THE BENJAMIN M. BARRESI SEPARATE PROPERTY TRUST, et al. v. MERIT, et al.

THE BENJAMIN M. BARRESI SEPARATE PROPERTY TRUST, an Oklahoma Trust; COSMO ENERGY, LLC, an Oklahoma Limited Liability Company; and NTH, LLC, an Oklahoma Limited Liability Company, Plaintiffs/Appellees,
vs.
MERIT PETROLEUM, LLC, an Oklahoma Limited Liability Company; JOHN W. SWEEDEN, IV, an individual; JCW ENERGY, LLC; SYNTAX, LLC; ALLSQUARE, LLC; ALLSQUARE HOLDINGS, LLC; FOSBURY, LLC; and PUBLICADATAOK, LLC, Defendants/Appellants.

APPEAL FROM THE DISTRICT COURT OF
OKLAHOMA COUNTY, OKLAHOMA

HONORABLE SHEILA STINSON, TRIAL JUDGE

AFFIRMED

Mark B. Houts, HOUTS LAW, PLLC, Oklahoma City, Oklahoma For Defendants/Appellants

Kyle Goodwin, William M. Lewis, Paul B. Cason, Jason Reese, GOODWIN / LEWIS, PLLC, Oklahoma City, Oklahoma For Plaintiffs/Appellees

JOHN F. FISCHER, JUDGE:

�1 Merit Petroleum, LLC and its owner John W. Sweeden, IV (collectively "Sweeden" unless otherwise noted) appeal the district court's final order denying their motion to disqualify counsel for NTH, LLC and The Benjamin M. Barresi Separate Property Trust in this litigation. ¹ This is Sweeden's second appeal regarding the district court's denial of his motion to disqualify counsel representing NTH and the Trust. In the first appeal, this Court remanded the case because the order appealed lacked the findings of fact and conclusions of law required by McGee v. Amoco Production Co., 2019 OK 7, 438 P.3d 355, and Miami Bus. Servs., LLC v. Davis, 2013 OK 20, 299 P.3d 477. ² The order which is the subject of this appeal contains the necessary findings and conclusions. Because Sweeden has failed to show any grounds for disqualification in the district court, we affirm the denial of their motion to disqualify counsel for the Plaintiffs.

BACKGROUND

�2 NTH is an Oklahoma limited liability company. The Operating Agreement of NTH was made effective December 13, 2019. When organized, NTH was owned equally by the Trust, JCW Energy, LLC and Merit. According to the district court's findings of fact, Benjamin Barresi is the sole member of the Trust; Justin Woody is the sole member of the defendant JCW Energy, LLC; and Sweeden is the sole member of Merit.

�3 Prior to the formation of NTH, Woody and Sweeden had been involved in a partnership with a third partner. It appears that partnership was terminated in July of 2019. Woody and Sweeden used assets and intellectual property from that partnership to form the new business, NTH, with Barresi. Originally, Barresi, Woody and Sweeden were named managers of NTH. However, it appears that Sweeden may have been removed from that office for cause on August 26, 2020, by a vote of Barresi and Woody, although Sweeden contends that his removal was ineffective.

�4 At the same time NTH was organized, these parties signed a Memorandum of Understanding effective December 13, 2019, whereby Sweeden was to develop software for use in the oil and gas industry and transfer certain assets to NTH. Sweeden represented that development of the software was almost complete. The Barresi Trust agreed to fund completion of the software project in the amount of $2,500,000, of which $2,350,000 was to be contributed "in a manner to be determined by the unanimous vote of the managers." Except for NTH's "monthly cash burn," any increase or decrease in the Trust's periodic contributions to NTH would "be determined by [the Trust] at [its] sole discretion." The software was to be used by Cosmo Energy, LLC, and marketed to other oil and gas industry participants. Cosmo is involved in the oil and gas business and is owned or controlled by the Trust. To complete development of the software, Sweeden was given access to Cosmo's proprietary data.

�5 The parties' new business lasted only a few months. By email dated July 28, 2020, to Woody and Sweeden, Barresi summarized the "break-up" of NTH and the plan going forward based on recent conversations among the parties. According to the email, Cosmo was no longer able to fund NTH due to COVID-19, and Sweeden would work to sell some or all of NTH's assets to repay Cosmo the $800,000 it had invested in the project. The email states that NTH "is dissolved effective July 7th, 2020." Woody suggested a change to the summary, which Barresi accepted. It does not appear that Sweeden responded.

�6 NTH, Cosmo and the Barresi Trust filed this action on August 25, 2020, alleging that Sweeden had breached the terms of the Memorandum of Understanding. The Petition asserted claims for breach of contract, fraud, conversion and unjust enrichment, among others, and sought monetary damages and injunctive relief. The Plaintiffs alleged that Sweeden failed to transfer the assets to NTH that he was required to transfer, failed to meet deadlines for completion of the software, installed "back door access to Ben Barresi's computer without his knowledge or consent," attempted to "hack [or] steal information" from that computer, misappropriated Cosmo's data, wrongfully denied Cosmo employees access to Cosmo's data, failed to account for the expenditure of funds received from NTH and otherwise misused NTH funds for personal and unauthorized expenses. Some aspects of these claims are unique to an individual Plaintiff although other aspects of the claims are shared by one or more of the Plaintiffs. The petition was filed by Kyle Goodwin and William M. Lewis of Goodwin/Lewis PLLC on behalf of NTH, the Barresi Trust and Cosmo.

�7 The Plaintiffs obtained a temporary restraining order the same day that they filed their petition, prohibiting Merit, Sweeden and the other Sweeden defendants from, among other things, "deleting, erasing or transferring" electronic data belonging to Cosmo or NTH. Although served with notice, Sweeden did not appear at the August 28, 2020 hearing on the preliminary injunction. As a result of that hearing, the temporary restraining order was converted to a preliminary injunction. That injunction also required Sweeden to disclose all passwords, administrative identifications, saved files and backed-up files for accounts owned by Barresi, Cosmo, NTH and other related entities. ³

�8 Sweeden was served with a copy of the Petition the day it was filed and entered an appearance through counsel on September 14, 2020. He filed his Answer on October 2, 2020, in which he asserted various affirmative defenses and alleged that the Plaintiffs had breached the parties' contract. On May 13, 2021, Sweeden sought leave to file "crossclaims, counterclaims and third-party claims." The district court held a hearing on Sweeden's motion on July 6, 2021, and advised Sweeden that he needed to re-urge his request after attaching his amended answer with the proposed crossclaims, counterclaims and third-party claims to the motion.

�9 On July 7, 2021, Sweeden's counsel sent a letter to counsel for the Plaintiffs demanding that NTH pursue claims against the Trust for violating the terms of the Operating Agreement by failing to contribute the full $2.5 million contemplated by the Memorandum of Understanding. On July 15, 2021, Sweeden filed his motion to disqualify counsel for the Plaintiffs from further participation in this case. He argued that the Goodwin/Lewis law firm had an impermissible and unwaivable conflict of interest precluding its continued representation based on two alleged grounds: (1) Attorney Lewis had previously represented Merit and Sweeden in another matter; and (2) NTH had claims in this lawsuit that are adverse to the Barresi Trust.

�10 The district court conducted an evidentiary hearing on Sweeden's motion on September 9, 2021. At that hearing, Sweeden referred to Barresi's July 28, 2020 email and argued that the Trust had breached the Memorandum of Understanding by not continuing to fund NTH. He maintained that NTH's purported claim against the Trust created a conflict preventing Plaintiffs' counsel from representing NTH or the Trust. The district court's order denying Sweeden's motion to disqualify was the subject of Sweeden's first appeal. After remand, the district court conducted a hearing on August 10, 2023, to resolve Sweeden's motion to enter findings of fact and conclusions of law consistent with this Court's Opinion in the first appeal. The district court's September 13, 2023 Findings of Fact and Conclusions of Law as to Defendant's Motion to Disqualify Plaintiffs' Counsel is the subject of this appeal.

STANDARD OF REVIEW

�11 When reviewing an order disqualifying or refusing to disqualify counsel for a party, the trial court's findings of fact are examined for clear error and its application of ethical standards to those facts is reviewed de novo. Bd. of Cnty. Comm'rs v. Assoc. of Cnty. Comm'rs of Oklahoma Self-Insured Grp., 2021 OK 15, � 9, 485 P.3d 234, 236. "The standard for disqualifying counsel is whether real harm to the integrity of the judicial process is likely to result if counsel is not disqualified." Miami Business Servs., LLC v. Davis, 2013 OK 20, � 12, 299 P.3d 477, 484 (citing Arkansas Valley State Bank v. Phillips, 2007 OK 78, � 25, 171 P.3d 899, 911). "The burden rests with the moving party to establish the likelihood of harm by a preponderance of the evidence." Bd. of Cnty. Comm'rs, 2021 OK 15, � 9, 485 P.3d at 237. Because a "litigant has a fundamental right to be represented by counsel of his or her choice," Jensen v. Poindexter, 2015 OK 49, � 11, 352 P.3d 1201, 1205, "the barrier a party must surmount to secure the disqualification of . . . opponent's counsel is high." Hayes v. Central State Orthopedic Specialists, Inc., 2002 OK 30, � 9, 51 P.3d 562, 565.

ANALYSIS

�12 Although instructed by the district court to file his proposed crossclaims, counterclaims and third-party claims on June 6, 2021, Sweeden did not do so until October 8, 2021. Consequently, when Sweeden filed his motion to disqualify opposing counsel on July 15, 2021, and when the district court conducted the September 9, 2021 hearing on that motion, the relevant issues in the case were framed by the Plaintiffs' petition and Sweeden's answer.

�13 Further, in neither his original motion to disqualify counsel nor at the hearing on that motion did Sweeden argue that the substance of the Plaintiffs' breach of contract, fraud and conversion claims against him and Merit created a conflict of interest precluding one counsel chosen by the Plaintiffs from representing all Plaintiffs in the prosecution of those claims. He argued that disqualification was required for two reasons: (1) one of the Plaintiffs' lawyers had previously represented him in a related matter; and (2) NTH had claims against the Barresi Trust not raised in the pleadings but which had to be raised in this action by separate counsel. Sweeden argued that both established a violation of Rule 1.7 of the Oklahoma Rules of Professional Conduct related to conflicts of interest with current clients, 5 O.S.2021 ch. 1, app. 3-a. ⁴ In neither his motion to disqualify counsel nor at the first hearing on that motion did Sweeden ask the district court to enter findings of fact or conclusions of law. The Benjamin Barresi Separate Property Trust, et al. v. Merit Petroleum, LLC, et al., No. 119,911 (COCA Div. IV Jun. 14, 2023) (unpublished).

�14 When this case was remanded after his first appeal, Sweeden did not seek to amend his motion to disqualify or request a new evidentiary hearing to address the purported conflicts raised by his subsequently filed amended answer, crossclaims, counterclaims and third-party claims. Sweeden did file a Request for Findings of Fact and Conclusions of Law. The Plaintiffs responded by filing their proposed findings and conclusions. In his August 21, 2023 Reply, filed after the August 10, 2023 hearing on his motion to enter findings and conclusions, Sweeden submitted his own proposed findings and conclusions and argued that the Plaintiffs were improperly attempting to raise new issues. He contended that the case had "been remanded to state the original basis for this Court's decision, not some new, belated argument." (Record at 331). On this point, Sweeden is correct.

�15 No transcript of the August 10, 2023 hearing, if one was made, is included in the appellate record. The district court filed its Findings of Fact and Conclusions of Law on September 13, 2023, noting that it was deciding Sweeden's "Motion to Disqualify Plaintiffs' Counsel filed on July 15, 2021" which "came before this Court for evidentiary hearing [on September 9, 2021]."

�16 Sweeden's December 17, 2021 amended answer and counterclaim asserted, for the first time, a "Derivative Action" on behalf of NTH against Cosmo and the Trust pursuant to 12 O.S.2021 � 2023.1. Although he had previously argued that the interests of NTH and the Trust were adverse because the Trust had allegedly breached the Memorandum of Understanding, he had not asserted a derivative claim on behalf of NTH when his motion to disqualify was decided. We are hard-pressed to reverse the district court on the basis of a purported conflict raised by pleadings not before the court at the time Sweeden's disqualification motion was litigated. "Trial courts are not traditionally reversed for error unless the error was called to their attention at a time when they themselves could reasonably be expected to correct it." Gaines v. Sun Refinery and Mktg., 1990 OK 33, � 20, 790 P.2d 1073, 1080.

�17 Consequently, we will review the September 13, 2023 order denying Sweeden's July 15, 2021 motion to disqualify on the basis of the pleadings and arguments raised by Sweeden when that motion was decided. At that point, the interests of the Plaintiffs were not adverse. They had sued Sweeden for his alleged breach of the Memorandum of Understanding as well as for his conversion of their property. And Sweeden's non-derivative claims did not create any conflict among the Plaintiffs precluding one law firm from representing all of them.

I. Conflict Based on Prior Representation

�18 Sweeden first argued to the district court that a disqualifying conflict exists because William Lewis, a member of the law firm representing the Plaintiffs, had represented him in a previous unrelated matter. He attached to his motion to disqualify a redacted copy of an email purporting to show that representation. The Plaintiffs provided the district court with an unredacted copy of that email. What the full text of the email shows is that Sweeden, Woody and another business partner were dissolving their partnership. Mr. Lewis had drafted the dissolution document for his client, the third partner. The email reflects that Mr. Lewis received only a request from Sweeden to incorporate a change to the draft which Mr. Lewis had tried to accommodate. After considering the evidence presented on this issue, the district court found that Sweeden had not retained Mr. Lewis, executed an engagement letter with him, or received or paid any portion of a bill from Mr. Lewis for that work. The district court concluded that there was no evidence that Mr. Lewis had previously represented Sweeden in that or any other matter.

�19 At the hearing on his motion to disqualify, Sweeden did not present any additional evidence or argument on this issue and did not address the matters in his presentation to the court. However, Sweeden denied that he had abandoned this issue. He stated: "I'll rely on the briefing for that." Sweeden's appellate briefing on this issue contributes nothing further. He merely quotes the email purportedly showing the prior representation but addresses none of the district court's other findings of fact or conclusions of law supporting its determination that no prior representation existed. We generally do not review "issues that receive only superficial treatment in an appellate brief or [ ], assignments of error that lack a reasoned argument or supporting authority." Cox Oklahoma Telecom, L.L.C. v. State of Oklahoma ex rel. Oklahoma Corp. Comm'n, 2007 OK 55, � 33, 164 P.3d 150, 162.

�20 Further, the facts on this issue are not in dispute: Mr. Lewis was employed by the third partner of the prior partnership to draft the dissolution agreement, there is no engagement letter or any other document by which Sweeden purported to employ Mr. Lewis as his attorney, there is no evidence that Mr. Lewis sent a bill to, or that Sweeden paid for, any of the legal services Mr. Lewis rendered for his work on dissolving the prior partnership. The email does not show that Mr. Lewis advised Sweeden on what changes to make to the dissolution document, but shows only that Mr. Lewis attempted to incorporate Sweeden's requested change into the dissolution document Mr. Lewis was drafting. Consequently, the district court did not err in finding that Mr. Lewis had not previously represented Sweeden. Cf., State ex rel. Oklahoma Bar Ass'n v. Gassaway, 2008 OK 60, �� 72-74, 196 P.3d 495, 509 (finding an unjustified belief insufficient to establish attorney-client relationship).

�21 A party seeking to disqualify an attorney pursuant to Rule 1.7 of the Oklahoma Rules of Professional Conduct must, at the outset, show that the attorney being challenged represented more than one client. ⁵ Sweeden did not meet his burden on this fundamental issue. Mr. Lewis' drafting accommodation to Sweeden, who chose to proceed with dissolution of the partnership without retaining his own attorney, did not constitute legal representation. As a result of our de novo application of Rule 1.7 to these facts, we agree with the district court -- there was no violation of Rule 1.7 based on Mr. Lewis' representation of the third partner in the dissolution of the partnership.

II. Conflict based on NTH's Claim against the Trust

�22 In his second alleged Rule 1.7 violation, Sweeden argued that NTH had a breach of contract claim against the Trust because the Trust provided only $800,000 of the $2,500,000 in funding contemplated by the Memorandum of Understanding. On the basis of this alleged claim, Sweeden argued that counsel chosen by NTH and the Trust could not represent any of the Plaintiffs because counsel would be required to bring that claim on behalf of one client, NTH, against another client, the Trust.

�23 First, Sweeden did not argue that a conflict of interest precluded counsel from representing the third Plaintiff, Cosmo, in its claim that Sweeden converted Cosmo's property and wrongfully prevented Cosmo employees from access to the Company's computer files. Sweeden focused solely on the joint representation of NTH and the Trust with respect to the Trust's obligations pursuant to the Memorandum of Understanding. Regarding this argument, Sweeden has satisfied the two-client requirement of Rule 1.7. NTH is represented by the same law firm that represents the Trust in this litigation.

�24 Second, however, to show a concurrent conflict of interest which violates Rule 1.7, Sweeden must do more than show joint representation of more than one client. He must show that: "(1) the representation of one client will be directly adverse to another client; or (2) there is a significant risk that the representation of one or more clients will be materially limited by the lawyer's responsibilities to another client." 5 O.S.2021 ch. 1, app. 3-a, Rule 1.7(a). With respect to NTH's claims against Sweeden, those claims are not "directly adverse" to the Trust. In fact, NTH and the Trust share a joint interest in some of those claims, e.g., misappropriation of NTH funds, and an independent, non-adversarial interest in the others, e.g., conversion of the Trust's and Cosmo's property. Further, at least until the Plaintiffs seek to collect any judgment against Sweeden, counsel's responsibilities to each Plaintiff will not be materially limited by their responsibilities to the other Plaintiffs. That theoretical possibility at this stage of the litigation is insufficient to create a conflict prohibited by Rule 1.7(a)(2).

�25 But Sweeden's motion does not concern the claims as framed by the pleadings. He is demanding something more. He is demanding that Plaintiffs' counsel file a new claim in this litigation whereby NTH would sue the Trust for breach of the funding obligations in the Memorandum of Understanding, and thereby create a Rule 1.7 concurrent conflict. However, any such claim belongs to NTH, not Sweeden, Merit or any of the other defendants affiliated with Sweeden. "The remedial rights of minority stockholders with respect to wrongs committed against the corporation . . . are derivative rights and any action taken by the stockholders to redress such wrongs must be for the benefit of the corporation." Weston v. Acme Tool, Inc., 1968 OK 7, � 12, 441 P.2d 959, 962 (citing Dobry v. Yukon Elec. Co., 1955 OK 281, 290 P.2d 135). ⁶

�26 Further, Oklahoma law provides a procedure by which a minority owner in a limited liability company can pursue such claims.

A member may bring an action in the right of the limited liability company to recover a judgment in its favor if . . . (2) The plaintiff has made demand on [the] managers . . . requesting that such managers . . . cause the limited liability company to sue in its own right; and (3) The . . . managers with such authority have wrongfully refused in the exercise of their business judgment to bring the action . . . .

18 O.S.2021 � 2051. The pleading requirements for derivative actions are found in the Oklahoma General Corporation Act at 18 O.S.2021 � 2052 and the Oklahoma Pleading Code, 12 O.S.2021 � 2023.1. ⁷

�27 Sweeden argues that he satisfied the demand requirement with his July 7, 2021 letter. ⁸ This requirement is not a mere formality. The procedural requirements of section 2023.1, particularly the demand requirement, provide important protections for the company. As this Court noted in Haddan et al. v. The Coves Master Association, Inc. et al.:

[T]he purpose of the demand requirement is to ensure that the corporate board's management decisions are respected, [and] a critical inquiry in any shareholder's derivative suit is whether the board, upon receiving a shareholder's demand, conducted an investigation in good faith and made a determination that initiating litigation was not in the corporation's best interest.

2025 OK CIV APP 12, � 18, 570 P.3d 602, 609. "The entire foundation of the demand requirement is that litigation on behalf of the corporation belongs to the corporation, which is managed by the board." Ironworkers Dist. Council of Philadelphia & Vicinity Ret. & Pension Plan v. Andreotti, 2015 WL 2270673, *31 (Del. Ch. May 8, 2015), aff'd, 132 A.3d 748 (Del. 2016). ⁹

�28 Further, when "a stockholder makes a demand on the board to consider or bring legal action, the stockholder has necessarily conceded that, at least at this stage of the pleadings, he cannot allege facts showing that the board is disqualified from the decision by self-interest or lack of independence." Id. at *25. Consequently, Sweeden was required to show that the managers of NTH "wrongfully refused in the exercise of their business judgment" to sue the Trust. 18 O.S.2021 � 2051(3). His argument to the district court did not address this requirement.

�29 More importantly, Sweeden cannot bring a derivative action as a counterclaim in the Plaintiffs' case. "A pleading shall state as a counterclaim any claim which at the time of serving the pleading the pleader has against any opposing party . . . ." 12 O.S.2021 � 2013. But NTH is not an "opposing party" in this litigation against whom such a counterclaim can be filed; it is the Plaintiff. Sweeden's derivative claim, if it exists, must be brought by NTH. "[A] stockholder of a corporation has no personal or individual right of action against third persons, including officers and directors of the corporation . . . ." Dobry v. Yukon Elec. Co., 1955 OK 281, � 8, 290 P.2d 135, 137. A derivative action "'is a suit by the corporation, asserted by the shareholders on its behalf, against those liable to it.'" Kaplan v. Peat, Marwick, Mitchell & Co., 540 A.2d 726, 730 (Del. 1988) (quoting Aronson v. Lewis, 473 A.2d 805, 811 (Del. 1984)) (overruled on other grounds by Brehm v. Eisner, 746 A.2d 244 (Del. 2000)). Sweeden's derivative argument would have NTH asserting a counterclaim against itself, not against an opposing party in this action.

�30 Because a counterclaim may only be brought against an "opposing party," Sweeden's derivative action is proper only if brought as a separate action. Until that action is filed and counsel enter their appearances for the respective parties, the determination of any conflict of interest prohibited by Rule 1.7 is premature. The cases Sweeden cites in his appellate briefing regarding the potential conflict of interest between a company and its management in derivative litigation address this issue. They do not resolve the conflict-of-interest issue raised by Sweeden in this litigation. Consequently, the district court did not err in denying Sweeden's motion to disqualify on the basis of a purported violation of Rule 1.7.

III. Timeliness of Sweeden's Motion

�31 As the district court stated in its findings of fact, Sweeden waited "approximately one year" to file his motion to disqualify Plaintiffs' counsel, even though Sweeden knew the basis for his disqualification argument as early as July, 28, 2020. One month before this case was filed, Sweeden received the memo from Barresi regarding the decision to stop future funding of NTH. He knew that fact when the preliminary injunction was entered against him, and he knew that fact when he filed his answer asserting as an affirmative defense that the Plaintiffs had breached the Memorandum of Understanding. But Sweeden did not raise the disqualification issue at those points in this litigation. He waited. ¹⁰ This delay is unexplained in the record and is concerning. See State ex rel. Howard v. Oklahoma Corp. Comm'n, 1980 OK 96, � 23, n.6, 614 P.2d 45, 50 (holding that the right to object to an attorney representing conflicting interests can be waived if not "timely presented").

�32 Nonetheless, "delay alone would not necessarily prejudice the non-moving party." Hayes v. Central State Orthopedic Specialists, Inc., 2002 OK 30, � 13, 51 P.3d 565, 566 (citing Kevlik v. Goldstein, 724 F.2d 844 (1st Cir. 1984)). But in this case, the delay did prejudice the Plaintiffs. When Sweeden filed his motion to disqualify this case was not dormant. It had been actively litigated for twelve months. And the litigation continued for two more years prior to Sweeden's second appeal of the order denying his motion to disqualify Plaintiffs' counsel. The delay between the first and second appeals resulted, in part, from Sweeden's failure to ask the district court to enter findings of fact and conclusions of law at the evidentiary hearing on his motion to disqualify. In Hayes v. Central State Orthopedic Specialists, Inc., a "delay of eight months while much was happening in the case, waived any right [the party] might have had to insist on the harsh remedy of disqualifying [opposing counsel]." 2002 OK 30, � 14, 51 P.3d at 566.

�33 Further, during this time, Sweeden did not ask the district court to stay the litigation pending either of his appeals of the disqualification issue, thereby avoiding or minimizing the prejudice to the Plaintiffs if he were successful. Even where a party has established a violation of the Rules of Professional Conduct requiring disqualification of opposing counsel, which Sweeden has not, the court will balance the hardship on the respective parties to determine whether denying disqualification would "'threaten the integrity of the judicial process.'" Id. (quoting In re Towne, 2000 OK 30, � 15, 3 P.3d 154, 161). We hold that Sweeden waived his right to have Plaintiffs' counsel disqualified in this litigation.

�34 We note that Sweeden, in his appellate briefing, argues that the Plaintiffs should not be permitted to assert their waiver argument for the first time on appeal because they did not raise that issue in the district court. ¹¹ Sweeden confuses the roles of appellants and appellees. Although the cases Sweeden cites in support of this argument state the general principle that ordinarily appellate issues must first be raised in the trial court, that rule applies to appellants. See, e.g., Panama Processes, S.A. v. Cities Serv. Co., 1990 OK 66, � 22, 796 P.2d 276, 286 (Appellant's "argument was not pressed below and cannot be asserted for the first time on appeal."). However, an appellate court "may affirm the judgment below on a different legal rationale." Lafalier v. Lead-Impacted Communities Relocation Assistance Tr., 2010 OK 48, n.88, 237 P.3d 181(citing Dixon v. Bhuiyan, 2000 OK 56, � 9, 10 P.3d 888, 891). Consequently, the "appellee may raise a legal issue in support of the correctness of the trial court's judgment and the relief actually granted when the issue is supported by the record on appeal." Farley v. City of Claremore, 2020 OK 30, � 20, 465 P.3d 1213, 1222 (superseded on separate grounds).

CONCLUSION

�35 Sweeden moved to disqualify Plaintiffs' counsel in this litigation based on a concurrent conflict of interest prohibited by Rule 1.7 of the Oklahoma Rules of Professional Conduct, 5 O.S.2021 ch. 1, app. 3-a. He argued that disqualification was required for two reasons: (1) one of the Plaintiffs' lawyers had previously represented him in a related matter; and (2) NTH had claims against the Barresi Trust not raised in the pleadings but which had to be raised in this action by separate counsel.

�36 With respect to the first, the district court found that Sweeden was not represented in a previous matter by one of the Plaintiffs' attorneys, and Sweeden's superficial treatment of this issue on appeal does not show that the district court erred. Regarding the second, Sweeden has failed to show that a prohibited conflict of interest exists preventing counsel chosen by the Plaintiffs from representing all Plaintiffs.

�37 The district court's denial of Sweeden's motion to disqualify Plaintiffs' counsel is affirmed.

�38 AFFIRMED.

WISEMAN, P.J., and BLACKWELL, J., concur.

FOOTNOTES

¹ Syntax, LLC, Allsquare, LLC, Allsquare Holdings, LLC, Headwaters, LLC, Fosbury, LLC, and Publicadataok, LLC, also named as defendants in this action, appear to be business entities owned or controlled by or affiliated with Sweeden. Although one or more of these defendants have participated in filings in the district court relevant to the disqualification issue, only Merit and Sweeden are parties to this appeal. The other Sweeden entities will be omitted from discussion.

² See The Benjamin Barresi Separate Property Trust, et al. v. Merit Petroleum, LLC, et al., No. 119,911 (COCA Div. IV Jun. 14, 2023) (unpublished).

³ Sweeden was subsequently convicted by a jury on two counts of violating the permanent injunction. As of this date, the contempt issues were still being litigated.

⁴ (a) Except as provided in paragraph (b), a lawyer shall not represent a client if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if:

(1) the representation of one client will be directly adverse to another client; or

(2) there is a significant risk that the representation of one 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) Notwithstanding the existence of a concurrent conflict of interest under paragraph (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 claim by one client against another client represented by the lawyer in the same litigation or other proceeding before a tribunal; and

(4) each affected client gives informed consent, confirmed in writing.

⁵ The attorney-client relationship is established by contract, express or implied, and "can be established by a reasonable subjective belief of the client." State ex rel. Oklahoma Bar Ass'n v. Helton, 2017 OK 31, � 21, n.14, 394 P.3d 227, 236. See 12 O.S.2021 � 2502(A)(2): "A 'client' is a person, public officer, or corporation, association, or other organization or entity, either public or private, who consults an attorney with a view towards obtaining legal services or is rendered professional legal services by an attorney." The existence of an attorney-client relationship is a question for the trier of fact. State ex rel. Oklahoma Bar Ass'n v. Bailey, 2023 OK 34, � 186, n.164, 530 P.3d 24, 65) (citation omitted).

⁶ We rely on cases involving corporations, finding no distinction between a corporation and a limited liability company regarding the derivative rights of owners and the demand requirement. See Lifetouch Nat'l Sch. Studios v. Oklahoma Sch. Pictures, 2024 OK CIV APP 17, � 31, 554 P.3d 764, 774 (holding that there is no distinction between corporations and limited liability companies with respect to the alter ego theory of recovery). "In any case not provided for in the Oklahoma Limited Liability Company Act, the rules of law and equity . . . shall govern." 18 O.S.2021 � 2060. Derivative actions on behalf of corporations or limited liability companies are governed by the same law. See 12 O.S.2021 � 2023.1, infra note 7.

⁷ Section 2023.1 provides: "In a derivative action brought by one or more shareholders or members to enforce a right of a corporation or of an unincorporated association, the corporation or association having failed to enforce a right which may properly be asserted by it, the petition shall be verified and shall allege that the plaintiff was a shareholder or member at the time of the transaction of which he complains or that his share or membership thereafter devolved on him by operation of law. The petition shall also allege with particularity the efforts, if any, made by the plaintiff to obtain the action he desires from the directors or comparable authority and, if necessary, from the shareholders or members, and the reasons for his failure to obtain the action or for not making the effort. The derivative action may not be maintained if it appears that the plaintiff does not fairly and adequately represent the interests of the shareholders or members similarly situated in enforcing the right of the corporation or association. The action shall not be dismissed or compromised without the approval of the court, and notice of the proposed dismissal or compromise shall be given to shareholders or members in such manner as the court directs."

⁸ This Opinion does not address whether this letter, addressed to counsel for one of the two or three managers of NTH, satisfied the demand requirements of section 2023.1 because we hold that any derivative action must be brought as a separate action where that issue can be litigated if necessary.

⁹ Absent controlling Oklahoma law we rely on Delaware law because Oklahoma corporate law is derived from the Delaware statutory and decisional law of corporations. Johnson v. Brown, 2024 OK CIV APP 18, � 42, 554 P.3d 781, 790 (approved for publ'n by Okla. Sup. Ct.).

¹⁰ Sweeden's derivative claim was first asserted by the third attorney to represent him in this case, who entered his appearance approximately two months before filing the motion to disqualify.

¹¹ Based on the appellate record, we cannot determine the correctness of this assertion. There is no transcript of the August 10, 2023 hearing on Sweeden's motion to enter findings and conclusions. "Legal error may not be presumed in an appellate court from a silent record. The opposite is true. Absent a record showing otherwise, this court presumes that the trial court did not err." Hamid v. Sew Original, 1982 OK 46, � 6, 645 P.2d 496, 497. Nonetheless, it does appear that at some point the matter was raised, or the district court would not have addressed Sweeden's one-year delay in filing his motion to disqualify.