United States District Court, N.D. Illinois, Eastern Division
MARC KRAMER, KIRIL TRAJCEVSKI, MATT NYMAN, on behalf of themselves and all other similarly situated, Plaintiff,
AMERICAN BANK AND TRUST COMPANY, N.A., SHARON WHEELER, JULIE KLAUS, HARRY S. COIN and DALE DOLLENBACHER, Defendants
As Amended November 19, 2013.
For Marc Kramer, Kiril Trajcevski, Matt Nyman, on behalf of themselves and all other similarly situated, Plaintiffs: Terrence Buehler, LEAD ATTORNEY, Touhy, Touhy & Buehler, LLP, Chicago, IL; Ari Karen, Stanley Todman, PRO HAC VICE, Offit Kurman, PA, Fulton, MD; Daniel K. Touhy, Touhy, Touhy, Buehler & Williams, LLP, Touhy, Touhy, Buehler & Williams, LLP; Timothy Cronin Lynch, PRO HAC VICE, Offit Kurman, Baltimore, MD.
For American Bank and Trust Company, N.A., Julie Klaus, Defendants: Abbey Chun Furlong, Lane & Waterman Llp, Davenport, IA; Cameron A Davidson, Pappas Davidson O'Connor & Fildes, P.C., Rock Island, IL; Joel Christopher Griswold, John Conlaeth McIlwee, Melissa Anne Siebert, Baker & Hostetler, LLP, Chicago, IL.
For American Bank and Trust Company, N.A., Julie Klaus, Defendants: Cameron A Davidson, Pappas Davidson O'Connor & Fildes, P.C., Rock Island, IL;, Abbey Chun Furlong,, Lane & Waterman Llp, Davenport, IA; Joel Christopher Griswold, John Conlaeth McIlwee, Melissa Anne Siebert, Baker & Hostetler, LLP, Chicago, IL.
For Dale Dollenbacher, Defendant: John Conlaeth McIlwee, Melissa Anne Siebert, Baker & Hostetler, LLP, Chicago, IL.
MEMORANDUM OPINION AND ORDER
Jeffrey Cole, UNITED STATES MAGISTRATE JUDGE.
The American Bank and Trust Company, N.A. (the Bank) has moved to disqualify plaintiffs' counsel, Ari Karen. [# 141]. Judge Lee has referred the motion here for resolution. [#147]. 28 U.S.C. § 636(b)(1)(A); Rule 72(a), Federal Rules of Civil Procedure.
Regrettably, disqualification motions have become common tools in litigation, often being used for purely strategic purposes and to harass. See Richardson-- Merrell, Inc. v. Koller, 472 U.S. 424, 436, 105 S.Ct. 2757, 86 L.Ed.2d 340 (1985); In re BellSouth Corp., 334 F.3d 941, 961 (11th Cir. 2003); Freeman v. Chi. Musical Instrument Co., 689 F.2d 715, 722 (7th Cir. 1982);
Allegaert v. Perot, 565 F.2d 246, 251 (2d Cir.1977). Thus, motions for disqualification are not favored and should not be casually granted. Melamed v. ITT Cont'l Baking Co., 592 F.2d 290, 295 (6th Cir.1979); Fred Weber, Inc. v. Shell Oil Co., 566 F.2d 602, 609 (8th Cir.), cert. denied, 436 U.S. 905, 98 S.Ct. 2235, 56 L.Ed.2d 403 (1977); Panduit Corp. v. All States Plastic MFG. Co., 744 F.2d 1564, 1576-77 (Fed.Cir.1984). As I noted at the evidentiary hearing, I do not think the motion was made in bad faith or to gain a tactical advantage. (R. 249).
The Bank's motion stems from an encounter one of the Bank's managing consultants -Sharon Wheeler -- had with Mr. Karen at a seminar he was giving on loan officer compensation in Chicago in September 2010 -- a year before the present litigation. According to the Bank, just before Mr. Karen was to speak, Ms. Wheeler, in the public atrium outside the auditorium where he was to speak, shared confidential information of the Bank with him, regarding wage and hour issues, and he provided legal advice to her. It is the Bank's contention that as a consequence, an implied lawyer/client relationship came into being, and since this case is a wage and hour case, a conflict of interest exists requiring the disqualification of Mr. Karen, his law firm, his co-counsel, and his co-counsel's firm. Plaintiffs, of course, see it very differently.
As it was Ms. Wheeler's word against Mr. Karen's, an evidentiary hearing was required so that the credibility of the two witnesses could be properly assessed. See, e.g., Tellabs Operations, Inc. v. Fujitsu Ltd., 882 F.Supp.2d 1053, 1056 (N.D.Ill. 2012).  That assessment turns on the plausibility of the testimony, the shifting and vacillating explanations for conduct, uncertain, inconsistent, and clashing memories, the inconsistencies between testimony and objective evidence, the internal inconsistencies within testimony, and the extent to which documents or objective evidence may contradict or support the witness's story. See Anderson v. Bessemer City, 470 U.S. 564, 574-75, 105 S.Ct. 1504, 84 L.Ed.2d 518 (1985); Mitondo v. Mukasey, 523 F.3d 784, 788 (7th Cir. 2008); United States v. Bradford, 499 F.3d 910, 920-21 (8th Cir.2007); Kadia v. Gonzales, 501 F.3d 817, 820 (7th Cir.2007); Pinpoint, Inc. v. Amazon.Com, Inc., 347 F.Supp.2d 579, 583 (N.D.Ill.2004) (Posner, J.)(sitting by designation).
In addition, demeanor and inflection can be critical components of the decision whether to believe a witness. Anderson, 470 U.S. at 575; United States v. Schiro, 679 F.3d 521, 532 (7th Cir.2012); United States. v. Smith, 668 F.3d 427, 430 (7th Cir.2012). Indeed, " the demeanor of a witness...may satisfy the tribunal not only that the witness' testimony is not true but that the truth is the opposite of his story; for the denial of one, who has a motive to deny, may be uttered with such hesitation, discomfort, arrogance or defiance, as to give assurance that he is fabricating, and that, if he is, there is no alternative but to assume the truth of what he denies." NLRB v. Walton Mfg. Co., 369 U.S. 404, 408, 82 S.Ct. 853, 7 L.Ed.2d 829 (1962). 
Since " [t]he first step in the resolution of any legal problem is ascertaining the factual background and sifting through the facts with an eye to the legally relevant," Upjohn Co. v. United States, 449 U.S. 383, 390-91, 101 S.Ct. 677, 66 L.Ed.2d 584 (1981); see also Sandra T.E. v. South Berwyn School Dist. 100, 600 F.3d 612, 619 (7th Cir. 2010), we begin with the evidence adduced at the evidentiary hearing.
Mr. Karen's Version Of His Encounter With Ms. Wheeler
At the hearing, Mr. Karen explained that he was a frequent presenter at seminars like the one for the Illinois Mortgage Bankers Association in September, 2010 in Chicago. (R. 34). When he began giving the presentations, the intended audience was mortgage banks or bank representatives, but this grew to include loan officers. Indeed, the representation of loan officers in the audiences prompted Mr. Karen to tweak the presentation a bit. (R. 34). The presentation in question was focused on amendments to the Truth in Lending Act's regulation covering payment to loan officers: they could no longer be paid on the " percentage of the revenue derived in loans that they closed." (R. 34-35). 
One of Mr. Karen's aims in conducting these talks was to generate business -- to get mortgage lenders to hire him to advise them about compensation plans. (R. 37). He didn't get paid to speak, but he hoped that he would raise his profile and marketability in the industry, a not uncommon goal of speakers at CLE-type seminars. (R. 37). He would meet people at the presentations, and if they contacted him, he'd follow up with them. (R. 43). He said that he didn't necessarily make himself available to people before his presentations, but that day someone did come up to him while he was sitting and preparing his speech. (R. 38). He didn't find out until this litigation was well under way who she was -- Ms. Wheeler. (R. 38).
Ms. Wheeler had never met or spoken with Mr. Karen before that day. When she saw him, he was sitting at a table in the atrium outside the auditorium in which he was to speak. That area was open to the public and was filled with tables and chairs. Ms. Wheeler pulled up a chair at the table at which Mr. Karen was preparing his presentation and sat down and began talking to him. ( See Plaintiff's Exs. 2s-2c, which are color pictures of the area). That table -- and the others surrounding it -- were in a public area immediately adjacent to the public thoroughfare. Any conversation between Mr. Karen and Ms. Wheeler could be overhead by passersby. There were between 125 and 200 people who attended the presentation, and
there were people walking past the tables at various times while Mr. Karen was preparing his remarks and while he was speaking with Ms. Wheeler.
Mr. Karen testified that he arrived in Chicago only about an hour before he was to speak and thus had little time to work on his presentation. He said that the sponsor of the event had asked him to edit certain aspects of his presentation which he agreed to do and which he was working on at the time Ms. Wheeler approached him. The two spoke for about ten minutes.  He said that he asked no questions about the Bank, and that he never provided any kind of legal advice to Ms. Wheeler. He said, at these seminars his guard is always up, and that he is careful never to give legal advice because it can be misconstrued and can create unintended conflicts. ( See also Defendant's Ex. 7, ¶ 15). In fact, Mr. Karen said he did not recall if Ms. Wheeler even told him who she was with.
Mr. Karen said that the scope of his conversation was general in nature. Ms. Wheeler's focus was on the subject and content of the seminar, because she said she couldn't stay for the whole thing and thus wanted to get information about what was going to be said. She asked if it would cover minimum wage overtime. Mr. Karen told her that it would, but said he was asked to take out certain parts because a number of loan officers were going to be in attendance. He said there were no specific questions about the Bank, and no inquiries about his background. He said much of the discussion involved an exchange of pleasantries. He was emphatic that he never provided any legal advice to Ms. Wheeler. He said that not only would he not have done that under any circumstances, but he noted that there were people in the area of the table where they were sitting; some were seated at other tables; others were walking around.
Mr. Karen said he was " usually not allowed" to record contact information from attendees and claimed he did not take contact information from Ms. Wheeler. (R. 43). But, in the next breath, he conceded that he took her email address in order to send her a copy of the PowerPoint presentation because she couldn't stay for the whole thing. (R. 43).  Although he had stated in his affidavit that he gave her his business card, he didn't recall doing that. (R. 82). Mr. Karen wouldn't say whether Ms. Wheeler was part of his target client group. (R. 44). She was " in the universe of people [he] theoretically represent[ed]" ; actually, not her, but her bank. (R. 44).
Mr. Karen stated that he didn't think Ms. Wheeler worked for a bank at the time, despite having her email and giving a presentation that he said was targeted to
mortgage banks, bank representatives, and bank loan officers, all of whom would work for banks.
Q. And her email said ambankqc, right?
A. If that's what it said, sure, I don't remember.
Q. And then when you exchanged emails the day after, that actually had her signature block that said " American Bank," right?
A. If you say so. The way it would show on my screen, and I'm honestly notorious I don't scroll down, I should more, it's got me in trouble, but it would be ...