in the Interest of Kashif Kahn
533 S.W.3d 387
| Tex. App. | 2015Background
- Plaintiffs Kishwar and Padma Sharma sued ACGI and several individuals/entities (including Kashif Khan, Anantasai, RHMG, SUG, SHG) alleging breach of contract, fraud, conversion, and fiduciary breach tied to an alleged $1.115 million EB-5 investment misappropriation.
- Deborah Crain appeared as counsel for all defendants and participated in discovery and motions before Padma Sharma was added as a plaintiff on November 24, 2014.
- The Sharmas later amended to allege that Khan transferred ACGI funds to the other defendant entities, creating potential adversity between ACGI and those entities.
- On March 11, 2015, the Sharmas moved to disqualify Crain for representing multiple clients with adverse interests under Texas Disciplinary Rules of Professional Conduct (Rules 1.06 and 1.09).
- The trial court quashed defendants’ subpoenas for the Sharmas at the disqualification hearing and disqualified Crain and her firm from representing any defendants; a rehearing was denied.
- Defendants sought mandamus relief in the Fourteenth Court of Appeals asking the court to compel vacatur of the disqualification order; the appellate court denied mandamus.
Issues
| Issue | Plaintiff's Argument (Sharmas) | Defendant's Argument (Relators) | Held |
|---|---|---|---|
| Waiver by delay in moving to disqualify | Motion timely given Padma joined later; no dilatory motive | Motion was filed ~10 months after suit; waiver should apply | Court: No waiver as to Padma; only ~3.5 months elapsed after she joined and no evidence of dilatory tactic; no abuse of discretion |
| Whether joint representation violated Rule 1.09 (former-client/substantially related matter) | Crain’s joint representation posed a substantial risk and matters were substantially related; conclusive presumption that confidences exist | Representation was permissible; Rule misapplied | Court: Crain disqualified under Rule 1.09(a)(3) because ACGI and the other defendants are adverse and confidences were presumptively imparted |
| Whether Rule 1.06 (limiting duties/conflict probable) bars joint representation | Likely conflict would eventuate; joint representation improper | No probable adverse limitation | Court: Crain also disqualified under Rule 1.06 given the likelihood of adverse interests between ACGI and the other defendants |
| Whether trial court denied defendants opportunity to present evidence (including quashing subpoenas) | Trial court prevented live testimony and excluded evidence, causing error | Trial court did not refuse offers; defendants did not proffer or secure rulings on excluded evidence | Court: No abuse of discretion; record shows defendants did not properly offer evidence or obtain rulings and proposed testimony would have been immaterial |
Key Cases Cited
- In re Sanders, 153 S.W.3d 54 (Tex. 2004) (mandamus appropriate to correct erroneous disqualification)
- Spears v. Fourth Court of Appeals, 797 S.W.2d 654 (Tex. 1990) (movant bears burden to show ethical violation with specificity)
- NCNB Texas Nat'l Bank v. Coker, 765 S.W.2d 398 (Tex. 1989) (conclusive presumption that confidences were imparted when lawyer worked on matter)
- Phoenix Founders, Inc. v. Marshall, 887 S.W.2d 831 (Tex. 1994) (reaffirming strict rule on presumptive confidences in related matters)
- In re B.L.D., 113 S.W.3d 340 (Tex. 2003) (attorney cannot represent multiple clients if substantial risk representation of one will be materially adverse to another)
- In re EPIC Holdings, Inc., 985 S.W.2d 41 (Tex. 1998) (consideration of prejudice from delay and discovery in waiver analysis)
- Nat'l Med. Enterprises, Inc. v. Godbey, 924 S.W.2d 123 (Tex. 1996) (analysis of adversity: likelihood and seriousness of consequences)
- Wasserman v. Black, 910 S.W.2d 564 (Tex. App.—Waco 1995) (use of pleadings to determine adversity; delay analysis)
- Grant v. Thirteenth Court of Appeals, 888 S.W.2d 466 (Tex. 1994) (untimely motion to disqualify may be waiver)
- Vaughan v. Walther, 875 S.W.2d 690 (Tex. 1994) (timing between knowledge of conflict and motion is critical in waiver analysis)
- Bobbora v. Unitrin Ins. Servs., 255 S.W.3d 331 (Tex. App.—Dallas 2008) (preserving complaint about excluded evidence requires offer and ruling)
- Fletcher v. Minn. Min. & Mfg. Co., 57 S.W.3d 602 (Tex. App.—Houston [1st Dist.] 2001) (same on preservation for excluded evidence)