****300 word response****
The issue of substantial relationship in Metropolitan v. Syntek was introduced due to the role of the Hughes & Luce Law firm, which represented Metropolitan Life Insurance Company but had previously represented Gene Phillips, the controlling share owner of Syntek Finance Corporation.
In 1986, Hughes & Luce provided counsel to Mr. Phillips during a divorce, and subsequently drafted a prenuptial agreement.During that period, Mr. Phillips provided detailed information covering his personal finances, and the organization of his companies. The information introduced during this period laid the groundwork for the motion to disqualify Hughes & Luce made in Metropolitan v. Syntek.
Syntek filed suit in 1989 due to a conflict with Metropolitan over the purchase of a hotel under alleged false promises, which led to Syntek stopping all loan payments. During an almost two year pre-trial period, Richard Nelson, counsel for Metropolitan and a representative of Hughes & Luce, collected information indicating Mr. Phillips was potentially involved in Syntek’s decision to stop payments to Metropolitan. Mr. Nelson then adjusted Metropolitan’s pleadings to reflect the new allegations made about Mr. Phillips involvement. In response, Mr. Phillips and Syntek filed a motion to disqualify Hughes & Luce on the grounds that the information required to give rise to the new allegations constituted a substantial relationship due to the 1986 divorce case. The Texas Disciplinary Rules of Professional Conduct explicitly prevent a lawyer from taking representation that is adverse to a former client if the issue at hand is “the same or substantially related.”
While the trial court denied the motion and awarded Metropolitan $6.7 Million, their decision was reversed and remanded by the court of appeals, which claimed the trial court had abused its discretion. Metropolitan petitioned the holding of the court of appeals to the Supreme Court of Texas, which relied upon the substantial relationship test set by NCNB Tex. Nat’l Bank v. Coker to reverse and remand the court of appeals decision. That standard establishes that a movant must prove that the relationship which exists between the past and present litigations represents a genuine threat that information given in confidence will be revealed. Furthermore, the Supreme Court of Texas determined that the court of appeals improperly ruled the trial court had abused its discretion, as such an abuse would require the trial court to act “without reference to any guiding rules or principles or…in an arbitrary or unreasonable manner.”
Based upon the applicable standards, both the supreme court and trial court were justified in their denial of the motion to disqualify. The Cokerstandard was clearly not met as testimonies from fourteen witnesses and five Coker expert witnesses demonstrated that the information which provided the basis for substantial relationship existed within the public domain and had already been provided by Syntek during discovery.As the information was already available there cannot be a genuine threat that confidences would be revealed because there was nothing left to reveal. Mr. Nelson had clearly also considered the possibility of a substantial relationship as he made two separate conflict checks, but found no reason to recuse himself.
As the trial court clearly had reasonable grounds to deny the motion to disqualify, the court of appeals was unjustified to reverse the lower court’s decision based upon perceived abuse of discretion. Thus, the supreme court had ample justification to reverse and remand the holding of the court of appeals.