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Helena Country Club v. Brocato

Supreme Court of Arkansas

April 27, 2017

HELENA COUNTRY CLUB APPELLANT
v.
BILLY RAY BROCATO D/B/A SPLASH POOL AND SPA APPELLEE

         APPEAL FROM THE PHILLIPS COUNTY CIRCUIT COURT [NO. 54CV-15-226] HONORABLE CHRISTOPHER W. MORLEDGE, JUDGE

          Halbert Law Office, by: Charles E. Halbert, for appellant.

          Knapp Lewis Law Firm, by: Donald E. Knapp, Jr., and Michael C. Lewis, for appellee.

          COURTNEY HUDSON GOODSON, Associate Justice.

         This is an interlocutory appeal from the Phillips County Circuit Court's disqualification of Charles E. Halpert, Jr., as counsel for appellant, the Helena Country Club ("the Club"). For reversal, the Club argues that (1) the circuit court erred in its conclusion that evidence of an alleged statement made during settlement negotiations was admissible to allow appellee, Billy Ray Brocato d/b/a Splash Pool and Spa ("Brocato"), to call the Club's attorney as a witness; and (2) the circuit court erred in disqualifying the Club's attorney based solely on opposing counsel's statement that the attorney would be called as a witness. Our jurisdiction is pursuant to Arkansas Rule of Appellate Procedure-Civil 2(a)(8) (2016). We are unable to address the merits of this appeal on the record before us, and we therefore remand to settle the record.

         On September 22, 2015, Brocato filed a complaint against the Club, alleging claims of breach of contract and a violation of the Arkansas Deceptive Trade Practices Act ("ADTPA"). The facts as alleged in the complaint indicated that Brocato had been providing pool maintenance and cleaning services to the Club for the previous five years pursuant to the parties' oral agreement. Brocato stated that the parties had a course of dealing wherein he would perform the services he deemed appropriate and then bill the Club for those services. Brocato indicated that he was contacted by the Club in April 2015 and that he was instructed to prepare the pool for the upcoming summer season. He claimed that he conducted maintenance, repairs, and cleaning on the pool in April and May 2015, that he submitted invoices to the Club for the work, and that the Club had since refused to remit payment to him. Brocato alleged that he had suffered damages in the amount of $11, 505.48, plus interest and costs, and he also requested $25, 000 in punitive damages.

         The Club, through its attorney, Halpert, filed an answer to the complaint and a counterclaim. In its counterclaim, the Club alleged that Brocato had been notified that all work must be approved in advance and that he had failed to ask for approval for certain extra work. The Club denied that this extra work had been performed, and even if it had been, the Club indicated that it was not authorized. In addition, the Club claimed that Brocato had knowingly placed excessive orders for pool chemicals and that he had allegedly installed a new pump but had failed to produce an invoice for it. The Club asserted that these actions constituted both fraud and a violation of the ADTPA and requested damages in excess of $11, 000, as well as punitive damages.

         On June 16, 2016, the Club filed a motion to exclude evidence, claiming that Brocato had recently notified Halpert that he intended to call him as a witness at trial, which was scheduled for July 11, 2016. According to the Club's motion, Brocato intended to introduce a statement allegedly made by Halpert during a telephone conversation during which the possibility of settlement was discussed with Brocato and his counsel, and Halpert had responded, "We aren't paying him a fucking thing." The Club claimed that both Halpert and Brocato's counsel denied this event. The Club further argued that Arkansas Rule of Evidence 408 prevented the introduction of this evidence and that admission of this alleged statement at trial might require the disqualification of Halpert.

         Brocato filed a response to the motion and a brief in support in which he asserted that the statement made by Halpert was not made during settlement negotiations but was instead made in response to a demand by Brocato's counsel for payment. Even if it was found to have been made during settlement negotiations, Brocato argued that the statement was not inadmissible under Rule 408 because it would be used to prove the Club's intent and bias in relation to the ADTPA claim, not to prove the liability for, invalidity of, or amount of the claim. In addition, Brocato contended that Halpert would "undoubtedly" be called to testify as a witness at trial because he was on the board of directors of the Club when the decision was made to not pay Brocato. Brocato thus argued that this evidence was relevant to Halpert's credibility and that the Club's motion should be denied.

         On July 6, 2016, the circuit court apparently held a telephone hearing on the Club's motion to exclude evidence. However, both parties agree that this hearing was not transcribed, and there is no record of what occurred during the hearing. The circuit court then entered an order on July 8, 2016, disqualifying Halpert from representing the Club. The court found that "the potential for Mr. Halpert being called as a witness is imminent and it could be construed that the purpose of the evidence and/or testimony presented by Mr. Halpert would be for some other reason than the introduction of settlement negotiations." The court thus concluded that "[i]t appears that Mr. Halpert has a conflict and as such he is disqualified from representing Defendant in this matter." The Club filed a timely notice of interlocutory appeal from the order of disqualification.

         On appeal, the Club argues that the circuit court erred in concluding that evidence of an alleged statement made during settlement negotiations was admissible to allow Brocato to call Halpert as a witness at trial. The Club further contends that the circuit court erred by disqualifying Halpert based solely on opposing counsel's statement that he would be called as a witness.

Arkansas Rule of Evidence 408 (2016) states as follows:
Evidence of (1) furnishing, offering, or promising to furnish, or (2) accepting, offering, or promising to accept, a valuable consideration in compromising or attempting to compromise a claim which was disputed as to either validity or amount, is not admissible to prove liability for, invalidity of, or amount of the claim or any other claim. Evidence of conduct or statements made in compromise negotiations is likewise not admissible. This rule does not require exclusion if the evidence is offered for another purpose, such as proving bias or ...

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