An unusual application of Hughes tolling appeared in White Nile Software v. Travis. The issue of who was entitled to act on behalf of a potential legal-malpractice client remained unresolved for a whopping seven years:

“Thus, rather than coming to a conclusion in 2011, White Nile’s legal malpractice claims in state court were in a legal limbo while Mandell’s bankruptcy proceedings continued, pending a final determination of authority or capacity to take action on behalf of White Nile …  This issue was only resolved when the order of the bankruptcy court that Mandel had no shares in White Nile became final in October 2018.”

The Fifth Court concluded that this potential claims was tolled, quoting Hughes: “Where “a person is prevented from exercising his legal remedy by the pendency of legal proceedings, the time during which he is thus prevented should not be counted against him in determining whether limitations have barred his right.” No. 05-20-00354-CV (Aug. 29, 2022) (mem. op.).

The “case-within-a-case” requirement for a legal-malpractice claim led to affirmance of a defense summary judgment: “While [the expert’s] opinion provides examples of steps independent counsel could have taken on [Plaintiff’s] behalf, we conclude his opinion that the outcome would have been different is speculative and conclusory. . . . [His] testimony may raise an inference that a different attorney might have more aggressively pursued a temporary injunction to prevent [the bank] from foreclosing, but whether the trial court would have granted a request for an injunction is entirely speculative; as is [his] opinion that had the temporary injunction against [Plaintiff] been denied, [Plaintiff] would have re-financed . . . or sold . . . to a different buyer at a higher purchase price.”  No. 05-18-00467-CV (July 3, 2019) (mem. op.) (emphasis added).

A significant challenge in professional liability cases involving litigation is proving the “case in a case” – what the outcome should have been in the relevant lawsuit, absent the alleged malpractice. In Haddock v. Gruber, the Fifth Court addressed the collateral estoppel effect of an earlier judgment in a complex series of cases, concluding that it precluded the proof of the necessary “case in a case.” The opinion addresses both the elements of collateral estoppel in this context and several policy-based attacks on the use of the doctrine in this setting. No. 05-16-1113-CV (March 22, 2018) (mem. op.)

I literally cannot wait

In J.A. Green Development Corp. v. Grant Thornton, LLP, et al., the Dallas Court of Appeals held that limitations begin to run for claims arising from professional negligence in an IRS administrative proceeding as soon as the client learns the IRS disagrees with the advice.

The allegations were that Green hired Grant Thornton and Akin Gump in an IRS audit concerning Green’s participation in a “distressed debt strategy” that was sold to Green by prior advisors. Green alleged that Grant Thornton and Akin Gump told Green that the strategy was likely to be upheld as legal, causing Green to reject a settlement offer by the IRS. In December 2008, the IRS disagreed and issued a report disallowing the loss and imposing substantial penalties. Green alleged that Grant Thornton and Akin Gump then backed away from their prior advice. Six months later, Green sued the original advisors who sold it the tax strategy, but Green continued to retain Grant Thornton and Akin Gump to handle the appeal of the IRS decision. When it later became clear the appeal of the IRS decision would go poorly, Green settled with the IRS for more than the offer it rejected. It then sued Grant Thornton and Akin Gump.

The Dallas Court of Appeals affirmed summary judgment in favor of the defendants. The question was whether limitations started running in December 2008, when the IRS issued its first report indicating that the loss would be disallowed, or in November 2009, when it became clear the appeal of the IRS decision would fail. “[A] cause of action accrues when a wrongful act causes some legal injury, even if the fact of injury is not discovered until later, and even if all resulting damages have not yet occurred.” Green had to concede that it was first injured when it was sold the tax strategy because it had sued the promoters of the strategy before the administrative appeal failed. Green claimed the injury caused by Grant Thornton and Akin Gump was distinct from that caused by the original advisors, but the Court of Appeals held that Green suffered a single continuous injury that Green knew of when it received the IRS report disallowing the claimed loss. The Court of Appeals also held that the Hughes Tolling Rule, which tolls limitations in legal malpractice cases arising from litigation until the litigation is resolved, does not apply to administrative proceedings.

Congratulations to 600commerce’s own David S. Coale, who argued the case on appeal for Akin Gump, and to Trey Cox and Chris Patton, who were trial counsel.

JA Green Development v Grant Thornton

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After a jury awarded millions of dollars in damages and the Court of Appeals affirmed, the defendants in that case decided to become plaintiffs by suing their lawyers at Andrews Kurth. The county court at law granted summary judgment for the defendants, and the Dallas Court of Appeals affirmed. In a malpractice case based on an attorney’s conduct in connection with litigation, the plaintiff has to demonstrate that it would have prevailed in the prior case but for the lawyer’s negligence. Concluding that the plaintiffs’ proof on that point was conclusory and speculative, the Court held that there was no evidence in the summary judgment record to establish causation of any injury to the plaintiffs.

Rogers v. Zanetti, No. 05-14-00733-CV

Several months before the decedent died, he had his attorney prepare an amendment to a trust he had created that would have increased the distributions to his two children.  The attorney drafted the amendment, but the decedent never signed it.  Acting in their capacity as personal representatives for their father’s estate, the children sued the attorney for negligence.  The attorney moved for summary judgment, which the trial court granted based on its finding that the attorney owed no duty to them.

The children appealed, and the Dallas Court of Appeals affirmed, holding that “an attorney owes a duty of care only to his or her client, not to third parties who may have been damaged by the attorney’s negligent representation of the client.”

Donaldson v. Mincey

In this legal malpractice case, the Court rejected the plaintiff’s expert opinion as based on invalid assumptions.  The expert opined that the value of sale of an interest in certain oil and gas wells would have been $960,000 greater in April 2008, when the interest should have sold but for a law firm’s malpractice.  Among other faulty assumptions, the Court noted that the expert wrongly assumed that (1) the later sale, in September 2008, was a simple asset sale, when, in fact, it involved a partial settlement of a lawsuit; (2) the projections of actual drilling costs, as opposed to actual results, were the proper measure of costs; and (3) that wells would have been drilled at a certain specified rate.

Thompson & Knight v. Patriot Exploration LLC

In this attorney malpractice case, a client sued his lawyer for malpractice and a number of other related causes of action.  The parties settled the case at mediation and signed a settlement agreement requiring the lawyer to sign an agreed judgment to secure payment of the settlement amount.  The client’s attorney prepared the agreed judgment and sent it to the lawyer’s attorney, but, after several attempts, never received a response.  As a result, the trial court re-opened the case (which had been dismissed due to the settlement), set it for a bench trial, and sent notice of the trial setting to both parties.

At the bench trial, neither the lawyer nor his attorney showed up, and the trial court awarded the client damages in an amount that was more than three times the amount of the settlement.  The lawyer then filed a motion for a new trial.  His attorney acknowledged, however, that he had received notice of the trial but ignored it because he thought that it was an “erroneous” notice since the case had settled.  The trial court found this excuse insufficient and denied the motion.  On appeal, the Court of Appeals agreed, and, although it reversed some of the damages awarded to the client, held that it was within the trial court’s discretion to conclude that the lawyer and his attorney “failed to appear for trial as the result of intentional conduct or conscious indifference.”

McLeod v. Gyr, No. CC-11-02708-B

Two years ago, the Dallas Court of Appeals held that the statutory “assumption of the risk” defense (CPRC § 93.001) superseded the common law “unlawful acts” doctrine, which provided that plaintiffs cannot recover damages if, at the time of injury, they were engaged in an illegal act that contributed to the injury. Gulf, C. & S.F. Ry. Co. v. Johnson, 9 S.W. 602, 603 (Tex. 1888). The unlawful acts doctrine is typically invoked in legal and medical malpractice cases. This morning, the Supreme Court decided the same case on different grounds, holding that the Proportionate Responsibility Act negates the common law doctrine and instead requires the finder of fact to apportion responsibility between the lawbreaking plaintiff (or, in this case, the decedent) and the defendant. The illegal activity in this instance was the consumption of marijuana and heroin, which led to the death of Joel Martinez, the son of plaintiff Mary Ann Arredondo. The mother sued the son’s friend, Geoffrey Dugger, who had failed to tell the paramedics that Martinez had snorted the heroin. Dugger initially escaped liability completely when the trial court granted summary judgment in his favor based on the unlawful acts doctrine. The Court of Appeals reversed, holding that § 93.001 superseded the common law doctrine, but did not apply under the facts of the case. On petition for review, the Supreme Court has now held that the Proportionate Responsibility Act applies even where the statutory assumption of the risk defense does not apply. Thus, a jury will have to apportion responsibility between the lawbreaking decedent and his partner in recreational drug consumption. However, the court expressly limited its holding to personal injury and wrongful death cases, leaving open the question of whether a client’s illegal acts will continue to serve as a complete bar to legal malpractice claims.

Dugger v. Arredondo, No. 11-0549

Rickey Wayne Tolbert sued his former attorney, George Otstott, for legal malpractice. Tolbert is a pro se prison inmate, and was incarcerated at the time Otstott settled three separate personal injury matters on Tolbert’s behalf. The trial court granted summary judgment for the defendant based on his limitations defense, and since the underlying lawsuits were settled between 1987 and 1991, you would think that’s probably a meritorious defense. The court of appeals agreed. As a matter of law, a reasonably diligent person, after receiving a $1,012 check from his attorney, followed by sixteen years of silence, would have investigated and discovered that the lawyer had settled all three claims. Thus, the two year limitations periods for legal malpractice expired long before the filing of Tolbert’s lawsuit in 2010.

Tolbert v. Otstott, No. 05-12-0024-CV

Jeanette Hooper and her husband Charles sued their lawyers for legal malpractice. The underlying case had been a personal injury suit arising out of a car wreck, which was apparently dismissed after the lawyers sued the owner of the other vehicle instead of the actual driver. The jury awarded $235,000 in damages, based on the testimony of a legal expert who opined that the Hoopers should have recovered $130,000 for past medical expenses, $180,000 for lost earning capacity, $250,000 for pain and suffering, and $250,000 for damages such as loss of consortium and physical impairment. On appeal, however, the court of appeals held that the testimony did not establish a causal link between the underlying car wreck and the subsequent damages. While it was justifiable for the jury to compensate the plaintiffs for damages sustained in the immediate aftermath of the wreck, such as emergency room bills and initial pain and suffering, the “case-within-a-case” aspect of the legal malpractice claim required the plaintiffs to establish a causal connection between the accident and the health problems Charles experienced months and even years after the collision. That connection needed to be made by the testimony of a medical expert, and could not be demonstrated through bare medical records or inferred by the jury. Because some elements of the plaintiffs’ damages were valid and some were invalid, the court of appeals also sustained the defendants’ challenge to the trial court’s submission of a broad-form damages question, reversed the judgment, and remanded for further proceedings.

Kelley & Witherspoon, LLP v. Hooper, No. 05-11-01256-CV

Attorney Robert Collins was sued by his client, Chris Green, for professional negligence and breach of fiduciary duty.  Green claimed that Collins had failed to serve the defendant in the underlying lawsuit, thereby allowing that case to be dismissed for want of prosecution.  As a result, Green’s claims became time-barred.  Collins filed an answer to Green’s lawsuit, but failed to appear at trial. Green testified in support of his claim, and the trial court granted a default judgment for $31,500.  The trial court subsequently denied Collins’ motion for new trial, and Collins appealed.

On appeal, Collins argued that the judgment had to be reversed because Green had failed to prove that he could have collected on any judgment in the underlying lawsuit.  But while that complaint may have been accurate, the court of appeals saw no need to reach it because Collins had failed to brief anything about Green’s breach of fiduciary duty claim.  That meant that he had failed to attack all independent grounds supporting the judgment, resulting in affirmance of the case.

Collins v. Green, No. 05-11-00893-CV

In this legal malpractice action, Jean Pierre – a Dallas commercial real estate investor – brought suit against the lawyer who represented him in a failed real estate transaction.  Pierre claimed that the lawyer had failed to advise him of the consequences of his counterparty’s changes to the earnest money provision in the real estate contract at issue.  As a result of the revised earnest money provision, Pierre lost $400,000 because the contract did not permit him to retain the earnest money when the purchaser pulled out of the transaction at the last minute.

Though the jury found in Pierre’s favor, the Court of Appeals overturned the trial court’s judgment because it found that Pierre failed to offer legally sufficient evidence of proximate causation.  In so doing, the Court of Appeals rejected Pierre’s contention that all that he needed to prove to establish causation was that he would not have signed the contract if he had understood the earnest money provision.  The Court, in rejecting Pierre’s claim, concluded that Pierre was required to prove that the counterparty would have agreed to the alternative earnest money provision (that would have refunded the money to Pierre), and that Pierre could not establish such a conclusion.

Pierre v. Steinbach

In Green v. McKay, the Court of Appeals addressed the causation requirement in a legal malpractice action.  Appellants were charged by the City of Dallas with certain code violations on a property they had sold to a debtor, who had executed a deed of trust in their favor, but who was later forced to file in Chapter 13 bankruptcy.  In response to the suit, appellants sought legal advice from appellee, McKay, who told appellants that they did not have to do anything and that “it would go away.”  The City ultimately obtained a default judgment of $562,275 against appellants, who then turned around and sued McKay for legal malpractice.  The Court of Appeals upheld the trial court’s decision, finding that the appellants had not presented any evidence of “causation.”  According to the Court, in a legal malpractice action, “[c]ausation requires that a plantiff prove a meritorious defense to the underlying case.”  Based on principles of bankruptcy law—which established that under the vendor’s lien held by appellants, they held legal title to the property in question—the Court found the appellants would not have been able to establish a meritorious defense in the code violations lawsuit even if McKay had filed an answer.  Accordingly, the Court concluded that the appellants could not establish the causation element of their malpractice claim and upheld the trial court’s dismissal.