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Frantz v. Hawley Troxell Ennis & Hawley LLP

Supreme Court of Idaho

November 2, 2016

MARTIN FRANTZ, Plaintiff-Appellant,

         2016 Opinion No. 120

         Appeal from the District Court of the First Judicial District of the State of Idaho, Kootenai County. Hon. John T. Mitchell, District Judge.

         The orders of the district court are affirmed.

          Frantz Law, PLLC, Post Falls, for appellant. Jonathan Frantz argued.

          Paine Hamblen, LLP, Spokane, Washington, for respondent. John C. Riseborough argued.

          J. JONES, Chief Justice

         Counsel for appellant Martin Frantz ("Frantz") hired attorney Merlyn Clark as an expert witness in an unrelated matter in 2009. Clark was and is a partner with respondent law firm Hawley Troxell Ennis & Hawley LLP ("Hawley Troxell"). In 2010, Frantz' creditor, Idaho Independent Bank ("Bank"), hired Hawley Troxell to represent it in a contract action against Frantz. In 2011, while that matter was pending, Frantz filed for bankruptcy. Hawley Troxell continued to represent the Bank as a creditor in the bankruptcy, including in an adversary proceeding the Bank filed against Frantz in 2013.

         Frantz alleged in the adversary proceeding that Clark's interactions with Frantz in the 2009 matter created an attorney-client relationship and that it was therefore a conflict of interest for Clark's firm to represent the Bank against Frantz. Frantz also alleged that Hawley Troxell improperly used confidential information Clark acquired in the 2009 matter. The bankruptcy court concluded that there was no attorney-client relationship between Clark (or Hawley Troxell) and Frantz. The adversary proceeding was later dismissed as moot.

         Frantz subsequently brought the instant case against Hawley Troxell in Idaho district court, alleging legal malpractice and breach of fiduciary duty. The district court denied pro hac vice admission to attorney Jeffrey Katz, Frantz' chosen counsel. The district court also dismissed the complaint on the grounds of judicial estoppel, lack of standing, and abatement. Finally, it awarded Hawley Troxell attorney fees under Idaho Code sections 12-120(3) and 12-121. Frantz appealed the denial of pro hac vice admission, the dismissal of his complaint, and the award of attorney fees. By stipulation, the Court subsequently dismissed the appeal as to the award of attorney fees.



         In 2008, Frantz hired Bruce Owens and Regina McCrea of Owens & Crandall, PLLC, to represent him in an unrelated legal malpractice action against the firm of Witherspoon, Kelley.[1]Clark was retained as an expert witness in the case in 2009.[2] Frantz alleged that Clark's role was "to provide consultation and expert testimony." He further alleged that "Clark reviewed the record in the fraud case, which included documents regarding financial information for Mr. Frantz' business entity . . . . Clark prepared a 21-page preliminary report . . . . Clark also provided oral advice on the matter." Additionally, Frantz asserted that "Frantz paid Hawley Troxell's bill for Clark's services in the case, which included reviewing documents, preparing the report, and providing advice." The 2009 malpractice claim settled without Clark issuing a final written report, being deposed, or testifying. Frantz argues in this appeal that because Clark "consulted on areas of the case outside of [his] expert testimony, " his "role morphed from that of a testifying expert to that of consulting expert thereby forming an attorney-client relationship with Mr. Frantz."

         In 2010, the Bank retained Hawley Troxell to sue Frantz for his failure to pay off a loan that had matured. Clark did not participate in that action. In 2011, while that action was pending, Frantz petitioned for bankruptcy. Hawley Troxell continued to represent the Bank in Frantz' bankruptcy case. The bank filed a claim for $6, 400, 000 against Frantz' bankruptcy estate. In 2013, the Bank filed an adversary proceeding against Frantz in the bankruptcy, alleging that Frantz had fraudulently represented the value of his assets, including the assets at issue in the case in which Clark had served as an expert witness.

         In the adversary proceeding, Frantz moved to disqualify Hawley Troxell from representing the Bank, alleging that Frantz was a former client of the firm and that the firm possessed confidential information based on its prior representation of Frantz. Frantz hired Jefferey Katz, an Illinois attorney, as an expert witness in the disqualification hearing, but the bankruptcy court did not allow expert testimony at the hearing. Frantz also hired Katz to represent him "in any future litigation" charging Hawley Troxell with malpractice related to the alleged prior representation.

         In December 2014, U.S. Bankruptcy Judge Terry Myers denied the motion to disqualify Hawley Troxell, finding and concluding that Clark's "role in the malpractice litigation was solely that of a testifying expert witness" and that no attorney-client relationship was formed. In May 2015, Frantz sought, and the bankruptcy court granted, a waiver of discharge as to all creditors and debts, including the Bank and its loan. This apparently mooted the adversary proceeding. However, the record on appeal does not include a final judgment from either the adversary proceeding or the broader bankruptcy case.

         Represented by Katz, Frantz filed the instant malpractice case against Hawley Troxell in February 2015. The next month, Katz directly contacted Mr. Jack Gustavel, the Bank's CEO, regarding this malpractice case. Gustavel did not respond to Katz' email. Frantz also contacted Gustavel, describing a proposal to end the suit the Bank had filed against him in 2010. It appears that Frantz and Katz wanted the Bank to join Frantz' malpractice case against Hawley Troxell as a co-plaintiff. Any settlement proceeds would be paid first to the Bank in the amount necessary to extinguish Frantz' debt to the Bank and the rest would go to Frantz. The Bank did not accept Frantz' offer.

         In April 2015, Frantz moved for pro hac vice admission of Katz. Hawley Troxell opposed the motion, arguing that Katz had violated Idaho Rule of Professional Conduct ("I.R.P.C.") 4.2 by making unauthorized contact with the Bank, a party represented by Hawley Troxell.[3] The opposition was based on the idea that a foreign attorney who either does not know ...

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