                          NOTICE: NOT FOR PUBLICATION.
   UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION DOES NOT CREATE
          LEGAL PRECEDENT AND MAY NOT BE CITED EXCEPT AS AUTHORIZED.




                                     IN THE
              ARIZONA COURT OF APPEALS
                                DIVISION ONE


             NATALIE ORLANDO and DANIEL ORLANDO,
                    wife and husband, Petitioners,

                                        v.

 THE HONORABLE JOSEPH C. BUTNER, III, Judge Pro Tempore of the
        SUPERIOR COURT OF THE STATE OF ARIZONA,
              in and for the County of YAVAPAI,
                  Respondent Judge Pro Tempore,

                SALLY HARGROVE, an unmarried woman,
                        Real Party in Interest.

                             No. 1 CA-SA 14-0162
                              FILED 09-30-2014


  Petition for Special Action from the Superior Court in Yavapai County
                          No. P1300CV201300125
          The Honorable Joseph C. Butner, III, Judge Pro Tempore

              JURISDICTION ACCEPTED; RELIEF DENIED


                                     COUNSEL

Warnock, MacKinlay & Carman, PLLC, Prescott
By Brian R. Warnock and Krista M. Carman
Counsel for Petitioners

Dean R. Cox, L.L.C., Prescott
By Dean R. Cox
Counsel for Real Party in Interest
               ORLANDO v. HON. BUTNER/HARGROVE
                      Decision of the Court



                       MEMORANDUM DECISION

Judge Michael J. Brown delivered the decision of the Court, in which
Presiding Judge Peter B. Swann and Judge Samuel A. Thumma joined.


B R O W N, Judge:

¶1             Natalie and Daniel Orlando (“the Orlandos”) seek special
action relief from the superior court’s order disqualifying their counsel of
record, the law firm of Warnock, MacKinlay and Carman, PLLC (“WMC”).
Because we conclude the superior court did not abuse its discretion in
ordering disqualification, we accept jurisdiction and deny relief.

                              BACKGROUND

¶2             In May 2008, Sally Hargrove, represented by attorney
Christopher Jensen, filed a lawsuit in Yavapai County Superior Court
against the Orlandos alleging Hargrove suffered serious injuries as a result
of Natalie Orlando’s negligence in a car-pedestrian accident (“the personal
injury litigation”). At the time of the accident, the Orlandos carried liability
insurance through American Family Insurance (“American Family”) of
$15,000 on the vehicle involved in the accident, which was used for business
and family purposes. The Orlandos were represented by both insurance
defense counsel and WMC.

¶3            In January 2010, the Orlandos filed suit in Maricopa County
Superior Court against American Family alleging its insurance agent
negligently failed to advise them to obtain more than the statutory
minimum of automobile liability insurance coverage (“the American
Family litigation”).

¶4            In September 2010, Hargrove’s personal injury claim
proceeded to a jury trial. During trial, it was discovered that several jurors
may have engaged in misconduct. To avoid a possible mistrial, the parties
agreed to a settlement conditioned upon the following. If the jury returned
a verdict in favor of Hargrove, judgment would be entered against the
Orlandos, who would then assign all of their claims against their insurer in
the American Family litigation to Hargrove. In exchange for the
assignment, the Orlandos would not seek a mistrial and Hargrove would
not execute on the judgment against the Orlandos. The superior court



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                ORLANDO v. HON. BUTNER/HARGROVE
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confirmed the agreement by all parties and counsel. Following a verdict in
favor of Hargrove, the court entered judgment against the Orlandos in the
amount of $655,776.12. The parties then formalized their agreement by
executing an assignment and covenant not to execute (“the assignment and
covenant”). The covenant provided in pertinent part that the Orlandos
would “furnish full and complete communication, cooperation,
documentation, and, as necessary, sworn testimony to support the assigned
claims” against American Family and they would “execute such additional
documents as may be necessary to carry out the intent” of the covenant.

¶5            Meanwhile, the primary issue in the American Family
litigation was the basis for the Orlandos’ decision not to increase their
automobile insurance coverage after they expanded their business. In an
attempt to place responsibility for this decision upon the Orlandos or third
parties, American Family sought to show that the Orlandos’ business
advisors either instructed or should have instructed the Orlandos to
increase their liability coverage. In a June 2010 disclosure statement,
American Family noted its intent to identify as nonparties at fault “lawyers,
accountants, and other business consultants” who worked with the
Orlandos in the “establishment of a small business in the fall of 2007.”

¶6             In November 2010, in response to American Family’s
discovery requests, WMC identified WMC partner Andre Carman as the
attorney who advised the Orlandos regarding the transition of their small
business from a sole proprietorship to a corporation. Shortly thereafter,
pursuant to the assignment and covenant, Jensen and WMC filed a joint
motion requesting that Jensen be substituted for WMC as counsel of record
for plaintiff(s) (Hargrove and/or Orlandos, depending upon the outcome
of a motion to substitute) in the American Family litigation. At the same
time, and also as provided by the assignment and covenant, Hargrove and
the Orlandos filed a joint motion to substitute Hargrove in place of the
Orlandos as the sole plaintiff or, in the alternative, as an additional plaintiff.
The superior court granted the motion to substitute counsel but denied the
motion to substitute or add Hargrove as a plaintiff.

¶7            In August 2012, a protracted dispute arose regarding the
Orlandos’ obligation to cooperate and furnish documents to Hargrove
under the assignment and covenant. Jensen repeatedly inquired as to
Carman’s status as a possible nonparty at fault and witness, and requested
access to WMC’s legal files for both the personal injury litigation and the
American Family litigation. Although Jensen insisted the assignment and
covenant permitted him to inspect all legal files relevant to claims and
defenses in the American Family litigation, the Orlandos ultimately refused


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              ORLANDO v. HON. BUTNER/HARGROVE
                     Decision of the Court

to authorize a release of the files. Jensen also asserted that WMC had a
conflict of interest that precluded it from representing the Orlandos in the
American Family litigation given the circumstances surrounding Carman’s
advice to the Orlandos regarding their business. Jensen further asserted
that if the Orlandos failed to comply with his requests for documents such
inaction would constitute a breach of the assignment and covenant.

¶8             After the Orlandos informed Jensen they would seek his
disqualification, Jensen moved to withdraw from the American Family
litigation. The superior court granted the motion in February 2013. Three
days later, the Orlandos (represented by WMC) initiated the instant
litigation by filing a complaint in Yavapai County Superior Court (“current
litigation”) seeking a declaration that Hargrove breached the assignment
and covenant. In March 2013, through new counsel Timothy Ducar,
Hargrove filed a counterclaim asserting that the Orlandos had breached the
assignment and covenant. The Orlandos then filed a third-party claim
against Jensen, alleging he was responsible for the breach of the parties’
agreements.

¶9            In April 2013, WMC contacted Ducar and requested that
Hargrove “appoint” replacement counsel in the American Family litigation
for the Orlandos pursuant to the assignment and covenant. Hargrove
disagreed that she had any obligation to appoint such counsel. For reasons
that are not clear from the limited record before us, the Orlandos entered
into a stipulation with American Family to dismiss the American Family
litigation. The superior court accepted the stipulation on May 22, 2013, and
ordered the case dismissed with prejudice.

¶10           In April 2014, Hargrove moved to disqualify WMC from
further representation of the Orlandos in the current litigation. Hargrove
argued WMC’s continued representation of the Orlandos gave the
appearance of impropriety and violated Arizona Rules of Professional
Conduct Ethical Rules (“ER”) 1.9 and 3.7. The Orlandos objected and filed
a cross-motion to disqualify Ducar from further representation of
Hargrove. After hearing oral argument, the superior court granted the
motion to disqualify WMC, concluding that Warnock and Carman are
potential witnesses in the current litigation. The Orlandos then filed this
special action.




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               ORLANDO v. HON. BUTNER/HARGROVE
                      Decision of the Court

                               JURISDICTION

¶11            “An order granting a motion to disqualify counsel prior to
trial is an interlocutory order” for which there is no adequate remedy by
appeal. State ex rel. Romley v. Superior Court, 181 Ariz. 378, 380, 891 P.2d 246,
248 (App. 1995). In the exercise of our discretion, we accept special action
jurisdiction.

                                DISCUSSION

¶12            We review the superior court’s ruling on a motion to
disqualify counsel for an abuse of discretion. Simms v. Rayes, 234 Ariz. 47,
49, ¶ 8, 316 P.3d 1235, 1237 (App. 2014). An abuse of discretion occurs when
the court “makes an error of law in reaching a discretionary conclusion or
when the record, viewed in the light most favorable to upholding the trial
court’s decision, is devoid of competent evidence to support the decision.”
Savord v. Morton, 235 Ariz. 256, 259, ¶ 10, 330 P.3d 1013, 1016 (App. 2014)
(internal quotation omitted). As the party seeking disqualification,
Hargrove carried the burden of proof. Simms, 234 Ariz. at 50, ¶ 8, 316 P.3d
at 1238. The law is well established that “because every litigant has the
right to the counsel of its choice a party should not be allowed to disqualify
opposing counsel for mere strategic or tactical reasons.” Sec. Gen. Life Ins.
Co. v. Superior Court In & For Yuma Cnty., 149 Ariz. 332, 335, 718 P.2d 985,
988 (1986).

¶13            As set forth in ER 3.7(a), a lawyer “shall not act as advocate at
a trial in which the lawyer is likely to be a necessary witness unless: (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.”

¶14          The primary, contested issue in the current litigation stems
from the circumstances surrounding the stipulation to dismiss the
American Family litigation. The Orlandos assert that Hargrove was given
proper notice of their intent to dismiss the action and did not object.
Hargrove, on the other hand, avowed she never communicated with
anyone regarding the stipulated dismissal and was not aware of the
dismissal until it was agreed to by the Orlandos and WMC. She further
avowed that she “never did anything to abandon those claims.”

¶15           At the August 1, 2014 hearing on the cross-motions for
disqualification, Carman acknowledged that he was both a named witness
and nonparty at fault in the American Family litigation. Carman argued,


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               ORLANDO v. HON. BUTNER/HARGROVE
                      Decision of the Court

however, that his status as a named witness and nonparty at fault was moot
because Hargrove “abandoned” the American Family litigation.
Nonetheless, when questioned by the superior court, Carman admitted that
he would have “a conflict of interest in this case” if Hargrove did not, in
fact, abandon the litigation and the stipulation to dismiss was entered
without her approval. Carman also acknowledged that the settlement was
negotiated between Brian Warnock and counsel for American Family and
further admitted, when pressed by the superior court, that he and the firm
received a “significant benefit” when the American Family litigation was
dismissed with prejudice and he and his firm were no longer exposed to
potential liability in that matter.1

¶16           In their cross-motions for disqualification, the parties
essentially agreed counsel on both sides would be necessary witnesses at
trial. In WMC’s response to the motion to disqualify, Warnock, after
asserting that grounds for disqualification had not been established
(because any potential testimony would be privileged), alternatively stated:
“Either both Mr. Ducar and Mr. Warnock should be considered necessary
witnesses and disqualified from representing their respective clients, or
neither should be required to testify. The Ethical Rules and a reasonable
examination of the underlying circumstances dictate that the former is a
more judicious option.” In his reply, Ducar agreed with Warnock that the
attorneys for both parties were disqualified and Ducar moved to withdraw
as counsel for Hargrove.


1       In their special action reply, the Orlandos contend that WMC did not
represent them during the settlement negotiations. As support for this
claim, the Orlandos submitted a recent declaration of Johnny J. Sorenson,
the attorney representing American Family in the American Family
litigation. In the declaration, Sorenson avows that he does not know “the
exact scope” of Warnock’s “formal relationship” with the Orlandos, but
believes his representation of the Orlandos “was limited.” Significantly,
this information is contrary to Carman’s representations at oral argument
before the superior court that WMC handled the settlement negotiations on
behalf of the Orlandos. In addition, this information was not presented to
the superior court. Accordingly, we do not consider the Sorenson
declaration or the Orlandos’ argument related thereto. See Napier v.
Bertram, 191 Ariz. 238, 239, ¶ 6, 954 P.2d 1389, 1390 (1998) (explaining that
appellate courts generally will not consider arguments a party has failed to
raise in the superior court). Based on the foregoing, Hargrove’s motion to
strike the Sorenson declaration is moot.



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                ORLANDO v. HON. BUTNER/HARGROVE
                       Decision of the Court

¶17            Applying ER 3.7 to these circumstances, the limited record
before us supports the superior court’s finding that the WMC attorneys are
likely to be necessary witnesses in the current litigation. As acknowledged
by Carman in the superior court, Warnock directly negotiated the dismissal
of the American Family litigation, which substantially inured to the benefit
of Carman and the entire WMC firm. The circumstances surrounding how
and why the stipulation of dismissal was entered into are central to the
issues in the current litigation, and the superior court could reasonably find
that communications relating to WMC’s actions during these negotiations
cannot be readily obtained through another source. We therefore conclude
that the superior court did not abuse its discretion in finding that a conflict
warranting disqualification of WMC exists. See ER Rule 3.7 cmt.
(“Combining the roles of advocate and witness can prejudice the tribunal
and the opposing party and can also invoke a conflict of interest between
the lawyer and client.”); Cottonwood Estates, Inc. v. Paradise Builders, Inc., 128
Ariz. 99, 102, 624 P.2d 296, 299 (1981) (“[I]t is generally considered a serious
breach of professional etiquette and detrimental to the orderly
administration of justice for an attorney to take the stand in a case he is
trying.”).2

¶18           Notwithstanding this conflict, ER 3.7 “recognizes that a
balancing is required between the interests of the client and those of the
tribunal and the opposing party.” ER 3.7 cmt. “Even if there is risk of []
prejudice, in determining whether the lawyer should be disqualified, due
regard must be given to the effect of disqualification on the lawyer’s client.”



2      The Orlandos contend that none of the WMC lawyers may be called
as a witness because the Orlandos have not waived their attorney-client
privilege. Whether the Orlandos waived the attorney-client privilege
through the assignment and covenant is not the issue before us. Even if it
were, an assertion of privilege only protects an attorney from being
compelled to testify regarding attorney-client communications or attorney
work-product and does not create a complete bar insulating an attorney
from being called as a witness. Cf. State Bar of Arizona Ethics Opinion 00-
11 (Nov. 2000) (stating lawyers must disclose non-privileged but ER 1.6
confidential client documents when directed to do so by a final order
rendered by a court of competent jurisdiction even absent client consent).
Furthermore, the Orlandos’ argument is contrary to Warnock’s
acknowledgement in the cross-motion to disqualify that attorneys for both
parties would be necessary witnesses.



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               ORLANDO v. HON. BUTNER/HARGROVE
                      Decision of the Court

Id. “It is relevant that one or both parties could reasonably foresee that the
lawyer would probably be a witness.” Id.

¶19            In their response and cross-motion to disqualify counsel, the
Orlandos did not specifically claim substantial hardship; instead, they
asserted generally that disqualification would require them to obtain new
counsel, causing further delays in the litigation. At oral argument before
the superior court, Carman briefly noted that a change in counsel would
create a hardship for the Orlandos based on the duration of WMC’s
representation and the firm’s negotiation of the assignment and covenant
and general knowledge of the underlying cases. The Orlandos attached to
their special action petition, however, an affidavit of Natalie Orlando dated
August 22, 2014. In the affidavit, she avows that disqualification of WMC
would create a substantial hardship because of financial constraints and
difficulties in finding local counsel competent to handle the complexity of
the case. Because this document was signed after the superior court’s
relevant ruling in this matter, and the Orlandos have not indicated that the
document was filed with the superior court, we will not consider it. See
Ariz. R.P. Spec. Act. 7(e) (“All references to the record shall be supported
by an appendix of documents in the record before the trial court that are
necessary for a determination of the legal issues raised by the petition.”)
(emphasis added). To the extent the Orlandos raised hardship in the
superior court, it was limited to the difficulty in having to transfer WMC’s
acquired knowledge of the case to new counsel. We cannot say the superior
court abused its discretion by implicitly finding the significance of the
conflict outweighed the alleged harm to the Orlandos.3

¶20           Finally, we must address whether disqualification of Carman
and Warnock also requires disqualification of the entire WMC firm. As an
initial matter, the Orlandos have cited no authority in support of their
assertion that the superior court erred in disqualifying WMC. See Ariz. R.

3       To the extent the Orlandos argue Hargrove waived the
disqualification issue by failing to move for WMC’s disqualification for
almost a year after the stipulated dismissal, we note the Orlandos did not
raise this argument in their response to the motion for disqualification or at
the hearing. We therefore do not consider it. See Napier, 191 Ariz. at 239, ¶
6, 954 P.2d at 1390. We also note that in May 2014 Hargrove filed a lawsuit
against WMC alleging conversion, interference with contract or business
expectancy, breach of fiduciary duty, legal malpractice, aiding and abetting
tortious conduct, negligence and civil conspiracy. The superior court
expressly indicated it did not consider the filing of this lawsuit in reaching
its conclusion, nor do we consider it here.


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               ORLANDO v. HON. BUTNER/HARGROVE
                      Decision of the Court

P. Spec. Act. 7(e) (petition shall include citations to authorities). Moreover,
on the record before us, we find no abuse of discretion.

¶21           As set forth in ER 3.7(b), a lawyer may “act as advocate in a
trial in which another lawyer in the lawyer’s firm is likely to be called as a
witness unless precluded from doing so by ER 1.7 or ER 1.9.” In addressing
ER 3.7, our supreme court noted that a law firm may continue to represent
a client when one attorney is called as a witness unless a conflict of interest
exists under ER 1.7 or ER 1.9, “or disqualification is appropriate for some other
reason.” Sec. Gen. Life Ins. Co., 149 Ariz. at 336 n.2, 718 P.2d at 989 n.2
(emphasis added).

¶22            Ethical Rules 1.7 and 1.9 “do not address possible conflict
problems [in which] a testifying lawyer’s law firm desires to remain in the
case.” Jones v. City of Chicago, 610 F. Supp. 350, 360 n.4 (N.D. Ill. 1994).
Given the unique posture of this case, in which the WMC firm was itself
exposed to liability in the underlying litigation, necessarily raising
questions as to whether the personal interests of the WMC attorneys and
the firm factored into the settlement of the American Family litigation, the
record supports the superior court’s conclusion that WMC’s personal
interests in the case mandate disqualification of the entire firm. See id. at
360, 362 (explaining that the “same reasons which support disqualification
of the testifying attorney also support disqualification of the testifying
attorney’s entire firm” and that the “ultimate and continuing justification
for the advocate witness rule, preservation of the integrity of the judicial
process,“ required disqualification of both the testifying attorney and his
firm). Accordingly, in this case and on this record, the Orlandos have not
shown an abuse of discretion relating to the disqualification of WMC.

¶23           Because we conclude the superior court did not abuse its
discretion in disqualifying WMC in the current litigation, we need not
address Hargrove’s arguments that disqualification was also required
under ER 1.9 as well as the appearance of impropriety.




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              ORLANDO v. HON. BUTNER/HARGROVE
                     Decision of the Court

                            CONCLUSION

¶24           We accept jurisdiction of this special action and deny the
Orlandos’ request to vacate the superior court’s order disqualifying WMC
from further representation in this case. We deny each party’s request for
attorneys’ fees under Arizona Revised Statutes section 12-349.




                                :gsh




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