(CN) - A lawyer who prepared a show-cause order for a judge does not have quasi-judicial immunity with respect to the automatic stay he allegedly violated, the 9th Circuit ruled Wednesday.
Though the question in the appellate ruling was a narrow one, the dispute between two attorneys in Clark County, Nev., was prompted by injuries Freddy Burton sustained in a bicycle-automobile collision.
Burton's medical expenses from the accident cost some $271,000, so he hired attorney Jan Koch to pursue a personal injury claim. In the meantime, he granted liens on the claim to Valley Hospital Medical Center and others to which he owed money for his treatment.
Koch eventually settled Burton's personal injury claim for $185,000. He also recommended that Burton declare bankruptcy and hire bankruptcy attorney David Crosby. After paying Crosby to do so, Burton had about $104,000 left of his settlement.
Valley Hospital then sold its account receivable to Infinity Capital Management, and Infinity's lawyer at the time - who was later substituted for attorney Salvatore Gugino - filed an interpleader lawsuit against Burton's other lien holders.
When the interpleader action got underway in Nevada's 8th Judicial District, Judge Ronald Israel asked Koch why he had not handed over the remainder of Burton's settlement to the court clerk as local court rules required. Koch said he would deposit the funds with the bankruptcy court for Burton who was a not party to the interpleader action.
Judge Israel later asked Gugino, Infinity Capital Management's attorney in the interpleader action, to prepare a show-cause order requesting that Koch explain why he should not be held in contempt for his failure to comply with the law requiring him to deposit the funds.
Gugino prepared the order and sent a draft to Koch, who shot back that Gugino, Judge Israel and Infinity had violated an automatic stay. Koch also "made personal attacks on Gugino's competency," according the ruling.
Though the show-cause order was ultimately never filed, Koch and Burton filed a federal complaint against Gugino, Israel and Infinity in Las Vegas for their alleged violation of an automatic stay. They sought more than $10,000 in damages.
U.S. District Judge Robert Clive Jones found that the claim against Judge Israel was barred by absolute judicial immunity, but he refused to afford absolute quasi-judicial immunity to Gugino for his role in preparing the show-cause order. Judge Clive said that Gugino had a "duty to not prepare or present the order."
A appellate panel agreed, 2-1, on Wednesday that Gugino did not qualify for quasi-judicial immunity, which is sometimes given to bankruptcy trustees, prosecuting attorneys and clerks of court, but never to defense attorneys.
"Although the function performed by Gugino had a close nexus to the judicial process - he prepared the order during a judicial proceeding, and orders are a basic and integral part of judicial proceedings - preparing the order did not involve the kind of discretionary judgment that is protected by the doctrine," Judge Sidney Thomas wrote for the majority.
"Preparing an order on behalf of a court does require the preparer to make important decisions about language and tone, but the ultimate discretion in determining whether an order will be integral to resolving a dispute lies with the judge, not the preparer. Only the judge can exercise the unique authority vested in him by signing an order of the court."
Writing in dissent, Judge Ronald Gilman argued that Gugino deserved immunity because he "was in effect acting as Judge Israel's law clerk," a position that the 9th Circuit has in the past afforded quasi-judicial immunity.
The majority opinion "puts at risk the common practice of private attorneys drafting proposed orders on behalf of a judge," Gilman added.
Sitting on the panel by designation from the 6th Circuit in Cincinnati, Gilman also lightly chastised the attorneys in the case for a lack of cooperation, saying that the "entire dispute could have been avoided if the attorneys involved had exhibited greater collegiality and common sense."