No. 89-577
IN THE SUPREME COURT OF THE STATE OF MONTANA
1990
DENNIS R. WASHINGTON,
Plaintiff and Respondent,
-v-
MONTANA MINING PROPERTIES, INC.,
a Montana Corporation,
Defendant and Appellant,
and
ASARCO, INC., a New Jersey Corporation,
Plaintiff and Respondent.
and
MONTANA MINING PROPERTIES, INC.,
a Montana Corporation, and LAITH
REYNOLDS and OLIVE J. SMITH,
Defendants and Appellants,
MONTANA MINING PROPERTIES, INC.
a Montana Corporation,
Plaintiff and Appellant
-v-
ASARCO, INC., a New Jersey Corporation,
and DENNIS R. WASHINGTON, et al.,
Defendants
APPEAL FROM: District Court of the Second Judicial District,
In and for the County of Silver Bow,
The Honorable Frank M. Davis, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
W.D. Murray, Jr, Butte, Montana
Anthony F. Phillips, New York, New York
For Respondent:
Ronald B. MacDonald, Missoula, Montana
Ross Richardson; Henningsen, ~u6cel1,Vucurovich &
Richardson; Butte, Montana
Laura B. Houguet; White & Case, New York, New York
Submitted on Briefs: April 26, 1990
Decided: J u l y 131 1990
Filed:
Justice R. C. McDonough delivered the Opinion of the Court.
Petitioner Montana Mining Properties, Inc., (MMP) has
petitioned this Court for a writ of supervisory control
disqualifying Judge Mark P. Sullivan from preceding further in this
case. In its petition, MMP maintains that Judge Sullivan should
be disqualified due to his relationship with the law firm
representing the respondent, Dennis R. Washington. The writ is
granted and we direct that this action be assigned to another
judge .
The sole issue on appeal is:
Whether a writ of supervisory control disqualifying a
presiding judge should issue when: (1) his son is employed by
counsel of record for the respondent, Dennis R. Washington, (2) he
knows and associates with partners of that law firm on a social
basis, and (3) the petitioners raise questions concerning his
ability to impartially preside over the case.
On June 19, 1987, Dennis Washington (Washington) entered into
a contract with MMP for the sale of two mining properties and
equipment, which are located in Butte, Montana. The first
property, the "Main Butte Propertyt1was sold td MMP for three
million dollars in cash. Both parties agree this sum has been
paid.
The second parcel of property sold for $500,000 and the
equipment located on this property sold for three million dollars.
Half of the price for the equipment was to be paid in cash. The
parties agree that this part of the contract has been performed.
2
The dispute here arises from the contract which provides that
the $500,000 for the second parcel of property, and $1.5 million
representing the balance of the price of the equipment may be paid
in Itunrestricted free trading common stockl1 of a public company,
called Butte Mining PLC. This company was organized and promoted
in London by Clive J. Smith, who was one of four joint venturers
who controlled MMP. The joint venture used MMP as a vehicle to
acquire mining properties that were then transferred to Butte
Mining PLC. Shares in this company were then sold in public stock
offerings.
The agreement between Washington and MMP provided that the
stock, which represented the $1.5 million balance of the purchase
price for the equipment, was to be transferred to Washington no
late than September 15, 1987. The stock representing the $500,000
due on the property was transferred on November 27, 1987. The
agreement stated that time was of the essence with respect to both
payments, and it contained an express termination clause, pursuant
to which Washington was entitled to terminate the contract in the
event of default. The agreement contained provisions which granted
to MMP, a "first right of refusall1 to acquire an interest in any
mineral property owned by Washington in the Butte Mining District.
The shares of stock were delivered to a firm of accountants,
Bryant & Co., in Jersey, Channel Islands. Apparently, the delivery
of both stock payments was made on time. In October of 1987, Peter
Bryant notified Washington, through a letter, that his firm was
holding 312,500 shares of common stock which were made payable I1to
the order of" Washington. This delivery represented the $500,000
due under the contract for the land. A subsequent letter from
Bryant advised Washington that he was releasing to Washington's
order an additional 937,000 shares, which represented the $1.5
million balance dae on the equipment.
Washington does not deny receiving these letters. However,
he maintains that he never gained possession, dominion or control
over the stock. In support of this contention, Washington
testified that he was never sent any documents regularly
disseminated to Butte Mining PLC shareholders, nor given dominion
over the shares. He maintained that when he attempted to sell the
shares, he was unable to do so because Smith retained control over
the escrow where the stock was held. In light of these
circumstances, Washington maintained that he was not paid the
monies due him under the contract.
Eventually, Washington, deeming MMP in breach of the contract,
brought a lawsuit on March 14, 1989. In his complaint, he sought
to terminate all of MMP1s rights under the agreement. MMP answered
the complaint and denied the allegations of breach of contract.
In short, MMP maintained that its deliveries of stock to the
holding company constituted valid deliveries and that it had,
therefore, met its obligations under the contract.
On April 25, 1989, Washington publicly announced that he had
entered into an agreement with ASARCO, Inc. Under this agreement,
Washington agreed to sell certain mining properties, located in
Butte, to ASARCO. MMP deemed this agreement a violation of its
right of first refusal contained in its contract with Washington.
It brought a lawsuit seeking a preliminary injunction to prohibit
consummation of the arrangement and also sought tort and
contractual damages against both Washington and ASARCO.
A hearing was held relative to MMP1s request for an injunction
on May 22 and 23, 1989. At this hearing, the primary issue was
whether MMP had violated the terms of its contract with Washington.
Obviously if MMP was in breach, and Washington was entitled to
terminate the contract, MMP was not entitled to enforce its right
of first refusal.
At the hearing, both sides presented testimony concerning the
stock transfers. The law firm of Datsopoulos, MacDonald and Lind
P.C., of Missoula, Montana, represented Washington. As part of his
case, Washington called Milton Datsopoulos, one of the named
partners of that firm, to testify concerning the various payment
arrangements. Dennis Washington, Clive Smith, and Kelvin Myers,
an employee of Bryant & Co., also testified.
The trial judge, the Honorable Mark Sullivan, determined that
MMP had not validly transferred the stock to Washington. Judge
Sullivan found that Washington did not have dominion or control
over the stock and therefore MMP had not validly made the payments
under the contract. He further found that this was a material
breach since it represented a failure of a significant part of the
consideration. Judge Sullivan, therefore, denied MMP's request for
an injunction.
Following the injunction hearing, MMP was informed that Judge
Sullivan's son was employed as a legal intern by Datsopoulos,
MacDonald and Lind. This fact led counsel for MMP to question a
number of rulings made by Sullivan during the injunction hearing.
In particular, MMP questioned the judge's ruling which allowed
Milton Datsopoulcrs to testify when his law firm was actively
representing one of the defendants to the action. According to
MMP, Datsopoulos sat at counsel table during the hearing and
actively assisted in Washington's defense. Judge Sullivan's
decision to allow his testimony, MMP maintains, is in direct
contravention of Rule 3.7(a) of the Montana Rules of Professional
Conduct which states:
A lawyer shall not act as an advocate at trial in which
the lawyer is likely to be a necessary witness except
where :
(1) the testimony relates to a non-contested issue;
(2) the testimony relates to the nature and value of
legal services rendered in the case; or
(3) disqualification of the lawyer would be a substantial
hardship on the client.
None of these exceptions apply here. The suspicions generated
by Judge Sullivan's rulings and his relationship with the
Datsopoulos law firm, led counsel for MMP to request that Judge
Sullivan remove himself from further proceedings in the case.
According to MMP's brief, they met with the Judge on June 2, 1989
and made this request, which was denied. In this same meeting,
Judge Sullivan apparently informed attorneys for MMP that he
considered his findings of fact and conclusions of law, which were
contained in his order denying their request for an injunction, to
be final. MMP maintains that such statements are contrary to
established law, which dictates that findings made in a preliminary
injunction hearing are not conclusive to any subsequent trial.
Moreover, MMP argues that such statements, which were made prior
to any discovery in the case, clearly indicate that Judge Sullivan
is prejudiced.
MMP, following this conversation, filed a motion to disqualify
Judge Sullivan. Pursuant to this motion, this Court ordered the
Honorable Frank Davis to conduct a hearing and to determine whether
Judge Sullivan should be disqualified. While this motion was
pending, a newspap-erreporter observed Judge Sullivan at a football
game with Milton Datsopoulos and Ronald MacDonald, both of whom are
partners in the Datsopoulos firm. According to uncontradicted
testimony, Judge Sullivan did not attend the football game with
either of these gentlemen. Rather, he unexpectedly ran into Mr.
MacDonald, who then invited the Judge to his firm's stadium box for
a drink. He accepted this invitation and enjoyed one drink and
conversation with the two lawyers for approximately 10-15 minutes.
The conversation only involved football and neither Judge Sullivan
nor the lawyers spoke about any issues surrounding the case in
controversy.
Despite the innocent nature of this conversation, the
newspaper reporter who observed the activity wrote an article which
appeared in The Montana Standard on September 23, 1989. The
article briefly described the status of the case, including the
disqualification proceeding, and contained quotes from both Mr.
MacDonald and Judge Sullivan.
On September 11, 1989, the parties presented written argument
concerning Judge Sullivan's disqualification, to Judge Davis. The
arguments included an affidavit which was submitted by Judge
Sullivan. It generally defended his actions taken in the case.
MMP maintains that through his submission of this affidavit, Judge
Sullivan overstepped his bounds as a disinterested, impartial judge
and stepped into the role as advocate and maintains that this
further evidences bias on his part.
Following submission of the partiest arguments, Judge Davis
entered an order denying MMPts motion. MMP petitioned this Court
for a writ of supervisory control. In its briefs in support of
that petition, MMP requested this Court to exercise its
extraordinary powers to direct the lower court to disqualify Judge
Sullivan from all further proceedings in the case.
The only issue we must face is whether a writ of supervisory
control should issue. We address this issue in two parts. First
we review Judge Davis' order and determine whether he correctly
held that Judge Sullivan need not disqualify himself. Second, we
must view all of the facts surrounding the controversy in order to
determine whether Judge Sullivan should be disqualified because the
facts create an appearance of impropriety.
Judge Davis based his decision primarily upon his
interpretation of the disqualification statute, which states in
relevant part:
Any .. . judge . . . must not sit or act in any
action or proceeding:
8
...
2. When he is related to either party or any
attorney or member of a firm of attorneys of record for
a party by consanguinity or affinity within the fourth
degree, computed according to the rules of law;
In his opinion and order, Judge Davis determined that Judge
Sullivan's son, who was a legal intern for Datsopoulos, MacDonald
and Lind was not "an attorney or member of a firm of attorneys of
record for a party . . .I' He based this conclusion on the fact
that Sullivan's son was not an attorney and not a member of the
Bar. Accordingly, he was not and could not be a "memberf'of the
Datsopoulos law firm.
We do not disagree with this interpretation of the statute.
The wording of 5 3-1-803, MCA, is clear. If the legislature
intended to provide that a judge disqualify himself when a member
of his family interned for a law firm appearing before him, it
could easily have provided that "employees," or "student interns1'
are covered by the statute. It chose not to do so, however, and
we decline MMP's invitation to add these words. When the wording
of a statute is clhar, its words will be interpreted by their plain
meaning. Montana Assoc. of Underwriters v. State Dept. of Admin.
(1977), 172 Mont. 211, 563 P.2d 577.
Having determined that Judge Davis did not incorrectly
determine that Judge Sullivan should be disqualified under the
language of § 3-1-803, MCA, we must consider whether we should
exercise our extraordinary power of supervisory control to remove
Judge Sullivan on the basis that his actions have created an
Itappearanceof impropriety." A review of the policies behind our
constitutional power supervisory control appropriate before
we consider this issue.
The power to issue writs of supervisory control is derived
from Article VII, Section 2, of the Montana Constitution which
states:
Section 2. Supreme court jurisdiction. (1) The
supreme court has appellate jurisdiction and may issue
hear, and determine writs appropriate thereto. It has
original jurisdiction to issue, hear, and determine writs
of habeas corpus and such other writs as may be provided
by law.
(2) It has general supervisory control over all
other courts.
j his provision grants this Court supervisory control over all
inferior courts within the State. This power is separate and
distinct from the Court's appellate jurisdiction. This Court has
observed that it is a power which is called into use when necessary
to meet exigent circumstances for which no express remedy has been
provided. State ex rel. Whiteside v. First Judicial District Court
(1900), 24 Mont. 539, 63 P. 395. Its primary purpose is to "keep
the courts themselves within bounds, and to insure the harmonious
working of our judicial system." Whiteside, 63 P. at 399. The
writ should only be issued in extraordinary situations. State ex
rel. Topley v. District Court (1918), 54 Mont. 461, 171 P. 273.
Mindful of these policies, we conclude that a writ of
supervisory control is appropriate in this case. The petitioners
have recited numerous facts which could indicate bias on the part
of Judge Sullivan. The fact that his son interns for the
Datsopoulos law firm together with the fact that Judge Sullivan has
associated on a social basis with members of that firm do not
require disqualification. However, these facts when viewed in
light of other circumstances surrounding the case, including Milton
Datsopoulos' testimony, and the newspaper article describing the
meeting at the football game, have snowballed to create an
appearance of impropriety.
Rule 4 of the Canons of Judicial Ethics requires that a
judge's conduct should be free from the appearance of impropriety.
Factors present in this case, in particular the newspaper article,
render the realization of this standard a virtual impossibility.
Additionally, we note that Rule 33 of the Canons of Judicial
Ethics requires a judge, when engaged in pending or prospective
litigation, to be particularly careful to avoid any action that may
reasonably tend to awaken the suspicion that his social or business
relations or friendships constitute an element in influencing his
judicial conduct. The facts here have raised questions of
impropriety. They evidence an impression of impropriety and bias.
Justice must satisfy the appearance of justice. Jones v. City
of Chicago, 610 F.Supp 350, (N.D.Il1.E.D. 1984). As eloquently
stated by Lord Hewart,
... a long line of cases shows that it is not merely
of some importance but is of fundamental importance that
justice should not only be done, but should manifestly
and undoubtedly be seen to be done. Nothing is to be
done which creates even a suspicion that there has been
an improper interference with the course of justice. Rex
v. Sussex Justices (1924), 1 k.b. 256, 259.
The people's confidence in the ability of the courts to
administer justice must not be diminished. A state ruled by law
cannot afford any perceived notion that justice is not being served
by the judiciary. It is for this reason, that we grant MMP's
petition for a writ of supervisory control. We emphasize that such
action by this Court is only undertaken under extraordinary
circumstances. However, the events involving the lower court have
created an aura of possible bias or prejudice. In order to remedy
this situation as well as to protect the integrity of the judiciary
as a whole, the writ is granted and the Court hereby orders that
this action be assigned to another district judge who has not
participated heretofore in this case.
We Concur: y
,'
Justices
Justice John C. Sheehy, dissenting:
From the record here, it does not appear that Montana Mining
Properties, Inc. has much of a case. To mask its lack of
substance, Montana Mining Properties, Inc., through its counsel,
has mounted a vengeful attack on the impartiality and integrity of
a judicial officer.
This litigation involves essentially two questions: 1) did
Montana Mining Properties breach its contract of purchase with
Dennis R. Washington; and, 2) does Montana Mining Properties
(hereinafter MMP) have any right of first refusal as to other
mining properties proposed to be sold by Dennis R. Washington to
ASARCO, Inc?
Under MMP1s contract with Washington, MMP was required to pay
balances on the contract to Washington by certain dates in U.S.
dollars or in I8unrestricted,free tradingw common stock of the same
value. The record before us is clear that MMP neither paid
Washington the balance due in U.S. dollars at the times required,
nor did it provide him with unrestricted and free-trading common
stock as the alternative. Therefore, MMP breached the contract and
is not entitled to an injunction.
The second question relates to a right of first refusal, which
was included in the contract between MMP and Washington. The right
of first refusal applied to other mining properties held by
Washington in the Butte area. Washington made a deal for the sale
of certain of those properties or an interest therein to ASARCO.
Washington gave notice to MMP of the proposed offer, and MMP has
not at any time met or tendered the amounts of money necessary to
meet the first refusal requirement. Aside from its obvious breach
of contract, if a right of first refusal existed in MMP, the latter
did not or could not meet the offer, which takes care of the first
refusal issue.
In the light of the record, District Judge Sullivan properly
denied MMPts request for a temporary injunction to stop the ASARCO
deal. Upon the denial of the injunction, Washington and ASARCO
completed their deal. Although the temporary injunction was
denied, the principal action itself remains undecided in District
Court. It is possible, but only barely possible, it seems to me,
that MMP might have other evidence to turn the tables as to the
contract breach. Yet MMP did not appeal the denial of the
temporary injunction. Instead, it mounted its attack against Judge
Sullivan, and eventually District Judge Frank Davis was called in
to determine whether Judge Sullivan should be disqualified. Judge
Davis denied the disqualification after the hearing, concluding
properly, I think, that Ittheappearance of impropriety was mostly
in the eye of the loser.I1
The alleged impropriety turns on three incidents: (1) the
temporary employment of Pat Sullivan as an intern for the law firm
representing Washington; (2) a ten-minute conversation between
District Judge Sullivan and Ronald MacDonald, one of Washington's
attorneys, at a football game; and (3) the permission by Judge
Sullivan to allow the testimony of Milton Datsopoulos as a witness
in the temporary injunction hearings.
The employment by law firms of law school students as
temporary interns is common in Montana. It is a recognition by the
law firms of this State that support of our Law School is increased
by offering hands-on law office experience to law school students.
Washingtonfs law firm employs five or six of such interns per year.
Such employment, particularly when the intern has never been
directly involved in the case at issue does not qualify as a basis
for disqualification of a district judge. Canon 3C, Canons of
Judicial Ethics relatingto the disqualification of a judge because
of relationship applies only if the relative is "acting as a lawyer
in the proceeding." The commentary under that Canon, published by
the American Bar Association, is as follows:
The fact that a lawyer in a proceeding is affiliated with
a law firm with which a lawyer-relative of the judge is
affiliated does not of itself disqualify the judge.
Under appropriate circumstances, the fact that Ithis
impartiality might reasonably be questioned1Iunder Canon
3C(1) or that the lawyer-relative is known by the judge
to have an interest in the law firm that could be
flsubstantiallyaffected by the outcome of the proceedingff
under Canon 3C(l) (d)(iii) may require his
disqualification.
Here the employment of Pat Sullivan as an intern does not meet
any of the propositions set forth in the commentary. In fact, he
was not a lawer when acting as an intern. Pity the sons and
daughters of district judges in the future who as law students will
not be selected as interns because of the jeopardy the majority
opinion now places on such employment.
The facts pertaining the association District Judge
Sullivan with Ronald MacDonald, of Washingtonls law firm, at a
university football game are far overblown. It is a common
experience for attenders at such football games to be invited for
a short visit at one or other of the several plush boxes maintained
by law firms and corporations of Montana at the University stadium.
As a result, such boxes are usually crowded, with much passing in
and out by visitors. This Court should not countenance such a
casual contact as indicating bias unless we are willing to examine
strictly our own tendencies. We have just returned from the annual
meeting of the State Bar of Montana, where probably every member
of this Court associated at cocktail parties and other events with
counsel from around the State, many of whom have pending before
this Court appeals or other original proceedings. To hold that
such contacts, including casual visits at a University stadium
football box, indicate bias is nothing more than silly.
The third point is the testimony of Mr. Datsopoulos at the
injunction hearing itself. Milton Datsopoulos was called to the
stand, and his testimony was objected to as follows:
MR. PHILLIPS: Your Honor, we object to this witness
testifying concerning material matters in dispute of this
case. H e w sappeared here at the counsel table as counsel
of record.
MR. MACDONALD: May I be heard with regard to that, your
Honor? I am laying this as foundation. There have been
a number of statements that have been made with regard
to Mr. Datsopoulost participation. Mr. Myles has
testified, for our benefit for the first time, that it's
his understanding Mr. Datsopoulos authorized the holding
of stock as was testified by Mr. Clive Smith.
It comes somewhat as a surprise to us, and I believe that
it is appropriate to call Mr. Datsopoulos who hasn't
participated materially other than some comic relief with
these proceedings.
THE COURT: I am going to allow it. Overruled. You may
proceed in question.
In the majority opinion, Rule 3.7(a) of the Montana Rules of
Professional Conduct is cited, which states that a lawyer shall not
testify as a witness when he is an advocate at the trial, with
three exceptions. One of those exceptions is where
"disqualification of the lawyer would work substantial hardship on
the client." In the case at bar, it was the contention of MMP that
its delivery of stock to an escrow holder in the Channel Islands
was in fact delivery of stock to Mr. Washington. The effect of
the Smith testimony was that Mr. Datsopoulos had authorized such
a delivery of the stock. Washington's interests would be
substantially affected if Smith's testimony were not contravened.
Yet the majority holds that the exception contained in the Montana
Rules of Professional Conduct does not apply, saying "None of these
exceptions apply here.'' Thus, this Court, without an appeal, has
decided an issue that should have been raised by appeal. In any
event, on the record here, the ruling of District Judge Sullivan
with respect to the lawyer's testimony was correct.
All through the majority opinion, it is evident the majority
can find no fault, no bias, no partiality or improper orders made
by the District Court. The majority can find no direct fault with
the ruling of District Judge Davis that disqualification of Judge
Sullivan was not necessary. Yet the majority, saying in effect
that they could never convict Judge Sullivan of bias, nevertheless
convict him on the basis of a perceived appearance of impropriety.
The majority have attenuated judicial integrity to the breaking
point, in a case without warrant for such action. I dissent.
Justice
0