In Re Se. Eye Ctr. (Pending Matters)

2020 NCBC 9
North Carolina Business Court·Decided January 30, 2020·No. 15-CVS-1648·Published

Opinion

In re Se. Eye Ctr. (Pending Matters), 2020 NCBC 9.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION

WAKE COUNTY 15 CVS 1648

IN RE SOUTHEASTERN EYE ORDER AND OPINION ON KAY CENTER-PENDING MATTERS HARRIS TURNER’S MOTION TO INTERVENE, TURNER’S MOTION TO REMOVE THE $2.1 MILLION

JUDGMENT AGAINST JDPW TRUST AND TO REMOVE JDPW TRUST

FROM RECEIVERSHIP, AND

PLAINTIFFS’ MOTION TO

DISQUALIFY DOUGLAS S. HARRIS AS COUNSEL FOR TURNER

(OLD BATTLEGROUND V. CCSEA)

1. THIS MATTER is before the Court upon (i) the Motion of the Sole Beneficiary of JDPW Trust, Kay Harris Turner (“Turner”), to Intervene Pursuant to Rule 24 of the North Carolina Rules of Civil Procedure (“Motion to Intervene”), (ECF No. 1182); (ii) Turner’s Motion to Remove the $2.1 Million Judgment Against JDPW Trust and to Remove JDPW Trust from Receivership Pursuant to Rule 60(b)(4)(5)(6) (“Rule 60(b) Motion”) (together with the Motion to Intervene, “Turner’s Motions”), (ECF No. 1176); and (iii) Plaintiffs Old Battleground Properties, Inc. and Nivison Family Investments LLC’s (collectively, the “Nivison Parties”) Motion to Disqualify Douglas S. Harris (“Harris”) as Counsel for Turner (“Motion to Disqualify”), (ECF No. 1196), (collectively, the “Motions”).

2. Having considered the Motions, the related briefing, and the arguments of counsel at the hearing on the Motions, the Court GRANTS the Motion to Disqualify and STRIKES the Motion to Intervene and Rule 60(b) Motion, including supporting briefs and materials, without prejudice to Turner’s right to refile or renew either Motion prior to March 16, 2020.

Smith Debnam Narron Drake Saintsing & Myers, LLP, by Byron L.

Saintsing, for Plaintiffs Nivison Family Investments, LLC and Old Battleground Properties, Inc. and Third-Party Defendant Arthur Nivison.

Oak City Law LLP, by Robert E. Fields, III, for Receiver Gerald A.

Jeutter, Jr., as Receiver for JDPW Trust U/T/A Dated June 8, 2007, Central Carolina Surgical Eye Associates, P.A., HUTA Leasing LLC, Southeastern Eye Management, Inc., Southeastern Cataract Laser Center, PLLC, EMS Partners, LLC, KEPES Newco, LLC, and DRE Newco, LLC.

Wyatt Early Harris Wheeler, LLP, by Scott F. Wyatt and Donavan J.

Hylarides, for Defendants Richard A. Harris, Historic Castle McCulloch, LLC, and Castle McCulloch, Inc.

Douglas S. Harris, pro se.

Douglas S. Harris for Kay Harris Turner, in her alleged capacity as the beneficiary of JDPW Trust U/T/A Dated June 8, 2007.

Bledsoe, Chief Judge.

I.

BACKGROUND

3. The factual and procedural background of this case is extensive and complex. A detailed background may be found in In re Se. Eye Ctr.-Pending Matters, 2019 NCBC LEXIS 29 (N.C. Super. Ct. May 7, 2019) (“Summary Judgment Order”). The Court recites here only the background facts and procedural history relevant to the Motions.

4. After the Summary Judgment Order was entered on July 26, 2019, the Court noticed a jury trial of all remaining issues in this action for December 9, 2019.

(ECF No. 1171.) A few weeks later, on August 13, 2019, Turner, in her purported capacity as the beneficiary of JDPW Trust U/T/A Dated June 8, 2007 (“JDPW Trust” or the “Trust”) and through her counsel Harris, filed the Rule 60(b) Motion, by which she sought to remove the Nivison Parties’ $2.1 million allowed claim against the Trust and remove the Trust from the current receivership. 1 (Mot. Remove $2.1 Million J. JDPW Trust & Remove JDPW Trust Receivership Pursuant Rule 60(b)(4)(5)(6), ECF No. 1176.) The $2.1 million claim had been allowed and the Trust placed into receivership through this Court’s orders dated April 28, 2016. (ECF Nos. 471, 472.)

5. Because the Rule 60(b) Motion potentially impacted the scope of the issues for trial, the Court continued the jury trial to January 27, 2020. (ECF No. 1181.) Thereafter, on August 22, 2019, Turner, again purporting to act in her capacity as the beneficiary of the Trust, moved to intervene for the limited purpose of making the Rule 60(b) Motion. (Mot. Sole Beneficiary JDPW Trust, Kay Harris Turner, Intervene Pursuant Rule 24 N.C. R. Civ. P., ECF No. 1182.) The Court permitted limited discovery concerning Turner’s Motions, (ECF No. 1190), and set a briefing and hearing schedule on the then-pending Motions, (ECF No. 1191).

1 Gerald A. Jeutter, Jr. (“Receiver”) has been appointed to serve as receiver over the following

entities: Central Carolina Surgical Eye Associates, P.A. (“CCSEA”), EMS Partners, LLC, Southeastern Cataract Laser Center, PLLC, Southeastern Eye Management, Inc., HUTA Leasing, LLC, Kepes Newco, LLC, DRE Newco, LLC, and JDPW Trust (collectively, the “Receivership Entities”). See Se. Eye Ctr., 2019 NCBC LEXIS 29, at *19, n. 4, *20; Old Battleground Props. v. Cent. Carolina Surgical Eye Assocs., P.A., 2015 NCBC LEXIS 19, at *24 (N.C. Super. Ct. Feb. 25, 2015).

6. On September 20, 2019, the Nivison Parties moved to disqualify Harris as counsel for Turner under Rules 1.7 and 3.7 of the North Carolina Rules of Professional Conduct. (Pls.’ Mot. Disqualify Douglas S. Harris Counsel Kay Harris Turner [hereinafter “Mot. Disqualify”], ECF 1196.)

7. The Court held a hearing on the Motions on January 8, 2020, at which all parties were represented by counsel and Harris appeared pro se. The Motions are ripe for resolution.

II.

ANALYSIS

A. Motion to Disqualify 8. Although last filed, the Court concludes that the Motion to Disqualify should be determined before Turner’s Motions. As explained more fully below, Plaintiffs allege that Harris has conflicts of interest that preclude his representation of Turner in this litigation, including that he will be a material witness offering testimony in conflict with Turner at trial and that he has economic interests in the outcome of the litigation directly opposed to Turner’s interests. Because there is an obvious risk that Turner’s Motions have been prepared by conflicted counsel, the Court concludes that justice and fairness require that the Motion to Disqualify be decided first, with Turner’s Motions decided only if the Motion to Disqualify is denied.

9. Numerous courts around the country have followed this approach under similar circumstances. See, e.g., Grimes v. District of Columbia, 794 F.3d 83, 90 (D.C. Cir. 2015) (“[A] plausible claim of conflict must be resolved before allegedly conflicted counsel or the court takes further action in the case[,]” as “a conflict of interest could affect the fairness and impartiality of the proceeding[.]”); id. (“Resolving asserted conflicts before deciding substantive motions assures that no conflict taints the proceeding, impairs the public’s confidence, or infects any substantive motion prepared by or under the auspices of conflicted counsel.”); Bowers v. Ophthalmology Grp., 733 F.3d 647, 654 (6th Cir. 2013) (“A [trial] court must rule on a motion for disqualification of counsel prior to ruling on a dispositive motion because the success of a disqualification motion has the potential to change the proceedings entirely.”); Sumpter v. Hungerford, No. 12-717, 2013 U.S. Dist. LEXIS 71119, at *12 (E.D. La. May 20, 2013) (A “motion to disqualify must . . . be resolved first in the interest of fairness and judicial economy[.]”); see also, e.g., Albert v. Hess Oil V.I. Corp., 70 V.I. 316, 335 (V.I. Super. Ct. 2019) (“This Court . . . holds that a motion to disqualify an attorney must be resolved before any other motion.”); Martino v. DeMartino, No. FA054007219S, 2006 Conn. Super. LEXIS 1878, at *6 (Conn. Super. Ct. June 14, 2006) (“[W]hen the defendant filed this motion to disqualify, action on all other motions was, of necessity, held in abeyance. A motion to disqualify must be resolved before the other pending motions may be decided.” (citation omitted)). 2 10. The Court now turns to the Motion to Disqualify.

2 Some courts have found an exception to this general rule when a motion to disqualify is

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