On February 15th, a Texas appellate court held that lawyers who briefly represented a plaintiff and a third-party defendant in the same suit were not disqualified because the conflict of interest was quickly cured and the party seeking the disqualification was not actually prejudiced.
In the case, In re Ace Real Prop. Invs., LP, 2018 BL 50889, Tex. App., 9th Dist., No. 09-17-00479-CV, the plaintiff, Ace Real Property Investments, LP, sued Cedar Knob Investments, LLC for breach of contract and fraud. Cedar Knob then sued the plaintiff’s broker, Home Run Realty, seeking contribution for Ace’s alleged damages.
Attorneys for Ace filed the answer for third-party defendant Home Run. Both Ace and Home Run consented to Ace’s lawyers doing so. Cedar Knob objected and moved to disqualify Ace’s attorney’s, arguing that representation of adverse parties (Ace and Home Run) amounted to an unwaivable conflict. Home Run then moved to substitute counsel, which the trial court allowed. The trial court held a hearing and granted Cedar Knob’s disqualification motion, which Ace appealed.
Texas Rule of Professional Conduct 1.06 states that a lawyer cannot represent multiple parties in a suit where the interests of the parties are “materially and directly adverse” to one another. The appellate panel, which consisted of three judges, unanimously agreed that disqualification was not required because Cedar Knob failed to show that it had been prejudiced by the conflict.The appellate court further disagreed with Cedar Knob’s contention that the plaintiff and third-party defendant were generally adverse. Instead, the court reasoned that counsel’s dual representation would not necessarily prevent a fair resolution of the case or create the appearance of impropriety.
Read the full case here.
