MI Appeals Court Upholds Disqualification of Plaintiffs’ Initial Attorney Due to Conflict of Interest in Their Landscaping Dispute

This post was authored by Georgia Reid of Touro Law Center

Steven Schneider and Julie Ann Schneider brought an action against their neighbors, Barton Rachwal and Andrea Rachwal (the Rachwals), the city of Orchard Lake Village (the City) and its building official, Gerry McCallum, in 2020 after the Rachwals constructed a new dwelling and changed the landscaping on their property.  After the trial court dismissed the action for lack of standing, the Schneiders appealed.  The Schneiders also argued that the trial court erred by ruling that their initial attorney, Robert Jacobs, and his associated law firm should have been due to an alleged conflict of interest.  The Court of Appeals agreed held the trial court did not err in dismissing the claims, and also offered a lengthy analysis of the conflict of interest issue.

The Schneider property and the Rachwal property next door were originally part of a single tract that.  The tract was subdivided into three parcels, and the original owner imposed covenants and restrictions to run with the land.  Before the Rachwals purchased the property in 2011, the Schneiders were already embroiled in litigation with the Rachwals’ predecessors, the Flynns.  In 2009, a selltlement was reached, which provided that the Schneiders could enforce the existing deed restrictions in place for the property then owned by Flynn, but upon a sale or transfer of that property, the Schneiders would receive $50,000 from the closing proceeds and “release any rights to enforce the restrictions on the Flynn property,” but “[i]f no payment is made as provided herein, [plaintiffs] shall continue to have such rights of enforcement.”  The Rachwals did not pay the Schneiders $50,000, upon purchase of the property.  The Schneiders later informed the Rachwals that The Rachwals could pay the $50,000 amount at a later time to obtain a release of the deed restrictions, which mostly centered around the maintenance of a drainage ditch.

The Rachwals subsequently tendered the $50,000 amount. In lieu of accepting that payment, the Schneiders filed a lawsuit, claiming (1) the Rachwals violated the deed restrictions applicable to their property, which plaintiffs were entitled to enforce under the 2009 settlement order, and (2) the Rachwals performed work on their property in violation of several ordinances, which the City failed to enforce.

The Rachwals and the City moved for summary disposition with respect to the deed restrictions, the trial court granted the dismissal.  The trial court gave only a single specific reason for granting summary disposition—the plaintiffs lack standing. 

Reviewing the case de novo, the Court of Appeals cited evidence that in the form of a letter from the Plaintiffs’ letter from December 5, 2012.  The Court found the letter was proof that the Schneiders agreed to “modify the original settlement order with respect to the timing of the payment by accepting the $50,000 payment after the closing to obtain release of the deed restrictions.” Hence, the Court held that the plaintiffs waived their rights with regard to both the payment and to enforce the deed restrictions by rejecting the payment and filing the action instead.

The Schneiders also argue that the trial court erred by dismissing their claims against the City, McCallum, and the Rachwals premised on alleged violations of local ordinances – specifically, that the did not like the landscaping on the Rachwal’s property. The Schneiders alleged that they suffered “special injury affecting their rights and substantial interests,” which were detrimentally affected in a manner different from the general public. The trial court ruled that plaintiffs did not have standing to assert such claims.  The Court of Appeals agreed with the trial court, holding that the Schneiders did not show “how any landscaping changes made by the Rachwals impact plaintiffs’ property directly or specifically, in a manner different from the general public.”

The Schneiders also argued that the trial court erred by ruling that their initial attorney, Robert Jacobs, and his associated law firm, Jackier Gould, P.C., were disqualified from representing plaintiffs in this matter due to a conflict of interest.  The Rachwals moved to disqualify Jacobs and his associated firm, Jackier Gould. Mr. Rachwal had been a long-time client of Nathan Upfal and Jackier Gould since 2002.  Upfal continued to represent Rachwal by preparing the annual meeting minutes for his professional corporation. Both Upfal and Jacobs are “of counsel” members of Jackier Gould. Barton sent an e-mail to both attorneys, as well as the named partners at Jackier Gould, alerting them that he was an existing client of the firm and that Jacobs’s adverse representation of plaintiffs was an impermissible conflict of interest, contrary to MRPC 1.7.  The trial court agreed, and the Court of Appeals affirmed after reviewing the facts de novo.

Schneider v. City of Orchard Lake Village, 2020 WL 2505213 (MI App. unrep. 5/14/2020)