United States District Court, D. Arizona
HONORABLE G. MURRAY SNOW UNITED STATES DISTRICT JUDGE.
before the Court are Plaintiffs' Motion to Disqualify
Wilenchik & Bartness, P.C. from Representing Defendant
Richard Carrigan Because of a Non-Waivable Conflict of
Interest, (Doc. 54), Defendants Richard Carrigan and Tony
Ker's Motion to Disqualify, (Doc. 63), and
Plaintiffs' Motion for Leave to File Sur-Reply in
Opposition to Motion to Disqualify, (Doc. 75). For the
following reasons, the Court denies the three
the parties use strong and in some cases inflammatory
language to describe differing accounts of the background to
this lawsuit, the essential facts for purposes of these
motions are not greatly in dispute.
controlled a company called Changing World Technologies
(“CWT”), which itself was a holding company for
another company called Renewable Environmental Solutions, LLC
(“RES”). RES was in the renewable diesel fuel
business. In the course of this business it received certain
tax credits from the United States Government. In December of
2012, Plaintiffs decided to reorganize CWT. The plan was for
a company called GEM Holdco, LLC (“GEM”) to buy
60% of CWT after a period of time, and subsequently sell it
to another company called RDX. Defendants Tony Ker and Richard
Carrigan served on RDX's board; non-party Dennis Danzik
served as its CEO.
GEM and RDX had an agreement that RDX would only buy its
share of CWT through GEM, and not directly from Plaintiffs.
But Plaintiffs instead sold CWT to RDX directly. As part of
this purchase, RDX agreed to remit to Plaintiffs tax credits
that CWT had accrued, but not yet received, as of the
filed a lawsuit in New York state court, suing CWT, RDX and
Danzik for tortious interference, breach of contract and
other related claims based on the sale of CWT directly to
RDX. Schlam Stone & Dolan (“Schlam”), the law
firm representing Plaintiffs here, represented all the
defendants in the New York action. Subsequently, GEM filed an
additional claim of defamation adding Ker and Carrigan based
on a press release Danzik had released about GEM. Schlam
represented Ker and Carrigan as well on this claim. The
defamation claim was later dropped, and with it, Ker and
Carrigan were dropped as defendants. Subsequently, Schlam
withdrew from representing RDX and Danzik, and CWT (still
represented by Schlam) sued RDX and Danzik over an alleged
theft of the tax credits that RDX was supposed to remit to
are currently three related lawsuits pending in this
district. In CWT Canada II LP et al v. Elizabeth Danzik
et al, No. CV-16-00607-DGC, the Plaintiffs are suing
Danzik's wife and the Danziks' LLC based on their
role in the alleged theft of the tax credits. In Dennis
M. Danzik et al v. CWT Canada II Limited Partnership et
al, No. CV-17-00969-JAT, Danzik and RDX sue the
Plaintiffs (and certain other parties) for alleged fraud
relating to the sale of CWT to RDX. And in this action, also
based on the alleged theft of tax credits, Plaintiffs sue
several members of RDX's board, as well as a company
known as Danzik Applied Sciences, LLC (“DAS”). It
is also asserted that the United States Attorney's Office
is investigating Dennis Danzik for the alleged theft of tax
Defendants in this matter are represented by Wilenchik &
Bartness PC (“WB”). Plaintiffs filed a motion to
disqualify WB from representing Carrigan, because WB also
represents Danzik in one of the other actions in this
district, as well as in the U.S. Attorney's Office
investigation. Plaintiffs assert Danzik and Carrigan have
represents the Plaintiffs in this matter. Concurrent with
their response to Plaintiffs' motion to disqualify,
Defendants filed a motion to disqualify Schlam on the basis
of Schlam's prior representation, in the New York case,
of Defendants Ker and Carrigan.
United States District Court for the District of Arizona has
adopted the Arizona Rules of Professional Conduct as its
ethical standards. L.R. Civ. P. 83.2(e). The Court therefore
applies Arizona ethical rules in evaluating motions to
disqualify counsel. See Roosevelt Irrigation Dist. v.
Salt River Project Agric. Improvement & Power Dist.,
810 F.Supp.2d 929, 944 (D. Ariz. 2011).
avoid the use of ethical rules for the tactical
disqualification of opposing counsel, “[o]nly in
extreme circumstances should a party to a lawsuit be allowed
to interfere with the attorney-client relationship of his
opponent.” Optyl Eyewear Fashion Int'l Corp. v.
Style Cos., Ltd., 760 F.2d 1045, 1050 (9th Cir. 1985)
(explaining that disqualification motions should be subject
to “particularly strict scrutiny” because of
their potential for abuse); see also In re Cty. of
L.A., 223 F.3d 990, 996 (9th Cir. 2000) (“A motion
to disqualify a law firm can be a powerful litigation tactic
to deny an opposing party's counsel of choice.”).
The moving party has the burden of showing that the Court
should disqualify an attorney from representing his client.
Alexander v. Superior Court, 141 Ariz. 157, 161, 685
P.2d 1309, 1313 (1984); Amparano v. ASARCO, Inc.,
208 Ariz. 370, 377, 93 P.3d 1086, 1093 (Ct. App. 2004).
preserve the integrity of the judicial system[, ] close or
doubtful cases should be resolved in favor of
disqualification.” Richards v. Holsum Bakery,
Inc., No. CV09-00418-PHX-MHM, 2009 WL 3740725, at *6 (D.
Ariz. Nov. 5, 2009). However, because of the “great
prejudice often associated with an enforced change of
counsel, courts applying these standards have granted
disqualification only when the moving party has demonstrated
substantial and irreparable harm growing out of the ethical
violation.” Id. (quoting Complaint of
Korea Shipping Corp., 621 F.Supp. 164, 169 (D. Alaska
1985)). “Whenever possible the courts should endeavor
to reach a solution that is least burdensome upon the client
or clients.” Alexander, 141 Ariz. at 161. The
Court has no “rule of automatic disqualification,
” and will instead consider a number of factors in
determining whether disqualification is warranted.
Research Corp. Techs., Inc. v. Hewlett-Packard Co.,
936 F.Supp. 697, 701 (D. Ariz. 1996). These factors include
“(1) the nature of the ethical violation, (2) the
prejudice to the parties, including the extent of ...