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In re RFC and Rescap Liquidating Trust Litigation

United States District Court, D. Minnesota

March 27, 2017

In re RFC AND RESCAP LIQUIDATING TRUST LITIGATION
v.
FIRST TENNESSEE BANK, N.A., Defendant, This Document Relates to: RESCAP LIQUIDATING TRUST, Plaintiff, and RESCAP LIQUIDATING TRUST, Plaintiff,
v.
WMC MORTGAGE, LLC, as Successor to WMC Mortgage Corp. F/K/A Weyerhaeuser Mortgage Company, Defendant.

          Jessica J. Nelson and Donald G. Heeman, FELHABER LARSON, Peter Evan Calamari, David Lawrence Elsberg, and Isaac Nesser, QUINN EMANUEL URQUHART & SULLIVAN, LLP, Anthony Paul Alden and Johanna Yao Ong, QUINN EMANUEL URQUHART & SULLIVAN, LLP, and Jeffrey Alan Lipps and Jennifer A.L. Battle, CARPENTER LIPPS & LELAND LLP, for plaintiff.

          Sharon Robin Markowitz, STINSON LEONARD STREET LLP, for both defendants.

          Todd A. Noteboom, W. Anders Folk, Timothy P. Griffin, William Thomson, and Rachel Davis, STINSON LEONARD STREET LLP, and Amanda Flug Davidoff and James Harris Congdon, SULLIVAN & CROMWELL LLP, for First Tennessee Bank, N.A.

          ORDER DENYING PLAINTIFF'S MOTION TO DISQUALIFY COUNSEL

          JOHN R. TUNHEIM Chief Judge

         The individual matters before this court, ResCap Liquidating Trust v. First Tennessee Bank, N.A. (“First Tennessee”) and ResCap Liquidating Trust v. WMC Mortgage, LLC, (“WMC”), both filed January 23, 2017, are two of dozens of lawsuits that Plaintiff ResCap Liquidating Trust (“ResCap”) has filed against mortgage loan originators over the course of many years. (Compl., Jan. 23, 2017, Case No. 17-194, Docket No. 1; Compl., Jan. 23, 2017, Case No. 17-198, Docket No. 1.) In January 2015, well before the filing of these two individual matters, the Court consolidated for pretrial purposes the related cases then pending before United States District Judge Susan Richard Nelson. (Administrative Order, Jan. 27, 2015, Case No. 13-3451, Docket No. 100; see also Am. Administrative Order, Jan. 29, 2015, Case No. 13-3451, Docket No. 102.) Thus, shortly after ResCap filed the complaints in First Tennessee and WMC, the Court reassigned the matters to the consolidated proceeding before Judge Nelson. (Clerk's Notice of Initial Case Assignment, Case No. 17-198, Jan. 23, 2017, Docket No. 2; Am. Administrative Order, Jan. 25, 2017, Case No. 17-194, Docket No. 5; Administrative Order, Jan. 24, 2017, Case No. 17-198, Docket No. 5.)

         On February 10, 2017, attorneys from the law firm Stinson Leonard Street (“Stinson”) filed a notice of appearance in First Tennessee. (See Notice of Appearance, Feb. 10, 2017, Case No. 17-194, Docket No. 7.) Shortly thereafter, Judge Nelson sua sponte recused, pursuant to 28 U.S.C. § 455, because her spouse is a member of the Stinson firm. (Order of Recusal & Reassignment, Feb. 13, 2017, Case No. 17-194, Docket No. 10.) An attorney from Stinson first appeared in WMC on February 21, 2017. (See Letter to Magistrate Judge, Feb. 21, 2017, Case No. 17-198, Docket No. 7.) Relying on a prior order (the “December Order”) disqualifying Stinson when a different defendant in the consolidated action - Impac Funding Corporation (“Impac”) - retained Stinson mid-stream in ongoing litigation, (see Mem. Op. & Order (“December Order”), Dec. 8, 2016, Case No. 13-3451, Docket No. 2023), ResCap now requests that the Court prohibit Stinson from representing Defendants First Tennessee Bank, N.A. (“First Tennessee”) and WMC Mortgage, LLC (“WMC”).

         As the Court noted in the December Order, (see Id. at 12), the Eighth Circuit reviews orders disqualifying counsel carefully because “the potential for abuse by opposing counsel is high.” Droste v. Julien, 477 F.3d 1030, 1035 (8th Cir. 2007). Disqualifying a party's counsel of choice is an “extreme measure” that “should be imposed only when absolutely necessary.” Macheca Transp. Co. v. Phila. Indemn. Ins. Co., 463 F.3d 827, 833 (8th Cir. 2006) (citations omitted). The party seeking disqualification bears the burden of showing that this outcome is warranted, see A.J. by L.B. v. Kierst, 56 F.3d 849, 859 (8th Cir. 1995), but if there are genuinely “legitimate doubts, ” they “must be resolved in favor of disqualification, ” Olson v. Snap Prods., Inc., 183 F.R.D. 539, 542 (D. Minn. 1998).

         Reviewing the motion at hand, the Court finds the situation in First Tennessee and WMC distinguishable from the circumstances giving rise to the December Order. Most importantly, First Tennessee and WMC retained Stinson attorneys less than a month after service of process; in contrast, Impac retained Stinson attorneys almost two years after Judge Nelson took the reins in that case. (See December Order at 15.) While there is the danger that some inefficiency will result from separate proceedings, (see id.), Judge Nelson has invested very little time in First Tennessee or WMC (cf. Id. at 15-16 (explaining that Stinson should be disqualified in part because Judge Nelson had already “overseen numerous pre-trial disputes” in the Impac litigation and there were “discovery disputes that have not yet become the subject of a formal motion and that [would] likely relate back to earlier decisions Judge Nelson has made in the case”).) And while the potential for judge-shopping will always be present when a judge is related to a local attorney, the Court finds First Tennessee's and WMC's retention of Stinson from the outset does not raise the same red flags as Impac's mid-litigation retention of Stinson. (See Id. at 14-15.) Balancing all the relevant circumstances, the Court finds that disqualification of Stinson attorneys is not warranted.

         ORDER

         Based on the foregoing, and all the files, records, and proceedings herein, IT IS HEREBY ORDERED that Plaintiff ResCap Liquidating Trust's Motion to Disqualify Counsel [Case No. 13-3451, Docket No. 2247] in the individual matters of ResCap Liquidating Trust v. First Tennessee Bank, N.A., Case ...


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