In the Matter of Edward E. Johnson, Jamie Johnson, Dennis Gleason, Jim
Felkner, Jr., and L. T. Robertson

Laborers' International Union of North America
Independent Hearing Officer

Docket No. 99-11D

Decided June 30, 1999

Order and Memorandum Regarding Conflict of Counsel

    This Order and Memorandum deals with the General Executive Board Attorney's ("GEB Attorney") Motion to Disqualify Attorney Bill T. Walker from representing Dennis Gleason, Jim Felkner, Jr., and L.T. Robertson ("Respondents") in this matter. On May 25, 1999, the Independent Hearing Officer ("IHO") held a telephonic hearing on the GEB Attorney's Motion to Disqualify. At the conclusion of the hearing, the IHO ordered the parties to submit supplemental legal memoranda on the legal issues. After having considered the supplemental memoranda in conjunction with the testimony from the telephonic hearing, attorney Bill T. Walker is hereby disqualified from representing Respondents in the present matter but may participate in the limited manner set out below.

    On March 24, 1998, the GEB Attorney filed a Complaint in Trusteeship against Local 703. The IHO held a hearing on May 28, 1998, at which Attorney Walker represented Local 703. Walker was not a regularly retained counsel to Local 703. At the time of the hearing, Respondents were all members of the Local 703 Executive Board. Dennis Gleason was the President, Jim Felkner was the Secretary-Treasurer, and L.T. Robertson was the Vice President. Shortly before the hearing, Jamie Johnson resigned from his position as Business Manager and was replaced by Dennis Gleason. Following the hearing, the IHO placed Local 703 under trusteeship to restore democratic procedures and to correct financial malpractice by the officers and former officers of the Local. See In the Matter of: Local 703 Trusteeship, IHO Order and Memorandum, 9720T (July 7, 1998). The factual circumstances which gave rise to the trusteeship proceeding also gave rise to the current disciplinary charges. The Respondents retained Walker to represent them in the hearing on the disciplinary charges.

    The GEB Attorney moves to disqualify Walker on two grounds. The GEB Attorney contends that there is a clear conflict of interest between Walker's current clients (the former officers) and Walker's former client (Local 703), which he represented in the trusteeship hearing, and that Walker will be called by the GEB Attorney as a key witness to the charges of misuse of funds by his clients.

279 In the Matter of Edward E. Johnson 1999

    Walker argues that the determination as to whether there is a conflict is his alone, and that if the IHO believes Walker's decision to be erroneous, the IHO may report Walker to the Illinois attorney disciplinary board. This is not a correct statement of the law. It is well settled that in order to protect the integrity of the judicial system, the courts may eliminate conflicts of interest between attorneys and their clients. Commonwealth Insurance Company v. Graphix Hotline, Inc., 808 F.Supp. 1200, 1203 (E.D. Pa. 1992).

    As a judicial officer within LIUNA, the IHO has the same power to disqualify attorneys who appear before him as do the courts. In making determinations with regard to disqualification, the IHO enforces the applicable Rules of Professional Conduct and considers the same issues that a court would consider. _See In the Matter of Cook and Guinn, IHO Order and Memorandum 96-31D (January 3, 1997); In the Matter of Antonio Garcia, IHO Order and Memorandum 95-32D, (March 20,1996). The LIUNA Appellate Officer has affirmed this power of the IHO. See In Re Cook and Guinn, 1997 A.O. 109 (97005-IHO); In Re Garcia, 1996 A.O. 105 (96-010-IHO).

    The facts underlying the conflict issue are set forth below. The IHO will note the GEB Attorney's allegations and what facts are uncontested in the record.

    Local 703 hired Attorney Walker to represent Local 703 at the trusteeship hearing in 1998. On May 29, 1998, the Executive Board authorized the payment of $8,000 to Walker "for his defense of the local in the trusteeship hearing." Walker requested that payment be made in two installments: $4,000 on May 28, and $4,000 on June 14, 1998. The first installment was paid on May 28. The GEB Attorney alleges that, notwithstanding that the Executive Board had approved only $8,000 in fees for Walker, and was due only $4,000, Gleason and Felkner signed and delivered a Local 703 check to Walker for $15,000. The GEB Attorney alleges there is no documentation of approval from the Executive Board for the additional $11,000. In a letter to Gleason dated June 5, 1998, Walker described the $11,000 as an "availability earned retainer fee to assure that I will be available to assist in further endeavors during the pending matters." The charges allege that Gleason and Felkner attempted to conceal the money they had given to Walker from any scrutiny. Walker endorsed the $15,000 check over to Richard Kurth, another attorney who sometimes represented Local 703, who deposited the check in his own account. On June 13, 1998, Kurth obtained a cashier's check payable to Walker in the amount of $4,000. When the deputy trustee discovered the payment, he contacted Kurth and on August 21, 1998, Kurth returned the $11,000 to the Local. The GEB Attorney has stated that he intends to call Walker to testify as to his clients' role in the transfer of the funds to Walker and conversations with them regarding the approval of the Executive Board, or the lack thereof; their knowledge of Walker's role in moving the money to Kurth and then back to him; and the purpose of the Kurth transfer.

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Walker's Conflict Arising from His Prior Representation of Local 703
Rule 1.9 of the Illinois Rules of Professional Conduct states:

    The subject of conflicts of interest arising from a prior representation is one of the most fact-specific in the entire field of legal ethics. "Any court decision that is intended to serve as a guide to future behavior is vulnerable to continual arguments to distinguish it." BNA Lawyers' Manual on Professional Conduct, Conflicts of Interest: Representation Adverse to Former Client, Section 51:207.

    Two matters are substantially related "when an attorney might have acquired confidential information as counsel in one matter which is also relevant to the other matter." ILA Local 1332 v. ILA, 909 F.Supp. 287, 291 (E.D. Pa. 1995). The two matters in which Walker acted as counsel are substantially related. Walker represented Local 703 in the trusteeship proceedings which involved activities of Respondents for which they are charged in this matter.

    The more troublesome issue is whether Local 703, now under trusteeship, is a former client, in the sense having had a confidential relationship with Walker. Walker was hired by the Executive Board, of which the Respondents were members, to represent Local 703 at the trusteeship proceedings. The additional $11,000 was allegedly paid to Walker as an "availability earned retainer fee to assure that ... [Walker] will be available to assist in further endeavors during the pending matters:" After the $11,000 payment to Walker, Local 703 was placed under trusteeship. Subsequently, the members of the Executive Board who originally hired Walker were removed from office and the Trustee of Local 703 has not retained Walker on any matter.

281 In the Matter of Edward E. Johnson 1999

    The IHO notes that while Local 703, as an entity, was technically the client in the previous matter, it was the members of the Executive Board, including the Respondents, who hired Walker and with whom Walker had the confidential relationship. In his representation of Local 703 at the trusteeship hearing, Walker defended the actions of the Respondents. In the present disciplinary matter, Walker is representing the interests of the same group. The "test for adversity is premised on whether or not the interests of the former and current client are differing." BNA Lawyers' Manual on Professional Conduct, Conflicts of Interest: Lawyer As a Witness, Section 51:214 citing In Re Da carp. Derivative Securities Litigation, 102 FRD 624, 628 (S.D.Ohio 1984). As a practical matter, Walker's representation of the charged parties in this disciplinary matter is not adverse to the interests of the parties who hired him and whom he essentially defended in the trusteeship hearing.

    In Federal Deposit Insurance CM. v. Amundson, a lawyer who represented a bank and its directors, was permitted to subsequently represent the directors and officers in a suit brought against them by the bank's successor in interest, the Federal Deposit Insurance Corporation. 682 F.Supp. 981, 989 (D. Minn. 1988). The court noted that the bank's attorney-client relationship did not transfer to the FDIC in that instance. Id.; See also Cadillac Insurance Company v. The American Bank of Schiller Park, 1991 WL 259013 (N.D. Ill. 1991). Similarly, in this matter, the IHO finds that Walker's prior attorney client relationship with the Executive Board of Local 703 did not transfer to the trustee of Local 703.

Walker as a Potential Witness for the GEB Attorney

    This rule, also known as the advocate-witness rule, generally prohibits a lawyer from appearing as an advocate and a witness in the same proceeding. Jones v. City of Chicago, 610 F.Supp. 350, 354 (N.D. Ill. 1984).

    Under the pertinent part of Rule 3.7, a lawyer who knows or reasonably should know that he "may be called as a witness other than on behalf of the client, . . . may accept or continue the representation until the lawyer knows or reasonably should know that the lawyer's testimony is or may be prejudicial to the client." The Rule specifically states that the lawyer may accept or continue the representation until he knows or reasonably should know that his testimony is or may be prejudicial to the client. (Emphasis added). At this point in the proceeding, Walker should know his testimony may be prejudicial to his client.

  282 In the Matter of Edward E. Johnson 1999

    Walker maintains that once he received the $11,000 fee it became his property and that the location of the $11,000 was of no concern to anyone other than himself. He further alleges that any testimony he would give would relate only to the nature and value of his services and would therefore not be prejudicial to his clients. According to Walker, he was not made aware of any of the events concerning the approval the additional $11,000 and that therefore, he can give no testimony on the matter that would prejudice his clients.

    A review of the factual circumstances at this point indicates that Walker's testimony could very easily be prejudicial to his clients. Walker may testify that his clients did not provide him with any information regarding the approval of the $15,000 payment. This fact alone would make it appear that they were secretive about it and continuing a ruse on him. Walker may testify that his clients informed him that the extra payment was authorized by the full Executive Board. If this is false, it implicates them to a further extent.

    Walker did not deposit the money in his own client account, but endorsed the funds over to Kurth, and Kurth in turn paid Walker the $4,000 owing on his original fee request. Kurth kept the remainder. Walker could be asked what his clients knew of the transfer to Kurth, and why the transfer was made and a check returned. Any testimony relating to the retainer will bring into play Walker's credibility. At the conclusion, Walker may be forced to argue that his clients kept him uninformed about the approval, and that they were unaware of the transfer of the money. The IHO could find incredible any portion of Walker's testimony which would then implicate the clients in wrongdoing.

    In the case of People v. Reed, the trial court ordered the defendant's attorney to withdraw on the grounds that the prosecutor indicated that he "might call ... [the defendant's attorney] as a witness, since he was present at the police station at the time of defendant's interrogation and could testify as to whether the police officers refused to let him see defendant." 298 111. App. 3d 285, 295, 698 N.E. 2d 620, 628 (1998). The court noted that "under such circumstances, Rule 3.7 mandated ... [the attorney's] withdrawal. Id. The court also noted that the pleadings in the record clearly indicated that defendant's attorney was "a potential witness on behalf of his client." Id. at 296, 628. In the present matter, the respondent's attorney took part in the financial transactions that are integral to the charges in this case and therefore is able to testify as a fact witness. The pleadings of record in this matter allege that Walker participated in the activities with regard to his payment.

    In the case of United States v. Defazio, the court disqualified an attorney for a defendant charged with bankruptcy fraud because the attorney had represented the defendant in the bankruptcy proceedings and was likely to be called to testify as to the source of the information in the bankruptcy schedules. 899 F.2d 626 (7`s Cir. 1990). In that case, the court found a conflict under Rule 3.7 and disqualified the attorney because he was to testify as to the source of the information filed in the bankruptcy proceeding.

    

    Walker has a conflict of interest under Rule 3.7(b) of the Illinois Rules of Professional Conduct.

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    Finally, the IHO must consider all of the previously discussed factors in light of the policy reasons underlying a court's power to dismiss. See Jones v. City of Chicago, 610 F.Supp. 350, 357, 362 (N.D. Ill. 1984) (explaining that the need to avoid the possible role confusion that may develop when an attorney acts as both a witness and an advocate is critical to the proper functioning of the legal system). A lawyer who is called as a witness may not be completely objective and may be viewed by the fryer of fact as compromising the truth, thus the interests of the client will be adversely affected. Jones, 610 F.Supp. at 357. Of even greater concern is the "court's interest in protecting the integrity of the proceedings and maintaining public confidence in the judicial system." ILA 1332 v. IL A, 909 F.Supp. 287 293 (E.D. Pa. 1995). The IHO concludes that in the present matter, the conflict of interest is evident.

    The IHO must also consider the hardship to the client in the event of disqualification. Jones v. City of Chicago, 610 F.Supp. 350, 361 (N.D. Ill. 1984). This hardship "must be viewed in light of the time that the issue of potential disqualification becomes apparent." Id. It is only when "the potential for disqualification was not known to the parties in advance" that the substantial hardship to client may be controlling. See id. (explaining that hardship to the client refers to hardship that could not reasonably have been foreseen). As Walker previously represented Local 703 on substantially the same facts, he was aware of the conduct of the Respondents that is at issue in this matter. Most importantly, the charges clearly allege the role of the Respondents and Walker's own role in the activities of the $11,000 payment. Walker should have recognized upon being retained to defend respondents on the charges that he was a possible witness in the matter.

    The IHO is most concerned with this particular facet of the conflict issue. LIUNA members facing disciplinary charges should be free to have counsel of their choice with the least amount of restriction as possible. The IHO is well aware that counsel cost money.

    Attorney Walker is disqualified from taking a speaking role in the Respondent's defense. He may sit at counsel table and assist new counsel in the hearing of the case. He may not argue, nor make objections.

    In this procedure, Walker may assist Respondents, but he will not be placed in the position of arguing his own credibility or the credibility of his clients.

    Accordingly, it is hereby ORDERED that Attorney Bill T. Walker withdraw from the present matter, under the conditions described above.

PETER F. VAIRA

INDEPENDENT
  HEARING OFFICER