Krutzfeldt Ranch, LLC v. Pinnacle Bank, 272 P.3d 635

Krutzfeldt Ranch, LLC sued Pinnacle Bank for breach of contract, breach of the covenant of good faith and fair dealing, and fraud relating to a $5 million loan for a Billings subdivision.
Pinnacle Bank was represented by Crowley Fleck; Hoskins and Brekke & Hoskins PLLC previously advised Krutzfeldts on liability/tax issues and later joined Crowley to represent Pinnacle Bank.
Hoskins advised on tax issues and drafted settlement language; he was not disclosed as an expert to Pinnacle or Crowley.
Crowley refused to consent to or waive a conflict when Hoskins joined Crowley; Crowley asserted a formal ethical screen would suffice.
District Court denied disqualification and permanent injunction; court found Krutzfeldts were former clients and sustained the screen.
Montana Supreme Court reverses, holds Crowley must be disqualified; Krutzfeldts were current clients of Hoskins at the time he joined Crowley; no effective withdrawal or timely screen valid to avoid disqualification.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the district court erred denying disqualification.	Krutzfeldts were Hoskins's current clients when he joined Crowley.	Hoskins's clients became former clients upon joining Crowley due to the engagement and screen; no ongoing conflict.	Yes, district court erred; Krutzfeldts remained current clients; disqualification required.
Whether an ethical screen could preserve Crowley’s representation of Pinnacle Bank.	Screen failed to timely and effectively prevent disclosure of confidential information.	Screen would ensure no confidential information was shared; thus permissible.	No; screen was not timely or effective; disqualification required.
Whether the engagement letter and lack of withdrawal evidenced continued representation.	Engagement letter and Dear Client letter showed ongoing relationship post-July 2010.	No ongoing present client status; Krutzfeldts became former clients.	Present-client status persisted; disqualification required.
What is the appropriate remedy given the conflict and prejudice to Krutzfeldts.	Disqualification is necessary to protect loyalty and public confidence.	If conflict exists, screen suffices and remedy is less drastic.	Disqualification of Crowley; remedy appropriate to protect loyalty and public trust.

Schuff v. A.T. Klemens & Son, 303 Mont. 274, 16 P.3d 1002 (2000 MT 357) (standard for abused discretion in disqualification; pretrial impact must be shown)
State Farm Mut. Auto. Ins. Co. v. Fed. Ins. Co., 86 Cal.Rptr.2d 20 (1999) (automatic imputation principles under former client rules)
Unified Sewerage Agency v. Jelco Inc., 646 F.2d 1339 (9th Cir. 1981) (present-client standard continues after transition to new firm)
In re Marra, 319 Mont. 213, 87 P.3d 384 (2004 MT 8) (imputations and disqualification rules; public interest in ethics)
In re Johnson, 319 Mont. 188, 84 P.3d 637 (2004 MT 6) (undivided loyalty; duty to current clients)
Schuff, 2000 MT 357 () (disqualification standards and timelines)