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In re Inppamet Ltd.

Court of Appeals of Texas, Fifth District, Dallas

February 21, 2018

IN RE INPPAMET LTD. AND PLASTIC AND METAL PARTS, INC., Relators

         On Appeal from the 44th Judicial District Court Dallas County, Texas Trial Court Cause No. DC-08-13797

          Before Justices Lang, Brown, and Stoddart Opinion by Justice Brown.

          MEMORANDUM OPINION

          ADA BROWN JUSTICE

         In this mandamus proceeding, Relators Inppamet Ltd. and Plastic and Metal Parts, Inc. (collectively "Inppamet"), seek review of the trial court's order denying their motion to reconsider the disqualification of real party in interest RSR Corporation's counsel. This case has previously been to this Court and to the Texas Supreme Court. See In re RSR Corp., 475 S.W.3d 775 (Tex. 2015) (orig. proceeding); In re RSR Corp., 405 S.W.3d 265 (Tex. App.-Dallas 2013, orig. proceeding). At the heart of the dispute was which of two disqualification standards should apply to the facts of the case, that set out in In re American Home Products Corp., 985 S.W.2d 68 (Tex. 1998) (orig. proceeding), or that set out in In re Meador, 968 S.W.2d 346 (Tex. 1998) (orig. proceeding). The trial court initially applied the American Home Products standard and granted Inppamet's request to disqualify RSR's counsel. This Court then denied RSR's petition for writ of mandamus, but the Texas Supreme Court conditionally granted mandamus relief. In re RSR, 475 S.W.3d at 782. The supreme court held the trial court should have applied the disqualification standard set out in Meador. Id. at 780-81, 782. The court ordered the trial court to vacate the disqualification order but did not decide whether disqualification would have been proper under Meador. Id. at 781. After the supreme court issued its opinion, Inppamet filed a motion asking the trial court to reconsider the disqualification under Meador. The trial court refused to determine the merits and instead denied the motion as "untimely, dilatory in nature, and/or waived." We conditionally grant the writ of mandamus.

         Background

         The Brewer Law Firm represented real party in interest RSR in RSR's suit against Inppamet. Inppamet's former finance manager, Hernán Sobarzo, "secreted documents from his employer when he quit and provided them to [the Brewer Law Firm]." In re RSR, 475 S.W.3d at 779. Inppamet moved to disqualify the Brewer Law Firm from representing RSR on grounds the firm had reviewed Inppamet's confidential and privileged information relating to the prosecution of the case. The issue was first presented to a special master as part of her determination of Inppamet's Amended Motion for Sanctions, which sought disqualification as a possible sanction. The parties filed extensive briefing on the motion, and the special master heard arguments at a September 6, 2012 hearing. In the briefing and at the hearing, the parties argued the disqualification issue at length, including their contentions about which disqualification standard should be applied to the facts of this case. RSR argued that Meador, which applies when a lawyer receives an opponent's privileged materials outside the normal course of discovery, provided the applicable standard but did not warrant disqualification. See In re Meador, 968 S.W.2d at 352. Under Meador, the trial court considers six nonexclusive factors to determine whether a lawyer should be disqualified. Id. at 351-52. Inppamet argued that Meador did not provide the appropriate standard because the attorneys in this case were directly involved in wrongfully procuring the opponent's documents. See id. at 352 ("Also, we express no opinion on the proper standard for disqualifying an attorney who was directly involved in wrongfully procuring an opponent's documents."). In its Amended Motion for Sanctions, Inppamet instead urged application of a standard set out in an El Paso Court of Appeals opinion, but it also argued that even under Meador the Brewer Law Firm's disqualification was still warranted. In a letter brief filed after the special master's hearing on the motion, Inppamet asserted the appropriate standard was that in American Home Products, which involved disqualification of counsel for hiring the other side's former paralegal or legal assistant. See Am. Home Prods., 985 S.W.2d at 74-75. Whether disqualification is required under the American Home Products standard involves two presumptions: a nonrebuttable presumption that a legal assistant received confidential information, and a rebuttable presumption that the information was shared with the new employer. Id. at 75. On October 25, 2012, the special master issued Special Master's Order No. 13 that simply denied Inppamet's Amended Motion for Sanctions without explanation.

         Inppamet appealed the special master's ruling to the prior district judge who held a two-day, de novo hearing on the Amended Motion for Sanctions. Before that judge, Inppamet chose to rely solely on American Home Products as the appropriate standard, telling the judge he did not need to look at the Meador factors. That judge specifically held that American Home Products provides the applicable standard in this case. He ruled that disqualification was required under American Home Products and ordered the Brewer Law Firm disqualified from representing RSR.

         RSR sought mandamus review of the disqualification order in this Court, arguing the trial court erred by applying American Home Products instead of Meador. We concluded that American Home Products applied and issued an opinion denying RSR's petition for writ of mandamus. In re RSR, 405 S.W.3d at 277. Then RSR sought mandamus relief in the Texas Supreme Court, which that court initially denied. In December 2015, the supreme court granted rehearing, however, and conditionally granted the writ. In re RSR, 475 S.W.3d at 782. RSR had argued the trial court abused its discretion in disqualifying its lawyers based on American Home Products because Sobarzo is a fact witness, rather than a legal assistant. Id. at 778. The supreme court agreed with RSR that American Home Products does not apply to a fact witness such as Sobarzo who was not hired for litigation purposes and was not directly supervised by lawyers. Id. at 780, 782. It held the Meador factors are appropriate for evaluating whether the Brewer Law Firm should be disqualified. Id. at 780-81, 782. The court noted that to the extent the Brewer Law Firm should have known any documents were privileged, it still was not "directly involved in wrongfully procuring them." Id. at 779. The supreme court ordered the trial court to vacate the disqualification order but declined to "decide whether disqualification would have been proper under Meador because the trial court did not reach the issue and did not resolve all fact issues relevant to a Meador analysis." Id. at 781.

         After the supreme court issued its opinion, Inppamet filed a "Motion to Compel Documents & Testimony Relevant to a Meador Analysis." Inppamet asserted additional discovery was necessary to conduct a disqualification analysis under the Meador factors. The current trial judge referred the motion to compel to the special master. While that motion was pending, Inppamet filed a "Motion to Reconsider Disqualification Under Meador & Disqualify Brewer Law Firm."

         In April 2016, the special master held a hearing on the motion to compel additional discovery. On February 20, 2017, the special master issued a sixteen-page order, Special Master's Order No. 16, denying Inppamet's motion. Order No. 16 includes "findings of fact and conclusions of law that set forth the grounds" for denial. The special master denied Inppamet's request for supplemental discovery relevant to a Meador analysis as untimely because Inppamet sought the same discovery in 2011, but later decided to forego the discovery until resolution of its motions for sanctions, which relied in part on Meador. Inppamet did not express a need for the discovery when presenting its amended sanctions motion to the special master or in connection with its appeal of the special master's denial of that motion. Order No. 16 states, "Permitting that discovery now would reward Inppamet's delay and penalize RSR for Inppamet's litigation decisions."

         In July 2017, the trial court adopted Special Master's Order No. 16 as the ruling of the court. After a September 2017 hearing on the motion to reconsider disqualification, the trial court issued an order ruling, "For all the reasons stated in the Order [adopting Special Master's Order No. 16] and Order 16, the Motion to Reconsider Disqualification Under Meador . . . is hereby DENIED as untimely, dilatory in nature, and/or waived." Inppamet filed a petition for writ of mandamus to challenge the denial of this motion.

         Standard of Review

         Mandamus is an extraordinary remedy that is available in limited circumstances. Walker v. Packer, 827 S.W.2d 833, 839 (Tex. 1992) (orig. proceeding). To obtain mandamus relief, a relator must show both that the trial court has clearly abused its discretion and that relator has no adequate remedy by appeal. In re Prudential Ins. Co., 148 S.W.3d 124, 135-36 (Tex. 2004) (orig. proceeding). A trial court abuses its discretion if it incorrectly analyzes or applies the law. In re RSR, 475 S.W.3d at 778; Walker, 827 S.W.2d at 839. Mandamus is appropriate to ...


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