Conley, Lott, Nichols Machinery Co. v. Brooks, 05-97-00164-CV

• Citation: 948 S.W.2d 345
• Decision Date: 09 June 1997
• Docket Number: No. 05-97-00164-CV,05-97-00164-CV
• Parties: CONLEY, LOTT, NICHOLS MACHINERY COMPANY, et al., Relators, v. The Honorable David BROOKS, Judge Presiding, 191st District Court of Dallas County, Texas, Respondent.
• Court: Texas Court of Appeals

Page 345

948 S.W.2d 345

CONLEY, LOTT, NICHOLS MACHINERY COMPANY, et al., Relators, v. The Honorable David BROOKS, Judge Presiding, 191st District

Court of Dallas County, Texas, Respondent.

No. 05-97-00164-CV.

Court of Appeals of Texas,

Dallas.

June 9, 1997.

Jane Makela, George M. Kryder, III, Ann Marie Areadi, Carrington, Coleman, Sloman & Blumenthal, Dallas, for Relators.

David Kress Brooks, Dallas, W.D. Masterson, Kilgore & Kilgore, Inc., Dallas, for Respondent.

Before KINKEADE, WHITTINGTON and MOSELEY, JJ.

OPINION

KINKEADE, Justice.

Relators Conley, Lott, Nichols Machinery Company, W. Robert Nichols, III, and Nichols Associates, Ltd., seek a writ of mandamus against respondent the Honorable David Brooks. Dana Meador, the real party in interest, sued relators in the underlying litigation. Her attorney, W.D. Masterson, had come into possession of certain privileged documents through no action on his part. Because he had obtained confidential information from those documents, relators moved to disqualify him and his law firm. Judge Brooks overruled the motion to disqualify. Relators request this Court to mandamus Judge Brooks to vacate his order and to grant the motion to disqualify. For the reasons given below, we conditionally grant the writ.

Nichols is the chief executive officer of Conley, Lott, Nichols Machinery Company. Meador served as a financial consultant to the company. On December 12, 1994, Nichols terminated her, and she sued, alleging various causes of action, among them sexual harassment. W.D. Masterson and his law firm represented her.

On October 10, 1994, Nichols had terminated another employee, Tom Dowdle. The company sued Dowdle for fraud. The law firm of Sayles & Lidji represented the company in this suit. The parties negotiated a settlement. During the course of those negotiations, Robert R. Varner, Jr., an attorney with Sayles & Lidji, wrote Nichols a letter dated June 6, 1995. The letter begins, "What follows is my understanding of the terms upon which the company has agreed to settle the above-referenced matter." As a result, the attorney-client privilege appears to apply to the letter on its face. Among the terms of the settlement was that Dowdle would provide the company with a "[s]worn statement concerning the Dana Meador lawsuit."

In the meantime, Nichols had hired Patricia Peterson as executive secretary. She began to feel insecure in her position. One day, she took some papers that Nichols had left on top of his desk and made copies of them for her own personal files. Among the papers was the Dowdle settlement letter. Other papers that were taken, as it turned out, were covered by the attorney-client privilege or the work product exemption. In February 1996, Peterson resigned, and she too wanted to sue for sexual harassment. She hired Meador's attorney, Masterson, and he filed suit on her behalf for sexual harassment and other claims on July 19, 1996.

On June 12, 1996, relators took Meador's deposition in her lawsuit. She testified that she knew of the statement that Dowdle was to make concerning her lawsuit, as part of the settlement of the Dowdle lawsuit. She said that Peterson had copies of the settlement letter and other documents. Peterson had supplied the copies to Masterson to use as he saw fit.

Alarmed, relators took Peterson's deposition in October 1996, to learn exactly what she might have in her possession. On October 14, relators orally requested Masterson to return the documents. On October 17, relators made a formal written letter demand. Masterson refused. On October 25, relators filed a motion for sanctions in the Meador lawsuit. The motion included a request to disqualify Masterson as Meador's counsel. The trial court conducted a hearing and found that certain documents were in fact privileged. It ordered the documents returned. But it also overruled the motion to disqualify. In a letter to the parties, Judge Brooks stated his reasoning: (1) Masterson was not shown in any way to be involved in improperly obtaining the documents; (2) the privileged nature of the documents was not facially apparent, nor could it be inferred from the circumstances by which they came to Masterson's attention; and (3) Masterson had practiced extensively before Judge Brooks, and his conduct had always comported with the highest standard of ethics. Relators argue that, after they had established that Masterson had obtained confidential information from the privileged documents, Judge Brooks abused his discretion in failing to disqualify Masterson and his law firm.

The American Bar Association has promulgated an ethics opinion squarely on point. ABA Comm. on Ethics and Professional Responsibility, Formal Op. 94-382 (unsolicited receipt of privileged or confidential materials). If a lawyer comes into possession of privileged or confidential materials, by whatever means or however innocently:

[the] lawyer receiving such privileged or confidential materials satisfies her professional responsibility by (a) refraining from reviewing materials which are probably privileged or confidential, any further than is necessary to determine how appropriately to proceed; (b) notifying the adverse party or the party's lawyer that the receiving lawyer possesses such documents; (c) following the instructions of the adverse party's lawyer; or (d), in the case of a dispute, refraining from using the materials until a definitive resolution of the proper disposition of the materials is obtained from a court.

Id. Meador argues that, as the ethics opinion itself concedes, a number of state bar ethics committees have concluded that an attorney may ethically make any use of confidential information that comes inadvertently into his possession. Of the three state bar ethics committee opinions mentioned in the American Bar Association ethics opinion, however, the most recent dates from 1989. Since then, communication technology has advanced dramatically. As the ethics opinion observes, society now makes frequent use of facsimile machines and electronic mail. Inadvertent disclosures of confidential information frequently occur, and today's beneficiary of such disclosures may likely become tomorrow's victim. During oral argument, Masterson argued that the sole factor to consider is whether an attorney acquiring confidential documents is culpable in obtaining the documents--whether he has violated one or more of the Texas Disciplinary Rules of Professional Conduct. We consider such a restrictive standard unrealistic in light of today's telecommunications.

Conversely, relators argue that an attorney should be disqualified whenever she comes into possession of confidential information, regardless of what she does to attempt to remedy the situation. They note that another court has held that, when counsel obtains confidential information of an adversary, there is no need to show actual wrongdoing, or even actual use of the confidential information, in order to disqualify counsel. Contico International, Inc., v. Alvarez, 910 S.W.2d 29, 35-36 (Tex.App.--El Paso 1995, orig. proceeding).

Contico, however, is scarcely controlling. The Texas Supreme Court overruled it. Mendoza v. Eighth Court of Appeals, 917 S.W.2d 787, 788 (Tex.1996) (per curiam). ¹ Lorenzo and Elia Mendoza sued Contico and other defendants for the alleged wrongful death of their son. The Mendozas' attorney, James Scherr, appeared to possess a notebook and videotape taken from Contico's investigation file. The trial court judge denied Contico's motion to disqualify Scherr on that basis. Contico, 910 S.W.2d at 31. Contico sought mandamus relief in the Eighth Court of Appeals. The Eighth Court conditionally granted relief and ordered the trial court to grant Contico's motion to...