Northern Natural Gas Company v. Tract No. 1062710 et al
Filing
948
MEMORANDUM AND ORDER denying 777 Motion to Disqualify. Signed by District Judge Monti L. Belot on 3/9/2015. (smg)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
NORTHERN NATURAL GAS COMPANY,
)
)
Plaintiff,
)
)
v.
)
)
APPROXIMATELY 9117 ACRES IN PRATT, )
KINGMAN AND RENO COUNTIES,
)
KANSAS, AND AS FURTHER DESCRIBED
)
HEREIN;
)
)
TRACT NO. 1062710
)
CONTAINING 80.00 ACRES MORE OR
)
LESS, LOCATED IN KINGMAN COUNTY,
)
KANSAS, AND AS FURTHER DESCRIBED
)
HEREIN; ET AL.,
)
)
Defendants.
)
)
CIVIL ACTION
No.
10-1232
MEMORANDUM AND ORDER
This case comes before the court on defendant Nash Oil & Co.’s
motion to disqualify Stull & Beverlin, L.L.C. as counsel for the Huff
Landowner Group due to a conflict of interest under Rule 1.9 of the
Kansas Rules of Professional Conduct.
(Doc. 777).
been fully briefed and is ripe for decision.
The motion has
(Docs. 778, 792, 795).
Nash Oil’s motion is denied for the reasons herein.
I.
Facts and Procedural History1
This action to condemn property was brought by Northern Natural
Gas Company under the authority of Natural Gas Act, 15 U.S.C. §
717f(h).
The action was prompted by evidence that natural gas
injected into Northern’s underground storage field near Cunningham,
1
The complete factual and procedural history of this case is
available by viewing this court’s prior orders. See Docs. 464, 691,
810, 941).
Kansas, was migrating out of the storage area and was being produced
by wells to the north of the field.
Northern obtained authority from
the Federal Energy Regulatory Commission (FERC) to acquire certain
property rights in this adjacent “2010 Extension Area.”
The property to be condemned includes two underground formations
(the Simpson and the Viola) underlying some 9,200 acres in the
Extension Area. It also includes some surface rights and several well
bores, which Northern has taken to implement a water injection plan
to reduce gas migration. The court previously granted Northern’s
motion for immediate possession of the property being condemned.
(Doc. 464.)
The parties claiming interests in the various tracts
taken by Northern include the Huff Landowner Group, represented by
Stull & Beverlin, and Nash Oil, an oil and gas operator which had
producing gas wells in the 2010 Extension Area.
Gordon Stull of Stull & Beverlin has represented Nash Oil and
Jerry
Nash,
owner
of
Nash
Oil,
in
the
past.
In
2003,
Stull
represented Nash Oil in a lease dispute concerning Tract #2262611, a
tract which is subject to condemnation by Northern in this action.
The dispute concerned a lease which was operated by Nash Oil.
At the
time, the landowners claimed that the lease terminated due to lack of
production and the failure to pay the shut-in royalties.
Jerry Nash
contacted the Keenan Law Firm, which represented the landowners, and
negotiated a new agreement with the landowners.
later drafted by Stull.
The agreement was
The agreement gave Vision Investments a 20%
interest in a new lease between the landowners and Jandie Oil Company.
(Doc. 792, exh. H).
Vision Investments is owned by Cheryl Nash, the
wife of Jerry Nash.
(Doc. 888 at 73).
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The lease is now operated by
L.D. Davis. In 1989 and 1997, Stull represented Jerry Nash in divorce
proceedings.
Stull no longer has any records concerning the divorce
proceedings.
Nash Oil moves to disqualify Stull & Beverlin on the basis that
Stull obtained confidential financial information concerning Nash in
his prior representations and that their positions in this action are
materially adverse.
II.
Analysis
A federal court sitting in Kansas and deciding a motion to
disqualify for conflict of interest must look for guidance to the
Model Rules adopted in Kansas and to Kansas case law construing those
rules.
See Graham ex rel. Graham v. Wyeth Laboratories, 906 F.2d
1419, 1422–23 n. 5 (10th Cir. 1990); Koch v. Koch Indus., 798 F. Supp.
1525, 1531 (D. Kan. 1992).
Rule 1.9(a) of the Model Rules of
Professional Conduct precludes a lawyer who has formerly represented
a client in a matter from representing “another person in the same or
a substantially related matter in which that person's interests are
materially adverse to the interests of the former client unless the
former client consents after consultation.”
Kan. S. Ct. Rule 226 at
Rule 1.9(a).
Rule 1.9(a) Conflict
Disqualification under Rule 1.9(a) is “dependent upon the party
moving for disqualification to establish that (1) the attorney whose
disqualification is sought formerly represented them in a matter; (2)
the matter is substantially related to a matter in which the attorney
now seeks to represent a new client; and (3) the new client's interest
is
substantially
adverse
to
the
-3-
interest
of
the
party
seeking
disqualification.” Chrispens v. Coastal Refining & Marketing, Inc.,
257 Kan. 745, 756, 897 P.2d 104 (1995).
There is no dispute that Stull previously represented Nash Oil
in various matters and that Nash Oil does not consent to Stull’s
representation
of
the
Huff
Landowner
Group.
Thus,
the
issues
presented by Nash Oil's motion are whether there is a “substantial
relationship” between the matters Stull worked on while representing
Nash Oil and/or Nash and Nash Oil's case here and whether the parties
are substantially adverse. See id. (primary inquiry under Rule 1.9(a)
is whether the cases where conflict has been alleged are substantially
related).
A hearing is not requiring when dealing with a Rule 1.9(a)
motion for disqualification.
Id. at 759.
In determining whether a substantial relationship exists, the
court evaluates the similarities between the factual bases of the two
representations.
See Koch, 798 F. Supp. at 1536.
legal claims or issues is not required.
A commonality of
Koch, 798 F.Supp. at 1536.
Such an evaluation requires the court to “reconstruct the attorney's
representation of the former client, to infer what confidential
information could have been imparted in that representation, and to
decide whether that information has any relevance to the attorney's
representation
information
of
could
the
current
have
been
client.”
imparted
What
Id.
involves
confidential
considering
what
information and facts ought to have been or would typically be
disclosed
in
such
a
relationship.
Id.
Consequently,
the
“representations are substantially related if they involve the same
client and the matters or transactions in question are relevantly
interconnected or reveal the client's pattern of conduct.” Id.
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First, Nash Oil argues that Stull’s previous representation of
Nash Oil during a lease dispute with the landowners of Tract #2262611
is substantially related to this case because both matters concern a
tract which is the subject of the condemnation action.
As stated by
Stull in his affidavit, and uncontested by Nash Oil, Stull’s prior
representation concerning Tract #2262611 was to draft an agreement
between Nash and the landowners of Tract #2262611 which resulted in
Vision Investments owning a 20% interest in a lease between the
landowners of Tract #2262611 and Jandie Oil.
Stull’s uncontested
affidavit also states that Stull did not negotiate the agreement with
the attorneys for the landowners of Tract #2262611.
Jerry Nash’s
affidavit regarding the representation is conclusory and does not
provide any evidence from which the court could conclude that Nash
disclosed
confidential
information.
Therefore,
given
the
circumstances concerning the prior representation, it is unlikely that
Stull gained confidential information during the representation.
Moreover, there is no basis to conclude that any information
Stull might have gained, confidential or otherwise, in the prior
representation would be relevant to this case.
In this case, the
court must determine the amount of compensation due to all interested
parties, including the landowners and Nash Oil.
The lease concerning
Tract #2262611 is not disputed as the parties have stipulated as to
its validity.
due
to
the
See Doc. 939 at 4.
interested
parties,
In order to determine the amount
the
court
will
allocate
the
compensation awarded by the Commission pursuant to the terms of the
stipulated
lease
in
which,
notably,
Nash
Oil
has
no
interest.
Therefore, Nash Oil has not met its burden to show that the prior
-5-
representation concerning the lease dispute is substantially related
to this case.2
Finally, Nash Oil argues that Stull’s representation of Nash
during divorce proceedings in 1989 and 1997 resulted in Stull being
privy to Nash’s financial state of affairs.
Oil
makes
no
attempt
to
establish,
(Doc. 778 at 2).
however,
that
the
Nash
divorce
proceedings are relevantly interconnected to the issues in this case,
i.e. the allocation or division of the value of the land determined
by
the
commission.
Stull’s
affidavit
states
that
he
has
no
independent recollection of Nash’s financial status during the divorce
proceedings and that his knowledge of Nash’s financial status has been
gained solely from the required disclosures made by Nash Oil in this
case.
Nash Oil has not disputed or controverted Stull’s statements.
Moreover, Nash Oil has not explained how any knowledge of the
financial condition of the company is relevant to the legal issue of
whether the oil and gas leases in question have terminated.
The
parties and the court are treating the question of lease validity as
strictly a legal question and at this point no further discovery is
contemplated.
Even if the financial condition of Nash Oil were
somehow relevant to further proceedings in this case, the financial
condition of the company at the time of Nash’s prior divorces in 1989
and 1997 is so dated that it would be of no relevance to events which
occurred in 2010 or 2011. The current financial condition of Nash Oil
was made public in this case by Northern Natural Gas in filings made
2
While Nash Oil has six tracts in this condemnation where the
validity of the oil and gas leases are being questioned, Nash Oil has
only identified a single lease on one tract in the Extension Area that
Stull had any involvement with as an attorney. (Doc. 778-1 at ¶ 8.)
-6-
concerning the posting of security in connection with its motion for
immediate possession.
(Docs. 426 at 3-4; 426-2; 426-3).
Therefore,
the court finds that Nash Oil has not met its burden to establish that
the matters in this case are substantially related to the prior
divorce proceedings.
The court finds that Nash Oil has failed to meet its burden to
establish that Stull has a conflict of interest under Rule 1.9 of the
Kansas Rules of Professional Conduct.
Unjustified Delay
Merits of the motion aside, the court further finds that Nash
Oil’s
motion
is
untimely.
“Motions
to
committed to the court's sound discretion.”
Supp.2d 1122, 1125 (D. Kan. 2004).
disqualify
counsel
are
Lowe v. Experian, 328 F.
“A motion to disqualify should be
made with reasonable promptness after a party discovers the facts
which lead to a motion.” Monarch Normandy Square Partners v. Normandy
Square Assocs. Ltd. P’ship, 1989 WL 86963 at *3 (D. Kan. July 26,
1989). An unjustified delay in filing a motion to disqualify alone is
sufficient grounds for denying the request.
Redd v. Shell Oil Co.,
518 F.2d 311 (10th Cir. 1975).
This case was originally filed in 2010.
Stull filed an answer
on behalf of certain landowners in September 2010.
Nash Oil asserts
that it did not file a motion to disqualify at that time because it
did not believe that the landowners’ position was materially adverse
to Nash Oil.
Nash Oil contends that its positions were not adverse
until the court entered an order regarding the date of taking on July
2, 2013.
(Doc. 691).
Stull responds that there was always a
possibility that the landowners and Nash Oil would disagree as to the
-7-
division of the condemnation award.
Notably, Nash Oil was aware of
a conflict in October 2012 when the producer defendants filed their
position regarding the date of taking.
In that filing, the producer
defendants state, “Northern and the Huff Landowners have contended,
or will contend, that the shut-in or the Producer-Defendants’ Viola
wells terminated the underlying oil and gas leases for lack of
production, reducing their value . . . to zero.” (Doc. 536 at 3).
Notwithstanding knowledge of the disagreement of the validity of
the leases, a central issue in this case, Nash Oil waited almost
fourteen months, until after the Huff Landowner Group rejected the
settlement offer, to file this motion.
This case is now in the final
stages of litigation and the court finds that disqualification of
Stull and Beverlin will result in prejudice to the Huff Landowner
Group. See e.g., Coffeyville Res. Refining & Mktg. v. Liberty Surplus
Ins. Corp., 261 F.R.D. 586, 591 (D. Kan. 2009).
Therefore, the court finds that the motion should be denied as
unreasonably delayed.
III. Conclusion
Nash Oil’s motion to disqualify Stull and Beverlin is denied.
(Doc. 777).
A motion for reconsideration of this order is not encouraged.
Any such motion shall not exceed 3 double-spaced pages and shall
strictly comply with the standards enunciated by this court in Comeau
v. Rupp, 810 F. Supp. 1172, 1174 (1992).
The response to any motion
for reconsideration shall not exceed 3 double-spaced pages.
shall be filed.
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No reply
IT IS SO ORDERED.
Dated this 9th day of March 2015, at Wichita, Kansas.
s/ Monti Belot
Monti L. Belot
UNITED STATES DISTRICT JUDGE
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