FLEXFUNDS HOLDINGS, LLC, ET AL.,

v.

MARIO RIVERO, ET AL.,

Third District Court of Appeal State of Florida

Opinion filed June 29, 2022. Not final until disposition of timely filed motion for rehearing.

________________

No. 3D21-1315 Lower Tribunal No. 20-7881 ________________

FlexFunds Holdings, LLC, et al., Appellants,

vs.

Mario Rivero, et al., Appellees.

An Appeal from a non-final order from the Circuit Court for Miami-Dade County, Lourdes Simon, Judge.

Trenam, Kemker, Scharf, Barkin, Frye, O'Neil & Mullis, P.A., and Eric S. Koenig (Tampa), and Bradley A. Muhs (St. Petersburg), for appellants.

Law Offices of Geoffrey B. Marks, and Geoffrey B. Marks; Almazan Law, and Daniel A. Espinosa, for appellee Mario Rivero.

Before FERNANDEZ, C.J., and LINDSEY, and HENDON, JJ.

LINDSEY, J.

I.

BACKGROUND

FlexFunds Holdings is a private equity firm with two members: Jose Carlos Gonzalez (“Gonzalez”) and Mario Rivero (“Rivero”). Gonzalez owns 75% and Rivero owns 25%. Rivero served as FlexFunds Holdings’ CEO. Beginning in 2018, Gonzalez and Rivero began to have disagreements over their business relationship. In January of 2020, Gonzalez terminated Rivero from his position as CEO of FlexFunds Holdings. In April of 2020, FlexFunds Holdings sued Rivero. Lawyer Koenig and his firm, Trenam Law, filed the suit on behalf of FlexFunds Holdings alleging, in part, breach of fiduciary duty, conversion, fraud, and civil theft. Notably, Lawyer Koenig and Trenam Law previously represented FlexFunds Holdings on unrelated litigation while Rivero was employed there.

1 FlexFunds Holdings, LLC owns the entirety of its subsidiaries, FlexFunds Ltd. and FlexFunds ETP, LLC.

At the conclusion of the hearing, Lawyer Koenig asked the trial court to clarify its ruling and the following question and answer took place: MR. KOENIG: Your Honor, I just have a brief question . . . . Is it part of your ruling that under the Rule of Professional Responsibility [sic], that Rivero must consent to whatever law firm or attorney is

THE COURT: And I’m glad you asked that because I do find, yes, under [4-1.13] that because he’s clearly testified that he did not consent to the representation, that is required, and the testimony is that he did not do so. So, yes . . . .

In its order, the trial court found complete disqualification was mandated by Rules 4-1.7, 4-1.10, and 4-1.13 of the Rules Regulating the Florida Bar, as well as the Fifth District’s holding in Campellone v. Cragan, 910 So. 2d 363 (Fla. 5th DCA 2005). FlexFunds Holdings moved for reconsideration, challenging only the disqualification with respect to FlexFunds Holdings. The trial court denied reconsideration, but at the hearing on FlexFunds Holdings’ motion, the trial court further clarified its ruling, explaining: TRIAL COURT: [I]f there’s any clarification is necessary, here it is. Your firm and yourself cannot continue representing FlexFunds. I believe that FlexFunds was your first –the client you represented initially, then individually you had Mr. Gonzalez whom you represented, Mr. Gonzalez’s companies you also represented. And then all the parties, their interest are directly adverse to Mr. Rivero, so – and the clients you currently represent are adverse.

So because that requires consent of Mr. Rivero, and you don’t have consent, for those reasons under the rules you cannot continue to represent the parties.

FlexFunds Holdings timely appealed. We have jurisdiction pursuant to Florida Rule of Appellate Procedure 9.130(a)(3)(E).

II.

STANDARD OF REVIEW

“The standard of review for orders entered on motions to disqualify counsel is that of an abuse of discretion.” Alters v. Villoldo, 230 So. 3d 115, 117 (Fla. 3d DCA 2017) (quoting Applied Dig. Sols., Inc. v. Vasa, 941 So. 2d 404, 408 (Fla. 4th DCA 2006)). We note, however, that “disqualification of a party’s lawyer in a civil case is a drastic remedy, [which] must be employed only in limited circumstances.” Gutierrez v. Rubio, 126 So. 3d 320, 321 (Fla. 3d DCA 2013). “An order disqualifying counsel must be tested against the standards imposed by the Rules Regulating the Florida Bar.” Kemp Invs. N., LLC v. Englert, 314 So. 3d 734, 736 (Fla. 5th DCA 2021).

III.

ANALYSIS

The sole issue on appeal is whether the trial court abused its discretion in disqualifying Lawyer Koenig and Trenam Law from representing FlexFunds Holdings in this litigation. For the following reasons, we find it did not.

(1) the representation of 1 client will be directly adverse to another client; or (2) there is a substantial risk that the representation of 1 or more clients will be materially limited by the lawyer’s responsibilities to another client, a former client or a third person or by a personal interest of the lawyer.

(b) Informed Consent. Notwithstanding the existence of a conflict of interest under subdivision (a), a lawyer may represent a client if:

(1) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client;

(2) the representation is not prohibited by law;

(3) the representation does not involve the assertion of a position adverse to another client when the lawyer represents both clients in the same proceeding before a tribunal; and (4) each affected client gives informed consent, confirmed in writing or clearly stated on the record at a hearing.

(emphasis added).

Relevant to the issue of disqualification of Lawyer Koenig and Trenam Law from representing FlexFunds Holdings is the comment to Rule Regulating the Florida Bar 4-1.13 with respect to derivative actions, which reads: Derivative actions Under generally prevailing law, the shareholders or members of a corporation may bring suit to compel the directors to perform their legal obligations in the supervision of the organization. Members of unincorporated associations have essentially the same right. Such an action may be brought nominally by the organization, but usually is, in fact, a legal controversy over management of the organization.

The question can arise whether counsel for the organization may defend such an action. The

(emphasis added).

Campellone interprets and applies Rules 4-1.7 and 4-1.13 of the Rules Regulating the Florida Bar and supports the trial court’s ruling on the issue before us. 910 So. 2d 363. In Campellone, Rae Ann Campellone (“Campellone”) was a 51% shareholder and respondent, Michael Cragan (“Cragan”), was a 49% shareholder in the entities associated with the lawsuit. 910 So. 2d at 634. Similar to the instant appeal, the litigation therein involved both derivative and direct claims.² Id. Cragan filed a verified complaint against Campellone

2 A derivative action is “[a] suit by a bene-ficiary of a fiduciary to enforce a right belonging to the fiduciary; esp., a suit asserted by a shareholder on the corporation's behalf against a third party (usu. a corporate officer) because of the corporation's failure to take some action against the third party. If the claim involves a serious wrongdoing by those in control of the organization, a conflict may arise between the lawyer's duty to the organization and the lawyer’s relationship with the board, and the lawyer may not be able to defend the action.” Derivative Action, Black’s Law Dictionary (11th ed. 2019); see also Price v. Gurney, 324 U.S. 100, 105 (1945) (“A derivative

action is a suit by a shareholder to enforce a corporate cause of action. The corporation is a necessary party to the suit. And the relief which is granted is a judgment against a third person in favor of the corporation.”).

3 Regarding Lawyer Mann’s representation of Campellone, the Fifth District held the trial court abused its discretion in holding Lawyer Mann could not represent her based on the specific facts of the case and reversed the trial court’s decision in part. Id.

IV.

CONCLUSION

For the reasons set forth above we find no abuse of discretion in the trial court’s order disqualifying Lawyer Koenig and Trenam Law from representing FlexFunds Holdings. Because Lawyer Koenig and Trenam Law did not appeal the portion of the trial court’s order disqualifying them from representing the Gonzalez Entities, we express no opinion on it.