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Schneider v. CitiMortgage, Inc.

United States District Court, D. Kansas

November 21, 2014

RANDALL A. and AMY L. SCHNEIDER, Plaintiffs,
v.
CITIMORTGAGE, INC., et al., Defendants.

MEMORANDUM AND ORDER

K. GARY SEBELIUS, Magistrate Judge.

This matter comes before the court upon defendants' Motion to Disqualify Counsel (ECF No. 137).[1] Defendants CitiMortgage, Inc., Citibank, National Association, Citigroup, Inc., and Primerica Financial Services Home Mortgages, Inc. move to disqualify plaintiffs' counsel, Donna L. Huffman, because she is likely to be called as a fact witness in this case.

I. Background

This case revolves around plaintiffs Randall A. and Amy L. Schneider's 2010 loan refinance. In their complaint, plaintiffs assert claims for breach of contract, violations of the Equal Credit Opportunity Act (ECOA), Real Estate Settlement Procedures Act (RESPA), Kansas Consumer Protection Act (KCPA), for conversion, and fraud.[2] At issue is defendants' conduct surrounding plaintiffs' loan refinancing, particularly, whether defendants wrongfully denied a refinance and/or otherwise illegally interfered with plaintiffs' refinancing through another lender, and/or imposed illegal fees and penalties on plaintiffs. In their complaint, plaintiffs make factual allegations, including: that defendants told the Schneiders that they did not qualify for a refinance; that they were charged numerous illegal fees; that after being denied the Citi refinance, "the Schneiders came to local lender Home Quest Mortgage and applied for a loan where they qualified for multiple programs due in part to their debt ratio, property value, and perfect credit;" and that soon after, "Citi began to show their colors and insincerity on the lack of qualification' for a loan when... they began calling and soliciting the Schneiders for a loan refinance."[3] The Schneiders allege that Citi attempted to hinder their refinance with Home Quest by imposing a prepayment penalty, by changing and increasing the amount due on the loan, and its status.

Defendants deny these allegations and argue they are entitled to conduct discovery to determine their validity; including whether the Schneiders were in fact "immediately approved and closed the loan... with no change in circumstance except the knowledge by the order of the payoff' by competitor mortgage company Home Quest."[4] Plaintiffs' counsel, Ms. Huffman, is the owner and registered agent of Home Quest Mortgage, LLC.[5] She was also the broker who serviced the Schneiders on their 2010 loan refinance.

This case was removed to federal court on August 14, 2013. The parties' initial discovery deadline was October 30, 2014, but has been extended to January 16, 2015. Several discovery disputes have arisen thus far, but the parties have engaged in document discovery, and at least one deposition has been taken. On October 22, 2014 District Judge Sam A. Crow denied defendants Primerica Financial Services Home Mortgages, Inc. and Citigroup, Inc's motion for summary judgment, without prejudice.[6] In light of plaintiffs' Fed.R.Civ.P. 56(d) affidavit, [7] the court allowed for discovery to continue with respect to all defendants, because the parties are in the midst of discovery, and it is possible that plaintiffs will yet be able to show Citigroup, Inc. and Primerica liable.

Defendants now seek to disqualify Ms. Huffman under Kansas Rule of Professional Conduct 3.7, because she is likely to be a necessary witness at trial. Defendants contend that the case has reached pre-trial stages during which the attorneys will obtain evidence that could be admitted at trial, potentially exposing Ms. Huffman's dual role as both a witness and advocate to a jury.

II. Discussion

The District of Kansas adopts the Kansas Rules of Professional Conduct as the applicable standard of professional conduct, except where another local rule specifically applies.[8] Kansas Rule of Professional Conduct 3.7 prohibits a lawyer from:

[a]ct[ing] as an advocate at a trial in which the lawyer is likely to be a necessary witness except where:

(1) the testimony relates to an uncontested issue;

(2) the testimony relates to the nature and value of legal services rendered in the case; or

(3) disqualification of the lawyer would work substantial hardship on the client.[9]

The rule specifically limits its prohibition to advocacy at trial.[10] This reflects the rule's primary purpose-to avoid jury confusion if a lawyer were to appear in dual roles; both as a fact witness and as an advocate.[11] It does not apply typically to a lawyer's ability to perform pretrial activities.[12] The moving party bears the burden of showing that counsel should be disqualified.[13] "The proof must be more than mere speculation and must sustain a reasonable inference of a violation" of the professional rules.[14] At the same time, showing a violation of a professional rule does not in every case necessitate disqualification. Instead, the court considers the facts of each case and balances the "interest of protecting the integrity of the [judicial] process against the right of a party to the counsel of its choice."[15] Because disqualification involves the court's ability to control attorney behavior during litigation, it is a matter left to the court's sound discretion.[16] However, "[c]ourts have found disqualification of counsel appropriate only under limited circumstances"[17] and "give these motions serious, conscientious, and conservative treatment."[1 ...


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