Corwin Place LLC

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IN THE UNITED STATED BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
IN RE: 	)
)
CORWIN PLACE, LLC, 	) 	Case No. 16-bk-750
)
Debtor. 	) 	Chapter 11
___________________________________ 	)
MEMORANDUM OPINION
On November 17, 2016, Corwin Place LLC (the “Debtor”) filed a motion to disqualify the
law firm representing Premier Bank’s (“Premier”), its principal creditor. Premier filed a response
in opposition to the Debtor’s motion and the court conducted a hearing on the matter on November
30, 2016. At the hearing, the court requested supplemental briefing regarding the standards federal
courts employ in addressing motions to disqualify and seeking clarification on certain factual
points. 	Having received the additional submissions from the parties, the matter is now ripe for
disposition.
The Debtor asserts that the court should disqualify Premier’s counsel, Bailey & Glasser,
based upon a conflict of interest stemming from the Debtor’s principal, Charles Corwin, previously
consulting with Bailey & Glasser regarding potential lender liability claims that he wished to bring
on behalf of the Debtor against Premier. 	In response, Premier alleges that the scope of the
consultation was limited such that Corwin was merely a prospective client of Bailey & Glasser’s.
Thus, Premier asserts that West Virginia Rule of Professional Conduct 1.18 controls and was not
violated because no significantly harmful information was shared between Charles Corwin and
Bailey & Glasser.
For the reasons set forth hereinafter, the court will deny the Debtor’s motion to disqualify
Bailey & Glasser.
I. 	BACKGROUND
Charles Corwin is the principal of the Debtor. On December 9, 2015, Corwin contacted
Bailey & Glasser by telephone, at which time he discussed his potential case against Premier Bank
Dated: Monday, December 19, 2016 4:12:14 PM
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with a paralegal for the firm. 	During the course of that conversation, Corwin informed the
paralegal that he was interested in pursuing lender liability claims against Premier. He speculated
that his claims were worth $12 to $15 million. Tony Clackler, an associate attorney for Bailey &
Glasser, attempted to return Corwin’s telephone call, but left a voicemail after failing to reach
Corwin. On December 14, 2015, Corwin returned Clackler’s phone call and left a voicemail after
the call went unanswered. On December 15, 2015, Corwin and Clackler spoke for the first time.
During the telephone conversation, they scheduled an appointment on December 22, 2015 to meet
and discuss the case.
On December 22, 2015, Clackler and Corwin did not meet. Corwin mistakenly traveled to
the Morgantown office of Bailey & Glasser where he spoke with a different attorney while
Clackler worked in the Charleston, West Virginia office. 	On that same day, Corwin emailed 1
Clackler the Fifth Amendment to the Forbearance Agreement between the Debtor and Premier.
On the same day, Clackler responded that he would be away on holiday until January 4, 2016, but
that Corwin should send the note indicating the loan obligation the Debtor owed to Premier and
any additional forbearance agreements between the same. This email also contained a reminder
that Bailey & Glasser had not agreed to represent Corwin or the Debtor at that time.
On January 11, 2016 Corwin forwarded an email from an attorney associated with the law
firm of Bowles Rice, LLP, who represented Premier at that time that included the second, third,
and fourth amendments to the forbearance agreement between the Debtor and Premier. On January
14, 2016, Corwin followed up, inquiring as to whether Clackler had reviewed the materials
supplied on the 11 th . 	Clackler informed Corwin, again by email, that he was reviewing the
documents and discussing the potential for entering into representation of the Debtor with his
supervisor. On January 15, 2016, Corwin emailed Clackler that he had more information to share
with him. 	Corwin then called Clackler on January 27, 2016, leaving a voicemail indicating the
same. Corwin again reached out to Clackler on January 29, 2016 stating that he was anxious to
hear back from the firm because Premier was contemplating demanding payment in full under the
note. Clackler responded by arranging a phone call for that afternoon.
On February 1, 4, and 8, 2016, Corwin sent emails to Clackler which included pictures of
the real estate development central to the dispute between the Debtor and Premier, email
1 All emails to and from Corwin came from the account of his wife Marlene Corwin.
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conversations between Corwin and representatives of Premier, and contact information for an
attorney involved in the matter. On February 9, 2016, Clackler informed Corwin he was reviewing
all of the materials supplied. On February 16, 2016, Corwin forwarded an email to Clackler which
indicated that Bailey & Glasser represented him in this matter. On February 18, 2016, Clackler
sent a final email indicating that Bailey & Glasser did not represent the Debtor or Corwin and
would not do so going forward. No further communication occurred between the parties.
While Bailey & Glasser was contemplating representing the Debtor it did not represent and
had not previously represented Premier. Premier approached Bailey & Glasser about representing
it in the Corwin litigation in October 2016. It then entered an appearance on behalf of Premier in
this case on November 4, 2016. 	Shortly thereafter, on November 17, 2016, the Debtor filed its
motion to disqualify.
II. DISCUSSION
The West Virginia Rules of Professional Conduct apply in this court. 	N.D.W. Va. L.R.
Gen. P. 84.01. “A failure to adhere to those rules may require disqualification.” CSX Transp. Inc.
v. Gilkison, Doc. No. 05-202, 2006 WL 3203419, at *1 (N.D.W. Va. Nov. 3, 2006). However,
“disqualification is a drastic measure which courts should hesitate to impose except when
absolutely necessary.” University of West Virginia Bd. Of Trustees v. VanVoorhees, 33 F. Supp.2d
519, 520 (N.D.W. Va. 1998).
Motions to disqualify are not favored because of the overwhelming preference to permit
litigants to elect their own counsel and the potential “of opposing parties to misuse disqualification
motions for strategic reasons.” 	Shaffer v. Farm Fresh, Inc., 966 F.2d 142, 146 (4 th Cir. 1992).
Thus, courts are to “avoid overly-mechanical adherence to disciplinary canons” so as to preserve
“litigants’ rights freely to choose their counsel.” 	Id. 	“Nevertheless, the guiding principle in
considering a motion to disqualify counsel is safeguarding the integrity of the court proceedings.”
Zachair, Ltd. v. Driggs, 965 F.Supp. 741, 750 (D. Md. 1997). Thus, courts “must not weigh the
circumstances with hairsplitting nicety but, in the proper exercise of its supervisory power over
the members of the bar and with a view of preventing an appearance of impropriety,” resolve all
doubts in favor of disqualification. U.S. v. Clarkston, 567 F.2d 270, 273 fn. 3 (4th Cir. 1977) (citing
Gas-A-Tron of Arizona v. Union Oil Co. of California, 534 F.2d 1322, 1324-25 (9th Cir. 1976).
However, a “stronger objective indicator . . . than simple judicial intuition is needed to warrant the
drastic step of disqualification of counsel.” Shaffer, 966 F.2d at 145.
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Although courts must consider the specific factual circumstances surrounding a motion to
disqualify, evidentiary hearings are not necessary in every instance. United States v. Philip Morris
Inc., 312 F.Supp.2d 27, 34-35 (D.D.C. 2004). Rather, courts must gather enough evidence to fairly
make a decision and preserve the record for appellate review. 	Id. 	If a court receives adequate
facts through affidavits, documents, or other submissions, it has discretion to determine that
discovery is unnecessary. Id.2
The Model Rules of Professional Conduct, as adopted by the West Virginia Supreme Court
of Appeals (hereinafter “Rule”) differentiate between prospective, current, and former clients
when assessing conflicts of interest. 	In matters dealing with a prospective client, Rule 1.18
governs, whereas Rule 1.09 applies for conflicts with former clients, and Rules 1.07 and 1.08 apply
for current clients. The nature of the attorney-client relationship governs which rule applies: if no
such relationship formed, but an attorney and a prospective client interacted on a specific matter,
then Rule 1.18 applies; if an attorney-client relationship applies but has since been terminated, the
client is a former client and 1.09 applies; and if an attorney-client relationship formed and was not
terminated, the rules for current representation apply.
West Virginia law has long held an attorney-client relationship forms when a client
expresses “a desire to employ” an attorney and the attorney consents “to act for him in a
professional matter.” Keenan v. Scott, 61 S.E. 806, 809 (W. Va. 1908). If no such meeting of the
minds occurs, but an attorney willingly interacts with an individual about undertaking potential
representation of that individual, then a prospective attorney-client relationship forms and Rule
1.18 governs any potential conflicts of interest. W. Va. R.P.C. 1.18(a).
Rule 1.18 provides that attorneys owe two clear duties to prospective clients: (1) they must
not use or reveal information provided by the prospective client except as would be permitted in
cases involving former clients and (2) they “shall not represent a client with interests materially
adverse to those of a prospective client in the same or a substantially related matter if the lawyer
received information from the prospective client that could be significantly harmful to that person
in the matter.” 	W. Va. R.P.C. 1.18(b) and (c). 	Notably, the standards set forth in this rule are
liberalized from the conflicts rules involving former or current clients. W. Va. R.P.C. 1.18 cmt. 6
2 In the matter at hand the parties agreed to submit the matter to the court for a ruling on the basis
of the briefing and the exhibits presented in connection therewith. The court likewise perceives
the record to be adequately developed and ripe for disposition.
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(noting that a “lawyer is not prohibited from representing a client with interests adverse to those
of the prospective client in the same or a substantially related matter unless the lawyer has received
from the prospective client information that could be significantly harmful if used in the matter.”)
Rule 1.09, on the other hand, prevents an attorney from representing a client “in the same or a
substantially related matter in which that person’s interests are materially adverse to the interests
of the former client” in all cases unless the former client gives informed consent confirmed in
writing. 	Thus, the key difference in the rules for conflicts with prospective clients and former
clients is that a conflict of interest only bars representation of an adverse party of the prospective
client if the consultation produced information that was significantly harmful to the prospective
client.
In cases governed by Rule 1.09, “the burden of establishing that a substantially related
matter exists is on the former client. Once it is established that the matters are substantially related,
the court will presume that confidential information was divulged during the earlier representation,
thereby avoiding disclosure of the very information which is to be protected.” State Ex. Rel. Ogden
Newspapers v. Wilkes, 566 S.E.2d. 560, 563 (W. Va. 2002). 	The clear justification for such a
presumption is to protect any disclosure of information protected by attorney-client privilege. Id.
The parties have not presented, nor has the court been able to locate, any case regarding whether
such a presumption applies under Rule 1.18. 	However, such a presumption may always be
rebutted, although the evidence available to an attorney seeking to rebut a presumption may be
limited by a duty to avoid disclosing privileged information.
In this case, the parties concede that no attorney-client relationship formed between Corwin
or the Debtor and Bailey & Glasser. 	Thus, the parties agree that Rule 1.18 governs whether a
conflict of interest exists. 	The Debtor asserts that a presumption exists that confidential
information was divulged during the earlier representation, and that such a presumption should be
expanded to include presuming that the disclosed information would be harmful to it in this
proceeding. 	Moreover, the Debtor asserts that an appearance of impropriety exists such that
allowing the representation to continue is improper. Bailey & Glasser argues that it has set forth
substantial evidence into the record to indicate that no harmful information was disclosed, thus the
representation is permitted under the West Virginia Rules of Professional Conduct, and therefore
disqualification would be improper.
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Bailey & Glasser has presented substantial evidence on the record documenting the
communications between Corwin and the firm and particularly Clackler. Based on the evidence
set forth, all of the information shared with Clackler or other members of the firm consisted of
information that was already in the possession of Premier. For instance, all of the emails forwarded
to Clackler were comprised of communications between Corwin and representatives of Premier.
Moreover, Premier was a party to all of the documents Corwin sent to Clackler. Thus, it is clear
that none of the information shared with Bailey & Glasser via email could be harmful to the Debtor
in the case of its bankruptcy or the related adversary proceeding. Furthermore, the telephonic and
personal discussions between Corwin and members of the firm were limited in length and
frequency. Moreover, Bailey & Glasser presented substantial documentation of the notes taken by
its attorneys and paralegals stemming from these discussions. 	None of the notes indicated that
Corwin shared information that could possibly be significantly harmful. Based on the abundance
of evidence provided by Bailey & Glasser, it clearly rebutted any presumption that harmful
information was shared during its consultation with Corwin. As the burden falls to the movant in
a motion to disqualify, and as the Debtor failed to provide any evidence of potentially harmful
information that Corwin shared with Bailey & Glasser, the Debtor fails to demonstrate that Bailey
& Glasser violated Rule 1.18.
The Debtor relies heavily on Healthnet, Inc. v. Health Net, Inc. to stand for the proposition
that an appearance of impropriety is enough to disqualify counsel in federal courts. 289 F.Supp.2d.
755 (S.D.W. Va. 2003). In that case, Judge Goodwin disqualified counsel for violating Rule 1.09
by representing a client in a matter substantially related to his representation of a former client
when the current and former client’s interests were directly adverse. Id. Furthermore, the court
explained that it “continue[d] to adhere to the rule that courts determining whether to disqualify
counsel should act to prevent the appearance of impropriety.” 	Id. at 758. 	The court further
explained that an appearance of impropriety exists if the moving party can show “that a reasonable
former client would be concerned by the conflict.”
This court finds the rationale in Healthnet unpersuasive within the context of the facts of
this case. First, Judge Goodwin found that the appearance of impropriety evidenced the violation
of Rule 1.09; an appearance of impropriety alone was not the basis for disqualification. Moreover,
to apply the Healthnet objective standard for when an appearance of impropriety signals a violation
of Rule 1.09 to Rule 1.18 would melt away the key difference in those rules. As explained above,
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Rule 1.18 bars representation of a client if an attorney possesses information that would be
significantly harmful to the prospective client in the matter at hand. Such a requirement is absent
from Rule 1.09. If courts were to find that Rule 1.18 was violated when a reasonable prospective
client would be concerned by the conflict, the limited protection offered by Rule 1.18 would be
expanded to the level of protection set forth in Rule 1.09. Undoubtedly, reasonable prospective
clients are concerned when they encounter, as opposing counsel, the firm with which they
previously consulted. 	However, comment 6 to Rule 1.18 makes it abundantly clear that such a
representation is permissible “unless the lawyer has received from the prospective client
information that could be significantly harmful if used in the matter.” As noted, the record here
fails to show a violation of that standard.
Furthermore, federal courts have held that, without more, “the possible appearance of
impropriety . . . is simply too weak and too slender a reed on which to rest a disqualification order.”
Freeman v. Chicago Musical Instrument Co., 689 F.2d 715, 723 (7th Cir. 1982) (citing Armstrong
v. McAlpin, 625 F.2d 433, 445 (2d Cir. 1980). This analysis from the Second and Seventh Circuits
is particularly convincing as motions to disqualify are not looked upon favorably in this Circuit or
in others. As disqualifications “may not be rested on mere speculation that a chain of events whose
occurrence theoretically could lead counsel to act counter to his clients interest might in fact occur”
and as the Debtor was only able to set forth hypothetical situations which may harm it, the motion
to disqualify must be denied. Shaffer v. Farm Fresh, Inc., 955 F2d 142, 145 (4th Cir. 1992).
III.CONCLUSION
Therefore, the Debtor has not satisfied his burden to demonstrate that Corwin shared
significantly harmful information during his consultation with Bailey & Glasser. 	Moreover,
Premier has rebutted any presumption that such harmful information was shared by producing
documentation of virtually every communication between Corwin and Bailey & Glasser.
Therefore, the court does hereby
ORDER that the Debtor’s Motion to Disqualify Counsel (Doc. No. 106) filed November
17, 2016, is DENIED.
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