In re RSR Corp.
Supreme Court of Texas, No. 13-0499 (December 4, 2015)
Opinion by Justice Devine

The Texas Supreme Court conditionally granted mandamus in this closely-watched case from the Dallas Court of Appeals. Disagreeing with the Dallas Court, the Supreme Court held the trial court abused its discretion in disqualifying plaintiffs’ counsel, Bickel & Brewer, because the lower court improperly analyzed the lawyers’ conduct under the construct of a side-switching paralegal rather than the more flexible analysis for former employees found inIn re Meador.

Bickel & Brewer has long represented RSR Corporation in a dispute against Inppamet S.A. Chilean counsel represents RSR in a similar case pending in Chile. During the course of the litigation, Herman Sobarzo, Inppamet’s finance manager, left Inppamet, taking with him 2.3 gigabytes of data, including privileged attorney-client information. Sobarzo later presented himself to RSR’s Chilean counsel, and ultimately to Bickel & Brewer, as a “whistle-blower” and turned over the documents he had taken from his former employer. The trial court found that Sobarzo met with Bickel & Brewer’s attorneys and consultants at least 19 times for a total of more than 150 hours, and that Bickel & Brewer had reviewed at least some of Sobarzo’s documents. The law firms ultimately hired Sobarzo as a “consultant,” for which Sobarzo charged $1,600 per day—reportedly four times his normal salary.

After this arrangement came to light, the trial court granted Inppamet’s request to disqualify Bickel & Brewer from continuing to represent RSR. The court analyzed the motion under the American Home Products line of cases, which typically involve side-switching paralegals and legal assistants. In those cases, “two presumptions ensure that any law firm hiring a side-switching paralegal is disqualified unless it has screening measures in place” to prevent the paralegal from working on the case for the new employer. Inppamet argued that analysis was appropriate in this case because, in Sobarzo’s role as finance manager, he worked with Inppamet’s lawyers and was functionally part of the company’s “litigation team.” The trial court concluded that, because Sobarzo was not screened from working on the case after he “switched sides”—and was in fact hired as a consultant specifically to work on the case—Bickel & Brewer must be disqualified under American Home Products. The Dallas Court of Appeals concurred and denied RSR’s petition for mandamus relief.

The Supreme Court disagreed, however, holding that American Home Products does not apply to former employee fact witnesses who merely consulted with counsel as one part of their job duties. It noted that Sobarzo’s “position with his former employer existed independently of litigation, and his function was not primarily to report to lawyers.” Accordingly, Bickel & Brewer was free to contact him under Texas Disciplinary Rule 4.02, subject to its obligation to protect against the disclosure of Inppamet’s privileged communications. It held: “If attorneys abuse their freedom by eliciting privileged or confidential information from fact witnesses, then their conduct is subject to Meador.”

Under the Meador test, the trial court should have considered factors such as the significance of the privileged information, the extent to which the attorneys reviewed and digested it, the fault of the movant in allowing the unauthorized disclosure, and the potential prejudice to all of the parties. The facts Inppamet relied on, such as the amount of time Bickel & Brewer spent with Sobarzo, the number of potentially privileged documents at issue, the fact that the law firms actually hired Sobarzo as a consultant, and the allegedly excessive payments made to Sobarzo, should be considered as part of the Meador analysis, but did not justify adopting the “entirely different analytical framework” of American Home Products.

The Court did not opine on whether disqualification would have been proper under the Meador standard, but conditionally granted mandamus relief on the ground that the trial court abused its discretion by analyzing the disqualification motion using the American Home Products presumptions.