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Texas Association of Defense Counsel
Ed Wright, Editor, 1996-1999
Voir Dire: Preparation, Communication, and Presentation Selection, Theory, and Strategy-
Presented to the State Bar of Texas
Professional Liability Newsletter (Non-Medical)
A Publication of the Texas Association
of Defense Counsel
Newsletters
SPRING 1999 EDITION
Editor:
EDWIN E. WRIGHT, III
Stradley & Wright
Abrams Centre
9330 LBJ Freeway
Suite 1400
Dallas, Texas 75243
Tel: (972) 231-6001
Fax: (972) 231-7004
I.
THE DEATH OF Ranger v. Guin
In Ranger County Mutual Ins. Co. v. Guin, 723 S.W.2d 656 (Tex. 1987), the Supreme Court upheld an actual and punitive damage award against the insurer and stated that an attorney retained by the insurance company to defend an insured is a "sub agent of the insurance company." Id. at 658 through 659. In State Farm v. Traver, 42 Tex. Sup. C. J. 284, the Supreme Court holds that an insurer is not vicariously liable for the malpractice of an independent attorney it selects to defend an insured. This case should be on the "must read" list of all defense counsel.
The case at issue arose out of a motor vehicle collision that occurred in January of 1989. Mary Davidson collided with Calvin Klause. Mary Jordan, a passenger in Klause's car, was severely injured. State Farm Mutual Automobile Insurance Company insured both Davidson and Klause with a standard automobile liability policy carrying a $25,000.00 per person liability limit.
Subsequently, Ms. Jordan sued both drivers in one lawsuit. State Farm retained separate counsel to represent Ms. Davidson and Mr. Klause. A jury found Ms. Davidson 100% liable for the accident, and the trial court awarded Ms. Jordan $375,000.00 plus approximately $100,000.00 in pre-judgment interest against Ms. Davidson based upon a jury verdict. Ms. Davidson died after the trial, and her executor, Ronald Traver, brought suit against State Farm alleging that State Farm was negligent, breached its duty to defend Davidson in the Jordan lawsuit, breached its Stowers duties, breached its duty of good faith and fair dealing, and violated the Deceptive Trade Practices Act and Article 21.21 of the Insurance Code because the attorney which State Farm had retained to represent Ms. Davidson in the Jordan lawsuit commit malpractice by failing to attend several key depositions and by failing to offer a meaning defense at trial. Mr. Traver further alleged that State Farm deliberately orchestrated the malpractice to avoid potential Stowers liability to Mr. Klause during settlement negotiations. In effect, Traver contended that State Farm acted in its own self interest by shifting liability for the accident at issue from Mr. Klause to Ms. Davidson. Interestingly, Mr. Traver had also sued the attorney who represented Ms. Davidson in the underlying case, but that attorney had filed Chapter 7 bankruptcy proceedings as a result of the suit, and the trial court severed the claims against him.
The trial court rendered summary judgment for State Farm on all claims. The Court of Appeals, however, reversed, stating that based upon the "sub agent" language of Ranger Co. Mutual Ins. Co. v. Guin, State Farm was responsible for any injury caused by the malpractice of the attorney that it retained for Ms. Davidson. Thus, the Court of Appeals remanded Mr. Traver's negligence claims and claims under the Deceptive Trade Practice Act and Insurance Code back to the trial court. The Supreme Court rendered judgment for State Farm on all claims based upon vicarious liability but remanded the case to the trial court to allow Mr. Traver to pursue the remaining claims that he pled or might plead against State Farm.
In specifically holding that State Farm was not vicariously liable for the conduct of an independent attorney that it selected to defend its insured, the Supreme Court first examined the status of defense counsel. The Court noted that the defense attorney was an independent contractor since he had the discretion regarding the day to day details of conducting the defense and was not subject to the carrier's control. Further, the court pointed out the defense attorney owed unqualified loyalty to the insured and could withdraw from the defense if he was not permitted to act responsibly.
Next, the Court held that the "sub agent" language in the Ranger case was merely dicta since the Ranger case was a Stowers case only. Therefore, the Supreme Court declared that it had never held that an insurer was vicariously responsible for the conduct of defense counsel.
In a well reasoned concurring and dissenting opinion, Judge Gonzalez pointed out that the majority opinion was based upon "... an idyllic and perhaps naive view of the current status of insurance defense counsel." Justice Gonzalez stated that the insured wanted the best defense possible while the insurance carrier wanted to provide a defense at the lowest possible cost. Identifying great changes in the insurance industry, Justice Gonzalez further specified that these changes may have weakened the protection that Employers Casualty v. Tilley envisioned such that insureds were getting a "Yugo defense" rather than the "Chevrolet" defense for which they have paid. Justice Gonzalez requests the legislature to hold hearings and discovery the scope of these potential problems. Finally, he would have held that Mr. Traver was not precluded from pursuing his deceptive trade practice insurance claims against State Farm and would have allowed him an opportunity to make a case for vicarious liability against State Farm.
II.
DISQUALIFICATION UNDER RULE 1.09
In the consolidated mandamus proceedings of In Re: Epic Holdings, et al and In Re: Kenneth George, Opinion delivered December 31, 1998, the Supreme Court disqualified plaintiff's counsel and held that the district court's refusal to grant the motion for mandamus was a clear abuse of discretion.
The two consolidated actions arose out of a corporate dispute. Specifically, plaintiff Vicki Anderson alleged that Kenneth George, the chief executive officer of Epic Holdings, Inc., and two other directors of that corporation had breached their fiduciary duties by exorbitantly over compensating themselves and other corporate executives during the acquisition of Epic by another company. Mr. George moved to disqualify Ms. Anderson's counsel under Rule 1.09 contending that her suit was substantially related to matters in which her attorney's former law firm, Johnson & Gibbs, had represented Mr. George and Epic. Mr. George further alleged that Anderson's counsel questioned the work that Johnson and Gibbs had done for him and Epic.
The underlying work for Epic had required more than 20 attorneys at Johnson & Gibbs to examine corporate, tax, securities, banking, ERISA, labor, real estate and health law. The firm had billed over $2.2 million for four months work in setting up Epic Health Care and additional $2.3 million for handling other matters for the company over the next three years. Several lawyers in Ms. Anderson's new law firm had worked on these matters although they had left the Johnson & Gibbs law firm approximately four years before Epic was acquired by the new company. Two trial judges had already overruled the Motions to Disqualify. The Supreme Court disagreed. The Court focused upon the fact that two members of Ms. Anderson's legal team had worked for Epic and Defendant George. The Court criticized Ms. Anderson's position wherein her attorneys challenged the existence of attorney-client relationship with Defendant George and Epic. The Court declared that when an attorney performs legal services benefiting a person individually, a third party could not challenge the attorney-client relationship. Otherwise, an avenue for circumventing the presumption of protecting client confidence would be circumvented.
III.
LAW FIRM DISQUALIFIED BECAUSE OF LEGAL ASSISTANT
In Re: American Holding Product Corp., et al, Opinion delivered December 31, 1998, is a mandamus proceeding in which two law firms were disqualified because a legal assistant had worked for firms on both the defense and plaintiff side.
The litigation arose out of the Norplant contraceptive device. Approximately 3,000 plaintiffs sued several companies in five separate cases in Hidalgo, Bexar, Starr and Zavala Counties. The Law Offices of Frank Herrera and Cherry, Davis, Harrison, Montez, Williams, and Baird, P.C. were counsel for approximately 1,000 of the claimants. Defendant Wyeth-Ayerst Laboratories, Inc. sought to disqualify the two firms because a legal assistant, Diana Palacios, had worked for two firms on both sides of the docket. Apparently, Ms. Palacios had interviewed potential fact and expert witnesses, met with Wyeth's counsel, coordinated meetings between Wyeth's counsel and prospective consulting and testifying experts, investigated individual plaintiff claims at the request for Wyeth's counsel, wrote memoranda to Wyeth's counsel on how to best utilize potential witnesses, and examined the jury selection process in Zavala County. She had also prepared 24 memoranda for Wyeth.
Subsequently, she had approached Mr. Frank Herrera, a counsel for the Plaintiffs, about employment. Mr. Herrera had hired her after one of the attorneys for Wyeth told him that Ms. Palacios had never worked for him and did not have access to any of Wyeth's privileged information in the Norplant matters. After reviewing the record in detail, the Supreme Court held that the trial court abused its discretion in failing to disqualify the Herrera firm because of that firm's failure to screen Ms. Palacios from the litigation.
The Supreme Court primarily relied upon Grant v. 13th Court of Appeals, 888 S.W.2d 466, 468 (Tex. 1994) and Phoenix Founders, Inc. v. Marshall, 887 S.W.2d 831, 834-36 (Tex. 1994), to disqualify the Herrera firm. In particular, since Ms. Palacios had worked on the case for both sides, a conclusive presumption arose that confidences and secrets were imparted when she worked for the opposition. This presumption is not rebuttable according to the Supreme Court. Nevertheless, presumption that information was shared with a new employer may be overcome. That presumption may be rebutted only by establishing that sufficient precautions were taken to guard against any disclosure of confidences. These would be to instruct the legal assistant not to work on any prior employment matters and to take reasonable steps to insure that she does not work on such matters. In particular, the Herrera firm could have avoided the entire controversy by taking necessary steps to isolate Ms. Palacios from the Norplant litigation according to the Supreme Court.
IV.
INSURANCE CARRIER MAY SUE ATTORNEYS ON VARIOUS THEORIES
In Safeway Managing General Agency, Inc. v. Clark and Gamble, Opinion No. 04-98-00130-CV; the San Antonio Court of Appeals held that an insurance company could not sue defense counsel that it had retained for breach of fiduciary duty and breach of agency. Nevertheless, the carrier could sue the firm for causes of action not based upon the attorney-client relationship. Specifically, the carrier had standing to assert claims for negligent misrepresentation, fraud, conspiracy, breach of contract and warranty.
The case arose out of a motor vehicle accident. State and County Mutual Fire Insurance Company had insured Mitchell Manning under a standard liability policy with limits of $20,000.00. Ms. Manning was involved in an accident with a Mr. Garcia who obtained a default judgment against Ms. Manning in the amount of $495,212.70. Subsequently, Mr. Garcia sued the insurance company. The insurance company hired the law firm of Clark and Gamble to represent Ms. Manning.
Clark and Gamble negotiated a settlement with Mr. Garcia for $23,647.25. According to the carrier, the firm characterized this settlement as a full release of Mr. Garcia's claims although the carrier released funds without first approving the settlement papers. When the carrier received the executed documents, it discovered that Mr. Garcia had settled only the amount of the Judgment in excess of the policy limits, and the carrier was forced to pay Mr. Garcia an additional $20,000.00.
The carrier then sued Clark and Gamble for negligence, gross negligence, fraud, civil conspiracy, breach of fiduciary duty, breach of agency, breach of warranty, and breach of contract. Clark and Gamble moved for summary judgment based upon the lack of an attorney-client relationship. The trial court granted the motion and Safeway appealed.
The appellate court first noted that no attorney-client relationship existed between an insurance carrier and the attorney it hires to defend one of its insureds. As such, the carrier, Safeway, lacked standing to sue based upon a theory of breach of fiduciary duty. Viewing the remaining causes of action, the Court distinguished claims of negligent misrepresentation, civil conspiracy, fraud, breach of contract, and breach of warranty because these causes of action were not based upon the attorney-client relationship or professional duty. Rather, these claims were based upon an independent duty separate and apart from the attorney-client relationship. Therefore, the court of appeals held that Safeway, the insurer, had standing to bring the claims and causes of action against Clark and Gamble for negligent misrepresentation, fraud, conspiracy, breach of contract, and breach of warranty.
V.
ATTORNEY LIABILITY FOR NOT OBTAINING A PROTECTIVE ORDER
In Roberts v. Healey, Opinion No. 14-96-10306-CV, the 14th Court of Appeals affirmed in part and reversed and remanded in part a summary judgment in a suit for damages from an attorney's failure to obtain a protective order against his client's estranged husband which allegedly resulted in the death of the client's two small children and injuries to her mother.
In July of 1991, Karen Roberts married Daniel Kennedy. The couple had two children. During the marriage, Mr. Kennedy developed a drug habit and became very unstable. In September of 1994 his behavior had become so erratic that his wife asked him to move out of their mobile home. In October of 1994 Ms. Roberts retained Defendant Healey to represent her in the divorce. Thereafter, Mr. Kennedy made harassing calls and pages to his estranged wife, including several threats. This was related to the attorney, and Mr. Kennedy's drug use was also related. Although the attorney filed an application for restraining order along with the client's affidavit, the attorney never made an effort to obtain a signed protective order despite repeated phone calls from the client and her mother.
The client moved into a new apartment because of the behavior. She also called the police and requested that they keep her estranged husband away from her. In November, Mr. Kennedy, the estranged husband, attempted to commit suicide which the client reported to counsel. The estranged husband checked in and out of a psychiatric ward and left a note at his estranged wife's new apartment. The client immediately took the note to her attorney's office and gave it to his secretary. Subsequently, the estranged husband, Mr. Kennedy, confronted his ex-wife while he was high on cocaine outside her apartment as she was leaving for work. He forced her to accompany him into the apartment where he broke in, shot and killed his two children, shot and wounded his mother-in-law, and then committed suicide. The mother-in-law and client then filed suit against the attorney and his firm contending that his failure to obtain a protective order constituted negligence, breach of warranty or contract, and breach of statutory duties under the Deceptive Trade Practice Act, all of which caused the death of the two children, the wounding of the mother-in-law, and resulting damages.
The attorney and his firm obtained a summary judgment in the trial court by arguing that his failure to obtain a protective order against the estranged husband was not the proximate or producing cause of the injuries and damages at issue as a matter of law.
The Court of Appeals first held that the attorney's failure to obtain a protective order was too attenuated from the criminal conduct to constitute a legal cause of injury to the plaintiffs. Examining the evidence, the court stated that although the attorney was aware of numerous threats, his failure to obtain a protective order did no more than create the condition that enabled the estranged husband to kill the children and wound the mother-in-law. In fact, the defendant pointed out that his client had lied to Kennedy on the day of the attack telling him that she had already obtained a protective order to prevent his violent actions; yet, he killed his children and wounded his mother-in-law despite receiving this information. Therefore, the appellate court upheld summary judgment on the negligence and gross negligence as well as deceptive trade practices claims.
On the other hand, the court reversed the breach of contract and warranty against the attorney and his firm because the attorney and his firm had failed to include the grounds for granting summary judgment on these causes of action in his motion for summary judgment. Finally, the court upheld the summary judgment against the mother-in-law on the negligence and gross negligence claims since she was not a client but upheld them but remanded summary judgment claims for the mother-in-law for her deceptive trade practice and bystander claims since those claims were not based upon the attorney-client relationship and did not involve the same causation issues.
VI.
REMEDY FOR WRONGFUL CONTINGENCY FEES
In Lopez v. Muoz, Hockema & Reed, L.L.P., 980 S.W.2d 738 (Tex. App. - San Antonio, 1998), the clients sued their former law firm and individual attorneys therein for breach of contract and breach of fiduciary duty for wrongfully charging higher contingency fees than was due. The San Antonio Court of Appeals reversed a summary judgment for the firm holding that the firm's contingency fee surcharge was a breach of contract; that the surcharge constituted breach of fiduciary duties; that the discovery rule applied to toll the statute of limitations for breach of fiduciary action; and that return of the overcharge only, not the entire fee, was appropriate.
In July of 1989 Mr. Leonel Lopez, Sr. and Jr. signed an attorney employment fee agreement with the Law Firm of Munoz, Hockema & Reed. Under this agreement, the firm agreed to represent the Lopez family in a wrongful death case against Westinghouse Electric Corporation. The contract provided for a 40% contingency fee agreement which escalated to 45% in the event the case was appealed.
The lawyers successfully tried the case obtaining a jury verdict for over $25 million. Thereafter, the case was settled for $15 million. In a meeting with the firm and a tax attorney in October of 1991, the firm told Mr. Lopez, Jr. that the attorney's fees would be 45% and that the family's share would be $8,250,000.00. A settlement agreement was signed on October 30, 1991.
On April 11, 1995 the Lopez family filed a lawsuit against the firm and its individual attorneys to recover $750,000.00 in overpayment of the attorney's fees. In particular, the former clients contended that the lawyers should have charged only 40% not 45%. Both sides moved for summary judgment. The trial court granted the lawyers' summary judgment, and the clients appealed.
The firm and its lawyers argued that they were entitled to a 45% fee because the settlement agreement was not signed until after an appeal was perfected. The clients argued that there was no appeal to a "higher court," and the Court of Appeals agreed since an appeal to a higher court meant more than simply filing a cash bond which Defendant in the underlying case had done, not the lawyers for the former clients. Otherwise, the lawyers would have obtained an additional $750,000.00 for doing nothing.
The firm and its lawyers next argued that the breach of contract claim was barred by the doctrine of acceptance of benefits. The Court pointed out that the Lopez family, the former clients, did not act with full knowledge of their rights. In particular, they did not understand the meaning of the phrase, "appealed to a higher court." Hence, the doctrine of acceptance of benefits would not apply. Finally, the Court of Appeals rejected the remaining defenses and held that the firm and its lawyers should return $750,000.00 to the family since the discovery rule tolled the statute of limitations.
VII.
LIABILITY OF ATTORNEYS TO CLASS ACTION PLAINTIFFS
In Doctor Richard Gillespie v. James Franklin Scherr, et al, Opinion No. 14-97-00479-CV, the 14th Court of Appeals affirmed a summary judgment granted in favor of two lawyers and a law firm which had represented chiropractors in a class action suit.
The appellants were chiropractors practicing in Texas. The defendants were two attorneys and a law firm who had filed a class action case in El paso on behalf of all chiropractors in Texas against insurance carriers who refused or delayed payments of chiropractic bills. The class was never certified, and settlements were entered into and approved for some settling plaintiffs named in the case between the filing and dismissal of the class action. The plaintiffs who were left out of the settlements sued to two attorneys and their law firms in Harris County for fraud and breach of fiduciary duty. Other chiropractors intervened in the case although they were not named plaintiffs in the original case. The claims of the named plaintiffs were tried and settled after the intervening plaintiffs' causes of action were severed. The two lawyers and their firms filed Motions for Summary Judgment arguing that no attorney-client relationship existed between them and the intervening plaintiffs. Both the trial court and the 14th Court agreed.
After examining the record, the 14th Court pointed out the only case it had found held that lawyers for even named plaintiffs in an uncertified class owed no duty to unnamed class members. Since Texas follows the "bright line privity rule," the Court further declared that the defendant lawyers and law firms could not be held liable to the intervenors since the lawyers had never actually represented them. Finally, the court pointed out that the intervenors' pleadings were defective as far as alleging an attorney-client relationship. Therefore, the Court upheld the Motions for Summary Judgment.
VIII.
LIMITATIONS
Two recent cases show application of limitations in legal malpractice cases.
In Dunbar v. Fulbright & Jaworski, the First Court of Appeals in Opinion No. 01-96-00958-CV; reversed a summary judgment based upon the statute of limitations. In that case, a cellular and molecular biologist sued her former employer, the Fulbright and Jaworski law firm and others based upon a series of 1987 transactions. On October 7, 1987 the plaintiff contended that she signed an agreement assigning all rights in an invention to the Baylor College of Medicine because a Fulbright and Jaworski attorney representing Baylor College of Medicine told her it was a requirement of the terms of her employment with the Baylor College of Medicine to do so. In May of 1994, more than six years after the agreements were signed, the Plaintiff sued for breach of fiduciary duty, fraud, legal malpractice, deceptive trade practice violations, and conspiracy. The trial court granted the motions for summary judgment filed on behalf of all defendants asserting that plaintiffs claims were time barred because the plaintiff had acknowledge knowledge of facts giving rise to her cause of action when she signed the agreements.
The Appellate Court first noted that the summary judgment motions did not attempt to disprove any of the plaintiff's causes of action. Rather, the motions were based solely on the contention that the plaintiff's claims were time barred because the plaintiff knew the facts giving rise to her causes of action when she executed the agreements in 1987. Under the discovery rule, a plaintiff tolls limitations until that time when the claimant knows or reasonably should have known that the plaintiff was legally injured by an alleged act or wrong, however slight. Reviewing the record of summary judgment evidence, the Court pointed out that the plaintiff did not understand the difference between an assignment and licensing agreement when she signed the agreements when the summary judgment was viewed in a light most favorable to her. Further, the summary judgment movants had not negated an attorney-client relationship or fraudulent misrepresentation. Therefore, the Court of Appeals reversed and remanded the case for trial.
In Burnap v. Linnartz, Opinion No. 04-97-00959-CV; the San Antonio Court of Appeals upheld a summary judgment based upon a limitations defense.
In the case, Willard Burnham sought to hold lawyer Linnartz liable because Mr. Linnartz was allegedly the originating a billing attorney for client files relating to his firm's representation of a partnership in which Mr. Burnham was a partner.
Mr. Linnartz argued that the discovery rule did not apply because the undisputed facts established that in more than one instance, the plaintiff had been put on notice of the cause of action against Mr. Linnartz. The Court of Appeals agreed after examining the record. First, the plaintiff had signed release and indemnification on July 31, 1986. Further, he had signed another release in January of 1988. Finally, in July of 1989, the Plaintiff had received a certified letter. All of these placed the plaintiff on notice of a legal injury. Since the plaintiff did not sue Mr. Linnartz and his firm until 1991, his actions were barred by the two-year statute of limitations.
IX.
INEFFECTIVE WAIVER
In General Motors Acceptance Corp. v. Crenshaw, Dupree & Mylam, L.L.P., Opinion No. 08-96-00411-CV, the El Paso Court of Appeals reversed a summary judgment in favor of the Crenshaw, Dupree & Mylam law firm.
The case arose out of a fraud and legal malpractice claim by General Motors against the firm. Originally, General Motors and the firm were sued by a group of individuals for numerous common law tort causes of action and violations of the D.T.P.A. On November 10, 1995, these individuals and companies entered into a settlement agreement with General Motors. Subsequently, several of the same individuals settled their claims against the firm.
General Motors then filed suit against the firm seeking actual damages and indemnification and/or contribution. Ultimately, the trial court granted summary judgments ruling that the parties take nothing against each other, and General Motors appealed.
In the latter part of 1989 General Motors approached the Rose family about acquiring a Hundai dealership in Lubbock, Texas which was owned by Eddie Horn. In the transaction, Crenshaw, Dupree & Mylam represented not only the Roses but also General Motors. The firm obtained a waiver of conflict interest signed by the Roses. Nevertheless, the Roses contended that the waiver was ineffective. In reversing the summary judgment action that the firm had received, the court pointed out that the firm had represented both parties. General Motors had instructed the firm to obtain a proper release from the Roses. Since it allegedly failed to do so, a fact issue existed, and the summary judgment for the firm would have to be reversed since limitations did not bar the recovery.
X.
WHO GETS THE FEE?
In Clary v. Schmolke, 927 S.W.2d 883 (Tex. App. - Beaumont, 1998), the Beaumont Court of Appeals entered judgment for the primary attorney in the law firm after an associate took the case and reached a fee sharing agreement with outside counsel.
The lawsuit arose out of a dispute over attorney's fees regarding the settlement of a personal injury case. Mr. Solar, the client, suffered personal injuries while working on an off-shore rig. He originally retained attorney James Clary to represent him. At that time, Mr. Clary was working as an associate for Robert Schmolke's law firm. Mr. Clary referred to the case to Clayton Clark, a Texas attorney, and Mr. Clark and Mr. Clary reached an agreement wherein they would split legal fees on a 50/50 basis. Clary later resigned from Schmolke's law firm. Mr. Solar's personal injury lawsuit was settled generating $160,000.00 in legal fees. Mr. Clark kept $80,000.00 for himself, sent $40,000.00 to Mr. Clary and placed the remaining $40,000.00 into the registry of the court because of the fee dispute between Mr. Clary and Mr. Schmolke. The trial court entered judgment for Schmolke awarding him $40,000.00 and also awarded him attorney's fees and pre-judgment interest.
The Beaumont court upheld the judgment. First, the court noted that Mr. Clary had worked as an associate for 13 years. Mr. Clary had also denied the existence of the case even though he had worked on it while being employed at the Schmolke firm and had charged expenses to the firm for working on the case. The Court also upheld the award of attorney's fees since Mr. Schmolke was required to have a lawyer represent his interest in the case.
XI.
PROPER SETTLEMENT AGREEMENT
In Cherco Properties, Inc. v. Law, Snakard & Gamble, P.C., et al, Opinion No. 2-97-131-CV, the Fort Worth Court of Appeals upheld a summary judgment based upon a settlement agreement.
In that case, Cherco sued two law firms for allegedly commiting legal malpractice for their work on a lawsuit involving several oil and gas wells. When the malpractice case trial began, the Court announced to the trial court and jury that they had reached a settlement. The parties then executed a written agreement which was hand written by Cherco's attorney that read in pertinent part: "1) Calhoun & Stacy, P.C. pays Cherco $15,000.00 and 2) Law Snakard & Gamble pays Cherco $30,000.00 and returns Cherco's dollar sanctions check of $5,560.00." Cherco refused to execute formal settlement documents asserting that the written settlement agreement was unenforceable because it did not include a time of performance. At a hearing on counter-claims that Cherco had breached its settlement agreement, the trial court rendered judgment in accordance with the prior written agreement and assessed attorney's fees, costs and pre-judgment interest against Cherco.
The Fort Worth Court first noted that the settlement agreement was enforceable under Rule 11 since the defendant law firms agreed to pay in exchange for Cherco's release of liability. The Court further noted that because time of performance was not stated in the contract, the law would allow a reasonable time to settle. Under the facts of the case, the appellate court held that only a reasonable time had passed.
To Contact Ed Wright
Telephone: (972) 231-6001 Facsimile: (972) 231-9150 E-mail: wright@edwright.com
* Board Certified in Personal Injury Trial Law and Civil Trial Law, Texas Board of Legal Specialization
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| How We Can Help You
Home Page Resources for Professional Liability Newsletters Voir Dire: Preparation, Communication, and Presentation Selection, Theory, and Strategy- |
|
A Publication of the Texas Association
of Defense Counsel
|
|
Editor:
EDWIN E. WRIGHT, III
Stradley & Wright
Abrams Centre
9330 LBJ Freeway
Suite 1400
Dallas, Texas 75243
Tel: (972) 231-6001
Fax: (972) 231-7004
THE DEATH OF Ranger v. Guin
In Ranger County Mutual Ins. Co. v. Guin, 723 S.W.2d 656 (Tex. 1987), the Supreme Court upheld an actual and punitive damage award against the insurer and stated that an attorney retained by the insurance company to defend an insured is a "sub agent of the insurance company." Id. at 658 through 659. In State Farm v. Traver, 42 Tex. Sup. C. J. 284, the Supreme Court holds that an insurer is not vicariously liable for the malpractice of an independent attorney it selects to defend an insured. This case should be on the "must read" list of all defense counsel.
The case at issue arose out of a motor vehicle collision that occurred in January of 1989. Mary Davidson collided with Calvin Klause. Mary Jordan, a passenger in Klause's car, was severely injured. State Farm Mutual Automobile Insurance Company insured both Davidson and Klause with a standard automobile liability policy carrying a $25,000.00 per person liability limit.
Subsequently, Ms. Jordan sued both drivers in one lawsuit. State Farm retained separate counsel to represent Ms. Davidson and Mr. Klause. A jury found Ms. Davidson 100% liable for the accident, and the trial court awarded Ms. Jordan $375,000.00 plus approximately $100,000.00 in pre-judgment interest against Ms. Davidson based upon a jury verdict. Ms. Davidson died after the trial, and her executor, Ronald Traver, brought suit against State Farm alleging that State Farm was negligent, breached its duty to defend Davidson in the Jordan lawsuit, breached its Stowers duties, breached its duty of good faith and fair dealing, and violated the Deceptive Trade Practices Act and Article 21.21 of the Insurance Code because the attorney which State Farm had retained to represent Ms. Davidson in the Jordan lawsuit commit malpractice by failing to attend several key depositions and by failing to offer a meaning defense at trial. Mr. Traver further alleged that State Farm deliberately orchestrated the malpractice to avoid potential Stowers liability to Mr. Klause during settlement negotiations. In effect, Traver contended that State Farm acted in its own self interest by shifting liability for the accident at issue from Mr. Klause to Ms. Davidson. Interestingly, Mr. Traver had also sued the attorney who represented Ms. Davidson in the underlying case, but that attorney had filed Chapter 7 bankruptcy proceedings as a result of the suit, and the trial court severed the claims against him.
The trial court rendered summary judgment for State Farm on all claims. The Court of Appeals, however, reversed, stating that based upon the "sub agent" language of Ranger Co. Mutual Ins. Co. v. Guin, State Farm was responsible for any injury caused by the malpractice of the attorney that it retained for Ms. Davidson. Thus, the Court of Appeals remanded Mr. Traver's negligence claims and claims under the Deceptive Trade Practice Act and Insurance Code back to the trial court. The Supreme Court rendered judgment for State Farm on all claims based upon vicarious liability but remanded the case to the trial court to allow Mr. Traver to pursue the remaining claims that he pled or might plead against State Farm.
In specifically holding that State Farm was not vicariously liable for the conduct of an independent attorney that it selected to defend its insured, the Supreme Court first examined the status of defense counsel. The Court noted that the defense attorney was an independent contractor since he had the discretion regarding the day to day details of conducting the defense and was not subject to the carrier's control. Further, the court pointed out the defense attorney owed unqualified loyalty to the insured and could withdraw from the defense if he was not permitted to act responsibly.
Next, the Court held that the "sub agent" language in the Ranger case was merely dicta since the Ranger case was a Stowers case only. Therefore, the Supreme Court declared that it had never held that an insurer was vicariously responsible for the conduct of defense counsel.
In a well reasoned concurring and dissenting opinion, Judge Gonzalez pointed out that the majority opinion was based upon "... an idyllic and perhaps naive view of the current status of insurance defense counsel." Justice Gonzalez stated that the insured wanted the best defense possible while the insurance carrier wanted to provide a defense at the lowest possible cost. Identifying great changes in the insurance industry, Justice Gonzalez further specified that these changes may have weakened the protection that Employers Casualty v. Tilley envisioned such that insureds were getting a "Yugo defense" rather than the "Chevrolet" defense for which they have paid. Justice Gonzalez requests the legislature to hold hearings and discovery the scope of these potential problems. Finally, he would have held that Mr. Traver was not precluded from pursuing his deceptive trade practice insurance claims against State Farm and would have allowed him an opportunity to make a case for vicarious liability against State Farm.
II.
DISQUALIFICATION UNDER RULE 1.09
In the consolidated mandamus proceedings of In Re: Epic Holdings, et al and In Re: Kenneth George, Opinion delivered December 31, 1998, the Supreme Court disqualified plaintiff's counsel and held that the district court's refusal to grant the motion for mandamus was a clear abuse of discretion.
The two consolidated actions arose out of a corporate dispute. Specifically, plaintiff Vicki Anderson alleged that Kenneth George, the chief executive officer of Epic Holdings, Inc., and two other directors of that corporation had breached their fiduciary duties by exorbitantly over compensating themselves and other corporate executives during the acquisition of Epic by another company. Mr. George moved to disqualify Ms. Anderson's counsel under Rule 1.09 contending that her suit was substantially related to matters in which her attorney's former law firm, Johnson & Gibbs, had represented Mr. George and Epic. Mr. George further alleged that Anderson's counsel questioned the work that Johnson and Gibbs had done for him and Epic.
The underlying work for Epic had required more than 20 attorneys at Johnson & Gibbs to examine corporate, tax, securities, banking, ERISA, labor, real estate and health law. The firm had billed over $2.2 million for four months work in setting up Epic Health Care and additional $2.3 million for handling other matters for the company over the next three years. Several lawyers in Ms. Anderson's new law firm had worked on these matters although they had left the Johnson & Gibbs law firm approximately four years before Epic was acquired by the new company. Two trial judges had already overruled the Motions to Disqualify. The Supreme Court disagreed. The Court focused upon the fact that two members of Ms. Anderson's legal team had worked for Epic and Defendant George. The Court criticized Ms. Anderson's position wherein her attorneys challenged the existence of attorney-client relationship with Defendant George and Epic. The Court declared that when an attorney performs legal services benefiting a person individually, a third party could not challenge the attorney-client relationship. Otherwise, an avenue for circumventing the presumption of protecting client confidence would be circumvented.
III.
LAW FIRM DISQUALIFIED BECAUSE OF LEGAL ASSISTANT
In Re: American Holding Product Corp., et al, Opinion delivered December 31, 1998, is a mandamus proceeding in which two law firms were disqualified because a legal assistant had worked for firms on both the defense and plaintiff side.
The litigation arose out of the Norplant contraceptive device. Approximately 3,000 plaintiffs sued several companies in five separate cases in Hidalgo, Bexar, Starr and Zavala Counties. The Law Offices of Frank Herrera and Cherry, Davis, Harrison, Montez, Williams, and Baird, P.C. were counsel for approximately 1,000 of the claimants. Defendant Wyeth-Ayerst Laboratories, Inc. sought to disqualify the two firms because a legal assistant, Diana Palacios, had worked for two firms on both sides of the docket. Apparently, Ms. Palacios had interviewed potential fact and expert witnesses, met with Wyeth's counsel, coordinated meetings between Wyeth's counsel and prospective consulting and testifying experts, investigated individual plaintiff claims at the request for Wyeth's counsel, wrote memoranda to Wyeth's counsel on how to best utilize potential witnesses, and examined the jury selection process in Zavala County. She had also prepared 24 memoranda for Wyeth.
Subsequently, she had approached Mr. Frank Herrera, a counsel for the Plaintiffs, about employment. Mr. Herrera had hired her after one of the attorneys for Wyeth told him that Ms. Palacios had never worked for him and did not have access to any of Wyeth's privileged information in the Norplant matters. After reviewing the record in detail, the Supreme Court held that the trial court abused its discretion in failing to disqualify the Herrera firm because of that firm's failure to screen Ms. Palacios from the litigation.
The Supreme Court primarily relied upon Grant v. 13th Court of Appeals, 888 S.W.2d 466, 468 (Tex. 1994) and Phoenix Founders, Inc. v. Marshall, 887 S.W.2d 831, 834-36 (Tex. 1994), to disqualify the Herrera firm. In particular, since Ms. Palacios had worked on the case for both sides, a conclusive presumption arose that confidences and secrets were imparted when she worked for the opposition. This presumption is not rebuttable according to the Supreme Court. Nevertheless, presumption that information was shared with a new employer may be overcome. That presumption may be rebutted only by establishing that sufficient precautions were taken to guard against any disclosure of confidences. These would be to instruct the legal assistant not to work on any prior employment matters and to take reasonable steps to insure that she does not work on such matters. In particular, the Herrera firm could have avoided the entire controversy by taking necessary steps to isolate Ms. Palacios from the Norplant litigation according to the Supreme Court.
IV.
INSURANCE CARRIER MAY SUE ATTORNEYS ON VARIOUS THEORIES
In Safeway Managing General Agency, Inc. v. Clark and Gamble, Opinion No. 04-98-00130-CV; the San Antonio Court of Appeals held that an insurance company could not sue defense counsel that it had retained for breach of fiduciary duty and breach of agency. Nevertheless, the carrier could sue the firm for causes of action not based upon the attorney-client relationship. Specifically, the carrier had standing to assert claims for negligent misrepresentation, fraud, conspiracy, breach of contract and warranty.
The case arose out of a motor vehicle accident. State and County Mutual Fire Insurance Company had insured Mitchell Manning under a standard liability policy with limits of $20,000.00. Ms. Manning was involved in an accident with a Mr. Garcia who obtained a default judgment against Ms. Manning in the amount of $495,212.70. Subsequently, Mr. Garcia sued the insurance company. The insurance company hired the law firm of Clark and Gamble to represent Ms. Manning.
Clark and Gamble negotiated a settlement with Mr. Garcia for $23,647.25. According to the carrier, the firm characterized this settlement as a full release of Mr. Garcia's claims although the carrier released funds without first approving the settlement papers. When the carrier received the executed documents, it discovered that Mr. Garcia had settled only the amount of the Judgment in excess of the policy limits, and the carrier was forced to pay Mr. Garcia an additional $20,000.00.
The carrier then sued Clark and Gamble for negligence, gross negligence, fraud, civil conspiracy, breach of fiduciary duty, breach of agency, breach of warranty, and breach of contract. Clark and Gamble moved for summary judgment based upon the lack of an attorney-client relationship. The trial court granted the motion and Safeway appealed.
The appellate court first noted that no attorney-client relationship existed between an insurance carrier and the attorney it hires to defend one of its insureds. As such, the carrier, Safeway, lacked standing to sue based upon a theory of breach of fiduciary duty. Viewing the remaining causes of action, the Court distinguished claims of negligent misrepresentation, civil conspiracy, fraud, breach of contract, and breach of warranty because these causes of action were not based upon the attorney-client relationship or professional duty. Rather, these claims were based upon an independent duty separate and apart from the attorney-client relationship. Therefore, the court of appeals held that Safeway, the insurer, had standing to bring the claims and causes of action against Clark and Gamble for negligent misrepresentation, fraud, conspiracy, breach of contract, and breach of warranty.
V.
ATTORNEY LIABILITY FOR NOT OBTAINING A PROTECTIVE ORDER
In Roberts v. Healey, Opinion No. 14-96-10306-CV, the 14th Court of Appeals affirmed in part and reversed and remanded in part a summary judgment in a suit for damages from an attorney's failure to obtain a protective order against his client's estranged husband which allegedly resulted in the death of the client's two small children and injuries to her mother.
In July of 1991, Karen Roberts married Daniel Kennedy. The couple had two children. During the marriage, Mr. Kennedy developed a drug habit and became very unstable. In September of 1994 his behavior had become so erratic that his wife asked him to move out of their mobile home. In October of 1994 Ms. Roberts retained Defendant Healey to represent her in the divorce. Thereafter, Mr. Kennedy made harassing calls and pages to his estranged wife, including several threats. This was related to the attorney, and Mr. Kennedy's drug use was also related. Although the attorney filed an application for restraining order along with the client's affidavit, the attorney never made an effort to obtain a signed protective order despite repeated phone calls from the client and her mother.
The client moved into a new apartment because of the behavior. She also called the police and requested that they keep her estranged husband away from her. In November, Mr. Kennedy, the estranged husband, attempted to commit suicide which the client reported to counsel. The estranged husband checked in and out of a psychiatric ward and left a note at his estranged wife's new apartment. The client immediately took the note to her attorney's office and gave it to his secretary. Subsequently, the estranged husband, Mr. Kennedy, confronted his ex-wife while he was high on cocaine outside her apartment as she was leaving for work. He forced her to accompany him into the apartment where he broke in, shot and killed his two children, shot and wounded his mother-in-law, and then committed suicide. The mother-in-law and client then filed suit against the attorney and his firm contending that his failure to obtain a protective order constituted negligence, breach of warranty or contract, and breach of statutory duties under the Deceptive Trade Practice Act, all of which caused the death of the two children, the wounding of the mother-in-law, and resulting damages.
The attorney and his firm obtained a summary judgment in the trial court by arguing that his failure to obtain a protective order against the estranged husband was not the proximate or producing cause of the injuries and damages at issue as a matter of law.
The Court of Appeals first held that the attorney's failure to obtain a protective order was too attenuated from the criminal conduct to constitute a legal cause of injury to the plaintiffs. Examining the evidence, the court stated that although the attorney was aware of numerous threats, his failure to obtain a protective order did no more than create the condition that enabled the estranged husband to kill the children and wound the mother-in-law. In fact, the defendant pointed out that his client had lied to Kennedy on the day of the attack telling him that she had already obtained a protective order to prevent his violent actions; yet, he killed his children and wounded his mother-in-law despite receiving this information. Therefore, the appellate court upheld summary judgment on the negligence and gross negligence as well as deceptive trade practices claims.
On the other hand, the court reversed the breach of contract and warranty against the attorney and his firm because the attorney and his firm had failed to include the grounds for granting summary judgment on these causes of action in his motion for summary judgment. Finally, the court upheld the summary judgment against the mother-in-law on the negligence and gross negligence claims since she was not a client but upheld them but remanded summary judgment claims for the mother-in-law for her deceptive trade practice and bystander claims since those claims were not based upon the attorney-client relationship and did not involve the same causation issues.
VI.
REMEDY FOR WRONGFUL CONTINGENCY FEES
In Lopez v. Muoz, Hockema & Reed, L.L.P., 980 S.W.2d 738 (Tex. App. - San Antonio, 1998), the clients sued their former law firm and individual attorneys therein for breach of contract and breach of fiduciary duty for wrongfully charging higher contingency fees than was due. The San Antonio Court of Appeals reversed a summary judgment for the firm holding that the firm's contingency fee surcharge was a breach of contract; that the surcharge constituted breach of fiduciary duties; that the discovery rule applied to toll the statute of limitations for breach of fiduciary action; and that return of the overcharge only, not the entire fee, was appropriate.
In July of 1989 Mr. Leonel Lopez, Sr. and Jr. signed an attorney employment fee agreement with the Law Firm of Munoz, Hockema & Reed. Under this agreement, the firm agreed to represent the Lopez family in a wrongful death case against Westinghouse Electric Corporation. The contract provided for a 40% contingency fee agreement which escalated to 45% in the event the case was appealed.
The lawyers successfully tried the case obtaining a jury verdict for over $25 million. Thereafter, the case was settled for $15 million. In a meeting with the firm and a tax attorney in October of 1991, the firm told Mr. Lopez, Jr. that the attorney's fees would be 45% and that the family's share would be $8,250,000.00. A settlement agreement was signed on October 30, 1991.
On April 11, 1995 the Lopez family filed a lawsuit against the firm and its individual attorneys to recover $750,000.00 in overpayment of the attorney's fees. In particular, the former clients contended that the lawyers should have charged only 40% not 45%. Both sides moved for summary judgment. The trial court granted the lawyers' summary judgment, and the clients appealed.
The firm and its lawyers argued that they were entitled to a 45% fee because the settlement agreement was not signed until after an appeal was perfected. The clients argued that there was no appeal to a "higher court," and the Court of Appeals agreed since an appeal to a higher court meant more than simply filing a cash bond which Defendant in the underlying case had done, not the lawyers for the former clients. Otherwise, the lawyers would have obtained an additional $750,000.00 for doing nothing.
The firm and its lawyers next argued that the breach of contract claim was barred by the doctrine of acceptance of benefits. The Court pointed out that the Lopez family, the former clients, did not act with full knowledge of their rights. In particular, they did not understand the meaning of the phrase, "appealed to a higher court." Hence, the doctrine of acceptance of benefits would not apply. Finally, the Court of Appeals rejected the remaining defenses and held that the firm and its lawyers should return $750,000.00 to the family since the discovery rule tolled the statute of limitations.
VII.
LIABILITY OF ATTORNEYS TO CLASS ACTION PLAINTIFFS
In Doctor Richard Gillespie v. James Franklin Scherr, et al, Opinion No. 14-97-00479-CV, the 14th Court of Appeals affirmed a summary judgment granted in favor of two lawyers and a law firm which had represented chiropractors in a class action suit.
The appellants were chiropractors practicing in Texas. The defendants were two attorneys and a law firm who had filed a class action case in El paso on behalf of all chiropractors in Texas against insurance carriers who refused or delayed payments of chiropractic bills. The class was never certified, and settlements were entered into and approved for some settling plaintiffs named in the case between the filing and dismissal of the class action. The plaintiffs who were left out of the settlements sued to two attorneys and their law firms in Harris County for fraud and breach of fiduciary duty. Other chiropractors intervened in the case although they were not named plaintiffs in the original case. The claims of the named plaintiffs were tried and settled after the intervening plaintiffs' causes of action were severed. The two lawyers and their firms filed Motions for Summary Judgment arguing that no attorney-client relationship existed between them and the intervening plaintiffs. Both the trial court and the 14th Court agreed.
After examining the record, the 14th Court pointed out the only case it had found held that lawyers for even named plaintiffs in an uncertified class owed no duty to unnamed class members. Since Texas follows the "bright line privity rule," the Court further declared that the defendant lawyers and law firms could not be held liable to the intervenors since the lawyers had never actually represented them. Finally, the court pointed out that the intervenors' pleadings were defective as far as alleging an attorney-client relationship. Therefore, the Court upheld the Motions for Summary Judgment.
VIII.
LIMITATIONS
Two recent cases show application of limitations in legal malpractice cases.
In Dunbar v. Fulbright & Jaworski, the First Court of Appeals in Opinion No. 01-96-00958-CV; reversed a summary judgment based upon the statute of limitations. In that case, a cellular and molecular biologist sued her former employer, the Fulbright and Jaworski law firm and others based upon a series of 1987 transactions. On October 7, 1987 the plaintiff contended that she signed an agreement assigning all rights in an invention to the Baylor College of Medicine because a Fulbright and Jaworski attorney representing Baylor College of Medicine told her it was a requirement of the terms of her employment with the Baylor College of Medicine to do so. In May of 1994, more than six years after the agreements were signed, the Plaintiff sued for breach of fiduciary duty, fraud, legal malpractice, deceptive trade practice violations, and conspiracy. The trial court granted the motions for summary judgment filed on behalf of all defendants asserting that plaintiffs claims were time barred because the plaintiff had acknowledge knowledge of facts giving rise to her cause of action when she signed the agreements.
The Appellate Court first noted that the summary judgment motions did not attempt to disprove any of the plaintiff's causes of action. Rather, the motions were based solely on the contention that the plaintiff's claims were time barred because the plaintiff knew the facts giving rise to her causes of action when she executed the agreements in 1987. Under the discovery rule, a plaintiff tolls limitations until that time when the claimant knows or reasonably should have known that the plaintiff was legally injured by an alleged act or wrong, however slight. Reviewing the record of summary judgment evidence, the Court pointed out that the plaintiff did not understand the difference between an assignment and licensing agreement when she signed the agreements when the summary judgment was viewed in a light most favorable to her. Further, the summary judgment movants had not negated an attorney-client relationship or fraudulent misrepresentation. Therefore, the Court of Appeals reversed and remanded the case for trial.
In Burnap v. Linnartz, Opinion No. 04-97-00959-CV; the San Antonio Court of Appeals upheld a summary judgment based upon a limitations defense.
In the case, Willard Burnham sought to hold lawyer Linnartz liable because Mr. Linnartz was allegedly the originating a billing attorney for client files relating to his firm's representation of a partnership in which Mr. Burnham was a partner.
Mr. Linnartz argued that the discovery rule did not apply because the undisputed facts established that in more than one instance, the plaintiff had been put on notice of the cause of action against Mr. Linnartz. The Court of Appeals agreed after examining the record. First, the plaintiff had signed release and indemnification on July 31, 1986. Further, he had signed another release in January of 1988. Finally, in July of 1989, the Plaintiff had received a certified letter. All of these placed the plaintiff on notice of a legal injury. Since the plaintiff did not sue Mr. Linnartz and his firm until 1991, his actions were barred by the two-year statute of limitations.
IX.
INEFFECTIVE WAIVER
In General Motors Acceptance Corp. v. Crenshaw, Dupree & Mylam, L.L.P., Opinion No. 08-96-00411-CV, the El Paso Court of Appeals reversed a summary judgment in favor of the Crenshaw, Dupree & Mylam law firm.
The case arose out of a fraud and legal malpractice claim by General Motors against the firm. Originally, General Motors and the firm were sued by a group of individuals for numerous common law tort causes of action and violations of the D.T.P.A. On November 10, 1995, these individuals and companies entered into a settlement agreement with General Motors. Subsequently, several of the same individuals settled their claims against the firm.
General Motors then filed suit against the firm seeking actual damages and indemnification and/or contribution. Ultimately, the trial court granted summary judgments ruling that the parties take nothing against each other, and General Motors appealed.
In the latter part of 1989 General Motors approached the Rose family about acquiring a Hundai dealership in Lubbock, Texas which was owned by Eddie Horn. In the transaction, Crenshaw, Dupree & Mylam represented not only the Roses but also General Motors. The firm obtained a waiver of conflict interest signed by the Roses. Nevertheless, the Roses contended that the waiver was ineffective. In reversing the summary judgment action that the firm had received, the court pointed out that the firm had represented both parties. General Motors had instructed the firm to obtain a proper release from the Roses. Since it allegedly failed to do so, a fact issue existed, and the summary judgment for the firm would have to be reversed since limitations did not bar the recovery.
X.
WHO GETS THE FEE?
In Clary v. Schmolke, 927 S.W.2d 883 (Tex. App. - Beaumont, 1998), the Beaumont Court of Appeals entered judgment for the primary attorney in the law firm after an associate took the case and reached a fee sharing agreement with outside counsel.
The lawsuit arose out of a dispute over attorney's fees regarding the settlement of a personal injury case. Mr. Solar, the client, suffered personal injuries while working on an off-shore rig. He originally retained attorney James Clary to represent him. At that time, Mr. Clary was working as an associate for Robert Schmolke's law firm. Mr. Clary referred to the case to Clayton Clark, a Texas attorney, and Mr. Clark and Mr. Clary reached an agreement wherein they would split legal fees on a 50/50 basis. Clary later resigned from Schmolke's law firm. Mr. Solar's personal injury lawsuit was settled generating $160,000.00 in legal fees. Mr. Clark kept $80,000.00 for himself, sent $40,000.00 to Mr. Clary and placed the remaining $40,000.00 into the registry of the court because of the fee dispute between Mr. Clary and Mr. Schmolke. The trial court entered judgment for Schmolke awarding him $40,000.00 and also awarded him attorney's fees and pre-judgment interest.
The Beaumont court upheld the judgment. First, the court noted that Mr. Clary had worked as an associate for 13 years. Mr. Clary had also denied the existence of the case even though he had worked on it while being employed at the Schmolke firm and had charged expenses to the firm for working on the case. The Court also upheld the award of attorney's fees since Mr. Schmolke was required to have a lawyer represent his interest in the case.
XI.
PROPER SETTLEMENT AGREEMENT
In Cherco Properties, Inc. v. Law, Snakard & Gamble, P.C., et al, Opinion No. 2-97-131-CV, the Fort Worth Court of Appeals upheld a summary judgment based upon a settlement agreement.
In that case, Cherco sued two law firms for allegedly commiting legal malpractice for their work on a lawsuit involving several oil and gas wells. When the malpractice case trial began, the Court announced to the trial court and jury that they had reached a settlement. The parties then executed a written agreement which was hand written by Cherco's attorney that read in pertinent part: "1) Calhoun & Stacy, P.C. pays Cherco $15,000.00 and 2) Law Snakard & Gamble pays Cherco $30,000.00 and returns Cherco's dollar sanctions check of $5,560.00." Cherco refused to execute formal settlement documents asserting that the written settlement agreement was unenforceable because it did not include a time of performance. At a hearing on counter-claims that Cherco had breached its settlement agreement, the trial court rendered judgment in accordance with the prior written agreement and assessed attorney's fees, costs and pre-judgment interest against Cherco.
The Fort Worth Court first noted that the settlement agreement was enforceable under Rule 11 since the defendant law firms agreed to pay in exchange for Cherco's release of liability. The Court further noted that because time of performance was not stated in the contract, the law would allow a reasonable time to settle. Under the facts of the case, the appellate court held that only a reasonable time had passed.
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* Board Certified in Personal Injury Trial Law and Civil Trial Law, Texas Board of Legal Specialization
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