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In re Reed

Court of Appeals of Texas, Second District, Fort Worth

April 26, 2018

IN RE DARREN KEITH REED; DEREK PAUL SMITH, INDIVIDUALLY AND AS TRUSTEE OF THE SMITH IRREVOCABLE TRUST; CADDOA CREEK RANCH, LLC; CANADIAN RIVER RANCH PARTNERSHIP; SMITH LAND & CATTLE GP, LLC; SMITH RANCHING LTD; HIGH POINT RANCH, LLC; LAKESIDE RANCH BC, LLC; AND SMITH RANCH MERIDIAN, LLC RELATORS

          FROM THE 325TH DISTRICT COURT OF TARRANT COUNTY TRIAL COURT NO. 325-584465-15

          PANEL: SUDDERTH, C.J.; MEIER and PITTMAN

          MEMORANDUM OPINION [1]

          BONNIE SUDDERTH CHIEF JUSTICE

         Attorney Jeffrey Armstrong represents Relators[2] in the divorce proceeding between Real Parties in Interest Husband Daryl Greg Smith and Wife Karen Annette Smith. Relators are Darren Keith Reed, [3] six entities in which Husband purportedly holds an interest, a family trust, and the trustee thereof.[4] Armstrong has petitioned this court seeking a writ of mandamus ordering the trial court to allow him to withdraw as counsel for the Relators due to a conflict of interest. Because we conclude that Armstrong is entitled to the relief sought, we conditionally grant the writ.

         Background

         I. The divorce proceeding

         After 18 years of what she described as a tumultuous marriage, Wife filed for divorce in October 2015. The proceedings appear to have been acrimonious and contentious ever since, with Wife accusing Husband of having deceptively secreted funds and property away from the community estate and to the Relators in the years prior to the divorce being filed. In fact, in March 2017, Wife filed a Second Amended Counterpetition naming Relators as third-party defendants and alleging that the Relators had acted individually or in concert with Husband to defraud the community estate through fraudulent transfers of community property interests.[5] Relators promptly retained Armstrong as counsel.

         Adding to Wife's frustration is her view of Husband's alleged misconduct during the proceedings themselves. According to Wife, Husband has refused to pay spousal and child support, has refused to comply with discovery requests despite court orders to do so and sanctions for his failure to obey the orders, has hired and fired multiple attorneys representing him, and has wrongfully attempted to recuse the trial court judge. Wife blames Husband almost exclusively for delaying this case-two trial settings have been continued over the two-and-a-half years that the case has been pending-although she was the party who requested each continuance. The case is currently set for a two-week jury trial to begin June 4, 2018.

         II. Armstrong's motion to withdraw and the hearing below

         On March 2, 2018, Armstrong moved to withdraw from his representation of Relators, alleging that he was unable to effectively communicate with them. Ten days later, on March 12, 2018, Armstrong filed a supplement to his motion to withdraw in which he alleged that, in addition to being unable to effectively communicate with Relators, a conflict of interest had arisen between two or more of the Relators requiring his withdrawal. The motion and the supplement notified Relators of Armstrong's request to withdraw and their right to contest his withdrawal. They did not file a written response.

         The trial court heard Armstrong's motion to withdraw in a hearing on March 13, 2018. Relators did not attend. During the hearing, Armstrong argued three bases for his withdrawal: first, that he had been unable to effectively communicate with Relators; second, that a conflict of interest had arisen among at least two of the Relators; and third, that "there [was] a problem with fulfilling obligations to [his] firm with [his] clients."

         Wife's written response and her counsel's argument at the hearing focused on her allegations of Husband's transgressions and her desire to avoid any further delay in the case. Wife argued that the trial court was empowered by the disciplinary rules to require Armstrong to continue representing Relators and that doing so was necessary to do justice in this case by preventing a third continuance of the trial setting and to avoid unfairness and prejudice to her.

         Husband did not file a written response to Armstrong's motion, but at the hearing, Husband's counsel opposed Armstrong's withdrawal on the basis that the parties were in the midst of conducting discovery and had depositions scheduled.

         In response to their opposition, Armstrong argued that he was required to withdraw because of the conflict of interest and that, even if the trial court could shield him from disciplinary action if he were required to remain as counsel to Relators, he would be exposed to potential malpractice actions or actions for breach of any fiduciary duty owed to Relators. The following exchange then took place:

THE COURT: What is the nature of the conflict?
MR. ARMSTRONG: I understand the Court's question. I have to be careful and not - I still have a duty of confidentiality, Judge, and so under the rules I have to respond with, "Professional considerations require my withdrawal, and there's a conflict that exists."
I understand the Court's question, Your Honor, but I have to maintain the confidence.
[WIFE'S COUNSEL]: Your Honor, we object. There's no evidence of conflict that has actually been offered other than the say-so of Mr. Armstrong.
MR. ARMSTRONG: And, Your Honor, to produce evidence of a conflict is to breach the confidence of my clients.

         After further argument, the trial court denied the motion to withdraw, stating, "I'm not continuing this case. The motion to withdraw is denied." Armstrong asked the trial court to reconsider, urging that his withdrawal was mandatory and reiterating his concern regarding exposure for legal malpractice or breach of his fiduciary duty. The trial court replied, "I'm not."[6]

         III. Armstrong's petition ...


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