603 S.W.3d 53
Tex.2019Background
- Billy Bob’s Texas Investments (BBT), a closely held LLC, adopted a Company Agreement requiring unanimous owner consent for “major decisions,” including litigation, and a Certificate of Formation naming six Governing Persons.
- A control dispute arose when a majority (the "Hickman Group") attempted to remove Concho Minick as Managing Member; Minick and others (the "Murrin Group") sued individually and derivatively asserting the unanimity requirement.
- Kelly Hart & Hallman (KHH) was retained to represent both BBT and the Hickman Group; the engagement was signed by BBT officers and most owners, and fees were paid from BBT funds.
- The Murrin Group moved to disqualify KHH (arguing impermissible dual representation in derivative litigation) and filed a Rule 12 motion to require KHH to show authority to represent BBT under the unanimity clause.
- The trial court denied both motions; the court of appeals refused mandamus relief; the Texas Supreme Court considered whether the denials were an abuse of discretion and whether relators lacked an adequate remedy at law.
Issues
| Issue | Plaintiff's Argument (Murrin Group) | Defendant's Argument (Hickman Group / KHH) | Held |
|---|---|---|---|
| Whether KHH must be disqualified for representing both BBT and Hickman Group in derivative litigation | Dual representation places KHH on both sides (BBT as derivative plaintiff and Hickman defendants), violating disciplinary rules and prejudicing Murrin | No categorical conflict: actual adversity must be shown; BBT may align with Hickman or claims treated as direct; no proof of confidential-use prejudice; disqualification at eve of trial is disruptive | Denied: no abuse of discretion. Dual representation not per se disqualifying; relators failed to show necessary prejudice or confidences; trial court may consider true adversity. |
| Whether KHH lacked authority under Rule 12 because Company Agreement required unanimous owner approval to hire counsel for BBT | Unanimity clause made hiring KHH unauthorized, so KHH cannot represent BBT | Certificate of Formation and executed engagement letter supplied "sufficient authority"; also factual questions remain for trial | Denied mandamus: even assuming relators’ contractual view, they failed to show lack of an adequate remedy at law; damages and other remedies remain available. |
| Whether mandamus relief was warranted (clear abuse + no adequate remedy) | Denial of disqualification and Rule 12 requires immediate mandamus because disqualification has no adequate remedy and Rule 12 denial wastes trial resources | Trial court did not clearly abuse discretion; alternative remedies and trial protections exist; disqualification is drastic and may prejudice nonmovant | Denied: relators did not establish both a clear abuse of discretion (re disqualification) and lack of adequate remedy (re Rule 12). |
Key Cases Cited
- In re H.E.B. Grocery Co., 492 S.W.3d 300 (Tex. 2016) (mandamus is extraordinary; relator must lack adequate remedy at law)
- In re Turner, 542 S.W.3d 553 (Tex. 2017) (denial of disqualification can be abuse of discretion and often lacks adequate appellate remedy)
- In re Nitla S.A. de C.V., 92 S.W.3d 419 (Tex. 2002) (disqualification is a severe remedy; movant must show prejudice)
- In re Meador, 968 S.W.2d 346 (Tex. 1998) (court must consider all facts and prejudice to nonmovant when ruling on disqualification)
- Nat’l Med. Enters. v. Godbey, 924 S.W.2d 123 (Tex. 1996) (disciplinary rules provide guidance but do not alone determine disqualification)
- In re RSR Corp., 568 S.W.3d 663 (Tex. 2019) (courts must guard against disqualification used as a dilatory tactic)
- Richardson-Merrell, Inc. v. Koller, 472 U.S. 424 (1985) (disqualification causes delay and additional expense to nonmovant)
- Johnson v. Fourth Court of Appeals, 700 S.W.2d 916 (Tex. 1985) (mandamus only when only one outcome is permissible)
- Walker v. Packer, 827 S.W.2d 833 (Tex. 1992) (mandamus for manifest and urgent necessity)
- In re Salazar, 315 S.W.3d 279 (Tex. App.—Fort Worth 2010) (recognizing that some Rule 12 denials may lack adequate appellate remedy)