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Flores Rentals, L.L.C. v. Flores

March 16, 2007; as amended May 11, 2007

FLORES RENTALS, L.L.C., A TEXAS LIMITED LIABILITY COMPANY, APPELLANT,
v.
ERNESTO FLORES, APPELLEE.



Appeal from Geary district court; BENJAMIN J. SEXTON, judge.

SYLLABUS BY THE COURT

1. Whether jurisdiction exists is a question of law over which this court has unlimited review.

2. An appellate court has a duty to dismiss an appeal when the record discloses a lack of jurisdiction.

3. Appellate jurisdiction is defined by statute; the right to appeal is neither a vested nor constitutional right.

4. Kansas appellate courts may exercise jurisdiction only under circumstances allowed by statute; the appellate courts do not have discretionary power to entertain appeals from all district court orders.

5. An order disqualifying counsel is not a final decision for purposes of an appeal pursuant to K.S.A. 60-2102(a)(4), which requires a final decision before an appellate court acquires jurisdiction. The only appellate remedy available to a party appealing from an order disqualifying counsel, at least in the circumstances where the issue is intertwined with the merits of the case, is to take an interlocutory appeal or to appeal after a final decision.

The opinion of the court was delivered by: Luckert, J.

Appeal dismissed.

This is an appeal from an order of the district court granting defendant Ernesto Flores' motion to disqualify the law firm of Weary Davis, L.C., from serving as counsel for plaintiff Flores Rentals, L.L.C., or its owner Rosemary Flores. The issue we consider on appeal is whether the district court's order of disqualification is an appealable order under the collateral order doctrine, a narrow exception to the general rule that only final orders may be appealed as a matter of right. We conclude that the collateral order doctrine does not allow an appeal of an order disqualifying counsel when the order has been entered because the attorney may be a witness in the litigation.

The question of potential disqualification of the Weary Davis law firm arose after an attorney in the firm, Steven R. Struebing, was identified as a potential witness. Ernesto raised the issue by filing a motion to disqualify the Weary Davis law firm. In his written motion and in his arguments to the district court, Ernesto alleged that Struebing had previously represented Ernesto, Rosemary, and Flores Rentals in certain real estate transactions. Ernesto essentially asserted that he was in partnership with Rosemary and that any advice given by the Weary Davis law firm was in furtherance of their partnership. Ernesto asserts that determination of ownership of the partnership is a critical issue in this case in which Flores Rentals, through its attorneys at Weary Davis, argues Ernesto converted money or assets belonging to Flores Rentals for his personal use or to give as gifts to others. In a related suit filed in Bexar County, Texas, Ernesto has requested a declaratory judgment regarding his alleged one-half ownership in Flores Rentals.

It is uncontroverted that Ernesto had contact with the Weary Davis law firm during the process of inquiring into three different parcels of real estate which were potential sites for Flores Rentals to operate franchised locations of Aaron's Rents and Sells, a national retail and rent-to-own furniture company. Working with Ernesto, Struebing provided legal services related to one tract of real estate which was ultimately determined not to be a suitable size for the Aaron's store. In a second phase of events involving Struebing, Ernesto found property in Junction City, Kansas, which was owned by Storage Properties, Inc., a corporation of which Struebing was a principal shareholder and vice-president. Ultimately, in April 2002, Flores Rentals entered into a lease agreement with Storage Properties. The lease agreement and guarantee were drafted by Struebing. Per Storage Properties' request, both Rosemary and Ernesto signed themselves as guarantors.

Then, in the spring of 2003, Flores Rentals began investigating a location for an additional Aaron's franchise store. This led to Ernesto contacting Struebing for assistance yet again. Struebing negotiated a lease for property in Liberal, Kansas; the lease was drafted and completed. Again, Ernesto and Rosemary were both listed as guarantors on the lease.

Around this same time period, Rosemary terminated Ernesto's involvement with Flores Rentals. Flores Rentals filed the present action against Ernesto in Geary County District Court in April 2005, alleging that Ernesto was hired as manager of the Aaron's store in Junction City and, during his time of employment, wrongly converted money or assets belonging to Flores Rentals.

During discovery, Ernesto's Texas counsel wrote a letter stating that Struebing would need to be called as a witness in both the Texas and Kansas lawsuits and suggesting, therefore, that the Weary Davis law firm might have to withdraw from the Kansas case. Ernesto's Kansas counsel became aware of the letter the day before Ernesto's deposition and alerted Struebing. Struebing reviewed the applicable Kansas Rules of Professional Conduct (KRPC) and concluded that withdrawal was not required. Struebing prepared a letter to that effect and delivered it to Ernesto's counsel the next morning.

This ultimately led to Ernesto's filing a motion to disqualify Struebing's law firm, Weary Davis, from serving as counsel for Flores Rentals in the Kansas case based upon Struebing being a key witness with regard to the pivotal issue of who owns Flores Rentals.

The district court agreed. The district court found it uncontroverted that the interests between defendant Ernesto and plaintiffs Flores Rentals and Rosemary are substantially adverse to one another. The district court further found that the ownership issue, to which Struebing would testify in Texas, could also have a substantial bearing on the results in the Kansas case. Based upon testimony at the hearing on the motion to disqualify and documentation provided in the pleadings, the district court determined there was a possibility that Ernesto and Rosemary were in a partnership.

The district court found an issue existed regarding whether the Weary Davis law firm represented Ernesto as a former client, noting that although the law firm denied providing any counsel to Ernesto, it is uncontroverted that Ernesto had numerous contacts with the law firm. The district court determined that, based on their contacts, Ernesto had a substantial relationship with the Weary Davis law firm and that each prong of the requirements necessary before an attorney must be disqualified under KRPC 1.9(a) (2006 Kan. Ct. R. Annot. 421) (Conflict of Interest: Former Client) were satisfied. Further, Ernesto neither provided a waiver to allow the law firm to represent the plaintiff in the Kansas lawsuit, nor did he consent to the law firm's representation of the plaintiff. Therefore, the district court granted the motion to disqualify the Weary Davis law firm as counsel.

After granting Ernesto's motion to disqualify counsel, the district court, at Flores Rentals' request, made findings for an interlocutory appeal pursuant to K.S.A. 60-2102(c). In October 2005, in Court of Appeals Case No. 95,366, Flores Rentals applied under K.S.A. 60-2102(b) for permission to take an interlocutory appeal. The Court of Appeals, however, denied the motion.

In November 2005, Flores Rentals subsequently filed a docketing statement and notice of appeal with the Clerk of the Appellate Courts in the present case. This time, the Court of Appeals issued an order to show cause, directing the parties to show why the appeal should not be dismissed for lack of jurisdiction because, according to the Court of Appeals, "the order appealed from may be interlocutory in ...


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