Law360, Houston (March 28, 2013, 5:12 PM ET) — Martin Disiere Jefferson & Wisdom LLP asked a Texas appeals court Wednesday to overturn its disqualification as counsel to the state’s windstorm insurer because it is only based on trial attorney Steve Mostyn’s unhappiness with the firm’s refusal to settle cases he is pursuing.

In a brief filed with the First District Court of Appeals, Martin Disiere claims that Mostyn and Galveston attorney Craig Eiland concocted a conflict of interest between the firm and the Texas Windstorm Insurance Agency after settlement efforts relating to 400 of Mostyn’s cases stalled.

The “evident purpose of their motion to disqualify was as an improper trial tactic,” the brief said. “In this case, when asked ‘why are we here’ at one of the hearings, Mostyn admitted that the reason is he had ‘only 400 cases left’ and TWIA was no longer settling as he wished.”

Mostyn told Law360 on Thursday that Martin Disiere was “grasping at straws” and denied an allegation that he was unhappy that the firm was replacing TWIA claims examiner Anthony Biello, with whom Mostyn had been able to “quickly settle” thousands of cases.

“Martin lives on an island called Fantasy Island,” Mostyn said of Martin Disiere founding partner Christopher Martin.

Mostyn added that his relationship with Biello was purely professional and that he had settled 4,000 cases with the TWIA “before Tony ever got there.”

Eiland said in a statement Thursday that “the record is clear” that Martin gave him “specific legal advice on important issues” in Hurricane Ike litigation against the TWIA that precludes him from now representing the insurer.

“Now he is trying to represent someone adverse to my clients, including on those issues,” Eiland said. “Our ethics rules don’t allow that without the client waiving it, and the public entities I represent would be prejudiced by his actions. So I did what the rules provide for — I filed a motion to disqualify. The trial judge agreed and disqualified him and his law firm.”

Martin Disiere is challenging in the appeals court a February order issued by Judge Susan Criss of Galveston County’s 212th Judicial District Court. Judge Criss disqualified the firm as the TWIA’s statewide coordinating counsel overseeing nearly 1,000 cases after finding that Martin had advised Eiland on handling claims against the agency before it retained the firm in late 2012.

Two days after signing the order disqualifying the TWIA’s managing counsel, Judge Criss set for trial 10 cases per month against the TWIA beginning in June, according to court records. The appeals court has abated the disqualification while it resolves Martin Disiere’s request to overturn Judge Criss’ order.

The firm claims that Eiland, who serves as a state representative, struck up a friendship with Martin during a past legislative session. After learning that Martin was steeped in insurance law, from time to time Eiland would informally call on him to answer “Professor Martin” questions related to cases he was handling, according to the firm.

In some instances, Eiland hired Martin’s firm to assist on a case and those arrangements were always formalized by letters of engagement, Martin Disiere claims.

But the firm says Martin never agreed to serve as an expert for Eiland against the TWIA and that specific advice Judge Criss believed created a conflict of interest was responsive to a generic “industry custom and practice” question posed by Eiland that was not prejudicial to the TWIA.

In any event, the firm says, the TWIA waived in writing any potential conflict and Eiland and Mostyn waived their right to disqualify the firm by waiting several months before seeking Martin Disiere’s expulsion, all the while negotiating and litigating their clients’ claims with firm attorneys.

And Martin Disiere suggested in court filings that a darker motive is at play. Eiland shared Martin’s contested opinion, which related to insurance coverage for lost overhead and profits and sales tax paid on repair materials, with Mostyn, who in turn emailed it to Biello to leverage settlement of some of his cases, the firm claims.

But it was only after Martin Disiere was hired by the TWIA and Mostyn’s settlements began slowing down, that the attorney threatened to depose Martin as an expert witness, according to a brief the firm filed with the appeals court in February.

“Mostyn’s posturing was part of his scheme to get Martin and his firm off of his TWIA cases,” the brief said. “He had been prosecuting approximately 7,000 claims against TWIA in several counties. Mostyn was able to quickly settle all but 400 of those claims working with his friend, Anthony Biello, a claims examiner TWIA had borrowed from an insurance company.”

The firm says Mostyn and Eiland ultimately moved to disqualify it because “plaintiffs’ counsel was not receiving settlement money fast enough.”

Oral arguments in the appeal are set for April 17.

The TWIA is represented by Levon G. Hovnatanian, Bruce Ramage and Kevin G. Cain of Martin Disiere Jefferson & Wisdom LLP and Dale Wainwright, Jeffrey L. Oldham, Patrick A. Caballero and J. Mark Little of Bracewell & Giuliani LLP.

The plaintiffs are represented by J. Steve Mostyn of Mostyn Law Firm, Jennifer Bruch Hogan and Richard P. Hogan, Jr. of Hogan & Hogan and A. Craig Eiland, among others.

The case is In re Texas Windstorm Insurance Association, case number 01-13-00123-CV, in the First District Court of Appeals for the State of Texas.

–Editing by Jeremy Barker.

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