Co-Counsel Are Ousted From Handling Case for Being ‘Associated’ With Tainted Lawyer

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By Joan C. Rogers  

 

A lawyer who withdrew from representing a plaintiff due to a former-client conflict was “associated” with co-counsel so that they too must be disqualified, the Texas Court of Appeals, Fourth District, held June 5 (In re CMH Homes Inc., Tex. App. 4th Dist., No. 04-13-00050-CV, 6/5/13).

The presumption that a tainted lawyer has shared confidential information with lawyers with whom he is now “associated” is irrebuttable, Justice Karen Angelini stated in her opinion for the court.

A dissenting justice argued that “there is no precedent recognizing an irrebuttable presumption of shared confidences between co-counsel.”

Former-Client Conflict.

CMH Homes Inc. and Vanderbilt Mortgage and Finance Inc. were sued in 2004 for alleged fraud and forgery in connection with financing for purchases of manufactured homes at CMH's Store 214 in Corpus Christi, Tex. Ricardo Carrillo represented CMH in the suit along with other attorneys.

Later Carrillo was elected as County Attorney of Duval County, Tex. The county decided to sue CMH in connection with financing transactions at Store 214 and hired the two attorneys who had represented the plaintiffs in the earlier action, David Rumley and Baldemar Gutierrez, as outside counsel to handle the case.

Carrillo was listed on the original pleading in 2012 as an attorney for Duval County, but he remained counsel of record for only two months. He moved to withdraw when opposing counsel asked him to step away in light of his previous representation of CMH. It was undisputed, Angelini said, that the earlier litigation involved the same allegations, the same transactions, and the same CMH personnel at Store 214 that are at issue in the present litigation.


“[W]e construe Rule 1.09(b) to include … individuals working together on a case or issue regardless of their actual status as a member of the firm, of-counsel, or co-counsel.”
Justice Karen Angelini

CMH subsequently filed a motion to disqualify Rumley and Gutierrez as plaintiff's counsel based on Carrillo's conflict arising from the earlier representation. They resisted, contending that Carrillo had no actual involvement in the current suit and did not share any confidences with them.

The trial court denied the motion to disqualify the outside lawyers. The court of appeals held that, due to their association with Carrillo, Rumley and Gutierrez also are disqualified from siding against CMH in this litigation.

What 'Associated' Means.

As an initial point, the court found that Carrillo was prohibited from representing CMH under Texas Disciplinary Rule of Professional Conduct 1.09(a), which forbids a lawyer from representing a current client against a former client when the current matter is substantially related to the earlier representation.

Although Rumley and Gutierrez argued that Carrillo never actually represented Duval County in the current litigation, the court was unpersuaded. Carrillo hired the two outside lawyers to file suit against CMH and negotiated the county's contract with them, Angelini pointed out. No evidence indicated that Carrillo was unaware his name was included on the suit as an attorney for the county, she added.

Rumley and Gutierrez also contended that they were not “associated” with Carrillo in the current action within the meaning of Rule 1.09(b), which forbids lawyers who are “associated” with a firm from representing a client if any of them practicing alone would be prohibited from doing so by Rule 1.09(a).

To determine the meaning of “associated” in Rule 1.09(b), the court consulted a dictionary and found that the common meaning of that term is “closely connected (as in function or office) with another.” With that definition in mind, the court stated:  

[W]e construe Rule 1.09(b) to include not only partners, employees, and associates within the same firm, but individuals working together on a case or issue regardless of their actual status as a member of the firm, of-counsel, or co-counsel.

 

 

Can't Be Rebutted.

Drawing on Texas Supreme Court decisions, the court said that with lawyers--as opposed to nonlawyer employees of a law firm--“the presumption of shared confidences is irrebuttable.”

When a lawyer who has actively handled a client's case changes firms, there is an irrebuttable presumption that the lawyer learned confidential information in the former representation, the court explained. That presumption isn't at issue here, Angelini said, since it was undisputed that Carrillo obtained confidential information about CMH and its theories and defenses in the earlier litigation.

And when the lawyer's new firm is representing the opponent of that lawyer's former client, there is also an irrebuttable presumption that the lawyer will share the former client's confidences with his new firm. The effect of this second presumption is the mandatory disqualification of the firm, Angelini explained.

Nat'l Med. Enters. Inc. v. Godbey, 924 S.W.2d 123 (Tex. 1996), explained that this irrebuttable presumption of shared confidences is necessary because it would be nearly impossible for a former client to prove that lawyers in the same firm had not shared confidences, Angelini stated. Moreover, she said, the presumption helps clients feel secure and safeguards the integrity of legal practice.

Those concerns are present here, the court said, because Carrillo was associated with Rumley and Gutierrez for the purpose of suing CMH, even though he did not actually join either lawyer's firm. Based on the presumption of shared confidences, Carrillo's involvement necessitates the disqualification of the outside lawyers, the court concluded.

Dissent: Don't Second-Guess Trial Court.

In a dissenting opinion, Justice Rebeca C. Martinez argued that the court should defer to the trial court's decision not to disqualify the outside lawyers. She said no evidence showed that Carrillo represented Duval County in the litigation against CMH. His name on the petition and his signature on the motion to withdraw were formalities that did not indicate an adverse representation, she said.

It was also an unjustified leap, Martinez contended, for the majority to determine that Carrillo was “associated” with Rumley and Gutierrez within the meaning of Rule 1.09(b). The Texas Supreme Court has not recognized an irrebuttable presumption of shared confidences with co-counsel, she asserted.

CMH was represented by Lino Mendiola III of Andrews Kurth, Austin, Tex.; Scott A. Brister of Andrews Kurth, Houston; and J. A. “Tony” Canales of Canales & Simonson in Corpus Christi, Tex.

David L. Rumley of Wigington Rumley Dunn & Ritch in Corpus Christi represented Duval County, along with Jesusa Sanchez-Vera and Linda Flores Resendez, Alice, Tex.


Full text at http://www.bloomberglaw.com/public/document/In_re_CMH_Homes_Inc_No_041300050CV_2013_BL_147621_Tex_App_June_05.

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