You're correctly citing part of the rules but are not including the entire application. IF MN had ever represented KC, JB could move the court to prevent MN from representing TES, alleging a conflict of interest. Like I said earlier, I was involved in a case in Florida last year wherein this issue arose. I've done a lot of research on the matter and there are a plethora of cases regarding same. For every case which was appealed and an opinion written, there were many others that end at the trial level. It's not unheard of, especially in smaller communities, and it can be an issue for litigation, not just a matter for the bar. The thing is, however, someone involved in the case must have standing to complain. Today, no one did, which was why the court suggested JB's recourse could be a bar complaint, which in my experience, is a much less common event.
Think about it: If opposing counsel formerly represented you in the same case, would you want to file a bar complaint or would you want the attorney removed from the case?