A Dallas state judge is considering a motion to disqualify a law firm in an oil and gas royalty dispute for having a conflict of interest with the Bank of Texas.
At a Tuesday afternoon hearing, a lawyer for the bank claimed that Houston law firm Hirsch & Westheimer made an appearance as counsel on behalf of her client’s courtroom opponent, Equinor, despite the firm having a 10-year relationship with the bank.
A bigger problem, argued Dallas attorney Chrysta Castañeda, was the revealation in an affidavit filed by the opposing side that revealed the phone system at Hirsch & Westheimer automatically records every single phone call. That fact alone is troubling because it shows the firm possesses the bank’s proprietary and confidential information and is not afraid to use it to its advantage, Castañeda claimed.
“I am astounded that any counsel would file an affidavit like this in open court,” she told Dallas District Judge Staci Williams, who presided over the hearing.
Castañeda’s client on the record is BOKF N.A., which does business as the Bank of Texas. The bank is trustee for the South Texas Syndicate Trust, the entity that entered the oil and gas lease agreements at issue in the litigation. In addition to the case in Judge Williams’ court, there is a related case in South Texas’ La Salle County. BOKF has also sued Spanish energy giant Repsol in the dispute.
Although Hirsch & Westheimer did not make an appearance in the Dallas case until BOKF filed its motion bringing up the issue on Feb. 25, Castañeda said the conflict issue is troubling because Hirsch had already been involved in discovery in the South Texas case before Bank of Texas was aware of the alleged conflict — which gave the firm access to the bank’s privileged information.
“They have our confidential information [through their] longstanding attorney-client privilege, and there’s reasonable probability that they’ll use it,” Castañeda said.
According to the affidavit filed by Hirsch bankruptcy shareholder Michael J. Durrschmidt, the firm’s potential conflict on the current case came up because of a conversation between him and Samuel Ory, a partner at Oklahoma firm Frederic Dorwart Lawyers, which is the bank’s outside general counsel. Durrschmidt and Ory discussed the possibility of Durrschmidt serving as local counsel to represent BOFK’s interests in the Alta Mesa Resources bankruptcy in Houston.
During that conversation, Durrschmidt informed Ory “as a courtesy” about his firm’s role in the bank’s litigation against Equinor, but told him he did not believe there was a conflict, the affidavit states. Orly also agreed that there was no conflict because the matters were unrelated.
Hirsch & Westheimer, which made a special appearance for this hearing, had a different perspective from Castañeda’s.
“We have no information relevant to anything in this lawsuit whatsoever,” said Hirsch & Westheimer partner Eric Lipper, the attorney who represents Equinor.
Although Judge Williams did not rule on the disqualification issue at the hearing, she seemed to give clues as to which direction she is leaning.
While Lipper addressed the court, Castañeda raised an objection. The judge sighed and widened her eyes in Lipper’s direction after granting it. When he began explaining his role in a separate but related case, the judge cut him off.
“I don’t mean to interrupt, but that’s not about what this is about,” she said. “The business secrets seem to be the real issue. I didn’t find that very persuasive. I’ve gotten the icing and sprinkles; I just need the cake.”
And when Lipper explained that Equinor told him “they’d be disappointed beyond words” if he could not be their lawyer in the litigation, the judge interjected.
“I don’t need the emotions, just the facts,” Judge Williams said.
Fireworks erupted when Dallas lawyer Larry Friedman, who represented Hirsch & Westheimer’s interests in the hearing, made multiple objections while Miriam Sweetin of Dorwart spoke about the bank’s concerns about the privileged information Hirsch had access to — particularly BOKF’s banking and trust practices, risk tolerance, litigation strategy and settlement practices.
She also discussed the heightened measures banks must take because of the stricter regulatory standards they must meet. Before she got two words in, Friedman objected to “hearsay.”
Because of the strict standards, Sweetin brought up the bank’s concern about the possibility of violating federal laws if any cyber breaches occurred at Hirsh, since recordings of phone calls are stored on a server. Friedman grilled Sweetin on which specific federal laws the bank would be in jeopardy of violating, and made much of the fact that she could only list one off the top of her head.
Later on, the two wrestled over the question of whether Sweetin was directly an employee of the bank or the Dorwart firm
“Who pays your salary?” Friedman asked. “She’s spoken as an employee of the bank, but she’s not.”
Sweetin replied that she is a lawyer for the firm, that is general counsel of the bank. “I don’t know how you interpret that,” she said.
Judge Williams interjected, expressing her desire for the hearing — which had bled over into the late afternoon — to be over.
“It looks like you’re splitting hairs … this is nuts on the icing on the cake,” the judge said to Friedman.
“I’m making a record,” he replied.