United States District Court, D. Arizona
ORDER
Honorable Steven P. Logan United States District Judge
On
April 25, 2018, the Government filed a motion (the
“Motion”) to disqualify the law firm of Henze
Cook Murphy (“HCM”) from representing Defendant
Michael Lacey (“Lacey”) and the law firm of Davis
Wright Tremaine (“DWT”) from representing Lacey
and Defendant James Larkin (“Larkin”). (Doc. 118)
The Motion was fully briefed on July 2, 2018, and the Court
heard oral argument at a hearing on October 5, 2018. As set
forth below, the Court finds that Carl Ferrer
(“Ferrer”) expressly waived his right to seek
disqualification of HCM and DWT in previous joint
representation and joint defense agreements; accordingly, the
Motion is denied.
I.
Procedural Background
On
March 28, 2018, a federal grand jury returned a ninety-three
count indictment against several Defendants, including Lacey
and Larkin, alleging that the Defendants engaged in various
crimes related to the operation of the website Backpage.com,
including conspiracy, facilitating prostitution, and money
laundering. (Doc. 3) The indictment also includes forfeiture
allegations.[1] Id. Lacey and Larkin were
arrested on April 6, 2018. The docket reflects that attorneys
from DWT entered appearances on behalf of Lacey and Larkin,
and attorneys from HCM entered appearances on behalf of
Lacey.
On
April 5, 2018, Ferrer pleaded guilty to conspiracy to
facilitate prostitution and money laundering. (CR 18-464-SPL,
Doc. 7) The charges against Ferrer were based on his work at
Backpage.com (“Backpage”). (Doc. 118 at 6) On
April 13, 2018, Ferrer sent letters to DWT and HCM asking
that the firms comply with their ethical duties to him, as a
former client, and withdraw from representing Lacey and
Larkin. (Doc. 118, Exs. A and B) On April 20, 2018, DWT sent
Ferrer a letter stating that they would “withdraw from
representation in all matters and cases as counsel for you,
Backpage.com, LLC, and all related entities owned or
controlled by you . . . .” (Id. at Ex. U) HCM
states that it withdrew from its representation of
Backpage.com and Ferrer on October 17, 2017. (Doc. 176 at 7)
Neither DWT nor HCM withdrew from their representation of
Lacey and Larkin in this matter.
The
Government asserts that, before filing the Motion, it met
with various defense counsel in an attempt to resolve its
concerns regarding potential conflicts of interest. (Doc. 118
at 2; see also Doc. 176 at 8 (HCM states that it
retained counsel to meet with the Government to discuss HCM
performing a limited role representing Lacey)) The parties
were not able to resolve these issues, and the Government
filed the Motion. (Doc. 118)
A.
Briefing on the Motion to Disqualify
On
June 6, 2018, after receiving extensions of time to respond,
Defendants filed responses to the Motion. (Docs. 130, 134,
147, 149, 154, 156, 160, 162, 163, 172, 174, 176, 177, 180)
Lacey filed a response in opposition to the Government's
Motion directed at HCM, through his separately retained trial
counsel. (Doc. 174) HCM also filed a response in opposition
to the Motion, through its separate counsel. (Doc. 176) On
June 13, 2018, the Government filed a reply to Lacey's
and HCM's responses. (Doc. 192)
On June
6, 2018, Lacey and Larkin, through separate counsel, also
filed a joint response to the Government's Motion
directed at DWT. (Doc. 180) On June 13, 2018, the Government
filed a reply to Lacey's and Larkin's response to the
Motion directed at DWT. (Doc. 193) On July 2, 2018, the
Government filed a supplement to that reply. (Doc. 207)
Defendant Andrew Padilla (“Padilla”), through
separate counsel, also filed a response in opposition to the
Government's Motion directed at DWT (Doc. 177), and the
Government filed a reply to Padilla's response. (Doc.
194) In addition, several Defendants filed joinders to the
various responses to the Motion.[2] On October 5, 2018, the
Court heard argument on the pleadings, and the arguments made
by each party were taken under advisement.
II.
Motion to Disqualify
The
Government argues that each firm's prior representation
of Ferrer presents an incurable conflict of interest that
should disqualify both firms from participation in this case.
Relying on Ethical Rule 1.9(a) of the Arizona Rules of
Professional Conduct (Duties to Former Clients), the
Government asserts that HCM and DWT have incurable conflicts
of interest because (1) they previously represented Ferrer in
substantially related matters, (2) Ferrer's interests as
their former client are materially adverse to the interests
of their current clients, Lacey and Larkin, because Ferrer
has pleaded guilty to criminal conduct related to his work at
Backpage and is cooperating with the Government in its
pursuit of criminal charges against other Backpage
principals, including Lacey and Larkin, [3] and (3)
Ferrer
has not given informed consent, confirmed in writing, to
allow HCM and DWT to represent Lacey and Larkin. (Doc. 118 at
2, 8) The Government also argues that HCM's and DWT's
continued representation of Lacey and Larkin in this matter
would violate Ethical Rule 1.7(a)(2) of the Arizona Rules of
Professional Conduct (Conflicts of Interest: Current Clients)
because there is a significant risk that the firms'
representation of Lacey and Larkin would be materially
limited by their responsibilities to their former client
Ferrer. (Id. at 8-9)
A.
Applicable Standards
This
Court applies the Arizona Rules of Professional Conduct to
evaluate the conduct of attorneys admitted or authorized to
practice before it and, therefore, the Court applies these
rules to resolve the Government's motion to
disqualify.[4]See LRCiv 83.2(e); Roosevelt
Irrigation Dist. v. Salt River Project Agric. Improvement
& Power Dist., 810 F.Supp.2d 929, 944 (D. Ariz.
2011) (“this Court applies the Arizona ethical rules
when evaluating motions to disqualify counsel.”)
(citations omitted); Amparano v. ASARCO, Inc., ...