a legal dispute arose in which the law firm of Fennemore 20 Craig PC — which represents Mr. Byrd — represents a plaintiff against a limited liability 21 company and a limited partnership in which I and my wife have indirect interests. Though 22 there is no claim or possibility of personal liability to me and my wife, we have beneficial 23 interests in the entities and therefore have an ultimate financial interest in the litigation. 24 I have no actual or potential bias against Fennemore Craig and I currently preside over 25 cases in which Fennemore Craig’s clients have waived the potential conflict. Because this 26 case predated the LLC/LP dispute described above, I did not recognize the potential conflict 27 in this case until recently. 28 1 A more complete description of the LLC/LP litigation, and my and my wife’s 2 interests, is as follows: 3 THE INVESTMENT ENTITIES AND MY INTEREST IN THEM 4 I and my wife are both (a) members of Apache Peak Investments, LLC, an Arizona 5 limited liability company, and (b) shareholders of Whetstone Development Company, an 6 Arizona corporation. Apache Peak Investments, LLC is a partner of Whetstone Partners, 7 LLP, an Arizona limited liability partnership. I am not a general partner of Whetstone 8 Partners, LLP. My involvement in it is only indirect, through my ownership interest in one 9 of its constituent partnerships, Apache Peak Investments, LLC. Whetstone Partners has an 10 interest, either as owner, Trust Beneficiary, or Beneficiary of a Deed of Trust, in 11 approximately 13,000 acres of land located in Benson, Cochise County, Arizona. This land 12 is commonly known as the “Whetstone Ranch.” Along with other property, approximately 13 1,700 acres (the “WDC Investment Property”) of the Whetstone Ranch was optioned by 14 Whetstone Partners, LLP to WDC Investment Company, LLC. WDC Investment Company, 15 LLC is currently wholly owned by Whetstone Development Company. 16 I do not act as a manager, officer, or director of any of these entities. I have never 17 acted in a management capacity for any of them. As shareholders, we have less than a 1% 18 percent interest in Whetstone Development Company, the sole member of WDC Investment. 19 Therefore, we indirectly hold the same percentage interest in WDC Investment Company. 20 By virtue of our membership in Apache Peak Investments, LLC which in turn is a member 21 of Whetstone Partners, LLP, we also have ultimately less than 1% beneficial interest in 22 Whetstone Partners, LLP. 23 SAGE LITIGATION 24 WDC Investment Company entered into a contract to assign its option rights in the 25 WDC Investment Property to Sage Whetstone, LLC, a Delaware limited liability company. 26 On April 30, 2008 Sage Whetstone filed a Complaint in the U.S. District Court, District of 27 Arizona (Complaint No. CIV-08-275-JMR) against both WDC Investment Company, LLC, 28 and Whetstone Partners, L.L.P. arising out of the contract for the option rights. Fennemore -2- 1 Craig PC represents Sage Whetstone, LLC in the litigation. The Complaint contains four 2 counts, which are as follows: 3 1. Count One: (Breach of Contract – Covenant of Good Faith and Fair 4 Dealing). The contract provided that certain documents would be imposed as encumbrances 5 (the “Encumbrance Documents”) upon the WDC Investment Property. Sage Whetstone 6 alleges that the Encumbrance Documents tendered to Sage Whetstone in connection with the 7 contract were “not commercially reasonable, and seek to deprive Sage Whetstone from 8 receiving the benefits reasonably contemplated and expected to flow to it under the 9 Agreement.” Therefore, Sage Whetstone asserts that it is entitled to damages for breach of 10 11 contract. 2. Count Two: (Recision of Contract). Sage Whetstone alleges that the parties 12 understood that “a material basis of the Agreement was the participation of a financially 13 responsible, experienced, national scope homebuilder and developer such as Pulte [Homes].” 14 Because Pulte Homes withdrew from a contract to purchase a separate parcel within the 15 Whetstone Ranch, Sage Whetstone claims it is entitled to recision of the contract. 16 3. Count Three: (Breach of Contract – Return of Deposit). Sage Whetstone 17 alleges that “if the parties do not agree on Encumbrance Documents, Sage Whetstone can 18 terminate the Agreement, and the refundable deposits paid by Sage Whetstone then shall be 19 repaid to Sage Whetstone.” Sage Whetstone alleges that it did not agree to the Encumbrance 20 Documents, and therefore, is entitled to the return of its refundable earnest money deposit 21 in the amount of $1, 600,000.00. 22 4. Count Four: (Unjust Enrichment). Sage Whetstone alleges that it has “paid 23 for services and consultants whose work has increased the value of the land.” Sage 24 Whetstone further alleges that WDC Investments and Whetstone Partners have failed “to pay 25 Sage Whetstone for the value of the benefits received,” and that such failure to pay for the 26 value of these benefits is not justified. Therefore, Sage Whetstone alleges that it is entitled 27 to payment of damages arising from WDC Investments’ and Whetstone Partners’ unjust 28 enrichment in connection with Sage Whetstone’s planning and consulting services. No -3- 1 specific amount is prayed for under this count. However, Sage Whetstone alleges that it 2 expended approximately $4,430,000.00 in connection with “the Master Planned Community” 3 it intended to construct upon the property. 4 5. Answer and Counterclaim. The Defendants in this action have filed an 5 Answer and Counterclaim and have asserted both that nothing is owed to Sage Whetstone, 6 LLC and that Sage Whetstone, LLC is liable to the Defendants pursuant to A.R.S. § § 33-420 7 for their filing of a wrongful lis pendens. 8 STANDARDS OF JUDICIAL DISQUALIFICATION 9 The standards for judicial disqualification are set out in 28 U.S.C. § 455. I find no 10 grounds for disqualification under 28 U.S.C. § 455(b), which are non-waivable. However, 11 the general disqualification of 28 U.S.C. § 455(a) requires a judge to disqualify himself “in 12 any proceeding in which his impartiality might reasonably be questioned.” Section 3.6-3 of 13 the Guide to Judiciary Policies and Procedures summarizes general principles of 14 disqualification where a lawyer appearing before the judge is representing an opposing party 15 in other litigation adverse to the judge: 16 17 18 19 20 21 22 23 24 25 26 27 28 § 3.6-3 Lawyer Representing Party Opposing Judge in Other Litigation (a) A judge should recuse from cases handled by a law firm, one of whose members or associates represents a party adverse to the judge in other litigation. Similarly, a judge who joins a class action arising from former employment with the Department of Justice should recuse (subject to remittal) from cases handled by a DOJ attorney directly involved in the class action or the underlying administrative decisions leading to it. (b) Recusal is not required when a lawyer or law firm previously represented an adverse party in litigation to which the judge or the judge’s minor child was a party, after the matter has been finally closed. (c) Judge should recuse, subject to remittal, from cases in which the bankruptcy trustee’s counsel is an attorney in a firm whose partner is suing the judge in unrelated litigation. (d) When a former law firm is involved in litigation that may result in the judge’s personal liability, the judge should recuse (absent remittal) where the following persons appear: lawyers who are parties against the law firm; law firms representing plaintiffs against the law firm; lawyers who are lay and expert witnesses against the law firm; specific lawyers representing the law firm; other members of the firms representing the law firm. (e) A judge should recuse from matters handled by a law firm representing a developer, where the judge’s property value would be diminished substantially by the development, the judge has publicly opposed it, and the matter is in litigation (though the judge is not a party). (f) A judge’s impartiality cannot reasonably be questioned because a party moved, in unrelated litigation, to add as a defendant a company in which the judge had a -4- 1 financial interest, but then withdrew the motion. 2 I have previously concluded that my ultimate financial interests in Whetstone 3 Development Company, the sole member of WDC Investment Company, LLC, and 4 Whetstone Partners, L.L.P. are sufficient to implicate 28 U.S.C. § 455(a), as interpreted by 5 section 3.6-3 of the Guide to Judiciary Policies and Procedures. However, though my 6 impartiality might reasonably be questioned in matters in which Fennemore Craig PC are 7 counsel, I have no actual bias or prejudice for or against the firm or any of its lawyers, or for 8 or against any of its clients in the matters before me. 9 Disqualification under 28 U.S.C. § 455(a) is subject to waiver if “preceded by a full 10 disclosure on the record of the basis for disqualification.” 28 U.S.C. § 455(e). I have 11 consulted with the office of the General Counsel of the Administrative Office of the Courts, 12 which provides advice to federal judges on matters of judicial ethics and disqualification, and 13 I am advised that my disqualification in this case is subject to waiver. I will therefore require 14 the parties to file a statement by September 1 indicating whether or not they waive the 15 potential disqualification. 16 Regarding Plaintiff’s “Motion for Additional Time to Respond to Defendants’ 17 Motions in Limine and Motion to Continue the Pretrial Conference Set for September 14, 18 2011” (Doc. 155): If I continue to preside over this case after September 1, I will grant 19 Plaintiff a reasonable extension. Otherwise, the next judge will address that motion. 20 21 22 IT IS THEREFORE ORDERED that, on or before September 1, 2011, each side shall file a notice stating whether or not it waives the conflict described above. DATED this 25th day of August, 2011. 23 24 25 26 27 28 -5-

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