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Mt. Hebron District Missionary Baptist Association of Al, Inc. v. Sentinel Insurance Co. Ltd.

United States District Court, M.D. Alabama, Eastern Division

September 7, 2017

MT. HEBRON DISTRICT MISSIONARY BAPTIST ASSOCIATION OF AL, INC., Plaintiff,
v.
SENTINEL INSURANCE COMPANY, LIMITED, Defendant,
v.
LANDON ALEXANDER, SR., Third-Party Defendant.

          ORDER

          GRAY M BORDEN UNITED STATES MAGISTRATE JUDGE

         Before the court is Third-Party Defendant Landon Alexander, Sr.'s Motion to Disqualify Counsel (Doc. 87), which seeks the disqualification of counsel for Plaintiff Mt. Hebron District Missionary Baptist Association of Alabama, Inc. (“Mt. Hebron”). Mt. Hebron has responded in opposition to the motion (Docs. 90 & 92), Alexander has filed a reply in support (Doc. 91), and the parties were heard on the motion during a telephonic hearing on August 3, 2017. For the reasons stated below, and after careful review of the parties' submissions and the applicable law, it is ORDERED that the motion (Doc. 87) is GRANTED and that the law firm of Funderburk & Lane is disqualified from the representation of Mt. Hebron in this lawsuit.

         I. FACTUAL AND PROCEDURAL BACKGROUND

         The early procedural history of this litigation is set out in the court's Report and Recommendation of March 16, 2017 (Doc. 76). For present purposes, the core dispute is whether Alexander is a proper recipient of the proceeds of an insurance policy issued by Sentinel Insurance Company, Limited (“Sentinel”) for a church building operated by Mt. Hebron until a tornado destroyed it. Doc. 11. The operative complaints are Mt. Hebron's First Amended Complaint (Doc. 11), Mt. Hebron's Third-Party Complaint against Alexander (Doc. 34), and Sentinel's Complaint in Interpleader (Doc. 24). Sentinel interpleaded the proceeds from the insurance policy, and the interpleader action will be resolved before addressing the underlying claims, counterclaims, and third-party claims. See, e.g., Docs. 83 & 89.

         However, one roadblock stands in the way of the orderly resolution of the interpleader action: Alexander insists that he consulted with Attorney Kenneth Funderburk of the law firm of Funderburk & Lane about this very matter in 2015. Doc. 87-1. Funderburk nevertheless undertook the representation on behalf of Mt. Hebron. Alexander raised this potential conflict of interest with Funderburk no later than December 2016. Doc. 87-4 at 5. Funderburk does not acknowledge a conflict of interest and has refused to withdraw voluntarily from the representation. As a result, Alexander filed the instant motion on June 27, 2017. Doc. 87.

         Alexander and Funderburk agree on certain of the operative facts. They agree that they met at Funderburk's law office on at least two occasions[1] during 2015. Docs. 87-1 at ¶ 9 & 90-1 at ¶ 5-9. One meeting occurred on May 5, 2015, and another on June 16, 2015. Docs. 87-1 at ¶ 9 & 90-1 at ¶ 5 & 9. Alexander paid Funderburk $50 by check for the meeting in May and $75 by check for the meeting in June, with both checks drawn on an account held in Alexander's name. Docs. 87-1 at ¶ 9 & 90-1 at ¶ 5 & 9. The memorandum line for Alexander's checks indicated, respectively, that the payments were for a “Consultation fee” and a “lawyer.” Docs. 87-2 & 87-3. Funderburk negotiated both checks and has not refunded the fees. See Docs. 87-2 & 87-3. This is consistent with Funderburk's general practice for consultations in that he customarily charges a consultation fee, which covers about fifteen minutes of his time. Doc. 90-1 at ¶ 3, 5 & 9.

         Around the time of these meetings, Alexander left a number of documents at the offices of Funderburk & Lane for Funderburk's review, including an invoice from Alexander to the “Mount Hebron District Association Center” for “a loan that is being paid with no interest or labor fee, ” which described the terms of the loan and characterized Alexander as the “mortgage holder”; a copy of the warranty deed for the Mt. Hebron property; and a copy of the Mt. Hebron by-laws, which include the provision that the building may not be sold without paying Alexander or his heirs the sum of $200, 000. Doc. 90-11. Funderburk kept these documents in a filing cabinet and he does not recall reviewing them. Doc. 90-1 at ¶ 13.

         While Funderburk and Alexander agree on these basic facts, otherwise the substance of their meetings is largely in dispute. Alexander claims that he constructed Mt. Hebron's building under an agreement that his expenses and labor would serve as an interest-free loan to Mt. Hebron. Doc. 87-1 at ¶ 2-3. Mt. Hebron had not fully reimbursed him by early 2015, and Alexander's purpose in seeing Funderburk was to seek his legal advice on how to get Mt. Hebron to make good on the loan. Doc. 87-1 at ¶ 5-6. During their meetings, Alexander told Funderburk that he wanted to be recognized as a mortgagee on the property, described the facts underlying the dispute, and shared his communications with Mt. Hebron officials. Doc. 87-1 at ¶ 7. He asked Funderburk how to memorialize his interest in the property and ultimately requested that Funderburk draw up the documentation to do so. Doc. 87-1 at ¶ 7. Funderburk reviewed Alexander's documents and gave his initial opinion that Alexander has a “good case” for reimbursement, but later reversed course and said that it would be difficult to get Mt. Hebron to repay the loan. Doc. 87-1 at ¶ 8 & 11.

         Funderburk remembers the meetings differently. For many decades, Funderburk has served as an attorney for a number of religious organizations in and around Russell County, Alabama, including Mt. Hebron. Doc. 90-1 at ¶ 6. When he agreed to take a meeting with Alexander in May 2015, Funderburk believed that Alexander was a member of a prominent family associated with Mt. Hebron. Doc. 90-1 at ¶ 6. However, as soon as he saw Alexander, Funderburk realized that he was mistaken and he did not know Alexander. Doc. 90-1 at ¶ 6. He took the May 5 meeting with Alexander anyway, and by the end of the meeting Funderburk understood that Alexander was “seeking [his] advice” on an “ongoing disagreement between [Alexander] and the other board members of Mt. Hebron.” Doc. 90-1 at ¶ 8. Funderburk does not recall the specific details of that dispute, but maintains that he and Alexander did not talk about Alexander's request to memorialize a debt or to have himself listed as a mortgagee, or the need for Funderburk's assistance in drafting documents to accomplish these goals. Doc. 90-1 at ¶ 7.

         Funderburk took the June 16 meeting understanding it to be following up on Alexander's disagreement with the Mt. Hebron board members. Doc. 90-1 at ¶ 9. During the meeting, Alexander referred to a debt owed to him by Mt. Hebron. Doc. 90-1 at ¶ 11. It eventually became apparent to Funderburk that Alexander's interests were adverse to Mt. Hebron's, and as a result Funderburk told Alexander that he would not represent him. Doc. 90-1 at ¶ 11.

         Until that time, Alexander believed that Funderburk was already serving as his attorney. Doc. 87-1 at ¶ 12. He had not been told to restrict or limit his discussion of the dispute with Mt. Hebron or the facts leading it. Doc. 87-1 at ¶ 12. Funderburk had not mentioned that he was meeting with Alexander in his capacity as a lawyer for Mt. Hebron. Doc. 87-1 at ¶ 12.[2] As a result, Alexander assumed he could speak honestly and freely with Funderburk and that his communications would be kept in confidence. Doc. 87-1 at ¶ 13. He would not have consulted Funderburk on these issues if he had known that Funderburk would represent Mt. Hebron in this lawsuit. Doc. 87-1 at ¶ 13.[3]

         II. DISCUSSION

         On the whole, lawyers hold themselves to high standards of candor and fair dealing.

         Occasionally, however, when the lawyers do not police themselves, the court must exercise its inherent authority to discipline them as officers of the court. E.g., In re Snyder, 472 U.S. 634, 643 (1985) (“Th[e] inherent power [to discipline lawyers] derives from the lawyer's role as an officer of the court which granted admission.”) (citing Theard v. United States, 354 U.S. 278, 281 (1957)). This is, unfortunately, one of those occasions in which the court “is obligated to take measures against unethical conduct.” Woods v. Covington Cnty. Bank, 537 F.2d 804, 810 (5th Cir. 1976). The Middle District of Alabama's local rules charge the district's judges with insuring that the lawyers appearing before this court avoid misconduct in all forms, including violations of the Alabama Rules of Professional Conduct. M.D. Ala. LR 83.1(g) & ...


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