This matter is before the court on two motions to disqualify counsel: (1) the motion of the plaintiffs to disqualify the members of Stites & Harbison, PLLC ("Stites") from representation of the defendants; and (2) the motion of the defendants to disqualify Terri Stallard and the remaining members of McBrayer, McGinnis, Leslie & Kirkland, PLLC ("MMLK") from representation of the plaintiffs. These motions have been fully briefed and are now ripe for review. The court, having reviewed the record and being otherwise sufficiently advised, will DENY both motions.
This matter is a dispute related to a family trust which was established by James V. Martin. Plaintiffs, Roxanne Umphenour, Norman W. Umphenour and ANZAC, LLC, filed this action stating claims against the defendants, Lynn Jane Mathias, John Robert Mathias, individually, and John Robert Mathias in his capacity as trustee of the Joseph V. Martin Irrevocable Trust dated May 17, 1985, for waste, unjust enrichment and breach of contract.
Mr. Martin created the James V. Martin Irrevocable Trust on May 17, 1985 (the "Trust") one day prior to his marriage to Lillian G. Martin. The principal asset of the Trust is/was Highcroft Farm, approximately 120 acres located in Fayette County, Kentucky. The Trust was established to provide for Mr. Martin's needs during his lifetime. John R. Mathias, a defendant, was named as co-trustee of the Trust along with Mr. Martin. The trust instrument provides that "after the death of Mr. Martin, the trust shall terminate and the corpus and any undistributed income shall be distributed to the children of [Mr. Martin]," Lynn Jane Mathias, Roxanne Umphenour (then Roxanne Martin), and John Grover Martin (collectively, the "Beneficiaries"). (Trust Agreement attached as Exhibit A to Defendants' Motion to Disqualify).
Mr. Martin died in 1997. Subsequent to his death, the Trust was the subject of litigation filed by Lillian Martin. Lillian Martin claimed that the Trust was a fraud on her dower rights and attempted to acquire one-half of the interest in Highcroft Farm ("Dower Litigation"). Katherine Coleman and Gina McCann of the law firm of Sturgill, Turner, Barker & Moloney, PLLC originally represented the Beneficiaries and the Trust. In October 1998, Joel Turner and Andrew Horne of the law firm of Brown, Todd & Heyburn (which is now known as Frost Brown Todd ("FBT")) were substituted as counsel for the Beneficiaries and the Trust. The Dower Litigation concluded by order of the Kentucky Supreme Court entered in 2003. The Dower Litigation was funded, in part, by a note in the amount of $65,000 issued by Mr. Mathias, Ms. Mathias and the Trust to ANZAC, LLC.
Although Terri Stallard was an attorney at Brown, Todd & Heyburn during the pendency of the Dower Litigation, there is no evidence in the record that Ms. Stallard worked on the Dower Litigation matter. There is evidence, however, that Ms. Stallard performed work related to the probate of Mr. Martin's estate after the completion of the Dower Litigation. Stallard wrote a letter to Mr. James Roscoe at Bank One dated November 4, 2003, regarding the "Martin Trust Agreement." (Letter from Terri Stallard attached as Exhibit C to Defendants' Motion to Disqualify). Barton T. Rogers, an attorney at FBT, wrote a letter to Roxanne Martin dated March 20, 2003, wherein Mr. Rogers stated that he "appeared on your and your siblings' behalf . . . " in connection with the probate of Mr. Martin's will. The letter goes on to state that upon receipt of additional information, "Terri or I will be in contact with you." (Letter from Barton T. Rogers attached as Exhibit D to Defendants' Motion to Disqualify). No engagement letter has been presented with regard to the prior legal work performed by attorneys at FBT.
In 1993, prior to Mr. Martin's death, Steve Ruschell, an attorney at Stites, advised Mr. Mathias regarding the duties of a fiduciary. (Letter from Steve Ruschell to John Mathias attached as Exhibit B to Plaintiffs' Motion to Disqualify). In relation to the legal advice regarding the duties of a fiduciary, Mr. Ruschell held a meeting at Stites' office on July 23, 1993, which the Beneficiaries attended. Ms. Umphenour recorded the meeting because her attorney, Jonathan Buckley, was unable to attend. (Notes from July 23, 1993, meeting attached as Exhibit A to Defendants' Response to Plaintiffs' Motion to Disqualify). Ms. Umphenour states that she "spoke with Mr. Ruschell, and relied upon his advice, in regard to general matters pertaining to the Trust, and specifically to matters pertaining to the fiduciary duties of both Co-Trustees (my father and John Mathias)," and that she "offered [her] information and relied on Mr. Ruschell's opinions based on [her] understanding that [they] had an attorney-client relationship." (Affidavit of Roxanne Umphenour attached as Exhibit A to Plaintiffs' Motion to Disqualify). The bills for this advice were paid by Mr. Mathias. No engagement letter has been presented with regard to this legal work.
Ms. Stallard is now associated with the law firm of MMLK. She originally entered an appearance in this matter but subsequently withdrew. Ms. Stallard has been copied on correspondence regarding the current litigation. Mr. Ruschell is still associated with the Stites law firm. He has not entered an appearance in this matter but was the recipient of letters attached as Exhibits to the instant motions.
As this court has noted in its prior opinions, motions to disqualify are governed by two sources of authority - local rules and federal common law. See Republic Services, Inc. v. Liberty Mutual Insurance Co., 2006 WL 3004014 at *4 (E.D. Ky. Oct. 20, 2006) (unpublished). Thus, the attorneys of record in this action are subject to the Kentucky Rules of Professional Conduct and the judicial decisions interpreting those rules. A district court has inherent authority to disqualify an attorney as a sanction for professional unethical conduct. See Cavender v. U.S. Xpress Enters., Inc., 191 F. Supp. 2d 962, 965 (E.D. Tenn. 2002). A district court does not, however, possess "unfettered discretion to disqualify counsel." Kitchen v. Aristech Chemical, 769 F. Supp. 254, 258 (S.D. Ohio 1991). "[D]isqualification is a drastic measure which courts should be hesitant to impose except when absolutely necessary. Disqualification separates a party from the counsel of his choice with immediate and measurable effect. Zurich Ins. Co. v. Knotts, 52 S.W.3d 555, 560 (Ky. 2001) (cited by Hall v. MLS National Medical Evaluations, 2008 WL 533542 (E.D. Ky. Feb. 27, 2008) (unpublished)). When confronted with a motion to disqualify, courts must be sensitive to the competing public policy interests of preserving client confidences and of permitting a party to retain counsel of its choice. Manning v. Waring, Cox, James, Sklar & Allen, 849 F. 2d 222, 224 (6th Cir. 1988). Resolving these competing interests requires the court to balance the interest of the public in the proper safeguarding of the judicial process together with the interests of each party to the litigation. General Mill Supply Co. v. SCA Servs., Inc., 697 F. 2d 704, 715 (6th Cir. 1982).
Rule 1.9 and Rule 1.10 of the Kentucky Rules of Professional Conduct set forth in Kentucky Supreme Court Rule 3.130 guide this court's review of the conduct challenged by both the plaintiffs' motion to disqualify the defendants' counsel based on a prior attorney-client relationship between plaintiffs and Mr. Ruschell and the defendants' motion to disqualify the plaintiffs' counsel based on a prior attorney-client relationship between defendants and Ms. Stallard.
Rule 1.9 entitled "Conflict of Interest: former client," provides as follows: A lawyer who has formerly represented a client in a matter shall not thereafter:
(a) Represent another person in the same or a substantially related matter in which that person's interests are materially adverse to the interests of the former client unless the former client consents after consultation;
(b) Represent a person in the same or a substantially related matter in which a firm with which the lawyer formerly associated had previously represented a client
(1) whose interests are materially adverse to that person; and
(2) about whom the lawyer had acquired information protected by Rule 1.6 and 1.9(c) that is material to the matter; unless the former ...