Brown v. Kelton

| Appellants Mid-Central Plumbing Company, Inc., and John W. Rogers, Mid-Central’s sole shareholder, along with separate appellant Stephen Toof Brown, bring this interlocutory appeal from an order of the Pulaski County Circuit Court disqualifying Brown from serving as the attorney for Mid-Central and Rogers in the case filed against them by appellee Brian Kel-ton. Appellants argue that the circuit court erred in disqualifying Brown because: (1) Ark.Code Ann. § 16-22-211 (Supp.2009) does not prohibit Farmer’s Insurance Exchange from using an employee to defend its insureds; (2) alternatively, the circuit court erred by not holding Ark. Code Ann. § 16-22-211 unconstitutional for intruding on this court’s exclusive authority to regulate the practice of law; (3) Kelton had no standing to object to an alleged conflict of interest; (4) it was not a conflict of interest for Brown to serve as the attorney for Mid-Central and Rogers; and (5) Mid-Central and Rogers gave proper informed | ^consent to be represented by Farmer’s Insurance Exchange’s staff counsel. Brown also argues that he did not breach his duty to preserve Mid-Central’s confidences. Mid-Central and Rogers additionally argue that the circuit court improperly disregarded their fundamental right to be represented by their chosen counsel. We affirm the circuit court’s order disqualifying Brown in the instant case.

This case arose from a car accident in which Kelton’s vehicle was struck by a vehicle owned by Mid-Central. Kelton filed suit against Mid-Central and Rogers alleging damages from the collision. Mid-Central and Rogers were insured by Truck Insurance Exchange (“TEI”) for $1,000,000, and TEI was reinsured by Farmer’s Insurance Exchange (“FIE”).

Approximately three months after an answer was filed on behalf of Mid-Central and Rogers, their attorney filed a motion for substitution, seeking to name Stephen Brown, an attorney employed by FIE, as the new attorney on the case. The circuit court entered an order substituting counsel. However, Kelton filed a response in opposition to the motion for substitution shortly thereafter. The circuit court held a hearing and the parties agreed that because the response in opposition had been filed after the motion to substitute had already been granted, it would be treated as a motion to disqualify.

After the hearing, the circuit court found that Brown’s representation of Mid-Central and Rogers would have constituted the unauthorized practice of law by FIE pursuant to Ark.Code Ann. § 16-22-211; that a conflict of interest existed for Brown because his undivided duty of loyalty and confidentiality would have. been owed to Mid-Central and Rogers, not |sto the insurance company that employed him; and that no effective waiver of the inherent conflict had or could have taken place. Accordingly, the circuit court disqualified Brown from further participation in the case on behalf of FIE’s insureds. The circuit court entered its order on June 2, 2010. This interlocutory appeal followed, and we now turn to the merits of the appeal.

Appellants first argue that Ark.Code Ann. § 16-22-211 does not prohibit an insurance carrier from assigning the defense of an insured’s lawsuit to in-house counsel and that such is true in a majority of other jurisdictions as well. Kelton responds that the circuit court’s application of section 16-22-211 was correct and that using in-house counsel to represent an insured equates to the insurance company unlawfully practicing law.

We review statutory interpretation de novo, as it is for this court to determine the meaning of a statute. See Dachs v. Hendrix, 2009 Ark. 542, 354 S.W.3d 95; Osborn v. Bryant, 2009 Ark. 358, 324 S.W.3d 687. Our rules of statutory construction are well settled:

The basic rule of statutory construction is to give effect to the intent of the legislature. Where the language of a statute is plain and unambiguous, we determine legislative intent from the ordinary meaning of the language used. In considering the meaning of a statute, we construe it just as it reads, giving the words their ordinary and usually accepted meaning in common language. We construe the statute so that no word is left void, superfluous or insignificant, and we give meaning and effect to every word in the statute, if possible.

Dachs, 2009 Ark. 542, at 7, 354 S.W.3d 95, at 100 (quoting City of Little Rock v. Rhee, 375 Ark. 491, 495, 292 S.W.3d 292, 294 (2009)).

Section 16-22-211 states, in relevant part:

14(a) It shall be unlawful for any corporation or voluntary association to practice or appear as an attorney at law for any person in any court in this state or before any judicial body, to make it a business to practice as an attorney at law for any person in any of the courts, to hold itself out to the public as being entitled to practice law, to tender or furnish legal services or advice, to furnish attorneys or counsel, to render legal services of any kind in actions or proceedings of any nature or in any other way or manner, or in any other manner to assume to be entitled to practice law or to assume or advertise the title of lawyer or attorney, attorney at law, or equivalent terms in any language in such a manner as to convey the im-

pression that it is entitled to practice law or to furnish legal advice, service, or counsel or to advertise that either alone or together with or by or through any person, whether a duly and regularly admitted attorney at law or not, it has, owns, conducts, or maintains a law office or any office for the practice of law or for furnishing legal advice, services, or counsel.

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(d) This section shall not apply to a corporation or voluntary association lawfully engaged in the examination and insuring of titles to real property, nor shall it prohibit a corporation or a voluntary association from employing an attorney or attorneys in and about its own immediate affairs or in any litigation to which it is or may become a party.

Ark.Code Ann. § 16-22-211(a),(d) (Supp. 2009).

Appellants argue that FIE falls into the exception created by subsection (d) because the insured’s lawsuit is a matter that is “in and about its own immediate affairs.” However, they attempt to de-emphasize the language that follows. The exception created is two-fold. The plain language of the statute allows a corporation to employ an attorney in two scenarios: (1) for matters “in and about its own immediate affairs”; “or (2) in any litigation to which it is or may become a party.” Id. (emphasis and numeral added).

Appellants argue that the language of section 16-22-211 should not be interpreted as creating disjunctive alternatives. However, “[i]n its ordinary sense, the word ⅛’ is a disjunctive particle that marks an alternative, generally corresponding to ‘either,’ as ‘either this |Bor that’; it is a connective that marks an alternative.” McCoy v. Walker, 317 Ark. 86, 89, 876 S.W.2d 252, 254 (1994) (quoting Beasley v. Parnell, 177 Ark. 912, 918, 9 S.W.2d 10, 12 (1928)). Additionally, were we to hold that “in and about its own immediate affairs” includes litigation to which it is not a party, but to which it is closely connected or has an interest in the outcome, the language following would be superfluous. Obviously, litigation to which it is a party or could become a party would then be included in the first exception. As noted, “[w]e construe the statute so that no word is left void, superfluous or insignificant, and we give meaning and effect to every word in the statute, if possible.” Dachs, supra.

In the instant case, it is undisputed that FIE is not a party and will not become a party to the underlying lawsuit. Therefore, it was prohibited by Ark.Code Ann. § 16-22-211 from assigning appellant Brown, one of its in-house counsel, to defend the insureds in the litigation.

Appellants next argue that Ark. Code Ann. § 16-22-211 is unconstitutional because the statute conflicts with the exclusive power to regulate the practice of law vested on this court by amendment 28 of the Arkansas Constitution. Kelton avers that this statute, much like others upheld by this court, is simply an aid in regulating the practice of law and is not in derogation of it.

Amendment 28 of the Arkansas Constitution provides that “[t]he Supreme Court shall make rules regulating the practice of law and the professional conduct of attorneys at law,” and this court has recognized that amendment 28 “put to rest for all time any possible question about the power of the courts to regulate the practice of law in the state.” McKenzie v. Burris, 255 Ark. 380, 341, 500 S.W.2d 357, 364 (1973). However, as even the appellants recognize, this court considered and rejected the idea of a possible conflict between amendment 28 and the legislative act prohibiting corporations from practicing law. See Arkansas Bar Ass’n v. Union Nat’l Bank of Little Rock, 224 Ark. 48, 273 S.W.2d 408 (1954). While facts of that case differed, this court observed:

In many jurisdictions, as in this state, the judiciary has on occasions apparently given approval to certain enactments by the legislative body, but these enactments are considered to be in aid of the judicial prerogative to regulate the practice of law and not to be in derogation thereof.

Id. at 54, 273 S.W.2d at 412.

The approach taken by this court in the Union National Bank case has since been utilized. See McKenzie, supra. We have recognized that “[statutes which provide a penalty for unauthorized practice of law by a nonresident of the forum state have been held to be cumulative to the powers of the' courts to punish.” McKenzie, 255 Ark. at 342, 500 S.W.2d at 365. Statutes relating to the practice of law are merely in aid of, but do not supersede or detract from the power of the judicial department to define, regulate, and control the practice of law. See id. The legislative branch may not, in any way, hinder, interfere with, restrict, or frustrate the powers of the court. See id. Moreover, we have “chosen to recognize and apply certain statutes which are not necessarily inconsistent with, or repugnant to, court rules, and do not hinder, interfere with, frustrate, pre-empt or usurp judicial powers, at least when the statutes were, at the time of enactment, clearly within the province of the legislative branch, |7and when the courts have not acted in the particular matter covered by the statute.” Id. at 343, 500 S.W.2d at 365.

While there is no question that we hold the power to define, regulate, and control the practice of law, section 16-22-211 reflects the consensus of this court as found in prior case law and implied by our court rules. We have observed that “[c]orpora-tions shall not practice law.” Union Nat’l Bank, 224 Ark. at 58, 273 S.W.2d at 411 (1954) (quoting People ex rel. Comm, on Grievances of Colorado Bar Ass’n v. Denver Clearing House Banks, 99 Colo. 50, 59 P.2d 468, 470 (1936)). Additionally, Rule 1.7 of the Arkansas Rules of Professional Conduct sets forth the general principle that an attorney may not represent a client if the representation involves a concurrent conflict of interest. Upon consideration of public policy and recognizing the inability of any person to faithfully serve two masters, we hold that the statute, which prohibits corporations, including insurance companies, from practicing law on behalf of a third party, is constitutional.

Appellants additionally argue that Kelton, as their adversary, had no standing to object to Brown’s representation of Mid-Central and Rogers. Kelton responds that a litigant does have standing to question his opponent’s authority to practice law and argues that the circuit court was correct in finding that the rules of professional conduct also allowed for the challenge. The question of standing is a matter of law for this court to decide, and this court reviews questions of law de novo. See McLane S., Inc. v. Arkansas Tobacco Control Bd., 2010 Ark. 498, 375 S.W.3d 628.

This court has previously held that an opponent, as a litigant, had standing to question their opponent’s authority to practice law. See Davis v. University of Arkansas Med. Ctr. & Collection Serv. Inc., 262 Ark. 587, 559 S.W.2d 159 (1977); see also, e.g., McKenzie, supra. Therefore, we affirm the circuit court’s finding that Kelton had standing to challenge Brown’s representation of Mid-Central and Rogers.

Mid-Central and Rogers also allege that the circuit court improperly disregarded their fundamental right to be represented by their chosen counsel and that they gave proper informed consent to the representation. Appellants’ fundamental-right argument was not raised and developed before the circuit court. It is well-settled that this court will not address an argument raised for the first time on appeal, even a constitutional argument. See Burdine v. Arkansas Dep’t of Fin. & Admin., 2010 Ark. 455, 379 S.W.3d 476. While Mid-Central and Rogers allege that they gave the proper informed consent to be represented by Brown, even had they given such consent, a lawyer may not represent the client if that representation is prohibited by law. See Ark. R. Prof 1 Conduct 1.7(b)(2) (2010).

Because we hold that Ark.Code Ann. § 16-22-211 prohibited Brown from representing Mid-Central and Rogers, and in light of our decision to hold the statute constitutional, any decision on the remaining arguments presented on appeal — that there was not an inappropriate conflict and that no breach of duty to preserve Mid-Central and Roger’s confidences had occurred — would be purely advisory. It is well-settled that we will not issue | nan advisory opinion. See Jewell v. Fletcher, 2010 Ark. 195, 377 S.W.3d 176.

Affirmed.