Client vs. Lawyer: Legal Ethics and Malpractice in Texas

Appellate Court Affirms Jury's Rejection of Fraud Claim Based on Firm's Brochure and Website

Sandy McCorquodale — Mon, 21 Apr 2008 22:35:00 GMT

The Pain Care Center, Inc., and Marsha Hughes v. O'Connor & Hannan, L.L.P., No. 14-06-00166-CV (Tex. App.--Houston [14th Dist.] September 25, 2007) (Opinion Delivered by Chief Justice Adele Hedges).

Background

In May 2001, employee Kirk Coverstone sued The Pain Care Center and Marsha Hughes, the firm's CEO, in a dispute centered upon the terms of Coverstone's employment contract. After dismissing original legal counsel assigned to the case, Ms. Hughes engaged attorney Michael Wing, and his firm, O'Connor & Hannan, to represent her and The Pain Care Center in the case.

Wing left O'Connor & Hannan several months later, but the firm never asked to be dismissed as counsel in the Coverstone suit. Following the issuance of a judgment in favor of Coverstone, Hughes filed suit against both Wing and O'Connor & Hannan, alleging professional negligence, fraud, breach of contract, and breach of fiduciary duty. Before trial, Wing independently settled with The Pain Care Center and Hughes. The trial court granted a no-evidence summary judgment in favor of O'Connor & Hannan and against Hughes and The Pain Care Center on the breach of contract issue.

However, the trial court found that the representation of Hughes and the Pain Care Center in the underlying action had been negligently performed, and that O'Connor & Hannan was vicariously liable for the acts of negligence because it had failed to secure a court order removing the firm from the responsibility of defending Hughes and the Pain Care Center after Wing's separation from the firm. The jury awarded $98,056.17 in damages, but the court applied a settlement credit for Wing's prior settlement ($300,000) to the award. The jury also found that the firm had not committed fraud against The Pain Care Center or Hughes.

The Pain Care Center and Hughes subsequently appealed the trial court's findings, citing multiple issues, including untimely discovery on the part of the defendants and the trial court's failure to find the defendants guilty of fraud.

Discovery Disputes

The appellants maintained that the trial court erred in allowing the defendants to present trial witnesses since O'Connor & Hannan had failed to "timely and adequately answer discovery." See Tex.R. Civ. P. 193.6(a) (providing that a party that fails to timely identify a witness may not offer that witness's testimony at trial), 215 (governing sanctions for discovery abuses).

The appeals court, however, noted that the sole reason given in support of this argument was the defendants' failure to identify the witnesses they intended to call until thirty days prior to trial. The appellants failed to explain why the thirty day notice was untimely, instead merely alleging that it was. They also failed to cite any relevant precedents to support this assertion. The appeals court noted, therefore, that the issue had not been properly briefed. See Tex. R. App. P. 38.1(h) (requiring that an appellant's brief "must contain a clear and concise argument for the contentions made, with appropriate citations to authorities and the record").

Hughes and The Pain Center also argued that the defendants had failed to state the relevant connection between the witnesses called and the case at hand. The appeals court, however, found that the connection was clearly stated in documentation provided by the defendants. Therefore, the appeals court held that the trial court had not erred in the matter of discovery, and subsequently upheld the court's decision.

Fraud

Hughes and The Pain Care Center alleged that the jury's failure to find fraud was against the overwhelming weight of the evidence presented at trial. To support this argument, they presented the law firm's brochure as evidence of fraudulent statements made, including the assurance that all clients' legal defense would be handled by a team, the firm would choose the attorney whose skills were best suited to the job, and the lawyer so chosen would be an experienced litigation attorney.

The appeals court pointed out that the jury was asked to find the firm guilty of fraud only if the firm knowingly made material misrepresentations of fact in the brochure that the firm planned to act upon. The jury would also have to believe Hughes' testimony that she relied largely on the brochure and firm website containing the alleged fraudulent claims in order to select O'Connor and Hannan as legal counsel.

The appeals court noted, "the jury is the sole judge of the credibility of the witnesses and the weight to be given to their testimony." See GTE Mobilnet, 61 S.W.3d at 615-16. "On the most basic level, the jury may simply have disbelieved Hughes' self-serving testimony." See, e.g., Purcell Const., Inc. v. Welch, 17 S.W.3d 398, 401-02 (Tex.App.--Houston [1st Dist.] 2000, no pet.) (holding evidence was factually sufficient where jury could have disbelieved testimony of principle of defendant company).

The court also observed the evidence that Hughes and Wing had a relationship prior to and independent of the attorney-client relationship. Wing was Hughes' college professor, and Hughes' own testimony, along with email correspondence between the two, was presented at trial to establish their prior relationship and discussion of the Coverstone case. Since a finding of fraud would require the jury to believe that Hughes chose Wing and O'Connor and Hannan as legal counsel based upon allegedly fraudulent claims in the brochure and website, the appeals court did not find that the jury's failure to do so was against the weight of the evidence presented at trial. For that reason, the appellant's final issue regarding fraud was also overruled and the trial court's prior ruling upheld.

Pro se litigant’s brief and conclusory statements provide not a scintilla of evidence to support her legal malpractice claim.

Sandy McCorquodale — Sun, 02 Sep 2007 01:03:49 GMT

Martinez v. Leeds, No. 08-05-00240-CV, 2007 WL 778643 (Tex. App.--El Paso 2007).

Filing a legal malpractice claim pro se is not the best idea. Appellant, a pro se litigant, sought both media attention and judicial relief against an attorney appointed as guardian ad litem and counsel to her. Appellee was appointed attorney and guardian ad litem to Appellant in connection with an emergency removal petition filed against Appellant by the Texas Department of Protective and Regulatory Services on July 26, 2001. On November 13, 2001, Appellee filed a motion to withdraw as counsel of record, based on Appellant’s alleged refusal to follow his advice and insistence on involving the media. Appellee attached a letter from Appellant to the El Paso Times to his motion to withdraw, in which Appellant accused Appellee of being “inadequate and ineffectual.” The trial court granted Appellee’s motion.

On October 21, 2004, Appellant filed a suit against Appellant for legal malpractice, breach of contract, defamation, and violation of her constitutional rights. Appellant filed an answer on November 5, 2004, and then both a traditional and a no evidence summary judgment motion. Both motions were granted; Appellant appeals.

The Court held that it need only analyze the propriety of the no-evidence summary judgment rule, because if its standard was met, the more stringent standard of a traditional summary judgment motion would also be met.

“A no-evidence summary judgment under Rule 166a(i) is essentially a pretrial directed verdict, and we therefore apply the same legal sufficiency standard in reviewing a no-evidence summary judgment as we apply in reviewing a directed verdict. The party moving for no-evidence summary judgment must assert that there is no evidence of one or more essential elements of a claim or defense on which the non-movant would the burden of proof at trial . The burden then shifts to the non-movant to produce evidence raising a fact issue on the challenged elements. To raise a genuine issue of material fact, the non-movant must set forth more than a scintilla of probative evidence as to an essential element of his claim or defense.”

The Court noted that Appellant did not provide any response to Appellee’s summary judgment motion, and therefore did not meet her burden to raise a genuine issue of material fact. Her brief and conclusory statements were unsupported by argument or citation to legal authority. Despite the allowance made because Appellant was not an attorney, nothing was provided for the court to review.

Next, the Court noted that Appellant argued that when the trial court granted summary judgment, she was denied her right to a jury trial. The court held that any constitutional challenges must be presented by motion, answer, or response to a motion for summary judgment, or they will not be considered. Regardless, the court noted that when there is no genuine issue of material fact, granting summary judgment does not violate a party’s constitutional right to a jury trial. Accordingly, the Court affirmed the trial court.

Legal malpractice suit barred by limitations where client was aware of facts early on; Professional services exemption barred DTPA claim.

Sandy McCorquodale — Sun, 02 Sep 2007 00:26:05 GMT

Brennan v. Manning, 2007 WL 1098476 (Tex. App.--Amarillo 2007).

In this case, the client knew of monies potentially owed to her in her divorce action, but did not fault counsel for not pursuing such claim until well after the lawsuit was over and done with.

In 1995, the client retained Manning and his law firm to represent her in a divorce proceeding against James Brennan. Brennan was an attorney specializing in personal injury litigation. At the time of the divorce, the client was aware that her husband received income from contingent fees and from the referral of cases to other attorneys. The client contended that during the lawyers' representation of her, she received erroneous legal advice from Manning that caused her to receive an inadequate share of the marital estate. Specifically, she maintained that Manning incorrectly advised her that she was not entitled to an interest in any contingent or referral legal fees owed to her husband.

The client's divorce proceeding resulted in the entry of a Decree of Divorce on January 23, 1998. Subsequent to entry of the Decree of Divorce, the client was periodically represented by the lawyers on matters related to the enforcement of that decree. The underlying cause of action was filed on June 24, 2004.

Manning and the other defendants filed an Original Answer affirmatively alleging that the client's claims were barred by limitations. The lawyers subsequently filed a traditional and no-evidence Amended Motion for Summary Judgment alleging that the client's claims were barred by limitations and a lack of causation. The client contended that limitations did not operate to bar her cause of action for three reasons: (1) limitations was tolled during the existence of an attorney-client relationship; (2) accrual of her cause of action was deferred due to the discovery rule; and (3) limitations was tolled due to fraudulent concealment by The lawyers. The client further contended the summary judgment evidence raised a question of fact as to causation.

The trial court granted summary judgment in favor of the lawyers, holding that the client’s claims were barred both by the statute of limitations and lack of causation. The Court of Appeals affirmed.

Hughes tolling rule held inapplicable

The Court of Appeals found that the Hughes tolling rule was inapplicable:

Legal malpractice claims are governed by a two year statute of limitations. A legal malpractice claim accrues when the legal injury occurs, unless there is a legal basis for tolling limitations. Appellant's legal malpractice claim centers upon her allegation that she received an inadequate division of community property when Manning incorrectly advised her that she was not entitled to a share of referral or contingency fees from lawsuits pending at the time of her divorce. Therefore, Appellant's legal malpractice claim accrued when she sustained a legal injury, which would have been at the time the community property was divided by the entry of a decree of divorce.

Appellant, relying upon Willis v. Maverick, would have us adopt a bright line rule that says in a legal malpractice cause of action, limitations is tolled so long as the attorney-client relationship exists between the parties. Appellant's reliance on Willis is misplaced. The existence of an attorney-client relationship does not, standing alone, toll limitations in a legal malpractice cause of action. Rather, limitations in a legal malpractice cause of action is tolled due to the attorney-client relationship only when the attorney's malpractice occurs and is discoverable during the course of the underlying litigation being pursued by the attorney on behalf of the client. The Hughes rule, which tolls the limitations period until all appeals in the underlying action are exhausted, is expressly limited to cases involving claims of attorney malpractice in the prosecution or defense of the underlying litigation and does not apply to malpractice claims involving transactional work.

Appellant's Decree of Divorce was signed on January 23, 1998. Therefore, applying the Hughes rule to the facts of this case, the statute of limitations on Appellant's legal malpractice cause of action was tolled until February 22, 1998, the date her divorce decree became final.

Subsequent to the Decree of Divorce becoming final, Manning performed legal services for Appellant in the nature of work incident to the enforcement of the decree. Appellant would have this Court extend the Hughes rule to revive the tolling of limitations during these periods of representation. We conclude that reasons underlying the Hughes rule are inapposite to the facts of this case, and we decline to extend that rule without clear precedent.

Tolling under discovery rule had long since run

With respect to the discovery rule, the court stated that this rule would operate to defer accrual of a cause of action until the client knew or should have known that she had an interest in the fees in question, but that she still sued too late:

Appellant further argues that the accrual of her cause of action was deferred due to the fact that she could not and did not discover the erroneous advice. The "discovery rule" exception to the statute of limitations operates to defer accrual of a cause of action until such time as the claimant knows, or in the exercise of reasonable diligence should know, of the facts giving rise to her claim or cause of action.

Therefore, the accrual of her cause of action, and concomitantly, the commencement of limitations, was deferred until that point in time that Appellant, with the exercise of reasonable diligence, knew or should have known that the community had an interest in the referral or contingent fees owed to her husband as a result of cases pending at the time of their divorce. Competent summary judgment evidence established that, more than two years prior to the commencement of this suit, Appellant had specific knowledge that referral and contingent fees were a part of their community estate because they had been listed as such in a sworn inventory filed by her husband in a prior divorce proceeding between the parties. Furthermore, Appellant was aware of specific referral and contingency fees cases pending at the time of her divorce and she even spoke to other lawyers concerning her right to receive a portion of the fees due to her husband from those cases. Subsequent to the divorce, Appellant retained an attorney to assist her in securing part of a referral or contingent fee that was due to be paid to her former husband. Based upon these facts, Appellant either knew, or in the exercise of reasonable diligence should have known, the facts giving rise to her claim more than two years prior to the commencement of this cause of action. As such, the trial court did not err in finding that the "discovery rule" did not operate so as to defer the accrual of Appellant's cause of action.

Fraudulent inducement also rejected

Finally, with respect to fraudulent inducement, the court held that it was inapplicable for the same reasons as the discovery rule was:

Appellant further argues the statute of limitations was tolled by the doctrine of fraudulent concealment. The tolling of limitations based upon fraudulent concealment is a distinct concept from the "discovery rule" exception and it exists for different reasons. When applicable, the doctrine of fraudulent concealment operates to estop a defendant from relying on limitations as a defense. The doctrine provides that where a defendant is under a duty to make disclosure but fraudulently conceals the existence of a cause of action from the party to whom it belongs, the defendant is estopped from relying on the defense of limitations until the party either learns of the right of action or should have learned thereof through the exercise of reasonable diligence. For the same reason that the discovery rule did not bar the application of the statute of limitations, the doctrine of fraudulent concealment does not operate to bar limitations.

Professional services exemption barred DTPA claim

The Texas Deceptive Trade Practices Act (DTPA) expressly exempts claims for damages based on the rendering of a professional service, the essence of which is the providing of advice, judgment, opinion, or similar professional skill. This exemption does not, however, apply to: (1) an express misrepresentation of a material fact that cannot be characterized as advice, judgment, or opinion; (2) a failure to disclose information in violation of § 17.46(b)(24); (3) an unconscionable action or course of action that cannot be characterized as advice, judgment, or opinion; (4) breach of an express warranty that cannot be characterized as advice, judgment, or opinion; or (5) a violation of § 17.46(b)(24).

The Court of Appeals agreed that none of the exceptions to the professional services exemption applied in this case:

Appellant's claims are clearly based upon legal services provided to her by Manning and the other Appellees. The essence of those legal services was the providing of advice, judgment, opinion, or similar skill. As such, the professional services exception to the DTPA was raised by the evidence, thereby shifting the burden to Appellant to establish an exception to the exemption.

In order to establish the "failure to disclose" information in violation of § 17.46(b)(24) exception, the party must prove (1) the concealing-party knew something material about the goods or services being rendered (2) which was not disclosed (3) with the intent to induce the claimant-consumer into entering into a transaction, and (4) the claimant-consumer would not have entered into the transaction had the information been disclosed. Appellant produced no summary judgment evidence which would have shown that either Manning or the other Appellees knew that any of the advice given to Appellant was erroneous. Furthermore, she failed to produce any summary judgment evidence that would have established that the failure to disclose any erroneous advice was done so with the intent to induce her into entering into the divorce settlement reached, nor that she would not have entered into the agreement reached had the allegedly erroneous information been disclosed. Appellant, therefore, failed to establish the "failure to disclose" exception to the professional services exemption.

In order to establish the "unconscionable" exception to the professional services exemption, a consumer-complainant must establish that the complained of conduct was unconscionable. An unconscionable act is one that takes advantage of the lack of knowledge, ability, experience, or capacity of a person to a "grossly unfair degree," or which results in a gross disparity between the value received and consideration paid, in a transaction involving transfer of consideration. Unconscionable action requires a showing that the resulting unfairness was glaringly noticeable, flagrant, and unmitigated. Conduct simply showing the failure to exercise that degree of care, skill, and diligence that an attorney of ordinary skill and knowledge would have exercised under the same or similar circumstances does not equate to an unconscionable act in violation of the DTPA. Having reviewed Appellant's claim of unconscionability in light of the entire transaction, we find that Appellant's claims are best stated as simple negligence claims. It cannot be said that the alleged concealment of erroneous advice resulted in glaringly noticeable, flagrant, and unmitigated unfairness to Appellant in the attorney-client relationship. Accordingly, we find Appellant's summary judgment evidence did not establish the "unconscionable" exception to the professional services exemption.

Trial court's order denying presuit deposition of lawyer not appealable where suit against lawyer is contemplated.

Sandy McCorquodale — Sat, 01 Sep 2007 23:48:43 GMT

Layton v. Clark, 2007 WL 654360 (Tex. App.--Amarillo 2007).

Be careful what you state in your papers, as your words may later be used against you. Here, the former client asked to take a presuit deposition of his former attorney, who had represented him in a May 1996 trial. Rule 202 of the Texas Rules of Civil Procedure permits taking a deposition to be used either in anticipation of litigation or in investigation of a potential claim. The trial court denied the request without a hearing. The client appealed.

On appeal, the former client argued that there were a number of constitutional questions that would require reversal. He also argued that his request was not intended to be a deposition in anticipation of filing a lawsuit, but rather to investigate an actual innocence claim.

Unfortunately for the former client, however, his original filed petition expressly stated that he was seeking to depose the lawyer to

“investigate a potential claim arising out of the trial of Petitioner … wherein the deponent may have committed legal malpractice.”

A trial court’s ruling is a final appealable order if the deposition sought is against a third party against whom suit is not contemplated. Accordingly, the Court of Appeals held that here, the appellant clearly sought discovery with the intent to file a legal malpractice case. Therefore, the order was interlocutory in nature and nonappealable. Thus, the Court of Appeals lacked jurisdiction to hear the appeal and dismissed it for lack of jurisdiction.

Expert witness had nothing of substance to add; No negligence in not objecting to a correct jury charge.

Sandy McCorquodale — Sat, 01 Sep 2007 23:24:57 GMT

Juarez v. Elizondo, 2007 WL 835427 (Tex. App.--San Antonio 2007).

What do you do when faced with an expert witness who has lots of opinions, but all are unsubstantiated? Appellants were faced with this dilemma in this case. The client hired the attorneys and their law firm to file a lawsuit arising from the death of Elijio Juarez, Jr. This lawsuit alleged that Juarez died as a result of brake failure on an oil tanker he was driving, which caused it to overturn. Because the employer was a workers compensation subscriber, only a claim for gross negligence could be brought against Mr. Juarez’s former employer. A claim was also asserted against an automotive shop that had inspected the truck before the accident; that claim settled before trial. A jury rejected the gross negligence claim and declined to award exemplary damages (which are permitted, even though workers compensation prevents recovery of actual damages). The client did not appeal but instead sued the lawyers, claiming legal malpractice.

The client sought to utilize Retired Justice J. Bonner Dorsey. It was Justice Dorsey’s opinion that the lawyers were negligent in failing to request a jury charge that conditionally submitted the actual damage question on a finding of liability for gross negligence or otherwise inquired about liability for gross negligence before the actual damage question. He also stated that the lawyers were negligent in failing to object to jury argument that compared gross negligence to murder and asserted that the client would only receive the actual damages awarded instead of exemplary damages. Justice Dorsey felt that the jury wanted to give the appellees everything they were entitled to, but that they were mislead by the jury argument.

The trial court granted summary judgment in favor of the lawyers, excluding Justice Dorsey’s expert opinion. The Court of Appeals affirmed.

With regard to the jury charge, Justice Dorsey said that no actual damages question should have submitted. However, when he was presented with authority stating that such a question was necessary, he changed his opinion. He then stated that the question order in the jury charge should have been reversed, so that the jury was not asked about damages until it stated whether there was gross negligence. However, Justice Dorsey also acknowledged that question order in a jury charge is within the court’s discretion and admitted that the charge was legally correct.

The Court of Appeals held that if no proper objection to a jury charge exists, then there can be no negligence for failing to object. In this case, an actual damages question needed to be submitted, and the submitted charge was consistent with the Texas Pattern Jury Charges. Accordingly, a reasonable attorney could have decided not to request any changes.

The court also held that an expert witness’s conclusory statements are insufficient to defeat a summary judgment motion. The court found that Justice Dorsey provided no legal support for his opinions and that the portions of his opinion were properly stricken.

Because we have concluded that Justice Dorsey failed to provide sufficient support for his opinions regarding the jury charge and those portions of his opinion were properly stricken, the remaining testimony does not constitute evidence that the appellees cause the appellants any damage by failing to object to the jury argument. Because the appellants presented no other expert to support their legal malpractice claim, the trial court properly granted the no evidence summary judgment as to this claim.

Accordingly, his remaining testimony did not constitute evidence of legal malpractice, the court found, and the summary judgment was justified.

Untimely expert affidavit fatal to legal malpractice claim.

Sandy McCorquodale — Sun, 19 Aug 2007 21:54:41 GMT

Sprowl v. Dooley, No. 05-06-00359-CV (Tex. App.–Dallas May 8, 2007) (not designated for publication). Ruling on Summary Judgment.

If you plan to prosecute a legal malpractice action, it helps if you file your expert’s affidavit on time when opposing a no-evidence summary judgment motion.

Background

The appellant, Linda Sprowl, sought reversal of a lower court’s ruling, which granted the attorneys’ motion for summary judgment on her legal malpractice claim. Sprowl’s expert affidavit was not filed in a timely manner. She further argued that her claim was not barred by res judicata.

Sprowl had hired the law firm of Dooley & Rucker to pursue a defamation case; she later filing a malpractice claim against the law firm of Marshal Dooley and Michael Scott for negligence, fraud, and violations of the Texas Deceptive Trade Practices Act (DTPA).

The defendants moved for summary judgment. Sprowl failed to timely file an expert’s affidavit addressing the standard of care of a reasonably prudent attorney and the alleged causal link between any breach of the duties by her attorney and her claimed injuries. The associate judge granted the summary judgment.

Sprowl appealed the decision to the district court, which heard arguments on December 12, 2005. Three days later, Sprowl filed an expert affidavit of Charles McGarry to support her legal malpractice claims. In February 2006, the district court entered a final judgment, which affirmed the associate judge’s ruling.

Timely summary judgment evidence lacking

The court of appeals affirmed the trial court's judgment in favor of Sprowl’s former lawyers and the law firm that had previously represented her.

Although Sprowl included claims under negligence, fraud, and DTPA theories, the crux of her complaint is for legal malpractice. See Kimleco Petroleum, Inc. v. Morrison & Shelton, 91 S.W.3d 921, 924 (Tex. App.–Fort Worth 2002, pet. denied) (noting regardless of the theory a plaintiff pleads, as long as the crux of the complaint is that the plaintiff's attorney did not provide adequate legal representation, the claim is one for legal malpractice).

To prevail on a legal malpractice claim, a plaintiff must show (1) the attorney owed the plaintiff a duty, (2) the attorney breached that duty, (3) the breach proximately caused the plaintiff's injuries, and (4) damages occurred. Alexander v. Turtur & Assoc., Inc., 146 S.W.3d 113, 117 (Tex. 2004). Because a lawyer is held to the standard of care that would be exercised by a reasonably prudent attorney, expert testimony of an attorney is usually necessary to establish the standard of skill and care ordinarily exercised by an attorney. Zenith Star Ins. Co. v. Wilkerson, 150 S.W.3d 525, 530 (Tex. App.–Austin 2004, no pet.); Ersek v. Davis & Davis, P.C., 69 S.W.3d 268, 271 (Tex. App.–Austin 2002, pet. denied). And when the causal link is beyond the jury's common understanding, expert testimony is also necessary. Alexander, 146 S.W.3d at 120.

The court of appeals noted that Sprowl recognized her need for expert testimony by filing the affidavit of Charles McGarry on December 15, 2005. Sprowl argued on appeal that although she filed the affidavit after the summary judgment hearing, the trial court should have considered it as proper evidence because she filed it prior to final judgment. The court of appeals found her argument was contrary to well-established law:

Summary judgment evidence may be filed late, but only with leave of court. Tex. R. Civ. P. 166a(c); Benchmark Bank v. Crowder, 919 S.W.2d 657, 663 (Tex. 1996). Therefore, a trial court may consider only the summary judgment evidence on file at the time of the summary judgment hearing or filed thereafter and before judgment with permission of the court. Basin Credit Consultants, Inc. v. Obregon, 2 S.W.3d 372, 374 (Tex. App.–San Antonio 1999, pet. denied) (holding no indication in record court granted leave of court for party to file affidavit two days after hearing; therefore, the court could not consider it as summary judgment evidence).

There is no order in this record granting Sprowl leave to file McGarry's affidavit late. As such, his affidavit was not properly before the trial court at the time of the summary judgment hearing. Accordingly, because the record contains no affirmative indication the trial court considered the late-filed affidavit, we must presume it did not consider it and we must likewise not consider it. See Neimes v. Ta, 985 S.W.2d 132, 138 (Tex. App.–San Antonio 1998, pet. dism'd by agr.). Because the trial court had no timely-filed expert affidavit before it, Sprowl failed to present any evidence of the standard of care or causal link between any alleged breach of duty and her damages. Thus, there is a complete absence of evidence of a vital fact of her malpractice claim. Chapman, 118 S.W.3d at 751. Therefore, the trial court properly granted the defendants' no-evidence summary judgment motion.

Creditor’s committee cannot disqualify attorneys representing a debtor where the client-debtor is satisfied with the legal services provided to it by the law firm.

Sandy McCorquodale — Sun, 19 Aug 2007 21:20:01 GMT

In re Specialty Restaurant Group, LLC, No. 07-30779-HDH-11 (N.D. Tex. April 24, 2007). Ruling on Creditor’s Application to Disqualify Debtor’s Attorneys.

A happy client makes for a happy lawyer. A bankruptcy court in Texas has ruled that a creditor’s committee cannot disqualify attorneys representing a debtor where the client-debtor is satisfied with the legal services provided to it by that law firm. The Court ruled in favor of the debtor and its attorneys.

Background

On April 19, 2007, the Court ruled on an application for Interim and Final Orders authorizing the employment and retention of the Law Firm of Fulbright & Jaworski, LLP, nunc pro tunc.

The Committee of Unsecured Creditors filed objections to the employment of the law firm, claiming that the firm was not a disinterested party and that the firm represented an adverse interest to the bankruptcy of Specialty Restaurant Group. The Committee’s claim was based on a failure to conduct a Uniform Commercial Code (UCC) search, and a failure to commence the case within ninety days of a failed perfection of a security interest in property by Specialty Restaurant Group’s secured creditor. The Committee claimed that the firm committed legal malpractice. They also claimed that and the bankruptcy estate had a claim against the firm and sought disqualification of the law firm from representing the company.

Specialty Restaurant Group requested that the court approve Fulbright & Jaworski’s post-petition application as counsel and indicated that the company was completely satisfied with the representation by the law firm.

Texas Court Ruling

Satisfaction with the services of a law firm by the client is a pivotal inquiry in a Texas legal malpractice claim. Yaquinto v. Segerstrom, 247 F.3d 218 (5th Cir.2001). The court held that Texas courts and the Fifth Circuit have found that legal malpractice actions are "intrinsically personal,” that the client’s satisfaction with a law firm’s representation is "paramount," and the client alone can determine if its counsel has misrepresented him.

Final Ruling

The court found that for alleged pre-petition legal malpractice claims, the debtor ultimately remains the client, even where the claim becomes property of the bankruptcy estate. In re C-Power Prod., Inc., 230 B.R. 800 (Bankr. N.D. Tex. 1998). Non-bankruptcy law restricts the assignment of a Texas legal malpractice claim. Thus, it was unclear to the court that the Creditor’s Committee had standing to assert that the law firm committed pre-petition legal malpractice. Under Texas law, the client (debtor) is the “only entity that may make a claim for disqualification” of legal counsel.

While the Creditor’s Committee cited cases where law firms were found to be disqualified, including In re First Jersey Sec., Inc., 180 F.3d 504 (3rd Cir.1999), the court ruled that such cases are not outcome-determinative. The court said that, in the cases cited by the Creditor’s Committee it was clear from the beginning that the law firms were holding funds that they would eventually be required to return to the estate; the basic elements of a preference claim were obvious and not really defensible.

In the present case, there was a real disagreement as to whether the law firm was required to conduct a UCC search, given the information it had from the client, and also, whether the law firm was required to instruct the to client file within ninety days of the date the lender perfected its interest against the personalty. Counsel for the Debtor explained, at the hearing on the Motion, that the timing of the filing was driven by business realities. And, at least to date, the client appeared satisfied with the services of the law firm. Accordingly, the application of the debtor, Specialty Restaurant Group, was granted and Fulbright & Jaworski was entitled to continue its representation of the company.

Anti-fracturing and anti-assignment rules land one-two punch against claims.

Sandy McCorquodale — Sun, 19 Aug 2007 20:47:25 GMT

Martha Camp v. RCW & Co., Inc., No. H-05-3580 (S.D. Tex. May 3, 2007). Ruling on legal malpractice and Deceptive Trade Practices Act (DTPA) claims.

In a tag-team application of the anti-fracturing and anti-assignment rules, a federal court collapsed multiple state law claims into a single legal malpractice claim and then rejected an attempted assignment of the legal malpractice claim. However, because the assignment was invalid as a transfer of the malpractice claim to the assignee, the assignor was permitted to pursue the malpractice claim.

Background

This case involved a business transaction related to the sale of a closely-held corporation, University Bookstore, Inc. (“UBI”), to a college bookstore’s employee stock ownership plan. Earnest Camp was the sole shareholder of UBI and his wife, Martha Camp served as President. The Camps hired defendant Preferred Business Services, Inc., to investigate the possibility of procuring a buyer for UBI’s assets. Eventually, Business Exchange and Mr. Camp signed a best-efforts listing agreement giving Business Exchange the exclusive right to sell assets of UBI, for which Business Exchange would receive $120,000.

In November 1999, Business Exchange recommended that the Camps retain defendant R.C.W. & Co., Inc., to assist in the potential sale of UBI stock to an employee stock ownership plan. The Camps alleged that they had relied on Business Exchange's representation that Roland Criss was "a reputable investment bank and consulting firm with specialized knowledge and experience with employee stock ownership plans and stock related transactions" when they hired Roland Criss to undertake the transaction.

On November 30, 1999, UBI and Roland Criss entered into an agreement whereby Mr. Camp was to conduct a business valuation of UBI's stock. Roland Criss represented that it would assist in the planning, arrangement, and administration of the employee stock ownership plan, in exchange for a $3,500 fee for the plan design services and fees for other services, retaining an attorney to prepare documents for filing with appropriate agencies, and to draft the sales agreement with costs to be paid by UBI. In July 2000, Criss Investments valued the stock of UBI at $2.4 million. The Camps and UBI allegedly relied on this valuation in their decisions to proceed with the implementation of an ESOP, and to continue with the services of Roland Criss.

UBI established the UBI Employee Stock Ownership Plan and adopted the UBI Employee Stock Ownership Trust. The Hollmanns were retained to draft documents and to assist in the design of the UBI ESOP and the UBI Trust. The Hollmanns and Criss allegedly represented to the Camps that the transaction complied with controlling law. UBI Trust purchased all 250 shares of UBI owned by Mr. Camp in January 2001, for $2.4 million. Part of the purchase price was funded by a third-party lender and personally secured by Mr. Camp. Mr. Camp paid Business Exchange $93,750, based on the adjusted sales price of 75% of UBI stock. Criss Investments later updated its valuations of stock in 2001 at $1.6 million and August 2002 at $1.8 million. Defendants McClure and Schumacher issued a valuation to UBI that the fair market value of UBI was $1.1 million as of January 2001, $1.3 million less than the value by Criss Investments in July 2000.

Ms. Camp, individually and as executor entered into a settlement agreement with the UBI ESOP in June 2004, and in so doing allegedly relied on the opinion of defendant Bruce Ruud & Associates that the proposed settlement was reasonable. Under the agreement, Camp paid $1.3 million in the form of a check and debt forgiveness to the UBI ESOP, and received in exchange "certain claims believed to be assignable at the time of settlement." Camp allegedly "became aware" that UBI or the UBI ESOP sold a parcel of land for $1.2 million when the Camps made the initial sale of UBI stock.

Camp filed suit in state court in September 2004, alleging claims under Texas law and ERISA against Criss, Hollmanns, and Business Exchange. The case was subsequently removed to federal court and the action was automatically stayed when UBI filed for bankruptcy. When the stay was lifted, the trustee for the bankruptcy estate of UBI filed an amended complaint against Criss and the Hollmanns for malpractice, violation of the Deceptive Trade Practices Act ("DTPA"), and breach of fiduciary duty under ERISA and Texas common law. The defendants brought multiple challenges to the claims.

The listing contract was alleged to have given Business Exchange the exclusive right to sell the assets of UBI to a third party for $2.4 million. Plaintiff alleged that Mr. Camp paid a commission based upon an adjusted sales price of $1.8 million, that the Book Store Trust was not ready, willing, and able to purchase UBI because the services and structure of the transaction failed, money was later required to be refunded, and that the Business Exchange "breached their contract by not producing a ready, willing and able purchase[r] as promised in their contract." Damages were claimed to have been incurred for, among others, commissions that plaintiff contends defendants failed to return.

The Hollmann Defendants contended that Plaintiffs Ms. Camp and the Trustee could not maintain their claims against them because (1) Plaintiffs improperly attempted to fracture a single malpractice claim into multiple claims; (2) the assignment through which Ms. Camp acquired her interest in the malpractice action is void under Texas law; and (3) the malpractice claim is barred by the applicable limitations period.

Anti-fracture rule applied

"Texas law . . . does not permit a plaintiff to divide or fracture her legal malpractice claims into additional causes of action." Goffney v. Rabson, 56 S.W.3d 186, 190 (Tex. App.-Houston [14th Dist.] 2001, pet. denied) (citing numerous authorities); see also Aiken v. Hancock, 115 S.W.3d 26, 28 (Tex. App.--San Antonio 2003, pet. denied); Ersek v. Davis & Davis, P.C., 69 S.W.3d 268, 274 (Tex. App.--Austin, 2002, pet. denied) (quoting Sledge v. Alsup, 759 S.W.2d 1, 2 (Tex. App.--El Paso 1988, no writ), for the proposition that "[n]othing is to be gained by fracturing a cause of action arising out of bad legal advice or improper representation into claims for negligence, breach of contract, fraud or some other name"). Notwithstanding its label, an action that arises out of an attorney's alleged poor legal advice or improper representation is one for legal malpractice. See Sullivan v. Bickel & Brewer, 943 S.W.2d 477, 481 (Tex. App.--Dallas 1995, writ denied); see also Goffney, 56 S.W.3d at 190 (characterizing the issue in legal malpractice actions as "whether the attorney exercised that degree of care, skill, and diligence as lawyers of ordinary skill and knowledge commonly possess and exercise"); Kahlig v. Boyd, 980 S.W.2d 685, 688-89 (Tex. App.--San Antonio 1998, pet. denied) (construing a fraud claim arising from an attorney's failure to disclose to his client an affair with his client's wife while representing the client in a child custody battle as one for malpractice, because it related to alleged deficiencies in the representation). Thus, mere recitation of independent claims does not preclude their treatment as a single cause of action if the "alternative causes of action are all essentially means to an end to achieve one complaint of legal malpractice." Klein v. Reynolds, Cunningham, Peterson & Cordell, 923 S.W.2d 45, 49 (Tex. App.--Houston [1st Dist.] 1995, no writ) (internal quotations omitted).

Here, Ms. Camp's claims for breach of contract, negligent misrepresentation, violation of the DTPA, breach of fiduciary duty, and gross negligence were comprised of all or some of the following allegations: that the Hollmann Defendants (1) misrepresented that the valuation, the ESOP transaction, and certain commissions charged by Defendants complied with controlling law; (2) failed to advise UBI and the UBI ESOP of "the risks associated with highly leveraged transactions," and "the relevance and significance of securing and reviewing a repurchase liability study"; and (3) failed to disclose conflict of interests between the relevant parties. These allegations are substantially the same as those recited in the Trustee's claims against the Hollmann Defendants for malpractice, violation of the DTPA, and breach of fiduciary duty under Texas common law. In sum, Plaintiffs' contentions pertain to an alleged failure by the Hollmann Defendants to exercise the requisite care, skill, and diligence in their representation of UBI and the UBI ESOP and therefore "amount to no more than restated claims for legal malpractice." Goffney, 56 S.W.3d at 190. Thus, the various state law claims asserted by Ms. Camp and the Trustee are properly construed as a single malpractice action, and the additional state law claims against the Hollmann Defendants were dismissed.

Anti-assignment rule applied

Ms. Camp's complaint expressly stated that she received by assignment from UBI and UBI ESOP the state law claims she asserts against the Hollmann Defendants, which must be construed as a single claim for malpractice. However, under Texas law, assignments of legal malpractice claims are void as contrary to public policy. See Britton v. Seale, 81 F.3d 602, 604 (5th Cir.1996) (construing Texas cases to bar all assignments of such actions); Wright v. Sydow, 173 S.W.3d 534, 553 (Tex. App.--Houston [14th Dist.] 2004, pet. denied) (concluding such assignments are injurious to the legal system); City of Garland v. Booth, 895 S.W.2d 766, 769 (Tex. App.--Dallas 1995, writ denied) (listing the numerous jurisdictions that follow this approach); Zuniga v. Groce, Locke & Hebdon, 878 S.W.2d 313, 316 (Tex. App.--San Antonio 1994, writ ref'd). As one court explained, "allowing assignability would debase the legal system and imperil the attorney-client relationship." City of Garland, 895 S.W.2d at 771. If such an assignment is void, the right to bring the action reverts to the assignor--in this case, the Trustee. See Vinson & Elkins v. Moran, 946 S.W.2d 381, 400 (Tex. App.--Houston [14th Dist.] 1997, writ dism'd by agr.) (voiding an assignment of a malpractice action, but holding an assignor who participated in the appeal could prosecute his claims against the attorneys on remand); see also 7 Williston On Contracts § 15:5 (4th ed. 1999) ("If the assignment or conveyance is champertous, it does not destroy the assignor's right; the assignor may still prosecute the claim in his own name."). Accordingly, the right to bring a malpractice action properly belonged to the Assignor/Trustee and not to Ms. Camp.

Camp also asserted claims for breach of fiduciary duty under ERISA, which she allegedly received by assignment. Federal common law governed the rights and obligations under ERISA. There is authority that "an express and knowing assignment of an ERISA fiduciary breach claim is valid." Tex. Life, Accident Health & Hosp. Serv. Ins. Guar. Ass'n v. Gaylord Entertainment Co., 105 F.3d 210 (5th Cir.1997).

Limitations

Lastly, the Hollmann Defendants argued that the Trustee's malpractice action was time-barred because it accrued more than two years before the filing of suit, specifically, on September 20, 2001, when Criss Investments restated its earlier valuation.

Under Texas law, legal malpractice claims are subject to a two-year limitations period. See Kansa Reins. Co. v. Cong. Mortgage Corp. of Tex., 20 F.3d 1362, 1374 (5th Cir.1994); Parsons v. Turley, 109 S.W.3d 804 (Tex. App.--Dallas 2003, pet. denied) (citing Tex. Civ. Prac. & Rem. Code § 16.003(a)). "Normally, a cause of action accrues when a wrongful act causes some legal injury." Via Net v. TIG Ins. Co., 211 S.W.3d 310, 313 (Tex. 2006). However, the discovery rule may defer accrual of a claim "until the plaintiff knew or, exercising reasonable diligence, should have known of the facts giving rise to the cause of action." In re Coastal Plains, Inc., 179 F.3d 197, 214 (5th Cir.1999) (citation omitted); see also Indus. Indem. Co. v. Chapman & Cutler, 22 F.3d 1346, 1356 & n .21 (5th Cir.1994) (noting the applicability of the discovery rule to legal malpractice claims).

Here, the complaint alleged that the errors in Criss Investments' valuation, and in the advice and services provided by the Hollmanns, were not discovered by UBI until April 2004, the date on which MSA issued an opinion assessing the fair market value of UBI at the time of sale to be $1.3 million, substantially less than the July 2000 valuation provided by Criss Investments. Thus, the applicability of the discovery rule and facts pled in the complaint supported the possibility that the action accrued on April 19, 2004, or within the two-year limitations period.

Final Ruling

Camp's counts for breach of contract, negligent misrepresentation, violation of the DTPA, gross negligence, and breach of fiduciary duty under Texas law were dismissed with prejudice, and the motions were otherwise in all other aspects were denied.

Counsel in mandamus proceeding must alert appellate court of changes in sworn facts.

Sandy McCorquodale — Tue, 19 Jun 2007 06:38:19 GMT

Lawyers commonly swear to mandamus petitions that give the procedural history of events in the lower court. The Dallas Court of Appeals recently reminded the bar that such sworn petitions trigger a duty to update the appellate court promptly if subsequent proceedings in the lower court change the material facts stated in the petition. In In re the City of Lancaster, No. 05-07-00196-CV (Tex. App.--Dallas June 18, 2007), the city filed a mandamus petition attacking a summary judgment order. The trial court subsequently entered a modified summary judgment order which mooted some -- but not all -- of the City's grounds for seeking a writ of mandamus.

Counsel for the city did not communicate to the appellate court that the trial court had revised the summary judgment that was the basis for the City's petition, or that the City's petition was moot in whole or in part. After the court issued an opinion on the mandamus petition, the parties filed an agreed motion to dismiss the proceeding, bringing to the court's attention for the first time that the trial court has issued the revised summary judgment.

The Court of Appeals required the city's counsel to show cause why they should not be sanctioned or referred to the Office of Disciplinary Counsel. After receiving the attorneys' responses, the court said:

. . . [T]he Texas Disciplinary Rules of Professional Conduct impose upon counsel the duty of candor toward the court. See Tex. Disciplinary R. Prof'L Conduct 3.03(a)(1), reprinted in Tex. Gov't Code Ann., tit. 2, subtit. G app. A (Vernon 2005) (Tex. State Bar R. art. X, § 9). “A lawyer shall not knowingly make a false statement of material fact . . . to a tribunal.” Tex. Disciplinary R. Prof'l Conduct 3.03(a)(1). Further, Disciplinary Rule 3.03(b) provides:
If a lawyer has offered material evidence and comes to know of its falsity, the lawyer shall make a good faith effort to persuade the client to authorize the lawyer to correct or withdraw the false evidence. If such efforts are unsuccessful, the lawyer shall take reasonable remedial measures, including disclosure of the true facts.

Tex. Disciplinary R. Prof'l Conduct 3.03(b). The duties set forth in Disciplinary Rules 3.03(a) and (b) “continue until remedial legal measures are no longer reasonably possible.” Tex. Disciplinary R. Prof'l Conduct 3.03(c).

. . . [T]he duty of honesty and candor a lawyer owes to the appellate court includes fairly portraying the record on appeal. Schlafly v. Schlafly, 33 S.W.3d 863, 873 (Tex. App.-Houston [14th Dist.] 2000, pet. denied). Texas Rule of Appellate Procedure 52.11 makes clear that a lawyer has the same duty in original proceedings. Tex. R. App. P. 52.11. Factual misrepresentations not only violate a lawyer's duty to the appellate court but also subject offenders to sanctions. Schlafly, 33 S.W.3d at 873; Am. Paging of Tex., Inc. v. El Paso Paging, Inc., 9 S.W.3d 237, 242 (Tex. App.-El Paso 1999, pet. denied).

After noting that the city's counsel had signed the mandamus petition and that the rules of appellate procedure also require the factual statements in a petition for mandamus to be “verified by affidavit made on personal knowledge by an affiant competent to testify to the matters stated,” Tex. R. App. P. 52.3, the court concluded:

[The city's attorneys'] responses to the Order to Show Cause state that they “absolutely did not offer false material evidence to this [C]ourt.” We agree. As noted in the May 18 Order to Show Cause, we presume the facts stated in the petition, filed by [one of the city's attorneys] and sworn to by [the other], were correct when the petition was filed. However, this does not end the inquiry. . . . [I]t appeared that thereafter -- after this Court had granted a stay and requested a response to the City's petition, and while the matter was pending before the Court -- events transpired rendering the facts stated and sworn to in the petition no longer true; that [the city's attorneys] knew such sworn statements were no longer true; and that they did nothing to communicate that knowledge to this Court. Thus, the issue is whether [the city's] attorneys complied with Disciplinary Rules 3.03(b) and (c) and, if not, why not.

. . .

In the context of an original proceeding seeking the issuance of a writ of mandamus, the statements in the petition . . . constitute material evidence in the original proceeding. When [the city's attorneys] later came to know that [the] affidavit, even though true when submitted, was rendered false by subsequent events, Disciplinary Rules 3.03(b) and (c) obligate [the city's attorneys] to correct or withdraw the false evidence and disclose the true facts. . . . [The city's attorneys] were obligated to file -- in the original proceeding -- either an amended, sworn petition setting forth the correct facts, or (at the very least) another affidavit correcting the statements made and sworn to in the prior petition. We reject [the attorneys'] argument to the contrary.

Further, when determining an original proceeding, the appellate court must necessarily presume that the facts set forth in the petition and sworn to according to rule 52.3 are correct, and that they remain correct during the pendency of the original proceeding. Otherwise, to obtain mandamus relief a petitioner would be in the ludicrous position of having to file regularly additional supplements to the petition assuring the appellate court that such sworn facts remain correct, and thus that mandamus relief is still appropriate. This is not the law. Thus, we read Texas Rules of Appellate Procedure 52.3 and 52.11 as necessarily imposing the same obligation as Disciplinary Rules 3.03(b) and (c) -- i.e. that counsel signing a petition in an original proceeding or swearing to the material facts in such a petition have an obligation to inform the appellate court of any changes in such sworn material facts which render those allegations or affidavit false.

Based on the record, including [the attorneys'] responses to the May 18 Order to Show Cause, we conclude that [the city's attorneys] failed to comply with Disciplinary Rules 3.03(b) and (c) and appellate rules 52.3 and 52.11. [The attorneys] have apologized to the Court, and indicated that any failure on their part was not intentional on their part, but rather was inadvertent. Thus, based on based on the record -- including their responses -- we conclude [the attorneys] have shown cause why they should not be sanctioned in this case. However, we alert counsel as to their obligations to the Court and to the Bar that arise when they sign or swear to petitions filed in original proceedings.

Source: http://www.5thcoa.courts.state.tx.us/files/05/recent/070196SF.HTM

Six lawyer mistakes which require expert testimony in a malpractice action.

Sandy McCorquodale — Thu, 31 May 2007 13:38:18 GMT

Some mistakes are so obvious that a jury can find negligence as a matter of common knowledge. Missing the statute of limitations is a classic example of negligence that any layperson can understand. But when is expert testimony required? Here are six areas from a recent case:

Failing to diligently investigate a claim.
Failing to diligently prosecute a claim.
Failing to challenge a class action certification.
Failing to answer and respond to discovery.
Failing to file a stay of counterclaims.
Failing to file a motion for contempt.

Sprowl v. Dooley, No. 05-06-00359-CV, 2007 WL 1330447 (Tex. App.--Dallas May 8, 2007) (not designated for publication).

Conclusory affidavit on damages dooms legal malpractice claim

Sandy McCorquodale — Tue, 22 May 2007 13:42:32 GMT

In a further illustration of the need to avoid conclusory affidavits in summary judgment proceedings, a legal malpractice claim foundered when an affidavit concerning damages was found to be conclusory in United Genesis Corp. v. Brown, No. 04-06-00355-CV, 2007 WL 1345372 (Tex. App.--San Antonio May 9, 2007).

Factual background

United desired to purchase a fast food restaurant in the San Antonio area. It hired Bradfield Properties, Inc. ("Bradfield"), a real estate brokerage firm, to assist in this endeavor. Bradfield, through its agent Rich Tomlinson, directed United to a property known as The Pizza Kitchen. Tomlinson and United's president, Nancy Gimenez, met with Mohammad Rohim Qureshi, who claimed to own The Pizza Kitchen through Qureshi Enterprises, Inc.

United and Qureshi Enterprises, Inc. entered into an earnest money contract pursuant to which United would purchase The Pizza Kitchen and all equipment for $60,000.00. Tomlinson recommended Brown as the escrow agent and closing attorney. Bradfield engaged Brown, forwarded him the earnest money contract, and requested he prepare the closing documents. Brown prepared a document entitled "Escrow Instructions," a bill of sale, a non-competition agreement, an escrow money contract, a promissory note, and a security agreement. As relevant, these documents indicate United was the buyer and Qureshi Enterprises, Inc. was the seller. Brown also conducted a general index search on the name of the purported seller (Qureshi Enterprises, Inc.) and found no existing liens. Though Tomlinson claims to have provided Brown with a certificate of good standing for an entity named Kazi & Qureshi Enterprises, Inc ., Brown conducted no lien search with regard to this entity. Brown did not attempt to determine if a certificate of good standing existed for Qureshi Enterprises, Inc. because he contends he was not provided with the necessary information to do so as was required by the Escrow Instructions.

On August 23, 2002, the parties met at Brown's office and signed the closing documents. The day after the closing, United began to experience problems-- inventory was short, a computer was missing, and the overall appearance of the restaurant was poor. United also began receiving collection letters and telephone calls. Qureshi disappeared. At United's request, Tomlinson performed a lien search under the name Kazi & Qureshi Enterprises, Inc. The search revealed a lien in the amount of $2,500.00 secured by The Pizza Kitchen's equipment. It was also later determined that Qureshi Enterprises, Inc. had lost its certificate of good standing.

United brought suit against Qureshi and the related entities, Bradfield, and Brown. As to Brown, United alleged legal malpractice and violations of the DTPA. Brown filed a no evidence and traditional motion for summary judgment as to both of United's claims.

Damages affidavit held conclusory

To recover on a claim for legal malpractice a plaintiff must establish: (1) the attorney owed the plaintiff a duty; (2) the attorney breached that duty; (3) the breach proximately caused injury; and (4) the plaintiff suffered damages. Alexander v. Turtur & Associates, Inc., 146 S.W.3d 113, 117 (Tex. 2004).

In his no evidence motion for summary judgment, Brown specifically alleged there was no evidence of damages. In response to Brown's no evidence motion for summary judgment, United produced only one piece of evidence relevant to the element of damages--the affidavit of Gimenez. As to damages, the affidavit states, in toto:

Had Dan Brown made that telephone call, I would not have paid "Qureshi Enterprises, Inc." tens of thousands of dollars for a business and assets that "Qureshi Enterprises, Inc." did not own, nor would I have suffered additional damages resulting from this fraudulent transaction. Those damages amount to economic losses of approximately $75,000.00.... Had Dan Brown done what I paid him to do and relied on him to do, United Genesis Corporation and I would not have suffered the damages we did as a result of this transaction.

The San Antonio Court of Appeals held that this minimal language in the affidavit concerning damages was insufficient to constitute any evidence of damages:

Conclusory statements in affidavits are insufficient to raise a fact issue precluding summary judgment. See Coastal Transp. Co., Inc. v. Crown Cent. Petroleum Corp., 136 S.W.3d 227, 232 (Tex. 2004) (stating that even unobjected-to conclusory testimony is incompetent evidence and does not raise fact issue). "A conclusory statement is one that does not provide the underlying facts to support the conclusion." 1001 McKinney Ltd. v. Credit Suisse First Boston Mortg. Capital, 192 S.W.3d 20, 27 (Tex. App.--Houston [14th Dist.] 2005, pet. denied). Of the three statements in Gimenez's affidavit that could possibly be construed to refer to damages, only the one alleging a $75,000.00 loss actually addresses the damages allegedly suffered by United. However, Gimenez has failed to provide any underlying facts to support her conclusion that United suffered $75,000.00 in damages as a result of Brown's actions or inactions. Her statement is nothing more than a bare conclusion and is therefore insufficient to raise a fact issue precluding summary judgment. Because United failed to present any competent summary judgment evidence on the element of damages, the trial court did not err in granting Brown's no evidence motion for summary judgment as to the legal malpractice claim.

Professional services exclusion barred DTPA claim

Section 17.49(c) of the Texas Deceptive Trade practices Act ("DTPA") states the statute is inapplicable to "a claim for damages based on the rendering of a professional service, the essence of which is the providing of advice, judgment, opinion, or similar professional skill." Tex. Bus. & Com. Code § 17.49(c). A professional service is one that consists of acts particular to the individual's specialized vocation. Nast v. State Farm Fire & Cas. Co., 82 S.W.3d 114, 122 (Tex. App.--San Antonio 2002, no pet.). An act is not a professional service if its only distinction is performance by a professional; rather, it must be an act that requires the professional to use his specialized knowledge or training. Id. This exemption from the DTPA does not apply to an express misrepresentation of material fact that cannot be characterized as advice, judgment, or opinion. Tex. Bus. & Com.Code § 17.49(c)(1).

Brown argued United's DTPA claims were prohibited because United's allegations against him were based on actions he failed to take in his rendition of professional services. United countered that its DTPA action was viable because Brown misrepresented the identity of the owner of The Pizza Kitchen as Qureshi Enterprises, Inc.

The San Antonio Court of Appeals held that the professional services exclusion barred the DTPA claim against the attorney:

United generally pled that based upon information set forth in the petition all defendants violated the DTPA. United then specifically pled four particular violations. Each specific violation is limited to Bradfield's misrepresentation that The Pizza Kitchen was owned by Qureshi or Qureshi Enterprises, Inc. As to Brown, United simply alleged he violated the DTPA based on preceding paragraphs in the petition -- those in the factual rendition and the legal malpractice portions of the petition. In those paragraphs United pled that Brown: (1) failed to follow the escrow instructions (which required him to exercise his "independent professional judgment" on behalf of both the buyer and the seller); (2) failed to ensure the property was actually owned by Qureshi Enterprises, Inc. and that the entity was in corporate good standing with the Texas Secretary of State; and (3) prepared the closing documents based solely on Bradfield's representation without independent verification of identity of ownership or corporate standing. These omissions are not express misrepresentations of material facts but are arguably acts that Brown's legal knowledge or training should have prompted him to undertake despite Bradfield's representation. United's complaints are clearly based on omissions that required Brown to utilize his professional judgment and skill thereby rendering them professional services for which no DTPA action is permitted. See Nast, 82 S.W.3d at 122. According to United's own pleadings, the misrepresentation of fact with regard to identity of ownership was Bradfield's, not Brown's. Accordingly, the trial court did not err in granting Brown's traditional motion for summary judgment on United's DTPA claims.

Professional services exemption bars DTPA claim against lawyer over divorce advice

Sandy McCorquodale — Sun, 29 Apr 2007 04:05:54 GMT

In Brennan v. Manning, No. 07-06-0041-CV, 2007 WL 1098476 (Tex. App.--Amarillo April 12, 2007), the court found that the professional services exemption barred a DTPA claim against a lawyer based on advice given in the course of a divorce proceeding.

Background Facts

In 1995, Lucia Brennan retained Manning and his law firm to represent her in a divorce proceeding against James Brennan. Brennan was an attorney specializing in personal injury litigation. At the time of the divorce, Lucia was aware that her husband received income from contingent fees and from the referral of cases to other attorneys. Lucia contended that during Manning's representation she received erroneous legal advice from him that caused her to receive an inadequate share of the marital estate. Specifically, she maintained that Manning incorrectly advised her that she was not entitled to an interest in any contingent or referral legal fees owed to her husband. She sued Manning and his law firm under the DTPA, among other claims.

Professional services exemption

The DTPA expressly exempts claims for damages based on the rendering of a professional service, the essence of which is the providing of advice, judgment, opinion, or similar professional skill. Tex. Bus. & Com. Code § 17.49(c). This exemption does not, however, apply to: (1) an express misrepresentation of a material fact that cannot be characterized as advice, judgment, or opinion; (2) a failure to disclose information in violation of § 17.46(b)(24); (3) an unconscionable action or course of action that cannot be characterized as advice, judgment, or opinion; (4) breach of an express warranty that cannot be characterized as advice, judgment, or opinion; or (5) a violation of § 17.46(b)(24).

The court held that the exemption barred the DTPA claims:

Appellant contends the professional services exemption is not applicable for two reasons: (1) Manning and the other Appellees failed to disclose information in violation of § 17.46(b)(24) and (2) the conduct of Manning and the other Appellees was unconscionable and could not be characterized as advice, judgment, or opinion. In the context of a summary judgment proceeding, a party relying on the professional services exemption has the burden to establish that exemption as a matter of law. Once established, the burden shifts to the party opposing summary judgment to establish the exception to the exemption. Head, 159 S.W.3d at 740; Palmer v. Enserch Corp., 728 S.W.2d 431, 435 (Tex. App.--Austin 1987, writ ref'd n.r.e.).

Appellant's claims are clearly based upon legal services provided to her by Manning and the other Appellees. The essence of those legal services was the providing of advice, judgment, opinion, or similar skill. As such, the professional services exception to the DTPA was raised by the evidence, thereby shifting the burden to Appellant to establish an exception to the exemption.

In order to establish the "failure to disclose" information in violation of § 17.46(b)(24) exception, the party must prove (1) the concealing-party knew something material about the goods or services being rendered (2) which was not disclosed (3) with the intent to induce the claimant-consumer into entering into a transaction, and (4) the claimant-consumer would not have entered into the transaction had the information been disclosed. Patterson v. McMickle, 191 S.W.3d 819, 827 (Tex. App.--Fort Worth 2006, no pet.).

Appellant produced no summary judgment evidence which would have shown that either Manning or the other Appellees knew that any of the advice given to Appellant was erroneous. Furthermore, she failed to produce any summary judgment evidence that would have established that the failure to disclose any erroneous advice was done so with the intent to induce her into entering into the divorce settlement reached, nor that she would not have entered into the agreement reached had the allegedly erroneous information been disclosed. Appellant, therefore, failed to establish the "failure to disclose" exception to the professional services exemption.

In order to establish the "unconscionable" exception to the professional services exemption, a consumer-complainant must establish that the complained of conduct was unconscionable. An unconscionable act is one that takes advantage of the lack of knowledge, ability, experience, or capacity of a person to a "grossly unfair degree," or which results in a gross disparity between the value received and consideration paid, in a transaction involving transfer of consideration. Tex. Bus. & Com.Code § 17.45(5). Unconscionable action requires a showing that the resulting unfairness was glaringly noticeable, flagrant, and unmitigated. Chastain v. Koonce, 700 S.W.2d 579, 584 (Tex.1985). Conduct simply showing the failure to exercise that degree of care, skill, and diligence that an attorney of ordinary skill and knowledge would have exercised under the same or similar circumstances does not equate to an unconscionable act in violation of the DTPA. See Latham v. Castillo, 972 S.W.2d 66, 68-69 (Tex.1998). Having reviewed Appellant's claim of unconscionability in light of the entire transaction, we find that Appellant's claims are best stated as simple negligence claims. It cannot be said that the alleged concealment of erroneous advice resulted in glaringly noticeable, flagrant, and unmitigated unfairness to Appellant in the attorney-client relationship. Accordingly, we find Appellant's summary judgment evidence did not establish the "unconscionable" exception to the professional services exemption.

Legal work incident to enforcement of divorce decree does not trigger Hughes tolling rule

Sandy McCorquodale — Sun, 29 Apr 2007 03:48:48 GMT

Limitations on a client's claim that she received erroneous legal advice from an attorney that caused her to receive an inadequate share of the marital estate in her divorce decree was not tolled by the Hughes rule, which tolls limitations on a legal malpractice action in some instances of continuous representation. In Brennan v. Manning, No. 07-06-0041-CV, (Tex. App.--Amarillo April 12, 2007), the court found that the lawyer's post-decree work on enforcement issues was not enough to trigger the Hughes tolling rule.

Background Facts

Lucia's divorce proceeding resulted in the entry of a Decree of Divorce on January 23, 1998. Subsequent to entry of the Decree of Divorce, Lucia was periodically represented by Manning and his law firm on matters related to the enforcement of that decree. Lucia's legal malpractice action was filed on June 24, 2004.

When the malpractice claim accrued

The court first determined when the malpractice claim accrued, applying the legal injury rule to find that the claim accrued when the divorce decree was entered:

Legal malpractice claims are governed by a two year statute of limitations. Tex. Civ. Prac. & Rem.Code Ann. § 16.003(a); Apex Towing Co. v. Tolin, 41 S.W.3d 118, 120 (Tex. 2001). A legal malpractice claim accrues when the legal injury occurs, unless there is a legal basis for tolling limitations. Hughes v. Mahaney & Higgins, 821 S.W.2d 154, 156 (Tex. 1991). Appellant's legal malpractice claim centers upon her allegation that she received an inadequate division of community property when Manning incorrectly advised her that she was not entitled to a share of referral or contingency fees from lawsuits pending at the time of her divorce. Therefore, Appellant's legal malpractice claim accrued when she sustained a legal injury, which would have been at the time the community property was divided by the entry of a decree of divorce. Smith v. McKinney, 792 S.W.2d 740, 742 (Tex. App.--Houston [14th Dist.] 1990, writ denied).

Hughes rule held not to apply

The court then turned to the question of whether the lawyer's post-decree work triggered application of the Hughes tolling rule. The court held that the Hughes rule did not apply:

The existence of an attorney-client relationship does not, standing alone, toll limitations in a legal malpractice cause of action. Ponder v. Brice & Mankoff, 889 S.W.2d 637, 644-45 (Tex. App.--Houston [14th Dist.] 1994, writ denied). Rather, limitations in a legal malpractice cause of action is tolled due to the attorney-client relationship only when the attorney's malpractice occurs and is discoverable during the course of the underlying litigation being pursued by the attorney on behalf of the client. Hughes, 821 S.W.2d at 156-57. The Hughes rule, which tolls the limitations period until all appeals in the underlying action are exhausted, is expressly limited to cases involving claims of attorney malpractice in the prosecution or defense of the underlying litigation and does not apply to malpractice claims involving transactional work. Murphy v. Mullin, Hoard & Brown, L.L.P., 168 S.W.3d 288, 292 (Tex. App.--Dallas 2005, no pet.).

Appellant's Decree of Divorce was signed on January 23, 1998. Therefore, applying the Hughes rule to the facts of this case, the statute of limitations on Appellant's legal malpractice cause of action was tolled until February 22, 1998, the date her divorce decree became final. [No motion for new trial was filed; therefore, the Decree of Divorce became final 30 days after it was signed. Tex. R. Civ. P. 329b.]

Subsequent to the Decree of Divorce becoming final, Manning performed legal services for Appellant in the nature of work incident to the enforcement of the decree. Appellant would have this Court extend the Hughes rule to revive the tolling of limitations during these periods of representation. We conclude that reasons underlying the Hughes rule are inapposite to the facts of this case, and we decline to extend that rule without clear precedent.

Defense attorney in a criminal proceeding is not a state actor under 42 U.S.C. § 1983.

Sandy McCorquodale — Sun, 29 Apr 2007 02:31:12 GMT

A client failed to establish federal question jurisdiction in a suit against a law firm.

Insofar as Plaintiff seeks to rely on 42 U.S.C. § 1983, the Court notes that a defense attorney in a criminal proceeding, whether retained or court appointed, is not a state actor. See Polk County v. Dodson, 454 U.S. 312, 325 (1981) (holding that "a public defender does not act under color of state law when performing a lawyer's traditional functions as counsel to a defendant in a criminal proceeding"); Mills v. Criminal Dist. Court No. 3, 837 F.2d 677, 679 (5th Cir.1988) (holding that "private attorneys, even court-appointed attorneys, are not official state actors, and generally are not subject to suit under section 1983"); Russell v. Millsap, 781 F.2d 381, 383 (5th Cir.1985) (holding that retained attorney does not act under color of state law).

Diggs v. Menes Law Firm, No. 3-06-CV-2232-N, 2007 WL 1119284 (N.D. Tex. April 16, 2007).

No personal jurisdiction over out-of-state lawyers who represented client in out-of-state lawsuit.

Sandy McCorquodale — Sun, 29 Apr 2007 02:13:49 GMT

The mere fact that a client has moved to Texas from another state and receives settlement payments in Texas is insufficient to support personal jurisdiction over the out-of-state lawyers who represented her in an out-of-state lawsuit. After a client failed to receive all the annuity payments which she thought she was to receive, she sued the out-of-state lawyers who had represented her in the out-of-state lawsuit. The federal district court in Fort Worth dismissed the claims for lack of personal jurisdiction.

Richard's basic assertion is that the court should exercise specific jurisdiction over Becker and Zoercher based on her being a resident of Texas and receiving annuity payments there. The annuity payments were the result of a settlement agreement reached in a case litigated and settled in Indiana. Richard hired Becker and the Zoercher firm, both citizens of Indiana at the time she hired them, in Indiana to represent her in a lawsuit filed, litigated, and settled in Indiana. The court finds that Richard moving to Texas prior to the case being settled and her receiving payments pursuant to the settlement agreement in Texas are insufficient to show that Becker and the Zoercher firm purposefully availed themselves of the benefits and protections of the laws of Texas. Thus, the court concludes that Becker and Zoercher do not have minimum contacts with Texas and that the court cannot properly exercise personal jurisdiction over them.

Richard v. R & Q Reinsurance Company, No. 4:07-CV-022-A, 2007 WL 1119212 (N.D. Texas April 13, 2007).

A lawyer may electronically record telephone conversations with clients and third parties without the other party or parties to the conversation being made aware that the conversations are being recorded.

Sandy McCorquodale — Sun, 25 Mar 2007 17:02:00 GMT

In Opinion No. 575 (November 2006), the Professional Ethics Committee of the State Bar of Texas concluded that lawyers may surreptitiously record their telephone conversations. The opinion reverses what had been the PEC’s position for most of the past three decades. The PEC noted:

It is recognized that there are legitimate reasons a lawyer would electronically record conversations with a client or third party. Among the legitimate reasons are to aid memory and keep an accurate record, to gather information from potential witnesses, and to protect the lawyer from false accusations.

No provision of the Texas Disciplinary Rules of Professional Conduct specifically prohibits a lawyer’s unannounced recording of telephone conversations in which the lawyer participates. Moreover, applicable law does not generally prohibit such recordings in Texas by a participant to a telephone conversation, whether or not the participant recording the conversation is a lawyer. See section 16.02 et seq. of the Texas Penal Code and section 2511 of title 18 of the United States Code.

After reconsidering the issue, this Committee is of the opinion that the Texas Disciplinary Rules of Professional Conduct do not generally prohibit a lawyer from making undisclosed recordings of telephone conversations in which the lawyer is a party, provided that certain requirements are complied with as discussed below.

Rule 8.04(a)(3) of the Texas Disciplinary Rules of Professional Conduct provides that a lawyer "shall not . . . engage in conduct involving dishonesty, fraud, deceit or misrepresentation; . . . ." In view of the fact that persons in Texas are generally not prohibited from making undisclosed recordings of their telephone conversations and that many businesses routinely record telephone conversations on business premises with or without notice, the Committee does not believe that an undisclosed recording of a telephone conversation by a party to the conversation can be termed to involve "dishonesty, fraud, deceit or misrepresentation" within the meaning of Rule 8.04(a)(3). Hence, absent more, a Texas lawyer’s undisclosed recording of his telephone conversation with another person should not be held to violate Rule 8.04(a)(3). Since, as already noted, an undisclosed recording of a telephone conversation by a party to the conversation is not a crime under Texas or Federal law, there appears to be no other provision of the Texas Disciplinary Rules of Professional Conduct that could be said to be violated by such an undisclosed recording. Accordingly, subject to the qualifications discussed in the next paragraph, the undisclosed recording of telephone conversations by a Texas lawyer should not be treated as a violation of the Texas Disciplinary Rules of Professional Conduct.

The Committee notes several qualifications to the conclusion reached above. First, in view of the rights conversations on business premises with or without notice, the Committee does not believe that an undisclosed recording of a telephone conversation by a party to the conversation can be termed to involve "dishonesty, fraud, deceit or misrepresentation" within the meaning of Rule 8.04(a)(3). Hence, absent more, a Texas lawyer’s undisclosed recording of his telephone conversation with another person should not be held to violate Rule 8.04(a)(3). Since, as already noted, an undisclosed recording of a telephone conversation by a party to the conversation is not a crime under Texas or Federal law, there appears to be no other provision of the Texas Disciplinary Rules of Professional Conduct that could be said to be violated by such an undisclosed recording. Accordingly, subject to the qualifications discussed in the next paragraph, the undisclosed recording of telephone conversations by a Texas lawyer should not be treated as a violation of the Texas Disciplinary Rules of Professional Conduct.

The Committee noted several qualifications to the conclusion reached above.

First, in view of the rights of a client to the lawyer’s protection of confidential client information as provided in Rule 1.05 and the client’s rights against a lawyer’s involvement in an impermissible conflict of interest contrary to Rule 1.06, a lawyer should make an undisclosed recording of telephone conversations involving a client only if there is a legitimate reason to make the recording in terms of protection of the legitimate interests of the client or of the lawyer.

Second, a lawyer should not make a recording of a telephone conversation with a client unless the lawyer can and does take appropriate steps consistent with the requirements of Rule 1.05 to safeguard confidential information that may be included in the recording of the telephone conversation.

Third, in view of the requirement of Rule 8.04(a)(2) that a lawyer not be involved in the commission of a serious crime, a lawyer should not make an undisclosed recording of a telephone conversation if the telephone conversation proposed to be recorded by a lawyer is subject to other laws (for instance the laws of another state) that make such a recording a serious criminal offense.

Finally, regardless of whether the client is involved in the telephone conversation or has consented to the recording, the lawyer may not under Rule 8.04(a)(3) make a recording of a telephone conversation if the making of such a recording would be contrary to a representation made by the lawyer to any person.

This opinion brings the PEC into general accord with the American Bar Association Standing Committee on Ethics and Professional Responsibility (the "ABA Committee"). In the ABA Committee’s Formal Opinion 01-422 (June 24, 2001), the ABA Committee withdrew Formal Opinion 337 (1974), which had held that a lawyer was not permitted to make undisclosed recordings of telephone conversations, and instead ruled that a lawyer may record his telephone conversations without disclosure to other parties to the calls provided that the recording is not in violation of applicable law and is not contrary to a representation by the lawyer that the conversation is not being recorded. The ABA Committee indicated that it was divided as to whether a lawyer was permitted to make an undisclosed recording of a telephone conversation with a client but indicated the Committee’s view that such recordings were generally inadvisable.

The PEC’s new opinion may be of assistance in addressing the amnesia some clients seem to suffer about what was said in telephone calls with their lawyers. While the PEC’s focus was clearly on lawyers taping calls with clients, don’t overlook the reference to third parties in the opinion, which sanctions the somewhat pernicious practice of lawyers taping lawyers. The transcripts of such lawyer-on-lawyer taping are bound to turn up in motion practice.

Expert’s affidavit insufficient to support summary judgment against lawyers on legal malpractice claims.

Sandy McCorquodale — Sun, 25 Mar 2007 16:24:00 GMT

What “appears” to an expert to be an “inescapable conclusion” is not so apparent to a court. In Tummel & Casso v. Snyder, the lawyers sued to recover fees and the client counterclaimed for legal malpractice. The clients then filed a “traditional” motion for partial summary judgment, alleging that the lawyers had committed legal malpractice in connection with their representation of the clients in two legal matters. Specifically, the clients alleged that appellants committed malpractice by pursuing (on the clients’ behalf) the enforcement of a non-compete agreement against Dr. Michael Sweeney (“the Sweeney litigation”), despite the absence of any chance of successful enforcement because there was no written agreement. Secondly, the clients alleged that the lawyers committed malpractice by filing a lawsuit to protect Dr. Snyder’s right to continue practicing at a surgery center, despite the absence of any chance of success because Dr. Snyder had failed to exhaust his administrative remedies. In support of their motion, the clients attached numerous documents, including copies of the unsigned non-compete agreement.

The trial court entered summary judgment against the lawyers on the legal malpractice claims. They appealed. The Corpus Christi Court of Appeals reversed, finding the affidavit of the clients’ legal malpractice expert to be conclusory and, thus, insufficient to support summary judgment against the lawyers:

In their motion, appellees contend that appellants committed malpractice by seeking to enforce a non-compete agreement against Sweeney even though they knew there was no written agreement. The motion asserts that appellants failed to discharge their “duty to explain the applicable law, explain any potential defenses or impediments to the goal sought, and allow [appellees] the opportunity to make a reasoned decision about initiating and/or continuing to pursue litigation.” It also asserts that appellants “induced” appellees into signing promissory notes for legal invoices and that appellees “believe” appellants were using the notes and invoices as collateral for a line of credit through appellants’ bank.

Appellees’ summary judgment evidence includes the affidavits of (1) William Snyder, (2) Patricia Snyder, (3) Reynaldo Ortiz, appellees’ counsel, and (4) Steven L. Lee, an attorney and appellees’ expert. The summary judgment evidence also includes various documents attached to the affidavits.

William Snyder’s affidavit states that when he initially met with Tummel to discuss the Sweeney matter, he gave him copies of a non-compete agreement that had been discussed with Sweeney, but made it clear that the agreements had never been signed. Snyder states that he “incurred thousands of dollars in legal fees to advance a claim that apparently had no hope of prevailing.” He further states that Tummel “required” that he and Patricia sign promissory notes for the legal fees incurred. A copy of the unsigned “employment agreement” was also provided as summary judgment evidence.

Patricia Snyder’s affidavit also states that Tummel was told that an agreement had been discussed with Sweeney but that no signed written agreement existed. She stated that Tummel insisted he could enforce the non-compete agreement against Sweeney despite the absence of a written agreement.

Attached to Reynaldo Ortiz’s affidavit is an excerpt from Tummel’s responses to appellees’ interrogatories. In the responses, Tummel asserts that although appellees did not provide him a copy of the written agreement with Sweeney, they represented to him that Sweeney had agreed in writing to certain “non-compete” provisions in the agreement.

Steven L. Lee’s affidavit states that Tummel had a duty to inform his clients (appellees) that without a written agreement, enforcement of an oral covenant-not-to-compete was “highly unlikely under the existing law.” He states that the Tummel defendants were stuck on the “fixed notion” of enforcing an oral contract, and that there was an appearance of an “absence of attention to finding the appropriate vehicle” to pursue appellees’ goals. He also states that

the evidence gives every appearance that the Tummel Defendants sacrificed their fiduciary duties of utmost fairness, candor, rendition of independent legal advice and judgment, and placing paramount the clients’ interest in order to provide financial benefit to themselves. Bluntly stated, it appears that the Tummel Defendants identified a client with a legal problem and deep pockets and proceeded to bill that client with great vigor, based more on the lawyers’ financial needs than the client’s legal needs.

* * * *

As I am unaware of any evidence that Dr. Snyder or an agent was ever presented with information concerning potential downside risks and the attendant costs of certain of the services. I am also unaware of any evidence that Dr. Snyder turned the Tummel Defendants loose with instructions to “spare no expenses” or to “vigorously pursue this even though it is a long shot,” without regard to costs or ultimate outcome. When this is coupled with the unusual financial arrangement of securing each invoice with a promissory note and using the notes and/or receivables to maintain a line of credit at a bank, the inescapable conclusion is that the Tummel Defendants breached their fiduciary duties.

Appellants contend that appellees’ summary judgment evidence is inadequate to establish causation as a matter of law. In their brief, appellees assert that “[t]he proximate cause of [their] damages is therefore the fact that by not disclosing the vast remoteness of success the Appellants continued to bill for a claim destined to fail.” We agree with appellants that appellees’ summary judgment evidence is insufficient to establish their right to judgment as a matter of law. See Anderson v. Snider, 808 S.W.2d 54, 55 (Tex. 1991).

An affidavit that merely contains an expert’s conclusory statements is insufficient to support or defeat summary judgment. See Ryland Group, Inc. v. Hood, 924 S.W.2d 120, 122 (Tex. 1996). This is true because such statements are not credible or susceptible to being readily controverted. See id. An expert’s affidavit supporting a motion for summary judgment must be clear, positive, direct, otherwise credible, free from contradictions and inconsistencies, and readily controvertible. See Tex. R. Civ. P. 166a(c). Here, Lee’s affidavit asserts the “appearance” of an absence of attention by appellants to finding an appropriate legal strategy for accomplishing their clients’ goals and a “strong appearance” that appellants’ “judgment was impaired by their own financial interests.” After reviewing Lee’s affidavit, we conclude it contains no more than conclusory statements that are insufficient to support summary judgment. See Hood, 924 S.W.2d at 122.

Tummel & Casso v. Snyder, No. 13-04-223-CV, 2007 Tex. App. Lexis 1208 (Tex. App.–Corpus Christi 2007).

When a client has given a promissory note in lieu of payment for legal services already rendered, the client is estopped from later claiming that the charges for such services were not reasonable.

Sandy McCorquodale — Sun, 25 Mar 2007 16:22:00 GMT

Getting a client to sign a promissory note for legal fees owed has a substantial benefit – it can cut off a dispute over the reasonableness of the legal fees in a subsequent collection action.

Appellants cite Hall v. Fowler, 389 S.W.2d 730, 732 (Tex. App.–Dallas 1965, no writ), in support of their argument that when a client has given a promissory note in lieu of payment for legal services already rendered, the client is estopped from later claiming that the charges for such services were not reasonable. In Fowler, a client executed a promissory note to her attorney for legal fees rendered pursuant to the client's divorce. 389 S.W.2d at 731. After the client defaulted, the attorney sued and moved for summary judgment, which was granted and affirmed on appeal, even though the former client claimed inadequate consideration for the note. Id. at 732. In affirming the summary judgment in favor of the attorney, the Fowler court stated:

One cannot receive and accept the personal services of another, and thereafter execute a promissory note for the amount of the fee demanded by the one performing the services, and then defeat liability on that note by contending that the services were not worth the amount of the note. If there was a question as to the value of services already rendered, that question must be considered as resolved by the execution of the note.

Id. We agree with the Fowler court's reasoning.

Tummel & Casso v. Snyder, No. 13-04-223-CV, 2007 Tex. App. Lexis 1208 (Tex. App.–Corpus Christi 2007).

Judicial estoppel bars post-confirmation assertion of debtor’s unscheduled legal malpractice claim.

Sandy McCorquodale — Sun, 25 Mar 2007 16:19:00 GMT

The bankruptcy court in San Antonio has rejected an attempt to bring an unscheduled legal malpractice claim post-confirmation:

It is undisputed that a bankruptcy debtor is required to schedule all assets and that there is a duty to amend which continues throughout the case. It is also undisputed that none of the Debtors scheduled a potential cause of action against Defendant in their bankruptcy schedules, even though Plaintiffs claim that their causes of action relate solely to prepetition conduct of Defendant. Although Plaintiffs contend that Defendant would not have scheduled causes of action against itself, the undisputed evidence shows that Plaintiffs were also represented by counsel other than Defendant at all relevant times. Not only were there outside counsel prior to and at the commencement of the bankruptcy cases, but on June 10, 2004, the Debtors filed an Application to Employ the Law Firm of Langley & Banack as Co-Counsel for the Debtors. The employment of Langley & Banack was approved by this Court's Order on July 15, 2004. The Plan and Disclosure Statement were filed by Langley & Banack on or about December 29, 2004, and the confirmation hearing took place on March 2, 2005. If the directors, officers and non-Defendant attorneys of the Plaintiffs wished to assert claims against Defendant, they had ample opportunity to schedule such an asset and specifically reserve it in the Plan. Instead, a general retention clause was merely placed in the Plan and Disclosure Statement which purported to retain any claims which the Plaintiffs might have against any of their professionals.

The leading case on judicial estoppel is Browning Mfg. v. Mints (In re Coastal Plains, Inc.), 179 F.3d 197 (5th Cir. 1999). Coastal Plains described judicial estoppel as a common law doctrine by which a party who has assumed a position in its pleadings may be estopped to later assume an inconsistent position. Detrimental reliance by the opponent is not necessary because the doctrine is intended to protect the judicial system rather than the litigants. Coastal Plains at 205.

The record is replete with references to purported knowledge on the part of directors, officers and non-Defendant attorneys of alleged wrongdoing by Defendant. By failing to disclose and schedule the causes of action, the Debtors are judicially estopped to take a different position, postconfirmation, that there are claims and causes of action arising out of Defendant's prepetition conduct.

The Plaintiffs claim inadvertence or lack of knowledge should preclude the application of judicial estoppel. The Court does not find that the failure to disclose the alleged causes of action was inadvertent because the Plaintiffs knew of the facts giving rise to the potential claims and chose to keep their potential claims "under the radar" until well after confirmation. In the Plan of Reorganization, in which all of the Debtors were proponents, the Debtors vigorously pursued confirmation as being in the best interest of the creditors and the Debtors. The Plan contains a general reservation of causes of action against professionals of the Debtors, while not specifically listing any claims against particular professionals or the nature of any claims. After confirmation, the Debtors changed their positions, deny benefit as a result of confirmation of the Plan of Reorganization, and claim breach of duties by the Defendant. Judicial estoppel prohibits the assertion of such inconsistent positions. In re Coastal Plains, Inc., 179 F.3d 197, 210 (5th Cir. 1999).

The National Benevolent Association of The Christian Church (Disciples of Christ) vs. Weil, Gotshal & Manges, LLP, Adversary No. 05-5134-RBK, 2007 Bankr. Lexis 372 (Bankr. W.D. Tex. 2007).

The court also held that the claims were barred by the res judicata effect of the two final orders in the Chapter 11 case.

These two Orders constitute res judicata on all issues which were or could have been litigated in the Motion to Sell or the Plan of Reorganization. Plaintiffs' contentions that the Chapter 11 cases were unnecessary, ill-conceived and never should have been filed constitute a collateral attack on both the sale Order and the Order Confirming the Plan.

Providing out-of-state legal representation is not enough to subject an out-of-state lawyer or law firm to the personal jurisdiction of that state, even if the client resides in that state.

Sandy McCorquodale — Sun, 25 Mar 2007 16:17:00 GMT

It is well settled that providing out-of-state legal representation is not enough to subject an out-of-state lawyer or law firm to the personal jurisdiction of that state, even if the client resides in that state. See, e.g., Austad Co. v. Pennie & Edmonds, 823 F.2d 223, 226-227 (8th Cir. 1987) (court did not have personal jurisdiction over the out-of-state attorneys or their law firm in part because the law firm did not maintain offices in the forum state, the attorneys did not live in the forum state, and the firm had never solicited business in the forum state); Wien Air Alaska, Inc. v. Brandt, 195 F.3d 208, 213 (5th Cir. 1999) ("[W]hen a lawyer chooses to represent a client in another forum, that in itself does not confer personal jurisdiction if the claim does not arise from the lawyer's contacts with the forum.").

. . .

In Texas, representation of a client in the forum state by a nonresident attorney can give rise to specific jurisdiction against the attorney in a case based on an alleged breach of fiduciary duties owing to the client. See, e.g., Wien Air Alaska, Inc. v. Brandt, 195 F.3d 208, 213 (5th Cir. 1999) ("when the claim arises from a breach of fiduciary duty based on a failure to disclose material information, the fact that the lawyer continually communicated with the forum while steadfastly failing to disclose material information shows the purposeful direction of material omissions to the forum state.").

Claro v. Mason, Civil Action No. H-06-2398, 2007 U.S. Dist. Lexis 13291 (S.D. Tex. 2007) (nonresident lawyer’s response to a grand jury subpoena by sending documents to the forum state did not subject the nonresident lawyer to personal jurisdiction in subsequent malicious prosecution action).

Counsel’s decision based on existing case law is not ineffective assistance of counsel under Strickland.

Sandy McCorquodale — Sun, 25 Mar 2007 16:14:00 GMT

Doing the best you can with what you have is a constant problem in unsettled areas of the law, particularly unsettled areas of statutory construction. Justice Keasler’s concurring opinion in this Court of Criminal Appeals case makes the point:

In Ex parte Chandler, we explained that “a reasonably prudent attorney in Texas is not constitutionally deficient if he relies upon pertinent judicial opinions in assessing the validity of a legal proposition.” Ex parte Chandler, 182 S.W.3d at 358. Moreover, because “‘what an attorney thinks the law is today may not be what a court decides tomorrow[,]’ . . . ‘the rule that an attorney is not liable for an error in judgment on an unsettled proposition of law is universally recognized.’“ Id. (quoting 3 Ronald E. Mallen & Jeffrey M. Smith, Legal Malpractice § 18.1, at 2 (5th ed. 2000)). “[C]ounsel’s performance will be measured against the state of the law in effect during the time of trial and we will not find counsel ineffective where the claimed error is based upon unsettled law.” Ex parte Welch, 981 S.W.2d 183, 184 (Tex. Crim. App. 1998) (citing Vaughn v. State, 931 S.W.2d 564, 567 (Tex. Crim. App. 1996)). We also stated that “legal advice which only later proves to be incorrect does not normally fall below the objective standard of reasonableness under Strickland.” Ex parte Chandler, 182 S.W.3d at 359.

Roemer’s counsel’s legal advice was correct at the time he offered it. Counsel relied on the only available opinion dealing with the issue. “[T]he state of the law in effect during the time of trial,” Ex parte Welch, 981 S.W.2d at 184, consisted of a single opinion, which clearly resolved the issue against his client. Counsel thoroughly explained the legal issue and the effect of the court of appeals’ opinion to his client. But the final decision to accept the plea agreement was Roemer’s alone. It could not, therefore, be counsel’s judgment error. Roemer’s counsel’s actions fall squarely within our explanation of effective assistance of counsel in Ex parte Chandler.

Ex parte Roemer, 2007 Tex. Crim. App. Lexis 229 (Tex. Crim. App. 2007) (Keasler, J., concurring, joined by Hervey, J.).

Brief private meeting with client’s minor child does not support disqualification of attorney in motion to modify proceeding.

Sandy McCorquodale — Mon, 15 Jan 2007 02:01:00 GMT

A 13-year-old child does not have the legal capacity to employ an attorney. In In re Martel, No. 12-06-00397-CV, 2007 Tex. App. Lexis 70 (Tex. App.–Tyler 2007) (orig. proc.), an effort to disqualify a lawyer in a modification of custody proceeding, based on the lawyer’s brief private meeting with his client’s son, failed.

Background

Joseph M. Martel, Sr., filed a petition in the trial court seeking to modify the conservatorship and terms of possession of Austin Thomas Martel, one of the children born to Joseph and Jane Martel during their marriage. Approximately two months later, Jane took Austin to meet her attorney, Samuel W. George. George met with Austin in George’s office. Jane was not present at the meeting, but was in the building.

At a hearing on temporary orders, several witnesses testified about the meeting between Austin and George. Jane testified that she took Austin to meet with George so that George could “explain his rights to him.” She explained that Austin had been told that Joseph would put him on the stand, that he could be represented by his own attorney, that he could have his own legal advice, and that he could do as he pleased and get on the stand. She said Austin had also been told that he could be represented by George and that she would have to pay for it. According to Jane, Austin said Joseph told him these things. She also testified that she told Austin she was taking him to George’s office because George could answer his questions, and Austin replied, “That’s fine.” Jane testified that George and Austin met for approximately ten minutes and that she noticed no change in Austin’s demeanor after the meeting. She further stated that Austin went to sleep in the car immediately after the meeting.

Daphne Martel, Joseph’s present wife, described her conversation with Austin about his meeting with George. Ac-cording to Daphne, Austin said George had frightened him, threatened him, made him read out of a “large book,” and stated several times using profane language that he hated Joseph. Joseph testified that Austin “feels intimidated as a witness” as a result of his meeting with George. George testified that he met with Austin and read to him from the Texas Family Code. He strongly denied using “foul language” in the meeting and said he told Austin he felt sorry for him. He also denied giving Austin legal advice, but stated that he “told him what his rights were.” Thereafter, Joseph filed a motion to disqualify George alleging as grounds that George had become a witness in the case and, alternatively, that by their meeting, George established an attorney-client relationship with Austin, who is adverse to Jane in the case.

After a hearing, the trial court denied Joseph’s motion to disqualify George. Joseph then filed a petition for writ of mandamus in the court of appeals.

Disqualification of Counsel

Disqualification of counsel is a severe remedy. In re Nitla S.A. de C.V., 92 S.W.3d 419, 422 (Tex. 2002). It can result in immediate and palpable harm, disrupt trial court proceedings, and deprive a party of the right to have counsel of choice. Id. Accordingly, in ruling on a motion to disqualify, the trial court must adhere to an exacting standard to discourage use of disqualification as a dilatory trial tactic. In re Meador, 968 S.W.2d 346, 350 (Tex. 1998). When deciding disqualification issues, Texas courts have often looked to the Texas Disciplinary Rules of Professional Conduct. See, e.g., id.; In re T.E.D., No. 12-06-00143-CV, 2006 WL 2106971, at *2 (Tex. App.–Tyler July 31, 2006, orig. proceeding) (mem. op.). The disciplinary rules do not determine whether counsel is disqualified, but provide guidelines and suggest the relevant considerations. In re EPIC Holdings, Inc., 985 S.W.2d 41, 48 (Tex. 1998).

In moving to disqualify a party’s counsel of choice, the movant bears the burden of establishing that disqualification is justified. See id. at 60. Mere allegations of unethical conduct or evidence showing a remote possibility of a violation of the disciplinary rules will not suffice to merit disqualification. In re Cerberus, 164 S.W.3d 379.

Lawyer as Witness

Joseph first alleged that George was disqualified because he had become a witness in the case. As support for this conclusion, Joseph cited Texas Disciplinary Rule of Professional Conduct Rule 3.08, subsections (a) and (b).

Rule 3.08, subsection (a) prohibits a lawyer from continuing employment as an advocate in a pending adjudicatory proceeding if the lawyer knows or believes that the lawyer is or may be a witness necessary to establish an essential fact on behalf of the lawyer’s client. Tex. Disciplinary R. Prof’l Conduct 3.08(a), reprinted in Tex. Gov’t Code Ann., tit. 2, subtit. G app. A (Vernon 2005) (Tex. State Bar R. art. X, § 9).

Subsection (b) of Rule 3.08 prohibits a lawyer from continuing as an advocate in a pending adjudicatory proceeding if the lawyer believes the lawyer will be compelled to furnish testimony that will be substantially adverse to the lawyer’s client, unless the client consents after full disclosure. Tex. Disciplinary R. Prof’l Conduct 3.08(b), reprinted in Tex. Gov’t Code Ann., tit. 2, subtit. G app. A (Vernon 2005) (Tex. State Bar R. art. X, § 9).

The Court of Appeals rejected this ground for disqualification:

Joseph alleges that the factual dispute about what occurred in George’s meeting with Austin will be a “subject” at trial. However, he does not identify any essential fact that must be established on Jane’s behalf for which George’s testimony is necessary. Moreover, even if he had shown necessity as required by Rule 3.08(a), he must also demonstrate actual prejudice to himself resulting from George’s service as both lawyer and witness. See In re Sanders, 153 S.W.3d 54, 57 (Tex. 2004); Ayres v. Canales, 790 S.W.2d 554, 558 (Tex. 1990). Joseph has failed to show any such prejudice. [In fact, the trial court could have concluded that Joseph expects to benefit from George’s testimony ] Therefore, he has not shown that George is disqualified under Rule 3.08(a).

. . . Jane opposed Joseph’s disqualification motion in the trial court and opposes Joseph’s attempt in this proceeding to require George’s disqualification. Nothing in the record suggests that Jane has not consented to George’s continued representation after full disclosure. Because Joseph has not shown the absence of Jane’s informed consent to George’s continued representation, he has not established that George is disqualified under Rule 3.08(b).

Conflict of Interest

Joseph further argued that George should be disqualified because he had a conflict of interest. See Tex. Disciplinary R. Prof’l Conduct 1.06, reprinted in Tex. Gov’t Code Ann., tit. 2, subtit. G app. A (Vernon 2005) (Tex. State Bar R. art. X, § 9). Rule 1.06 provides, in pertinent part, as follows:

(a) A lawyer shall not represent opposing parties to the same litigation.

(b) In other situations and except to the extent permitted by paragraph (c), a lawyer shall not rep-resent a person if the representation of that person:

(1) involves a substantially related matter in which that person’s interests are materially and directly adverse to the interests of another client of the lawyer or the lawyer’s firm; or

(2) reasonably appears to be or become adversely limited by the lawyer’s or law firm’s responsibilities to another client or to a third person or by the lawyer’s or law firm’s own interests.

The attorney-client relationship is a contractual relationship whereby an attorney agrees to render professional ser-vices for a client. Honeycutt v. Billingsley, 992 S.W.2d 570, 581 (Tex. App.–Houston [1st Dist.] 1999, pet. denied). The relationship may be expressly created by contract, or it may be implied from the actions of the parties. Id. It is necessary that the parties either explicitly or implicitly manifest an intention to create an attorney-client relationship. Hill v. Bartlette, 181 S.W.3d 541, 547 (Tex. App.–Texarkana 2005, no pet.).

The Court of Appeals rejected this ground for disqualification:

This argument is based upon the premise that, as a result of his meeting with Austin, George established an attorney-client relationship with Austin. Joseph reasons that because both Austin and Jane are George’s clients, and Austin is adverse to Jane, George cannot continue to represent Jane. . . .

Joseph does not argue that George and Austin expressly created an attorney-client relationship. Instead, he argues that such a relationship must be implied because George explained Austin’s rights to him and read to him from the Family Code. However, Joseph does not cite any case or other authority showing that these acts, without more, are sufficient to create an attorney-client relationship, nor have we been able to locate any such authority. More importantly, Austin is 13 years old and does not have the legal capacity to employ an attorney. See Byrd v. Woodruff, 891 S.W.2d 689, 704 (Tex. App.–Dallas 1994, writ dism’d by agr.) (minor is without legal capacity to employ an attorney); see also Tex. Civ. Prac. & Rem. Code Ann. § 129.001 (Vernon 2005) (age of majority in Texas is 18 years). Joseph does not explain by what authority the trial court could have implied the creation of a relationship that Austin could not have expressly created by contract. Therefore, he has not shown that George is disqualified under Rule 1.06.