Disqualification — Sixth Circuit Utilizes Hempstead Video’s Trial Taint Standard — Ethical Wall and Actual Meaning of “Of Counsel” Relationship on the Facts Preclude Finding of Conflict (Criminal Case; Consitutional Implications)

United States v. Kilpatrick, 2015 U.S. App. LEXIS 14289 (6th Cir. Aug. 14, 2015):

Codefendants Kwame Kilpatrick, former mayor of Detroit, and Bobby Ferguson, a Detroit contractor, challenge their jury convictions for bribery, extortion, mail and wire fraud, RICO conspiracy, and tax evasion. The issues are whether: (1) Kilpatrick was denied his constitutional right to conflict-free counsel because his two lead attorneys had recently become "of counsel" to a firm that was suing Kilpatrick for alleged conduct related to his criminal [*2]  charges; (2) the extensive testimony by two case agents violated the Rules of Evidence; (3) the district court erred when it allowed witnesses to report what other people had told them about Kilpatrick and Ferguson as evidence that the witnesses feared the defendants; and (4) the district court erred by ordering Kilpatrick to pay restitution to the Detroit Water & Sewerage Department and to the IRS. For the reasons that follow, we AFFIRM the convictions, but VACATE and REMAND the restitution order.


The trial of Kilpatrick, Ferguson, and Bernard Kilpatrick (Kilpatrick's father, who is not a party in this appeal) transpired from September 2012 to March 2013. The six-month proceeding included almost 100 government witnesses and over 700 exhibits, and encompassed 10,000 pages of transcripts. The jury found Kilpatrick guilty of 24 of the 30 counts against him. These include one count of RICO conspiracy, 18 U.S.C. § 1962(d); four counts of extortion, 18 U.S.C. § 1951; one count of attempted extortion, 18 U.S.C. § 1951; one count of bribery, 18U.S.C. § 666(a); eleven counts of mail and wire fraud, 18 U.S.C. §§ 1341, 1343; five counts of subscribing a false tax return, 26 U.S.C. § 7206(a); and one count of income tax evasion, 26 U.S.C. § 7201. The jury found Ferguson guilty of nine out of eleven counts: [*3]  one count of RICO conspiracy, 18 U.S.C. § 1962(d); six counts of extortion, 18 U.S.C. § 1951; one count of attempted extortion, 18 U.S.C. § 1951; and one count of bribery, 18 U.S.C. § 666(a).

Kilpatrick and Ferguson then moved for a new trial. Among their grounds for relief were the first three arguments they now make to this court. The district court denied the motion.  [**3]  The issues in this appeal do not require a detailed explanation of the charges and the evidence. Suffice it to say that the government's main theory was that Kilpatrick and Ferguson conspired to extort money from other Detroit-area contractors by pressuring them to include Ferguson's companies in their city contracts--even when Ferguson's companies were not the most qualified candidates and even when Ferguson's companies did no work.


We turn first to Kilpatrick's claim that he was denied his constitutional right to conflict-free counsel. This claim concerns Kilpatrick's lead trial attorneys, James Thomas and Michael Naughton. Kilpatrick initially hired Thomas in 2008 to represent him in other matters. After Kilpatrick was indicted in this case, the district court--upon Kilpatrick's request--appointed Thomas and Naughton to serve as his counsel under the Criminal [*4]  Justice Act.


From 2005 to 2010, the year of Kilpatrick's indictment, Thomas represented Gaspar Fiore. Fiore eventually became a victim-witness in the government's investigation of Kilpatrick and Ferguson.

In July 2011, the Macomb Interceptor Drain Drainage District filed a civil complaint against Kilpatrick as lead defendant in a case involving the Macomb Drain project--one of the city sewer department projects that was an issue in the criminal case. The plaintiff's counsel in that lawsuit was the firm of O'Reilly Rancilio P.C. ("the O'Reilly Firm"). Although Kilpatrick did not retain Thomas and Naughton to represent him in the civil case, Thomas and Naughton filed Kilpatrick's answer to prevent default. In April 2012, Thomas and Naughton became "of counsel" attorneys with the O'Reilly Firm. Accordingly, they obtained an order from the court in the civil suit allowing them to withdraw from representing Kilpatrick. Naughton certified that he served Kilpatrick with a copy of the order and indicated Kilpatrick acknowledged receipt of the order. In August 2012, shortly before the criminal trial, Kilpatrick told the district court that he wanted Thomas to withdraw on account of Thomas's [*5]  previous representation of Fiore and a breakdown in the attorney-client relationship.

 [**4]  The court asked for briefing on all possible conflicts and held a hearing on August 14, 2012 (an earlier conflict hearing on August 7 did not concern the O'Reilly Firm issue). Thomas told the court he could not ethically cross-examine his former client Fiore. He also explained that he and Naughton maintained a separate office from the O'Reilly Firm, had separate electronic filings systems, and had no financial ties to the Macomb Drain litigation.

To alleviate the apparent conflict, the government agreed to withdraw the charges that concerned Fiore. Additionally, the court appointed a separate attorney to cross-examine the witnesses related to the Macomb Drain project.1 In light of these safeguards and the uncontested evidence that Thomas and Naughton had separate offices and separate physical and electronic filing systems from the O'Reilly Firm and no financial relationship to the Macomb Drain litigation, the district court declined to disqualify Kilpatrick's attorneys.

1   That attorney was Harold Gurewitz, who represents Kilpatrick in this appeal.

The district court also considered Kilpatrick's claim that [*6]  he had lost trust in his attorneys and could no longer work with them. The court denied Kilpatrick's motion to replace his attorneys, finding that it was merely a tactic to delay the trial. Kilpatrick does not appeal this aspect of the decision.

The criminal trial began on September 6, 2012. On October 31, 2012, the court in the civil case dismissed all claims against Kilpatrick. On February 11, 2013, the day closing arguments began in the criminal trial, the court in the civil case denied the plaintiff's motion for reconsideration.

On appeal, Kilpatrick points out that the civil suit incorporated allegations from Kilpatrick's indictment, and that the civil plaintiff attempted to amend its complaint during the criminal trial, drawing on evidence that was being developed during that trial. Thomas and Naughton, Kilpatrick explains, "were defending Kilpatrick in the criminal case on the very same alleged acts of corruption that the firm to which they were of counsel sought to establish in a parallel civil suit."

 [**5] B. ANALYSIS

Kilpatrick contends that (1) Thomas and Naughton had an actual conflict of interest due to the O'Reilly Firm's simultaneous representation of the plaintiff in the civil [*7]  suit, which he argues deprived him of the effective assistance of counsel; and (2) the district court failed to thoroughly investigate and resolve the attorneys' conflicts.

Whether counsel rendered ineffective assistance is a mixed question of law and fact that we review de novo. McFarland v. Yukins, 356 F.3d 688, 699 (6th Cir. 2004). We review the district court's underlying factual findings for clear error. Id.

The Sixth Amendment's right to counsel includes a "correlative right to representation that is free from conflicts of interest." Wood v. Georgia, 450 U.S. 261, 271 (1981). For most ineffective-assistance-of-counsel claims, the defendant must prove both (1) deficient performance and (2) prejudice to warrant reversal of a conviction. Strickland v. Washington, 466 U.S. 668, 687 (1984). But conflict-of-interest claims warrant a modified Strickland analysis. Moore v. Mitchell, 708 F.3d 760, 777 (6th Cir.), cert. denied sub nom. Moore v. Robinson, 134 S. Ct. 693 (2013). When assessing alleged conflicts of interest, courts presume prejudice exists if the defendant demonstrates that counsel "actively represented conflicting interests" and that this "actual conflict of interest adversely affected" the lawyer's performance. Burger v. Kemp, 483 U.S. 776, 783 (1987) (quoting Strickland, 466 U.S. at 692).

To prove actual conflict, a defendant must "point to specific instances in the record" and "make a factual showing of inconsistent interests." Thomas v. Foltz, 818 F.2d 476, 481 (6th Cir. 1987) (quoting United States v. Mers, 701 F.2d 1321, 1328 (11th Cir. 1983)). The defendant must show that the lawyer "made [*8]  a choice between possible alternative courses of action, such as eliciting (or failing to elicit) evidence helpful to one client but harmful to the other." McFarland, 356 F.3d at 705 (quoting Thomas, 818 F.2d at 481). However, the more reasonable the lawyer's choice, the less likely it was the result of actual conflict. Id. at 706.

Kilpatrick's ineffective-assistance claim fails for two independent reasons: Kilpatrick cannot show that (1) his attorneys actively represented conflicting interests or (2) an actual conflict adversely affected their performance. First, to establish the actual conflict, Kilpatrick  [**6]  cites the Michigan Rules of Professional Conduct and a State Bar of Michigan Opinion. Together, the sources prohibit a lawyer (and through imputed disqualification, the firm with which the lawyer is associated, including through an of-counsel relationship) from representing a client if the representation is "directly adverse" to another client. Mich. R. Prof'l Conduct 1.7(a), 1.10(a); Mich. Bar Op. No. RI-102 (Oct. 1, 1991). He argues that, based on Michigan's professional ethics rules, Thomas's and Naughton's of-counsel affiliation with the O'Reilly Firm created an actual conflict. Kilpatrick's argument, standing alone, fails because [*9]  all it suggests is a "per se" conflict, not an "actual" conflict. Moore, 708 F.3d at 777.

The constitutional question we must answer is not whether Kilpatrick's attorneys violated ethical rules, but whether an actual conflict existed that adversely affected their performance. See Nix v. Whiteside, 475 U.S. 157, 165 (1986); Hempstead Video, Inc. v. Inc. Vill. of Valley Stream, 409 F.3d 127, 132 (2d Cir. 2005) (explaining that a violation of a disciplinary rule should only lead to disqualification if it taints the underlying trial). Although a lawyer's conflicts are ordinarily imputed to his or her firm based on the presumption that associated attorneys share client confidences, contrary to the Michigan ethics opinion, "attorneys with limited links to a firm are not always considered to be 'associated' with the firm for purposes of conflict imputation." Hempstead Video, 409 F.3d at 133 (citing, among others, Manning v. Waring, Cox, James, Sklar & Allen, 849 F.2d 222, 224 (6th Cir. 1988) (holding that screening measures can rebut the presumption of shared confidences)). Here, in light of (1) the "thick ethical wall" between Kilpatrick's counsel and the firm; (2) the government's decision to drop all charges related to Fiore; and (3) the court's decision to appoint a fourth defense attorney to cross-examine the Macomb Drain contract witnesses, the district court plausibly determined that no actual conflict existed. Furthermore, on account of [*10]  the ethical wall separating Thomas and Naughton from the O'Reilly Firm (and the physical distance between the two offices), the district court properly concluded that Kilpatrick's lawyers were not so closely associated with the O'Reilly Firm that the firm's conflict of interest should be imputed to them. See Hempstead Video, 409 F.3d at 132-36 (discussing the variation in "of counsel" relationships and adopting a functional approach that focuses on the substance of the relationship and the nature of the screening procedures to determine whether to impute a conflict of interest). The trial record shows that Kilpatrick's attorneys were loyal and diligent in their representation.

 [**7]  Kilpatrick asks us to apply the bright-line rule of presumed conflict from Holloway v. Arkansas, 435 U.S. 475 (1978). But the Holloway automatic-reversal rule only applies when "defense counsel is forced to represent codefendants over [a defendant's] timely objection, unless the trial court has determined that there is no conflict." Mickens v. Taylor, 535 U.S. 162, 168 (2002). In all other cases, prejudice is only presumed when "a conflict of interest actually affected the adequacy of [the attorney's] representation." Id. at 171; see also Koste v. Dormire, 345 F.3d 974, 982-83 (8th Cir. 2003).

Second, assuming there had been an actual conflict, Kilpatrick points to little evidence in the [*11]  record that suggests his counsel did anything detrimental to his defense or failed to do something that was clearly advantageous. See Moore, 708 F.3d at 777. The most Kilpatrick's brief alleges is that Thomas failed to cross-examine a government witness, Derrick Miller, about Miller's conversations with Kilpatrick regarding certain city contracts. The allegation only appears in a footnote, and Kilpatrick does not explain what Thomas should have asked Miller, or why. The government argues that Miller was indeed cross-examined, but that it was done by Ferguson's counsel because the defendants' attorneys had agreed before trial to take turns cross-examining the witnesses. In any event, Thomas's failure to cross-examine Miller was not facially unreasonable or indicative of a pattern of divided loyalty that tainted the trial. See Hempstead Video, 409 F.3d at 132. Because Kilpatrick has not established a conflict of interest that adversely affected his lawyers' performance, his constitutional claim fails.

Kilpatrick next argues the district court failed to thoroughly investigate and resolve Thomas's and Naughton's conflicts after it was on notice of them because it "failed to take into account the nature of the conflict." When a trial court [*12]  knows (or reasonably should know) that a potential conflict exists, the court has a duty to investigate the potential conflict. Mickens, 535 U.S. at 168.

To the extent this argument is merely a repackaging of his ineffective-assistance claim, the argument fails for the reasons stated above. The record also shows the court promptly investigated and resolved the conflict. Kilpatrick first informed the court of a potential conflict on August 7, 2012. At that point, Kilpatrick was concerned about Thomas's representation of Fiore because Fiore had alleged before a grand jury that Kilpatrick had extorted him. On  [**8]  August 9, 2012, the district court ordered the parties to brief "every possible conflict" including "the conflict discussed in the [Detroit] Free Press this morning concerning the Macomb Interceptor [Drain] Drainage District." Recall that Kilpatrick knew about Thomas's and Naughton's of-counsel affiliations with the O'Reilly Firm by April 2012, when he was served with a copy of the court's order allowing Thomas and Naughton to withdraw. Nevertheless, it was the district court itself that first raised the potential O'Reilly Firm conflict after reading about it in the newspaper. The court promptly ordered [*13]  briefing on the matter, heard argument on August 14, and resolved the conflict.

In his reply brief, Kilpatrick asserts that there were no facts presented to the court to support its conclusion that Thomas's and Naughton's of-counsel relationships with the O'Reilly Firm were attenuated. Although it is true that the court accepted counsel's written submissions as fact and did not hold an evidentiary hearing, Kilpatrick points to no contrary evidence. Nor does he suggest the court's findings were erroneous. In any event, this argument is best left for a motion under 28 U.S.C. § 2255. See United States v. Ferguson, 669 F.3d 756, 762 (6th Cir. 2012) (claims of ineffective assistance of counsel are generally addressed by collateral attack rather than on direct appeal).

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