United States District Court, D. Arizona
BRIDGET S. BADE, Magistrate Judge.
Defendant Injury Assistance, LLC (Injury Assistance) has filed a Motion to Disgorge Michael Love's Attorney Fees. (Doc. 79.) Michael Love (Love) is counsel for Plaintiff Andrew Berrey (Berrey), who opposes the motion. (Doc. 80.) For the reasons set forth below, the Court denies the motion.
This is an interpleader action in which the parties assert conflicting claims to settlement proceeds that Berrey received in a personal injury action. (Doc. 15.) Berrey deposited the settlement proceeds into the Court's registry on June 23, 2014. (Doc. 25.) On October 27, 2014, Berrey, Injury Assistance, and Defendants Plaintiff Investment Funding, LLC (PIF) and Scottsdale Healthcare Corp., filed a Joint Stipulation for Entry of Judgment asking the Court to enter partial judgment in favor of Berrey for payment of his attorneys' charging lien for $11, 549.98. (Doc. 62.) The Court granted the stipulated motion and ordered that $11, 549.98 be disbursed from the interpleaded funds to Berrey's attorneys, and judgment was entered for Berrey in this amount. (Docs. 63, 64.)
Injury Assistance now asks the Court to order Berrey's attorney, Love, to disgorge the attorney's fees that the Court previously ordered disbursed based on the parties' joint stipulation. (Doc. 79.) The motion seeks disgorgement based on broad theories, including Love's alleged misconduct in obtaining the joint stipulation for disbursement of his attorney's fees from the settlement funds "under false pretenses, " Love's alleged conflict of interest in representing Berrey in this case and representing PIF in an unrelated case in state court, and Love's alleged violation of fiduciary duties to Berrey and non-clients, including Injury Assistance. (Doc. 79; Doc 82.)
Berrey opposes the motion, which he characterizes as an improper attempt to bring a claim against Love, a non-party, and he argues that the Court should find that Injury Assistance is estopped from seeking to disgorge the attorney's fees because it previously stipulated to the disbursement of these fees. (Doc. 80 at 4-5, 10.) Berrey also asserts he has properly safeguarded the settlement proceeds by depositing them in the Court's registry, Injury Assistance has no interest in the funds disbursed for his attorney's charging lien, his attorney, Love, does not have a fiduciary duty to Injury Assistance, and Injury Assistance cannot assert that Love has a conflict of interest because it is not his client. (Id. at 5-6, 9-10.) The Court first addresses Berrey's arguments asserting estoppel and characterizing the motion, and then addresses Injury Assistance's allegations that Love engaged in misconduct in obtaining the joint stipulation, that Love has a conflict of interest, and that he violated fiduciary duties.
II. Estoppel and Characterization of Injury Assistance's Motion
A. Judicial Estoppel Does Not Bar Injury Assistance's Motion
Relying on state law, Berrey argues that Injury Assistance is judicially estopped from its requested relief because Injury Assistance stipulated to the disbursement of the fees that are now at issue in the motion to disgorge. (Doc. 80 at 10 (citing State v. Towery, 920 P.2d 290, 304 (Ariz. 1996).) However, "federal law governs the application of judicial estoppel in federal court." Helfand v. Gerson, 105 F.3d 530, 534 (9th Cir. 1997) (citation omitted). Judicial estoppel, or the doctrine of preclusion of inconsistent positions, "precludes a party from gaining an advantage by taking one position, and then seeking a second advantage by taking an incompatible position." Id. (citations omitted.) "It is an equitable doctrine, intended to protect the integrity of the judicial process by preventing a litigant from playing fast and loose with the courts.'" Id. (citations omitted).
Here, Injury Assistance has changed its position with respect to the stipulated fee disbursement, but it does not appear that Injury Assistance is seeking to gain an unfair advantage by taking inconsistent positions. Instead, as set forth below in Section III, Injury Assistance seeks to withdraw its assent to the joint stipulation because it asserts that it discovered misconduct by Love and was misled into entering the joint stipulation. (Doc. 82 at 2.) It would be inappropriate to use the equitable doctrine of judicial estoppel to shield allegations of misconduct from review. Therefore, the Court declines to apply judicial estoppel and will review the motion on its merits.
B. The Motion Does Not Assert a Claim Against Love
Berrey characterizes Injury Assistance's motion as asserting an independent "tort [claim] in the nature of a breach of fiduciary duty" against Love, and contends that this Court lacks jurisdiction over Love because he is not a party to the underlying action and has not been served with process. (Doc. 80 at 5.) Accordingly, Berrey argues that the motion must be summarily denied. (Id. ) The Court disagrees with Berrey's characterization of the motion and does not construe the motion as asserting an independent claim against Love because the motion pertains directly to the Court's October 27, 2014 Order and Judgment. (Doc. 79 at 3-4, ¶ 9; Doc. 63; Doc. 64.)
C. The Motion Seeks Relief from an Order and Judgment under Rule 60
By seeking to disgorge Love's attorney's fees, the motion effectively requests that the Court vacate its October 27, 2014 Order granting the parties' joint stipulation to disburse the attorney's fees (Doc. 63), and grant relief from the Order and Judgment (Doc. 64) by directing Love to deposit the previously disbursed funds in the Court's registry. Therefore, although the parties do not assert that Rule 60 of the Federal Rules of Civil Procedure applies ...