In Re Bank of America, N.A.

OPINION

TAFT, Justice.

The issue for this Court is whether plaintiffs counsel should be disqualified after extensively reviewing and digesting approximately 135 pages of defendant’s privileged information, obtained through no wrongdoing. The trial court1 denied the motion to disqualify. We conclude the motion should have been granted and conditionally grant the writ of mandamus.

The discovery dispute below

Nitla S.A. de C.V. (Nitla), the plaintiff and real party in interest, sued several defendants below.2 The defendants included the relator, NationsBank, N.A., now known as Bank of America, N.A. (Bank of America). Nitla’s causes of action are grounded in fraud.

On March 22, 1999, the trial court’s predecessor ruled that approximately 158 specific, Bates-stamped pages of documents, *240presented for in camera inspection pursuant to Bank of America’s claims of attorney-client and work-product privilege, were not so privileged. At the March 22 hearing, the predecessor judge handed many of the in camera documents to counsel for Nitla at the time he made the ruling, over Bank of America’s objection.3 Bank of America had no opportunity to seek mandamus relief before these in camera documents were given to Nitla.4 The remaining in camera documents were tendered to Nitla by the predecessor judge in April 1999, after Bank of America had filed its petition for writ of mandamus.

The ñrst mandamus proceeding

Three days after the first in camera documents had been handed to Nitla, Bank of America sought mandamus relief. Ultimately, this Court stayed further dissemination of the documents, and the trial court ordered Nitla to return the in camera documents to the trial court.5 On June 19, 2000, this Court held6 that most of the in camera documents were privileged. See In re NationsBank, N.A. n/k/a Bank of America, N.A., No. 01-99-00278-CV, 2000 WL 799807 (Tex.App.—Houston [1st Dist.], Jun. 19, 2000, orig. proceeding) (not designated for publication). After this Court’s June 19, 2000 ruling, neither Bank of America nor Nitla sought mandamus relief in the Supreme Court of Texas.

Motion to disqualify

On July 14, 2000, in the trial court, Bank of America moved to disqualify Nitla’s counsel. Bank of America argued disqualification was appropriate because (1) Nit-la’s lawyers had consistently disregarded their ethical and professional obligations to gain an unfair advantage, and (2) all the factors that the Supreme Court of Texas considered in In re Meador, 968 S.W.2d 346 (Tex.1998) as supporting disqualification had been satisfied. Bank of America reminded the trial court and Nitla of what it had said at the March 22, 1999 hearing: an attorney who reviewed an opposing party’s privileged documents could be subject to disqualification.

Following Nitla’s response and a hearing, the trial court signed an order on August 21, 2000, denying Bank of America’s motion to disqualify Nitla’s counsel. In the order,7 the trial court concluded as follows:

(1) Counsel for Nitla obtained the in camera documents as a result of a judicial proceeding. The trial court noted that lawyers routinely argue that their clients need immediate relief when such really is not the case, and he declined to characterize such *241oral advocacy as unprofessional, unethical, or misleading.
(2) Nitla reasonably relied on the action of the predecessor judge in providing it with the in camera documents.
(3) Bank of America had “clean hands” in the dispute concerning the turning over of the in camera documents.
(4) Nitla’s counsel extensively reviewed and digested the privileged information.
(5) There was no competent evidence to support Bank of America’s assertion and argument that Nitla’s lawyers developed their trial strategy based on their extensive discussion of the privileged documents in briefs filed with this Court in the first mandamus proceeding.
(6) The trial court was prepared and available to quash deposition notices and to sustain objections to specific questions lodged during any deposition to prevent the use of privileged information.
(7) Bank of America’s argument that it had been prejudiced by the disclosure of its privileged information was nothing more than advocacy and conclusory statements.
(8) The trial court was not persuaded that Nitla’s counsel should be disqualified, even absent evidence of harm to Nitla.

Bank of America filed this second mandamus proceeding after the trial court’s August 21 ruling.

Arguments of the parties

In this mandamus proceeding, Bank of America argues that, by failing to properly review the evidence in the record supporting disqualification, the trial court abused its discretion in denying its motion to disqualify. Bank of America maintains that this is a “factually unique case ... because it combines the erroneous actions of a trial court in releasing privileged documents and the inexcusable attempts of Nitla and its counsel to gain an unfair advantage.”

According to Bank of America, the standards of Meador apply to this case. Applying Meador, Bank of America insists that the trial court abused its discretion by not disqualifying Nitla’s counsel: (1) because the evidence in the record established that (a) Nitla made a strategic decision to risk disqualification by insisting upon immediate receipt of the in camera documents, and then proceeding to review and analyze them, and (b) Bank of America was prejudiced by the disclosure of the privileged information; and (2) because there is no evidence in the record to support prejudice to Nitla if its counsel is disqualified.

Nitla responds that there is no legal precedent where a court has disqualified counsel after counsel obtained review of documents by court order and pursuant to the discovery process. According to Nitla, Meador is distinguishable because, in that ease, information was improperly obtained outside of the legal process. Nitla contends, as the trial court concluded, that its counsel did not violate the Texas Disciplinary Rules or the ABA Formal Opinion 94-382. Even if Meador does apply, Nitla argues that application of the Meador factors does not lead to disqualification and that it will be severely prejudiced if its attorneys are disqualified.

Standard of review

An order denying a motion to disqualify counsel is reviewable by a petition for writ of mandamus. See, e.g., Meador, 968 S.W.2d at 348; National Med. Enters., Inc. v. Godbey, 924 S.W.2d 123, 133 (Tex.1996). Appellate relief is generally deemed inadequate. See Godbey, 924 S.W.2d at 133.

*242In Meador, an attorney received unsolicited, privileged and confidential information of the opposing party. 968 S.W.2d at 349. The attorney was not directly involved in improperly obtaining the confidential information. 968 S.W.2d at 351, 354. We find that these facts are not substantively different from those before us in this mandamus proceeding. Nitla did not obtain Bank of America’s privileged, in camera documents through any wrongdoing on its part or that of its counsel. See, e.g., Contico Int’l, Inc. v. Alvarez, 910 S.W.2d 29, 35 (Tex.App.—El Paso 1995, orig. proceeding) (misconduct to continue representation when lawyer has gained confidences of opposing party through theft, deceit, inadvertence, or other means), overruled in part by Meador, 968 S.W.2d at 354 (disapproving of Contico to extent it held attorney must be disqualified when attorney gains possession of opponent’s confidential information through no wrongdoing on part of attorney). Nor did Nitla obtain the in camera documents through any inadvertence of Bank of America. See, e.g., Granada Corp. v. First Court of Appeals, 844 S.W.2d 223, 226 (Tex.1992) (inadvertent disclosure of privileged documents). The fact that the disclosure of the privileged documents to Nit-la in 1999 did not become unauthorized until this Court reversed the trial court’s ruling in 2000, does not, in our view, impact the application of Meador.

Accordingly, we conclude that whether the trial court’s decision to deny the motion to disqualify Nitla’s counsel constituted an abuse of discretion depends upon an application of the factors set forth in Mea-dor. Our review of the trial court’s decision will be based on whether, under Mea-dor, given the evidence presented to the trial court, the trial court could have reasonably decided only to disqualify Nitla’s counsel. See Walker v. Packer, 827 S.W.2d 833, 840 (Tex.1992) (“The relator must establish that the trial court could reasonably have reached only one decision.”).

With respect to resolution of factual issues or matters committed to the trial court’s discretion, we may not substitute our judgment for that of the trial court, unless the trial court’s decision is shown to be arbitrary and unreasonable. Id. at 839-40. Our review of a trial court’s determination of the legal principles controlling its ruling is much less deferential. A trial court has no discretion in determining what the law is or in applying the law to the facts. Id. at 840.

Mention must also be made of the relative importance of the “severity of disqualification” versus protection of privileged information. The supreme court stated in Spears v. Fourth Court of Appeals, 797 S.W.2d 654, 656 (Tex.1990), citing NCNB Texas Nat'l Bank v. Coker, 765 S.W.2d 398, 399 (Tex.1989):

Disqualification is a severe remedy. The courts' must adhere to an exacting standard when considering motions to disqualify so as to discourage their use as a dilatory trial tactic.

(Citations omitted.)

However, the supreme court also stated in Coker: “The preservation of clients’ secrets and confidences is not an option.” 765 S.W.2d at 399. The supreme court has adopted a strict rule requiring disqualification whenever counsel undertakes representation of an interest that is adverse to that of a former client. See Phoenix Founders, Inc. v. Marshall, 887 S.W.2d 831, 833 (Tex.1994). Underlying this strict rule is the conclusive presumption that confidences and secrets were imparted to the attorney during the prior representation. See Phoenix Founders, Inc., 887 S.W.2d at 833; Coker, 765 S.W.2d at 400.

*243Finally, the supreme court emphasized in Meador:

Without doubt, there are situations where a lawyer who has been privy to privileged information improperly obtained from the other side must be disqualified, even though the lawyer was not involved in obtaining the information. Discovery privileges are an integral part of our adversary system. By protecting attorney-client communications and an attorney’s work product, they encourage parties to fully develop cases for trial, increasing the chances of an informed and correct resolution.

968 S.W.2d at 351.

We do not mean to imply that the facts in this second mandamus proceeding involve the imparting of confidential information during a prior representation, as was the case in Coker and Phoenix Founders, Inc. There is no prior representation issue here. We cite to Coker and Phoenix Founders, Inc. for the purpose of demonstrating the policy reason underlying the ban on representation of a client against a former client: the protection of a client’s confidences and privileged information.

Application of Meador in this second mandamus proceeding

1. The Meador factors.

A trial court, giving due consideration to the importance of discovery privileges, must consider all the facts and circumstances presented to it to determine whether the interests of justice require disqualification. See Meador, 968 S.W.2d at 351. In this exercise of judicial discretion, the trial court should consider, among others, the following factors:

(1)whether the attorney knew or should have known that the material was privileged;
(2) the promptness with which the attorney notifies the opposing side that he received its privileged information;
(3) the extent to which the attorney reviews and digests the privileged information;
(4) the significance .of the privileged information, i.e., the extent to which its disclosure may prejudice the movant’s claim or defense, and the extent to which return of the documents will mitigate that prejudice;
(5) the extent to which movant may be at fault for the unauthorized disclosure;
(6) the extent to which the nonmovant will suffer prejudice from the disqualification of his attorney.

Id. at 351-52.

It is acknowledged, by all, that counsel for Nitla was given the in camera documents by the predecessor judge after the judge ruled that they were not privileged. In its August 21, 2000 order, the trial court exonerated Nitla’s counsel of having violated the Texas Disciplinary Rules and the ABA Formal Opinion 94-382, as alleged by Bank of America. We see no evidence in the record before us that compels a different conclusion.8

However, Nitla’s counsel was also aware that Bank of America continued to assert privilege with respect to the documents, intended to seek mandamus relief, and, in fact, sought and obtained mandamus relief with respect to most of the documents for which Bank of America had asserted privilege. It is also acknowledged that Bank of America “has clean hands in this dispute.”

In summary, Meador factor (1) does not weigh much in favor of disqualification; *244Meador factor (2) is inapplicable; and Meador factor (5) weighs toward disqualification. We next consider Meador factors (3), (4), and (6).

2. Factor (3) — The extent to which counsel for Nitla reviewed/digested the privileged information.

This factor is conceded. The August 21, 2000 order states: “This Court agrees, and the appellate record supports the argument that Nitla’s counsel has extensively reviewed and digested the privileged information.” Nitla did not dispute this assertion either in the trial court or in its response here.

3. Factor ⅜) — The significance of the privileged information, i.e., the extent to which its disclosure may prejudice the movant’s claim or defense, and the extent to which return of the documents will mitigate that prejudice.

In the August 21, 2000 order, the trial court characterized Bank of America’s claims of prejudice as advocacy, conclusory statements, and unsupported by the evidence. We have reviewed the reporter’s record of the August 3, 2000 hearing on the motion to disqualify. In that record, the trial court acknowledged that it had read the motion to disqualify as well as the response and supplement. Attached to the motion, among other items, were the following exhibits: (1) the reporter’s record of the March 22, 1999 hearing; (2) the reporter’s record of the July 6, 1999 hearing; (3) a copy of this Court’s opinion of June 19, 2000; and (4) copies of the two main response briefs filed by Nitla in cause no. 01-99-00278-CV.

This Court is familiar with the 48-page and the 35-page response briefs filed by Nitla in the first mandamus proceeding. Those briefs quote from and describe the in camera documents to invoke the crime/ fraud exception to the attorney-client and work product privileges, as well as to support Nitla’s allegations that Bank of America was engaged in fraudulent activities. In fact, those briefs rely almost entirely on the in camera, privileged documents to support Nitla’s case for application of the crime/fraud exception and allegations of fraud. The briefs written by Nitla’s counsel are evidence of the significance of the in camera privileged documents, the extent to which the privileged information has been woven into Nitla’s case, and the prejudice to Bank of America caused by the disclosure of its privileged information. Meador factor (4) weighs heavily toward disqualification.

4.Factor (6) — The extent to which the nonmovant will suffer prejudice from the disqualification of its attorney.

As the order of September 5, 2000 amending the August 21, 2000 order states, there is no evidence in the hearing record of harm to Nitla. However, Nitla argued as follows in response to the motion to disqualify, and the trial court stated it had read the response:

[Bank of America’s] contention that Nit-la will not be unduly prejudiced by its counsel’s disqualification is frivolous. This Court can take judicial notice that this case has been on file since 1996 and contains literally tens of thousands of pages of pleadings. The summary judgment filings and supporting documents are enormous. Approximately fifty (50) days of deposition testimony have been taken in this case. This case is nearly ready for trial and Nitla would undoubtedly suffer extraordinary prejudice if its attorneys were disqualified after more than four years of litigation. It is highly unlikely that Nitla would be able to find qualified attorneys who would pursue this case if all of their present counsel were disqualified.

*245Meador factor (6) weighs against disqualification.

5. Balancing the Meador factors.

On the one side, factors (1) and (6) support the trial court’s ruling that Nitla’s counsel should not be disqualified. Nitla strenuously argues that it has been neither unprofessional nor unethical in its obtaining, use, and review of Bank of America’s in camera documents and that such was, initially, judicially blessed. We saw no evidence to the contrary in the record. If Nitla’s counsel is disqualified, will Nitla be severely prejudiced? If severe prejudice equals a substantial delay in going to trial while new counsel prepares for trial, the answer is “yes.”

On the other side, the evidence is overwhelming under factors (3) and (4) that Nitla’s counsel has reviewed and digested some 185 pages of documents this Court has held privileged, and woven the materials in those documents into its case of fraud against Bank of America. It is undisputed that the release of such privileged information was without the fault of Bank of America (factor (5)). While Nitla was neither unprofessional nor unethical, it is also true that Nitla strenuously advocated that it immediately receive Bank of America’s in camera documents, without even a 10-day stay to allow Bank of America to seek mandamus relief. On the day Nitla received the in camera documents, it knew of Bank of America’s intent to seek mandamus relief; within three days, the intent became reality.

Disqualification is a severe remedy and should be discouraged as a dilatory trial tactic. However, there is no evidence of dilatory tactics here by Bank of America. It is difficult to see what else Bank of America could have done to obtain review of the trial court’s ruling on its privileged documents or to protect the confidentiality of its privileged information used by Nitla, once this Court had ruled most of the in camera documents were privileged. Under the reasoning in Coker, Phoenix Founders, Inc., and Meador, in the circumstances of this case, the severity of disqualification must give way to the importance of maintaining the confidentiality of privileged information.

Conclusion

Our review of the record compels the conclusion that the trial court could only have found, after conducting an analysis under Meador, that Nitla’s counsel should be disqualified. Therefore, we hold that the trial court abused its discretion when it denied Bank of America’s motion to disqualify Nitla’s counsel, and that the Bank of America has no adequate remedy by appeal. We are confident that the trial court will promptly reconsider and grant Bank of America’s motion to disqualify. Our writ of mandamus will issue if it does not.

Both parties have filed certain documents under seal in this Court. Any sealing motions that have not been previously granted are granted hereby. Within 10 days of the date of this opinion, the Clerk of the Court is directed to destroy all sealed documents, unless the party that filed such sealed documents files a written request, within such 10-day period, to have such documents returned. The Clerk will return such documents to such party only to the extent that the copies do not contain notations of the Court.

Justice MIRABAL dissenting.

. The Honorable Levi J. Benton, judge of the 215th District Court of Harris County, Texas.

. The lawsuit below is Nitla S.A. de C.V. v. Analysis and Research for Capital Management, Ltd., et al., trial court cause no. 96-44152, in the 215th District Court of Harris County, Texas.

. Bank of America also asked the trial judge to stay the production, to allow it time to seek an emergency stay from the court of appeals. Counsel for Bank of America stated: "and there are some cases saying that whenever an attorney gets privileged materials and reviews them based upon that knowledge, they can later be disqualified.”

. That same day, counsel for Bank of America sent by facsimile transmission a letter to Nit-la’s counsel reiterating his belief that the tendered in camera documents were privileged, requesting that the documents not be reviewed or distributed, and advising that a petition for writ of mandamus would be filed within 48 hours.

. Nitla confirmed that it is bound by the provisions of a confidentiality agreement concerning the in camera documents. See In re NationsBank, N.A. n/k/a. Bank of America, N.A., No. 01-99-00278-CV, slip op. at 7, 2000 WL 799807 (Tex.App.—Houston [1st Dist.], Jun. 19, 2000, orig. proceeding) (not designated for publication).

. Justice Mirabal dissenting.

. As amended by the order signed on September 5, 2000.

. However, the absence of a disciplinary violation does not mean that a court may not disqualify an attorney. See In re Meador, 968 S.W.2d 346, 350 (Tex.1998).