Summary
granting petition for writ of mandamus because the movants' unexplained six-month delay waived their motion to disqualify
Summary of this case from In re Kyle Fin. Grp., LLCOpinion
No. 04-18-00077-CV
05-09-2018
IN RE WALKER SCHMIDT and Awesome Services, LLC, d/b/a South Texas Investments
MEMORANDUM OPINION
Original Mandamus Proceeding Opinion by: Marialyn Barnard, Justice Sitting: Sandee Bryan Marion, Chief Justice Marialyn Barnard, Justice Patricia O. Alvarez, Justice PETITION FOR WRIT OF MANDAMUS CONDITIONALLY GRANTED
This proceeding arises out of Cause No. 14-03-0144-CVA, styled Schmidt Oilfield Services Venture and Berry Contracting, LP d/b/a Bay, Ltd. v. Walker Schmidt, et al., pending in the 218th Judicial District Court, Atascosa County, Texas. The Honorable David A. Berchelmann, Jr. signed the order at issue in this proceeding.
The relators, Walker Schmidt, individually, and Awesome Services, LLC d/b/a South Texas Investments ("Awesome Services"), are defendants in the underlying litigation. Walker Schmidt owns Awesome Services. Attorney Glenn Deadman represented the relators in the underlying lawsuit. The real parties in interest, Los Robles, LLC and Megan Ruth Nors are also defendants below. Los Robles and Nors filed a motion to disqualify Deadman from acting as relators' legal counsel. After the trial court granted the motion, relators filed a petition for writ of mandamus complaining about the trial court's order. The real parties in interest responded, and relators replied. Because we conclude the real parties in interest waived their ability to seek disqualification, we conditionally grant the petition for writ of mandamus.
BACKGROUND
The underlying lawsuit involves statutory and constitutional liens filed by plaintiffs on a ranch owned, at the time, by Awesome Services. Plaintiffs' original petition names only relators as defendants. In their lawsuit, plaintiffs alleged relators did not pay for plaintiffs' labor, services, materials, equipment, and/or supplies provided for improvements to the ranch. Plaintiffs requested foreclosure on their lien.
Another attorney filed an answer on relators' behalf. In October 2015, Deadman filed a Notice of Appearance as counsel for relators and other defendants.
Los Robles, LLC was originally owned by Walker Schmidt and Megan Ruth Nors. Walker Schmidt later transferred his interest in Los Robles, LLC to Nors. Awesome Services transferred its interest in the ranch to Los Robles, LLC and Nors. At least one other lien appears to have been filed on the ranch, this one by Cosmed, LLP. Cosmed later foreclosed on the ranch and conveyed the ranch to itself. Cosmed then transferred the ranch to RM Ranches LLC. Marshall Trust is the sole member of RM Ranches. With each of the above transfers, the plaintiffs amended their petition to add additional defendants, including Los Robles, LLC and Nors.
On January 21, 2016, Deadman filed an answer on behalf of Los Robles and Nors. Deadman also appeared at three depositions on their behalf, and served responses to written discovery directed to them. In early 2017, other attorneys retained by Los Robles and Nors notified Deadman that he did not represent Los Robles and Nors. In late March 2017, fifteen months after Deadman filed an answer on behalf of Los Robles and Nors, they filed a motion to show authority alleging Deadman acted without authority in purporting to represent them. Deadman opposed the motion, alleging he represented Los Robles and Nors based on a signed Legal Services Agreement between himself and Nors. He also alleged Nors was aware of the lawsuit and she answered the discovery requests. Although no hearing was held on the motion to show authority, the trial court granted the motion in an order that states the following:
At Ted Sanderfer's September 15, 2016 deposition, Deadman appeared as attorney for, among others, Awesome Services, Walker Schmidt, Los Robles, and Nors. At Rene DeLeon's September 15, 2016 deposition, Deadman appeared as attorney for, among others, Awesome Services, Walker Schmidt, Los Robles, and Nors. At Walker Schmidt's January 25, 2017 deposition, Deadman appeared as attorney for, among others, Awesome Services, Walker Schmidt, Los Robles, and Nors.
On this day came on to be heard the Motion to Show Authority filed by Megan Ruth Nors and Los Robles, LLC. Without admission of any liability and while [Deadman] does not agree with the assertions in the Motion to Show Authority, he does not contest to the entry of an Order granting the Motion to Show Authority making the Motion to Withdraw MOOT.
In November 2017, Los Robles and Nors filed a motion for disqualification, alleging Deadman violated Texas Rules of Disciplinary Conduct 1.09 and 3.08. They asked that Deadman be disqualified from representing defendants Walker Schmidt and Awesome Services in the lawsuit. Los Robles and Nors alleged Deadman represented them in the same litigation and took positions adverse to them, both as an attorney advocate and as an active participant both during and after his representation of them in the same litigation. They also alleged Deadman so intertwined himself personally with material issues that he has become a fact witness. Deadman opposed the motion on several grounds.
In its order granting the disqualification, the trial court drew a line through this sentence: "The Court Finds that [Deadman] has violated Texas Rules of Disciplinary Conduct 1.09(a)(3) and 3.08(a)." Without stating its grounds, the court merely ordered and decreed that Deadman "is disqualified from representing Walker Schmidt or Awesome Services in all further proceedings in this litigation." The trial court ordered Walker Schmidt and Awesome Services to retain alternative counsel. This mandamus proceeding ensued.
STANDARD OF REVIEW
Mandamus will issue only to correct a clear abuse of discretion when there is no other adequate remedy by appeal. See In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 135-36 (Tex. 2004) (orig. proceeding); Walker v. Packer, 827 S.W.2d 833, 839 (Tex. 1992) (orig. proceeding). To satisfy the clear abuse of discretion standard, the relator must show "that the trial court could reasonably have reached only one decision." Liberty Nat'l Fire Ins. Co. v. Akin, 927 S.W.2d 627, 630 (Tex. 1996) (orig. proceeding) (quoting Walker, 827 S.W.2d at 840). Mandamus is appropriate to correct an erroneous order disqualifying counsel because there is no adequate remedy by appeal. In re Sanders, 153 S.W.3d 54, 56 (Tex. 2004) (orig. proceeding) (per curiam); In re Sandoval, 308 S.W.3d 31, 33 (Tex. App.—San Antonio 2009, orig. proceeding).
WAIVER
Relators assert Los Robles and Nors waived their right to disqualify Deadman because they delayed filing their motion to disqualify, without explanation, until almost nine months after the alleged conflict arose.
"A party who fails to file its motion to disqualify opposing counsel in a timely manner waives the complaint." Vaughan v. Walther, 875 S.W.2d 690, 690-91 (Tex. 1994) (orig. proceeding) (per curiam) (six and one-half month delay resulted in waiver; therefore, trial court erred by granting disqualification); BP Am. Prod. Co. v. Zaffirini, 419 S.W.3d 485, 515 (Tex. App.—San Antonio 2013, pet. denied) ("Considering (1) the almost seven months period between when the conflict was apparent until BP filed its motions to disqualify Zaffirini and Jones, (2) BP's explanation for the delay, and (3) BP's filing the motions three days before the hearing, we cannot say the trial court abused its discretion in denying BP's motion to disqualify Zaffirini and Jones and in denying BP's motions to strike Zaffirini's and Jones's affidavits."); In re Davila, 04-99-00571-CV, 1999 WL 735164, at *3 (Tex. App.—San Antonio Sept. 22, 1999, orig. proceeding) ("In this case, the motion to disqualify was filed after an unexplained four month delay. Given the length of this delay in the absence of any explanation and the fact that the motion was filed seven days before the hearing on Davila's motion for summary judgment, we hold that the Association waived its complaint by failing to file the motion to disqualify in a timely manner.").
A court should also consider any other evidence that indicates the motion is being filed as a dilatory trial tactic. In re Louisiana Texas Healthcare Mgmt., L.L.C., 349 S.W.3d 688, 690 (Tex. App.—Houston [14th Dist.] 2011, orig. proceeding). For example, the court should consider whether significant discovery has occurred and the delay has prejudiced the other party. See In re EPIC Holdings, Inc., 985 S.W.2d 41, 53 (Tex. 1998) (orig. proceeding). We also look to whether the moving party has a satisfactory explanation for the delay. Id. at 52.
Here, relators do not contend the motion for disqualification was filed on the eve of any hearing or trial, nor do they assert prejudice. Instead, they rely on the length of time that passed before Los Robles and Nors filed their motion for disqualification and their lack of any explanation for the delay. Relators allege Los Robles and Nors waived their complaint because they knew about an alleged conflict as early as March 2017, but they did not move to disqualify Deadman until November 2017.
On March 29, 2017, Los Robles and Nors filed their "Motion to Show Authority" in which they alleged:
1. Glenn J. Deadman has appeared in this case, purporting to represent Megan Ruth Nors and Los Robles, LLC.
2. Megan Ruth Nors and Los Robles, LLC assert that Glenn J. Deadman is acting without authority and, in accordance with rule 12 of the Texas Rules of Civil Procedure, requests that Glenn J. Deadman be cited to appear before the Court and show authority to defend this action.
The trial court granted the "Motion to Show Authority" on June 8, 2017. Almost five months later, in November 2017, Los Robles and Nors filed their "Motion for Disqualification." At the hearing on the motion for disqualification, Deadman alleged that, in March 2017, other attorneys retained by Los Robles and Nors notified him that he did not represent Los Robles and Nors. Deadman contended Nors claimed she was surprised she and Los Robles were parties to the lawsuit, and Nors claimed her signature on the Services Agreement was forged and she never intended Deadman to be her attorney. Deadman also argued that Los Robles and Nors waived their right to seek disqualification by waiting nine months to move for disqualification although they were aware of any alleged conflict as early as March 2017. At the hearing, Los Robles and Nors's attorney stated, "[Deadman] realized that . . . Ms. Nors and his client, Mr. Schmidt, had a conflict of interest as early as March . . .." The trial court granted the motion on December 13, 2017.
There is no dispute that almost nine months elapsed from when Deadman was first informed in March 2017 that he was not Los Robles and Nors's attorney and when Los Robles and Nors filed their November 2017 motion for disqualification. However, Los Robles and Nors counter the waiver argument by asserting Deadman did not establish when they discovered Deadman's "own shenanigans in organizing RM Ranches, serving as its manager and a trustee for its sole member, and negotiating" the sale of the ranch through foreclosure. In their response to the petition for writ of mandamus, Los Robles and Nors contend these were the actions that gave rise to their motion to disqualify. They assert the time between their discovery of knowledge sufficient to put them on notice of a conflict and their filing the motion for disqualification is determinative. However, Los Robles and Nors do not state when they discovered the alleged conflict.
In response, relators point to the plaintiffs' Eighth Amended Petition, filed in June 2017, in which the plaintiffs alleged Cosmed purported to post the ranch for foreclosure on April 4, 2017, title to the property was then conveyed to Cosmed, which in turn, conveyed title to RM Ranches on May 18, 2017. Plaintiffs alleged "RM Ranches is an entity controlled in whole or in part by [Walker] Schmidt, and that the foreclosure by Cosmed was done in a coordinated effort with Schmidt and RM Ranches to extinguish subordinate liens such as those held by Plaintiffs . . .." Although the Eighth Amended Petition does not name Deadman, relators argue this petition put Los Robles and Nors on notice of the alleged conflict of interest that forms the basis of their motion for disqualification.
We should "consider the length of time between the moment the conflict became apparent to the aggrieved party to the time the motion for disqualification is filed in determining whether the complaint was waived." Wasserman v. Black, 910 S.W.2d 564, 568 (Tex. App.—Waco 1995, orig. proceeding). At the hearing on their motion for disqualification, Los Robles and Nors did not respond to Deadman's waiver objection by attempting to explain their delay. In their response to the petition for writ of mandamus, Los Robles and Nors do not state when they first learned of a conflict, nor do they offer any explanation for why they waited until November 2017 to file their motion. Almost six months elapsed between the filing of the June 2017 Eighth Amended Petition and the November 2017 motion for disqualification, and Los Robles and Nors do not allege this petition was insufficient to put them on notice of the alleged conflict. EPIC Holdings, 985 S.W.2d at 52 (moving party satisfactorily explained delay).
CONCLUSION
Based on the unexplained delay in filing their motion for disqualification, we must conclude Los Robles and Nors waived their right to seek disqualification of Deadman as relators' attorney. Therefore, we conditionally grant the petition for writ of mandamus, and order the trial court to withdraw, within fifteen days, its December 13, 2017 "Order Granting Defendants', Los Robles, LLC and Megan Ruth Nors, Motion for Disqualification." The writ of mandamus will issue only if the trial court fails to withdraw its December 13, 2017 order within fifteen days from the date of our opinion and order.
Because our conclusion on waiver is dispositive, we do not address relators' remaining arguments. See TEX. R. APP. P. 47.1; 52.8(d).
Marialyn Barnard, Justice