Opinion
NUMBER 13-17-00345-CV
10-12-2017
IN RE VILLALOBOS & VAUGHAN, PLLC AND JEFFREY R. VAUGHAN
On Petition for Writ of Mandamus.
MEMORANDUM OPINION
Before Chief Justice Valdez and Justices Longoria and Hinojosa
Memorandum Opinion by Justice Longoria
Through this original proceeding, relators Villalobos & Vaughan, PLLC and Jeffrey R. Vaughan seek to set aside an order disqualifying their counsel, George Bishop. We conditionally grant relief.
This petition for writ of mandamus arises from trial court cause number CL-15-3706-E in the County Court at Law No. 5 of Hidalgo County, Texas and the respondent is the Honorable Arnoldo Cantu. See TEX. R. APP. P. 52.2. This same case has spawned two other original proceedings. See In re Villalobos & Vaughan, P.L.L.C., No. 13-17-00261-CV, 2017 WL 2180694, at *1 (Tex. App.—Corpus Christi May 18, 2017, orig. proceeding [mand. denied]) (mem. op.); In re Villalobos & Vaughan, P.L.L.C., No. 13-16-00072-CV, 2016 WL 744319, at *1 (Tex. App.—Corpus Christi Feb. 19, 2016, orig. proceeding) (per curiam mem. op.).
I. BACKGROUND
The underlying trial court proceedings stem from a dispute over the alleged breach of a promissory note and assignment executed in 2012. Vaughan borrowed $300,000 from Raul Medina and Pierre Newkirk. In order to secure the loan, Vaughan assigned his interest in several lawsuits to Medina and Newkirk. The assignments included the "Villalobos & Vaughan, PLLC — Avandia Settlement of 148 cases" and three other specific lawsuits, including two cases filed on behalf of Agustin Garcia. Vaughan did not pay the promissory note. Medina brought suit against relators to collect the amounts owed under the note. In turn, relators counterclaimed against Medina for usury, quantum meruit, and "negligent destruction" of some of the cases which Vaughan utilized as collateral for the promissory note. Bishop served as an attorney on some of the cases referenced in the promissory note and had contingent fee interests in those cases.
Although the record presented to this Court does not contain a copy of the original petition, it appears that Medina filed this lawsuit in October 2015. Bishop made an appearance as counsel for Villalobos & Vaughan on January 7, 2016. Medina filed a motion to disqualify Bishop on June 3, 2016. Medina contended that Bishop was a fact witness in the underlying case. The motion to disqualify stated that relators were contending that Medina "mishandled cases of Agustin Garcia listed in the Promissory Note" and asserted that Bishop served as an attorney on the cases complained about. As an exhibit, Medina included an October 17, 2014 contingent fee agreement which split fees on one of the cases between Garcia, Bishop, relators, and Medina. Medina asserted that Bishop's "dual role as fact witness and counsel will confuse the jury and be highly prejudicial."
Relators filed a response to the motion to disqualify which included assertions that Bishop would not serve as a fact witness in the case and allegations that Medina had failed to file his motion to disqualify in a timely manner. The trial court held a hearing on the motion to disqualify on June 13, 2016. At the hearing, the parties mentioned that the case had a preferential trial setting in July. Bishop testified that he had been hired by relators at the beginning of the case and that he had spent more than 150 hours in conducting discovery, preparing pleadings, and making court appearances. Bishop further argued that Medina had waived his claim of disqualification by waiting until a "late date shortly before the end of discovery and shortly before the trial to raise his issue."
The July trial setting was passed and the parties continued to litigate the case. On May 2, 2017, the trial court held a hearing on pending matters, at which Medina urged his motion to disqualify Bishop and a traditional motion for summary judgment. On May 3, 2017, Judge Cantu issued an order disqualifying Bishop. This original proceeding ensued. This Court requested and received a response to the petition from Medina and also received a reply from relators.
II. STANDARD OF REVIEW FOR MANDAMUS
Mandamus is an extraordinary remedy. In re H.E.B. Grocery Co., 492 S.W.3d 300, 302 (Tex. 2016) (orig. proceeding) (per curiam). Mandamus relief is proper to correct a clear abuse of discretion when there is no adequate remedy by appeal. In re Christus Santa Rosa Health Sys., 492 S.W.3d 276, 279 (Tex. 2016) (orig. proceeding). The relator bears the burden of proving both of these requirements. In re H.E.B. Grocery Co., 492 S.W.3d at 302; Walker v. Packer, 827 S.W.2d 833, 840 (Tex. 1992) (orig. proceeding). An abuse of discretion occurs when a trial court's ruling is arbitrary and unreasonable or is made without regard for guiding legal principles or supporting evidence. In re Nationwide Ins. Co. of Am., 494 S.W.3d 708, 712 (Tex. 2016) (orig. proceeding); Ford Motor Co. v. Garcia, 363 S.W.3d 573, 578 (Tex. 2012). We determine the adequacy of an appellate remedy by balancing the benefits of mandamus review against the detriments. In re Essex Ins. Co., 450 S.W.3d 524, 528 (Tex. 2014) (orig. proceeding); In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 136 (Tex. 2004) (orig. proceeding). Where the trial court has abused its discretion in disqualifying counsel, there is no adequate remedy by appeal and mandamus relief is warranted. See In re Guar. Ins. Servs., Inc., 343 S.W.3d 130, 132 (Tex. 2011) (orig. proceeding); NCNB Tex. Nat'l Bank v. Coker, 765 S.W.2d 398, 400 (Tex. 1989) (orig. proceeding).
III. DISQUALIFICATION OF COUNSEL
Disqualification of a party's counsel is a severe remedy. In re Cerberus Capital Mgmt., L.P., 164 S.W.3d 379, 382 (Tex. 2005) (orig. proceeding); In re Nitla S.A. de C.V., 92 S.W.3d 419, 422 (Tex. 2002) (orig. proceeding) (per curiam); In re Tex. Windstorm Ins. Ass'n, 417 S.W.3d 119, 128-29 (Tex. App.—Houston [1st Dist.] 2013, orig. proceeding). "It can result in immediate and palpable harm, disrupt trial court proceedings, and deprive a party of the right to have counsel of choice." In re Nitla S.A. de C.V., 92 S.W.3d at 422. "Disqualification can delay proceedings in the trial court, require the client to engage a successor attorney, and, in appropriate cases, deprive the client of work product done on his behalf by the disqualified attorney." In re Tex. Windstorm Ins. Ass'n, 417 S.W.3d at 129. "Because of the serious consequences of disqualification of opposing counsel, such motions can be misused for delay or to exert inappropriate leverage to force a settlement." Id. "The law strongly discourages the use of motions to disqualify as tactical weapons in litigation." Id.
The movant bears the burden of proof on a disqualification motion. In re EPIC Holdings, Inc., 985 S.W.2d 41, 60 (Tex. 1998) (orig. proceeding); Smith v. Abbott, 311 S.W.3d 62, 73 (Tex. App.—Austin 2010, pet. denied). "To prevent the abusive filing of such a motion for tactical reasons, the court must carefully evaluate the motion and record to determine if disqualification is warranted." In re Nitla S.A. de C.V., 92 S.W.3d at 422. The trial court "must strictly adhere to an exacting standard" in ruling on disqualification motions. NCNB Tex. Nat'l Bank, 765 S.W.2d at 399; see Spears v. Fourth Ct. of Apps., 797 S.W.2d 654, 656 (Tex. 1990) (orig. proceeding). We review the trial court's ruling for abuse of discretion. See In re Sanders, 153 S.W.3d 45, 57 (Tex. 2004) (orig. proceeding) (per curiam); BP Am. Prod. Co. v. Zaffirini, 419 S.W.3d 485, 514 (Tex. App.—San Antonio 2013, pet. denied); In re Tex. Windstorm Ins. Ass'n, 417 S.W.3d at 129.
IV. ANALYSIS
Relators contend that the trial court abused its discretion in disqualifying Bishop because Medina did not produce evidence that Bishop's testimony was necessary or that his alleged dual roles as witness and attorney would cause actual prejudice. In this regard, Bishop testified under oath that he would not serve as a witness at trial. Relators also contend that Medina waited too long to secure a ruling on the motion to disqualify and thus waived the motion to disqualify—essentially urging that it is a strategic "eve of trial" motion.
Because we believe it is dispositive, we begin our analysis with the issue of waiver. A party who fails to file its motion to disqualify opposing counsel in a timely manner generally waives the complaint. In re George, 28 S.W.3d 511, 513 (Tex. 2000) (orig. proceeding); Vaughan v. Walther, 875 S.W.2d 690, 690 (Tex. 1994) (per curiam) (orig. proceeding). In determining waiver, we consider the length of time between when the conflict became apparent to the aggrieved party and when the aggrieved party filed a motion for disqualification. Grant v. Thirteenth Ct. of Apps., 888 S.W.2d 466, 468 (Tex. 1994) (orig. proceeding); In re La. Tex. Healthcare Mgmt., L.L.C., 349 S.W.3d 688, 689 (Tex. App.—Houston [14th Dist.] 2011, orig. proceeding). We also consider any evidence that indicates the motion is being filed as a dilatory trial tactic rather than a concern that confidences related in an attorney-client relationship may be divulged. In re La. Tex. Healthcare Mgmt., L.L.C., 349 S.W.3d at 690; see Vaughan, 875 S.W.2d at 690-91; Spears, 797 S.W.2d at 656; Turner v. Turner, 385 S.W.2d 230, 236 (Tex. 1964); Enstar Petroleum. Co. v. Mancias, 773 S.W.2d 662, 664 (Tex. App.—San Antonio 1989, orig. proceeding) (per curiam). We further look to whether the moving party has a satisfactory explanation for the delay. In re EPIC Holdings, Inc., 985 S.W.2d at 52. Finally, we also consider whether significant discovery has occurred and the delay has prejudiced the other party. See id. at 52-53; In re Kahn, No. 14-15-00615-CV, ___ S.W.3d ___, ___, 2015 WL 7739735, at *2 (Tex. App.—Houston [14th Dist.] Dec. 1, 2015, orig. proceeding) (op.).
We apply these tenets to the case at hand. Considering the length of time between when the conflict became apparent to Medina and when he filed the motion to disqualify Bishop, we conclude that Medina would have been aware of Bishop's role in the case on the date of his initial appearance as counsel for relators in January 2016. Bishop appeared as counsel in the cases listed on the promissory note itself and was specifically referenced in one of the case's contingency fee agreements along with Medina. Thus, almost six months elapsed from January 2016 until June 2016 when Medina filed the motion to disqualify. Courts have found that a party waived its disqualification motion under similar periods of delay. See e.g., Buck v. Palmer, 381 S.W.3d 525, 528 (Tex. 2012) (concluding that an unexplained delay of seven months amounted to waiver); Vaughan, 875 S.W.2d at 691 (finding that a delay of six and one-half months constituted waiver); Enstar Petroleum Co., 773 S.W.2d at 664 (finding waiver where the movant waited four months to file the motion to disqualify). In contrast, smaller delays have generally not constituted a waiver of disqualification. See In re Amer. Home Prods. Corp., 985 S.W.2d 68, 73 (Tex. 1998) (orig. proceeding) (concluding that a delay of less than two months in filing a motion to disqualify did not constitute waiver); In re Hoar Constr, L.L.C., 256 S.W.3d 790, 798 (Tex. App.—Houston [14th Dist.] 2008, orig. proceeding) (holding that the trial court did not abuse its discretion by implicitly rejecting a waiver argument where the motion to disqualify was filed after a three-month delay); Rio Hondo Implement Co. v. Euresti, 903 S.W.2d 128, 131 (Tex. App.—Corpus Christi 1995, orig. proceeding) (holding that a two and one-half month delay did not constitute waiver of the right to disqualify).
Further, almost an entire year elapsed from June 2016, when Medina filed the motion to disqualify, until Medina secured a ruling on the motion in May 2017. While Medina set multiple hearings on the motion to disqualify, each setting was ultimately passed. The record before the Court does not indicate that Medina requested any earlier ruling on the motion to disqualify. See In re La. Tex. Healthcare Mgmt., L.L.C., 349 S. W.3d 688, 689 (Tex. App.—Houston [14th Dist.] 2011, orig. proceeding) ("The court should . . . consider any other evidence which indicates the motion is being filed not due to a concern that confidences related in an attorney-client relationship may be divulged but as a dilatory trial tactic.").
Relators contend that Medina is utilizing his motion to disqualify as a dilatory tactic. In this regard, relators note that Medina initially set the motion to disqualify for hearing one month prior to the first preferential trial setting, set it again for hearing three days prior to the second preferential trial setting, and set it again for a hearing one month prior to the third preferential trial setting. Based on the case law, we conclude that this presents some indication that the disqualification motion was utilized as a dilatory tactic. See, e.g., Vaughan, 875 S.W.2d at 690-91 (holding that the movant waived her right to disqualify counsel where she waited to file the motion to disqualify until the day of the final hearing in a child custody case when she had been aware of the possible conflict of interest nearly seven months earlier); Spears, 797 S.W.2d at 656 (holding that "courts must adhere to an exacting standard when considering motions to disqualify so as to discourage their use as a dilatory trial tactic"); Turner, 385 S.W.2d at 236 (holding that movant waived her right to disqualification by waiting to file motion to disqualify her husband's attorney more than eighteen months after she notified attorney that she had discharged him and hired other counsel to represent her); Enstar Petroleum. Co., 773 S.W.2d at 664 (holding that relator waived its right to disqualify entire law firm when it was aware of the disqualification issue as early as December 1988, "well in advance of the March 1989 trial setting").
In considering whether Medina has a satisfactory excuse for the delay, Medina argues that:
It is easy to conclude that [the judge] delayed his ruling on the Motion to Disqualify George M. Bishop after Relator Villalobos & Vaughan, PLLC filed a 3rd Party Petition against the two Houston law firms. Once these firms were non-suited by Relator Villalobos & Vaughan, PLLC, [the judge] granted the motion and George M. Bishop was disqualified from representing Relators as counsel at all depositions, hearings and trial.
Medina offers no excuse for the six month delay between Bishop's appearance in the case and his filing of the motion to disqualify. Moreover, with regard to the almost year-long delay between filing the motion and obtaining a ruling, we are unable to fathom how or why the existence of relators' third party action against other law firms would affect or delay the disposition of a motion to disqualify relators' counsel.
Finally, we consider whether significant discovery has occurred and the delay has prejudiced the other party. Relators' response to Medina's motion to disqualify was supported by a June 9, 2016 affidavit from Vaughan. Vaughan testified by affidavit that disqualifying Bishop would cause immediate harm to relators and delay the trial of the case. Vaughan further testified that as of that date, Bishop had spent over 150 hours preparing the case for trial, including drafting pleadings, preparing discovery, answering discovery, attending depositions, attending multiple hearings, and reviewing and analyzing thousands of pages of documents.
Because of the long delay in filing a motion to disqualify in this case, we conclude that Medina waived his right to seek Bishop's disqualification. See, e.g., Vaughan, 875 S.W.2d at 690-91; Spears, 797 S.W.2d at 656; see also In re Gunn, No. 14-13-00566-CV, 2013 WL 5631241, at *7 (Tex. App.—Houston [14th Dist.] Oct. 15, 2013, orig. proceeding) (mem. op.)
V. CONCLUSION
The Court, having examined and fully considered the petition for writ of mandamus, the response, and the reply, is of the opinion that relators have established their right to relief. We hold that the trial court abused its discretion in granting Medina's motion to disqualify Bishop and relators have no adequate remedy by appeal. Accordingly, we lift the stay previously imposed in this cause. See TEX. R. APP. P. 52.10(b) ("Unless vacated or modified, an order granting temporary relief is effective until the case is finally decided."). We CONDITIONALLY GRANT the writ of mandamus and direct the trial court to vacate its order granting Medina's motion to disqualify Bishop. The writ will issue only if the trial court fails to comply.
NORA L. LONGORIA
Justice Delivered and filed the 12th day of October, 2017.