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Park Apartments at Fayetteville, LP v. Plants

Supreme Court of Arkansas

May 17, 2018

THE PARK APARTMENTS AT FAYETTEVILLE, LP; THE PARK APARTMENTS AT FAYETTEVILLE MANAGEMENT COMPANY, LLC; AND LINDSEY MANAGEMENT CO., INC. APPELLANTS
v.
SHILAH PLANTS APPELLEE

          APPEAL FROM THE WASHINGTON COUNTY CIRCUIT COURT [NO. 72CV-15-2068-1] HONORABLE JOHN C. THREET, JUDGE

          John M. Pesek, for appellants.

          Jason Auer, Legal Aid of Arkansas, Inc., for appellee.

          RHONDA K. WOOD, Associate Justice.

         Appellants', The Park Apartments at Fayetteville, LP, The Park Apartments at Fayetteville Management Company, LLC, and Lindsey Management Co., Inc. (Lindsey) (collectively "the Park"), [1] appeal centers around the following issue: Do Arkansas's Rules of Professional Conduct require attorney disqualification simply because the attorney had access to client information but did not gain actual knowledge while practicing at her former association? We hold that they do not, and therefore, we reverse and remand.

         I. Facts

         In November 2015, appellee Shilah Plants filed a complaint against the Park alleging that the liquidated-damages clause in her lease agreement is unenforceable, constitutes an illegal penalty, and violates the Arkansas Deceptive Trade Practices Act and the Arkansas Security Deposit Act. Plants's attorneys work for Legal Aid of Arkansas (Legal Aid) in Jonesboro. Attorneys from Lindsey's in-house legal department represent the Park.

         From July 2016 through December 2016, Summer McCoy worked as a staff attorney for Legal Aid in its Springdale office. Legal Aid assigns cases among attorneys based on four workgroups: domestic violence, consumer, housing, and economic justice. McCoy worked in the economic-justice workgroup which primarily deals with issues associated with Medicare, Medicaid, ARKids, SNAP benefits, unemployment benefits, and home healthcare. In January 2017, McCoy began working as a staff attorney for Lindsey.

         In February 2017, Plants filed a motion to disqualify the Park's attorney and Lindsey's entire in-house legal department. Plants alleged a conflict of interest arose because, while McCoy was working at Legal Aid, she had access to Plants's confidential attorney and client information and files. Plants further claimed that although McCoy did not appear as counsel in the case, McCoy's conflict of interest should be imputed to the Park's attorney and the entire Lindsey legal department because McCoy is now part of that department.

         Following a July 2017 hearing, the circuit court concluded that McCoy had a conflict of interest because "she had full access to all of Legal Aid's files." The circuit court further imputed McCoy's conflict to the other attorneys in Lindsey's in-house legal department. Consequently, it granted the motion to disqualify. Park filed an interlocutory appeal pursuant to Arkansas Rules of Appellate Procedure-Civil 2(a)(8).

         The Park makes four arguments on appeal: (1) the circuit court erroneously applied Norman v. Norman, 333 Ark. 644, 970 S.W.2d 270 (1998), when it concluded that access to client information alone is sufficient for attorney disqualification; (2) Legal Aid does not have any confidential information because its information is subject to disclosure under the Arkansas Freedom of Information Act; (3) the circuit court erred in disqualifying the Park's attorney because McCoy's association with Lindsey's legal department did not create an appearance of impropriety; and (4) the circuit court erred in failing to find Plants waived her right to move to disqualify the Park's counsel. Because we reverse on the first point, we do not address the remaining arguments.

         II. Principles of Law and Analysis

         On appeal, we review a circuit court's decision to disqualify an attorney under an abuse-of-discretion standard. Sturdivant v. Sturdivant, 367 Ark. 514, 241 S.W.3d 740 (2006). An abuse of discretion may be manifested by an erroneous interpretation of the law. Craig v. Carrigo, 340 Ark. 624, 12 S.W.3d 229 (2000). The Arkansas Rules of Professional Conduct are applicable in disqualification proceedings. Norman, 333 Ark. at 651, 970 S.W.2d at 272-73. We read the rules as they are written and interpret them in accordance with our established principles of rule construction. Sturdivant, 367 Ark. at 517, 241 S.W.3d at 743. If the rule's language is plain and unambiguous, we will give it the obvious and plain meaning. Id.

         We begin with the Park's first argument that the circuit court erroneously applied Norman. The Park asserts that under the Arkansas Rules of Professional Conduct an attorney must have actual knowledge of confidential information to be disqualified, and the circuit court erroneously interpreted Norman as holding that access to a client's information alone is sufficient for disqualification.

         In Norman, we reversed the trial court's decision not to disqualify an attorney, Newell, who was representing the ex-wife in a petition to enforce an alimony provision contained in a divorce decree, because Newell's law partner was formerly associated with Callahan, who had represented the ex-husband during the parties' earlier divorce proceeding. Norman, 333 Ark. at 653-54; 970 S.W.2d at 273-74. In considering the disqualification, we stated, "[A]n attorney must have actual knowledge . . . during his association before the attorney and his firm will be disqualified." Id. at 654; 970 S.W.2d at 274. We further stated that "an attorney is presumed to have all the confidential knowledge that any member of his first firm possessed." Id. This is a rebuttable presumption and the second firm has the burden to overcome ...


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