in Re Saeed Kahn ( 2013 )

Petition for Writ of Mandamus Denied and Memorandum Opinion filed
March 26, 2013.
In The
Fourteenth Court of Appeals
NO. 14-13-00081-CV
IN RE SAEED KAHN, Relator
ORIGINAL PROCEEDING
WRIT OF MANDAMUS
333rd District Court
Harris County, Texas
Trial Court Cause No. 2010-18239
MEMORANDUM OPINION
On January 30, 2013, relator Saeed Kahn filed a petition for writ of
mandamus in this court. See Tex. Gov’t Code Ann. §22.221; see also Tex. R. App.
P. 52. In the petition, relator asks this court to compel the Honorable Joseph
Halbach, presiding judge of the 333rd District Court of Harris County, to vacate
his order disqualifying William B. Underwood, III as counsel for relator. We deny
the petition for writ of mandamus.
Background
Real-party-in-interest 2000 IIG is a corporation incorporated by relator
Saeed Khan for the purpose of operating a convenience store. Akhtar Lakhani and
Mirza Javed Ashraf are also directors and officers of 2000 IIG. On June 7, 2007,
Khan and 2000 IIG filed suit against Arif M. Siddiq (“the 2007 suit”). The suit
involves property known as the Rodrigo property. 2000 IIG purchased the note on
the Rodrigo property in 2005. Khan, Siddiq, and Lakhani intended to develop the
Rodrigo property and sell it. Khan allegedly transferred the property as president
of 2000 IIG to Siddiq, but contends he did not receive the consideration for the
transfer that was promised by Siddiq. In 2007, Khan and 2000 IIG sued Siddiq for
breach of contract alleging Siddiq never paid Khan for the property. They sought
to rescind the sale based on failure of consideration, fraud, fraudulent inducement,
fraudulent misrepresentation, and “other torts giving rise from the Defendant’s acts
and omissions[.]”
On February 29, 2008, attorney William Underwood substituted as counsel
for 2000 IIG in the 2007 suit. On December 8, 2008, Khan filed an amended
petition in which he non-suited the claims against 2000 IIG. On February 10,
2010, Khan non-suited his claim against Siddiq. This suit settled and Khan agreed
not to make a claim against 2000 IIG with regard to the Rodrigo property.
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On March 19, 2010, Khan filed suit in cause no. 2010-18239 against Siddiq,
Ashraf, and Lakhani (“the 2010 suit”). Khan filed the 2010 suit to recover, among
other things, the consideration he allegedly was promised for the transfer of the
Rodrigo property to Siddiq. As in 2007, Khan also sought rescission of the deed
on the basis of common law fraud, statutory fraud, fraudulent inducement,
fraudulent misrepresentation, accident or mutual mistake.
On September 20, 2010, 2000 IIG filed a plea in intervention claiming the
property and any causes of action relating to the property belong to 2000 IIG, not
Khan. 2000 IIG alleged that Khan improperly acted in 2000 IIG’s name without
authority. Also, on September 20, 2010, 2000 IIG filed its first motion to
disqualify Underwood as Khan’s counsel. 2000 IIG argued that Underwood
represented it in the 2007 suit and that the two suits involve the same complaint.
This 2010 motion was passed and the parties did not obtain a ruling.
On December 27, 2011, Khan filed a counterclaim against 2000 IIG in
which he sought a declaratory judgment that the release entered into in another suit
filed in 2008 (“the 2008 suit”) be set aside and rescinded and that the stock of 2000
IIG be returned to Khan. Khan argued that the release should be rescinded on the
basis of fraud, misrepresentation, or mutual mistake. On April 3, 2012, Khan non-
suited his counterclaim against 2000 IIG. On August 16, 2012, Khan re-filed the
counterclaim against 2000 IIG.
On August 27, 2012, 2000 IIG filed its second motion to disqualify
Underwood. In the motion, 2000 IIG alleged that Underwood represented 2000
IIG in the 2007 suit and that he confirmed in a May 18, 2012 deposition that he
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represented 2000 IIG and served as advisor and counsel including the issue of the
Rodrigo property. Khan responded to the motion to disqualify arguing that the
suits did not involve similar matters and Underwood did not obtain confidences
during his earlier representation. Khan further argued that 2000 IIG waived its
disqualification argument through delay.
On September 21, 2012, the trial court held a hearing on the motion to
disqualify. After hearing argument of counsel, the trial court denied the motion.
On October 5, 2012, 2000 IIG filed a motion for reconsideration. In the motion,
2000 IIG alleged that the subject matter of the 2007 suit was “the warranty deed
that conveyed the Rodrigo property to Arif Siddiq and allegations of fraud and
failure on the part of Arif Siddiq to pay consideration to Saeed Khan.” 2000 IIG
alleged that the “subject matter, fact scenario, and current claims are virtually the
same as the September 2012 counterclaim petition filed by William Underwood
against his former client, 2000 IIG Inc.”
On October 19, 2012, the trial court held a hearing on the motion for
reconsideration. At the hearing, 2000 IIG’s attorney argued that Underwood
should be disqualified because the 2007 suit involved the “same fact scenario” as
the 2010 suit and the counterclaim re-filed in 2012. The trial court took the matter
under advisement and advised the parties if they needed findings of fact and
conclusions of law to file proposed findings and conclusions. The trial court
issued an order without separate findings of fact and conclusions of law granting
the motion to disqualify Underwood.
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Khan challenges the trial court’s order in this petition for writ of mandamus,
raising two issues: (1) Did 2000 IIG waive its motion to disqualify Underwood
through delay? and (2) Are the two suits substantially similar?
Mandamus Standard
Mandamus is appropriate to correct a trial court’s abuse of discretion in
denying a motion to disqualify counsel because there is no adequate remedy by
appeal. See In re EPIC Holdings, Inc., 985 S.W.2d 41, 52–54 (Tex. 1998). In
determining whether mandamus is appropriate, we focus on whether the trial court
abused its discretion. In re Meador, 968 S.W.2d 346, 350 (Tex. 1998). In
determining whether the trial court abused its discretion with respect to resolution
of factual matters, we may not substitute our judgment for that of the trial court
and may not disturb the trial court’s decision unless it is shown to be arbitrary and
unreasonable. See Walker v. Packer, 827 S.W.2d 833, 839–40 (Tex. 1992).
Waiver
We will first address Khan’s contention that 2000 IIG waived its motion to
disqualify through delay. In considering a motion to disqualify, the trial court must
adhere to an exacting standard to prevent a party from using a motion to disqualify
as a dilatory trial tactic. See Spears v. Fourth Court of Appeals, 797 S.W.2d 654,
656 (Tex. 1990). One of the requirements of that exacting standard is that a party
who does not file a motion to disqualify opposing counsel in a timely manner
waives the complaint. Grant v. Thirteenth Court of Appeals, 888 S.W.2d 466, 468
(Tex. 1994).
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Waiver of a motion to disqualify is determined by the filing of the motion.
In re Butler, 987 S.W.2d 221, 224 (Tex. App.—Houston [14th Dist.] 1999, orig.
proceeding). In determining whether a party waived the complaint, the court will
consider the length of time between when the conflict became apparent to the
aggrieved party and when the aggrieved party filed the motion to disqualify. See
Butler, 987 S.W.2d at 224–25. The court also should consider any other evidence
that indicates the motion is being filed not due to a concern that confidences
related in an attorney-client relationship may be divulged but as a dilatory trial
tactic. In re Louisiana Texas Healthcare Management, LLC, 349 S.W.3d 688, 690
(Tex. App.—Houston [14th Dist.] 2011, orig. proceeding).
The first motion to disqualify Underwood as counsel for Khan was filed
September 20, 2010. On the same day, 2000 IIG filed a plea in intervention
asserting its interest in the property. The disqualification hearing that was
scheduled for October 4, 2010 was passed, and no ruling was made on the 2010
motion. On April 3, 2012, Khan non-suited his claims against 2000 IIG. On
August 6, 2012, Khan re-filed his counterclaim against 2000 IIG. On August 28,
2012, 2000 IIG filed the second motion to disqualify Underwood as counsel for
Khan. The second motion was granted by the respondent.
Our primary inquiry is when the conflict became apparent to 2000 IIG. If it
was in September 2010, the length of the delay in this case is sufficient to support a
finding of waiver. See HECI Exploration Co. v. Clajon Gas Co., 843 S.W.2d 622,
628 (Tex. App.—Austin 1992, writ denied) (trial court did not abuse its discretion
in denying motion to disqualify filed eleven months after conflict became
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apparent); Conoco, Inc. v. Baskin, 803 S.W.2d 416, 420 (Tex. App.—El Paso
1991, no pet.) (trial judge reasonably could have found waiver of the
disqualification motion where relators were first advised of a possible conflict
nearly eleven months before the motion to disqualify was filed, and only one and
one-half months before the scheduled trial date); Enstar Petroleum Co. v. Mancias,
773 S.W.2d 662, 664 (Tex. App.—San Antonio 1989, orig. proceeding) (where
conflict became apparent as early as December 1988, and trial was set for March
1989, a motion to disqualify the entire firm filed on same date of trial was
untimely).
In this case, the first motion to disqualify was filed in 2010, and passed by
the movants. The second motion was not filed for another two years. Khan raised
the issue of waiver in response to the motion to disqualify. The parties argued
waiver at the initial hearing that resulted in denial of the motion. In the motion for
reconsideration and at the hearing on the motion, waiver was not addressed. The
trial court’s disqualification order does not expressly address waiver.
Factual determinations by the trial court may not be disturbed by mandamus
review if those determinations are supported by sufficient evidence. See Mendoza
v. Eighth Court of Appeals, 917 S.W.2d 787, 790 (Tex. 1996) (orig. proceeding).
The trial court’s implied finding of no waiver is supported by 2000 IIG’s evidence
that the conflict did not become apparent until Khan re-filed the counterclaim in
August 2012. 2000 IIG filed its motion to disqualify less than one month after the
counterclaim was re-filed. After reviewing the record, we conclude the trial
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court’s finding is supported by sufficient evidence. The trial court did not abuse its
discretion in finding that 2000 IIG did not waive its right to seek disqualification.
Substantial Similarity
We now turn to Khan’s contention that the 2007 suit and the 2010 suit and
2012 counterclaim are not substantially similar. A lawyer who previously
represented a client may not represent another person on a matter adverse to the
client if the matters are the same or substantially related. In re Columbia Valley
Healthcare System, L.P., 320 S.W.3d 819, 824 (Tex. 2010) (orig. proceeding)
(citing Phoenix Founders, Inc. v. Marshall, 887 S.W.2d 831, 833 (Tex. 1994)
(orig. proceeding); NCNB Texas Nat’l Bank v Coker, 765 S.W.2d 398, 399–400
(Tex. 1989) (orig. proceeding); Tex. Disciplinary R. Prof’l Conduct 1.09(a),
reprinted in Tex. Gov’t Code, tit. 2, subtit.G, app. A, (State Bar. R art. X, § 9)).
The party moving to disqualify an attorney must prove: (1) the existence of a prior
attorney-client relationship; (2) in which the factual matters involved were so
related to the facts in the pending litigation; (3) that it involved a genuine threat
that confidences revealed to his former counsel will be divulged to his present
adversary. See Coker, 765 S.W.2d at 400 (Tex. 1989). If the moving party meets
this burden, he or she is entitled to a conclusive presumption that confidences and
secrets were imparted to the former attorney. See id. If the lawyer works on a
matter, there is an irrebuttable presumption that the lawyer obtained confidential
information during the representation. Phoenix Founders, Inc., 887 S.W.2d at 833.
The parties do not dispute that a prior attorney-client relationship existed.
Therefore, we turn to the question of whether the factual matters involved were so
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related that there was a genuine threat that confidences revealed to former counsel
will be divulged to the present adversary.
In the 2007 suit, Khan alleged that on or about October 3, 2006, Khan and
Siddiq entered into an agreement for Siddiq to purchase the Rodrigo property.
Khan alleged he executed a warranty deed for the property, but that Siddiq never
paid “the required consideration.” In the petition, Khan alleged the deed recited
consideration of $10.00, but Siddiq had agreed to pay more than $450,000 for the
property. He alleged the property was posted for sale in 2007 for $1,758,000.
Khan sought to have the deed set aside or title to the property transferred back to
him.
In the 2010 suit, Khan alleged that he, Siddiq, Ashraf, and Lakhani entered
into an agreement under which Khan agreed to transfer “a substantial asset of 2000
IIG, Inc.” to Siddiq in return for $225,000 plus fifty percent of the future profits of
the Rodrigo property. Because no payments allegedly were made to Khan, he sued
for breach of contract. Khan also alleged fraud and conspiracy under the same set
of facts. Khan further sought a declaratory judgment that the Rodrigo property
was improperly transferred to Siddiq and that the property should be returned
either to Khan or 2000 IIG. In the alternative, Khan sought rescission of the deed
to the property.
On August 16, 2012, Khan re-filed a counterclaim against 2000 IIG in the
2010 suit. In the counterclaim, Khan seeks to set aside a release entered into
between the parties in a 2008 suit. According to the counterclaim, Khan, under the
terms of the settlement agreement in the 2008 suit, “reserved his claims related to
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the issues regarding the Rodrigo property that are involved in the instant
litigation.”
Khan argues that the suits are not substantially related because the 2007 suit
was for rescission of the deed, and the 2012 counterclaim is for rescission of a
settlement agreement. The 2012 counterclaim, however, arises out of the 2010
suit, which is virtually identical to the 2007 suit. The record reflects that in both
cases Khan argues he did not receive sufficient consideration for the transfer of the
Rodrigo property. The factual recitations in each of the petitions set forth the facts
surrounding the warranty deed allegedly issued to Siddiq for the Rodrigo property.
In determining similarity, we are to consider whether the issues in the two
cases are similar, not the remedy sought by the plaintiff. See Home Ins. Co. v.
Marsh, 790 S.W.2d 749, 754 (Tex. App.—El Paso 1990, orig. proceeding).
Disqualification of counsel is not improper, however, merely because factual
differences exist between the prior and current representation. See Texaco v.
Garcia, 891 S.W.2d 255, 256 (Tex. 1995) (upholding the disqualification of
plaintiffs’ counsel in an environmental contamination suit against Texaco because
he had previously represented Texaco and its related, affiliated and subsidiary
companies in several environmental contamination cases). In this case, it was not
unreasonable for the trial court to conclude that the 2007 and 2010 suits and the
2012 counterclaim dealt with substantially related matters. Therefore, we cannot
say the trial court abused its discretion in disqualifying Underwood as Khan’s
counsel.
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Khan has not established entitlement to the extraordinary relief of a writ of
mandamus. Accordingly, we deny the petition for writ of mandamus.
PER CURIAM
Panel consists of Justices Frost, Brown, and Busby.
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