Deseret First Credit Union v. Parkin , 339 P.3d 471 ( 2014 )

2014 UT App 267_________________________________________________________
THE UTAH COURT OF APPEALS
DESERET FIRST FEDERAL CREDIT UNION,
Plaintiff and Appellee,
v.
JERRY W. PARKIN,
Defendant and Appellee.
GEORGE K. FADEL,
Proposed Intervenor and Appellant.
Memorandum Decision
No. 20130010-CA
Filed November 14, 2014
Second District Court, Farmington Department
The Honorable David R. Hamilton
No. 090700605
George K. Fadel, Appellant Pro Se
Wallace O. Felsted and Gregory S. Moesinger,
Attorneys for Appellee Deseret First Federal Credit
Union
David J. Shaffer, Attorney for Appellee
Jerry W. Parkin
JUDGE STEPHEN L. ROTH authored this Memorandum Decision, in
which JUDGE GREGORY K. ORME and SENIOR JUDGE JUDITH M.
BILLINGS concurred.1
1. The Honorable Judith M. Billings, Senior Judge, sat by special
assignment as authorized by law. See generally Utah R. Jud.
Admin. 11-201(6).
Deseret First Federal Credit Union v. Parkin
ROTH, Judge:
¶1 George K. Fadel appeals from three district court orders.
First, he contends the district court erred in denying his motions
to intervene in litigation between Jerry W. Parkin, as successor
trustee for the Wilma G. Parkin Family Protection Trust (the
Trust), and Deseret First Federal Credit Union (Deseret First).
Second, he challenges the court’s decision to strike his
corresponding complaint in intervention. Finally, he challenges
the district court’s entry of rule 11 sanctions against him. We
affirm.
¶2 In August 2009, Deseret First filed suit against the Trust to
quiet title to a parcel of land that Deseret First claimed it had
purchased from the Trust several years earlier through an
installment contract. The Trust hired Fadel, an attorney, on a
contingent fee arrangement to represent it in the suit. In the
written client agreement, the Trust agrees to pay Fadel ‚one-half
of the amounts recovered by settlement or judgment . . . in
excess of $10,000.‛ The fee agreement further provides that
recovery in the form of property ‚could result in *Fadel+
obtaining a joint interest in the land with the Trust*+‛ to the
extent of the agreed-upon fee.
¶3 Against Fadel’s advice, the Trust entered into mediation
with Deseret First on October 20, 2011. Fadel attended a portion
of the mediation but was not present for its conclusion. 2 The
mediation resulted in an agreement (the Settlement Agreement)
whereby the Trust agreed to sell the disputed parcel to Deseret
2. Although the district court found that Fadel left the mediation
prior to its conclusion, the parties dispute the circumstances
leading to Fadel not being present for the entire mediation. We
conclude that the precise circumstances are not pertinent to the
issues presented on appeal.
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First for $30,000, a sum lower than Fadel believed could be
obtained if the case proceeded to trial. The Trust hired new
counsel, David Shaffer, and on November 15, 2011, the Trust,
through Shaffer, and Deseret First filed a stipulated motion to
dismiss the quiet title suit with prejudice. Although he was
aware of the settlement and that he had been replaced as counsel
on the case, Fadel then filed a motion in limine, purportedly on
behalf of the Trust.3 Fadel also filed an objection to his client’s
stipulated request for dismissal on the basis that ‚it is best for all
concerned that the case be tried for the benefit of the Trust
beneficiaries as well as for the attorney’s fee.‛ In response,
Deseret First filed a motion for sanctions against Fadel. The
motion cited rule 11 of the Utah Rules of Civil Procedure and the
inherent authority of the court to regulate the conduct of
attorneys as bases for sanctioning Fadel for his continued
attempts to act as counsel when his client had replaced him with
another attorney.
¶4 On December 2, 2011, the district court entered an order
dismissing the case. The order did not address the motion for
sanctions against Fadel. Despite the dismissal, in January 2012,
Fadel queried the district court regarding the status of his earlier
motions and sought to file additional documents on behalf of the
Trust. At that point, the court issued a ruling (the First Ruling),
noting that ‚*t+he parties resolved their dispute‛ even though
‚Mr. Fadel had apparently advised his then clients [the Trust]
not to settle.‛ The court concluded that ‚*i+t was the *Trust’s+
3. The thrust of this motion was to ask the court to preclude
Deseret First from pursuing the claim for contractual attorney
fees that it had included in its complaint, an issue apparently
mooted by the Settlement Agreement. But the merits of the
motion are not at issue here; rather, its significance lies in the fact
that Fadel filed it after having been replaced as counsel for the
Trust.
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decision how to resolve the[] case. A Substitution of Counsel was
filed,‛ and ‚Mr. Shaffer is recognized by the Court as [the
Trust’s+ counsel. Mr. Fadel has no current basis to submit
pleadings on behalf of *the Trust+.‛ The court then stated that it
would not consider any of the documents filed by Fadel after he
had been replaced as counsel but that it would consider Deseret
First’s motion for sanctions. The court directed Fadel to respond
to the sanctions motion by the end of January. Fadel did not file
a response.
¶5 On August 1, 2012, the court held a hearing on the motion
for sanctions. At the hearing, the district court asked Fadel to
explain whom he thought he was representing when he filed the
motion in limine and the objection to the request for dismissal in
light of the fact that the Trust ‚wanted to settle this case‛ and
‚there was a settlement agreement that was signed off by
*Fadel’s+ former clients.‛ The court also inquired about Fadel’s
motivation for having filed an appeal of the dismissal of the case
on the Trust’s behalf,4 given that he had acknowledged being
aware of the Trust’s desire to settle the case. Fadel responded
that because he had never been properly replaced as the attorney
of record and because he was not present for the mediation’s
resolution, no valid settlement of the case was possible. Fadel
4. Sometime after the First Ruling, Fadel had filed an appeal
from the district court’s dismissal of the Deseret First–Trust
litigation. We dismissed Fadel’s appeal in mid-May 2012 on two
grounds: (1) because he had been replaced as counsel, Fadel had
‚no right to file a notice of appeal on behalf of *the Trust+,‛ and
thus, the court had no jurisdiction to consider the propriety of
the dismissal; and (2) no final, appealable order relating to Fadel
himself had yet been entered because ‚*a+ motion for sanctions
against Fadel is currently pending in the district court.‛ Deseret
First Fed. Credit Union v. Parkin, 2012 UT App 140, ¶¶ 2–4, 278
P.3d 630 (per curiam).
20130010-CA 4 2014 UT App 267Deseret First Federal Credit Union v. Parkin
also admitted that he was pursuing his own interest in the
contingent fee and argued that the Trust could not settle the case
without his consent because of that fee arrangement.
¶6 Following the hearing, the court entered a ruling (the
Second Ruling), granting the motion for sanctions on the basis
that Fadel had violated rule 11 of the Utah Rules of Civil
Procedure. Specifically, the court concluded that ‚it was not
reasonable under the circumstances for Mr. Fadel to believe he
had authority to file on behalf of his former client and that he
had no evidentiary basis for his contentions in those filings
because he had already been replaced as counsel.‛ The court
then instructed both Deseret First and the Trust to submit
affidavits regarding their attorney fees.
¶7 Approximately one week later, Fadel filed a motion,
under rule 24(a) of the Utah Rules of Civil Procedure, to
intervene as a party in this litigation. Deseret First opposed
intervention and filed a second request for sanctions against
Fadel. Fadel responded with a second motion to intervene and a
complaint in intervention. Deseret First then moved to strike the
complaint in intervention.
¶8 On November 5, 2012, the district court held a hearing on
all pending motions. At the hearing, Fadel stated that he was
appearing on behalf of himself as intervenor and, despite the
court’s First Ruling, on behalf of the Trust in the Deseret First–
Trust lawsuit as well. The district court then issued a written
decision addressing the issues raised in both the August and
November hearings. In its Consolidated Findings of Fact and
Order (the Order), the court decided that the settlement was
valid and that it ‚would not disturb its *First+ Ruling . . . , which
resolved the issue of enforcing the parties’ Settlement
Agreement.‛ Thus, because a judgment of dismissal had already
been entered and ‚‘intervention is not to be permitted after entry
of judgment,’‛ Fisher v. Fisher, 2003 UT App 91, ¶ 18, 67 P.3d
1055 (quoting Ostler v. Buhler, 1999 UT 99, ¶ 9 n.3, 989 P.2d 1073),
20130010-CA 5 2014 UT App 267Deseret First Federal Credit Union v. Parkin
the court denied Fadel’s motions to intervene as untimely and
struck his complaint in intervention. Consistent with the Second
Ruling, the Order also required that Fadel pay attorney fees to
Deseret First and the Trust as a sanction for his
willful misconduct . . . after the settlement of this
case. . . . [E]ven after being advised by the court
that he (Mr. Fadel) is not recognized as counsel for
the Trust and that he has no basis to submit
pleadings on behalf of the Trust or pursue claims
on behalf of the Trust, Mr. Fadel has repeatedly
attempted to represent the Trust in filing motions,
and he has repeatedly taken positions that are
frivolous, meritless, and inconsistent with the
Settlement Agreement, the Order of Dismissal with
Prejudice, the First Ruling, and the Second Ruling.
The court explained that it was entering the sanctions on the
‚combined bases‛ of rule 11 and the inherent powers of the
court. The Order required Fadel to pay $5,500 toward Deseret
First’s attorney fees and $4,500 toward the Trust’s. Fadel
appeals.
I. The Motions to Intervene and to Strike the Complaint in
Intervention
¶9 Fadel first asserts that the district court erred in denying
his motions to intervene as a matter of right and in granting
Deseret First’s motion to strike his complaint in intervention.5
5. Fadel asserts that the district court’s ruling regarding the
complaint in intervention did not address ‚the legality or
propriety of the second motion and the complaint.‛ However,
the district court specifically denied both Fadel’s first and second
(continued...)
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Rule 24(a) of the Utah Rules of Civil Procedure affords a person
the right to intervene so long as the person seeking to intervene
can demonstrate
(1) that [the] motion to intervene was timely, (2)
that [the person] has ‚an interest relating to the
property or transaction which is the subject of the
action,‛ (3) ‚that the disposition of the action may
as a practical matter impair or impede [the
person’s+ ability to protect that interest,‛ and (4)
that *the person’s+ interest is not ‚adequately
represented by existing parties.‛
Supernova Media, Inc. v. Pia Anderson Dorius Reynard & Moss, LLC,
2013 UT 7, ¶ 22, 297 P.3d 599 (quoting Utah R. Civ. P. 24(a)). In
this case, the district court denied Fadel’s motion to intervene
because it was untimely. ‚We review for abuse of discretion the
district court’s determination of whether the motion to intervene
was timely filed.‛ Id. ¶ 15.
¶10 ‚*T+imeliness . . . [is] determined under the facts and
circumstances of each particular case, and in the sound
discretion of the court.‛ Id. ¶ 23 (alterations and omission in
original) (citation and internal quotation marks omitted). As a
general rule, however, ‚‘intervention is not to be permitted after
entry of judgment.’‛ Fisher, 2003 UT App 91, ¶ 18 (quoting
Ostler, 1999 UT 99, ¶ 9 n.3); see also Supernova Media, 2013 UT 7,
¶ 24 (noting that a motion to intervene is generally considered
timely ‚if it is filed before the final settlement of all issues by all
parties‛ (citation and internal quotation marks omitted)). A
judgment includes ‚any order from which an appeal lies.‛ Utah
R. Civ. P. 54(a).
motions to intervene and explicitly struck the complaint in
intervention as a result.
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¶11 Fadel contends that a final, appealable judgment had not
yet entered when he filed his motions to intervene in August
and September 2012 because the district court’s final ruling in
the case was not entered until December 2012. But Fadel focuses
on the wrong order. The underlying case—the litigation between
Deseret First and the Trust—had been dismissed in December
2011, months before Fadel sought to intervene. Only the motion
for sanctions against Fadel, a non-party, remained pending
before the court when Fadel moved to intervene. That the
December 2011 dismissal of the case between Deseret First and
the Trust was a final judgment seems unassailable, and, in fact,
Fadel attempted to appeal that order, see supra note 2. A motion
to intervene must be filed ‚before the final settlement of all
issues by all parties.‛ Supernova Media, 2013 UT 7, ¶ 24 (emphasis
added) (citation and internal quotation marks omitted). Because
the parties (Deseret First and the Trust) had resolved their
dispute and the litigation had been dismissed before Fadel filed
his motion to intervene, his motion was not timely. See id.; see
also Fisher, 2003 UT App 91, ¶¶ 18, 20 (noting that by the time of
the appeal, any petition to intervene would be untimely because
the case between the parties had ended).6 Without a timely
motion, Fadel has failed to carry his burden of demonstrating
that he was entitled to intervene. See Supernova Media, 2013 UT 7,
6. Fadel asserts that Fisher v. Fisher, 2003 UT App 91, 67 P.3d
1055, ‚is not relevant in that it is a domestic relations case‛ and
the attorney lien statute has since been amended in relation to
domestic relations cases. However, our conclusion in Fisher that
the attorney could not move to intervene because a final
judgment had already been rendered, making any intervention
motion untimely, was based on general intervention principles
rather than the attorney lien statute. See id. ¶¶ 18, 20. As a
consequence, Fisher cannot be distinguished in the way that
Fadel claims; rather, the case supports the district court’s
decision here.
20130010-CA 8 2014 UT App 267Deseret First Federal Credit Union v. Parkin
¶ 22. Accordingly, we affirm the district court’s denial of Fadel’s
motions to intervene. And because the motions to intervene
were properly denied, it was appropriate for the district court to
strike the complaint in intervention.
II. Sanctions
¶12 Fadel also challenges the district court’s order that he pay
sanctions. Fadel argues that the court erred in determining that
he had violated rule 11 of the Utah Rules of Civil Procedure
because (1) neither Deseret First nor the Trust had complied with
the requirements of rule 11 that are prerequisite to an award of
sanctions and (2) his conduct did not merit sanctions in the first
place.
¶13 With regard to his first argument, Fadel misconstrues the
nature of the district court’s sanction order. The court did not
rely only on the parties’ sanction motions under rule 11 but
determined more broadly that ‚[u]nder the combined bases and
effect of Deseret First’s *motions for sanctions,+ the Court’s First
Ruling, the Court’s inherent powers, and the remand order from
the Utah Court of Appeals‛ directing the district court to
consider attorney fees, ‚Fadel had violated rule 11.‛ (Citations
omitted.) Thus, it appears that the court was relying on both its
inherent authority and rule 11 when it ordered sanctions. And
Fadel fails to challenge the court’s alternative basis for its
decision—a court’s authority to enter the award based on its
inherent powers. See Allen v. Friel, 2008 UT 56, ¶ 7, 194 P.3d 903.
However, even if rule 11 were the only basis for the court’s
sanctions order, the award was within the district court’s
authority, whether or not the parties’ motions complied with the
rule.
¶14 Rule 11 of the Utah Rules of Civil Procedure provides for
the entry of sanctions against an attorney when the attorney
‚present[s] a pleading . . . or other paper to the court‛ for ‚any
improper purpose, such as to harass or to cause unnecessary
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delay or needless increase in the cost of litigation‛ or that asserts
‚claims, defenses and other legal contentions . . . [that are not]
warranted by existing law‛ or are frivolous. Utah R. Civ. P.
11(b)–(c). Sanctions may be sought by one of the parties to the
litigation or ordered by the court sua sponte. Id. R. 11(c). Fadel
correctly points out that when a party moves for sanctions, rule
11(c)(1)(A) lays out specific prerequisites for submitting such a
motion to the court. See id. R. 11(c)(1)(A). However, Fadel
overlooks rule 11(c)(1)(B), which governs the proceedings when
a court orders sanctions ‚*o+n its own initiative,‛ id. R.
11(c)(1)(B). In that case, the court must ‚enter an order
describing the specific conduct that appears to violate
subdivision (b) and directing an attorney . . . to show cause why
[he or she] has not violated subdivision (b).‛ Id. That is just what
the court did in the First Ruling. The court informed Fadel that it
was concerned about Fadel’s ongoing attempts to represent the
Trust and file documents when the Deseret First–Trust litigation
had settled and Fadel was no longer recognized as the Trust’s
attorney. The court then directed Fadel to file a response to the
motion for rule 11 sanctions, or in other words, to demonstrate
that he had not violated rule 11. Accordingly, whether the
parties’ motions for sanctions complied with rule 11 does not
determine the outcome; the district court was authorized to
proceed under rule 11 on its own initiative and did so once Fadel
drew its attention to the deficiency in the parties’ own rule 11
motions.
¶15 We now consider whether the court properly ordered
sanctions. When reviewing an order for rule 11 sanctions, we
review the ultimate conclusion that the rule has been violated as
well as any subsidiary legal conclusions for correctness. Griffith
v. Griffith, 1999 UT 78, ¶ 10, 985 P.2d 255. We review the court’s
factual findings for clear error. Id. We conclude that the district
court correctly determined that Fadel violated rule 11 because
his actions indicated an improper purpose and were, in the
words of the district court, ‚frivolous, meritless, and inconsistent
20130010-CA 10 2014 UT App 267Deseret First Federal Credit Union v. Parkin
with the Settlement Agreement, the Order of Dismissal with
Prejudice, the First Ruling, and the Second Ruling.‛
¶16 Fadel’s contingent fee agreement with the Trust provides
that he is to receive ‚one-half of the amounts recovered by
settlement or judgment . . . in excess of $10,000. The amounts
recovered [are] to be measured by the value received in cash or
property or both free from claim from Deseret [First,] which
could result in [Fadel] obtaining a joint interest in the land . . . .‛
Thus, under the fee agreement, the Trust’s decision to settle the
litigation by selling the property to Deseret First for $30,000
meant that Fadel was entitled to a fee of $10,000. Fadel, however,
believed that the Trust’s position in the litigation was strong and
that it would receive much more if the case were actually tried,
perhaps as much as $300,000. Such an outcome, of course, would
have significantly increased the amount of his fee.
¶17 An attorney, however, may not put his or her own
interests ahead of the client’s. Fisher v. Fisher, 2003 UT App 91,
¶ 20 n.8, 67 P.3d 1055 (citing Utah Rules of Professional Conduct
1.7(a), which prohibits an attorney from representing a client
when the lawyer’s own personal interests may materially limit
his or her ability to provide adequate representation). Fadel’s
prioritization of his interest in his fee over the wishes of the
Trust amounted to a conflict of interest. See Utah R. Prof’l
Conduct 1.7 cmt. 1 (noting that a concurrent conflict of interest
between an attorney and a client can arise ‚from the lawyer’s
own interests‛). The Utah Rules of Professional Conduct prohibit
an attorney from providing representation to a client ‚if the
representation involves a concurrent conflict of interest.‛ Id. R.
1.7(a). In Fisher v. Fisher, 2003 UT App 91, 67 P.3d 1055, we
observed that an attorney’s interest in collecting his fee became
such a conflict once that interest interfered with the client’s right
to collect the child support awarded to her. Id. ¶ 20 n.8. There,
the attorney sought to enforce an attorney lien he placed on his
client’s right to receive child support payments from the child’s
father. Id. We explained that ‚at the time *the attorney+ sought to
20130010-CA 11 2014 UT App 267Deseret First Federal Credit Union v. Parkin
enforce his attorney lien, [his] interests were in conflict with [his
client’s,+‛ and the prioritization of his own interests over his
client’s warranted termination of his representation as counsel.
Id.¶18 The district court correctly determined that the
circumstances in this case precluded Fadel from continuing to
represent the Trust once their views of how to proceed diverged
so significantly. A lawyer is bound to ‚abide by a client’s
decision whether to settle a matter.‛ Utah R. Prof’l Conduct
1.2(a); see also id. R. 1.2 cmt. 1 (‚The decisions specified in
paragraph [1.2](a), such as whether to settle a civil matter, must
also be made by the client.‛). Thus, even if the attorney believes
it is in the client’s best interest to continue to trial, once the
attorney’s advice to do so is refused, he or she must defer to the
client’s desire to resolve the litigation. There is no dispute that
the Trust desired to settle the litigation with Deseret First for the
sum of $30,000. As a result, once Fadel had given his contrary
advice, he was required to either proceed in support of the
Trust’s wishes or withdraw from the case. See id. R. 1.2(a).
¶19 Yet after the mediation, Fadel did not withdraw; rather,
he put his own interest in collecting a larger fee above the Trust’s
decision to resolve the case short of trial. Indeed, Fadel did not
seek merely to protect his attorney lien, but he instead sought to
have the Trust’s decision to replace him as counsel vacated and
to take over the litigation by setting aside the Settlement
Agreement so that the case could proceed to trial against the
Trust’s wishes. He filed pleadings in which he purported to be
the Trust’s attorney when he was not, including an objection to
the Trust’s stipulation to dismiss the case and an appeal, and he
continued to assert that he represented the Trust even after the
court warned him that he had been removed as counsel. 7
7. Fadel argues that he could not be replaced as counsel because
he did not give his consent to the substitution as required by rule
(continued...)
20130010-CA 12 2014 UT App 267Deseret First Federal Credit Union v. Parkin
Because Fadel acted in disregard of the Trust’s decision to settle
the case and instead decided to pursue his own desire to take the
case to trial in order to increase his potential fee, Fadel had a
conflict of interest that precluded him from representing the
Trust any further.
¶20 Fadel nevertheless maintains that under the totality of the
circumstances, his actions were meritorious. He asserts that had
he been billing the Trust at his normal hourly rate rather than
representing it on a contingent fee basis, he would have billed
$47,000 for legal services provided up to the time of mediation.
He contends that he has not yet received any payment for his
services. However, whatever right Fadel may have had to be
paid for his work did not permit him to continue to represent the
Trust where his focus on the amount of his fee came into direct
conflict with his client’s right to resolve the litigation in a way
that met its own goals.
¶21 Accordingly, we conclude that there was no error in the
district court’s determination that Fadel’s actions in purporting
to represent the Trust, contrary to its express wishes and its own
74 of the Utah Rules of Civil Procedure. See Utah R. Civ. P. 74(d)
(‚An attorney may replace the counsel of record by filing and
serving a notice of substitution of counsel signed by former
counsel, new counsel, and the client.‛).
The primary purpose of rule 74, however, is to keep the
judicial process moving forward when a party desires a change
in representation. See id. R. 74 (explaining the process for
attorney withdrawal and appointment of new counsel). It cannot
be interpreted to preclude the district court from recognizing
new counsel in the face of an attorney’s refusal to withdraw,
where the client desires it and new counsel has been engaged
and is ready to proceed.
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judgment of where its interests lie, warranted an award of
sanctions. We therefore affirm that award.8
¶22 In summary, we affirm the district court’s decisions to
deny Fadel’s motions to intervene and to strike the complaint in
intervention because the intervention motions were untimely.
We also affirm the award of sanctions because there was a basis
for the district court’s findings that Fadel acted for an improper
purpose and asserted claims that were without merit and
frivolous.
_____________
8. Fadel does not challenge the amount of the sanction award or
the type of sanctions awarded.
20130010-CA 14 2014 UT App 267