United States District Court, W.D. Texas, San Antonio Division
JUDSON POST NO. 2059, VETERANS OF FOREIGN WARS, Plaintiff,
PHILADELPHIA INDEMNITY INSURANCE COMPANY, Defendant.
ELIZABETH S. ("BETSY") CHESTNEY, UNITED STATES
the Court in the above-styled cause of action are
Plaintiff's Opposed Motion for Sanctions and Motion to
Disqualify Defendant's Attorney, William R. Pilat [#38]
and Plaintiff's Opposed Motion to Compel Appraisal and to
Abate Case Pending Appraisal Outcome [#40]. The motions were
referred to the undersigned for disposition on July 23, 2019
and August 27, 2019, respectively. The Court held a hearing
on the motions on September 3, 2019, at which counsel for
both parties appeared before the Court. In resolving the
motions, the Court has considered the parties' written
filings [#41, #44, #46, #49, #51] and their arguments at the
hearing. For the reasons set forth below, the Court will
deny Plaintiff's motion for sanctions
and grant Plaintiff's motion to compel
first-party insurance dispute arises out of storm damage to
property owned by Plaintiff Judson Post No. 2059, Veterans of
Foreign Wars located at 3202 Ackerman Road, Kirby, Texas
78219. Defendant Philadelphia Indemnity Insurance Company
issued an insurance policy to Plaintiff covering the subject
property. Plaintiff submitted a claim to Defendant against
the policy for damage, and the claim was denied. Defendant
disputes whether the damage underlying the claim was
preexisting or caused by the storm. Plaintiff sued Defendant
in state court for breach of contract, violation of Sections
541 and 542 of the Texas Insurance Code, violation of the
Deceptive Trade Practices Act (“DTPA”), and for
breach of the duty of good faith and fair dealing. (Orig.
Pet. [#1-3] at 4-21.) Plaintiff originally also sued two
Texas-based Defendants (Elizabeth Ortiz and Paul R. White
& Company, Inc.), but the state court dismissed
Plaintiff's claims against these two parties with
prejudice. (Dismissal Order [#1-3] at 80.) Defendant
thereafter removed Plaintiff's Petition to federal court
on June 20, 2018. (Notice of Removal [#1].) The Court has
diversity jurisdiction over this action pursuant to 28 U.S.C.
§ 1332(a). A scheduling order is in place to govern the
course of this case, and the parties have been proceeding
with discovery. Trial is set for June 15, 2020. (Am. Sched.
Order [#36] at 4.)
has now moved for sanctions against Defendant's attorney
William R. Pilat and has asked the Court to compel appraisal
and abate this case pending the appraisal outcome pursuant to
the appraisal provision in the insurance policy at issue. The
Court addresses each motion in turn.
motion for sanctions arises out of actions taken by Defense
counsel William R. Pilat after he took depositions of
Plaintiff's corporate representatives on May 21, 2019.
The depositions took place at the property that is the
subject of this lawsuit. Mr. Pilat admits that after the
deposition concluded he took 14 photos with his iPhone of the
interior of one of the rooms of Plaintiff's property.
Defendant produced the photographs in discovery.
now asks the Court to sanction Mr. Pilat for failing to
consult with Plaintiff's counsel before taking the
photographs and failing to comply with the proper procedure
set forth in the Federal Rules for entering and photographing
property. See Fed. R. Civ. P. 34(a)(2) (allowing a
party to serve a request within the scope of Rule 26(b)
“to permit entry onto designated land or other property
possessed or controlled by the responding party, so that the
requesting party may inspect, measure, survey, photograph,
test, or sample the property or any designated object or
operation on it”). Plaintiff seeks attorney's fees
for the costs associated with this motion and asks the Court
to disqualify Mr. Pilat as counsel for Defendant, arguing
that he is now a necessary witness in this case and therefore
in violation of the Texas Disciplinary Rules of Professional
Conduct. The Court orally denied the motion at the hearing
and now memorializes its oral ruling with this written Order.
courts have inherent power to sanction bad-faith conduct.
Goodyear Tire & Rubber Co. v. Haeger, 137 S.Ct.
1178, 1186 (2017); Chambers v. NASCO, Inc., 501 U.S.
32, 46 (1991). “In order to impose sanctions against an
attorney under its inherent power, a court must make a
specific finding that the attorney acted in ‘bad
faith.'” Chaves v. M/V Medina Star, 47
F.3d 153, 156 (5th Cir. 1995) (internal quotation and
citations omitted). Plaintiff has failed to demonstrate that
Mr. Pilat acted in bad faith such that the imposition of
sanctions in any form is warranted.
there is no merit to Plaintiff's argument that Mr. Pilat
should be subjected to the “severe remedy” of
disqualification for his actions. See In re Sanders,
153 S.W.3d 54, 57 (Tex. 2004). A disqualification motion
filed in federal court is governed by at least four separate
ethical canons-the local rules of the district court in which
the motion is brought (here the Western District of Texas),
the American Bar Association (“ABA”) Model Rules
of Professional Conduct, the ABA Model Code of Professional
Responsibility, and the rules of professional conduct
employed by the bar of the state in which the court sits.
Crossroads Sys. (Tex.), Inc. v. Dot Hill Sys. Corp.,
No. A-03-CA-754-SS, 2006 WL 1544621, at *9 (W.D. Tex. May 31,
2006). All of the governing rules contain some version of
Texas Disciplinary Rule 3.08, which prohibits an attorney
from continuing employment as an advocate if the lawyer
“knows or believes that the lawyer is or may be a
witness necessary to establish an essential fact on behalf of
the lawyer's client.” Tex. Disciplinary R. of
Prof'l Conduct R. 3.08(a). See also ABA Model R.
of Prof'l Conduct R. 3.7(a); ABA Model Code of Prof'l
Responsibility DR 5-101(b). These rules exempt from
disqualification testimony by an attorney-witness that
relates to an “uncontested issue” or testimony
that relates solely “to a matter of formality and there
is no reason to believe that substantial evidence will be
offered in opposition to the testimony.” Tex.
Disciplinary R. of Prof'l Conduct R. 3.08(a).
acts of Mr. Pilat in taking these photographs do not make him
a witness necessary to establish an essential contested fact
in this case. He is therefore not subject to disqualification
under any governing canon of professional responsibility. As
stated on the record at the hearing, the parties are ordered
to confer on the photographs and to either (1) agree that Mr.
Pilat may stipulate to the authenticity of the photographs;
or (2) if they cannot agree to such stipulation, to agree
that the photographs are inadmissible in this case and the
parties will follow the procedure set forth in Rule 34(a)(2)
for obtaining replacement photographs as needed.
asks the Court to compel appraisal and abate this case during
the appraisal ...