District Judges All Step Aside in Pioneer Case : Litigation: Conflicts eliminate the five active justices, leaving the complex mortgage firm case to be heard by either a senior or an out-of-town judge.

The five active U.S. District Court judges in San Diego have declined to oversee the Pioneer Mortgage civil suit that is beginning to wind its way through the court system, raising the possibility that an out-of-town judge will be imported to rule over the complicated case.

U.S. District Judges Rudi M. Brewster, Earl B. Gilliam, Judith N. Keep, Gordon Thompson Jr. and John S. Rhoades have removed themselves from the case or declined to hear it because of possible conflicts. Lawyers associated with the case say the judges either knew parties involved in the lawsuit or have worked for law firms that represent various parties in the suit.

The case, which alleges fraudulent activity by several companies that did business with Pioneer, could be assigned to U.S. District Judge William Enright, a senior judge with a reduced workload. However, a spokeswoman for Enright said the judge has not yet considered whether to tackle the increasingly complex case.

The apparent inability to find a local judge who could try the case did not surprise attorneys associated with the web of litigation that encircles Pioneer Mortgage, a La Mesa-based mortgage loan company that ran short of cash in late 1990 and filed for protection in U.S. Bankruptcy Court in January.

Pioneer brokered $250 million in loans before running into financial problems. The status of those loans--and of the funds of 2,500 Pioneer investors--remains in doubt.

“Whenever you have 2,500 investors, most of them from San Diego, someone is going to end up knowing someone else,” said one attorney who is involved in the case. “San Diego is still a small town in so many ways,” said another attorney who is monitoring the case.

While judges regularly excuse themselves from cases, it is unusual for all active judges to pass on a given case, said William W. Luddy, clerk of the San Diego federal court.

It remains to be seen if Enright or one of the federal court’s other senior members--older judges who have significantly cut back their hours--would agree to hear the case, Luddy said.

It was also uncertain Monday whether Marilyn Huff, a local attorney with Gray Cary Ames & Frye who will soon be sworn in as a U.S. District Court judge, would hear the case. Huff was unavailable for comment Monday, but one federal judge earlier excused himself because he once was a partner with Gray Cary, a firm that represents an institution involved in the Pioneer case.

If no local judge is available to hear the case, the federal court will “notify the chief judge of the (9th) Circuit Court of Appeals asking that an outside judge be assigned,” Luddy said. “That happens on occasion, but it is unusual.”

While the U.S. District Court is looking for a judge to hear the case, two other cases related to Pioneer continue to move forward in other courtrooms.

U.S. Bankruptcy Judge James W. Meyers is overseeing business operations at Pioneer Mortgage, and Superior Court Judge Anthony Joseph is hearing a separate civil suit that disgruntled investors filed against companies that did business with Pioneer before the bankruptcy filing.

Before excusing himself from the case last month, Rhoades took the unusual step of asking Joseph, the Superior Court judge, and Barry Ted Moskowitz, a U.S. magistrate who is handling parts of the Pioneer case in federal court, to join him at the bench during a District Court hearing. Rhoades, Joseph and Moskowitz directed attorneys in the three separate court cases to work together in an attempt to keep the cases manageable.

The lack of a judge has not stalled the complex District Court suit, according to Tim Cohelan, one of three local attorneys who filed the suit on behalf of more than 100 investors. The attorneys are in the process of amending their initial complaint, and many procedural matters are being handled by Moskowitz, Cohelan said.

Cohelan said Rhoades, the most recent judge to handle the case, “set the stage” for upcoming important decisions prior to removing himself from Pioneer.

“Judge Rhoades established ground rules . . . (that will be) of great benefit to whomever takes over,” he said.

Cohelan suggested that the federal court give thought to importing a “senior judge from the New York district, where complex cases are the rule and not the exception. . . . Of course, we’d be more than happy if one of our more experienced senior judges were to agree to take the case.”

The judge who ends up hearing the suit will preside over a proceeding that is likely to last years. Before leaving the case, Rhoades directed the dozens of attorneys then associated with it to prepare a chart that explains “who’s suing whom.”

He also ordered the growing “sea of lawyers” to litigate the suits in federal and state courts in a manner that will “keep it from evolving into an epic tale of Dickens . . . (that becomes) the master of us all.”

Rhoades then indicated that if the case continued to grow in complexity, he would initiate guidelines that a federal court in Las Vegas used during a complex case stemming from the Nov. 21, 1980, fire at the MGM Grand Hotel in Las Vegas, in which 85 people died and 591 others were injured.

During that trial, Rhoades served as an attorney who represented a supplier that manufactured chandeliers at the hotel. While Rhoades does not believe the Pioneer cases will reach the level of complexity seen in the MGM Grand case, several local attorneys have predicted that Pioneer could generate one of the most complicated groups of cases ever heard in San Diego.