Legal Malpractice Law Review : Professional Responsibility Case Summaries & Commentary : Bennett J. Wasserman : LegalMalpractice.com : Lawyer Malpractice & Legal Ethics

Primis Corp. v. Milledge, Court of Appeals of Texas, Fourteenth District, Houston, May 27, 2010

Facts:  Defendants agreed to represent the plaintiffs in a certain lawsuit and plaintiffs paid the defendants a $5,000 retainer.  Plaintiffs contend the retainer was a "general retainer", while Defendants contend the retainer was specifically for the work to be performed on the particular lawsuit. 

Several weeks after plaintiffs paid the retainer, they were served with another suit wherein plaintiff sought confirmation of an arbitration award rendered against Primis Corporation.  Plaintiffs delivered the citation to the Milledge law office when no attorneys were present.  Soon thereafter, Samuel Milledge sent plaintiffs a letter noting the deadline to file an answer and requesting a retainer.  Plaintiffs never furnished the retainer and, eventually, a default judgment was entered. 

Primis then filed suit against Milledge asserting claims for negligence, breach of contract, and violations of the Texas Deceptive Practices Act.  The trial court found that Milledge owed Primis a duty to clearly and unambiguously advise Primis that Milledge would not be filing an answer for Primis.  Although the court noted that Milledge failed to give advice when legally obligated to do so and delayed handling a matter entrusted to his care, no damages were assessed against Milledge since Primis did not present expert testimony to establish that Milledge's negligence was the proximate cause of its injuries. 

Issue:  Whether expert testimony was necessary to establish proximate cause? 

Ruling:  Yes.

In a legal malpractice case predicated on professional negligence during litigation, expert testimony generally is required to determine whether the result of the underlying litigation would have been different but for the attorney's alleged negligence.

***

[Here] the trier of fact would have to assess whether, with reasonably prudent counsel, the trial court would have vacated or modified the arbitration award against Primis Corporation...The causation inquiry was beyond the trier of fact's common understanding, therefore, expert testimony was necessary for Primis to prove causation.

Lesson: To prevail in a legal malpractice action, Plaintiff must present expert testimony to establish that "but for" his attorney's negligence he would have prevailed in the underlying litigation. 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Rice v. Forestier,  414 S.W.2d 711 (Civ. App. 1967)

TX. underlying bankruptcy proceeding

Student contributor: Cheryl Neuman

Facts: Plaintiff retained defendant attorney for various matters, both in business and personally. Plaintiff suffered damages as a result of a default judgment filed against him in a bankruptcy proceeding. The plaintiff was served with citations. There is conflicting testimony regarding whether plaintiff delivered the citations (from the underlying cause of action) to the defendant’s office. Nevertheless, defendant was aware that the citations were in his office and defendant’s secretary actually prepared answers to the citations but was told not to file them because the business was in bankruptcy. The secretary placed the documents in a file and stored them away. These documents were then given to another attorney hired by plaintiff, in another matter. The new attorney testified that he received two citations from defendant’s file.

Issue: Whether defendant had a duty to inform plaintiff that he was not going to file an answer on plaintiff’s behalf?

Ruling: Yes. Since defendant knew that the citations were in his possession, he was obligated to inform plaintiff that he decided not to answer the citations. Defendant did, however, have the right to decline representation in this matter, but should have told plaintiff of his decision. The failure of the defendant to file the answer on plaintiff’s behalf and notify plaintiff that he would not be representing him was the proximate cause of the monetary loss as a result of the default judgment taken against him.

Lesson: A lawyer is free to choose his clients, but if the lawyer decides not to represent a longstanding client in a subsequent matter, it is prudent to inform the longstanding client of this decision. This is especially true, because, as seen in this case, a lawyer can be held liable to a client who he doesn’t inform that he will not be representing him.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Phoenix Founders, Inc. v. Marshall, 887 S.W.2d 831 (1994)

TX: Conflict of interest; disqualification

Student Contributor: Amber R. Gilchrest*

Facts: A paralegal working at the law firm of Thompson & Knight quit her job to work for David & Goodman,  where she spends 6/10th of an hour on a collection suit by Phoenix Founders against Ronald and Jane Beneke. The Benekes were represented by David & Goodman while Phoenix Founders was represented by Thompson & Knight. The paralegal later quit David & Goodman and returned to Thompson & Knight while the litigation against the Benekes continued.  The paralegal was not questioned by Thompson & Knight about any potential conflicts of interest and was not screened from the case. Counsel for the Benekes sent a letter demanding that Thompson & Knight withdraw from representing Phoenix Founders; Thompson & Knight refused,  at which point counsel for the Benekes filed a motion to disqualify. After initially overruling the motion, the trial court granted the motion because the confidential information known by an employee is imputed to the employer; in this case the paralegal imputed the confidential information to Thompson & Knight.

Issue: Whether a law firm must be disqualified from representation after employing a non-lawyer formerly employed by opposing counsel even though the law firm takes sufficient precautions to reduce the risk of the disclosure of confidential information?

Ruling: No, a law firm is not required to be disqualified from representation by employing a non-lawyer former employer of opposing counsel if the law firm takes sufficient precautions to reduce the risk of disclosure of confidential information to an acceptable level. In a case of first impression, the court looked to the Coker rule which states that lawyers are disqualified when they represent a client in pending suit that is “substantially related” and adverse to the interests of a former client. NCNB Texas Nat’l Bank v. Coker, 765 S.W.2d 398 (Tex. 1989). Furthermore, the court discussed the Petroleum Wholesale rule which states that any confidential information known by a lawyer is presumed to be shared with other members of the firm because of the nature of the relationship among firm members. Petroleum Wholesale, Inc. v. Marshall, 751 S.W.2d 295 (Tex. App. –Dallas 1988). The court agreed that the Coker rule applies to non-lawyers as well as lawyers,  but refused to extend Petroleum Wholesale  to non-lawyers provided that law firm can prove it took formal screening measures sufficient to protect confidential information. The nature of the involvement, time spent on the case, and the substantiality or the relation between the current and former case are all factors. The case was remanded for determination of whether the law firm took sufficient precautions to screen the paralegal.

Lesson: Lawyers and law firms should always ask every new employee or rehired employee about previous employment or other experience that may create conflicts of interest. Furthermore, law firms should have screening procedures and policies in place to ensure that confidential information is protected and not disclosed.

* Amber R. Gilchrest is in her final year at Texas Tech University School of Law.   She earned her B.A. with a double major in Government and Psychology from the University of Texas at Austin and wants to pursue a career in public service.  

  

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Aduddell v. Parkhill, 821 S.W.2d 158 (Tex. 1991)

TX: Underlying asbestosis personal injury clam; statute of limitations

Student Contributor: Jean Moss Sullivan*

Facts: Plaintiff was diagnosed on April 24, 1983 with asbetosis and retained the defendant lawyers to sue asbestos manufacturers for plaintiff’s injuries. The plaintiff’s statute of limitations for the asbestos injuries expired on April 24, 1985. Lawyers did not file the suit until May 20, 1985. The federal district court entered judgment for the asbestos manufacturers because the plaintiff’s claim was filed after the 2-year statute of limitations.
Plaintiff sued Lawyers for breaches of express and implied warranties under the Deceptive Trade Practices Act and for negligence. Lawyers moved for summary judgment because the plaintiff’s suit was filed after the two-year statute of limitations for his legal malpractice claim. The plaintiff then pled the discovery rule but the trial court granted Lawyers’ motion to strike the amended petition as untimely. The trial court granted summary judgment in favor of Lawyers. The court of appeals affirmed the summary judgment, holding that when the plaintiff fails to timely plead the discovery rule, the legal injury rule applies in determining when a negligence cause of action accrues and when the statute of limitations begins to run. The plaintiff’s legal injury by the defendants occurred on April 24, 1985, the date the statute of limitations ran in the underlying case.

Issue: Whether the plaintiff’s claims against the defendants begin to toll before all of the appeals for the underlying claim are exhausted.

Ruling: When an attorney allegedly commits litigation malpractice, the court held that the statute of limitations does not begin tolling until all appeals of the underlying claim are exhausted.

Lesson: A plaintiff may wait to file suit for a legal malpractice claim until all appeals for the underlying claim have been exhausted. A plaintiff is able to consider the final outcome of the underlying claim before filing suit for legal practice. If the discovery rule applies, it is necessary to plead it in a timely fashion. Malpractice litigators should be aware of the burdens in asserting limitations defenses and relying on discovery and other tolling rules.

 
Jean Moss Sullivan is a third year student at Texas Tech University Law School and is a J.D. Candidate for May 2010. She received her B.A. in Religion from Southwestern University in 2007.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

O'Donnell v. Smith,  52 Tex. Sup. Ct. J. 52 (Tex. 2009).

TX: Underlying decedent's estate claims

Student Contributor: Aaron Moncibiaz*

FACTS:  Executor Thomas O’Donnell sued Decedent’s former attorneys, Cox & Smith, for legal malpractice, breach of fiduciary duty, and gross negligence/malice. The claims are based on Cox & Smith’s advice to Decedent when Decedent served as executor of his wife’s estate. The Decedent retained Cox & Smith to advise him in the independent administration of his wife’s estate, and consulted the law firm regarding the separate vs. community classification of the couple’s shares of stock. Cox & Smith prepared an estate tax return that omitted certain shares of stock from a list of the wife’s assets.

The Decedent died twenty-nine years later, leaving the bulk of his estate to charity and not his children. Approximately one month after the Decedent’s death, his children sued the Decedent’s estate alleging that the Decedent has misclassified certain shares of stock as separate property, and as a result underfunded their mother’s trust. O’Donnell settled the children’s claims for just under $13 million, less than half of their estimated value. O’Donnell then sued Cox & Smith, alleging that the attorneys failed to properly advise the Decedent about the serious consequences of mischaracterizing assets, and that the firm’s negligence caused damage to the Decedent’s estate.

PROCEDURAL HISTORY:  At trial, Cox & Smith won summary judgment on all claims, but the court gave no basis for its decision. The court of appeals ruled in favor of Cox & Smith, basing its judgment on the fact that O’Donnell, as executor of the estate, lacked privity of contract with the attorneys. The Supreme Court of Texas vacated the lower court’s judgment and remanded for reconsideration in light of its decision in Belt v. Oppenheimer, Blend, Harrison & Tate, Inc., 192 S.W.3d 780 (Tex. 2006). In Belt, the Supreme Court of Texas held that an estate’s personal representative may bring the decedent’s survivable claims on behalf of the estate. The court further held that legal malpractice claims for pure economic loss survive, and an estate’s personal representative may bring survivable claims on behalf of the estate.

On remand, the court of appeals held that Belt was not limited to estate planning malpractice suits. The court explained that O’Donnell, as executor, stepped into Decedent’s shoes and could bring whatever malpractice action Decedent could have brought while still alive. The court then reviewed the record and found that although no evidence supported O’Donnell’s malice or breach of fiduciary duty claims, a triable issue of fact existed as to what damages were attributable to Cox & Smith’s actions. The court remanded the case to the trial court to determine if Cox & Smith’s actions constituted legal malpractice. Cox & Smith appeal this decision.

 ISSUE:  The court considered whether an executor may bring suit against a decedent’s attorney for malpractice committed outside the estate-planning process.

RULING: The Supreme Court of Texas agreed with the court of appeals’ interpretation of Belt and held that an executor should not be prevented from bringing the decedent’s survivable claims on behalf of the estate. The court does not, however, address whether Cox & Smith’s actions constituted legal malpractice.

A dissent supported by two justices of the court argued that the majority applied the wrong case in forming its opinion. The justices contend that Barcelo v. Elliott, 923 S.W.2d 575 (Tex. 1996) should control. Under the Barcelo privity barrier, a non-client is precluded from bringing a malpractice suit against the decedent’s attorneys because of lack of privity.

LESSON:  A decedent’s legal malpractice claim does not terminate with the death of the decedent. Regardless of whether the claim involves an estate planning matter or some other legal caveat, the claim survives and may be brought by the decedent’s personal representative.

*Aaron Moncibaiz, a third year law student at Texas Tech University School of Law, will be receiving his J.D. degree in May 2010.  A member of the Board of Barristers and a competitor in the American Association of Justice National Trial Advocacy Competition, Aaron has focused his studies to trial and appellate practice.  Aaron served as a legal intern for the American Legislative Exchange Council in Washington, D.C. and is currently employed as a law clerk with the Lubbock County District Attorney’s Office.  Aaron received his B.S. in Architecture from Texas Tech University in 2007.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Sanchez v. Hastings, 898 S.W.2d 287 (Tex. 1995).

TX: Underlying personal injury and wrongful death action; conflicts of interest; statute of limitations

Student Contributor: Rudolfo Santos, Jr.*

FACTS:   On June 8, 1984, Carlos Sanchez, husband of Graciela Sanchez, was killed on the job, when a portable crane mounted on his employer’s, Cedar Creek Fabrications, Inc., truck came into contact with electrical wires.
Soon thereafter, Steve Hastings, on behalf of the law firm Allison & Huerta, P.C., (the Firm), contacted Mrs. Sanchez and offered to represent her as well as the Estate of Carlos Sanchez, and their minor child Gina Sanchez, in a wrongful death and survival action stemming from the job accident. Mrs. Sanchez agreed to allow the firm to handle the matter, but unbeknownst to her the firm also represented Reliance Insurance Company, Cedar Creek Fabrications, Inc.’s workers compensation insurance carrier, in its subrogation action against the defendants for reimbursement of the death benefits paid to Carlos Sanchez’s family.
The Firm filed a wrongful death and survival suit naming various parties as defendants, but the suit did not include any action against Cedar Creek Fabrications, Inc. When the case proceeded to trial the court appointed an ad litem to represent Gina Sanchez. The ad litem had filed a claim against Cedar Creek Fabricators, Inc., alleging gross negligence, but by that time Graciela Sanchez was barred from bringing a similar claim due to expiration of the limitations period. The trial court rendered a final judgment against the defendants on August 29, 1990.
Approximately two months after final judgment was entered, Graciela Sanchez contacted the ad litem; it was at that time the ad litem informed Mrs. Sanchez about prospective malpractice claims against the Firm. On August 29, 1990, Graciela Sanchez filed a malpractice claim against the Firm and three of its attorneys individually. The defendants moved for summary judgment on the ground that Sanchez’s claim was barred by statute of limitations. The trial court granted defendants’ summary judgment on the ground that the two-year statute of limitations precluded the suit. The court of appeals affirmed.

ISSUE:  Whether the running of the statute limitations is tolled in a legal malpractice case where the underlying litigation has not concluded?

RULING:  The court held that the limitations period was tolled until the conclusion of the underlying litigation. The court considered its previous decision in Hughes v. Mahaney & Higgins, 821 S.W.2d 154 (Tex. 1991),  where it held :

“when an attorney commits malpractice in prosecution or defense of a claim that results in litigation, the statute of limitations on the malpractice claim against the attorney is tolled until all appeals on the underlying claims are exhausted.” Id. at 157.

The Court determined that Hughes necessarily extended to trial court proceedings. Therefore, limitations, on malpractice claims, are tolled until a final judgment is entered on all underlying claims.

LESSON:  1) Attorneys should avoid fundamental conflicts of interest, or at the very least be candid to clients by disclosing all potential conflicts of interest.    2) In Texas, the statute of limitations does not begin to run until a final judgment has been entered on all claims stemming from the underlying litigation.

*Rodolfo “Rudy” Santos, Jr. is a third year law student at the Texas Tech School of Law, and will be receiving his J.D. in May 2010.  His main area of study has been devoted to trial and appellate practice.  He will be joining the litigation department of Person, Whitworth, Borchers & Morales, LLP in August 2010.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Harry J. Joe, et ano. v. Two Thirty Nine Joint Venture, 145 S.W.3d 150 (TX. 2003)

Student Contributor: Max J. Starkie* 

Facts:  A client brought an action for malpractice and breach of fiduciary duty against his attorney and law firm after the attorney, a member of a local city council, voted in favor of a construction moratorium that was adverse to the client. The 14th Judicial District Court, Dallas County granted summary judgment for the attorney and law firm. The client appealed. The Dallas Court of Appeals reversed and remanded. Review by the Texas Supreme Court was granted. The Texas Supreme Court reversed and rendered judgment ruling that the client-appellant take nothing.

In 1992, an attorney and shareholder with the law firm of Jenkins & Gilchrist, P.C., who also served as a legislator on a city council, began his representation of Two Thirty Nine Joint Venture. He provided legal service for 239 JV’s formation, its acquisition, development, and sale of 239 acres of land in Irving, Texas.

The attorney-legislator voted in favor of an ordinance that adversely affected 239 JV. Specifically, he voted in favor an ordinance that would place a 120-day moratorium on apartment construction in Irving, Texas. The ordinance imposing the moratorium passed unanimously. As a result, the potential buyer of 239 JV’s acreage cancelled the contract with 239 JV. 239 JV claimed that the attorney-legislator’s vote as a council member quashed a land sale the group had in the works.  The attorney-legislator did not disclose information about the meeting to anyone at the law firm or 239 JV about the meeting, its agenda, or his position on the moratorium. The attorney-legislator later voted in favor of an extension of the moratorium on two more occasions.

In April, 1997, 239 JV filed a lawsuit against the attorney-legislator and his law firm of Jenkins & Gilchrist, P.C. The pleadings alleged that the attorney-legislator and his law firm owed 239 JV “a duty of ordinary care and a fiduciary duty and one of loyalty” and that the actions of the law firm and the attorney-legislator constituted a breach of those duties. 239 JV also alleged that the attorney and the law firm failed to disclose the conflict of interest created by the attorney’s involvement with the moratorium while the firm represented 239 JV in ongoing efforts to sell a tract of land for an apartment building and failure to disclose matters that were material to the firm’s representation of 239 JV.

Issue:  Whether the applicability of legislative and official immunity to legislators, who are also practicing attorneys and who encounter a conflict between their public and private professional responsibilities, shields lawyer-legislators from civil liability for activities within their legislative capacities?

Ruling:  When these obligations conflict, the Court held that legislative immunity shields lawyer-legislators from civil liability for activities within their legislative capacities. In other words, clients cannot sue lawyer-legislators for voting as legislators against clients’ interests.

Lesson: The decision allows numerous Texas attorneys to continue serving on public boards and in elected office without worrying about numerous possible conflicts posed by representing specific private clients as attorneys.

This decision is important because it spells out that lawyer-legislators are now free from having clients control how they vote, a proposal that would have made it nearly impossible for lawyers to serve in public office. Had the decision not been reversed, it could have been a disastrous outcome for lawyers who serve on public bodies.

A lawyer-legislator's clients also have reasons to be troubled by the decision. If a client is going to hire an attorney-legislator, the client should be careful about what issues are coming up before his attorney because that attorney now has no obligation to inform the client of anything he's learned in the course of his legislative duty. In other words, legislative immunity trumps the fiduciary duty a lawyer owes a client.

Max J. Starkie is a second year law student at Texas Tech University School of Law, and a candidate for his J.D. in May 2011. He was an advocate on the AAJ National Mock Trial Team for the Texas Tech University School of Law. He has served as a law clerk for the Honorable Judge Royal Hansen of the Third District Court in Salt Lake City, Utah. He served as a Police Officer in the State of Utah for approximately seven years prior to attending law school. Max received his B.S. in Criminal Justice from Utah Valley University.
  

• Email This
• Print
• Comments
• Trackbacks
• Share Link

 Douglas v. Delp, 987 S.W.2d 879 (Tex. 1999)

TX: Underlying commercial transaction; litigation; bankruptcy

Student Contributor: Chelsea Tucker* 

Facts:  Billy Delp, his wife Gertrude Delp, and John Harvison were business partners who had formed various companies. Billy believed Harvison was attempting to buy businesses outside of the companies’ core business activities. Billy and Gertrude removed Harvison as an officer of two of the companies, Nu-Way and Economy Oil. Harvison filed suit against Billy and Gertrude. Billy and Gertrude were represented by Douglas and Douglas, Kressler & Wuester, P.C. (collectively DKW). Two days into a temporary injunction hearing in which Gertrude was the primary witness, the two sides began settlement negotiations. After a short meeting with DKW, Billy and Gertrude signed a compromise settlement agreement (finalized by Harvison’s attorneys) in which Gertrude was required to resign from the boards of Nu-Way and Economy Oil. The Delps soon lost all assets held through Nu-Way. Billy and Gertrude Delp brought a legal malpractice suit against DKW over its handling of the settlement agreement and for failing to adequately prepare Gertrude for her testimony in the temporary injunction hearing. Soon after, Billy filed for bankruptcy. Billy listed the malpractice claims against DKW as an asset. The bankruptcy trustee sold the claims to Philip Treacy & Associates, which was acting on behalf of DKW’s malpractice carrier. Treacy filed a trial court motion to dismiss Billy’s malpractice claims. This motion was granted.   Following trial on Gertrude’s claims, the trial court granted a directed verdict for DKW. Gertrude and Billy appealed the directed verdict and the dismissal of Billy’s claims. The court of appeals reversed and remanded both Gertrude’s and Billy’s interest in the malpractice claims and part of Gertrude’s DTPA claims.

 Issues:

1) Whether Billy and/or Gertrude had standing to pursue their claims.
2) Whether a plaintiff may recover damages for mental anguish in a legal malpractice suit.
3) Whether DKW’s representation that the agreement would protect the Delps’ interests supports DTPA liability.

Ruling:

The Supreme Court held that:

1. Billy lacked standing to pursue claims in state court because the claims swept into his bankruptcy estate and Gertrude lacked standing because her claims for economic loss related to jointly managed business were part of her husband’s bankruptcy estate.

2. Mental anguish damages are not recoverable when the mental anguish is a consequence of economic losses caused by an attorney’s negligence; and (3) DKW’s representation that the agreement would protect the Delps’ interests was too vague to be actionable under DTPA.

Lesson:
1. A claim of mental anguish damages in a legal malpractice suit will generally not prevail.
2. Give your client enough information so that she is capable of making an informed decision before signing a settlement agreement.
3. Counsel clients on all legal aspects of documents they sign, especially those that may have a detrimental effect on the client.
4. Have the client sign a document saying that she has read and understands the agreement in its entirety, and acknowledges the possible negative results of signing the agreement.

*Chelsea Tucker is in her second year at Texas Tech School of Law and is a candidate for her Juris Doctor in May 2011. She is currently employed as a law clerk for a personal injury attorney and drafts petitions, motions, and appeals, consults with clients, and files documents at the courthouse. Chelsea has also interned with the District Attorney’s Office in Kerrville, Texas. During her first year at Texas Tech School of Law, Chelsea was awarded the Jurisprudence Award for Superior Academic Achievement in Legal Practice.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

 Aiken v. Hancock, 115 S.W.3d 26 (Tex. App.—San Antonio 2003, pet. denied).

TX: Underlying civil litigation "catastrophe".

Student Contributor: Courtney E. Hamilton*

Facts:   Douglas Aiken brought action against his former attorneys Patrick Hancock and Mark Ferguson, and their firm, Deadman and Ferguson, alleging violations of the Deceptive Trade Practices Act (DTPA), breach of fiduciary duty, negligence, gross negligence and breach of contract. The trial court partially granted Ferguson’s motion for summary judgment and dismissed Aiken’s breach of contract claims. The trial court also granted Ferguson’s first amended motion for summary judgment. Aiken appealed the decision of the trial court and neither the law firm of Deadman and Ferguson or Deadman were parties to the appeal. Aiken’s arguments to support his claim of breach of fiduciary duty were that Ferguson (1) falsely represented to Aiken his readiness to go forward and try Aiken’s case, and (2) failed to disclose that he was not ready to try Aiken’s case. Aiken also alleged that Ferguson falsely represented to him that the expert witness was ready to testify about a full audit and failed to disclose that the expert witness was not ready to testify about a full audit.
On appeal, Ferguson argued that Aiken’s claims are actually a single legal malpractice claim, and violating the Texas law that prohibits a plaintiff from fracturing legal malpractice claims.

Issue:  Whether Aiken improperly "fractured" his legal malpractice claims against Ferguson.

Ruling:  The San Antonio Court of Appeals held that Aiken improperly fractured his legal malpractice claim against Ferguson. The court found that Aiken’s classification of his claim as breach of fiduciary duty was improper because allegations did not consist of “self dealing, deception, or express misrepresentations in Ferguson’s legal misrepresentations in Ferguson’s legal representation.” The proper classification of these allegations would be a legal malpractice claim.
The court also held that Aiken’s assertion that Ferguson’s DTPA allegations based on alleged express misrepresentations did not state a cause of action independent from the malpractice claim.
After the court found that there was only one cause of action for legal malpractice the court applied the summary judgment standard of review. In doing so, the court held that summary judgment was proper because Aiken failed to prove causation and damages, two necessary elements for a legal malpractice claim.

Lesson:  A breach of fiduciary duty involves issues of loyalty, confidentiality, and candor while a legal malpractice claim involves negligence and the lawyer’s alleged failure to exercise ordinary care. A plaintiff cannot fracture their malpractice claim when they cannot meet the elements of the additional malpractice claims. The court will view this as one malpractice claim and the plaintiff must establish by a preponderance of the evidence all the elements of a malpractice claim (duty, breach, causation, and damages).
 

*Courtney E. Hamilton is a third year law student at Texas Tech School of Law, and a candidate for her J.D. in May 2010. She currently serves as Articles Editor for the Texas Tech Administrative Law Journal. She has served as a law clerk for the U.S. Attorneys’ Office for the Northern District of Texas, the Texas State Board of Pharmacy, and the Texas Commission on Environmental Quality. Courtney received her B.S. in Chemistry from Sam Houston State University.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Johnson v. Brewer & Pritchard, P.C., 73 S.W.3d 193 (Tex. 2002)

TX: Underlying referral of a personal injury case to another law firm

Student Contributor: Anna Ford (J.D. ( 2011) Texas Tech University School of Law; B.B.A. (2008) Emory University)

FACTS:  After a helicopter crash, James Chang, an associate with the firm of Brewer & Pritchard, recommended that the firm take the personal injury cases for the victims of the crash. Chang personally knew one of the victims, Herbert King, because he was Chang’s close friend’s father. After a partner at the firm recommended that the case be referred to another firm, Chang scheduled a meeting for King with Nick Johnson, a personal injury lawyer and close friend of Chang’s. Johnson referred the case to the firm of Jamail & Kolius, who made an agreement to pay Johnson a referral fee. A year after the case settled, Chang and Johnson formed a partnership together. Chang never told his employer about the referral but defendants’ facts support their contention that Chang did not receive any compensation as a result of the King suit or Johnson’s referral to Jamail & Kolius.  Thereafter, the firm sued its former associate, Chang, and Johnson, alleging breach of fiduciary duty, actual and constructive fraud, conversion, and negligence.
The district court entered summary judgment for defendants on all causes of action. The appellate court reversed and remanded the breach of fiduciary duty and constructive fraud causes of action against both defendants and affirmed the remaining causes of action. The Supreme Court affirmed the appellate court’s holding, disagreeing with its reasoning.
On appeal, the firm asserts that Chang had breached a fiduciary duty that he owed to the firm and that Johnson had knowingly assisted Chang in committing that breach. The firm contends that Chang violated the policies in place forbidding associates to refer cases without securing a referral fee for Brewer & Pritchard.
Defendants argue that as a matter of law Chang owed no fiduciary duty to plaintiff, mainly because there was no employment agreement to that effect.

ISSUE:  Does an associate of a law firm breach a fiduciary duty to his employer when gainfully referring a matter to another firm or lawyer without the employer’s permission?

RULING:  Yes. The associate owes a fiduciary duty to his employer not to personally profit or realize any gain or advantage from referring a matter to another law firm or lawyer, absent the employer’s agreement otherwise. However,

“an associate may participate in referring a client or potential client to a lawyer or firm other than his … employer without violating a fiduciary duty to that employer as long as the associate receives no benefit, compensation, or other gain as a result of the referral.”

LESSON:  The employee of a law firm should not profit from a referral to another firm or lawyer without the consent of his employer. The employee should disclose to his employer when he has referred a case to another lawyer or firm.   A lawyer should not share a fee with a lawyer who is not in the same firm without permission of his client.
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

 In re Segerstrom 247 F. 3d 218 (5th Cir. 2001)

TX: Underlying personal injury then bankruptcy, post judgment

Student Contributor: Brad Kvinta (J.D. (2010), Texas Tech University School of Law, B.S. (2006)Texas A & M University)

FACTS: In 1995, a vehicle driven by Kayla Segerstrom (Segerstrom) was involved in a collision with a vehicle driven by the Colvins. The collision caused one death and other serious injuries. The Colvins sued Segerstrom, her parents, and her parents’ sole proprietorship (“defendants”). The defendants’ insurance company hired Touchstone as defense counsel. A judgment was then entered solely against Segerstrom. Shortly thereafter, “the Colvins filed an involuntary bankruptcy petition against Segerstrom.” The bankruptcy estate (“estate”) then filed a complaint against Touchstone and the insurance company. “The complaint alleged that Touchstone had an inherent conflict of interest in representing Segerstrom, her parents, and her parents’ sole proprietorship as defendants in the same litigation.” “In October 1998, Segerstrom’s personal liability to the Colvins was discharged.” Summary judgment was entered against the estate, and the trustee appealed.

ISSUE: Whether Segerstrom’s bankruptcy estate included a legal malpractice claim against Touchstone and, if so, whether Touchstone, and the insurance company, are liable under that claim?

RULING: On appeal, the court indicated that Segerstrom’s bankruptcy estate included a legal malpractice claim against Touchstone. “As of the commencement of Segerstrom’s bankruptcy case, a legal malpractice claim against Touchstone had accrued to Segerstrom according to Texas law.” See In re Swift, 129 F.3d 792, 795-96 (5th Cir. 1997). “Segerstrom never denied or waived that malpractice action prior to the commencement of her bankruptcy.” Thus, the court indicated that the estate could maintain a legal malpractice claim against Touchstone.

Although the court indicated that a legal malpractice action could be filed on behalf of the estate, the estate did not prove that “but for the manner in which Touchstone conducted her defense, Segerstrom would have obtained a better result in the prior litigation.” In other words, the estate failed to prove the Segerstrom suffered any injury as a result of the alleged malpractice.

The court based this conclusion on Segerstrom’s post-petition affidavit, which denied the existence of a legal malpractice claim. The court noted that although this affidavit is irrelevant to the existence of a legal malpractice claim, it “carries considerable weight in determining whether the estate has met its burden of establishing injury and causation in accordance with Texas law.” Therefore, summary judgment in favor of Touchstone was proper.

Further, “Texas requires that insurance companies act with reasonable care in fulfilling their duty to defend under insurance contracts.” See Meridian Oil Production, Inc. v. Hartford Accident, 27 F.3d 150, 153 (5th Cir. 1994). The court indicated that the estate pointed to no authority in Texas that shows this duty requires the insurance company to identify conflicts and take steps to address them prior to hiring legal counsel for its insured. The court also indicated that even if this duty existed, there is insufficient evidence presented to support a breach of that duty. Therefore, summary judgment in favor of the insurance company was proper.

LESSON: Lawyers may be liable for legal malpractice to a plaintiff’s successor in interest. A successor in interest is a person entitled to the same legal rights as the plaintiff. In other words, a successor in interest is free to pursue any claim that the plaintiff was entitled to pursue. Thus, a lawyer must defend a legal malpractice claim against a successor in interest so long as the successor in interest is legally entitled to pursue such a claim and meets all requirements to successfully prosecute the claim.

In this case, legal malpractice claims survive the initiation of bankruptcy proceedings, even if personal liability in the underlying lawsuit has been discharged. Trustees (the successor in interest in this case) are free to pursue any claims which the debtor could have pursued prior to the initiation of a bankruptcy proceeding. Further, there is no duty under Texas law for an insurance company to identify conflicts and take steps to rectify said conflicts prior to the commencement of any legal proceeding.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

 LEGAL MALPRACTICE LAW REVIEW

              is pleased to present 

      Paul M. Koning                                                               

                                                             Brent Basden

                                                                     of

                                                           K & L Gates, LLP

                     LEGAL MALPRACTICE IN TEXAS--THE BASICS, April, 2010

• Email This
• Print
• Comments (5)
• Trackbacks
• Share Link

The Texas Supreme Court’s new opinion (October 30, 2009) in Akin, Gump, Strauss, Hauer & Feld, L.L.P. v. National Development and Research Corporation  holds that

1. “collectibility” must be determined no earlier than the time of the underlying judgment, and
2. “a malpractice plaintiff may recover damages for attorney’s fees paid in the underlying case to the extent the fees were proximately caused by the defendant attorney’s negligence.”

The first holding seems non-controversial, whereas the second may or may not open Pandora’s box (more on that in a separate comment posted immediately below this one).  Yet there is another consequence of the Akin Gump decision – hidden and significant – that reporters and commentators may have missed.

Because the holding on the first two issues required reversal, the Texas Supreme Court declined to review the lower court’s ruling regarding contingent fee offsets. The contingent fee offset issue is simple: If a lawyer’s malpractice results in the loss of a collectible judgment of $1,000, but the client had a 40% contingent fee agreement with the lawyer, is the client entitled to recover $1,000 or $600? If one applies a pure “but for” causation analysis the answer should be $600, because even if the case had been handled perfectly, the client would only have netted $600. Yet, the Dallas Court of Appeals held that the client’s damages are not to be offset by the amount of the lawyer’s contingent fee. Because the Supreme Court declined to review this issue, the Dallas Court’s ruling remains the law.

The Dallas Court observed:

Akin Gump was entitled to its contingency fee only if NDR prevailed in the [underlying] Panda lawsuit. Due to Akin Gump's negligence, NDR did not prevail and thus Akin Gump did not earn its contingency fee. To give the firm a credit for a contingency fee it failed to earn would be to reward its wrongdoing.

Is this logical? Does it conform the Texas Supreme Court’s reaffirmation of the “but for” standard for causation in Akin Gump? Are there any other reasons to disregard a lawyer’s contingent fee interest in determining the amount of damages?

The Dallas Court also held:

To secure the damages it would have been awarded in the Panda lawsuit, NDR was required to pay two sets of lawyers and endure the aggravation of a second lawsuit and a second appeal. The attorney's fees and expenses incurred to prosecute a legal malpractice suit are not recoverable as damages, absent some statute or agreement not applicable here. Simply put, NDR must pay attorneys twice to be in the same position it would have been in absent Akin Gump's malpractice. It should not be forced to “pay” a contingency fee that Akin Gump never earned. (citation omitted).

Does the Texas Supreme Court’s new ruling that attorneys’ fees may be recovered as damages remove the logical underpinning for the Dallas Court’s ruling on the contingent fee offset?

• Email This
• Print
• Comments (4)
• Trackbacks
• Share Link

The Texas Supreme Court’s new opinion in Akin, Gump, Strauss, Hauer & Feld, L.L.P. v. National Development and Research Corporation holds that

a malpractice plaintiff may recover damages for attorney’s fees paid in the underlying case to the extent the fees were proximately caused by the defendant attorney’s negligence.

Prior to this holding, Texas courts had generally disfavored the recovery of attorneys’ fees qua damages unless allowed by statute or contract.

At first glance, the Akin Gump Court’s holding appears straightforward and logical, and in some cases will be easy to implement. For example, if a lawyer fails to file an answer, resulting in a default judgment, the plaintiff should be able to recover the fees it must pay a second attorney to have the default set aside. In this example, 100% of the extra fees are attributable to cleaning up the first lawyer’s mistake. Most cases, however, are not so cut and dried. 

I fear several unintended consequences from the Court’s ruling: 

• First, will there be a new class of cases in which there are no damages but attorneys fees? For example, if a lawyer obtains a total victory for the client, will the client (perhaps hoping to bargain for a fee reduction) comb the record for inconsequential errors that nevertheless may have increased the total fee by some amount?
• Second, will the new rule be used to avoid summary judgment in cases in which the undisputed facts prove the negligence caused no damages? Take appellate malpractice. If a trial court decides as a matter of law that the client would have lost the appeal regardless of the malpractice, will the client’s claim now survive based on a “fact issue” regarding increased appellate costs due to the negligence?
• Third, how much will the rule expand the number and costs of mandatory expert witnesses? Expert testimony is needed to prove causation in all but the most obvious situations. Alexander v. Turtur & Assocs., Inc., 146 S.W.3d 113 (Tex. 2004).(PDF) Doesn’t this mean a new set of experts will be needed in every malpractice case in which the plaintiff seeks attorneys’ fees as damages? The experts will need to review the record and opine whether the malpractice proximately caused an increase in attorneys’ fees and, if so, how much.

Question: Does Akin Gump open Pandora’s box or is it simply a logical extension of “but for” causation? Are there any special rules or limits that should apply?

• Email This
• Print
• Comments (13)
• Trackbacks
• Share Link

Akin Gump Strauss, etc. v. National Development and Research Corp. (07-0818).

Supreme Court of Texas- Decided October 30, 2009

The Supreme Court of Texas took a giant step  closer to  New Jersey's rule in Saffer v. Willoughby, which permits a prevailing plaintiff in a legal malpractice action to recover as consequential damages attorneys' fees and expenses from the negligent attorney, in order to make the plaintiff whole again.

The case involved an underlying trial and botched jury verdict questions caused by the attorney's malpractice and then an appeal to correct the damage it caused.

Here's what the High Court in Texas said:

A negligence claim, unlike a fee forfeiture claim for breach of fiduciary duty, is about compensating an injured party. See Douglas v. Delp, 987 S.W.2d 879, 885 (Tex. 1999) (“[W]hen the injuries caused by an attorney’s negligence are economic, the plaintiff can be fully recompensed by the recovery of any economic loss. Restoration of the pecuniary interest suffices to return a plaintiff to her prior circumstances.”); Thomas D. Morgan, Lawyer Law: Comparing the ABA Model Rules and the ALI Restatement (Third) of the Law Governing Lawyers 98 (2005) (“A key distinction between fee forfeiture and the malpractice remedy is that the amount forfeited need have no relation to actual damages suffered by the client.”) (emphasis omitted); Restatement (Second) of Torts § 903 cmt. a (1977) (“When there has been harm only to the pecuniary interests of a person, compensatory damages are designed to place him in a position substantially equivalent in a pecuniary way to that which he would have occupied had no tort been committed.”).

We see little difference between damages measured by the amount the malpractice plaintiff would have, but did not, recover and collect in an underlying suit and damages measured by attorney’s fees it paid for representation in the underlying suit, if it was the defendant attorney’s negligence that proximately caused the fees. In both instances, the attorney’s negligence caused identifiable economic harm to the malpractice plaintiff. The better rule, and the rule we adopt, is that a malpractice plaintiff may recover damages for attorney’s fees paid in the underlying case to the extent the fees were proximately caused by the defendant attorney’s negligence. See Alexander v. Turtur & Assocs., Inc., 146 S.W.3d 113, 119 (Tex. 2004); Knebel v. Capital Nat’l Bank, 518 S.W.2d 795, 799 (Tex. 1974); 3 Ronald E. Mallen & Jeffrey M. Smith, Legal Malpractice § 21:19 (2009). 

In Saffer, the New Jersey Supreme Court similarly held:

A client "may recover for losses which are proximately caused by the attorney's negligence or malpractice." Lieberman v. Employers Ins., 84 N.J.325, 341, 419 A.2d 417 (1980)...The purpose of a legal malpractice claim is "to put a plaintiff in as good a position as he [or she] would have been had the [attorney] kept his [or her] contract."

                                                         * * *

...,[the prevailing plaintiff] is nonetheless entitled to reasonable expenses and attorney fees, as consequential damages, incurred in a successful malpractice prosecution.

143 N.J.256, 272, 670 A.2d 535.

According to one Texas blogger:

So, in a later malpractice action, the additional portion of fees attributable to the original lawyer’s negligence — added hearings, procedures, or appellate procedures — might be recoverable.

Question: The "later malpractice action" is  an "added procedure". So, aren't  the additional fees that a client has to pay to another lawyer to prosecute the later legal malpractice  action also "attributable to the original lawyer's negligence"? The Texas Court made clear in the Akin Gump case, as did New Jersey in Saffer, that these cases  do not involve the "American Rule" nor fee shifting. They involve compensating the damaged client for his losses and making the client that is  damaged by his lawyer's negligence whole again-- even if doing that requires bringing a later legal malpractice action against the negligent lawyer.

• Email This
• Print
• Comments (2)
• Trackbacks
• Share Link