FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit
FOR THE TENTH CIRCUIT November 22, 2017
_________________________________
Elisabeth A. Shumaker
Clerk of Court
UNITED STATES OF AMERICA EX
REL MARK CHRISTOPHER TRACY,
Plaintiff - Appellant,
v. No. 17-4062
(D.C. No. 2:14-CV-00701-JNP-PMW)
EMIGRATION IMPROVEMENT (D. Utah)
DISTRICT, a Utah Special Service
District; BARNETT INTERMOUNTAIN
WATER CONSULTING, a Utah
corporation; R. STEVE CREAMER;
FRED A. SMOLKA; MICHAEL
HUGHES; DAVID BRADFORD; MARK
STEVENS; CAROLLO ENGINEERS, a
California professional corporation; AQUA
ENVIRONMENTAL SERVICES, a Utah
corporation; LYNN HALES; ERIC
HAWKES; AQUA ENGINEERING, a
Utah corporation; JOE SMOLKA;
RONALD R. RASH; KENNETH WILDE;
MICHAEL B. GEORGESON; KEVIN W.
BROWN; ROBERT ROUSSELLE;
LARRY HALL; DON A. BARNETT,
Defendants - Appellees.
_________________________________
ORDER AND JUDGMENT*
_________________________________
*
After examining the briefs and appellate record, this panel has determined
unanimously to honor the parties’ request for a decision on the briefs without oral
argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore
submitted without oral argument. This order and judgment is not binding precedent,
except under the doctrines of law of the case, res judicata, and collateral estoppel. It
may be cited, however, for its persuasive value consistent with Fed. R. App. P. 32.1
and 10th Cir. R. 32.1.
Before TYMKOVICH, Chief Judge, HARTZ and O’BRIEN, Circuit Judges.
_________________________________
Mark Christopher Tracy appeals from the district court’s orders disqualifying
his counsel, denying his request for reconsideration of the disqualification order, and
dismissing his second amended complaint for failure to obtain new counsel.
Exercising jurisdiction under 28 U.S.C. § 1291, we affirm the original
disqualification because of the conflict of interest between Tracy and his counsel on a
matter collateral to the focus of the litigation. But we reverse the court’s denial of
his motion for reconsideration because the conflict had been resolved and there
apparently would be no prejudice to the court or any party. As a result, the dismissal
of the second amended complaint must also be reversed. We remand for further
proceedings.
I.
Mr. Tracy, acting as a relator, filed a qui tam complaint against the defendants
under the False Claims Act, 31 U.S.C §§ 3729 et seq. Early in the litigation he
directed his attorney, Phillip Lowry, to record a lis pendens against a water share
owned by defendant Emigration Improvement District (EID). EID responded with a
motion seeking release of the lis pendens as well as attorney fees and statutory
damages.
The district court granted EID’s motion and instructed EID to file a proposed
judgment. EID’s proposed judgment declared both Mr. Tracy and Mr. Lowry’s law
firm, Christensen and Jensen, P.C. (C&J), to be jointly and severally liable.
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Mr. Lowry filed an objection, purportedly on behalf of both Mr. Tracy and C&J,
which argued only that it would be improper to make C&J liable.
Because the objection appeared to advance the interests of Mr. Lowry and C&J
at the expense of Mr. Tracy, the district court became “concerned that this [objection]
presents an unwaivable conflict of interest.” Aplt. App. at 205. It therefore issued an
order directing Mr. Lowry and C&J to show cause why they should not be
disqualified from representing Mr. Tracy.
After C&J filed its response to the show-cause order, the court issued a
memorandum decision and order disqualifying C&J and Mr. Lowry. The order also
struck the objection, instructed Mr. Tracy to obtain new counsel to respond to the
proposed judgment, and directed C&J and Mr. Lowry to obtain outside counsel or
request permission to represent themselves.
Mr. Tracy, represented by new counsel, filed a response to the disqualification
order and asked the court to reconsider its decision to disqualify C&J. C&J,
represented by outside counsel, also filed a response in which it withdrew its
objection to the proposed judgment and stated that “[i]n order to most directly
address the Court’s concerns, C&J intends to pay the award of damages and
attorneys’ fees for the wrongful lis pendens.” Id. at 248.
The court declined to reconsider its disqualification order and directed
Mr. Tracy to obtain new counsel for the entirety of the case within 21 days or risk
dismissal of his complaint. A week later, it ordered entry of judgment against
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Mr. Tracy and C&J for the attorney fees and statutory damages awarded to EID. The
court also ordered release of the lis pendens.
Mr. Tracy later submitted a status report stating that he had “spoken with
23 attorneys and law firms in an effort to obtain new counsel, but all have declined
for various reasons.” Id. at 276. He also reiterated his desire to have C&J continue
to represent him in the qui tam action because he “believe[d] it would be in my best
interest to have them reinstated as my counsel.” Id. at 278. He again requested that
the court reconsider its disqualification order. The district court denied the renewed
request for reconsideration and dismissed the action without prejudice because pro se
relators may not prosecute qui tam actions.
II.
We review for abuse of discretion the district court’s disqualification order
because “the control of attorneys’ conduct in trial litigation is within the supervisory
powers of the trial judge, and is thus a matter of judicial discretion.” Cole v. Ruidoso
Mun. Sch., 43 F.3d 1373, 1383 (10th Cir. 1994) (internal quotation marks omitted);
see also Chavez v. New Mexico, 397 F.3d 826, 839 (10th Cir. 2005) (“We review a
district court’s decision on a motion to disqualify counsel for abuse of discretion.”).
Likewise, we review for abuse of discretion the district court’s decision to deny
Mr. Tracy’s motion to reconsider the disqualification order. See Van Skiver v. United
States, 952 F.2d 1241, 1243 (10th Cir. 1991). “A district court abuses its discretion
if its decision is arbitrary, capricious, whimsical, or manifestly unreasonable.” Bylin
v. Billings, 568 F.3d 1224, 1229 (10th Cir. 2009) (internal quotation marks omitted).
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Mr. Tracy argues that the district court abused its discretion when it
(1) disqualified his counsel without holding an evidentiary hearing and making
factual findings; (2) ordered the drastic remedy of disqualification; and (3) refused to
reinstate his counsel after the purported conflict was mooted. His first issue was not
preserved below. He never requested that the district court hold an evidentiary
hearing nor did he argue to the district court that it was required to hold an
evidentiary hearing at any point during the proceedings in the district court. We
therefore decline to address it. See Singleton v. Wulff, 428 U.S. 106, 120 (1976)
(“It is the general rule, of course, that a federal appellate court does not consider an
issue not passed upon below.”). We have explained that we will consider new
arguments for reversal on appeal “only if the appellant can satisfy the elements of the
plain error standard of review.” Richison v. Ernest Grp., Inc., 634 F.3d 1123, 1130
(10th Cir. 2011). And ordinarily we will not review for plain error unless the
appellant argues why that standard has been satisfied, see id. at 1130-31, but
Mr. Tracy has not so argued.
We also affirm the original disqualification order. The district court
considered the nonexhaustive factors set forth in Parkinson v. Phonex Corp.,
857 F. Supp. 1474, 1476 (D. Utah 1994):
The egregiousness of the violation, the presence or absence of prejudice to the
other side, and whether and to what extent there has been a diminution of
effectiveness of counsel are important considerations. In addition, equitable
considerations such as the hardship to the other side and the stage of trial
proceedings are relevant. The essential issue to be determined in the context
of litigation is whether the alleged misconduct taints the lawsuit.
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It concluded that disqualification was appropriate because all the factors weighed in
favor of disqualification. The court found that (1) the offense was egregious because
Mr. Lowry and C&J “advance[ed] arguments to serve their own interests at the direct
expense of their client’s interests,” Aplt. App. at 224; (2) there was prejudice to
Mr. Tracy because “his own counsel advance[d] arguments against his interests,” id.
at 225; (3) “there has been a significant diminution of the effectiveness of counsel”
because “[the] case has ground to a halt due to the conflict of interest” and
“adversarial briefing . . . will not be complete until Mr. Tracy obtains outside
counsel,” id. at 225-26; and (4) “[w]hile the case was filed some time ago, much of
the elapsed time was spent waiting for the United States to determine whether it
would intervene in this action” so “[t]he case is still in the earliest stage,” id. at 226.
We see no abuse of discretion in the court’s initial decision to disqualify C&J.
Not so for the denial of the motion to reconsider. C&J responded to the
disqualification order by removing its objection to the proposed judgment and
expressing its intent to pay the judgment in full, thereby eliminating the source of the
conflict with Mr. Tracy. Mr. Tracy also responded to the disqualification order and
moved for reconsideration. He stated that (1) he did not believe there was a conflict
between himself and C&J, but even if there was one, he waived the conflict; (2) there
was no suggestion that C&J was conflicted on any issue other than the lis pendens
issue, so after that was resolved there was no reason why C&J could not resume
representing him for the remainder of the case; (3) C&J’s continued representation
would not prejudice any other party; (4) there was no ongoing conflict that would
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cause his former attorneys to be less zealous in advocating for him; and
(5) disqualification would create a considerable hardship for him and would cause
him to be severely prejudiced. He requested “reinstatement of C&J because it would
be in his own best interests for C&J to continue to represent him in this matter.”
Aplt. App. at 238
Denying the motion to reconsider, the district court said that the conflict
between Mr. Tracy and C&J was not waivable. Although acknowledging that
disqualification of counsel would be “disruptive,” it determined that the hardship to
Mr. Tracy did not rise to the level of “‘manifest injustice’” sufficient to justify
reconsideration of its disqualification order. Id. at 263 (quoting Servants of
Paraclete v. Does, 204 F.3d 1005, 1012 (10th Cir. 2000)). The court acknowledged
C&J’s withdrawal of its objection to the lis pendens judgment and its offer to pay the
judgment by itself, but it said that “[c]ounsel cannot expect to act in a manner
warranting disqualification in one aspect of a case and then return to the rest of the
case as if the conduct never occurred—the taint of such conduct cannot be artificially
confined to discrete issues in a case.” Id. It concluded that C&J’s actions were
“plainly insufficient to undo the taint on the underlying lawsuit.” Id.
The court also denied Mr. Tracy’s renewed request for reconsideration in his
status report, which stated that he had been unable to obtain an attorney within the
21 days allotted because the 23 attorneys and law firms he had spoken with had
declined for various reasons. The court’s denial was “based on the reasoning in its
previous order.” Id. at 279.
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In our view the denial of the final request for reconsideration was an abuse of
discretion. To begin with, the request included “new evidence previously
unavailable”—Mr. Tracy’s inability to obtain counsel—which justified
reconsideration. See Servants of Paraclete, 204 F.3d at 1012.
Turning to the merits, the district court did not give adequate consideration to
the prejudice suffered by Mr. Tracy and did not adequately explain how the
participation of his attorneys for the remainder of the case would taint the litigation.
As a general matter, a litigant has the “right to employ counsel of [his] choice.”
Smith v. Whatcott, 774 F.2d 1032, 1035 (10th Cir. 1985). And here the prejudice to
Mr. Tracy is greatly magnified because he asserts that he has been unable to obtain
any replacement counsel (an assertion not disputed by opposing counsel or the court
below), which precludes him from pursuing his qui tam claim. It is hard to see how a
party could be more severely prejudiced than by dismissal of his suit.
To justify such prejudice, the taint to the litigation must be significant.
Typically, ethical violations that require disqualification involve “(1) a conflict of
interest that prevents zealous advocacy or (2) the potential use of privileged or
confidential information about one party that would give an unfair advantage to a
present client.” Archuleta v. Turley, 904 F.Supp.2d 1185, 1192 (D. Utah 2012). The
second circumstance is certainly not present here. As for the first, the district court
was properly concerned that Mr. Tracy’s attorneys were not providing zealous
representation when they sought to free themselves from any sanction for filing the
improper lis pendens and placing the full sanctions burden on their client. But even
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though the court properly considered that conduct to be egregious, it has not
explained why there should now be concern about zealous representation by C&J.
There is no longer any apparent conflict of interest regarding a matter under litigation
and Mr. Tracy, himself an attorney, should be able to adequately assess the risk of a
conflict. Perhaps there is a problem with the representation that was obvious to the
district court but has escaped us. EID’s brief does not assist us in this regard,
arguing solely that the “District Court’s refusal to reinstate [C&J], following its
agreement to pay damages arising from the wrongful lien, was not an abuse of
discretion because its prior conduct tainted the lawsuit.” Aplee. Br. at 33. For now,
therefore, we must reverse and remand for either a more complete explanation or the
grant of the motion to reconsider.
III.
We affirm the district court’s initial disqualification order, but we reverse its
decision denying Mr. Tracy’s motion to reconsider that order and the dismissal of the
case, and we remand for further proceedings consistent with this opinion.
Entered for the Court
Harris L Hartz
Circuit Judge
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