Commercial Litigation and Arbitration

Appeals Court Has Jurisdiction over Denial of Motion to Intervene If Is As of Right — Disqualification: Court May Look Through Generality of “Substantially Related” If It Has Specific Evidence Proving No Confidential Info of Former Client Used

Kirsch v. Dean, 2017 U.S. App. LEXIS 21257 (6th Cir. Oc.t 25, 2017):

Defendant Robert Dean and Proposed Intervenor ZFX, Inc. jointly appeal: (1) a December 7, 2016 order denying Dean's motion to disqualify Middleton Reutlinger, the law firm representing Plaintiff Terri Kirsch, and to strike its filings; and (2) a June 7, 2017 order denying ZFX's motions to intervene, disqualify Middleton, and strike Middleton's filings. The clerk ordered Dean and ZFX to show cause why their appeal should not be dismissed for lack of jurisdiction as having been taken from non-final, non-appealable orders. Dean and ZFX jointly responded to the show cause order, and Kirsch replied to oppose jurisdiction. Dean and ZFX also moved to disqualify Middleton from representing Kirsch on appeal, and Kirsch responded to oppose Middleton's disqualification.

In response to the show cause order, [*2]  Dean and ZFX assert that the denial of ZFX's motion to intervene is immediately appealable because it had an absolute right to intervene, and accordingly ask us to exercise pendent jurisdiction over the remaining district court rulings. Our "jurisdiction to consider an appeal from an order denying intervention . . . depends upon the nature of the applicant's right to intervene." Bhd. of R.R. Trainmen v. Baltimore & Ohio R.R. Co., 331 U.S. 519, 524, 67 S. Ct. 1387, 91 L. Ed. 1646 (1947). "[T]he controlling question on the issue of jurisdiction, the answer to which also determines the merits of this appeal, is whether the appellants were entitled to intervene in these proceedings as of right." Sam Fox Pub. Co. v. United States, 366 U.S. 683, 687, 81 S. Ct. 1309, 6 L. Ed. 2d 604, 608 (1961) (citation and internal quotation marks omitted) see also Purnell v. City of Akron, 925 F.2d 941, 944 n.2 (6th Cir. 1991) ("In deciding whether a court has jurisdiction, it is forced to determine the merits of the question raised, i.e., whether intervention was of right or invoked the sound discretion of the court."). At this juncture, we conclude that ZFX may have raised a colorable issue over which we can exercise jurisdiction. Because the jurisdictional and merits issues merge in these circumstances, a merits panel at the conclusion of briefing is better situated to determine if we have jurisdiction over the intervention issue. See Berryman v. Rieger, 150 F.3d 561, 564 (6th Cir. 1998) (noting that appellate [*3]  courts "often cannot adequately assess [their] jurisdiction to hear interlocutory appeals" without full briefing and argument). Accordingly, for now, we will retain jurisdiction over the appeal of the district court's denial of ZFX's motion to intervene.

We decline, however, to exercise pendent jurisdiction over the remaining district court rulings because the correctness of those rulings is not determinative of ZFX's absolute right to intervene. Should the merits panel conclude otherwise, or should the matter be returned to the district court with directions to grant ZFX's motion to intervene, this ruling may be reexamined.

ZFX and Dean separately move to disqualify Middleton from representing Kirsch on appeal because ZFX is a former client of Middleton. They argue that the underlying action is substantially related to the matter on which Middleton represented ZFX. "Motions to disqualify are viewed with disfavor and disqualification is considered a drastic measure which courts should hesitate to impose except when absolutely necessary." Valley--Vulcan Mold Co. v. Ampco--Pittsburgh Corp., 237 B.R. 322, 337 (B.A.P. 6th Cir. 1999) (citation and internal quotation marks omitted), aff'd 5 F. App'x 396 (6th Cir. 2001). A form[er] client seeking disqualification must show that "the [*4]  matters embraced within the pending suit are substantially related to the matters or causes of action wherein the attorney previously represented [the former client]." Gen. Elec. Co. v. Valeron Corp., 608 F.2d 265, 267 (6th Cir. 1979) (citation omitted). Matters are substantially related when there exists "a substantial risk that confidential factual information as would normally have been obtained in the prior representation would materially advance the client's position in the subsequent matter." Ky. S. Ct. R. 3.130 (1.9) cmt. 3; see also Bowers v. Ophthalmology Group, 733 F.3d 647, 652 (6th Cir. 2013). The "substantially related" evaluation, although generalized, was adopted to avoid engaging in a specific inquiry that would require the disclosure of confidential information. Bowers, 733 F.3d at 652-53.

In this case, specific evidence has been disclosed, which permits us to determine whether the prior representation was substantially related to the present litigation. We will not mechanically resort to disqualification under a generalized review when more specific information is available to avoid the disqualification of counsel that is not absolutely necessary. In this case, there is no evidence that confidential information was exchanged in Middleton's prior work with Kirsch and ZFX. Accordingly, disqualification is not appropriate. [*5]

Accordingly, the show cause order is WITHDRAWN as to ZFX's appeal from the denial of intervention. The remainder of the appeal is DISMISSED for lack of jurisdiction. The motion to disqualify Kirsch's appellate counsel is DENIED.

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