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Deatley v. Keybank National Association

United States District Court, D. Colorado

September 9, 2014

ALAN DEATLEY, NAPI (COLORADO) LLC, a Washington limited liability company, 15 Corporations, Inc., a Washington corporation, Plaintiffs,
v.
KEYBANK NATIONAL ASSOCIATION, an Ohio corporation, Defendant.

ORDER

PHILIP A. BRIMMER, District Judge.

This matter is before the Court on the Voluntary Motion to Dismiss Pursuant to F.R.C.P. 41(a)(2) [Docket No. 71] filed by plaintiffs Alan DeAtley, NAPI (Colorado) LLC ("NAPI"), and 15 Corporations, Inc. ("15 Corporations").

I. BACKGROUND[1]

A. Mr. DeAtley's Criminal Case

On October 6, 2010, a Denver grand jury returned an indictment against Mr. DeAtley, charging him with several counts of criminal conduct in connection with the State of Colorado's conservation easement tax credit program. Docket No. 29-1. In July 2011, the state court allowed Mr. DeAtley's counsel to withdraw based upon irreconcilable conflicts and granted a continuance. Mr. DeAtley then retained substitute counsel ("criminal counsel"). People v. DeAtley (" DeAtley I "), 2014 WL 2708455, at *1 (Colo. June 16, 2014). On November 13, 2012, Mr. DeAtley wrote to the trial court, asking the court to permit criminal counsel to withdraw. Id. at *2. The court granted Mr. DeAtley the opportunity to retain substitute counsel, but did not permit criminal counsel to withdraw. Id. In February 2013, Mr. DeAtley filed a malpractice action pro se in the United States District Court for the Eastern District of Washington against criminal counsel, which was later transferred to this District. DeAtley v. Stuart (" DeAtley II "), No. 13-cv-01140-REB-BNB (Docket No. 1 at 1). Mr. DeAtley accused criminal counsel of failing to review supporting documents and failing to retain a tax or forensic expert for trial. Id. (Docket No. 3 at 1-2). Criminal counsel again filed motions to withdraw. The trial court found that a conflict of interest between Mr. DeAtley and criminal counsel existed, but again denied criminal counsel's motions to withdraw, concluding that Mr. DeAtley had caused the conflict in order to delay the trial. DeAtley I, at *2. On February 15, 2013, the trial court granted Mr. DeAtley another opportunity to secure different counsel, but Mr. DeAtley was unable to do so. Id. at *2-*3. On March 26, 2013, criminal counsel filed a motion for reconsideration, which the trial court denied. Id. at *3. The trial court found that, although Mr. DeAtley had a history of attempting to disqualify attorneys in order to delay the trial, the complexity of the issues and the pending May 2013 trial rendered highly unlikely the possibility of Mr. DeAtley acquiring substitute counsel. Id. On April 9, 2013, criminal counsel filed a Petition for Rule to Show Cause why their motion to withdraw should not be granted with the Colorado Supreme Court. DeAtley II, (Docket No. 42-6). On April 11, 2013, the Colorado Supreme Court issued a Rule to Show Cause and stayed the criminal proceedings. Id. (Docket No. 42-7).

On October 28, 2013, the magistrate judge in DeAtley II recommended that criminal counsel's motion for a pre-judgment cost bond be granted and plaintiff's motion to stay be denied, finding that

[t]his action, alleging malpractice against his Colorado criminal defense counsel in the state prosecution, is part-and-parcel of Mr. DeAtley's abusive litigation strategy. Mr. DeAtley refuses in the state prosecution to proceed pro se or to retain substitute counsel. Through this malpractice action, he makes it impossible for his current criminal counsel to represent him in the state prosecution. And now he seeks to postpone this malpractice action until the criminal case he has stymied is resolved. Here, as in the Keybank case, I do not intend to facilitate Mr. DeAtley's improper manipulation of the judicial system.

Id. (Docket No. 43 at 3). The district judge adopted the magistrate judge's recommendation and dismissed the case without prejudice for Mr. DeAtley's failure to post a cost bond. Id. (Docket No. 56 at 7).

On June 16, 2014, the Colorado Supreme Court ruled that the state trial court erred in denying criminal counsel's motion to withdraw. It also ordered the trial court to determine if Mr. DeAtley had obtained substitute counsel and, if he had not, to advise Mr. DeAtley that he may be forced to proceed to trial without an attorney. DeAtley I, 2014 WL 2708455, at *5. The trial court was further directed to give Mr. DeAtley a short and reasonable time in which to determine how he would like to proceed. Id. Based upon a review of the docket sheet, Mr. DeAtley currently appears pro se and has been given until September 16, 2014 to acquire counsel. People v. DeAtley, 2010CR10309 (Denver Dist. Ct. August 22, 2014).

B. Procedural History

On July 3, 2012, plaintiffs filed this case in the United States District Court for the Western District of Washington and, on November 11, 2012, the case was transferred to this District. Docket No. 1-1; Docket No. 1. At the time of filing, the criminal case had been pending against Mr. DeAtley for nearly two years. Mr. DeAtley did not object to this case proceeding or raise any Fifth Amendment concerns during the pleading stage, briefing and resolution of a motion to dismiss, and into discovery. On March 20, 2013, the magistrate judge entered a scheduling order in this case. Docket No. 47. On April 4, 2013, defendant filed a notice of deposition of Mr. DeAtley for June 7, 2013. Docket No. 50. At the request of Mr. DeAtley's attorney, defendant canceled the deposition based upon the attorney's representation that Mr. DeAtley was undergoing a medical procedure on June 7. Docket No. 67 at 2. Rather than undergoing a surgical procedure, Mr. DeAtley consulted with a doctor on June 6, 2013. Id .; see also Docket No. 52 at 2, ¶ 3. Mr. DeAtley's attorney admitted that his own situation was "unresolved and now impaired due to [Mr. DeAtley's] total lack of financial resources." Docket No. 56 at 2, ¶ 3. On June 21, 2013, defendant filed a motion for sanctions for Mr. DeAtley's failure to appear at a deposition, which the magistrate judge construed as a motion to compel ("motion to compel"). Docket No. 52.

After defendant filed its motion to compel, plaintiffs filed a motion to stay, asserting, for the first time, that Mr. DeAtley's Fifth Amendment rights could be compromised if he were deposed. Docket No. 59 at 2. Although plaintiffs' motion to stay mentioned that the criminal proceedings against Mr. DeAtley were stayed and that Mr. DeAtley's attorneys in this case had retained a criminal law expert to advise them on how to proceed, plaintiffs did not argue that Mr. DeAtley's inability to secure substitute counsel in the criminal proceeding had any effect on his ability to proceed in the case. The magistrate judge ordered Mr. DeAtley to appear for his deposition and denied plaintiffs' motion to stay:

It is apparent to me that Mr. DeAtley is engaged in abusive litigation tactics for the improper purpose of manipulating the judicial system to delay both Keybank's attempts to pursue its foreclosure action and the state criminal prosecution.... [now] Mr. DeAtley seeks to postpone indefinitely this action until resolution of the criminal case, progress of which he has ...

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