Doe 1 et al., v. The Catholic Archdiocese of Chicago, et al.,

Filing 64

MEMORANDUM Opinion and Order. Signed by the Honorable Young B. Kim on 6/8/2010. (aac, )

UNITED STATES DISTRICT COURT N O R T H E R N DISTRICT OF ILLINOIS E A S T E R N DIVISION J O H N DOE, et al., P la in tif f s , v. T H E CATHOLIC ARCHDIOCESE OF C H IC A G O , et al., D e f e n d a n ts . ) ) ) ) ) ) ) ) )

C a s e No. 09 CV 7656

M a g is tr a te Judge Young B. Kim J u n e 8, 2010

M E M O R A N D U M OPINION and ORDER B e f o re this court is the defendants' motion to disqualify Phillip Aaron ("Aaron") and P h illip Aaron Law Firm, P.C. from representing the plaintiffs in this case. The defendants a rg u e that Aaron must be disqualified because he has a personal conflict of interest that will im p a ir his ability to zealously represent his clients. They also argue that Aaron should be d is q u a lif ie d because he is a fact witness to the events underlying the current claims. For the f o llo w in g reasons, the defendants' motion to disqualify plaintiffs' counsel is granted. P r o c e d u r a l History O n December 10, 2009, attorney Phillip Aaron filed this multi-count lawsuit on behalf o f 73 plaintiffs who identify themselves as African American and Hispanic survivors of s e x u a l abuse perpetrated by priests in the Catholic Archdiocese of Chicago ("the A rc h d io c e s e " ). Each of the plaintiffs has mediated or litigated prior claims against the A rc h d io c e s e stemming from that alleged abuse. In the current suit, the plaintiffs claim that i n the course of the previous legal and mediation proceedings, the Archdiocese, Cardinal

Francis E. George, and Bishop Raymond Goedert violated the plaintiffs' civil and c o n s titu tio n a l rights by, among other things, injecting "discriminatory conditions" into the m e d ia tio n proceedings and settling their abuse claims for less money than they offered to w h ite sexual-abuse victims. (R. 14, Am. Compl. at 25-26.) The plaintiffs also claim that the d e f e n d a n ts ' conduct violated the Federal Racketeer Influenced and Corrupt Organizations A c t ("RICO"), 18 U.S.C. § 1962, et seq., and numerous state laws. (Id. at 27-35.) The c o m p la in t demands $8.5 million in damages for each of the 73 plaintiffs (a total of $620.5 m illio n ). (Id. at 35-36.) On March 1, 2010, the Executive Committee for the United States District Court for th e Northern District of Illinois referred this case to the assigned magistrate judge to conduct h e a rin g s and enter appropriate orders on all nondispositive pretrial motions. Two weeks later th e defendants filed the current motion to disqualify Aaron, along with a motion to dismiss th e complaint in its entirety. The motion to disqualify falls within the scope of the referral to this magistrate judge. The motion to dismiss is currently pending before the presiding d is tric t judge. Facts In support of their motion to disqualify Aaron and his law firm, the defendants s u b m itte d documents showing that he represented most of the current plaintiffs in the m e d ia tio n and settlement proceedings that gave rise to the current allegations. (R. 26, Mot. to Disqualify, Group Exs. A-D.) Aaron negotiated settlements on behalf of 47 of those

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plaintiffs. (Id. Group Exs. B & C.) He signed each of the 47 settlement agreements, which in c lu d e language releasing the Archdiocese and Cardinal George from any known or u n k n o w n claims arising from any matter prior to the date of the agreements. (Id.) Six of the s e ttle m e n t agreements go further than releasing future claims; they include the following in d e m n if ic a tio n language: P h illip Aaron, individually and on behalf of The Law Office of P h illip Aaron, and [Doe], agree to hold harmless, defend and in d e m n if y the Released Parties their agents, attorneys and in s u re rs , from payment and satisfaction of any and all liens, c la im s , or causes of action related to this Agreement or any tax re la te d liabilities or responsibilities related to this Agreement. (Id . Group Exs. B & C, Settlement Agreements of Jane Does 1-4, John Does 14 & 35, ¶ 17.) Although the current complaint is lengthy and includes a number of factual assertions th a t seem untied to any legal claims, all of the allegations relate to the course of the prior litig a tio n and mediation in which Aaron participated as counsel for the claimants. For e x a m p l e , the plaintiffs allege that in the course of mediation the defendants: forced only m in o rity abuse victims to submit to polygraph examinations, subjected them to demeaning tre a tm e n t, tried to force them to remain silent regarding their claims, concealed evidence f ro m them to cause them to settle their claims for less than they are worth, and refused to s e ttle with some of them because of racial prejudice. (R. 14, Am. Comp. at 25-26, 29.) Whether those allegations state a federal claim is a question that is currently pending before th e district judge. (See R. 28, Mot. to Dismiss.)

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Analysis In the current motion to disqualify, the defendants argue that Aaron cannot serve as th e plaintiffs' attorney without violating this court's local rules regarding attorney conflicts o f interest and attorneys serving as witnesses. See L.R. 83.51.7 (Conflicts of Interest); L.R. 8 3 .5 3 .7 (Lawyer as Witness). According to the defendants, Aaron's conflict stems from what th e y say is his agreement to personally indemnify the defendants from liability for the claims d e s c rib e d in the current complaint. They also argue that because he was present throughout th e mediation proceedings which are the subject of this lawsuit, Aaron will be an essential f a c t witness in this case.1 In response, the plaintiffs argue that Aaron has no conflict of in te re s t because, they say, the indemnification clauses were never meant to cover the current a lle g a tio n s . Alternatively, they argue that because many (but not all) of the plaintiffs have c o n s e n te d to the cited conflict, disqualification is unnecessary. Finally, the plaintiffs argue th a t even if Aaron eventually becomes a witness, it is premature at the pleading stage to d is q u a lif y him based on the attorney-witness rule. The Seventh Circuit has long viewed attorney disqualification as a "drastic measure," a n d warned that motions for disqualification "should be viewed with extreme caution" given

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T h e defendants make the same arguments with respect to Terry Overton, who is referenced in the Amended Complaint as an Illinois attorney who is associated with the Phillip Aaron L a w Firm. (R. 14, Am. Compl. at 5.) Overton has not appeared as an attorney in this suit, a n d the plaintiffs assert that he is no longer associated with Aaron's firm. (R. 41, Pls.' Resp. a t 7 n.3.) Accordingly, to the extent the defendants argue that Overton should be d is q u a lif ie d , those arguments are moot. 4

their potential misuse as "techniques of harassment."

Freeman v. Chicago Musical

In s tr u m e n t Co., 689 F.2d 715, 721-22 (7th Cir. 1982); see also Owen v. Wangerin, 985 F.2d 3 1 2 , 317 (7th Cir. 1993). Nonetheless, there are situations where disqualification is "both le g itim a te and necessary," Freeman, 689 F.3d at 722, and this court has broad discretion to d e te rm in e whether disqualification is proper in a particular case, Whiting Corp. v. White M a c h . Corp., 567 F.2d 713, 715 (7th Cir. 1977). In making that determination, this court m u s t balance the clients' interest in retaining the counsel of their choice against this court's in te re s t in upholding the ethical standards set forth in its local rules. See Hutchinson v. S p a n ie r m a n , 190 F.3d 815, 828 (7th Cir. 1999) (discussing attorney-witness conflict under s im ila r Indiana rules); Whiting, 567 F.2d at 715. T h is court begins its analysis with the weaker of the defendants' arguments in favor o f disqualification: that Aaron should be disqualified because he may serve as a necessary f a c t witness in this case. The relevant attorney-witness rule is set forth in Local Rule 8 3 .5 3 .7 ( b ): [i]f a lawyer knows or reasonably should know that the lawyer m a y be called as a witness other than on behalf of the client, the la w ye r may act as an advocate in a trial or evidentiary p ro c e e d in g unless the lawyer knows or reasonably should know th a t the lawyer's testimony is or may be prejudicial to the c l ie n t ." T h e rule exists because attorneys--unlike witnesses--are ethically bound to promote their c lie n ts ' interests, Cunningham v. Hamilton County, Ohio, 527 U.S. 198, 206 (1999), and a la w ye r attempting to serve both roles "is apt to be a poor witness, a poor advocate, or both," 5

Gusman v. Unisys Corp., 986 F.2d 1146, 1148 (7th Cir. 1993). That is because the dual role m a y confuse jurors or create an appearance of impropriety, and because an attorney is u n lik e ly to be a truly objective witness while zealously representing his client's interests. Mercury Vapor Processing Techs., Inc. v. Vill. of Riverdale, 545 F. Supp. 2d 783, 787 (N.D. Ill. 2008). Here, the defendants argue that because Aaron participated in the very mediation p ro c e e d in g s that the plaintiffs now claim were discriminatory, he is likely to be a key witness a g a in s t his clients' claims. Their point is well-taken, but it is also premature. Because this c a s e is still in the pleading phase, the dangers the defendants cite are, at this point, only p o s s ib le risks. See In re Thomas Consolidated Indus., Inc., 289 B.R. 647, 653-54 (N.D. Ill. 2 0 0 3 ). Right now it is entirely speculative whether any of the claims will survive the p e n d in g motion to dismiss, let alone proceed to trial. And because the parties have yet to e n g a g e in discovery, there is no way to know whether if the case goes to trial Aaron will te s tif y, or whether other witnesses could testify to the same matters as Aaron. See Mercury V a p o r , 545 F. Supp. 2d at 788-89. What's more, the prohibition on attorneys acting as w itn e s s e s applies only to trial and evidentiary proceedings. L.R. 83.53.7(b). The relevant ru le specifically states that it should not be construed to prevent an attorney-witness "from h a n d lin g other phases of the litigation." L.R. 83.53.7(c). That leaves the lawyer free to c o n d u c t discovery, draft motions, and otherwise participate in the pretrial stage. See Mercury

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Vapor, 545 F. Supp. 2d at 789. Accordingly, at this stage in the case the defendants' concern re g a rd in g the attorney-witness rule does not warrant Aaron's disqualification. M o re troubling and immediate than Aaron's possible future role as a witness is the e v i d e n c e that he is operating under an actual conflict of interest. Local Rule 83.51.7(b) a d d re s s e s circumstances in which a lawyer's personal interests conflict with the clients': A lawyer shall not represent a client if the representation of that c lie n t may be materially limited . . . by the lawyer's own in te re s ts , unless: (1) the lawyer reasonably believes the re p re s e n ta tio n will not be adversely affected; and (2) the client c o n s e n ts after disclosure. S e e also Coburn v. DaimlerChrysler Servs. N. Am., L.L.C., 289 F. Supp. 2d 960, 965-66 (N .D . Ill. 2003). The rule exists to ensure "that clients receive the undivided loyalty of their c o u n s e l ." Guillen v. City of Chicago, 956 F. Supp. 1416, 1421 (N.D. Ill. 1997). In d e te rm in in g whether a conflict requires an attorney to be disqualified, the key questions are w h e th e r a conflict "will materially interfere with the lawyer's independent professional ju d g m e n t in considering alternatives or foreclose courses of action that reasonably should be p u rs u e d on behalf of the client." L.R. 83.51.7 Comm. Comment. T he defendants have submitted documents showing that in the course of the mediation p ro c e e d in g s that gave rise to this lawsuit, Aaron signed six settlement agreements in which h e agreed personally to indemnify the defendants "from payment and satisfaction of any and a ll liens, claims, or causes of action related to" the settlement agreement. (R. 26, Group Exs. B & C, Settlement Agreements of Jane Does 1-4, John Does 14 & 35, ¶ 17.) The defendants

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persuasively argue that this language creates an actual conflict of interest for Aaron because he has a contractual duty to defend them from the very claims the plaintiffs bring here, and b e c a u s e , they say, he may be personally liable for a portion of any damages the plaintiffs m ig h t recover. In response the plaintiffs argue that the indemnification clause does not give rise to a conflict of interest, and that even if it did, the consent of Aaron's clients renders d is q u a lif ic a tio n unnecessary. I n arguing that the indemnification clause does not create a conflict of interest, the p l a i n t if f s assert that the parties to the previous settlement agreements never intended the in d e m n if ic a tio n clause to cover claims such as those in the current complaint. Instead, they a rg u e that the indemnification clause only applies to "claims brought by nonparties, such as h e a l t h providers or lien holders, who may later bring a claim against the settlement p ro c e e d s ." (R. 41, Pls.' Resp. at 9.) They cite no language from the settlement agreement to support that reading, and their interpretation ignores the straight-forward language saying th a t: "Phillip Aaron, individually and on behalf of The Law Office of Phillip Aaron . . . agree to hold harmless, defend and indemnify the Released Parties . . . from payment and s a tis f a c tio n of any and all liens, claims, or causes of action related to this Agreement." (R. 2 6 , Group Exs. B & C, Settlement Agreements of Jane Does 1-4, John Does 14 & 35, ¶ 17.) That plain language says nothing about health providers and cites liens as only one form of p o te n tia l liability covered by the indemnification clause. The plaintiffs also argue that the in d e m n if ic a tio n language does not apply to their claims because, according to them, the

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defendants' interpretation is "nonsensical," because it would mean Aaron had "intentionally b o u n d himself in perpetuity to the defendants by committing to defend them against any c a u s e of action, brought by any person, at any time, for any reason." (R. 41, Pls.' Resp. at 9 .) But that argument is pure bluster. The defendants do not suggest that Aaron is forever b o u n d to indemnify them from any liability at any time or place, but only for claims or causes o f action that are connected to his six clients' previous settlement agreements. Notably, the p la in tif f s have not argued that the current claims are unrelated to those settlement a g re e m e n ts , and indeed, this court's reading of the current complaint shows that the s e ttle m e n t agreements are central to most of the claims for relief. N e x t the plaintiffs argue that the indemnification clauses cannot provide a ground for d is q u a lif ic a tio n because the current complaint alleges that the settlement agreements are the p ro d u c t of fraudulent inducement, and therefore are invalid. But the existence of a

c o n tro v e rsy over the validity of the agreements--and therefore, necessarily, that of the in d e m n if ic a tio n clause--does not eliminate the risk that Aaron could find himself saddled w ith personal liability for the very claims for which his clients seek recovery. Even if the d e f e n d a n ts took up Aaron's suggestion that they file a separate indemnification suit against h im , the conflict of interest would be eliminated in the current case only if and when that suit re s u lte d in judgment in his favor. Until then, Aaron's personal interest in avoiding potential lia b ility will be out of alignment with his clients' interests in obtaining monetary relief.

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Finally, Aaron argues that even if the indemnification clause creates a conflict of in te re s t, his disqualification is unnecessary because the six plaintiffs who are parties to the in d e m n if ic a tio n agreements all consented to his continued representation of them in the c u rre n t suit. But in these circumstances, their consent is insufficient to overcome the c o n f lic t. First, Aaron submitted affidavits from only 32 of the 73 plaintiffs. To overcome th e conflict, Aaron would have to submit consent affidavits from all of the plaintiffs. See L .R . 83.51.7, Comm. Comment ("When more than one client is involved, the question of c o n f lic t must be resolved as to each client."); Whiting, 567 F.2d at 716. But even had he o b ta in e d all of his clients' consent, that consent is ineffective in a situation where "a d is in te re ste d lawyer would conclude that the client should not agree to the representation." L.R. 83.51.7, Comm. Comment. Here the direct and immediate conflict stems from the risk th a t Aaron could be personally liable for any judgment his clients receive. Given the severity o f Aaron's conflict of interest, this is a situation where no objective attorney would agree that th e plaintiffs should consent to Aaron's continued representation. See Owen, 985 F.2d at 317 (n o tin g that despite client's consent, lawyer had not made "independent reasonable ju d g m e n t" regarding competing personal interests). Accordingly, the defendants have shown t h a t Aaron's disqualification from this case is both "legitimate and necessary." Freeman, 6 8 9 F.3d at 722. A lth o u g h neither side raised the question, this court considered whether Aaron's c o n f lic t disqualifies him from representing only the six defendants whose claims Aaron

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arguably agreed to indemnify, rather than the entire group of plaintiffs. In other words, b e c a u s e the defendants have asserted only that Aaron will be required to indemnify them for th e claims of six of the 73 plaintiffs, the court considered whether he could continue to re p re se n t the claims of the other 67 plaintiffs without being influenced by the conflict. But a careful review of the current complaint shows that would be impossible. The complaint in c lu d e s allegations that the defendants fraudulently concealed similar information from all o f the plaintiffs, conspired to concoct a false investigative report to influence them all, failed to supervise abusive priests, and engaged in a pattern of racketeering activity. Because the c o m p la i n t alleges that the defendants engaged in a pattern of activity common to all the p la in tif f s , the viability of one plaintiff's claim necessarily depends on the viability of the next p l a i n t i f f ' s claim. To zealously pursue the current claims on behalf of any plaintiff, Aaron n e c e s s a rily would be promoting the claims of the plaintiffs as a whole. Thus Aaron's c o n f lic t of interest with respect to the six plaintiffs whose settlement agreements include the indem nification language inevitably would bleed into his representation of the others' claims. Accordingly, this court concludes that Aaron is disqualified from representing any of the p la in tif f s . Because there is no evidence that any attorney other than Aaron currently is a s s o c ia te d with Aaron's law firm, Phillip Aaron Law Firm, P.C. is also disqualified.

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Conclusion F o r the foregoing reasons, the motion to disqualify Phillip Aaron and Phillip Aaron L a w Firm, P.C. is granted. ENTER:

_________________________________ Y o u n g B. Kim U n ite d States Magistrate Judge

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