United States District Court, M.D. Georgia, Macon Division
T. TREADWELL, JUDGE
Putnam Group, LLC has moved to disqualify First-Citizens Bank
and Trust Company, Inc. (the “Bank")'s
counsel, Stokes Carmichael & Ernst, LLP. Docs. 24; 25. On
December 21, 2017, the Court held a telephone conference to
address primarily the motion to disqualify. Doc. 52. For the
following reasons, the motion is DENIED.
August 25, 2014, the Bank filed a complaint in the United
States District Court for the Northern District of Georgia
against N.D. Horton Jr. and other affiliated businesses of
Horton to collect a debt. Doc. 1 ¶ 5; First-Citizens
Bank & Trust Co. v. N.D. Horton, Jr., et al., No.
1:14-cv-02751, Doc. 1 (August 25, 2014) (the “Atlanta
Case”). Notably, Putnam was not a party to that case.
March 30, 2016, after the Bank obtained a judgment and writ
of execution against all Horton defendants, the Bank's
lawyers filed a “Joint Motion to Sell Certain Assets,
” in which the parties agreed to auction off certain
assets and remit the proceeds to the court. Doc. 1 ¶ 6;
First-Citizens, No. 1:14-cv-02751, Doc. 91 at 4-5
(March 30, 2016). The motion, which was later granted, stated
that the “Horton Defendants, acting through the
instrumentalities of Defendant Horton, and Horton Iron Works,
LLC and The Putnam Group, LLC, have authorized the sale of
certain personalty and realty.”
First-Citizens, No. 1:14-cv-02751, Doc. 92 at 3
(March 31, 2016).
agrees that Horton was authorized to sell its assets, but not
for the benefit of the Bank. Doc. 50 at 82:20-83:4,
103:22-104:10. According to Horton, the proceeds from the
sale of Putnam's assets were to be used to pay
Putnam's federal taxes. First-Citizens, No.
1:14-cv-02751, Doc. 111-2 at 18:13-19:5 (April 15, 2016).
Indeed, Horton testified at an April 15, 2016 deposition in
the Atlanta Case that he owned “no part of Putnam
Group, ha[s] never owned any part of it, and ha[s] nothing to
do with the management of it.” Id. at 18:9-12.
Horton then testified that because Putnam never received the
proceeds from the sale of its property, he believed the Bank
“opened [itself] to a lawsuit from Putnam Group.”
Id. at 30:1-9. In short, according to Putnam, Horton
made clear to the Bank's lawyers in the Atlanta Case that
he was not authorized to sell Putnam's assets for the
Bank's benefit. Doc. 25 at 2.
Horton's testimony, on May 2, 2016, the Bank's
lawyers filed a “Motion to Disburse Proceeds” to
collect all proceeds from the auction sale.
First-Citizens, No. 1:14-cv-02751, Doc. 107 (May 2,
2016). In that motion, the Bank's lawyers represented to
the court that “Putnam Group never owned the Personalty
and [is] not entitled to any of the Proceeds.”
Id. at 17. The Bank's motion to disburse went
unopposed, and the court ultimately granted the motion in a
proposed order, which stated, in relevant part, that
“The Putnam Group, LLC do[es] not have and ha[s] never
had any interest in both the Personalty and the
Proceeds.” First-Citizens, No. 1:14-cv-02751,
Doc. 118 at 3 (June 2, 2016).
contends that Stokes Carmichael & Ernst, LLP should be
disqualified because, under Rule 3.7 of the Georgia Rules of
Professional Conduct, there is an apparent conflict of
interest and lawyers from the Stokes firm will be necessary
fact witnesses “as to what transpired in putting
together consent orders in the Atlanta Case that resulted in
the theft of property belonging to The Putnam Group,
LLC.” Doc. 24 at 3-6. The local rules of this Court and
federal common law govern motions to disqualify. Herrmann
v. GutterGuard, Inc., 199 F. App'x. 745, 752 (11th
Cir. 2006). The movant bears the burden to prove the grounds
for disqualification. In re BellSouth Corp., 334
F.3d 941, 961 (11th Cir. 2003). If a court bases
disqualification on an ethical violation, “the court
may not simply rely on a general inherent power to admit and
suspend lawyers, without any limit on such power.”
Schlumberger Techs., Inc. v. Wiley, 113 F.3d 1553,
1561 (11th Cir. 1997). Rather, the court must identify a rule
and conclude that the lawyer violated it. Id.
Because a litigant is presumptively entitled to counsel of
its choosing, only a compelling reason will justify
disqualification. Id. Moreover, because
disqualification is a “harsh sanction, often working
substantial hardship on the client, ” it “should
be resorted to sparingly.” Norton v. Tallahassee
Mem'l Hosp., 689 F.2d 938, 941 n.4 (11th Cir. 1982).
Court's local rule, M.D. Ga. R. 83.2.1(A), provides that
lawyers practicing in this Court “shall be governed by
this Court's Local Rules, by the Rules of Professional
Conduct adopted by the [Georgia Supreme Court], . . . [and]
the American Bar Association Model Rules of Professional
Conduct.” The Georgia Supreme Court and the ABA Model
Rules employ an identical Rule 3.7. Georgia Rule 3.7
provides, in pertinent part, that:
(a) A lawyer shall not act as 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