In re Murrin Bros. 1885, Ltd.

• Citation: 603 S.W.3d 53
• Decision Date: 20 December 2019
• Docket Number: No. 18-0737,18-0737
• Parties: IN RE MURRIN BROTHERS 1885, LTD., ERI-BBTX, LLC, and Concho Minick, Individually and Derivatively on Behalf of Billy Bob's Texas Investments, LLC, Philip Murrin, and Cowtown Concessions, Inc., d/b/a River Ranch Stockyards
• Court: Supreme Court of Texas

603 S.W.3d 53

IN RE MURRIN BROTHERS 1885, LTD., ERI-BBTX, LLC, and Concho Minick, Individually and Derivatively on Behalf of Billy Bob's Texas Investments, LLC, Philip Murrin, and Cowtown Concessions, Inc., d/b/a River Ranch Stockyards

No. 18-0737

Supreme Court of Texas.

Argued October 10, 2019

OPINION DELIVERED: December 20, 2019

Justice Blacklock delivered the opinion of the Court.

The parties to this mandamus action are warring ownership factions of "the world's largest honky-tonk," the iconic Fort Worth establishment Billy Bob's. Both sides, the Hickman Group and the Murrin Group, assert the right to control the management of Billy Bob's. The litigation began in May 2017. By January 2018, it was nearly ready for trial, when the Murrin Group, relators in this case, moved to disqualify the Hickman Group's lawyers. Conflicts of interest can require disqualification of counsel in some circumstances, even at a late stage of the case, and courts must carefully examine alleged conflicts to ensure the integrity of the judicial process. In these circumstances, however, the Murrin Group relators have not established a clear entitlement to the harsh remedy of attorney disqualification. Nor have they established their lack of an adequate remedy at law if the case proceeds with its current alignment of parties and counsel. For the reasons explained below, the Court denies mandamus relief.

I. Factual and Procedural Background

Billy Bob's is a historic entertainment venue located in the Fort Worth Stockyards. In 2011, the three long-time owners of Billy Bob's—Steve Murrin, Don Jury, and Holt Hickman—decided to reorganize the company. They brought in additional owners and collectively formed Bill Bob's Texas Investments (BBT), a closely held LLC, to own and manage Billy Bob's. BBT's owners adopted a Company Agreement, which dictates BBT's structure and contains rules for the management of BBT. One of those rules requires unanimous consent of the owners to any "matter within the scope of any major decision." Among the "major decisions" requiring unanimous consent is "settling, prosecuting, defending or initiating any lawsuit, administrative or similar actions concerning or affecting the business of BBT LLC and/or the BBT LLC Property." After adopting the Company Agreement, the owners received a Certificate of Formation for BBT from the Secretary of State. The Certificate of Formation lists six "Governing Persons" of BBT, all of whom are either owners of BBT or closely related to an owner or ownership entity.

On January 1, 2011, Concho Minick, both an owner and a Governing Person, was unanimously elected President and Managing Member with "full power and authority to make and carry out all decisions in connection" with "the ordinary, daily and routine business affairs of BBT." Several years later, nine of BBT's twelve owners—and four of its six Governing Persons—became dissatisfied with Minick's performance. This opinion refers to the anti-Minick faction as the Hickman Group. In May 2017, the Hickman Group attempted to dismiss Minick by a majority vote of the Governing Persons.

Despite the Hickman Group's attempt to dismiss him, Minick claimed a right to remain as President and Managing Member. He claimed his dismissal was a "major decision" for which the Company Agreement required a unanimous vote of the owners. Under that theory, the Hickman Group's dismissal of Minick was invalid because three owners—Minick himself, Murrin Brothers 1885, Ltd., and ERI-BBTX, LLC—opposed Minick's dismissal. Two Governing Persons—Minick and Steve Murrin—opposed the dismissal as well. This opinion refers to the pro-Minick faction as the Murrin Group. Generally speaking, the Murrin Group are the Relators in this mandamus action, while the Hickman Group are the Real Parties in Interest.¹

The Murrin Group responded to the Hickman Group's attempt to dismiss Minick by filing the underlying lawsuit against the Hickman Group. The suit contained claims asserted individually by the members of the Murrin Group and claims asserted derivatively on behalf of BBT. The suit sought injunctive relief to prevent the Hickman Group from acting unilaterally on behalf of BBT and the appointment of a receiver for BBT to break the intractable gridlock allegedly caused by the unanimity provision. It also sought a declaration that the four Governing Persons in the Hickman Group lacked authority to replace Minick as Managing Member without a unanimous vote.

The Hickman Group hired the law firm of Kelly Hart & Hallman (KHH) to represent BBT in the litigation and to represent the defendants named in the Murrin Group's suit. The engagement letter with KHH was signed by BBT's CFO as well as nine of BBT's twelve owners and four of its six Governing Persons. It appears to be undisputed that KHH's legal fees have been paid from BBT's funds, both for its representation of BBT itself and at least to some extent for its representation of the individuals and entities comprising the Hickman Group. KHH filed counterclaims, again on behalf of both the Hickman Group members individually and on behalf of BBT derivatively. The counterclaims also sought appointment of a receiver for BBT.

Between May 2017 and January 2018, the parties engaged in active litigation, including competing summary judgment motions, which the trial court denied in November 2017. The case was set for trial in April 2018. In January 2018, the Murrin Group filed a motion to disqualify KHH as counsel for BBT and as counsel for the Hickman Group. The motion alleged that because BBT is the "plaintiff" in the Murrin Group's derivative claims against the Hickman Group, KHH's representation of both BBT and the Hickman Group amounts to the impermissible representation of both sides in the same case. And because BBT is really a plaintiff, the Murrin Group alleged, KHH must also be disqualified from representing the individual Hickman Group defendants who are adverse to KHH's former client, BBT. In March 2018, the Murrin Group filed a Rule 12 motion, which required KHH to "show [its] authority" to represent BBT. TEX. R. CIV. P. 12. The Rule 12 motion argued that the decision to hire counsel on behalf of BBT was a "major decision" requiring unanimous agreement of the owners. The Hickman Group's principal response was that the Certificate of Formation granted them authority to hire counsel for BBT with a simple majority of the Governing Persons.

The trial court denied both motions. It did not explain its denial of the motion to disqualify. As to the Rule 12 motion, the trial court explained in writing that the letter of representation and BBT's Certificate of Formation constituted the "sufficient authority" required by the rule. The Murrin Group sought mandamus relief in the court of appeals as to the denial of both motions. The court of appeals denied relief without explanation. The Murrin Group filed a petition for writ of mandamus in this Court, challenging the denials of the Rule 12 motion and the motion to disqualify.

II. Analysis

A. Standard of Review

Mandamus is an extraordinary remedy and will only issue if the lower court has clearly abused its discretion and the relators have no other adequate remedy. In re H.E.B. Grocery Co. , 492 S.W.3d 300, 302 (Tex. 2016) (orig. proceeding). Mandamus relief is only appropriate when the relators have established that only one outcome in the trial court was permissible under the law.

Johnson v. Fourth Court of Appeals , 700 S.W.2d 916, 917 (Tex. 1985) (orig. proceeding), overruled on other grounds by In re Columbia Med. Ctr. of Las Colinas , 290 S.W.3d 204, 213 (Tex. 2009) (orig. proceeding). It is meant for circumstances "involving manifest and urgent necessity and not for grievances that may be addressed by other remedies." Walker v. Packer , 827 S.W.2d 833, 840 (Tex. 1992) (orig. proceeding) (quoting Holloway v. Fifth Court of Appeals , 767 S.W.2d 680, 684 (Tex. 1989) (orig. proceeding)).

B. Disqualification Motion

We start with the motion to disqualify KHH. The inappropriate denial of a motion to disqualify is an abuse of discretion for which there is generally no adequate remedy on appeal. In re Turner , 542 S.W.3d 553, 555 (Tex. 2017) (orig. proceeding). The remaining question is whether the trial court abused its discretion when it denied the motion to disqualify. We conclude that it did not.

Disqualification of counsel is a severe remedy that can result in significant expense to clients, disrupt the orderly progress of litigation, and deprive a party of the counsel of its choice. In re Nitla S.A. de C.V. , 92 S.W.3d 419, 422 (Tex. 2002) (orig. proceeding). The Murrin Group alleges that KHH is violating several disciplinary rules, including Rule 1.06(a) and Rule 1.09, by representing parties on both sides of the same lawsuit.² Although courts and litigants often "look[ ] to our disciplinary rules to decide disqualification issues," In re Meador , 968 S.W.2d 346, 350 (Tex. 1998) (orig. proceeding), the rules "do not determine whether counsel is disqualified in litigation." Nat'l Med. Enters. v. Godbey , 924 S.W.2d 123, 132 (Tex. 1996) (orig. proceeding). Rather, the rules "provide helpful guidance" and "suggest the relevant considerations." Id. Ultimately, a court "must consider all the facts and circumstances to determine whether the interests of justice require disqualification." Meador , 968 S.W.2d at 350.

Even if a violation of the disciplinary rules is established, the party requesting disqualification must also show it will suffer prejudice if disqualification is not granted. Nitla , 92 S.W.3d at 422. In addition to the movant's burden to show prejudice, the trial court should also consider "the extent to which the nonmovant will suffer prejudice from the disqualification of his or her attorney." Meador , 968 S.W.2d at 350. Such prejudice to the nonmovant may include the financial burden of obtaining substitute counsel that is not already familiar with the case. See ...