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CAUSE NO. 2015-23046
PINARD DEVELOPMENT LLC, § IN THE DISTRICT COURT
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Plaintiff, §
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v. §
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NORTHWOODS EDUCTIONAL §
FOUNDATION, INC., § HARRIS COUNTY, TEXAS
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Defendant, §
v. §
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PINARD DEVELOPMENT LLC, §
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Counter-Defendant. § 165th JUDICIAL DISTRICT
NORTHWOODS EDUCATIONAL FOUNDATION, INC.’S
REPLY TO PLAINTIFF’S RESPONSE TO MOTION TO DISQUALIFY
AND RESPONSE TO MOTION FOR SANCTIONS
Defendant and Counter-Claimant Northwoods Educational Foundation, Inc.
(“Northwoods Educational”) files this Reply in further support of the need for disqualification of
Nathan A. Steadman (“Steadman”) and his firm, MEYER NIGHT ILLIAMS L.L.P. (and to
respond to Plaintiff Pinard Development, LLC’s (“Pinard”) Motion for Sanctions) because:
Steadman made himself an essential witness when he collaborated with Rapp (the
attorney for Steadman’s target, Northwoods Educational) and Pinard to sue Northwoods
Educational, knowing full-well that Rapp represented Northwoods Educational at
the time (discussing strategy/timing/claims – not merely requesting documents
pursuant to a pre-suit investigation, as Plaintiff would have this court believe).
Steadman’s attempt to be both attorney and witness for his client prejudices Northwoods
Educational, as it handicaps Northwoods Educational’s ability to challenge his credibility
and to exclude him from the courtroom and other proceedings when invoking the Rule.
If anyone is entitled to sanctions, it would be Northwoods Educational for Steadman’s
refusal to voluntarily withdraw.
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I.
TEADMAN ADE IMSELF AN SSENTIAL ITNESS.
Steadman’s contacts with Rapp were more than limited communications pursuant to a
pre-suit investigation – they were intentional and knowing interferences with the contractual
relationship between Rapp (a former partner of Steadman’s) and Rapp’s client, Northwoods
Educational, during which Steadman intentionally and knowingly conspired with Rapp (the
attorney for Steadman’s target, Northwoods Educational) to sue Northwoods Educational.
Pinard argues that Steadman’s interactions with Rapp were merely limited
communications pursuant to an appropriate pre-suit investigation. They were much more than
that. Here is the very important distinction: Steadman did not just request documents to which
Pinard was entitled. If that was the extent of Steadman’s actions, Northwoods Educational
would agree that Steadman would not have made himself an essential witness. Further, if Rapp
had only represented Pinard (and not Northwoods Educational) then Steadman could have
discussed with his former partner, Rapp, the strategy for suing Northwoods Educational to his
heart’s content without making himself a witness. Instead, Steadman had multiple meetings with
Rapp (whom Steadman knew was acting counsel for Steadman’s target) during which they
discussed the strategy for Rapp’s eventual withdrawal and Steadman’s lawsuit against
Northwoods Educational (discussing strategy and coordinating timing of the withdrawal and
March 27, 2015: Pinard to Rapp: “Nathan [Steadman] came by and said he is going to call you [Rapp] about
Northwoods.” Motion Exh. “B”, at RK000683.
March 31, 2015: Pinard to Rapp, “After you speak with Nathan [Steadman], give me a call.” Motion Exh. “B”, at
RK000754.
April 6, 2015: Rapp to Pinard, “Want me to reach out to Nathan [Steadman] on the [Northwoods Educational] deal?
I will discuss with him [Steadman]…” Motion Exh. “B”, at RK000884.
March 25, 2015: In response to request from Steadman, Rapp sends documents to Steadman while explaining that
he represents Northwoods Educational and the priest has no signing authority, stating that “[Pinard] is coming in
tomorrow morning. I am trying to get confirmation that I can withdraw from further work for [Northwoods
Educational]…” Motion Exh. “B”, at RK000574.
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lawsuit, and discussing facts in support of the planned causes of action against Northwoods
Educational). This makes Steadman not only a potential party, but also an essential witness for
the claims against Pinard (and potential claims against Rapp) for tortious interference and civil
conspiracy.
Steadman’s testimony is necessary to determine what exactly occurred during his
meetings with Rapp and with Pinard, and Steadman’s personal knowledge of the discussions.
This evidence is absolutely necessary for the essential elements of the claims for tortious
interference (e.g., willful and intentional interference) and civil conspiracy (e.g., Pinard was a
member of a combination, the object of the combination was to accomplish an unlawful purpose
or a lawful purpose by unlawful means, the members had a meeting of the minds, a member
committed an overt act to further the object).
The controlling case law. Pinard attempts to distinguish the cases of Ayus and Guidry
(which held itwas an abuse of discretion to not disqualify the attorney). However, these cases
are both on point:
In re Guidry, 316 S.W.3d 729 (Tex. App.—Houston [14th Dist.] 2010, no pet.). In In re
Guidry, Mr. Lamont Jefferson (“Jefferson”), a partner at Haynes and Boone, LLP, served as
coverage counsel for a group of insureds (the “Insureds”). Id. at 732. In that role, Jefferson
April 6, 2015: Rapp to Pinard, “…I will discuss with him [Steadman], but I think that I now send the declination
letterto them [Northwoods Educational] and then we let Nathan [Steadman] run with it” [i.e.,
then we lethim
(Steadman) sue the client, Northwoods Educational]. Motion Exh. “B”, at RK000884.
April 6, 2015: Rapp to Pinard, “Nathan [Steadman] is not going to be able to file anything this week. He has a
hearing tomorrow and depos the rest of the week. And he [Steadman] wants to send a demand letter first to be able
to claim atty fees. His [Steadman’s] suggestion was that I send my declination letter giving them until Friday to
provide the signed contracts. That may spur them, and then he [Steadman] can move if they don’t respond. What do
you think? I am fine with that, since he [Steadman] can’t get anything done this week anyway.” Motion Exh. “B”, at
RK000884.
April 9, 2015: Rapp to Steadman, “Nathan [Steadman], Ianticipate you [Steadman] will pick this up after my
declination...” [again strategizing with Steadman regarding suing Rapp’s own client, Northwoods Educational], and
asking Steadman if it is “okay to send out tomorrow.” Motion Exh. “B”, at RK000898.
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advised the Insureds regarding coverage, sent numerous letters to opposing counsel, and
negotiated an agreement tolling the statute of limitations. Id. The initial suit settled, as did the
subsequent coverage suit. Id.
However, the Insureds then initiated suit against the brokers of the implicated insurance
policies under the Texas Insurance Code alleging that the brokers obtained substandard insurance
for the Insureds. Id. at 733–34. Jefferson was a fact witness in this suit because the brokers
raised a limitations defense and he had sent correspondence and negotiated a tolling agreement
directly related to limitations in the underlying suit. See id. at 732. The brokers moved for
summary judgment on limitations grounds, attaching Jefferson’s letters and testimony as
support. Id. at 734–35. Jefferson then appeared as “additional counsel” for the Insureds in
response to the motion for summary judgment. Id. at 735.
Relying on Rule 3.08, the brokers filed a motion to disqualify Jefferson. Id. at 736. The
trial court denied this motion, and the brokers sought mandamus. Id. at 737. The brokers argued
that Jefferson’s testimony was essential to their limitations defense. Id. The Insureds argued
that other representatives of the Insureds could provide similar testimony, and that the best
evidence of Jefferson’s letters were the letters themselves. Id. at 740. The Houston Fourteenth
Court of Appeals rejected the Insureds’ arguments and held Jefferson’s testimony met the
standard for Rule 3.08:
[T]hese other sources of proof would not be able to explain or testify concerning
the facts that Jefferson knew that might have aroused suspicion regarding the
possible existence of the Two–Year Claims. In addition, because the Jefferson
Letter and the evidence of what Jefferson knew and when he knew it are crucial
elements of the Brokers' defense, the Brokers are entitled not only to offer the
letter into evidence, but also to call the author as a witness to furnish testimony
concerning the substance of the letter and his thought processes in preparing it
and in filing suit on behalf of the Insureds.
Id. at 740 (emphasis added). Thus, the Houston Fourteenth Court of Appeals held the trial court
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abused its discretion in refusing to disqualify Jefferson and conditionally granted mandamus
relief. Id. at 742. Likewise, Northwoods Educational is entitled to Steadman’s testimony
regarding the substance of his conversations with Rapp, and his thought processes in preparing
such communications, as such testimony is crucial to the elements of Northwoods Educational’s
claims and Pinard’s defenses thereto.
Ayus v. Total Renal Care, Inc., 48 F. Supp. 2d 714 (S.D. Tex. 1999). Applying Rule 3.08, the
Southern District disqualified an attorney whose written correspondence served as a basis for the
opposing party’s claims against his client. Id. at 715. Dr. Ayus agreed to sell a controlling stake
in his dialysis practice to Total Renal Care (“TRC”). Ayus v. Total Renal Care, Inc., 48 F. Supp.
2d 714, 715 (S.D. Tex. 1999). Shortly after Dr. Ayus’s transaction with TRC closed, Dr. Ayus
claimed TRC began assembling a team tasked with documenting his every misstep in preparation
for his firing. Id. One member of this team was Vinson & Elkins attorney Adam Schiffer
(“Schiffer”), who authored and sent letters containing false allegations against Dr. Ayus as a
pretext for firing him. Id. Dr. Ayus filed suit against TRC for breach of contract, common law
fraud, and breach of fiduciary duty. Id.
Because he wanted to offer Schiffer’s letters as evidence, Dr. Ayus sought to disqualify
Schiffer under Rule 3.08. Id. TRC and Vinson & Elkins argued that disqualification would be
improper because Schiffer did not have personal knowledge of relevant facts, but instead had
based his letters exclusively on facts communicated to him by TRC. Id. at 716. Therefore, the
defendants argued that all of the allegations in the letters could be obtained by Schiffer’s sources,
representatives of TRC, making Schiffer’s testimony unnecessary. Id. The defendants also
argued that Vinson & Elkins was hired in anticipation of litigation and disqualification under
these circumstances would require a client to retain one lawyer for pre-litigation activities and
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another to represent the same position at trial. Id.
The Southern District held that the letters were necessary to Dr. Ayus’ case and
disqualified Schiffer under Rule 3.08. Id. at 716-17. In so holding, the court agreed with Dr.
Ayus’ arguments that TRC would have to prove the allegations in the letters were accurate, or at
least made in good faith, in defense to his breach of contract claims. Id. Further, Dr. Ayus
needed to use the letters to show he was fired despite his attempts to quickly and fairly address
the allegations therein. Id. Finally, Dr. Ayus needed the letters to demonstrate that TRC
attempted to harass and intimidate him, and to create a pretext for his firing. Id. The court
concluded that the truth or falsity of Schiffer’s letters was “squarely in issue” and refused to
restrict Dr. Ayus’ ability to use them “merely to allow TRC to retain its choice of counsel.” Id.
at 716.
Just as the truth or falsity of Schiffer’s letters was “squarely in issue”, requiring
Schiffer’s testimony (and thus his disqualification), the personal knowledge of Steadman as to
the facts and circumstances surrounding his meetings with Rapp and Pinard and whether those
meetings and communications meet the elements of tortious interference and civil conspiracy are
“squarely at issue”, requiring Steadman’s testimony (and thus his disqualification).
Interestingly, the Court in Ayus disqualified Schiffer as a preventative measure, despite
the statement by counsel for Dr. Ayus that plaintiff did not intend to call Mr. Schiffer as a
witness. Id. at 717. The court stated:
Although the lawyers for Plaintiffs state that they do not intend to call Schiffer
or any other VE lawyers as witnesses in this case, the Court believes that Schiffer
has “involved himself in the facts of this case” such that he may ultimately
become a necessary witness which would place him in the awkward position of
acting as both an advocate and witness before the jury. In fact, Plaintiffs'
lawyers, through discovery conducted to date, have already encountered
discrepancies and knowledge gaps between the deposition testimony of TRC
representatives and the content of the letters. The preventive measure of
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disqualifying Schiffer is therefore in order, to avoid the attorney-witness problem
that may yet arise in this case down the road.
Id. (emphasis added). Northwoods Educational’s argument is even stronger, as Northwoods
Educational does indeed plan to call Steadman as a witness.
II.
TEADMAN S UAL OLE AS TTORNEY/WITNESS ILL REJUDICE ORTHWOODS.
Steadman will, at the very least, be called by Northwoods Educational as a witness in this
case. Northwoods Educational will use his testimony as evidence for its claims of tortious
interference and civil conspiracy (as well as frivolous lawsuit and fraudulent real estate filing)
and Pinard will use Steadman’s testimony in support of its defenses against such claims.
Prejudice can be shown if the fact finder may be confused as to whether a statement by
an advocate-witness should be taken as proof or as an analysis of the proof, thereby
handicapping the opposing party in challenging the credibility of the advocate-witness. Id. at
740–41; see also Rule 3.08, cmt. 4. Prejudice can further be shown by the fact that an advocate-
witness, if permitted to remain on the trial team, will not be subject to exclusion from the
courtroom under the Rule. In re Guidry, 316 S.W.3d at 741 (summing up its reasoning as
follows:
[A]llowing Jefferson to serve as both a lawyer and a fact witness would cause
actual prejudice to the Brokers by blurring the line in the jurors’ minds between
Jefferson’s legal arguments as counsel and his trial testimony as a fact witness,
potentially inducing the jury to give undue weight to his arguments as counsel
because of his extensive personal knowledge of facts or because the jury could
not recall whether statements he made during the trial were made from the
counsel table or the witness stand. If Jefferson were permitted to serve on the
Insureds’ courtroom team, the Brokers would be prejudiced in their ability to
obtain Jefferson’s exclusion from the courtroom under the rule for exclusion of
witnesses).
The same reasoning applies in this case, as allowing Steadman and his firm to continue
its dual role handicaps Northwoods Educational’s ability to challenge Steadman’s credibility and
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to exclude him from the courtroom and other proceedings when invoking the Rule.
III.
INARD IS OT NTITLED TO ANCTIONS
As established by Northwoods Educational’s Motion and this Reply, the requested
dismissal of Steadman and his firm is not groundless, frivolous, or brought in bad faith and with
knowledge of its inaccuracy. Indeed, it should be Northwoods Educational requesting sanctions
against Steadman for not voluntarily withdrawing when requested to do so, see Exhibit “C” to
the Motion, and forcing this motion practice and attention by this Court.
IV.
ONCLUSION
As this Court can see based on the correspondence in Exhibit B, this is not a case of
Northwoods Educational unnecessarily calling a lawyer as a witness just to get that lawyer
disqualified. Steadman should have known that his actions were not only inappropriate, but also
made him an essential witness. He and his firm should be disqualified from further
representation of Pinard, and this Court should award any further relief to which it believes
Northwoods Educational is justly entitled (up to and including sanctions, for which Northwoods
Educational can provide an affidavit of costs should the Court determine it warranted).
Respectfully submitted,
BEIRNE AYNARD ARSONS L.L.P.
By:/s/ Scott D. Marrs ____________________
Scott D. Marrs
Texas Bar No.: 13013400
E-Mail: smarrs@bmpllp.com
Andrew B. McGill
Texas Bar No.: 24051026
E-Mail: bmcgill@bmpllp.com
Scott R. Davis
Texas Bar No.: 24059660
E-Mail: srdavis@bmpllp.com
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1300 Post Oak Blvd., Suite 2500
Houston, Texas 77056
Telephone: 713-623-0887
Facsimile: 713-960-1527
ATTORNEYS FOR DEFENDANT AND
COUNTER-PLAINTIFF
NORTHWOODS EDUCATIONAL
FOUNDATION, INC.
CERTIFICATE OF SERVICE
I hereby certify that on the 7th day of August, 2015, a true and correct copy of the foregoing
was served on all counsel of record via the Court’s electronic filing system:
Nathan A. Steadman
Mary Jane Lorkowski
MEYER NIGHT ILLIAMS L.L.P.
8100 Washington Avenue, Suite 1000
Houston, Texas 77007
/s/Andrew B. McGill______________________
Andrew B. McGill
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