ALLIEDSIGNAL RECOVERY v. AlliedSignal, Inc.

934 So. 2d 675, 2006 Fla. App. LEXIS 13247, 2006 WL 2265520
CourtDistrict Court of Appeal of Florida
DecidedAugust 9, 2006
Docket2D05-4251
StatusPublished
Cited by12 cases

This text of 934 So. 2d 675 (ALLIEDSIGNAL RECOVERY v. AlliedSignal, Inc.) is published on Counsel Stack Legal Research, covering District Court of Appeal of Florida primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
ALLIEDSIGNAL RECOVERY v. AlliedSignal, Inc., 934 So. 2d 675, 2006 Fla. App. LEXIS 13247, 2006 WL 2265520 (Fla. Ct. App. 2006).

Opinion

934 So.2d 675 (2006)

ALLIEDSIGNAL RECOVERY TRUST, Petitioner,
v.
ALLIEDSIGNAL, INC., Respondent.

No. 2D05-4251.

District Court of Appeal of Florida, Second District.

August 9, 2006.

*676 Donald B. Ayer, Gregory M. Shumaker, Edward K.M. Bilich, Michael S. Fried of Jones Day, Washington, D.C.; and John W. Frost, II, of Frost, Tamayo, Sessums & Aranda, P.A., Bartow, for Petitioner.

Benjamin H. Hill, III, and Dennis P. Waggoner of Hill, Ward & Henderson, P.A., Tampa; Steven D. McCormick, PC of Kirkland & Ellis, LLP, Chicago, Illinois; Major B. Harding and John Beranek of Ausley & McMullen, P.A., Tallahassee; Eugene F. Assaf and Craig S. Primis of Kirkland & Ellis, LLP, Washington, D.C., for Respondent.

LaROSE, Judge.

AlliedSignal Recovery Trust (Trust), a group of creditors of Breed Technologies, Inc. (Breed), petitioned this court for certiorari review of an interlocutory order disqualifying its trial counsel, Geoffrey Stewart, in Breed's fraud lawsuit against AlliedSignal, Inc. (AlliedSignal). In an *677 earlier order, we granted the petition and quashed the trial court's order. We take this opportunity to explain our reasoning.

At the outset, we note that "certiorari is the proper remedy to seek review of an order granting or denying a motion to disqualify counsel or a law firm." Gonzalez v. Chillura, 892 So.2d 1075, 1076 (Fla. 2d DCA 2004). After all, an order disqualifying counsel denies the right to choose one's counsel and works a material injury that cannot be remedied on appeal. Id. at 1076-77; City of Lauderdale Lakes v. Enter. Leasing Co., 654 So.2d 645, 646 (Fla. 4th DCA 1995).

The underlying facts are straightforward. Breed manufactured automobile air bag systems. Safety Restraint Systems (SRS), an AlliedSignal division, also manufactured automobile safety products. Breed retained Mr. Stewart, long-time counsel for Breed and its founders, to negotiate the purchase of SRS from Allied-Signal. In late 1997, Breed acquired SRS for $710,000,000.

In mid-1998, Breed allegedly learned that SRS's financial condition was significantly worse than previously represented by AlliedSignal. Breed's financial condition deteriorated and bankruptcy loomed. In 1999, Mr. Stewart advised Breed's founders to restructure their personal financial affairs to avoid potential mismanagement claims by Breed's creditors. Mr. Stewart also conducted an investigation that allegedly revealed that AlliedSignal had concealed critical financial information about SRS and seriously misrepresented SRS's past and projected earnings. In the summer of 1999, Breed, represented by Mr. Stewart, sued AlliedSignal. In defense, AlliedSignal contended that Mr. Stewart concocted his discovery of alleged fraud to insulate Breed's founders from mismanagement claims.

Several weeks after filing suit, Breed filed for bankruptcy protection. As part of Breed's restructuring, the bankruptcy court authorized formation of the Trust to pursue the fraud claims against AlliedSignal on behalf of Breed's creditors. In effect, Breed's claims were transferred to the Trust. "After payment of fees and expenses, any recovery from Allied Signal by the Trust [would] be distributed to Breed's creditors." Allied Signal Recovery Trust v. Allied Signal, Inc., 298 F.3d 263, 266 n. 2 (3d Cir.2002). The Trust retained Mr. Stewart as its counsel.

AlliedSignal moved to disqualify Mr. Stewart. The motion stressed that Mr. Stewart had an extensive and lengthy relationship with Breed and its founders, the fraud claims were based on Mr. Stewart's investigation, and the asset protection advice he gave to Breed's founders created a conflict between him and the Trust. According to AlliedSignal, Mr. Stewart would be a key trial witness or, at a minimum, an impermissible "unsworn witness."[1]

The Trust opposed the motion. It argued that disqualification was limited to two situations: (1) where the lawyer is a necessary witness for his own client; or (2) where the attorney, when called as a witness for the other side, will provide testimony prejudicial to his client and the client either does not consent to waive the conflict or does consent and the court finds the consent unreasonable.

Although the Trust saw no conflict, it waived any potential conflict of interest that Mr. Stewart might have in representing *678 the Trust. Further, the Trust disavowed any need or intention to call Mr. Stewart to testify at trial. The Trust certainly did not act injudiciously; the trustee consulted with Trust beneficiaries, sophisticated business entities, and financial institutions represented by competent lawyers. They supported Mr. Stewart's continued role as counsel, recognizing his expertise, detailed knowledge of the legal and factual issues in the case, and familiarity with Breed and its personnel. Nevertheless, the trial court disqualified Mr. Stewart. It concluded that Mr. Stewart was a necessary witness for AlliedSignal, was likely to be an "unsworn witness" at trial, and that any conflict waiver by the Trust was unreasonable.

Disqualification is an extraordinary remedy to be used sparingly. Therriault v. Berghmans, 788 So.2d 1119, 1120 (Fla. 2d DCA 2001); Arcara v. Philip M. Warren, P.A., 574 So.2d 325, 326 (Fla. 4th DCA 1991). Disqualification is an "immensely unusual remedy." Whitener v. First Union Nat'l Bank of Fla., 901 So.2d 366, 370 (Fla. 5th DCA 2005). An order disqualifying counsel "`must be tested against the standards imposed by [the] Rules of Professional Conduct.'" Tobkin v. Tobkin, 843 So.2d 961, 962 (Fla. 4th DCA 2003) (quoting City of Lauderdale Lakes, 654 So.2d at 646); accord Ray v. Stuckey, 491 So.2d 1211, 1213 (Fla. 1st DCA 1986); Cazares v. Church of Scientology of Cal., Inc., 429 So.2d 348, 349 (Fla. 5th DCA 1983). Measured against these standards, Mr. Stewart's disqualification was inappropriate.

The Rules Regulating the Florida Bar provide:

Rule 4-3.7. Lawyer as witness
(a) When Lawyer May Testify. A lawyer shall not act as advocate at a trial in which the lawyer is likely to be a necessary witness on behalf of the client except where:
(1) the testimony relates to an uncontested issue;
(2) the testimony will relate solely to a matter of formality and there is no reason to believe that substantial evidence will be offered in opposition to the testimony;
(3) the testimony relates to the nature and value of legal services rendered in the case; or
(4) disqualification of the lawyer would work substantial hardship on the client.

Rule 4-3.7 prohibits a lawyer from serving as trial counsel for a client where he is likely to be a necessary witness for that client. "Combining the roles of advocate and witness can prejudice the opposing party and can involve a conflict of interest between the lawyer and client." Rule 4-3.7 cmt. This dual role could create a conflict if the lawyer's testimony is at odds with that of his client. Moreover, the dual role could prejudice the opposing party by bolstering the lawyer's testimony for his client because it comes from an advocate. See Scott v. State, 717 So.2d 908, 910 (Fla.1998).

Rule 4-3.7 is inapplicable here, however; the rule contemplates the lawyer testifying on his client's behalf. The Trust conceded that Mr.

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Bluebook (online)
934 So. 2d 675, 2006 Fla. App. LEXIS 13247, 2006 WL 2265520, Counsel Stack Legal Research, https://law.counselstack.com/opinion/alliedsignal-recovery-v-alliedsignal-inc-fladistctapp-2006.