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United States v. Hofstetter

United States District Court, E.D. Tennessee

August 2, 2017




         This criminal matter is before the Court on the government's Appeal of Magistrate Judge's Order Appointing Co-Counsel [Doc. 159]. The government appeals Magistrate Judge C. Clifford Shirley, Jr.'s March 1, 2017, Order appointing Mike McGovern as co-counsel for the defendant, Sylvia Hofstetter [Doc. 117], and Judge Shirley's April 14, 2017, Memorandum and Order (the “M&O”) [Doc. 135] denying the government's Motion to Reconsider Order Appointing Co-Counsel and for Immediate Stay of Said Order [Doc. 118]. The government filed a sealed ex parte supplement in support of its appeal [Doc. 166], and Hofstetter filed a response to the appeal [Doc. 204]. On June 28, 2017, the Court held a hearing to address the appeal [Doc. 221]. For the reasons that follow, the Court will grant the government's appeal [Doc. 159], affirm in part and reverse in part Judge Shirley's orders [Docs. 117, 135], and remand the issue of appointment of new co-counsel for Hofstetter to Judge Shirley.

         I. Background[1]

         Hofstetter, the former operator of three healthcare clinics in Tennessee, was first indicted for alleged crimes in connection with a large-scale pill-mill conspiracy on March 4, 2015 [Doc. 3]. She retained attorney David Eldridge, who represented her at her detention hearing on March 13, 2015 [Doc. 18]. Hofstetter then discharged Eldridge and retained attorney Richard Escobar [Doc. 34]. Escobar became Hofstetter's counsel of record on April 9, 2015 [Id.]. Hofstetter also retained two additional attorneys, DeeAnne Athan and Dino Michaels, from Escobar's law firm, Escobar & Associates [Docs. 40, 41]. On October 2, 2016, the Grand Jury returned a superseding indictment against Hofstetter [Doc. 70]. Escobar and the other members of his firm then moved to withdraw as counsel on November 3, 2016 [Doc. 102]. Judge Shirley held a hearing on the motion and determined that Hofstetter qualified for court-appointed counsel [Doc. 105].

         The government represents that Judge Shirley asked Assistant United States Attorney (“AUSA”) Tracy Stone to assist the Court's Clerk's Office in working through potential attorney conflict issues to find competent counsel for Hofstetter [Doc. 159 p. 3]. By the time Escobar moved to withdraw, close to 130 defendants had been charged in related cases [Id.]. The government identified Charles Burks and Chris Oldham as two conflict-free attorneys [Id.]. At that time, neither Burks nor Oldham represented any of the defendants in the related cases, and Judge Shirley appointed Oldham to represent Hofstetter's co-defendant, Courtney Newman [Id. at 3 n.4].

         On January 6, 2017, Judge Shirley granted Escobar's motion to withdraw and appointed Burks as counsel for Hofstetter [Doc. 108]. Judge Shirley told Hofstetter that he was looking for a second lawyer to represent her [Doc. 159 p. 4]. During this time, AUSA Stone continued to work with the Clerk's Office to identify attorneys with no or minimal conflicts [See id.].

         On March 1, 2017, Judge Shirley granted Hofstetter's request for the appointment of a second attorney, finding that the appointment of co-counsel is necessary in the interest of justice [Doc. 116]. Judge Shirley appointed attorney Mike McGovern as co-counsel for Hofstetter [Doc. 117].

         On March 2, 2017, the government filed a Motion to Reconsider Order Appointing Co-Counsel and for Immediate Stay of Said Order [Doc. 118]. In support of its motion, the government argued that McGovern has an actual conflict of interest in his representation of Hofstetter [Id. at 1]. McGovern previously represented Scott Stockton in a related matter, Case No. 3:15-CR-45. Stockton's plea agreement indicates that he sponsored patients at one of Hofstetter's clinics in exchange for narcotics, which he subsequently sold [No. 3:15-CR-45, Doc. 25].

         Judge Shirley held a hearing on the motion for reconsideration on March 8, 2017 [Doc. 122]. At the hearing, the government represented that it is highly likely that it will call Stockton as a witness in Hofstetter's trial to testify about the clinic and about his relationship with Hofstetter's co-defendant, Newman. The government argued that McGovern has a conflict warranting disqualification due to his successive representation of Stockton and Hofstetter.

         Judge Shirley denied the motion for reconsideration on April 14, 2017 [Doc. 135]. In doing so, he determined that “any conflict of interest in this case is potential, rather than actual” [Id. at 8]. He also found that both Hofstetter and Stockton validly waived the right to conflict-free counsel [Id.]. In light of these circumstances, Judge Shirley deferred to Hofstetter's Sixth Amendment right to counsel of choice and provided that “McGovern may continue to represent Defendant Hofstetter” [Id. at 10].

         On May 9, 2017, the government filed an Appeal of Magistrate Judge's Order Appointing Counsel [Doc. 159]. The Court held a hearing to address the appeal on June 28, 2017 [Doc. 221]. On July 7, 2017, the Grand Jury returned a second superseding indictment against Hofstetter and others defendants [Doc. 224]. At an initial appearance and arraignment held before Judge Shirley on July 13, 2017, one of Hofstetter's newly indicted co-defendants moved for a continuance of the trial [Doc. 237].

         II. Standard of Review for Appeal

         The magistrate judge entered the orders [Docs. 117, 135] at issue in this appeal pursuant to 28 U.S.C. § 636(b). Section 636(b) allows district judges, subject to certain exceptions, to “designate a magistrate judge to hear and determine any pretrial matter pending before the court.” 28 U.S.C. § 636(b)(1)(A). A district judge may reconsider any pretrial matter determined under “subparagraph (A) where it has been shown that the magistrate judge's order is clearly erroneous or contrary to law.” Id.

         III. Analysis

         The government argues that this Court should reconsider the magistrate judge's orders [Docs. 117, 135] because: (1) the Sixth Amendment presumption in favor of counsel of choice does not apply; (2) McGovern has an actual or serious potential conflict; (3) the magistrate judge underestimated the negative effect McGovern's representation of Hofstetter will have on the public's perception of administration of justice and the judicial system; (4) Stockton and Hofstetter's waivers are invalid; and (5) there is no good reason to run the dangerous risks created by McGovern's appointment. The Court will first set forth the applicable law on successive representation. As the government asserts that the magistrate judge erred in applying the presumption in favor of counsel of choice, the Court will address that argument within its discussion of the applicable law. The Court will then analyze the government's remaining arguments in support of its appeal.

         A. Law on Successive Representation

         The Sixth Amendment's right to counsel encompasses two distinct rights-a right to effective assistance of counsel and a right to counsel of choice. See Daniels v. Lafler, 501 F.3d 735, 738 (6th Cir. 2007). While all defendants enjoy the right to effective assistance of counsel, id., “[d]efendants with the ability to hire their own attorney also have a right to counsel of their own choosing.” United States v. Basham, 561 F.3d 302, 324 (4th Cir. 2009) (citing United States v. Gonzalez-Lopez, 548 U.S. 140, 151-52 (2006)). Where a defendant has the right to counsel of choice, courts must recognize “a presumption in favor of a [defendant's] counsel of choice.” Wheat v. United States, 486 U.S. 153, 164 (1988). In contrast, indigent defendants that rely on court-appointed counsel have no constitutional right to counsel of choice. Daniels, 501 F.3d at 740.

         “The guarantee of effective assistance of counsel includes representation which is free of conflicts of interest.” McNeal v. United States, 17 F. App'x 258, 261 (6th Cir. 2001). “Successive representation occurs where defense counsel has previously represented a co-defendant or trial witness.” Moss v. United States, 323 F.3d 445, 459 (6th Cir. 2003). Such representation carries the risk for two types of conflicts of interest- actual and potential. See United States v. Swafford, 512 F.3d 833, 839 (6th Cir. 2008). “An actual conflict of interest exists when the attorney's and the defendant's interests diverge with respect to a material factual or legal issue or to a course of action, or when the attorney's representation of the defendant is impaired by loyalty owed to a prior client.” United States v. Jones, 381 F.3d 114, 119 (2d Cir. 2004). A potential conflict arises “if the interests of the defendant could place the attorney under inconsistent duties in the future.” Id.

         The M&O states “[a]lthough the Court ‘must recognize a presumption in favor of [the defendant's] counsel of choice, . . . that presumption may be overcome not only by a demonstration of actual conflict but by a showing of a serious potential for conflict'” [Doc. 135 p. 5 (second alteration in original) (citing Wheat, 486 U.S. at 160)]. In its appeal, the government asserts that Judge Shirley incorrectly applied the ...

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