Little Italy Development LLC v. Chicago Title Insurance Co. et al
Filing
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Memorandum Opinion and Order: Defendants Chicago Title Company's and Fidelity National Title Group, Inc.'s Motion to Disqualify Thompson Hine as Counsel for Plaintiff (Doc. 39 ) is GRANTED. Judge Patricia A. Gaughan on 12/1/11. (LC,S)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION
Little Italy Development LLC,
Plaintiff,
Vs.
Chicago Title Insurance Co., et al.,
Defendants.
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CASE NO. 1:11 CV 112
JUDGE PATRICIA A. GAUGHAN
Memorandum of Opinion and Order
INTRODUCTION
This matter is before the Court upon Defendants Chicago Title Company’s and Fidelity
National Title Group, Inc.’s Motion to Disqualify Thompson Hine as Counsel for Plaintiff (Doc.
39). This is an insurance dispute. For the reasons that follow, the motion is GRANTED.
FACTS
Only those facts necessary for a resolution of the instant motion are set forth herein.
Plaintiff, Little Italy Development LLC (“LID”), brings this lawsuit against defendants,
Chicago Title Insurance Company and Fidelity National Title Group, Inc. (collectively,
“Chicago Title”). LID purchased a title insurance policy from Chicago Title. On July 9, 2009,
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Little Italy Preservation Partners sued LID regarding the use of an easement over LID’s property
(“Underlying Litigation”). Thompson Hine, LLP represented LID in the Underlying Litigation
and represents LID in the matter currently pending before this Court. Thompson Hine also
represented Chicago Title on a variety of matters.
A.
The Moore matter
In August of 2007, Thompson Hine agreed to represent Chicago Title in an action
against, among others, Pamela Moore (“the Moore matter”) alleging that Moore improperly
diverted escrow funds for her personal use. Shortly thereafter, an agreed judgment was entered
in the amount of $365,837.95. From approximately January 7, 2009 through November 20,
2009, Thompson Hine foreclosed on Moore’s property in order to satisfy the judgment. During
the majority of this time period, Thompson Hine’s client contact at Chicago Title was attorney
Aaron Wegner. The foreclosure sale resulted in a deficiency of $77,000. On November 21,
2009, Chicago Title emailed Thompson Hine and indicated that “it may be that you will be able
to close your active file upon completion of the payment proceeds.” On May 14, 2010,
Thompson Hine conducted a debtor’s examination of Moore, which showed that Moore had no
significant assets. On June 7, 2010, Chicago Title inquired as to whether Moore had been
criminally indicted. Thompson Hine contacted the prosecutor’s office the following day. The
time charge for the telephone call to the prosecutor is the last time entry Thompson Hine made
with respect to the Moore matter. Over a year later, on July 1, 2011, Chicago Title sent an email to Thompson Hine asking whether Thompson Hine had “heard anything from Pam Moore,”
and questioning whether an indictment was ever filed.
B. The Brown matter
2
Thompson Hine also represented Chicago Title in a similar matter filed on December 8,
2008 (the “Brown matter”). Chicago Title moved for summary judgment on November 3, 2009.
Thereafter, an agreed judgment of approximately $255,000 was entered against the defendants in
the Brown matter. On May 14, 2010, Thompson Hine conducted a debtor’s examination and
began garnishing Brown’s wages. The last time charges entered by Thompson Hine occurred on
August 5 and August 30, 2010. On August 30, 2010, Thompson Hine sent a letter to Chicago
Title indicating, “at this point all we are doing is forwarding the proceeds from the wage
garnishment. Do you want us to close our file and direct the garnishments be sent directly to
you?” Chicago Title responded, “Please close it out.” Nearly a year later, on August 1, 2011,
Chicago Title contacted Thompson Hine, indicating that it had “not received any funds since
March,” and inquired as to whether Thompson Hine could “look into” the matter. Thompson
Hine responded that it could no longer represent Chicago Title as it was representing LID, who
is adverse to Chicago Title.
C. Thompson Hine’s representation of LID
LID is a partnership owned in part by an entity controlled by Terence Coyne. Thomas
Coyne is the brother of Terence Coyne and is the head of the real estate department at Thompson
Hine. In 2006, Thompson Hine represented LID in connection with the acquisition of certain
land in Cleveland. Thompson Hine negotiated a title insurance policy with Chicago Title on
behalf of LID. According to Thomas Coyne, Thompson Hine regularly negotiated title insurance
policies with Chicago Title on behalf of its clients.
Beginning in 2008, Thompson Hine represented LID in negotiations with a landowner
adjacent to the property recently acquired by LID. The negotiations involved certain easements
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and other property related disputes. On July 9, 2009, the adjacent landowner brought the
Underlying Litigation against LID.
Immediately upon receipt of the complaint in the Underlying Litigation, LID asked
Thompson Hine to seek coverage under the title insurance policy issued by Chicago Title.
According to Thomas Coyne, he informed LID that Thompson Hine also represented Chicago
Title and that “any potential conflict of interest” needed to be addressed prior to asserting a
claim against Chicago Title. Thompson Hine then informed Ed Horejs, Vice-President and
Regional Counsel with Chicago Title, of the coverage claim and raised the conflict of interest
issue. Thomas Coyne avers that Horejs advised him “that Chicago Title, as a matter of practice,
does not view the assertion of a claim for coverage as a conflict of interest.” According to
Thomas Coyne’s time charges, he then met with Horejs and extensively discussed issues
regarding the coverage issues. These discussions occurred from July 20, 2009 through July 23,
2009. On July 23, 2009, Coyne sent a draft of a coverage demand letter to Horejs for his review.
Horejs reviewed the letter and, based on his input, Thompson Hine finalized the letter on behalf
of LID and delivered it to Chicago Title on July 24, 2009.
On August 24, 2009, attorney Aaron Wegner, on behalf of Chicago Title, responded
indicating that it accepted the defense of only one claim in the Underlying Litigation. It
expressly rejected a defense of the remaining claims. On September 8, 2009, Thompson Hine
responded to Chicago Title’s letter, stating its belief that the “complete defense rule” obligated
Chicago Title to provide a defense of all claims asserted against LID. The letter further
indicated that Thompson Hine was willing to act as co-counsel to the firm representing LID on
the claim that Chicago Title agreed to cover. However, Thompson Hine indicated that it “would
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look to Chicago Title for reimbursement of Thompson Hine’s attorneys’ fees for that work
pursuant to our belief that Chicago Title is obligated to provide a complete defense.” On
September 30, 2009, Thompson Hine sent an email to Chicago Title indicating that it had yet to
receive a response to its September 8th letter. The email indicated that “a prompt response is
important to avoid prejudice to [LID] as it considers its settlement and litigation positions.”
Chicago Title responded on October 9, 2009, confirming its initial position that it would accept
the defense of only one claim.
On November 3, 2009, LID met with attorneys from Thompson Hine. One attorney’s
time charges indicate that the meeting occurred in order to discuss the “case against Chicago
Title.”
On November 5, 2009, the Thompson Hine attorney responsible for Chicago Title
matters sent at email to the Thompson Hine attorney in charge of the Moore and Brown matters.
The email indicated that a firm client “will be filing a title claim against Chicago Title. It has not
risen to the point of litigation and we don’t know if it will. Where do we stand on the [Moore
and Brown] matters? Are they nearing completion?” The attorney responded that the matters
“are nearing completion but it will still be a couple of months.” In addition, Thompson Hine
agreed to refrain from taking on “new work” on behalf of Chicago Title.
On December 15, 2009, Thompson Hine and LID amended their fee agreement. The
agreement provides as follows:
B.
Claims Against Chicago Title
Contingency of one-third of total settlement payment or award (damages/penalties/legal
fees/other.)
Separate and apart from above fee, client to pay, on a current basis, all out of pocket costs
5
and expenses, including court filing fees, court reporter fees, consultants, appraisers,
experts, computer research, photocopying, etc.
In addition, the agreement capped LID’s fees in the Underlying Litigation at $350,000
plus the “$37,000 previously paid.” According to Thompson Hine, it informed LID that it could
only accommodate LID’s alternative fee request if Chicago Title was no longer a client at the
time of the “anticipated litigation.” Thompson Hine further indicated that a “formal claim”
against Chicago Title “might not” be asserted for a period of one to three years following the
close of the Underlying Litigation.
On June 17, 2010, internal Thompson Hine emails reflect the following exchange:
Q:
What is the status of our Chicago Title cases–still pending or now complete?
A:
We are still in collections.
Thompson Hine then forwarded the email to another attorney at the firm and indicated:
A:
Still have ongoing client matters for Chicago Title. This may not prevent making
a title claim on behalf of a client, but it would not be permissible to sue Chicago
Title.
On July 15, 2010, after receiving correspondence from Thompson Hine regarding
Chicago Title’s lack of attention to the title claim, Chicago Title informed Thompson Hine that it
was denying LID’s request to reconsider the August 24, 2009 coverage determination. On July
21, 2010, Chicago Title sent a letter to the attorney representing LID in the Underlying
Litigation. The letter discusses Chicago Title’s settlement position. In addition, Chicago Title
denies a tender of defense with respect to new claims asserted in an amended complaint. On
July 23, 2010, Thompson Hine sent an internal email, indicating that it is “still engaged in
collection efforts” on behalf of Chicago Title.
On August 6, 2010, Thompson Hine sent a letter to Chicago Title on behalf of LID. The
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letter again sets forth LID’s position regarding the “complete defense rule.” In that letter,
Thompson Hine indicates that no one from Chicago Title has provided a legal analysis with
respect to the complete defense rule. The letter further takes issue with Chicago Title’s assertion
that it had not been provided with any additional information that would alter the coverage
determination. In relevant part, the letter provides as follows:
[Chicago Title] never provided us with a substantive response addressing the [complete
defense rule]. Accordingly, we once again ask that you provide us with whatever
authority Chicago Title believes supports its position that it is not obligated to defend all
of the claims in the above-captioned case.
In addition, [the attorney retained by Chicago Title to represent LID with respect to the
“covered claim” in the Underlying Litigation] forwarded to me your July 21, 2010 letter,
which was not sent directly to me, nor were we even provided a courtesy copy, even
though it addresses issues which I (on behalf of my client, LID) have been disputing with
Chicago Title for approximately a year now.... Her firm was not engaged to address
coverage issues, so it is suspect why your communications on coverage issues were
directed to her, rather than to me.
Astonishingly, I understand that you also requested that she forward your July 21, 2010
letter to me. There is no reason why you should not have communicated directly with
me, as I have been in contact with Chicago Title for about a year regarding these
coverage issues and you clearly had my contact information.
Chicago Title’s coverage determination appears to be based on a very limited view of
certain evidence in the case, which has led to erroneous factual and legal conclusions....
In response, allow me to correct the following....
***
These examples show a significant lack of understanding and a failure to conduct a
serious investigation into the facts and law involved in the claims for which LID has
demanded coverage.... Based on Ohio law... we renew our request that Chicago Title
reverse its decision and reimburse LID for all of its reasonable attorneys’ fees and costs
incurred to defend LID against all of the claims in the litigation.
It is undisputed that LID intends to rely on the correspondence from Thompson Hine to
show that Chicago Title engaged in bad faith in the handling of LID’s coverage claims.
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On August 19, 2010, Thompson Hine began the intake process of opening a matter on
behalf of LID and against Chicago Title. Thompson Hine completed the intake process on
August 27, 2010. That same day, Chicago Title sent a letter to Thompson Hine discussing
specific case law and outlining Chicago Title’s position with respect to the complete defense
issue.
The letter indicated that it was sent in response to Thompson Hine’s “request for
reconsideration of the Company’s August 24, 2009, July 15, 2010, and July 21, 2010 coverage
determinations.”
On August 30, 2010, the following email exchange took place among Thompson Hine
attorneys:
I am looking for an engagement letter, but so far no luck. I found the original conflicts
report we ran in August of 2007.... In 2009 Tom Zych approached me about obtaining a
conflict waiver for a matter on behalf of KeyBank, and [Chicago Title] was willing to
waive the conflict. See attached waiver letter. If there are other adverse matters, I am
not aware of them.
The problem with our ongoing case is that we are handling the garnishment on a
judgment we obtained on behalf of [Chicago Title]. The amount of legal work is minimal
but the work could go on for a long time. Maybe we should look for a way to end our
representation, if that’s ethically permissible.
[Chicago Title] may have some conflict policies for outside counsel, but if so I was not
provided them when we opened the first case in 2007....
Do you have any other suggestions?
A: Do you want me to suggest to in house counsel that I close my file and have the
garnishment monies sent directly to him?
Reply: If there is nothing more to do on the case and we could then have a closed file, so
there is no conflict in bringing the new case, that would be great.
The last time entry made by Thompson Hine for work performed on behalf of Chicago
Title occurred on August 30, 2010. The bill for work occurring through August 30, 2010 was
sent on September 13, 2010.
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On September 20, 2010, Thompson Hine sent a letter to Chicago Title referencing the
Moore and Brown matters. The letter stated, “this terminates our engagement on behalf of
Chicago Title.”
On January 12, 2011, Thompson Hine amended its contingent fee agreement with LID.
Thereafter, on January 18, 2011, Thompson Hine filed the complaint in this matter on behalf of
LID and against Chicago Title.
According to Chicago Title, it was not until June of 2011 that Chicago Title became
aware of the dual representation. Chicago Title claims that David Golub, who is in-house
counsel responsible for this litigation, learned of Thompson Hine’s representation on the Moore
and Brown matters while reviewing Chicago Title’s “Tymetrix” system. Thompson Hine points
out that within one week of this Court issuing an unfavorable ruling against Chicago Title, four
different in-house attorneys sent Thompson Hine emails requesting updates or assistance on the
Moore and Brown matters. Chicago Title met with Thompson Hine on August 11, 2011, in
order to seek Thompson Hine’s voluntary withdrawal. Thompson Hine refused, and thereafter,
Chicago Title filed this motion seeking to disqualify Thompson Hine from continuing to
represent LID on this matter. LID opposes the motion.
ANALYSIS
Chicago Title argues that Thompson Hine must be disqualified from representing LID in
this matter. According to Chicago Title, Rule 1.7 of the Ohio Rules of Professional Conduct
mandates the disqualification of Thompson Hine.1 The rule provides as follows:
1
Although Thompson Hine argues that it did not drop Chicago Title
like a “hot potato,” and claims that its representation on the Moore
and Brown matters came to their natural conclusions, no party
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(a) Except as provided in paragraph (b), a lawyer shall not represent a client if the
representation involves a concurrent conflict of interest. A concurrent conflict of interest
exists if:
(1) the representation of one client will be directly adverse to another client; or
(2) there is a significant risk that the representation of one or more clients will be
materially limited by the lawyer's responsibilities to another client, a former client
or a third person or by a personal interest of the lawyer.
(b) Notwithstanding the existence of a concurrent conflict of interest under paragraph (a),
a lawyer may represent a client if:
(1) the lawyer reasonably believes that the lawyer will be able to provide
competent and diligent representation to each affected client;
(2) the representation is not prohibited by law;
(3) the representation does not involve the assertion of a claim by one client
against another client represented by the lawyer in the same litigation or other
proceeding before a tribunal; and
(4) each affected client gives informed consent, confirmed in writing.
According to Chicago Title, disqualification is required because Thompson Hine’s
representation of LID in the coverage dispute is directly adverse to Chicago Title’s interest in the
dispute, as both Chicago Title and LID were “current clients” of Thompson Hine at the time the
conflict of interest arose. Chicago Title also argues that disqualification is required because
Thompson Hine did not obtain a written waiver as required by Rule 1.7(b)(4).
claims that this conflict issue should be analyzed under Rule 1.9,
i.e., the rule pertaining to “former client” conflicts. As set forth
below, the Court finds that at the time the parties were initially
“directly adverse,” both Chicago Title and LID were clients of the
firm. In its opening brief, Chicago Title indicated that it expected
LID to argue that the former client rule applied. It did not. Rather,
LID analyzed this issue exclusively under Rule 1.7, which pertains
to “concurrent client” conflicts. Accordingly, the Court will not
address whether Rule 1.9 should apply.
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On the other hand, LID argues that the interests of the parties were not “directly
adverse.” In addition, LID argues claims that Chicago Title impliedly waived any conflict.
According to LID, even if a conflict of interest occurred, disqualification is not required.
The Court will address each issue in turn.
A.
“Adverse interests”
Chicago Title argues that the interests of LID and Chicago Title were adverse as of
August 24, 2009, the date on which Chicago Title denied coverage for the defense costs in the
Underlying Litigation. LID argues that the interests were not “directly adverse” until after
Chicago Title was no longer a client of Thompson Hine. According to LID, the parties did not
become directly adverse until August 27, 2010, the date on which Chicago Title provided a legal
analysis supporting its rejection of the complete defense rule. By this date, the Moore and
Brown matters had concluded.
Upon review, the Court finds that the interests of LID and Chicago Title were “directly
adverse” during the time Thompson Hine represented both parties.2 It is undisputed that Chicago
Title denied coverage in August of 2009. Even assuming arguendo that the interests of the
parties were not adverse as of that denial letter, Chicago Title repeatedly stood by this initial
coverage determination and Thompson Hine, on behalf of LID, repeatedly corresponded with
Chicago Title in an effort to convince Chicago Title to provide coverage. LID argues that the
Court should look to the level of “antagonism” between the clients themselves. In this case, LID
2
At the outset, the Court notes that both parties submitted expert
reports. The Court will not consider the reports because, as noted
by LID, this is a legal issue which can be resolved without resort to
expert opinions.
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prepared for litigation against Chicago Title as of December 15, 2009, at the latest. On that date,
LID entered into a contingency fee agreement with Thompson Hine to cap their attorneys’ fees
in the Underlying Litigation in exchange for a piece of the recovery LID may have against
Chicago Title in the future. Although LID avers that it was aware that Thompson Hine could not
bring suit against Chicago Title due to the existence of the conflict, the contingency fee
agreement evidences LID’s belief that litigation was likely. Even more troubling, the agreement
puts Thompson Hine squarely at the divergent interests of its own two clients. At the end of the
day, this dispute centers on which entity–LID or Chicago Title–will pay Thomspon Hine’s legal
fees in defending the Underlying Litigation. Unfortunately, both entities were Thompson Hine’s
clients. Moreover, there can be no dispute that the interests were “directly adverse” as of the
August 6, 2010 letter. In that letter, Thompson Hine accuses Chicago Title of maintaining “a
very limited view of certain evidence in the case,” and further states that Chicago Title has
shown a “significant lack of understanding and a failure to conduct a serious investigation into
the facts and law involved in the claims for which LID has demanded coverage.” It simply
cannot be argued that these accusations demonstrate anything other than “directly adverse”
interests. In fact, LID relies on these very letters in its attempt to establish a bad faith claim.
Thus, not only did LID believe that its coverage claim was wrongfully denied, it believed that
Chicago Title acted tortiously in its dealing with LID.
In sum, Chicago Title denied LID’s claim on at least four separate occasions prior to
August of 2010.3 At the same time, LID entered into a contingency fee agreement with
3
It appears that Chicago Title notified LID through its attorneys on
August 24, 2009, October 9, 2009, July 15, 2010, and July 21,
2010.
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Thompson Hine, which governed the payment of LID’s fees for the Underlying Litigation.
Pursuant to the agreement, Thompson Hine limited the fees LID paid for Thompson Hine’s
services in exchange for an interest in any recovery LID may have against Chicago Title. The
contingency fee agreement essentially transferred Thompson Hine’s right to collect its fees from
one existing client to another. Then, in the August 6th letter, Thompson Hine essentially
accused its own client mishandling LID’s coverage claim, and LID intends to rely on those
letters in connection with its bad faith claim in this case. The Court finds that, on these facts, the
interests of LID and Chicago Title were “directly adverse” during the time that both were
represented by Thompson Hine.4
Moreover, no party claims that Thompson Hine obtained a written waiver of the conflict
4
Thompson Hine billed Chicago Title for work performed on
August 30, 2010, and email correspondence on that date indicates
that “the problem with our ongoing case is that we are handling the
garnishment on a judgment we obtained on behalf of [Chicago
Title]. The amount of legal work is minimal but the work could go
on for a long time. Maybe we should look for a way to end our
representation, if that’s ethically permissible.” Obviously, as of
this date, Thompson Hine believed it still represented Chicago
Title. Thus, even Thompson Hine’s own attorneys acknowledge
that as of August 30, 2010, the work was expected to “go on for a
long time,” and that terminating the relationship was the only way
to avoid the “concurrent client” ethical problem. Of course,
Thompson Hine then suggested terminating the relationship
without disclosing any of this information to Chicago Title, its own
client. Moreover, the ethical rules prohibited Thompson Hine
from undertaking representation of LID once it became apparent
that LID and Chicago Title were “directly adverse.” This Court
concluded that the interests of the parties were “directly adverse”
before Thompson Hine suggested terminating the relationship with
Chicago Title. Having already committed an ethical violation,
Thompson Hine’s attempt to argue that Chicago Title’s
uninformed agreement to end the relationship somehow absolves
Thompson Hine of the wrongdoing is unavailing.
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from Chicago Title. Accordingly, the Court finds that Thompson Hine’s concurrent
representation of LID and Chicago Title during the time they had directly adverse interests
constitutes a violation of Rule 1.7.
B.
Implied consent/waiver
LID argues that Chicago Title impliedly consented to the conflict by its delay in raising
the instant motion. According to LID, Chicago Title has known of the conflict since November
of 2008. Thompson Hine also informed Ed Horejs, Vice-President and Regional Counsel with
Chicago Title, of the coverage claim and “raised the conflict of interest issue.” According to
Thompson Hine, Horejs stated that “as a matter of practice, [Chicago Title] does not view the
assertion of a claim for coverage as a conflict of interest.” LID additionally points out that
Wegner, an in-house attorney for Chicago Title, was working on the Moore matter at the same
time he communicated with Thompson Hine on the LID matter. LID further notes that Chicago
Title did not seek disqualification until eight months into this case, and not until it received an
unfavorable ruling on summary judgment. LID argues that it will lose the benefit of its favorable
contingency fee agreement and be compelled to retain more expensive counsel. In addition, LID
argues that the motion to disqualify was made for strategic purposes, which is demonstrated by
Chicago Title’s attempt to “re-engage” Thompson Hine on the Brown and Moore matters shortly
after receiving the Court’s summary judgment ruling.
On the other hand, Chicago Title argues that Rule 1.7 conflicts cannot be “impliedly
waived.” Rather, the rule expressly requires a written waiver. Even if a concurrent conflict
could be impliedly waived, Chicago Title argues that Thompson Hine never informed it of the
extent of the conflict. Specifically, Chicago Title provides Horejs’s affidavit in which he avers
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that he assisted Coyne in the presentment of the claim. After it was denied on August 24, 2009,
Coyne never discussed with Horejs any potential conflict of interest. According to Horejs, he is
responsible for making underwriting decisions on large commercial deals and has no
involvement in whether policy claims are covered or denied. Nor does Horejs have any
responsibility for waiving conflicts. Moreover, Chicago Title points out that Coyne’s last time
entry involving Horejs occurred on July 23, 2009. With regard to Wegner, Chicago Title
acknowledges that his work on the Moore and LID matters briefly overlapped. During the
overlapping time period, however, Wegner sent a total of only four emails regarding Moore.
Moreover, he avers that he never associated Thompson Hine’s representation of Chicago Title in
Dayton with Thompson Hine’s representation of LID in Cleveland. Regardless, at no time did
any Thompson Hine attorney raise the conflict of interest issue with Wegner. According to
Chicago Title, the responsibility to address waiver issues lies with the law firm, not the client. In
addition, Chicago Title points out that nobody alluded to the contingency fee agreement until
responding to a subpoena issued in this case on September 16, 2011. Thus, Chicago Title could
not have consented to any conflict because it was not aware of all of the facts.
Assuming arguendo that a concurrent conflict could be impliedly waived, the Court finds
that LID fails to establish an implied waiver. As LID notes5, a waiver should be found where:
(1) there is substantial proof that the movant’s delay has resulted in serious prejudice to
the opposing party; or
(2) where litigation has proceeded to the point where disqualification would create
5
The law cited by LID relates to when a former client can impliedly
consent to the conflict. As Chicago Title points out, however, the
parties’ interests were directly adverse at the time both were
represented by Thompson Hine.
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substantial hardship to the opposing party; or
(3) where it is clear that the moving party knowingly delayed the filing of the motion in
order to cause such hardship or prejudice.
Upon review, the Court finds that none of the foregoing factors are present in this case.
As an initial matter, while Horejs may have indicated that he does not view the presentment of a
title coverage demand as a conflict of interest, there is no indication that Coyne ever informed
Horejs of any conflict once the parties interests became directly adverse. LID argues that the
parties’ interests were not directly adverse until the August 27, 2010 letter, at the earliest. Coyne
does not claim that he had any contact with Horejs during the entire preceding year. Thus, the
fact that Chicago Title does not view an initial coverage demand to be a “directly adverse
interest,” does not translate into a wholesale wavier of all “directly adverse interest” conflicts.
Moreover, other than possessing a basic knowledge that Thomspon Hine was performing work
on both the Moore and LID matters, there is no suggestion that anyone at Thompson Hine ever
raised the conflict issue with Wegner or that Wegner understood the depth of the conflict. The
Court agrees with Chicago Title that it is the responsibility of the attorney to inform the clients
of concurrent conflicts of interest. Moreover, LID fails to point to any “serious prejudice” it will
suffer. As noted above, Thompson Hine informed LID of the “conflict of interest issue” long
ago. At best, LID points out that it might lose its “favorable fee” agreement. There is no
evidence, however, supporting this contention. LID may very well be able to secure a
contingency fee agreement in this case, especially given the favorable ruling it already obtained
on summary judgment. With regard to “substantial hardship,” the Court notes that this case is
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still in the discovery stage, summary judgment motions are not due for over six months6, and no
trial date has been set. For these reasons, the Court finds that LID fails to establish that an
implied waiver should be enforced against Chicago Title.
C.
Disqualification
Chicago Title argues that disqualification is mandatory under Carnegie Cos., Inc. v.
Summit Properties, Inc., 918 N.E.2d 1052 (Ohio Ct. App. 2009). LID, on the other hand, argues
that not all ethical violations require disqualification. According to LID, disqualification is not
warranted on the facts of this case.
Upon review, the Court finds that disqualification is not mandatory. In Carnegie, the
court found as follows:
This court holds that a violation of [Rule 1.7] requires disqualification of the offending
lawyer. The language of the rule prohibiting concurrent adverse representation is
mandatory. A lawyer shall not accept or continue the representation of a client if a
conflict of interest would be created *** unless all [three prongs of the exception] apply.
Absent such a showing by the lawyer, the trial court must grant a motion for
disqualification.
Id. at 1069.
Carnegie noted that Ohio recently adopted Rule 1.7. The former rule, DR 5-105
provided:
A. A lawyer shall decline proffered employment if the exercise of his independent
professional judgment in behalf of a client will be or is likely to be adversely affected by
the acceptance of the proffered employment, except to the extent permitted under DR
5.105(C).
B. A lawyer shall not continue multiple employment if the exercise of his independent
professional judgment in behalf of a client will be or is likely to be adversely affected by
6
The parties also filed summary judgment motions early in this case
in order to resolve one issue.
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his representation of another client, except to the extent permitted under DR 5.105(C).
C. In the situations covered by DR 5-105 (A) and (B), a lawyer may represent multiple
clients if it is obvious that he can adequately represent the interest of each and if each
consents to the representation after full disclosure of the possible effect of such
representation....
The Carnegie court noted that the former rule contained a clause preventing
representation upon a showing that the attorney’s independent professional judgment is likely to
be compromised by the representation. Even if such a showing could be made, the conflict could
be remedied by demonstrating that it is “obvious” that the attorney could adequately represent
the interests of each and if a written waiver was obtained. The Carnegie court noted that the
new rule does not limit concurrent conflicts to those situations in which the attorney’s judgment
is likely to be compromised. Rather, all concurrent conflicts now require written waivers before
representation can be accepted or continued. The court relied on the mandatory nature of the
language in Rule 1.7 in determining that disqualification was required. See, R. 1.7 (“an attorney
shall not represent a client if the representation involves a concurrent conflict of interest” unless
a written waiver is obtained).
On the other hand, LID relies on Cliff Sales Co. v. American Steamship Co., 2007 WL
2907323 (N.D. Ohio Oct. 4, 2007), in support of its position that disqualification is not required.
In that case, the court expressly found a violation of Ohio’s new rule, i.e., Rule 1.7. The court
did not analyze the language and, instead, simply noted that “while some courts have adopted a
per se rule requiring disqualification of counsel based on concurrent representation, this Court is
persuaded that the better approach is to examine the factual situation to determine if
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disqualification is necessary.” Id. at *5.7
This Court finds that nothing on the face of Rule 1.7 requires that a court disqualify an
attorney for a violation of that rule. Although the Court agrees with the Carnegie court that the
language contained in Rule 1.7 is mandatory in nature, the Court finds that the language applies
to determining whether a violation of the concurrent client rule occurred. It does not provide for
any particular mandatory consequence once a violation is established. Accordingly, the Court
agrees with LID that the disqualification is not per se required.
That being said, it would seem to be the unlikely case in which a court would permit
continued representation in the face of a violation of Rule 1.7, as by its very nature denying
disqualification would promote a continuing ethical violation. Upon review, the Court finds that,
on the facts of this case, disqualification is warranted. As an initial matter, the nature of the
conflict is greatly disturbing to the Court. In the typical conflict of interest case, the attorney has
no stake in the conflict, other than perhaps obtaining additional business from a “lucrative”
client. In this case, however, Thompson Hine appears to have renegotiated a favorable fee
agreement with LID so that the fees LID incurred in the Underlying Litigation could be paid by
Chicago Title, who was another firm client at the time the fee agreement was signed. This is
only exacerbated by the fact that LID’s principal member is the brother of the head of the real
7
The parties discuss this Court’s decision in Pioneer-Standard
Electronics, Inc. v. Cap Gemini America, Inc., 1:01 CV 2185.
Cliff Hills relied on Pioneer in determining that no per se
disqualification rule exists. As Carnegie points out, however, Cliff
Hills’ reliance on Pioneer is misplaced. In Pioneer, this Court
determined that no ethical violation occurred in the first place.
Thus, the Court never reached whether disqualification is
mandatory or discretionary.
19
estate department at Thompson Hine.
In addition, as noted above, LID intends to rely on correspondence written by Thompson
Hine and directed against Chicago Title (at the time Chicago Title was a firm client) in order to
establish bad faith. As stated by Chicago Title, it is likely that Thompson Hine attorneys may be
called to testify in this case. Although that issue is not currently pending before the Court, the
Court finds that it weighs in favor of disqualification. Moreover, as Chicago Title points out,
discovery is not yet over and dispositive motions are not due for seven months. No trial date has
been set. Thus, the Court finds that LID will not suffer undue prejudice by the disqualification.
In addition, as expressly stated by Thompson Hine, LID knew of the conflict of interest
throughout the concurrent representation period and the potential for disqualification should not
be surprising.
The Court recognizes the importance of allowing litigants access to the counsel of their
choosing and further recognizes that motions to disqualify are “disfavored.” However, as noted
in Carnegie,
This court is aware of the delicate balance to be struck between the right to proceed with
counsel of one’s choice and the need to ensure that attorneys act ethically. A party does
not, however, have an absolute right to be represented by a particular lawyer or law firm.
In concurrent-representation situations, the importance of maintaining the public
confidence in the propriety of the conduct of those associated with the administration of
justice outweighs a party’s interest in choosing its own lawyers.
Carnegie, 918 N.E.2d at 1068.
In this case, the Court finds that Thompson Hine clearly violated its duty of undivided
loyalty by taking adverse action against its client, Chicago Title, in favor of another client, LID.
Given the unique nature of this case in that it ultimately involves determining which client will
pay Thompson Hine’s fees for the Underlying Litigation, together with the fact that Thompson
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Hine took actions against Chicago Title during its representation which will be used against
Chicago Title in this case, the Court finds that the interests in maintaining the public confidence
and assuring the propriety of attorney conduct, outweigh LID’s interest in choosing its own
attorney.
CONCLUSION
For the foregoing reasons, Defendants Chicago Title Company’s and Fidelity National
Title Group, Inc.’s Motion to Disqualify Thompson Hine as Counsel for Plaintiff (Doc. 39) is
GRANTED.
IT IS SO ORDERED.
/s/ Patricia A. Gaughan
PATRICIA A. GAUGHAN
United States District Judge
Dated: 12/1/11
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