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North Star Hotels Corp. v. Mid-City Hotel Associates

United States District Court for the District of Minnesota

118 F.R.D. 109 (1987)

Facts

North Star Hotels Corp. (North Star) (plaintiff) managed the Minneapolis Hilton Hotel and sued owner Mid-City Hotel Associates (defendant) for breach of the management contract. The law firm Faegre & Benson (Faegre) represented North Star. Mid-City moved to disqualify Faegre from representing North Star because Mid-City’s general partner, Harry Johnson, owned significant interests in two other real estate development partnerships that Faegre also represented. As general partner, Johnson would be personally liable for any judgment not satisfied by Mid-City’s assets. Faegre represented only the partnership entities in the ventures while other attorneys represented Johnson himself, but Johnson had personally guaranteed $3 million of the partnerships’ debt. Mid-City’s attorney claimed Johnson was denied a letter of credit needed to close a transaction for one of the partnerships after Faegre filed a lis pendens in connection with the litigation, and that partnership formally asked Faegre to withdraw from representing North Star. Mid-City argued that Faegre representing North Star was directly adverse to the partnerships’ financial interests or would materially limit its representation.

Rule of Law

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Issue

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Holding and Reasoning (Symchych, J.)

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