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United States v. Lacey

United States District Court, D. Arizona

October 12, 2018

United States of America, Plaintiff,
v.
Michael Lacey, et al., Defendants.

          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., ...


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