Shah et al v. Rodino et al

Filing 226

OPINION AND ORDER denying without prejudice with leave to refile 144 Motion to Disqualify Counsel. Signed by Magistrate Judge John E Martin on 3/22/2016. (smb) Modified on 3/23/2016 to correct doc title (lhc).

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
SOUTH BEND DIVISION
AMIT SHAH and TIM DUGLE,
Plaintiffs,
v.
MAY OBERFELL LORBER, et al.,
Defendants.

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CAUSE NO.:3:13-CV-103-JD-JEM

OPINION AND ORDER
This matter is before the Court on Plaintiffs’ Motion to Disqualify Defendant May Oberfell
Lorber [DE 144], filed by Plaintiffs on July 30, 2015. On August 31, 2015, a response was filed by
Defendants Duro, Inc. d/b/a Lee’s Wood Products, Duro Recycling, Inc. d/b/a Recycled/New, Duro
Realty, Inc., and Duro Transport, Inc. (collectively, the “Duro Entities”) and Defendant Terry
Rodino in his individual. On September 10, 2015, Plaintiffs filed a reply.
I.

Background
As previously noted in several orders, this case has a long history. At its core, this case is a

business dispute between the majority shareholder, Defendant Terry Rodino, and minority
shareholders, Plaintiffs Shah and Dugle, over the management and direction of several closely held
corporations, the Duro Entities. The parties have been involved in litigation in state court since 2004,
when Dugle sued Terry Rodino alleging breach of fiduciary duty, conversion, and deception. In
September 2010, Shah sued Terry Rodino seeking a forensic audit of the financial records of the
Duro Entities. In September 2011, Shah filed a third lawsuit in state court against Terry Rodino.
Those cases were subsequently consolidated into a single action that remains pending in state court.
Throughout the history of this case, the law firm of May Oberfell Lorber has represented Terry
Rodino in his individual capacity and the Duro Entities, and the Duro Entities have compensated

May Oberfell Lorber for its representation of Terry Rodino in his individual capacity and the Duro
Entities.
On February 24, 2013, Plaintiffs filed the instant lawsuit. On June 29, 2016, Plaintiffs filed
their Second Amended Complaint. The amended complaint added May Oberfell Lorber as a
defendant for allegedly conspiring with and assisting Defendants Terry Rodino and Scott Mills in
violating the federal Computer Fraud and Abuse Act (CFAA) and Indiana’s computer tampering
statute. In addition, the amended complaint named May Oberfell Lorber partners E. Spencer Walton,
Jr., and Georgianne M. Walker as defendants. On October 13, 2015, May Oberfell Lorber, Walton,
and Walker filed a motion to dismiss Plaintiffs’ claims against them pursuant to Federal Rule of
Civil Procedure 12(b)(6), which is still pending.
II.

Analysis
The Seventh Circuit has cautioned that disqualification is a prophylactic device employed

to protect the attorney-client relationship and is a “drastic measure which courts should hesitate to
impose except when absolutely necessary.” Cromley v. Bd. of Ed. of Lockport Twp. High Sch. Dist.
205, 17 F.3d 1059, 1066 (7th Cir. 1994) (quoting Freeman v. Chi. Musical Instrument Co., 689 F.2d
715, 721 (7th Cir. 1982)). Motions to disqualify “should be viewed with extreme caution for they
can be misused as techniques of harassment.” Freeman, 689 F.2d at 722. A district court possesses
“broad discretion” in determining whether disqualification is required in a particular case. Cardenas
v. Benter Farms, No. IP 98-1067-C T/G, 2001 WL 292576, at *1 (S.D. Ind. Feb. 7, 2001) (quoting
Whiting Corp. v. White Mach. Corp., 567 F.2d 713, 715 (7th Cir. 1977) (citation omitted)).The party
seeking disqualification bears the burden of showing facts requiring disqualification. Id.
In the instant Motion, Plaintiffs seek to have May Oberfell Lorber, Walton, and Walker

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disqualified as counsel for Defendants Stacey Rodino, Allison Rodino, Duro, Inc., Duro Recyling,
Inc., Duro Realty, Inc., Duro Transport, Apex Pallet, Inc., Lucky Lou, Inc., 2610, LLC, American
Travel Palace, LLC, ATP Exports, Inc., and Terry Rodino in his individual capacity. Plaintiffs argue
that May Oberfell Lorber’s past and present representation of Terry Rodino in his individual
capacity and of the Duro Entities is a conflict of interest and that the concurrent representation has
caused significant harm to the Duro Entities. Plaintiffs further argue that May Oberfell Lorber,
Walton, and Walker should be disqualified because they conspired with Terry Rodino to violate
CFAA and the Indiana’s computer tampering statute and because they have been added as
defendants in the Second Amended Complaint. Responding Defendants argue that Magistrate Judge
Nuechterlein has already determined that May Oberfell Lorber’s concurrent representation of Terry
Rodino and the Duro Entities is not harmful to the Duro Entities and that the instant Motion to
disqualify is premature until the Court first decides whether Plaintiffs’ Second Amended Complaint
states a claim upon which relief can be granted against May Oberfell Lorber, Walton, and Walker.
Plaintiffs argue generally that the act of naming May Oberfell Lorber, Walton, and Walker
as defendants in the Second Amended Complaint demands their disqualification. However, because
motions to disqualify “should be viewed with extreme caution for they can be misused as techniques
of harassment” and have the potential “to destroy [the attorney-client relationship] by depriving a
party of representation of their own choosing,” Freeman, 689 F.2d at 722, the act of naming
opposing counsel as a party-defendant does not function as a rule that absolutely requires
disqualification. See also Pu v. Greenthal Mgmt. Corp., No. 08 10084 (RJH)(RLE), 2009 WL
648898, at * 9 (S.D. N.Y. March 10, 2009) (denying a motion to disqualify counsel named as a
party-defendant in a shareholder’s derivative action because “while it is less common to have a case

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where the counsel subject to a motion to disqualify is also a named defendant and counsel for other
named defendants, the mere presence of this circumstance without more should not sway in favor
of disqualification.”). Moreover, if the Court accepted Plaintiffs’ argument, any party would be able
to successfully disqualify opposing counsel simply by naming them as a party-opponent. Id.
Plaintiffs also argue that May Oberfell Lorber’s representation of Terry Rodino in his
individual capacity and the Duro Entities is harmful the Duro Entities; however, as responding
Defendants correctly note, Magistrate Judge Nuechterlein has already decided this issue. On March
26, 2013, Plaintiffs filed a motion to disqualify May Oberfell Lorber, arguing as they do here that
the law firm should not be permitted to concurrently represent both Terry Rodino as the majority
shareholder of the Duro Enitities and the actual Duro Entities when their claims include an
allegation that Terry Rodino breached his fiduciary duty to the Duro Entities. Magistrate Judge
Neuchterlein denied that motion to disqualify May Oberfell Lorber and found that the interests of
Terry Rodino in his individual capacity as majority shareholder of the Duro Entities were aligned
with the interests of Duro Entities and that the Duro Entities have not suffered “any apparent
detriment as a result of [May Oberfell Lorber’s] dual representation [of Terry Rodino and the Duro
Entities]. In fact, the Duro Entities have enjoyed record profits in recent years, a fact that Plaintiffs
do not deny.” [DE 54].

Finally, the Court agrees that the instant Motion is premature. In

support of disqualification, Plaintiffs’ proffer numerous documents that they assert demonstrate May
Oberfell Lorber’s facilitation of Terry Rodino’s alleged violations of CFAA and the Indiana
computer tampering statute; however, discovery in this case has not began. Without even an
exchange of initial disclosures, responding Defendants have not been given an opportunity to gather
information or evidence to rebut Plaintiffs’ interpretation of those documents. In addition, it is

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uncertain whether May Oberfell Lorber, Walton, and Walker will remain as defendants. If May
Oberfell Lorber, Walton, and Walker’s combined motion to dismiss is granted, the portion of
Plaintiffs’ argument in support of disqualification based on their status as defendants is rendered
moot. Indeed, in Counts 67 through 69 of the Second Amended Complaint, Plaintiffs raise assorted
claims of legal malpractice against May Oberfell Lober, Walton, and Walker. Those claims
incorporate many of the same facts they offer in support of the instant Motion to disqualify. To
avoid the potential inconsistency of first deciding that those facts warrant disqualification of May
Oberfell Lorber, Walton, and Walker and then subsequently deciding that those facts fail to state a
claim for legal malpractice against them, the Court finds it appropriate that May Oberfell Lorber,
Walton, and Walker’s motion to dismiss is decided before it engages in a substantive review of
Plaintiffs’ request for their disqualification. See Whiting Corp., 567 F.2d at 715 (holding that district
courts have substantial discretion in determining whether disqualification is necessary). Magistrate
Judge Nuechterlein’s finding that the Duro Entities have not suffered harm as a result of May
Oberfell Lorber’s dual representation alleviates any concern regarding the potential prejudice the
Duro Entities may suffer until that motion to dismiss is resolved and discovery has began.
III.

Conclusion
For the foregoing reasons, the Court hereby DENIES with leave to refile Plaintiffs’ Motion

to Disqualify Defendant May Oberfell Lorber [DE 144].
SO ORDERED this 22nd day of March, 2016.
s/ John E. Martin
MAGISTRATE JUDGE JOHN E. MARTIN
UNITED STATES DISTRICT COURT
cc:

All counsel of record

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