Monday, October 24, 2011

How Did the Supreme Court Change Texas Nonsuit Law in Epps v. Fowler?

Historically, most nonsuits have been deemed to be without prejudice.   Greenberg v. Brookshire, 640 SW2d 870, 872 (Tex. 1982).  In recent years, parties have filed documents called "nonsuits with prejudice," and these will be treated as res judicata against the filing of the claim in question, consistent with the title of the document.   Galvan v. America's Favorite Chicken Co., 934 SW2d 409 (Tex. App.--San Antonio 1996, writ den.).

Nonsuits cannot deprive the defendant of the right to adjudicate a pending counterclaim.    The Travelers Ins. Co. v. Joachim, 315 SW3d 860 (Tex. 2010).     Absent that situation, a plaintiff nonsuiting without prejudice has been assumed to have no further exposure.

In Epps v. Fowler (No. 10-0283, Tex. Sup. Ct., Aug. 26, 2011), the plaintiff had sued on a contract which expressly provided that attorney fees would be awarded to the prevailing party.   The plaintiff filed a nonsuit without prejudice, and the principal issue in the case was whether the defendant could be deemed to be the prevailing party for purposes of an award of attorney fees.

The Supreme Court observed that had the nonsuit been with prejudice, there would be no question that the defendant would be the prevailing party.    In the case of a nonsuit without prejudice, the Court stated that, in view of the contract clause in question, the defendant would be the prevailing party if the trial court found, in a hearing upon a motion by the defendant, that the nonsuit was "taken to avoid an adverse judgment."     This determination should be made primarily based on the record already before the court.   And, apparently, a defendant could secure such a finding and win such an award even it had not counterclaimed for attorneys' fees under the contract.

Thus, in cases involving contracts with clauses that award attorney fees to the prevailing party, this case adds another potential danger to the nonsuiting plaintiff.   Plaintiffs should be advised of this danger before the case is filed.

Monday, October 10, 2011

Is it Always a Mistake to Sue a Former Client Over an Unpaid Fee?

No.    The danger that is seen in this situation is, of course, the possibility of a counterclaim for legal malpractice.     But sometimes that danger is very slight.

I have experience on both sides of legal malpractice cases.     When I have been asked by firms to consider suing a former client for an unpaid fee, the first thing that must be done is to evaluate the possible merit of a counterclaim for legal malpractice.     Sometimes it is clear that the potential counterclaim would be without  merit, and in those cases, if the firm's former client is solvent, it makes sense to go forward.    In one I had recently, the former client had been threatening a legal malpractice action before I even got involved in response to correspondence asking for payment of the arrearage.    I determined that the potential legal malpractice case was most probably lacking in merit.    We went forward with the suit for fees.    Once the former client had counsel, that counsel also starting make vague threats about a counterclaim.    I called his bluff and explained that it would be frivolous, and he would be creating potential exposure under the sanctions rules and Chapters 9 and 10 of the Texas Civil Practice & Remedies Code for his client, and maybe even for himself.

It turned out that the malpractice threat was just a bluff being used for leverage, and the case settled on very favorable terms for my law firm client.

So, I would advise not to automatically walk away from those unpaid fees.

Monday, September 26, 2011

How Do You Seek Review of an Adverse Ruling on a Motion to Compel Arbitration?

     The answer to this question is more complex than it should be.

     If your arbitration clause is governed by the Texas Arbitration Act, then an interlocutory appeal is allowed where there has been an order denying a motion to arbitrate or granting an application to stay an arbitration.    (CPRC 171.098)   However, under that act, orders compelling arbitration are generally not appealable by way of interlocutory appeal.    If the trial court actually dismisses the case after compelling arbitration, that action is appealable, as it is a final judgment.    Childers v. Advanced Foundation Repair, L.P., 193 S.W.3d 897 (2006).    If the trial court merely stays the case, there is no basis for an appeal at that time.    However, some courts have said that mandamus is available in that situation.     In re Godt, 28 S.W. 3d 732 (Tex. App.--Corpus Christi 2000, no pet.)

     In cases governed by the Federal Arbitration Act (9 U.S.C. 2, et. seq.), interlocutory appeal is not available, but rulings denying arbitration are reviewable by way of mandamus.    In Re D. Wilson Constr. Co., 196 S.W. 3d 774 (Te. 2006).   However, where a trial court has granted a motion to arbitrate, and has not dismissed the case (but rather stayed it), the weight of authority is that no mandamus is available and that appellate review must await the entry of a final judgment.    In re Gulf Exploration LLC, 289 S.W. 3d 836 (Tex. 2009).

     Thus, given the policy favoring arbitration that has prevailed in recent decades, these holdings reflect a preference for quick appellate review of orders denying arbitration, but with regard to orders compelling arbitration, "not so much."

    How do you know whether your case is governed by the Texas or the federal arbitration act, or perhaps by both?     That will be the subject of another blog entry in the near future.

Monday, August 29, 2011

Can a Legal Malpractice Suit Also Be a DTPA Suit?

Yes.

This is notwithstanding the fact that since 1995, the DTPA has had a provision excluding applicability to claims "for damages based on the rendering of a professional service, the essence of which is the providing of advice, judgment, or opinion, or similar professional skill."    Section 17.49(c).    That provision does make the DTPA inapplicable to a broad variety of typical legal malpractices cases, and it seems that it has led some in the bench and bar to conclude that the DTPA is wholly inapplicable to legal malpractice cases. However, that is not the case.

For one thing, other provisions of the DTPA provide for liability in connection with rendering services if "fraud-type" conduct is committed--that is, express misrepresentation of a material fact or failure to disclose material information, where such actions or omissions cannot be characterized as advice, judgment or opinion.    See, e.g.,  Gibson v. Ellis, 58 S.W. 3d 818 (Tex. App.--Dallas, 2001, no pet.).    This would likely include, for instance, failure to advise the client that the lawyer is inexperienced in the sort of matter that the client brought to him or where the lawyer affirmatively misrepresented his experience.

Additionally, a legal malpractice case might involve conduct that could be characterized as constituting an unconscionable act or course of action that could not be characterized as advice, judgment, or opinion.    Cases involving unconscionable actions or courses of actions often involve a party of greater sophistication or power taking advantage of someone with less of those attributes.    Of course, that may often be the case in many attorney-client relationships because of the fiduciary nature of the relationship.

Consequently, there exists a fairly broad array of legal malpractice cases that may also be legitimately characterized as DTPA cases.


Monday, August 8, 2011

In Legal Malpractice Arising From Botched Litigation, When Does the Statute of Limitations Start to Run?

The statute of limitations starts to run after the underlying litigation, including all appeals, is concluded.

This holding is somewhat counter-intuitive; with most torts, the statute of limitations starts to run when the tortious conduct is committed.   In the case of legal malpractice arising from negligently handled litigation, the tortious conduct itself does not immediately trigger the running of the statute of limitations.

That is because of two principal factors:    First, until the litigation ends, the nature of the damages, if any, flowing from the tortious conduct is not known.  Secondly, if the statute were deemed to begin running at the time of the commission of the negligent conduct, it would force the legal malpractice plaintiff to take potentially conflicting positions in the underlying case--which that party presumably would still be trying to win--and the legal malpractice case, where the plaintiff would be forced to argue that his underlying case had been lost or damaged by the negligence.    Indeed, the positions that such a legal malpractice plaintiff would be forced to take in the malpractice case could be used against him in the case giving rise to the malpractice claim.

In order to avoid that unfairness--and also in order to avoid forcing litigation to occur that subsequent events might prove to be unnecessary--the courts have settled on the rule that the statute of limitations in such cases does not begin to run until the underlying litigation, including all appeals, are over.    See, Apex Towing Co. v. Tolin, 41 S.W.3d 118 (Tex. 2001); Sanchez v. Hastings, 898 S.W. 2d 287 (Tex. 1995); and Hughes v. Mahaney & Higgins, 821 S.W. 2d 154, 157 (Tex. 1991).

It might also be noted that this is one of the few areas of Texas law, over the last 20 years, where there has been a more pro-plaintiff interpretation of limitations law.

Monday, July 18, 2011

What Are the Grounds and Procedures For Recusing or Disqualifying a State Court Judge?

First, disqualification and recusal are very different.    Disqualification is mandatory and even jurisdictional, and it can be raised at any stage of the litigation.   It is non-waivable.    If the judge made rulings in a case where he or she was subject to disqualification, the orders are void.

The grounds for disqualification come from the Texas Constitution (Art. V, Sec. 11), but they are restated in Tex. R. Civ. P. 18b.    The judge is disqualified if he or a member of his prior law firm served as counsel in the case; if he has an economic interest in the case, directly or as a fiduciary; or if any of the parties are related to him by the third degree of relationship.    This means that if any party, either by blood or adoption, has a relationship to the judge of father, mother, child, grandchild, or great-grandchild, aunt or uncle who is a sibling of one of the judge's parents, or a nephew or niece who is a child of one of the judge's siblings, then the judge is disqualified.     Usually if a judge is disqualified, they get out of the case on their own without the necessity of motion.

Recusal is more subject to discretion and is waivable.    The grounds can sometimes be the subject of differing opinions.    They include where a judge's impartiality might reasonably be questioned; if he or she has a personal bias or prejudice about the subject matter of the case or knowledge of evidence material to the case; he or a lawyer with whom he practiced has been a material witness to it; his spouse or minor child has a potential financial interest in the case that is material; or if he or his spouse or anyone within the third degree of relationship is a lawyer in the case.

The recusal rule is phrased in mandatory terms; so, some of the grounds for recusal can be effectively mandatory if there is no doubt about their applicability.    For instance, if the judge's daughter is a lawyer in the case, he must recuse.    Some of the other grounds, though, are phrased in a manner where opinions could differ.

It has been held that receipt of campaign contributions is not a ground for recusal.

The procedure for recusal is set out in Te. R. Civ P. 18a.     The motion must be filed at least ten days before the date set for the hearing.    Once it is filed, the judge subject to the motion may not take any further action in the case until the recusal motion is resolved.     If the judge declines to recuse voluntarily, he must send the motion materials to the presiding judge of the administrative judicial district, who will hear the motion or appoint another judge to hear it.    The judge who is the subject of the motion cannot decide the motion.    If the motion is denied, and it is found that the motion was brought solely for purpose of delay and without sufficient cause, the judge hearing the motion may impose any sanction authorized by Tex. R. Civ. P. 215(2)(b).

If you would like to read more about this subject, it is covered in the first volume of my treatise that I co-author with former Justice Scott Brister, Texas Pretrial Practice (James Publ. 2011), Sections 16.162-16.260; that treatise is available in most Texas law libraries or could be bought at the James Publishing website.

Monday, July 4, 2011

What is the Defense of "Fracturing a Legal Malpractice Claim"?

Numerous Texas cases have held that the courts will not allow a plaintiff to "fracture" a legal malpractice claim into other causes of action--such as breach of contract or breach of fiduciary duty--where the allegations are solely that an attorney failed to use the degree of care, skill and diligence that attorneys of ordinary skill and knowledge commonly exercise.     See, for instance, Goffney v. Robson, 56 S.W. 3d 186, at 190-194 (Tex. App.--Houston [14th Dist.] 2001, no pet) and the cases there cited.

This "defense" is not as potent as commonly claimed in the legal malpractice defense community.     The statement in the previous paragraph is not remarkable because the sole cause of action actually alleged is what is clearly defined as legal malpractice.      Breach of fiduciary duty, for instance, requires allegations that the attorney used his position of trust to benefit himself to the detriment of the client.     In the statement of law made above, that allegation is not made.

That does not mean, however, that the same case may not legitimately involve claims of legal malpractice and other claims against the lawyer, such as breach of fiduciary duty, or perhaps fraud or DTPA.    Rather, it means that the allegations and evidence have to prove those other causes of action, as well as legal malpractice.     It is entirely possible, for instance, that a case could involve lawyer negligence--legal malpractice--and also lawyer self-dealing to the client's detriment--breach of fiduciary duty.

Nonetheless, there have been a number of cases where nothing aside from negligence was alleged, and yet the plaintiff attempted to tack on other causes of action.    That is the "fracturing" which is forbidden. Why would a plaintiff do that?     It usually involves a statute of limitations issue.    The statute of limitations for legal malpractice is two years; but for breach of fiduciary duty or breach of contract, it is four years.     These cases usually have a limitations issue with regard to the malpractice claim, and the plaintiff is trying to wiggle out of it by using labels of claims with four year statutes.

Nonetheless, in some circles, a misunderstanding has arisen that if a case is one for legal malpractice, it is not possible for any other cause of action to be pleaded or proven in that case.     That is clearly not the law.    Rather, a case with the right facts for multiple causes of action can validly go to judgment on the multiple claims.

Sunday, June 26, 2011

What is the Difference Between Tortious Interference with a Contract and with a Business Relationship?

In Texas, a lot.   On first blush, it would appear that the tort of interference with a business relationship (sometimes also called a "prospective business relationship") would be the more potent tort because it would cover more situations.    Where a contract exists, a business relationship must surely exist, while some business relationships may not involve existing contracts.    However, the tort of interference with a contract is actually the more potent of the two because of the nature of the conduct required to make each tort actionable.

In Walmart Stores, Inc. v. Sturges, 52 S.W. 3d 711 (Tex. 2001), the supreme court held that, in order to be actionable as interference of a business relationship, the interfering conduct itself had to be tortious or otherwise unlawful.    Otherwise lawful conduct cannot form the basis for interference with a business or prospective business relationship.    This holding makes that tort much less potent because, if independently actionable conduct were committed by the defendant, one already has a basis for liability, and the interference claim would be nothing more than icing on the cake in most circumstances.    One circumstance where it might be more than that would be if the damages flowing from the interference were greater than those flowing from whatever tortious conduct was involved in committing the interference.

On the other hand, the conduct that can constitute tortious interference with a contract can be completely legal.    The Court gave an example where A was under contract to perform a particular service to B; and C, knowing this, simply induced A to breach his contract with B by offering him a better deal.    Offering A a better deal is not of itself illegal or actionable.

Thus, where there is a contract, this is a tort which is much easier to prove.     If a contract exists and the defendant knows it, any induced breach causing damages will be actionable.    cf.,  ACS, Invs. Inc., v. McLaughlin, 943 S.W. 2d 426, 430 (Tex. 1997).    And this will be true even if the inducement was otherwise legal.    Wal-Mart Stores, supra, at 716, 717.

Monday, June 13, 2011

Is the Primary Purpose of Federal Rule 11 Fee Shifting or Deterrence?

Deterrence.    This was made clear in the 1993 amendments to Rule 11 and the Advisory Committee Notes accompanying it.    The rule itself in part (c) (4) states that the sanction must only be what is necessary to achieve deterrence; moreover, it specifically states that if a violator is required to pay "part or all" of the attorney fees directly attributable to the violation, such a sanction may only be made only if warranted to achieve effective deterrence.     Thus, the rule envisions that fee shifting will be rare.    The Advisory Committee Notes go on to state, in Paragraph 13, that the even when some amount of fee shifting is ordered, it is appropriate for the court to exercise discretion, taking into account, among other things, whether the person sanctioned has "modest financial resources."

Also, as I mentioned in my earlier post about the Texas Legislature's "loser pays" bill, sanctions for filing frivolous litigation are also subject to a Constitutional threshold.    In Professional Real Estate Investors, Inc. v. Columbia Pictures, Inc., 508 U.S. 49 (1993), as interpreted by subsequent cases such as iLOR v. Google, Inc., 631 F. 3d 1372 (Fed. Cir. 2011), the Court forbids punishing counsel for filing allegedly frivolous cases unless the case is "objectively baseless."    "Objective baselessness" is then defined as applying only to a case where "no reasonable litigant could realistically expect to succeed on the merits."    Thus, if the case is less "frivolous" than that standard, imposition of any sanctions would violate the First Amendment right to petition the government for redress of grievances.

The real heyday for fee shifting and other very punitive sanctions under Rule 11 was 1983 to 1993.    The Fifth Circuit, for instance, has not affirmed a fee shifting sanction under Rule 11 subsequent to the 1993 rule amendment.

Monday, June 6, 2011

Do Lawyers Make Good Witnesses? How About Good Defendants?

"Yes" to the first question; "no" to the second.

First, there seems to be some level of conventional wisdom that lawyers do not make good witnesses.    I do not concur with that.  As third party witnesses, I regard lawyers as better than average witnesses.     I understand that the public sometimes has negative views toward lawyers.    But if a lawyer takes the stand as a third party witness, the  general tendency of jurors to believe a witness unless circumstances strongly militate to the contrary kicks in.    Moreover, lawyers generally are better skilled at expressing themselves than the average person.    They are also less likely to fall into traps.    As all trial lawyers know, there are many types of evidence that are, in effect, double-edged swords--it helps in one way, hurts in another.    Lay witnesses are more likely not to see the trouble coming from the negative side.

Professor Kingsfield, in the movie "The Paper Chase," famously said that beginning law students started with "a head full of mush" but ended their three years "thinking like a lawyer."    Of course, not all lay persons have heads full of mush.    But there is enough of an element of truth to this to say that a lawyer/witness is more likely to be able to finesse the "negative" side of the double-edged swords.   They have more presence of mind about that sort of thing.

The second question asks about lawyers as defendants, but the same considerations apply to lawyers as plaintiffs.    Here, the public's relative antipathy toward the legal profession has more relevance.    I would not describe it as white-hot anger toward lawyers.    Rather, jurors simply tend to be much less forgiving of lawyers for mistakes or misconduct than they are for non-lawyers.    It seems to be an attitude of "ok, you're so smart--you should have known better."    Probably for this reason, I have found that lawyers defending legal malpractice cases tend to be less willing than the average to allow a case to go all the way to trial.    This is not to say that lawyers cannot win as parties; they can, but they have a somewhat heavier burden.

Sunday, May 22, 2011

Is the Texas Legislature's "Loser Pays" Bill Unconstitutional?

Yes--at least regarding some parts of it.

One provision allows a suit to be dismissed early in the litigation process--perhaps, depending on the implementing rules, pursuant to a motion similar to the FRCP's 12 (b) (6)--and, if such a case is so dismissed, gives the trial court discretion to require the losing plaintiff to pay the attorney fees of the winning defendant.

Another provision states that the loser of a breach of contract case--whether it be the plaintiff or the defendant--will be required to pay the attorney fees of the winner.

The problem with those two provisions is this:    the U. S. Supreme Court has held that the filing of a lawsuit is protected, at least to some degree, under the First Amendment right to petition the government for redress.      Professional Real Estate Investors, Inc. v. Columbia Pictures, Inc.,  508 U.S. 49 (1993).   In that case, the Supreme Court was dealing with the "sham" exception to the general rule of immunity with regard to the filing of antitrust cases.     Nonetheless, it is clear that its reasoning would apply to the filing of any lawsuit.     That was recognized recently by the Federal Circuit in Ilor, LLC v. Google, Inc., 631 F.3d 1372 (Fed. Cir. 2011).    In Ilor, the Federal Circuit was dealing with the patent statute that allows fee shifting against a losing patent plaintiff in "exceptional cases."

These two cases effectively hold that a plaintiff, under the First Amendment, cannot be punished for filing a lawsuit--by fee shifting or the imposition of other liability--unless the lawsuit is "objectively baseless."    "Objective baselessness" was defined to mean that "no reasonable litigant could realistically expect to succeed on the merits."

The requirement that the plaintiff's case be objectively baseless--in order for the plaintiff to be ordered to pay the attorney fees of the defendant--creates a Constitutional threshold that applies to all statutes and rules that allow for the possibility of fee shifting against the plaintiff, such as FRCP 11, TRCP 13, and Chapters Nine and Ten of the Texas Civil Practice and Remedies Code.

And, of course, it would also apply to the Texas Legislature's "loser pays" bill, if it were to become law.    Moreover, in the Professional Real Estate case, the Court spoke through a majority of seven, including all the conservatives.

I believe that Texas--with the rules and statutes that it currently has in place to discourage frivolous litigation--has already reached the Constitutional limit of what can be done in this area.    Attempts to go further will be problematic.