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Agena v. Cleaver-Brooks, Inc.

United States District Court, D. Hawaii

December 19, 2019

TERRY N. AGENA, et al., Plaintiffs,
v.
CLEAVER-BROOKS, INC., et al., Defendants.

          ORDER AFFIRMING THE MAGISTRATE JUDGE'S ORDER DENYING IN PART DEFENDANTS' MOTION TO DISQUALIFY PLAINTIFFS' COUNSEL

          Derrick K. Watson United States District Judge

         The instant action was brought under Hawaii law and the Racketeer Influenced and Corrupt Organizations Act (RICO or Act), 18 U.S.C. § 1961 et seq., by a group of more than fifty Plaintiffs, alleging they were fraudulently induced to settle their asbestos claims by virtue of Cleaver-Brooks, Inc. and its national coordinating counsel concealing adverse information during the discovery process. Each of the plaintiffs who executed a settlement agreement in the underlying asbestos actions was advised by the same law firm that represents the group of Plaintiffs in this case.

         On that basis, Defendants Cleaver-Brooks and Husch-Blackwell, LLP moved to disqualify Plaintiffs' counsel. Dkt. Nos. 41, 45. The Magistrate Judge issued an Order denying the motion in part. Dkt. No. 65. Defendants now seek review, Dkt. Nos. 68, 70, contending the Magistrate Judge erred in applying Rules 1.7 and 3.7 of the Hawaii Rules of Professional Conduct. The Magistrate Judge held, in relevant part, that under Rule 1.7, there is not a concurrent conflict of interest between Plaintiffs and their counsel, and that although two of Plaintiffs' attorneys (Richard DeRobertis and Ilana Waxman) will likely testify at trial, under Rule 3.7, DeRobertis and Waxman are only disqualified from the trial portion of this action.

         For the reasons set forth below, the Magistrate Judge's conclusions are not clearly erroneous or contrary to law, and therefore the Magistrate Judge's Order is AFFIRMED.

         FACTUAL & PROCEDURAL BACKGROUND

         A. Relevant Facts

         The facts relevant to Plaintiffs' claims are set forth in the Court's recent Order regarding Defendants' motion to dismiss. Dkt. No. 71 at 2-9. Although Plaintiffs have since filed a second amended complaint, Dkt. No. 76, the gist of their claims remains the same. Plaintiffs seek relief on the basis that in the underlying asbestos lawsuits: (1) Cleaver-Brooks and its national coordinating counsel for asbestos litigation withheld information during discovery that “would make it more difficult for Plaintiffs” to prevail at trial; (2) “Plaintiffs through their counsel reasonably and detrimentally relied upon the [discovery] misrepresentations and omissions”; and (3) “as a result acted in a way that caused Plaintiffs damage . . . by agreeing to settle their claims for artificially low settlement amounts.” See Dkt. No. 76, ¶¶ 147-48.

         As relevant to Defendants' motion to disqualify Plaintiffs' counsel, it is undisputed that Galiher DeRobertis & Waxman LLP (the Galiher firm) represented the asbestos plaintiffs in the underlying actions when they executed their respective settlement agreements. See Dkt. No. 34-5. In the underlying actions, Richard DeRobertis and Gary O. Galiher “witnessed and approved” the “form and content” of the settlement agreements for each former asbestos plaintiff. See, e.g., Dkt. No. 34-5 at 13, 21.

         In the instant lawsuit, Plaintiffs are represented by the Galiher firm and Waters Kraus & Paul LLP (the Waters firm). See Dkt. Nos. 28, 76. Counsel of record from the Galiher firm is Alyssa Segawa, Allison Aoki, and Richard DeRobertis; and counsel of record from the Waters firm is Peter Kraus and Charles Siegel. See Dkt. Nos. 12, 28, 76. Plaintiffs admit that Richard DeRobertis and Ilana Waxman will “be witnesses at trial, ” but Plaintiffs aver they “will not act as trial counsel and will not take or defend any depositions in this case.” Dkt. No. 46 at 31, 36; see Dkt. No. 73 at 24-26. According to Plaintiffs, the Waters firm will try the case. Dkt. No. 73 at 26.

         B. Procedural History

         On July 26, 2019, Defendants filed a motion to disqualify Plaintiffs' counsel, arguing that the Galiher firm must be disqualified under Rule 1.7 of the Hawaii Rules of Professional Conduct, and, at a minimum, four lawyers at the Galiher firm- DeRobertis, Waxman, Segawa, and Aoki-should be immediately disqualified under Rule 3.7 from “all phases” of the litigation, including “pretrial proceedings.” Dkt. No. 41 at 18-20; Dkt. No. 45. The Magistrate Judge (MJ) issued an Order granting in part and denying in part Defendants' motion. Dkt. No. 65. Defendants filed their timely objections to the adverse portions of the MJ's Order. Dkt. No. 68, 70; cf. 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72(a).

         STANDARD OF REVIEW

         Where, as here, a magistrate judge issues a pre-trial order regarding a non-dispositive matter, any party may seek review by filing its objections to the order. 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72(a); LR 74.1. “The district judge in the case must consider timely objections, ” but the court cannot “modify or set aside any part of the order” unless it is “clearly erroneous or is contrary to law.” See Fed.R.Civ. P. 72(a) (emphasis added); Doe v. Kamehameha Sch., 596 F.3d 1036, 1041 n.4 (9th Cir. 2010).

         “A finding is clearly erroneous when although there is evidence to support it, the reviewing [body] on the entire evidence is left with the definite and firm conviction that a mistake has been committed.” Concrete Pipe & Prods. v. Constr. Laborers Pension Trust, 508 U.S. 602, 622 (1993) (internal quotation marks omitted) (quoting United States v. U.S. Gypsum Co., 333 U.S. 364, 395 (1948)). As a result, “the ‘clearly erroneous' standard is significantly deferential, ” id. at 623, and “[t]he reviewing court may not simply substitute its judgment for that of the deciding court.” Grimes v. City & Cty. of San Francisco, 951 F.2d 236, 241 (9th Cir. 1991). A magistrate judge's order is “contrary to law” if the order applies the incorrect legal stand or misapplies applicable law. Na Pali Haweo Cmty. Ass'n v. Grande, 252 F.R.D. 672, 674 (D. Haw. 2008); ...


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