Newsletters-Fall 1996, Edwin E. Wright, III, Board Certified in civil trial and personal injury trial law representing defendants and plaintiffs and medical malpractice victims Dallas, Texas

I

ATTORNEY DISCIPLINARY PROCEEDING

A. TRIAL COURTS CAN NOT INTERFERE WITH PENDING ATTORNEY GRIEVANCE PROCEEDINGS.

In two recent mandamus cases the Supreme Court held that trial courts do not have jurisdiction to interfere with pending attorney grievance proceedings. In The State Bar of Texas v. Jefferson, 40 Tex. Sup. Ct. J. 463 (April 2, 1997), two lawyers obtained a TRO from a district court staying grievance proceedings before an investigatory panel. The attorneys complained of numerous irregularities in the conduct of proceedings, including the State Bar’s use of special assistant disciplinary counsel to prosecute the case, the investigatory panel’s refusal to attempt to negotiate a sanction with the attorneys, the panel’s failure to make findings specifying what rules of professional conduct were alleged to be violated and the Bar’s alleged dissemination of confidential information concerning the case. The two attorneys made the same complaints in an original proceeding in the Supreme Court. The proceedings in the district court were sealed under Rule 76a(5), Tex. R. Civ. P.

The Supreme Court conditionally granted mandamus, relying upon its analysis in Board of Disciplinary Appeals v. McFall, 888 S.W.2d 110 (Tex. 1994). In McFall, the Court had held that a district court lacked jurisdiction under the Rules of Disciplinary Procedure to enjoin an attorney’s suspension. The rules provide for an appeal directly to the Supreme Court, and if an appeal is unsuccessful, the attorney can seek a re-instatement in the district court with a jury trial, if desired. The attorneys attempted to distinguish their situation from McFall on the grounds that they did not have another recourse for the redress of their complaints such as an appeal or action for reinstatement. The Supreme Court, however, noted that the attorneys had sought alternative relief in the original proceeding before it.

The State Bar also requested that the district court be directed to dismiss the action for lack of subject matter jurisdiction and that the papers in the district court be unsealed. The Supreme Court denied these requests. It held that the district court had jurisdiction to address other issues that did not interfere with a specific grievance procedure. In addition, mandamus was unavailable to address the issue of whether the papers in the district court should be unsealed because Rule 76a provides the right of appeal.

In a similar case the Supreme Court granted the State Bar a conditional mandamus against a county court at law, which had issued a writ of habeas corpus ordering the State Bar to cease and desist present and future prosecutions of attorney Lee Pruneda. In re The State Bar of Texas, 41 Tex. Sup. Ct. J. 82 (October 30, 1997). The Supreme Court reiterated that a trial court has no jurisdiction to enjoin attorney disciplinary proceedings.

B. STATE BAR EXERCISED REASONABLE DILIGENCE IN PROSECUTION OF DISCIPLINARY ACTION.

In The State Bar of Texas v. Erskine, Appeal No. 11-96-279-CV (Tex. App. - Eastland, Opinion delivered September 25, 1997), the Eastland Court of Appeals held that the trial court abused its discretion by dismissing the State Bar’s disciplinary action against attorney Blake Erskine for want of prosecution. The disciplinary action against Erskine was originally filed on December 27, 1987. On February 24, 1992 the trial court had granted Erskine’s first motion to dismiss, but that dismissal was reversed on appeal. The mandate from the first appeal was filed in the trial court on June 1, 1994. On May 21, 1996, the trial court again dismissed the proceedings holding that the State Bar failed to proceed with diligence after the reversal of the prior order of dismissal.

The State Bar appointed a new counsel for the case on January 26, 1995; the new counsel filed his notice of appearance on January 30, 1995. During February and March, he discussed the case with the Bar’s investigator, reviewed the extensive file materials on the case and inquired with the district clerk about local procedures. In April, May, and July the Bar’s counsel consulted with the Bar and the Commission on Lawyers Discipline. In September and October he instructed the Bar’s staff to perform various research on the case. On November 13, 1995 the counsel filed a motion for preferential trial setting and requested that the trial court set a jury trial at the earliest possible date. In response to this request, Erskine filed a motion to dismiss for want of prosecution. Pursuant to Erskine’s motion, the trial court ordered that the Bar’s discovery notices be canceled pending hearings on the motion to dismiss and a motion for summary judgment by Erskine.

The Court of Appeals held that although the Bar’s substitution of counsel caused some delay, much of the delay was attributable to Erskine. It cited Erskine’s filing a motion to dismiss in response to the State Bar’s effort to have the case set for trial and frustrating the Bar’s attempt to have the preliminary matters resolved. The Court therefore reversed the dismissal as an abuse of discretion. [The Court’s description of the activities for the Bar indicate that approximately sixteen and half months passed between the time the mandate from the first appeal was filed in the trial court and when the request for preferential trial setting, apparently the first action by the Bar that was communicated to Erskine. Erskine filed his motion to dismiss two weeks later. The trial court heard Erskine’s motion to dismiss and motion for summary judgment on March 29, 1996 and granted both motions on May 21, 1996. It is difficult to follow the Court of Appeals’ reasoning; the chronology of the events shows that much more time passed between the remand of the case and the first open action by the Bar’s attorney than the delay caused by Erskine’s trying to get a ruling on his motion to dismiss. The Court’s decision would have been easier to understand if the Court had simply ruled that the State Bar was entitled to change attorneys and that the new attorney had demonstrated reasonable diligence. Otherwise, under the Court’s analysis would the dismissal been upheld if Erskine had filed his motion two weeks before the Bar requested the trial setting?]

C. GRIEVANCE HEARING TESTIMONY BLOCKS SUMMARY JUDGMENT

Also in the State Bar of Texas v. Blake C. Erskine, supra, the Eastland Court of Appeals reversed the summary judgment for the attorney in the disciplinary proceedings. The State Bar alleged that in three particular cases, Erskine violated the disciplinary rules prohibiting an attorney from improperly recommending himself for employment, compensating others for recommending his employment, sharing legal fees with non-lawyers and circumventing the rules through the actions of another. The State Bar alleged that Erskine through an employee Leonard Oden, agreed with third parties to share in legal fees for cases referred to Erskine’s law firm. Erskine moved for summary judgment supported by his own affidavit and portions of disposition testimony from two of the third parties alleged in the petition, Larry Smith and John Smith. Erskine denied that he employed, encouraged or permitted Oden to solicit business through any other individual. Larry Smith in his disposition denied soliciting business for Erskine, recommending employment or receiving compensation for any recommendations. John Smith testified in his disposition that he could not remember recommending Erskine for employment, receiving particular checks from Erskine or receiving any money from Erskine or his employee after a lawsuit was settled or having an arrangement about compensation if he recommend Erskine. He could not remember the purpose for $20,000.00 or $40,000.00 checks that Oden wrote to him. In response the State Bar filed an affidavit by its attorney with a copy of excerpts from John Smith’s sworn testimony at a prior grievance committee hearing and a copy of the court reporter certificate. The trial court excluded the affidavit and the sworn testimony on the basis that the Bar’s attorney could not verify the testimony because he was not present at the grievance committee hearing. The Court of Appeals held that the trial court erred by striking the affidavit and its attachment. It noted that discovery products no longer need to be authenticated for summary judgment purposes, citing McConathy v. McConathy, 869 S.W.2d 341 (Tex. 1994). Furthermore, it held that the court reporter’s certificate properly authenticated the accuracy of the contents of the testimony and the attorney’s affidavit authenticated the duplication process by verifying the accuracy of the copies. At the grievance committee hearing, John Smith remembered much more than he did at his later disposition. He testified that he and Oden received 20 - 30% of the attorney’s fees from Erskine in cases that they referred to Erskine, that Erskine told him to go through Oden in referring clients, that Oden wrote checks to him for his share, and that he and Oden handled the clients’ signing of contracts hiring Erskine’s firm. Based upon this evidence, the Court of Appeals reversed the summary judgment. II.

ATTORNEY LIABILITY

A. CLIENTS’ CLAIMS AGAINST THEIR ATTORNEY ARE NOT ASSIGNABLE.

In Vinson & Elkins v. Moran, 946 S.W.2d 381 (Tex. App. - Houston [14th Dist.] 1997), the 14th Court of Appeals held that all malpractice claims against attorneys are non-assignable. Vinson & Elkins (V & E) was retained by the three co-executors of the Estate of W. T. Moran to handle the estate’s legal work. After the estate was finally settled, some of the beneficiaries asserted that V & E had failed to reveal conflicts of interest and that it had acted in its own interest instead of the best interest of the estate. Most of the beneficiaries did not want to actively participate in a suit against V & E and assigned their claims against the firm to Ann Moran or Jim Poinsett. Moran/Poinsett filed suit against V & E alleging negligence, DTPA violations, breech of fiduciary duty and conspiracy. They obtained a favorable jury verdict and a judgment in excess of $35,000,000.00 against V & E.

In 1994, the San Antonio Court of Appeals held that an assignment of a legal malpractice action arising out of litigation is invalid. Zuniga v. Groce, Locke & Hebdon, 878 S.W.2d 313, 318 (Tex. App. - San Antonio, 1994, writ ref’d). Because the Texas Supreme Court refused writ of error in Zuniga, the 14th Court treated the Zuniga opinion as that of the Supreme Court. Moran/Poinsett contended that Zuniga was limited to those incidents when a judgment-proof defendant assigns his legal malpractice claim to the plaintiff. The 14th Court of Appeals held that public policy considerations should guide its analysis rather than straining to fit a particular fact pattern. Assignments should be permitted or prohibited based on the likely effect on society and particularly on the legal system. The Court noted that 12 of the 17 other states which have addressed the issue have held that legal malpractice claims are not assignable. It stated that Goodley v. Wank & Wank, Inc., 62 Cal. App. 3d 389, 133 Cal. Rptr. 83, 86 (1976), was the first case to address the issue and contains the best articulation of some of the policy considerations underlying rejection of the assignability of legal malpractice claims.

It agreed with Goodley that allowing the assignment of legal malpractice claims could only endanger the sanctity of the attorney-client relationship. The 14th Court of Appeals held that the assignment of illegal malpractice claims is incompatible with an attorney’s duty of loyalty. A legal system that would permit the assignment of a malpractice claim to another would weaken attorney’s loyalty and thereby deserve both the client and the public. In addition, the attorney’s duty of confidentiality would be threatened by the assignment of legal malpractice claims. If an attorney is sued by his own client, the attorney is permitted to reveal confidential information as far as necessary to defend himself. If a client is able to assign the claim, however, the client’s control is lost but the attorney’s right to defend him or herself by revealing confidential information survives. Clients who anticipate this possibility would be encouraged to withhold information from their attorney to preserve their ability to assign a malpractice claim without fear of losing control over confidential information. The attorney-client privilege serves the broad societal interest of effective administration of justice. This interest is not served unless a client is able to confide in his attorney, secure in the knowledge that this communication will not be disclosed. Thus, ultimately the assignment of legal malpractice claims would erode the principles of confidentiality and ultimately affect the administration of justice. Finding that the analysis and the review of authority in Zuniga to be much broader than its actual holding, the 14th Court of Appeals held that the best rule is to bar all assignments of legal malpractice claims.

The 14th Court of Appeals further held that the same public policy reasons for prohibiting the assignment of legal malpractice claims also bar the assignment of causes of action against attorneys for conspiracy, violations of the DTPA or other intentional torts.

Moran/Poinsett contended that V & E was judicially or equitably estopped to contend that the assignments were invalid. The Court of Appeals held that judicial estoppel does not apply to a contradictory position taken in the same proceeding; it is called into play only in a subsequent action. In addition, the question of the assignability of legal malpractice claim requires no evidentiary proof, i.e., it is a purely legal issue. Therefore, estoppel is not relevant.

Nor did V & E waive its argument by not objecting to the admission of the executed assignment into evidence. V & E’s contention was based on a legal theory, not an evidentiary theory. V & E’s failure to object to the introduction of the documents into evidence would waive any evidentiary complaint regarding the documents, but it did not waive the legal contention as to the validity of the assignments.

Moran/Poinsett also argued that prohibiting the assignments would violate numerous provisions of the Texas and United States constitutions. The 14th Court rejected their arguments first on the basis that the Texas Supreme Court had disallowed the assignment of certain other claims in other incidences with no mention of violations of the constitutional prohibition of the impairment of contract rights, the equal protection provisions in the state and federal constitutions, or provisions against ex post facto laws. The Court of Appeals noted that the prohibition did not infringe upon fundamental rights and did not burden an inherently suspect class; therefore, equal protection requires only that the rule be rationally related to a legitimate state purpose. It found that the state’s interest in the fair administration of justice through the protection of the attorney-client relationship is a legitimate state purpose. It further noted that its decision did not destroy or impair a client’s right to redress against an attorney; it simply prescribes a method by which it may be accomplished. The Court of Appeals similarly rejected an argument that the assignments had be validated by §12.014 of the Texas Property Code. The policy reasons behind the rejection of certain assignments exists despite the existence of § 12.014.

B. ATTORNEYS HIRED BY THE EXECUTORS MIGHT ALSO HAVE AN ATTORNEY-CLIENT RELATIONSHIP WITH THE ESTATE BENEFICIARIES.

In Vinson & Elkins v. Moran, supra, the 14th Court of Appeals held that the evidence was legally and factually sufficient to establish an attorney client relationship between V & E and the beneficiaries of the estate. It has long been established in Texas that persons outside the attorney-client relationship do not have a cause of action for injuries that they might sustain from the attorney’s negligence in the performance of a duty to the client. Public policy supports a bright-line rule. Without the privity barrier, fear of liability could inject undesirable self-protective reservations into the attorney’s counseling rule. Generally, an attorney hired by executors or trustees to advise him in administrating an estate or a trust represents the executors or trustees, not the beneficiaries. That V & E was the attorney for the executors, and perhaps, should not have represented the beneficiaries because of potential conflicts, does not establish per se that it did not represent the beneficiaries. Just because an act is prohibited or involves a potential violation of the disciplinary rules does not mean it cannot or did not occur.

The 14th Court of Appeals held that the testimony concerning V & E’s attendance at beneficiary meetings, discussing a variety of subjects at those meetings and providing advice regarding the sale or holding of assets and regarding taxes and tax consequences provided legally and factually sufficient evidence that an attorney-client relationship existed between V & E and the beneficiaries even though the beneficiaries had not personally hired V & E and no V & E attorney had told a beneficiary that V & E represented the beneficiaries.

C. ESTATE BENEFICIARIES ARE NOT PER SE "CONSUMERS" WITH RESPECT TO ATTORNEYS HIRED BY EXECUTORS.

In Vinson & Elkins v. Moran, supra, the 14th Court of Appeals also held that the executors’ hiring of attorneys did not confer consumer status on the estate beneficiaries for DTPA purposes. V & E challenged the DTPA judgment against it on the grounds that the beneficiaries were not consumers under the DTPA. Consumer status is dependent upon the plaintiff’s relationship to the transaction, not on the contractual relationship between the parties. In Kennedy v. Sell, 689 S.W.2d 890 (Tex. 1985), the Supreme Court held that employees had consumer status with respect to insurance policy purchased by their employer for their benefit. The 14th Court of Appeals held that Kennedy did not address the situation in which goods or services were purchased for the primary benefit of the actual purchaser, and also incidentally benefited a third party. Instead, it agreed with the analysis of the Austin Court of Appeals in Brandon v. American Sterlizer Co., 880 S.W.2d 488 (Tex. App. - Austin, 1994, no writ) that when goods or services are purchased for the primary purpose of benefiting the business and use or benefit of the product extends to the employee only incidentally, the employee does not have standing to sue under the DTPA.

Executors are entitled to employ attorneys to assist them in the administration of the estate. Any benefit derived by the beneficiaries was merely incidental to the main purpose, i.e. legal assistance to the executives. The court compared the incidental benefits received by the estate beneficiaries with those received by union members from legal services performed for a labor union or benefits received by a citizen from legal representation of a city, county or governmental entity. In addition, conferring status on an estate beneficiary would run contrary to the need for finality in probate proceedings. If consumer status were conferred on estate beneficiaries, the existence of minor beneficiaries, residual beneficiaries, or others could extend the period of time in which an action could be brought against the attorneys hired by the executors for years after they ceased representing them. A suit against an attorney would necessarily involve revisiting the original administration in the estate and might very well affect the original distributions. Therefore, public policy weighs against conferring consumer status on estate beneficiaries.

D. ATTORNEYS DISCHARGING DUTIES IN REPRESENTING THEIR CLIENTS HAVE NO DUTY TO OTHER PARTIES.

In Renfroe v. Jones & Associates, Appeal No. 2-96-179-CV (Tex. App. - Fort Worth, Opinion issued May 29, 1997) the Fort Worth Court of Appeals affirm a summary judgment for defendant attorneys (collectively " J & A") on the grounds that J & A owed no duty to the plaintiff. In 1992, J & A’s client, Landmark obtained a judgment against Renfroe for $56,000.00, post-judgment interest and costs. Shortly thereafter, it applied for writ of garnishment. After an evidentiary hearing several weeks later, the trial court dissolved the writ of garnishment. Renfroe subsequently filed a wrongful garnishment action against Landmark, its property manager and J & A. Landmark and its property manager were subsequently dismissed with prejudice by settlement. Thereafter, J & A obtained a summary judgment.

The Court of Appeals began by stating the standards of review of a summary judgment. It then held that if Renfroe had any cause of action it was against J & A’s clients, with whom she had settled and released. Any cause of action against J & A fails because of the lack of privity between J & A and Renfroe. Texas law has long authorized attorneys to practice their profession, to advise their clients and to interpose any defensive or supposed defensive, without making themselves liable for damages. An attorney may assert any of his client’s rights without being personally liable for damages to the opposing party. The Fort Worth Court quoted with approval from Bradt v. West, 892 S.W.2d 56, 76 (Tex. App. - Houston [1st Dist.] 1994, writ denied) where the Houston 1st Court of Appeals held that an attorney does not have a right of recovery, under any cause of action, against another attorney arising from conduct in which the second attorney engaged in representing a party in a lawsuit in which the first attorney also represented a party. The Fort Worth Court of Appeals found that the Bradt reasoning applies with equal force to the liability of an attorney to the opposing party. Under Texas law, attorneys cannot be held liable for wrongful litigation conduct. The contrary policy "would dilute the vigor with which Texas attorneys represent their client" and "would not be in the best interest of justice." The rule focuses on the type of conduct in which the attorney engages rather than on whether the conduct was meritorious in the context of the underlying lawsuit. In other words, if the attorney’s conduct was discharging his duties in representing his client, it is not actionable even if it is meritless. J & A’s filing and preparing their clients’ application for garnishment was within the context of discharging their duties in representing their clients. Therefore, J & A owed no duty to Renfroe.

III.

SANCTIONS

A. FILING SUIT SOLELY FOR DISCOVERY IS SANCTIONABLE.

In Wallace v. Investment Advisors Inc., Appeal No. 06-96-00085-CV (Tex. App. - Texarkana, Opinion issued October 8, 1997), a divided Texarkana Court of Appeals held that the filing of a lawsuit for the sole purpose of obtaining discovery to be used in arbitration proceedings was sanctionable. Investment Advisors, Inc. (IAI) and one of its investment advisors, Nicholas Wentworth, assisted Robert Wallace with the investment of his money. After losing over half a million dollars, Wallace filed an arbitration proceeding against IAI and Wentworth with the American Stock Exchange alleging mismanagement. During the arbitration proceeding, Wallace sought to depose George Lollis, a Merrill Lynch employee who assisted Wallace in choosing IAI. According to the parties, under the applicable rules of the arbitration forum there was no right to depose a nonparty. Wallace declined to be voluntarily deposed. There was also a dispute between Wallace and IAI as to whether arbitration was an available remedy. Under those circumstances, Wallace and IAI entered into an agreement that Wallace could dismiss his claim against IAI in the AMEX arbitration proceeding without prejudice, file a lawsuit against IAI in a Texas district court, and depose Lollis and up to 3 other Merrill Lynch personnel. Wallace was not to engage in any type of discovery against IAI in the state court proceedings and within ninety days of the commencement of the suit, would non-suit the state action and refile its claim in the AMEX arbitration proceedings.

The trial court sanctioned Wallace’s attorney personally for fraudulently filing a lawsuit against Lollis and for abuse of discovery procedures. The Court of Appeals affirmed, holding that the suit was not true litigation but a ruse upon the court. No party was in court for the purpose of enforcing a right or seeking a remedy from the court. No remedy was available because of the underlying agreement. Because this was done knowingly, it constituted bad faith. Improper motive was shown by the attempt to use the judiciary for discovery by knowingly filing a lawsuit pretending to seek resolution of controversy when the suit was not filed for that purpose.

The trial court’s additional finding that the attorney failed to disclose facts to the court when disclosure was necessary pursuant to State Bar Rule 3.03 was held not to be necessary for imposing sanctions. That matter had been referred to the State Bar for administrative process and the Court of Appeals declined to address the matter as premature.

Chief Justice Cornelius dissented. In his opinion, Wallace’s attorney acted in good faith and with the belief that she had a legal right to proceed as she did. He noted that the appellees did not even contend that she violated any express provision of the rules, only the "spirit" of the rules. Justice Cornelius opined that in our legal system punitive statues or rules must be explicit and the party punished must be proven to have violated the explicit language of the applicable statue or rule. He would hold that, in hindsight, one might conclude that the attorney’s actions were improper, but she had an arguable right to seek redress and she sought it in good faith. Therefore, he would hold that the trial court abused its discretion in assessing sanctions in these circumstances.

B. ATTORNEYS DISQUALIFIED FOR PRIVATELY MEETING WITH THE OPPOSING PARTY. [CASE OF FIRST IMPRESSION]

In News America Publishing, Inc. v. Priest, Appeal No. 04-96-00810-CV (Tex. App. - San Antonio, Opinion issued May 21, 1997, Orig. proceeding), the San Antonio Court of Appeals issued a conditional writ of mandamus directing the trial court to enter a order disqualifying Akin, Gump, Strauss, Hauer, & Feld and two of its attorneys from representing the plaintiffs for privately meeting with one of the defendants. USSI had a contract to provide computer software services to News America Publishing. USSI sued News America, Don Frazier, USSI’s former president, and two former vice presidents of USSI and one time consultants to News America, alleging breach of contract and tortious interference with business relations. All defendants were represented by counsel. USSI non-suited Frazier. When the remaining defendants deposed USSI’s owner/corporate representative, they learned that on the same day and just prior to the non-suit, Frazier had a private meeting with the USSI representative and one of USSI’s attorneys at Akin, Gump’s offices. The meeting was "in response" to Frazier’s letter stating that he wanted to meet with them without his attorney present to discuss the lawsuit. The letter also stated that:

Prior to meeting with you, I decided to terminate my representation by Mark Cannan. Therefore, I hereby state that I am no longer represented by any attorney in this matter, and I do not desire to be represented by counsel in connection with my discussions with [plaintiffs’ representative and their attorneys].

At the time, Frazier did not communicate with his attorney that their professional relationship was terminated. No notice of the communication or the meeting was given to Frazier’s counsel or counsel for co-defendants until it was produced seven months later in response to a subpoena deuces tecum. One month after that, USSI filed supplemental answers to interrogatories in which it designated Frazier as one of their expert witnesses. The defendants filed a motion for sanctions seeking to disqualify Akin, Gump and its attorneys for violation of professional responsibility rule 4.02(a). Akin, Gump contended it had not violated Rule 4.02(a) because Frazier had terminated his relationship with his attorney. The trial court denied relief.

The San Antonio Court of Appeals noted that this issue appears to be one of first impression in Texas. DR 4.02(a) provides that an attorney should not orchestrate or encourage contact between herself or her client and imposing party who is represented by counsel unless the opposing the attorney has consented to such contact. The Court was of the opinion that the spirit of this rule requires the ethical attorney to avoid such communications when in the litigation setting for as long as counsel for the other party has not officially withdrawn from representation. Since this was a mandamus proceeding, the relaters had to show that the district court’s refusal to disqualify Akin, Gump was a clear abuse of discretion for which there is no adequate remedy by appeal. In its analysis, the San Antonio Court of Appeals considered the approach taken the federal Fifth Circuit, ADA opinions and Texas Rules of Civil Procedure.

The San Antonio Court of Appeals first noted the two prong test that the Fifth Circuit uses for disqualification under former Cannan 9:

(1) Movant must establish that a reasonable possibility that some specifically identifiable impriority has occurred;

(2) Movant must show that the likelihood of public suspension or obloquy out weighs the social interest which will be served by a lawyer's continued participation in particular case.

The San Antonio Court examined how that test was applied in Shelton v. Hess, 599 F. Supp. 905 (S.D. Tex. 1984). Shelton was a campus policeman who filed an employment discrimination suit against the University of Houston and several university officials for wrongful termination. One of the defendants, a former campus policeman himself, communicated with the plaintiff and his attorney at a time when he was represented by the university’s counsel. Subsequently the plaintiff dropped his punitive damage claims against him and later dismissed him entirely from the suit. Two and one-half months after the meeting but prior to his dismissal, Miller informed his counsel that he no longer wanted the attorney general’s office to represent him. Two months after his dismissal, Miller, who had a separate lawsuit against the university, filed a pro se notice of substitution naming the plaintiff’s counsel as his counsel. The federal court found that the defendants had been prejudice by these improper contacts and disqualified the plaintiff’s counsel. The fact that Miller had initiated the connection between himself and the opposing counsel did not militate against disqualification. Akin, Gump attempted to distinguish Shelton in two ways - (1) the federal courts are not required to limit their analysis of professional conduct to Texas rules and (2) in Shelton the plaintiff’s counsel was undisputedly conducting meetings with an opposing party at a time he was represented by counsel. Akin, Gump argued that they only met with Frazier after he informed them he was no longer represented by counsel.

The San Antonio Court of Appeals noted that for more than sixty years the ABA has taken the position that a client may not waive the protections accorded to him by the ethical responsibilities of the communicating attorney. The ABA Committee on Ethics and Professional Responsibility has stated that:

"Reflecting the concern that the represented person may not be in a position to make an informed waiver of the presence of counsel, the Rule operates to reduce the likelihood of the represented person engaging in communications that might ultimately prove harmful to her cause by imposing the strict ethical obligation on the communicating attorney."

The rule against communicating with represented parties is fundamentally concerned with the duties of attorneys, not with the rights of parties. The Court of Appeals recognized that any person represented by counsel may terminate that representation and that after that occurs, the communicating attorney is free to communicate with the now-unrepresented party within the guidelines of DR 4.03. However, the communicating attorney has an ethical responsibility to confirm whether, in fact, the opposing counsel has been effectively discharged.

The San Antonio Court of Appeals noted that under Tex. R. Civ. P. 8, Cannan was the attorney in charge on behalf of Frazier until such designation was changed by written notice to the court and all parties. Furthermore, an attorney’s representation continues in the pending case until the court, on written motion, grants withdrawal or substitution under Tex. R. Civ. P. 10. Noting that the sanctity of the attorney-client relationship cannot be over emphasized, the San Antonio Court held that the anti-contact rule is more than common courtesy, it is a professional requirement imposed to protect the client, other parties, and indeed, the very integrity of the adversary system. Concluding that confidential information had likely been disclosed to an opposing party, the Court found that it was a confronted with a Walker v. Packer situation of an inadequate remedy, that could not be cured on appeal. It therefore, directed that Akin, Gump and its attorneys be removed from representing the plaintiffs in the case.

IV.

ATTORNEYS’ COMPENSATION

A. STATUTORY FEE AWARDS CANNOT BE BASED UPON PERCENTAGE OF RECOVERY.

In Arthur Anderson & Co. v. Perry Equipment Corp., 545 S.W.2d 812, (Tex. 1997), the Texas Supreme Court held that the award of reasonable, necessary attorneys’ fees under the DTPA cannot be based solely upon a percentage of recovery. The Court held that in awarding a statutory attorneys’ fees under the DTPA, the fact-finder should consider the following factors:

* The time and labor required, the novelty and difficulty of the questions involved, and the skill required;

* The likelihood that acceptance of particular employment will preclude other employment by the attorney;

* The customary fee charged in the locality for similar services;

* the amount involved and the results obtained;

* The time limitations imposed by the client or circumstances;

* The nature and length of the professional relationship;

* The experience, reputation, and ability of the lawyer(s) performing the services; and

* Whether the fees are contingent on the results obtained or the uncertainty of collection.

The Supreme Court held that a contingency agreement may be considered by the fact-finder but was not sufficient to support the award of attorneys’ fees.

In Lubbock County, Texas v. Strube, Appeal No. 03-96-00510-CV (Tex. App. - Austin, Opinion on rehearing delivered September 25, 1997), the Austin Court of Appeal applied the Arthur Anderson holding to other statutory attorney’s fee cases pending on appeal. The Court of Appeals noted under prior opinions evidence of a contingency fee agreement would have supported an award of attorney’s fees under the Whistleblowers Act. Under Blair v. Fletcher, 849 S.W.2d 344, 345 (Tex. 1993), however, a court of appeal must render its decisions in light of changes in the law during the pendency of appeal. Generally, decisions of the Supreme Court operate retroactively unless that Court exercises its discretion to provide otherwise. Therefore, the Court of Appeal applied the Arthur Anderson analysis to the case pending before it.

B. DEFENDANTS’ ATTORNEYS’ FEES UNDER INDEMNITY PROVISION WERE COMPULSORY COUNTER-CLAIM.

In Ingersoll-Rand Co. v. Valero Energy Corp., Appeal No. 13-96-281-CV (Tex. App. - Corpus Christi, Opinion issued September 25, 1997), the Corpus Christi Court of Appeal affirmed a summary judgment denying the defendants’ counterclaims for attorneys’ fees on the basis of compulsorily counterclaim and the statute of limitations. Valero had contracted with M.W. Kellogg Co. to serve as a general contractor in the expansion of Valero’s Corpus Christi oil refinery. Kellogg hired Rand as a sub-contractor. In 1986, Valero sued Kellogg for negligence and DTPA claims; it added Rand as a defendant in 1989. In their defense both Kellogg and Rand filed motions for summary judgment based upon an indemnity provision in Valero’s contract with Kellogg. The trial court granted those motions. After the trial court severed Valero’s claims from remaining parties and issues in the lawsuit, Valero appealed. After the judgment was affirmed, Kellogg and Rand filed motions for summary judgment in the severed suit for attorneys’ fees based upon the terms of the same indemnity provision. Valero filed its own motion for summary judgment on the grounds that the attorneys’ fee claims were compulsorily counterclaims that were not timely urged and that they were time-barred.

Rand had filed its counterclaim for attorneys’ fees in the severed proceedings after Valero’s appeal had been decided. The Corpus Christi Court of Appeals held that Rand’s claim for attorneys’ fees under the indemnity provision was a compulsory counterclaim. Citing Getty Oil Co. v. Insurance Co. of N. Am., 835 S.W.2d 794, 798 (Tex. 1992), the Court held that even though Rand’s claims for attorneys’ fees were contingent upon its success, since the same provision of the contract provided both its defense and the basis for the attorneys’ fees claims, the claim was a compulsory counterclaim in the original suit. Because Rand did not file its counterclaim for attorneys’ fees until after the severance made the original summary judgment in its favor a final judgment, it had, in essence, filed a new suit and was barred by res judicata.

Kellogg had filed its claim for attorneys’ fees prior to the severance. However, the Corpus Christi Court held that Kellogg’s claims for attorneys’ fees accrued by the date that it filed its original answer in Valero’s lawsuit in 1986. Kellogg filed its counterclaim for attorneys’ fees in 1991. Therefore, the Court of Appeals held that it was barred by the four year statute of limitations. The Court of Appeals rejected Kellogg’s argument that its cause of action did not accrue until Valero had rejected its demand for payment because Valero’s filing suit against Kellogg was an unequivocal repudiation of the contract’s indemnity provision, thus triggering the running of the statute of limitations.

V.

ATTORNEY-CLIENT PRIVILEGE

A. ATTORNEY-CLIENT PRIVILEGE LOST BECAUSE ALL UNIVERSITY EMPLOYEES PRIVY TO INFORMATION NOT SHOWN TO QUALIFY AS UNIVERSITY REPRESENTATIVES.

In Osborne v. Johnson, Appeal No. 10-97-231-CV (Tex. App. - Waco, Opinion issued October 10, 1997, Orig. proceeding), the Waco Court of Appeals denied a mandamus sought by Baylor University seeking to prevent the disclosure of certain documents generated in an administrative investigation under a claim of attorney-client privilege. John Fox was a professor of anthropology at Baylor. In the summers he directed a group of Baylor students and other participants in a field school in Guatemala. After the 1996 field school, several students registered complaints against him with Baylor officials. Judy Parker, the primary complainant, alleged that Fox engaged in inappropriate behavior and made inappropriate remarks during the field school.

Baylor conducted an investigation of the students’ allegations. The investigators included among others, Harold Osborne, the chair of Fox’s department, Baylor’s Provost and the Dean of the College of Arts and Science, Baylor’s general counsel and an assistant general counsel.

The Foxs filed suit against Parker for libel, slander and tortious interference with John Fox’s employment contract and loss of consortium. The original proceeding stems from a subpoena duces tecum the Foxs served on Osborne. Osborne and Baylor filed written objections to the Foxs’ subpoena, asserting that the documents sought were protected by attorney-client privilege. To support the objection, they presented the testimony of the assistant general counsel, an affidavit of Osborne and the documents under seal for inspection. The trial court overruled the objections and ordered Osborne and Baylor to produce the documents.

The Court of Appeals noted that the standard of review in a mandamus proceeding is that Osborne and Baylor had to establish that the trial court committed a clear use of discretion and that they had no adequately remedy. It noted that if the trial court erroneously ordered the production of documents protected by the attorney-client privilege, a party would have no remedy at all. Thus, the issue was whether the trial court clearly abused its discretion in ordering the disclosure of the documents in question. A trial court has no discretion to determine the law or to apply the law to the facts incorrectly. A clear failure by the trial court to analyze or apply the law correctly is an abuse of discretion. However, if the evidence presented suggests that the privileged does not apply because the communication was not intended to be confidential or because the privilege was waived, a fact issue exists for the trial court to resolve. In Cameron County v. Hinojosa, 760 S.W.2d 742, 745 (Tex. App. - Corpus Christi 1988, Orig. proceeding), the court stated that if the parties present conflicting evidence on the applicability of the privilege, the trial court’s decision must be "deemed conclusive." [Note-an appellate court cannot make fact findings in a mandamus proceeding if the facts are disputed.]

Rule 503, Tex. R. Civ. Evid., protects from discovery confidential communications between an attorney or the attorney’s representative and the client or the client’s representative "made for the purpose of facilitating the rendition of professional legal services to the client." Texas has adopted the control group test to determining whether an individual qualifies as a representative of a corporation or other entity which has retained the counsel. National Tank Co. v. Brotherton, 851 S.W.2d 193, 198 (Tex. 1993). In order to qualify as a representative of an entity under Rule 503, a person must be shown to either have the authority to obtain professional legal services on behalf of the organization or to act on the advice rendered pursuant to the request made under such authority. Generally, only someone relatively high on the administrative ladder will qualify. Communications with underlings who may make internal recommendations to the superiors but who are not themselves authorized to make the final decisions will remain unprivileged.

The attorney-client privilege only protects confidential communications. The issue of confidentially focuses on the intent of the parties at the time the communications are made. Communications made in the presence of others who do not qualify as representatives of the client or the attorney are not confidential. An appellate court can conduct its own in camera inspection to determine if the trial court properly applied the law of privilege to the documents.

Baylor and Osborne submitted Osborne’s affidavit with the documents for the trial court’s in camera consideration without offering it into evidence. However, they did timely serve Osborne’s affidavit on the Foxs at least seven days prior to the hearing. The Foxs did not object to the affidavit being presented to the trial court but argued that it could not be considered by the Court of Appeals. The Court noted that a similar tender had been approved by the 14th Court of Appeals in Gaf Corp. v. Caldwell, 839 S.W.2d 149-51 (Tex. App. - Houston [14th District] 1992, orig. proceeding). It distinguished Barnes v. Whittington, 751 S.W.2d. 493 (Tex. 1988), where the Supreme Court held that affidavits should not be considered by the trial court judge as evidence in support of a privilege when they had not been filed with the district court, contained no certificate of service and were not served upon the opposing counsel. The Waco Court considered Barnes to be distinguishable because Baylor had served the Foxs with a copy of the affidavit pursuant to Rule 166b(4). The evidence presented by the assistant general counsel’s testimony and Osborne’s affidavit was that the Provost, the Dean of the College of Arts and Sciences and Osborne were all officials in John Fox’s chain of command. Each had an inherent authority to deal with potential disciplinary matters. Although none possessed the authority to terminate Fox , any of the three could "initiate the dismissal process." Each of the three had the authority to seek out legal counsel in a matter involving Fox and to act upon the advice of counsel in the matter. The Foxs argued that Osborne did not qualify as Baylor’s representative because he did not have ultimate decision making authority. The Waco Court held that the rule, as stated in National Tank, extends not only to those "in a position to control" entity’s decision, but also to those "in a position * to take a substantial part in [the] decision*." The Waco Court held that the Foxs failed to present sufficient evidence to rebut Osborne’s and Baylor’s prima facie showing that Osborne was a member of the Baylor control group.

When the Court examined the issue of whether the communications contained in the documents were intended to be confidential, it noted that Osborne testified in his disposition that at least one other person was involved in the investigation, the Dean of Student Life. The Waco Court held that the documents themselves must therefore be examined to resolve the fact questions of whether the documents in question were kept confidential by Baylor.

The documents consisted of five categories:

* investigative report drafts,

* summaries of the allegations,

* the proposed sanctions,

* office correspondence, and

* handwritten notes.

The investigative report drafts indicated that the contents were disclosed to three persons other than the identified administrators and the attorneys. Baylor’s evidence did not show the status of three additional persons privy to the information. The Court of Appeals could not presume from their respective titles that they were members of Baylor’s control group and thus authorized to seek or act on legal advice. Therefore, there was some evidence that the communications were never intended to be confidential or that the privileged was waived by disclosure to third parties. Since there was a fact question, the trial court’s decision was conclusive.

The information contained in the summaries of the allegations and the proposed sanctions were also contained in the investigative report draft. Therefore, the trial court’s conclusion that these documents were not protected was conclusive. The office correspondence consisted of memorandums sent by the attorney to the three administrators and a reply by the Provost. The attorney’s original opinion and the Provost’s reply were both sent to three other individuals whose status with Baylor was not shown by the record. Thus, the correspondence likewise presented a question as to whether it was confidential to begin with or whether the privilege was waived, and therefore the trial court’s conclusion was conclusive. Finally the handwritten notes suggested that they were written by Osborne, but the notes did not separately identify in any fashion as to who was present when Osborne made them or when he made them. Because the notes were submitted together to the court without providing evidence concerning when they were prepared, who was present or participated in the discussion which lead to their preparation, or the status and identity of the person(s) whose comments were reflected in the notes, a fact issue existed regarding whether the notes were intended to be confidential or whether their confidentially was waived by subsequent disclosure. Therefore, the trial court’s conclusion that the documents were not protected by the attorney-client privilege was conclusive. [Note - a party attempting to protect documents from discovery on the basis of attorney-client privilege needs to establish that all persons privy to the information in the documents were within the control group or otherwise met the standard for confidentially.]