Vicidiem v. Christensen

District Court, D. Utah·Decided August 31, 2020·No. 2:19-cv-00358·Unknown

Opinion

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH, CENTRAL DIVISION

VICIDIEM, INC., and CRAIG MEMORANDUM DECISION AND HUTCHINSON, ORDER DENYING MOTIONS TO DISQUALIFY COUNSEL Plaintiffs, v. Case No. 2:19-cv-358 DBB DBP

PAUL CHRISTENSEN, FIBERWAVE District Judge David B. Barlow TECHNOLOGIES LLC., et al., Magistrate Judge Dustin B. Pead Defendants.

This matter is referred to the undersigned from District Judge David Barlow based upon 28 U.S.C. 636(b)(1)(A). (ECF No. 86.) Pending before the court are competing motions to disqualify counsel. Defendants and Counterclaimants Paul Christensen and Dean North seek to remove Plaintiffs’ counsel Anderson & Karrenberg from this case. (ECF No. 83.) Plaintiffs and Counterclaim Defendants Craig Hutchinson and Vicidiem move the court to remove Kent Christensen who is Defendant Paul Christensen’s brother, and his father Roger Christensen, as counsel on this case. (ECF No. 92.) All of the Defendants are represented by these family members. For the reasons discussed below, the court denies Defendants’ Motion to Disqualify Counsel and denies Plaintiffs’ Motion to Disqualify Defendants’ Counsel. BACKGROUND Vicidiem provides services such as internet, television, and landline telephone services to apartment complexes and other multi-unit developments. Compl. p. 2, ECF No. 21. Hutchinson is the principal and founder of Vicidiem. From 2012 to 2013, Defendant Christensen represented Vicidiem, Hutchinson, and other equity owners of Vicidiem on a part time basis. Then in 2014 Christensen began working as Vicidiem’s “general counsel”1 drafting contracts, advising on litigation and employment matters, and representing Vicidiem on other legal issues. Plaintiffs assert that during this timeframe, Christensen became aware of Vicidiem’s critical information including pricing, contractual terms, account information, and negotiations. Over the next several

years, Christensen performed legal services for Vicidiem. For example, Christensen drafted non- solicitation and other non-compete agreements for Vicidiem, and he drafted a demand letter to a former Vicidiem employee regarding trade secrets and confidential information. In March 2019, Plaintiffs terminated Christensen. At the time of his termination Christensen was allegedly in possession of Vicidiem’s confidential information, including draft customer contracts. Despite requests to return the information, Christensen supposedly never complied. As is par for the course in cases similar to this one, shortly after Christensen was terminated, “three key Vicidiem employees … abruptly resigned.” Compl. p. 7. Defendants Dean North and Steven Tweedie were two of those that resigned. These employees, along with Christensen and others, then founded Fiberwave in April 2019. Plaintiffs’ allege that within days

of its founding, Defendants began reaching out to Vicidiem’s customers and vendors. This suit followed in May 2019. DISCUSSION The court has the inherent power to disqualify counsel “where necessary to preserve the integrity of the adversary process.” Field v. Freedman, 527 F.Supp. 935, 940 (D.Kan.1981). “It is well-established that ordinarily ‘the control of attorneys' conduct in trial litigation is within the

1 Plaintiffs note that Christensen “held himself out as General Counsel of Vicidiem.” Mtn p. 5, ECF No. 92. Plaintiffs refer to Christensen’s legal services as “independent contractor services” in the Amended Complaint. (ECF No. 21, p. 6.) Whether Christensen was Vicidiem’s General Counsel is immaterial to the court’s decision. It is clear from the record, that Christensen was involved in legal services for Vicidiem on a consistent and detailed basis for a number of years. supervisory powers of the trial judge,’ and is thus a matter of judicial discretion.” Cole v. Ruidoso Mun. Sch., 43 F.3d 1373, 1383 (10th Cir. 1994) (quoting Redd v. Shell Oil Co., 518 F.2d 311, 314 (10th Cir. 1975)). The moving party bears the burden on a motion to disqualify counsel. See Parkinson v. Phonex Corp., 857 F.Supp. 1474 (D. Utah 1994). An evidentiary hearing on a

motion to disqualify is not required when the parties have fully briefed the issue. See Weeks v. Indep. School Dist. No. I–89 of Oklahoma City., OK., Bd. Of Educ., 230 F.3d 1201, 1212 (10th Cir.2000). The parties have fully briefed the issue, in fact, the parties have filed multiple replies and sur-replies, and additional evidence is unnecessary. “A district court has broad discretion in imposing the remedy of disqualification.” Weeks, 230 F.3d at 1211. Yet, “federal courts have treated a motion for disqualification as one that should only rarely be granted.” Parkinson, 857 F.Supp. at 1480. As noted by Tenth Circuit, motions to disqualify are governed by two factors. “First, attorneys are bound by the local rules of the court in which they appear.” Cole, 43 F.3d at 1383. Federal courts generally adopt the rules of professional conduct of the state in which they reside. As set forth in the Local Rules,

attorneys appearing before this court are bound by the Utah Rules of Professional Conduct. See DUCivR 83–1.5.1(a). “Second, because motions to disqualify counsel in federal proceedings are substantive motions affecting the rights of the parties, they are decided by applying standards developed under federal law.” Cole, 43 F.3d at 1383 (internal citations omitted). The local rules of this court specifically provide that “attorneys practicing before this court ... must comply ... with the rules of practice adopted by this court and with the Utah Rules of Professional Conduct as revised, amended, and interpreted by this court.” DUCivR 83- 1.5.1(a). “Utah has adopted, with some variations, the American Bar Association Model Rules of Professional Conduct.” SLC Ltd. V v. Bradford Group West, Inc., 999 F.2d 464. 466 (10th Cir.1993). The Tenth Circuit specified that the ABA Model Rules of Professional Conduct “reflect the national standard to be used in ruling on disqualification motions.” Cole, 43 F.3d at 1383. (i) Defendants’ Motion to Disqualify Anderson and Karrenberg

Anderson & Karrenberg represent Plaintiffs Vicidiem and Craig Hutchinson in this case. Hutchinson is Vicidiem’s CEO and the sole director of its board of directors. (ECF No. 45 ¶7.) The counterclaims brought by Defendants assert that Hutchinson has been siphoning and or misdirecting “millions of dollars in resources, opportunities, and Vicidiem stock, for his benefit.” Mtn p. 18. Defendants contend that Anderson & Karrenberg should be disqualified under Utah Rule of Professional conduct 1.7, which governs conflicts of interest involving current clients. Rule 1.7 provides “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.” UT R RPC Rule 1.7. The rule, however, also provides that “[n]otwithstanding the existence of a concurrent conflict of interest ..., a lawyer may represent a client if ... each affected client gives informed consent, confirmed in writing.” Id.

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