Urban v. Federal Home Loan Mortgage Corporation

Filing 83

District Judge Timothy S Hillman: MEMORANDUM AND ORDER entered granting in part and denying in part 76 Motion to Disqualify Counsel. (Castles, Martin)

United States District Court
District of Massachusetts
_________________________________________________
)
)
)
)
v.
)
)
)
FEDERAL HOME LOAN MORTGAGE CORPORATION )
Defendant.
)
_________________________________________________ )
REBECCA URBAN, et al.,
Plaintiffs,

CIVIL ACTION
No. 11-10915-TSH

MEMORANDUM AND ORDER
January 13, 2015

HILLMAN, D.J.
Background
Rebecca Urban (“Urban” or “Plaintiff”), has filed suit against the Federal Home Loan
Mortgage Corporation (“FHLMC” or “Defendant”). Urban asserts claims for breach of contract,
breach of the implied covenant of good faith and fair dealing and violation of Mass.Gen.L. ch.
93A (“Chapter 93A”).1
In ruling on the parties’ cross-motions for summary judgment, I noted that Attorney
Thomas M. Dillon (“Attorney Dillon”), who is representing Urban in this case, had inserted
himself into the proceedings as a percipient witness, thereby raising the specter of Attorney
Dillon being required to withdraw from the case or being disqualified therefrom, in accordance
with Rule 3.7 of the Massachusetts Rules of Professional Responsibility. Thereafter, FHLMC

1

The Complaint includes a class action demand. To date, no motion for class certification has been filed.
See Fed.R.Civ.P. 7(b)(1); LR, D.Mass., 7.1(b).

filed a motion to disqualify Attorney Dillon and his firm, Schmitt & Dillon, from serving as
Urban’s trial counsel. Attorney Dillon has agreed to withdraw from his representation as trial
counsel and therefore, as to him the motion is allowed. For the reasons set forth below, the
motion is denied as to Schmitt & Dillon. FHLMC also requests that the Court find that by
raising certain claims in this action, Urban has waived the attorney-client privilege regarding her
discussions with her counsel about title insurance. For the reasons set forth below, FHLMC’s
motion seeking a declaration of an “at issue” privilege waiver is allowed.
Facts Relevant To Disqualification and Privilege Waiver Issues
FHLMC is a publicly traded United States Corporation chartered by an Act of Congress,
organized and existing under the Federal Home Loan Mortgage Corporation Act, 12 U.S.C. §
1451, et seq. FHLMC is currently operating under a conservatorship that began on September 6,
2008 and is conducting its business under the supervision of the Federal Housing Finance
Agency. As part of its role in Massachusetts, FHLMC acquires titles to properties that served as
collateral for defaulted mortgages and sells those properties. In most cases, the properties have
been foreclosed on. On April 14, 2010, FHLMC acquired title to a property by foreclosure order
located at George Hill Road, in Lancaster, Massachusetts (the “Property”). FHLMC listed the
Property for sale. Urban made an offer to purchase the Property, which was accepted by
FHLMC. Harmon Law Offices, P.C. (“Harmon Law”) represents FHLMC in the acquisition of
titles pursuant to the filing of a foreclosure order and subsequent sales of properties in
Massachusetts.
FHLMC requires buyers purchasing homes from it to enter into a purchase and sale
agreement and related addendums. Urban executed a Standard Form Purchase and Sale
Agreement on September 24, 2010. See Statement of Undisp. Facts By Def. Fed. Home Loan

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Mtg. Corp. (Docket No. 57)(“Def’s Factual Statement”), at Ex F (“P&S”). Also included was
the Addendum #1 to Contract of Sale, which contained the following provisions:
17. Closing Costs/Concessions
c.

Purchaser may choose the title insurance company for the closing. If
Purchaser agrees to use the title insurance company utilized by the Seller’s
attorney or agent, the Seller agrees to pay for Purchasers Owner’s Title
Policy. SELLER WILL NOT BE OBLIGATED TO PAY ANY
PORTION OF THE COST OF AN OWNER’S TITLE POLICY IF THE
POLICE IS NOT OBTAINED FROM THE TITLE INUSRANCE
COMPANY UTILIZED BY SELLER’S ATTORNEY OR AGENT.

See Def’s Factual Statement, at Ex E (“Addendum”). Prior to closing on the Property, Urban,
through her attorney, Attorney Dillon, notified Harmon Law that, in accordance with Paragraph
17c. of the Addendum (“Paragraph 17c”), Urban wished to obtain title insurance from the title
insurance company utilized by FHLMC’s attorney or agent. Harmon Law replied that under
Massachusetts law, FHLMC could not provide the title insurance because it would pose a
conflict of interest. More specifically, Harmon Law informed Attorney Dillon that where
Harmon Law represents FHLMC, it cannot provide the buyer with the title policy as part of the
transaction as it is a conflict of interest to represent both parties to a real estate transaction in
Massachusetts.
Urban purchased her own title insurance policy and proceeded with the closing, which
took place on December 20, 2010. The cost of the title policy was $680 and was listed on the
HUD-1 Settlement Statement as charged to Urban. According to Urban’s Hud-1 Settlement
Statement, $476.00 of the $680.00 paid by Urban for title insurance, issued by the
Commonwealth Land Title Insurance Company, was paid to Attorney Dillon’s law firm, as a
commission. On January 5, 2011, Urban renewed her request that FHLMC purchase the owner’s
title insurance policy for her. Harmon Law denied the request because of state ethics rules. On
January 10, 2011, Urban served a Chapter 93A demand letter on FHLMC.
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The parties filed cross-motions for summary judgment and in connection therewith,
Urban filed Pl’s Statement of Undisputed Material Facts (Docket No. 62). Urban accepted
FHLMC’s undisputed statement of material facts and “add[ed] the undisputed facts set forth in
the Affidavit of Thomas Dillon. …” Id. Among the additional facts attested to by Attorney
Dillon were the following:
1.
“I (Attorney Dillon) have personal knowledge of the matters
relative [to] Ms. Urban’s purchase of [the Property] based on my representation of
her in that transaction.”
2.
The P&S and its Addendum2 “provided that [FHLMC] would pay
for her Owner’s Policy of title insurance if she agreed to use the title company
utilized its attorney or agent. Ms. Urban wanted to take advantage of this
[O]wner’s Policy at [FHLMC’s] expense because it would substantially reduce
her closing costs, and she asked me to request the promised Owner’s Policy.”
3.
“After the signing of the Addendum but before the closing I
informed Joe Nolan of [Harmon Law] that Urban agreed to use the title company
utilized by its attorney or agent such that [FHLMC] would pay for the Owner’s
Policy … Mr. Nolan responded: ‘We get this question all the time. [FHLMC]
does not honor that provision in Massachusetts. We told them this is a problem,
but that is how it is.’”
4.
“Ms. Urban closed her purchase of [the Property] on or about
December 10, 2010 by accepting a deed to the property. [FHLMC] refused to pay
for her Owner’s Policy.”
5.
“On January 5 ,2011, I [Attorney Dillon] sent an e –mail to Kristen
Reynolds of [Harmon Law] Office again requesting that [FHLMC] pay for an
Owner’s Policy from the title insurer used by its attorney … This request was
again refused.
Id., at Attachment (Affidavit of Thomas M. Dillon).
If nothing else, the statement attributed to Joe Nolan of Harmon Law (that FHLMC had
been informed this provision was a problem in Massachusetts), is a contested issue of fact.

2

Attorney Dillon attests that it was Paragraph 22 which provided that FHLMC would pay for Urban’s
Owner’s Policy of title insurance if she agreed to use FHMLC’s title company. As set forth above, it was actually
Paragraph 17c of the Addendum.

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Discussion3
The Motion To Disqualify
Attorney Dillon disputes that he is a necessary witness in this case and that none of the
exceptions apply. Urban states that she does not press this dispute for the simple reason “that
Attorney Dillon need not and will not act as trial counsel,” and either she or FHLMC will be free
to call him as a witness. I am disturbed by Attorney Dillon’s failure to identify the obvious
ethical implications when he filed his affidavit in connection with the summary judgment
motion—not to mention his continued failure to appreciate an actual conflict that should be
apparent to even the most neophyte practitioner. For that reason and given the cavalier tone of
Urban’s submission, I want to make clear that I do find that Attorney Dillon is a necessary
witness in this case and that no exception applies and therefore, had he not conceded the point, I
would have disqualified him as trial counsel.4 The issue now becomes whether Attorney
Dillon’s firm, Schmitt & Dillon, should be disqualified.
Applicable Provisions5
Rule 3.7 of the Massachusetts Rules of Professional Responsibility provide that:
(a) A lawyer shall not act as an advocate at a trial in which the lawyer is
likely to be a necessary witness, except where:
(1) the testimony relates to an uncontested issue;
(2) the testimony related to the nature and value of legal services rendered
in the case; or

3

A substantial part of the the Court’s discussion of Urban’s legal claims and the law applicable thereto
paraphrases or is taken directly from Judge Saylor’s opinion denying FHLMC’s motion to dismiss, without separate
citation. See Urban v. Federal Home Loan Mortgage Co., Civ. No. 11-10915-FDS, 2012 WL 245246 (D.Mass. Jan.
25, 2012).
4
More specifically, I would have found that FHLMC sustained its burden of establishing that Attorney
Dillon is likely to be a necessary witness because his proposed testimony is relevant, material, not cumulative and
not obtainable elsewhere. See Carta v. Lumbermens Mut. Cas. Co., 419 F.Supp.2d 23, 29-31 (D.Mass. 2006).
5
The determination as to whether Schmitt & Dillon should be disqualified is controlled by the
Massachusetts Rules of Professional Conduct. See LR, D.Mass. 83.6(4)(B).

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(3) disqualification of the lawyer would work substantial hardship on the
client.
(b) A lawyer may act as an advocate in a trial in which another lawyer in
the lawyer’s firm is likely to be called as a witness unless precluded from doing
so under Rule 1.7 or Rule 1.9. [6]
Mass. S.J.C. Rule 3:07.
Furthermore, the comment so Rule 3.7 provide:
[1] Combining the roles of advocate and witness can prejudice the
opposing party and can involve a conflict of interest between the lawyer and
client.
[2] The opposing party has proper objection where the combination of
roles may prejudice that party’s rights in the litigation. A witness is required to
testify on the basis of personal knowledge, while an advocate is expected to
explain and comment on evidence given by others. It may not be clear whether a
statement by an advocate-witness should be taken as proof or an analysis of the
proof.
….
[4] … Whether the opposing party is likely to suffer prejudice depends on
the nature of the case, the importance and probable tenor of the lawyer’s
testimony, and the probability that the lawyer’s testimony will conflict with that
of other witnesses. Even if there is risk of such prejudice, in determining whether
the lawyer should be disqualified, due regard must be given to the effect of
disqualification on the lawyer’s client. It is relevant that one or both parties could
reasonably foresee that the lawyer would probably be a witness. …
[5] … [I]f there is likely to be substantial conflict between the testimony
of the client and that of the lawyer or a member of the lawyer’s firm, the
representation is improper. The problem can arise whether the lawyer is called as
a witness on behalf of the client or is called by the opposing party. Determining
whether or not such a conflict exists is primarily the responsibility of the lawyer
involved. See Comment to Rule 1.7. If a lawyer who is a member of a firm may
not act as both advocate and witness by reason of conflict of interest, Rule 1.10
disqualifies the firm also.
Comments 1,2 and 5 to Rule 3.7.

6

Rule 1.9, which deals with conflicts of interest relating to former clients, is inapplicable in this case.

6

Rule 1.7 of the Massachusetts Rules of Professional Conduct provides, in relevant part:
….
(b) A lawyer shall not represent a client if the representation of that client may be
materially limited by the lawyer’s responsibilities to another client or to a third
person, or by the lawyer’s own interests, unless:
(1) the lawyer reasonably believes the representation will not be adversely
affected; and
(2) the client consents after consultation … .
Mass. S.J.C. Rule 1.7.
The comments to Rule 1.7, provide that a conflict is not in itself sufficient to preclude
representation, however; the focus of the court must be on whether the lawyer’s loyalty to the
client is threatened. Additionally, there are some conflicts as to which a client cannot consent:
[4] Loyalty to a client is … impaired when a lawyer cannot consider,
recommend or carry out an appropriate course of action for the client because of
the lawyer’s other responsibilities or interests. The conflict in effect forecloses
alternatives that would otherwise be available to the client. … A possible conflict
does not itself preclude the representation. The critical questions are the
likelihood that a conflict will eventuate and, if it does, whether it will materially
interfere with the lawyer’s independent professional judgment in considering
alternatives or foreclose courses of action that reasonably should be pursued on
behalf of the client. Consideration should be given to whether the client wishes to
accommodate the other interest involved.
[5] A client may consent to the representation notwithstanding a conflict.
However, …. when a disinterested lawyer would conclude that the client should
not agree to the representation under the circumstances, the lawyer involved
cannot properly ask for such agreement or provide representation on the basis of
the client’s consent … .
Comments 4 & 5 to Rule 1.7.
Massachusetts Rules of Professional Conduct 1.10 provides in relevant part:
Rule 1.10. Imputed Disqualification: General Rule
(a) 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 Rule 1.7, 1.8(c), or 1.9 … .
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(c) A disqualification prescribed by this rule may be waived by the affected client
under the conditions stated in Rule 1.7.
Mass. S.J.C. Rule 1.10.
Read together, the applicable Massachusetts Rules of Professional Conduct allow
the law firm of Schmitt & Dillon to continue representing Urban in this case, so long as
she has consented after consultation and the lawyer reasonably believes that the
representation will not be effected. It is clear from its submission that Schmitt & Dillon
do not believe that their continued representation of Urban will be adversely effected by
the fact that Attorney Dillon is a percipient witness in this case. At this time, I am willing
to permit Attorney Schmitt to represent Urban at trial. However, as with the
disqualification of Attorney Dillon as trial counsel, I am troubled by the firm’s inability
to recognize the conflicts which warrant Attorney Dillon’s disqualification and the
potential conflicts which may arise should Schmitt & Dillon continue to represent
Urban— conflicts which could lead to the firm being disqualified at a later date. Given
these potential conflicts, the Court will require that Urban file a signed affidavit on or
before January 30, 2015 stating that Attorneys Schmitt and Dillon have explained such
potential conflicts to her and that she consents to their continued representation.
Defendants’ Motion To Find Waiver Of Attorney-Client Privilege
Essentially, FHLMC is arguing that Urban has waived the attorney-client
privilege over confidential communications which are relevant to the claims she has
asserted in this action. Urban’s primary argument in opposition to FHLMC’s motion is
that her discussions with her attorney are not relevant to any of her asserted claims. I
disagree. Not only are the discussions relevant to Urban’s claims, they are also relevant
and highly probative to FHLMC’s defense to those claims. Therefore, for the reasons set
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forth below, I find that she has waived the attorney-client privilege as to discussions
relevant to the claims she has asserted in this action.
Standard Of Review
The attorney-client privilege ‘must be narrowly construed because it
comes with substantial costs and stands as an obstacle of sorts to the search for
truth.’ As with any privilege, attorney-client privilege can be waived, even
implicitly (although implied waivers are hen’s teeth rare). This is especially true
in a civil proceeding where, because the privilege lacks a constitutional
dimension, the ‘liberal federal policy favoring discovery is of substantially greater
relative weight.’
It is settled law that by placing privileged communications … ‘at issue’ in
civil litigation, a party waives any applicable claim of privilege where
nondisclosure would cause manifest unfairness to the opposing party. A waiver,
as the First Circuit [has] made clear … is not automatic, but like most things
judicial, is subject to a balancing test. The test requires an arbitrating court to
consider whether a defendant has demonstrated the relevancy of the materials
sought, whether there is any reasonable alternative source for the information the
materials contain, and whether the plaintiff’s presumptively valid interest in
preserving the confidentiality of its privileged communications outweighs any
need for disclosure. ‘[T]he privilege ends at the point where the defendant can
show that the plaintiff’s civil claim, and the probable defenses thereto, are
enmeshed in important evidence that will be unavailable to the defendant if the
privilege prevails.’
F.D.I.C. v. R.W. Beck, Inc., No. CIV.A.01-CV-11982RGS, 2004 WL 1474579, at *1 (D.
Mass. July 1, 2004)(internal citations and citations to quoted cases omitted).
Whether A Finding Of Waiver Is Appropriate In This Case
Based on its submissions, I find that FHLMC has clearly met “the threshold
showing of relevance is established by a précis of the core allegations asserted against it
in [Urban’s] Complaint.” Id. I also find for the reasons stated in its supporting
memorandum, that the FHLMC has established that there is no alternative source for the
information and that Urban’s presumptively valid interest in maintaining the
confidentiality of the privileged communications does not outweigh the need for
disclosure. Therefore, I find that Urban has waived the attorney-client privilege as to
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communications between herself and Attorney Dillon (and any other attorney at Schmitt
& Dillon Urban spoke with) concerning title insurance and their communications with
Harmon Law about the same. See generally Greater Newburyport Clamshell Alliance v.
Public Serv. Co., 838 F.2d 13 (1st Cir. 1988).
Accordingly, FHLMC shall have the opportunity to depose Urban, Attorney
Dillon and any other such attorney at Schmitt & Dillon regarding those discussions. The
Court will provide the parties an opportunity to file motions in limine prior to trial
regarding the admissibility of specific communications.
Conclusion
It is hereby Ordered that:
Defendant Federal Home Loan Mortgage Corporation’s Motion To Disqualify Attorney
Thomas Dillon As Plaintiff Rebecca Urban’s Counsel And Seeking Declaration Of An “At
Issue” Privilege Waiver is allowed, in part, and denied, in part, as provided in this Memorandum
and Order.

/s/ Timothy S. Hillman
TIMOTHY S. HILLMAN
DISTRICT JUDGE

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