Pinnacle Surety Services, Inc. v. Loehnert, 3:14-cv-00425

Background

Pinnacle Surety Services sued defendants including Loehnert and Ayres; earlier the Court disqualified Defendants’ counsel for a conflict of interest arising from prior joint representation in a Wells Fargo matter.
Defendants moved to reconsider the disqualification order, arguing no manifest injustice because the prior Wells Fargo representation was joint and Pinnacle’s communications were not confidential as to co-clients.
Defendants previously filed extensive briefing, a surreply, sought a sealed evidentiary hearing, and argued at a conference before the Court issued its disqualification order.
The Court applied the Sixth Circuit two-step framework from Bowers v. Ophthalmology Group to evaluate disqualification based on a former-client conflict.
The Court found Pinnacle did not give informed consent to share confidential information with co-clients, and disclosure was not impliedly authorized; therefore counsel owed a continuing duty of confidentiality and had to be disqualified.
The Court denied reconsideration but certified the disqualification order for immediate appeal under 28 U.S.C. § 1292(b) and stayed discovery pending appeal.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether reconsideration under Rule 59(e) is warranted	Disqualification was correct; no manifest injustice alleged by plaintiff	Reconsideration should be granted to avoid manifest injustice because prior joint representation meant Pinnacle’s disclosures were not confidential as to co-clients	Denied — defendants failed to show manifest injustice or a proper basis under Rule 59(e)
Whether an attorney-client confidentiality duty barred Defendants’ counsel from representing Defendants now	Pinnacle’s communications remained confidential absent informed consent or implied authorization	Joint representation meant Pinnacle could not reasonably expect secrecy as to co-clients, so no breach of confidentiality	Held for plaintiff — no informed consent or implied authorization; confidentiality duty persisted, requiring disqualification
Applicability of Bowers two-step test to these facts	Bowers controls and supports disqualification	Defendants argued Bowers should not mandate disqualification given the joint-representation facts	Court applied Bowers and found its two-step framework appropriate and dispositive
Whether the disqualification order should be certified for immediate appeal under 28 U.S.C. § 1292(b)	Plaintiff opposed certification	Defendants sought certification so the appellate court could resolve the novel application of Bowers here	Granted — court found a controlling question of law with substantial ground for difference of opinion and stayed discovery pending appeal

Key Cases Cited

Bowers v. Ophthalmology Group, 733 F.3d 647 (6th Cir. 2013) (two-step framework for disqualification based on former-client conflicts)
GenCorp, Inc. v. Am. Intern. Underwriters, 178 F.3d 804 (6th Cir. 1999) (standards for granting Rule 59(e) relief)
Inge v. Rock Financial Corp., 281 F.3d 613 (6th Cir. 2002) (treating motions to reconsider as Rule 59(e) motions)
Sault Ste. Marie Tribe of Chippewa Indians v. Engler, 146 F.3d 367 (6th Cir. 1998) (Rule 59(e) is not an opportunity to re-argue a case)
Gesler v. Ford Motor Corp., 185 F. Supp. 2d 724 (W.D. Ky. 2001) (Rule 59(e) relief is extraordinary and granted sparingly)