In Jacobs v. Tapscott, Civil Action No. 3:04-CV-1968-D, 2006 U.S. Dist. Lexis 68619 (N.D. Tex. 2006), asbestos plaintiffs sued their lawyers over a series of settlements with solvent and insolvent defendants. The clients alleged, in part, that the underlying case had settled for less than it should have and that the lawyer had improperly used a power of attorney to settle the case without consulting the clients. The clients tendered two expert witnesses who rendered opinions on the settlement value of the underlying case and on the lawyers’ alleged negligence in undervaluing the case for settlement purposes.

After the court-ordered deadline for providing expert reports and on the eve of the June 2, 2006 discovery deadline, plaintiffs served a May 31, 2006 letter of Mark A. Hendrix, Esquire (“Hendrix”) and a June 2, 2006 letter of Peter E. Ferraro, Esquire (“Ferraro”), experts whom plaintiffs had designated, that contained supplemental opinions. . . . [D]espite Hendrix’s deposition testimony that he was not expressing an opinion on the general value of mesothelioma cases or on the Jacobs Litigation, in his supplemental letter he opines that no one at Baron & Budd evaluated the case as low as $1 million, if such a valuation was made it was not reasonable, and a more reasonable valuation of the case would be between $2.5 and $3 million. They cite Ferraro’s deposition testimony that, although he valued the case at the low end of $3 million, there was no negligence involved in settling the case or telling plaintiffs that they had settled the case for $2.5 or $2.6 million. And they complain that he now opines that a $1 million valuation was not reasonable and a settlement in the range of approximately $3 million was reasonable.

The court found that such testimony could have relevance:

[T]he opinions of Hendrix and Ferraro . . . appear[ ] to be important. For example, their opinions could have probative value in establishing the validity of plaintiffs’ breach of fiduciary duty claim based on the assertion that defendants used the powers of attorney to gain the benefit of attorney’s fees and to avoid the necessity and expense of a jury trial. The value of the Jacobs Litigation in relation to the amount of the settlement might reveal a motive to settle for less than the worth of the case, in order to enhance the certainty of obtaining attorney’s fees or to eliminate the expenses of a jury trial.

Comment

Motive, of course, is not an element on a breach of fiduciary duty claim or an Arce fee-forfeiture claim based on breach of fiduciary duty. But that aside, how does an expert’s opinion that the settlement value of a case exceeded the amount for which it was settled tend to prove that the lawyer had a motive to settle for less? Settlements have only three possible results when weighed against a hypothetical “true settlement value” – that the case settled for more than the true settlement value, that the case settled for exactly the true settlement value, or that the case settled for less than the true settlement value. If the case settled for more than the true settlement value, then aren’t the motives for settling the same – i.e., “to enhance the certainty of obtaining attorney’s fees” and “to eliminate the expenses of a jury trial”? Ditto for a settlement equaling the case’s true settlement value. Evidence that a lawyer settled a case for “less than the worth of the case,” which appears to be the essential nature of the evidence offered in this case, doesn’t answer the question as to why the lawyer did so. Failing that, it is difficult to see how the expert opinions tendered in this case are evidence of motive.