PITCO v. GBK CORP.

• Decision Date: 25 October 2002
• Docket Number: No. 96,604.,96,604.
• Citation: 2002 OK CIV APP 113,60 P.3d 520
• Parties: The PROSPECTIVE INVESTMENT AND TRADING COMPANY, LTD., Plaintiff/Appellant, Pezold, Caruso, Barker & Woltz, Appellant, v. GBK CORPORATION, Kaiser-Francis Oil Company, Texas Southwest Gas Corporation, and Oneok, Inc., Defendants/Appellees.
• Court: United States State Court of Criminal Appeals of Oklahoma. Court of Civil Appeals of Oklahoma

60 P.3d 520

2002 OK CIV APP 113

The PROSPECTIVE INVESTMENT AND TRADING COMPANY, LTD., Plaintiff/Appellant, Pezold, Caruso, Barker & Woltz, Appellant, v. GBK CORPORATION, Kaiser-Francis Oil Company, Texas Southwest Gas Corporation, and Oneok, Inc., Defendants/Appellees.

No. 96,604.

Court of Civil Appeals of Oklahoma, Division No. 1.

October 25, 2002.

R.K.Pezold, Terry J. Barker, Joseph C. Woltz, Gene G. Boerner, III, Tulsa, OK, for Plaintiff/Appellants.

Frederic Dorwart, J. Michael Medina, Tulsa, OK, for Defendants/Appellees, GBK Corporation and Texas Southwest Gas Corporation.

Keith Seller, Tulsa, OK, for Defendant/Appellee, Kaiser-Francis Oil Company.

Released for Publication by Order of the Court of Civil Appeals of Oklahoma, Division No. 1.

OPINION

CARL B. JONES, Judge:

¶ 1 Appellants, The Prospective Investment and Trading Company, Ltd. (PITCO) and Pezold, Caruso, Barker & Woltz (Law Firm) appeal the district court's order disqualifying Law Firm from representing PITCO in a law suit against GBK Corporation (GBK), Kaiser-Francis Oil Company (Kaiser-Francis), Texas Southwest Gas Corporation (Texas Southwest), and ONEOK, Inc. (ONEOK) (collectively Appellees). For the reasons set forth hereinafter, we affirm the district court's order.

FACTS

¶ 2 In 1988, Law Firm represented Samson Resources Company (Samson) in Wolverine Exploration Company, Inc. et al. v. Texaco, Inc., Case No. CJ-88-5522 in the District Court of Tulsa County, and related litigation, including an arbitration proceeding (Wolverine Arbitration). In 1993, Kaiser-Francis became involved in the Wolverine Arbitration due to its acquisition of a non-operating working interest which included an interest in the proceeds of the Wolverine Arbitration. While all of Law Firm's prior contacts with Kaiser-Francis had been adversarial, Law Firm represented Kaiser-Francis as a nominal party in the Wolverine Arbitration from 1993-1998. The parties disagree as to the nature and extent of such representation. Law Firm disputes that an attorney-client relationship was established; it urges both Law Firm and Kaiser-Francis disclaimed the creation of the attorney-client relationship. Kaiser-Francis counters Law Firm entered into an attorney-client relationship with Kaiser-Francis, but admits Law Firm's representation of Kaiser-Francis was limited to the Wolverine Arbitration; Law Firm could represent Samson against Kaiser-Francis in other litigation; and Law Firm could represent other clients in claims adverse to Kaiser-Francis so long as such representation was not related to the Wolverine Arbitration.

¶ 3 In 1995, Texaco, the defendant in the Wolverine Arbitration, requested production of Kaiser-Francis's gas contract-related documents and files (Discovery Order). Kaiser-Francis requested and Law Firm agreed to review numerous boxes of Kaiser-Francis's documents to identify any documents that might be subject to a privilege claim. Members of Law Firm signified their review of Kaiser-Francis's files by placing a yellow paper in the file which stated: "THIS FILE HAS BEEN REVIEWED FOR PRIVILEGED AND CONFIDENTIAL MATERIAL BY COUNSEL FOR THE COMPANY IN THE MATTER OF THE ARBITRATION BETWEEN WOLVERINE EXPLORATION COMPANY, et al. and TEXACO, INC."

¶ 4 Kaiser-Francis contends a settlement agreement covering certain oil and gas leases entered into between Kaiser-Francis and Oklahoma Natural Gas Co. (ONG), now known as ONEOK (Kaiser/ONEOK Settlement), was included in the documents reviewed by Law Firm. Kaiser-Francis urges the Kaiser/ONEOK Settlement was confidential and that such confidentiality was recognized by Law Firm when it represented Kaiser-Francis and negotiated, on Kaiser-Francis's behalf, a ratification and amendment of arbitration agreement which protected the confidentiality of Kaiser-Francis's files and documents. Law Firm counters there is no evidence the Kaiser/ONEOK Settlement was included in the boxes reviewed by Law Firm. Law Firm also contends the Kaiser/ONEOK Settlement was generally known by PITCO and other lawyers involved in litigation against Kaiser-Francis, and was ascertainable from public records; therefore, was not confidential.

¶ 5 On September 8, 2000, Law Firm filed a petition on behalf of PITCO alleging Appellees conspired to commit fraud and other torts by attempting to make it financially impossible for working interest owners, not affiliated with Appellees, to participate in new wells to be drilled by Appellees. The alleged conspiracy involved a gas contract, with a very restrictive pricing provision, originally entered into between ONG and Gulf Oil Corp. (Gulf Contract). PITCO alleged GBK wanted control of the Gulf Contract and its pricing and term provisions in order to benefit its subsidiaries, Texas Southwest and Kaiser-Francis, and that GBK entered into a conspiracy with ONEOK in order to achieve that goal. PITCO's petition also alleged Appellees failed to calculate payouts using the correct price.

¶ 6 Within two weeks of filing the PITCO petition, Law Firm served discovery requests on Kaiser-Francis seeking information regarding, inter alia: "The Settlement Agreement between Kaiser-Francis and ONEOK concerning gas purchase contracts between Kaiser-Francis and ONEOK for gas produced in the State of Oklahoma. Upon information and belief, this Settlement Agreement was entered into sometime in the late 1980's or early 1990's."

¶ 7 On February 2, 2001, Appellees filed a motion for protective order pursuant to Rule 1.9(a) and (c), Oklahoma Rules of Professional Conduct, 5 O.S.1991 Ch.1, App.3-A. Appellees sought to disqualify Law Firm from representing PITCO in the instant lawsuit due to conflict of interest. After a full two day evidentiary hearing on the merits and substantial briefing by the parties, the district court entered a 17 page, well-reasoned and thoroughly researched order.

¶ 8 The district court addressed several competing considerations: balancing PITCO's interest in retaining counsel of its choice against Kaiser-Francis's concern for protection of its confidential information; protecting and upholding the attorney-client relationship and protecting an attorney who is representing a current client against a former client from being accused of wrongdoing; preventing the potential misuse of the disqualification motion as a litigation tactic; and protecting and preserving the attorney-client relationship and client confidences. Also, the district court's order made the following specific findings and conclusions of law: an attorney-client relationship existed between Law Firm and Kaiser-Francis during the pendency of the Wolverine Arbitration; the information required by the Discovery Order was produced by Kaiser-Francis and reviewed by Law Firm; at least some confidential information was included in the production; all aspects of discovery and production of documents were considered confidential by the parties and Law Firm; and the settlement of the dispute between ONEOK and Kaiser-Francis was "generally known;" however, the terms of the Kaiser/ONEOK Settlement, which are included in the allegations of PITCO's petition with specificity would not be "generally known" and could only come from confidential information encompassed by Rule 1.9. Based on the foregoing findings of fact and conclusions of law, the district court sustained Appellees' motion for protective order and disqualified Law Firm pursuant to Rule 1.9(a) and (c).

¶ 9 Appellants filed a motion to reconsider which was overruled by the district court. The district court's order found Law Firm, which once represented Kaiser-Francis, is now alleging on behalf of PITCO that Kaiser-Francis is liable to PITCO and is using confidential information that was made available to and reviewed by Law Firm during its representation of Kaiser-Francis as the basis for PITCO's allegations.

¶ 10 For one of its allegations of error, Law Firm contends the district court erred when it disqualified Law Firm because its decision was based on the incorrect legal "appearance of impropriety" standard utilized prior to the current version of Rule 1.9. We do not find the district court relied on this standard as its sole basis to sustain the disqualification. And, since we affirm the trial court's decision on other grounds, we need not further address this issue.

¶ 11 Law Firm urges the evidence demonstrated that Law Firm never occupied an attorney-client relationship with Kaiser-Francis; Kaiser-Francis specifically waived any claim of conflict in future litigation against Kaiser-Francis brought by clients represented by Law Firm; the Wolverine Arbitration was not substantially related to the present case; the Kaiser/ONEOK Settlement was never involved in the prior Wolverine Arbitration; and the Kaiser/ONEOK Settlement is "generally known," therefore, excluded from the restrictions of Rule 1.9(c).

¶ 12 Kaiser-Francis counters the district court acted well within its discretion in disqualifying Law Firm because the compelling evidence showed Kaiser-Francis and Law Firm had an attorney-client relationship; the confidential documents viewed by Law Firm in the Wolverine Arbitration are substantially related to the current litigation; and the specific matters contained in the confidential Kaiser/ONEOK Settlement files were not generally known.

STANDARD OF REVIEW

¶ 13 In reviewing the district court's order of disqualification pursuant to Rule 1.9(a) and (c), we follow the requirements of Piette v. Bradley & Leseberg, 1996 OK 124, 930 P.2d 183. Piette requires the district court to hold an evidentiary hearing and if it determines a party's attorney should be disqualified, its disqualification order must include a specific factual finding that the attorney had knowledge of material and confidential information. Piette cites to Lansing Delaware Water Dist. v. Oak Lane Park, Inc., 248 Kan. 563, 808 P.2d 1369 (1991), as authority. Lansing-Delaware provides the following...