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O'Hanlon v. AccessU2 Mobile Solutions, LLC

United States District Court, D. Colorado

July 26, 2018



          Nina Y. Wang United States Magistrate Judge.

         This matter comes before the court on several pending motions:

(1) Defendants AccessU2 Mobile Solutions, LLC ("AccessU2"), EBH, LLC, and David Palm's Motion to Dismiss Amended Complaint, or in the Alternative, Motion for Summary Judgment (the "AccessU2 Motion") [#49, filed March 9, 2018];
(2) Plaintiff Kenneth P. O'Hanlon's ("Plaintiff or "Mr. O'Hanlon") "Motion for Disqualification of Attorneys for Defendants on the Grounds of Conflict of Interest, Violation of DR-5 of the Rules of Professional Conduct and Violation of Rules 1.7(a) and 1.9(a) of the Model Code of Professional Conduct" (the "Motion for Disqualification") [#64, filed April 17, 2018];
(3) Plaintiffs Motion to Amend Complaint and Grant Leave for the Amended Complaint (the "Motion to Amend") [#74, filed May 4, 2018];
(4) Defendant Michael Cohig's Motion to Quash Service of Process ("Motion to Quash") [#81, filed May 21, 2018];
(5) Defendant Paul Zorn's Motion to Dismiss Amended Complaint, or in the Alternative, Motion for Summary Judgment (the "Zorn Motion") [#82, filed May 21, 2018];[1]and
(6) Defendant Michael Fossenier's Motion to Quash Service of Process ("Motion to Quash") [#86, filed May 24, 2018].

         The undersigned considers the Motions pursuant to 28 U.S.C. § 636(b), Rule 72 of the Federal Rules of Civil Procedure, and the memoranda dated March 14, 2018 [#54], April 18, 2018 [#66], May 7, 2018 [#78], May 22, 2018 [#83], and May 24, 2018 [#87]. This court concludes that oral argument will not materially assist in the resolution of this matter. Therefore, having carefully reviewed the Motions and associated briefing, the applicable case law, and the entire docket, this court respectfully RECOMMENDS that the AccessU2 Motion and Zorn Motion be GRANTED and Plaintiffs Motion to Amend be DENIED. Further, it is ORDERED that Plaintiffs Motion for Disqualification is DENIED and Defendant Cohig's Motion to Quash and Defendant Fossenier's Motion to Quash are GRANTED.


         The court has discussed the background of this matter in several prior Orders, see, e.g., [#6; #18; #26; #62], and discusses it here only as it pertains to the instant Motions. Mr. O'Hanlon initiated this action by filing hispro se Complaint on January 24, 2018. [#1]. As Defendants in this action Plaintiff names several limited liability companies ("LLC") and several individuals allegedly associated with those entities (collectively, "Defendants"). [Id.]. Plaintiff alleges that Defendants actively deceived and defrauded him to remove him from AccessU2 without fair compensation and robbed him of fair market value for his development of patented technology. See generally [#1; #19]; see also [#56 at 8]. Following an Order to Show Cause why this matter should not be dismissed for want of subject matter jurisdiction, see [#6], and several Motions to Quash Service of Process of the initial Complaint by individual Defendants, see [#21; #33; #36], Plaintiff filed his First Amended Complaint ("FAC") on February 13, 2018, see [#19], the operative pleading in this matter.

         The FAC asserts four claims against Defendants for (1) improperly determining his distributive shares of AccessU2 in violation of 26 U.S.C. § 704(b) and corresponding tax code regulations ("Claim 1"); (2) failing to provide accurate K-l tax filings and filing fraudulent K-l tax filings with the Internal Revenue Service ("IRS") in violation of federal tax law ("Claim 2"); (3) improperly valuing Patent No. 7, 643, 821 B2 (the "'821 Patent") as it relates to his distributive shares of AccessU2 in violation of 26 U.S.C. § 704(b) and corresponding tax code regulations ("Claim 3"); and (4) civil theft of the '821 Patent, unjust enrichment, and violations of the federal Uniform Trade Secrets Act, which this court construes as violations of the Defend Trade Secrets Act ("DTSA"), 18 U.S.C. §§ 1832, 1836(b) ("Claim 4"). See [#19]. The undersigned provided Plaintiff until March 9, 2018, to serve Defendants properly with the FAC. See [#26]. Though Mr. O'Hanlon purportedly served Defendants properly, see [#40 through #48], several individual Defendants again moved to quash service of process, prompting this court to permit Mr. O'Hanlon to cure any deficiencies in service by May 1, 2018, with the express warning that failure to do so may result in a recommendation that improperly served Defendants be dismissed without prejudice from this action. See [#65]. Per Mr. O'Hanlon's request, he received an additional two weeks to serve Defendants Fossenier and Crane. See [#73]. Presently, Defendants Fossenier and Cohig have moved to quash service of process. See [#81; #86].

         On March 9, 2018, Defendants AccessU2, E B H, LLC, and David Palm moved to dismiss the FAC or for summary judgment in the alternative, because Mr. O'Hanlon's claims are barred by (1) accord, satisfaction, and release, (2) the statute of limitations, and (3) claim preclusion. See generally [#49]. The AccessU2 Motion asserts that the legal disputes between Plaintiff and Defendants have been lingering for several years, including prior litigation in the District Court for the City and County of Denver ("Denver District Court"). See generally [id.]; see also [#19 at p. 12, ¶ 34]. And, as noted above, Defendant Zorn filed a similar Motion on May 21, 2018. [#82].

         Plaintiff then filed his Motion for Disqualification on April 17, 2018. See [#64]. He contends that the court should disqualify defense counsel Stuart Mann from representing all Defendants, because a conflict of interest exists among the Defendants given that Mr. O'Hanlon seeks to hold each accountable to varying degrees, which may pit several Defendants against one another. See generally [id.]. He also asserts that not all Defendants have consented to Mr. Mann's representation such that Mr. Mann's representation of all Defendants is materially limited because he may abdicate his responsibilities to some Defendants as opposed to others.

         On April 20, 2018, Plaintiff filed a proposed Second Amended Complaint [#67], which the undersigned struck for failure to comply with the Federal Rules of Civil Procedure as well as this District's Local Rules of Civil Practice. See [#68]. But given Mr. O'Hanlon's apparent desire to file a Second Amended Complaint, this court set a deadline of May 8, 2018 for the joinder of parties and amendment of pleadings. See [id.]. Mr. O'Hanlon filed the instant Motion to Amend on May 4, 2018 [#74].

         The Motions are now ripe for disposition and/or recommendation. This court first considers Plaintiffs Motion for Disqualification given the potential consequences on the action in general should the court prohibit Mr. Mann from continuing to represent Defendants. Next, I consider the Motion to Amend, because a superseding complaint moots any Motions to Dismiss aimed at an inoperative pleading. See Gotfredson v. Larsen LP, 432 F.Supp.2d 1163, 1172 (D. Colo. 2006). Given this court's conclusion on the Motion to Amend, I then turn to the AccessU2 Motion and the Motions to Quash. In considering each of these motions this court affords a liberal construction to Mr. O'Hanlon's papers because he proceeds pro se, Hall v. Bellmon, 935 F.2d 1106, 1110 (10th Cir. 1991), but it does not act as his advocate and applies the same procedural rules and substantive law to Mr. O'Hanlon as to a represented party, Murray v. City o/Tahlequah, 312 F.3d 1196, 1199 n.2 (10th Cir. 2008).


         I. Motion for Disqualification[2]

         A. Legal Standard

         "A motion to disqualify rests with the sound discretion of the trial court." Quark, Inc. v. Power Up Software Corp., 812 F.Supp. 178, 179 (D. Colo. 1992). As the moving party, Mr. O'Hanlon has the burden of establishing the grounds for disqualifying defense counsel. See Religious Tech. Ctr. v. F.A.CT.Net, Inc., 945 F.Supp. 1470, 1473 (D. Colo. 1996). This is a significant task, as "courts have historically been highly cynical of motions to disqualify opposing counsel, noting that such motions are often dilatory or tactical devices." Miller v. Deustche BankNat'l Trust Co., No. 12-cv-03278-PAB, 2013 WL 4776054, at *5 (D. Colo. Sept. 4, 2013). Thus, to guard against the nefarious purpose of securing a strategic advantage courts must make specific findings of facts and conclusions of law when considering whether the appropriateness of disqualification. See World Youth Day, Inc. v. Famous Artists Merch. Exch., Inc., 866 F.Supp. 1297, 1299 (D. Colo. 1994). When, as here, the record is sufficient for making such a determination, no evidentiary hearing is required. See Weeks v. Independent School Dist. No. 1-89, 230 F.3d 1201, 1212 (10th Cir. 2000) (specifying that no evidentiary hearing is necessary where record contains sufficient information to make specific findings of fact).

         In evaluating a motion to disqualify in a federal case the court must decide the motion by "applying federal law." Helmer v. Goodyear Tire & Rubber Co., No. 12-CV-00685-RBJ, 2013 WL 328951, at *3 (D. Colo. Jan. 29, 2013). That is, attorneys in federal cases are not only "bound by the local rules of the court in which they appear", but also by "the ethical rules announced by the national profession and considered in light of the public interest and the litigants' rights." Cole v. Ruidoso Mun. Sck, 43 F.3d 1373, 1383 (10th Cir. 1994) (explaining that motions to disqualify in federal court affect substantive rights of the parties and are "decided by applying standards developed under federal law."). Mr. O'Hanlon's Motion for Disqualification focuses on the American Bar Association's Model Rules of Professional Conduct Rule 1.7 ("Model Rule 1.7"). [#64]. And although this District has adopted the Colorado Rules of Professional Conduct as its standards of professional responsibility, see D.C.COLO.LAttyR 2(a), this distinction makes no difference as Model Rule 1.7 and Rule 1.7 of the Colorado Rules of Professional Conduct are identical, compare Model Rules of Prof'l Conduct r. 1.7 with CO ST RPC Rule 1.7.[3] Under either rule, Mr. Mann cannot represent a client if such representation involves a concurrent conflict of interest. Thus, Mr. O'Hanlon must prove that

(1) [Mr. Mann's] representation of one client will be directly adverse to another client; or
(2) there is a significant risk that the representation of one or more clients will be materially limited by [Mr. Mann's] responsibilities to another client, a former client or a third person or be a personal interest of the lawyer.

Model Rules of Prof'l Conduct r. 1.7(a)(1), (2).

         B. Application

         Mr. O'Hanlon submits two arguments as to why the court should disqualify Mr. Mann from representing Defendants under Model Rule 1.7. First, he asserts that because each Defendant is potentially liability to him to varying extents, "the representation of one client would be directly adverse to the other clients." [#64 at 4]. He explains that "Defendants may disagree on trial strategy, the appropriateness of settlement, or may want to settle independently of the other defendants." [#79 at 6]. According to Mr. O'Hanlon, the various interests at stake for each Defendant will create direct adversity among the group as a whole. Second, he contends that not all Defendants have consented to Mr. Mann's representation of them in this matter, and that this will materially limit Mr. Mann's responsibilities to some as opposed to others. He requests that, should it not disqualify Mr. Mann, the court order all Defendants to file their consent to Mr. Mann's representation on the docket.

         Defendants AccessU2, E B H, LLC, and Palm counter that Plaintiff lacks standing to assert claims on behalf of adverse parties and that he fails to provide any "facts, law or cognizable basis to support his motion for disqualification." [#69 at 2]. I respectfully agree.

         Standing: It is axiomatic that a plaintiff must have standing to proceed in federal court. See Susan B. Anthony List v. Driehaus, 134 S.Ct. 2334, 2341 (2014) (standing requires "(1) an 'injury in fact,' (2) sufficient 'casual connection between the injury and the conduct complained of and (3) a 'likl[ihood]' that the injury 'will be redressed by a favorable decision.'" (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992))). This remains true even when moving to disqualify opposing counsel. See Shapiro v. Rynek, No. 13-CV-3086-WJM-KMT, 2017 WL 121617, at *3 (D. Colo. Jan. 11, 2017) (concluding that the movant must have standing to bring a motion to disqualify opposing counsel). For the following reasons, this court concludes that Mr. O'Hanlon lacks standing.

         The irreducible minimum of standing requires the plaintiff to prove an injury-in-fact, one that is not merely hypothetical but is "concrete, particularized, and actual or imminent." Colorado Outfitters Ass'n v. Hickenlooper, 823 F.3d 537, 544 (10th Cir. 2016). As an opposing party, who does not allege to be a former or current client, Mr. O'Hanlon has a difficult task of establishing that he suffered any cognizable injury from Mr. Mann's representation of Defendants. See Gates Rubber Co. v. Bando Chem. Indus., 855 F.Supp. 330, 334 (D. Colo. 1994) ("As a general rule, courts do not disqualify an attorney on the grounds of conflict of interest unless the former client moves for disqualification."). Mr. O'Hanlon fails to demonstrate how Mr. Mann's representation of Defendants has caused Plaintiff to suffer any injury-in-fact. Indeed, it appears from Mr. O'Hanlon's papers that he is asserting potential injuries to Defendants, which is insufficient to establish an injury-in-fact to Plaintiff. Cf Dawson v. City of Bartlesville, Okla., 901 F.Supp. 314, 315 (N.D. Okla. 1995) (noting that "invocation of [Oklahoma] Rule 1.7," which is similar to Model Rule 1.7, "does not alone provide standing for an antagonist to seek to disqualify opposing counsel. There must be some other ground for third-party standing.").

         In some instances, however, an opposing party may have standing "where the interests of the public are so greatly implicated that an apparent conflict of interest may tend to undermine the validity of the proceedings." Abbott v. Kidder Peabody & Co., 42 F.Supp.2d 1046, 1050 (D. Colo. 1999) (citing Beck v. Board of Regents, 568 F.Supp. 1107, 1110 (D. Kan. 1983) (proclaiming that where the actions of a member of the bar "cast even the appearance of an impropriety upon the legal profession" in the public's view, review of that conduct may be warranted)). But Mr. O'Hanlon fails to demonstrate that such circumstances arise here. Cf Abbott, 42 F.Supp.2d at 1050-51 (finding the defendants had standing to move to disqualify the plaintiffs' counsel where plaintiffs' counsel represented 200 plaintiffs in a non-class action suit and the retainer agreement deprived the plaintiffs the right to control their own cases); Smith v TFI Family Servs., Inc., No. 17-02235-JTM-GEB, No. 17-02236-JTM-GEB, 2018 WL 2926474, at *3 (D. Kan. June 28, 2018) (finding third-party standing where defense counsel represented entities that performed services for children in state custody, because such services sufficiently implicated the public's interests). Thus, Mr. O'Hanlon lacks standing to move to disqualify Mr. Mann under Model Rule 1.7.

         Merits: Even if Plaintiff had standing to move to disqualify Mr. Mann, his arguments fail on the merits as well. At bottom, Plaintiff believes that each Defendant is culpable to an unknown degree and may therefore try to implicate co-Defendants to skirt liability. See [#79 at 5]. But Mr. O'Hanlon submits no evidence to corroborate his assertions. And courts are wary of motions to disqualify opposing counsel because they have the potential for misuse to gain a tactical advantage or to harass opposing counsel; thus, such motions must be supported by more than speculation or conjecture. See Sequa Corp. v. Lititech, Inc.,807 F.Supp. 653, 659 (D. Colo. 1992). Further, direct adversity between co-defendants does not exist even if one may indirectly implicate the other, especially when all Defendants deny liability in general. See, e.g., Shapiro, 2017 WL 121617, at *4-5 ...

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