On Feb. 20, a unanimous U.S. Supreme Court ruled in Gunn v. Minton that legal-malpractice cases are best left to state courts rather than federal courts. But what happens when a defendant firm indicates that it would rather stay in federal court? Baker Botts is about to find out.
In 2010, a former client sued Baker Botts in U.S. District Court for the Northern District in Dallas, alleging negligence and breach of fiduciary duty. Axcess International Inc. alleged in its complaint that Baker Botts failed to inform it that the firm had a conflict: The firm was pursuing a patent for a competitor at the same time it represented Axcess in a patent application for a product in the same industry for the same invention.
Baker Botts denied the allegations in a response to the complaint in Axcess International Inc. v. Baker Botts.
On Feb. 25, Senior U.S. District Judge Royal Furgeson asked both parties to submit briefs on his court’s jurisdiction to hear Axcess in light of the high court’s decision in Gunn.
Interestingly, Furgeson became the first federal judge in the nation to allow a plaintiff to file a legal-malpractice case against a firm in federal court. It happened in 2006 in Air Measurement Technologies Inc., et al. v. Akin Gump Strauss Hauer & Feld, a decision upheld the following year by the U.S. Court of Appeals for the Federal Circuit.
On Feb. 28, Axcess filed an identical suit against Baker Botts in Dallas County Court-at-Law No. 5.
In its March 11 response to Furgeson’s request, Baker Botts stated that the claims against it differed from those in Gunn. That case involved a former client’s legal-malpractice claims against several patent litigators after the client’s patent was found to be invalid.
In Gunn, Chief Justice John Roberts Jr. carefully laid out the analysis of when a legal-malpractice case can "arise under" federal law. There are two ways, he wrote, the first being when federal law creates the cause of action asserted. Vernon Minton’s original patent infringement suit, for example, arose under federal law because a federal statute specifically authorized it, he wrote.
But Roberts ultimately concluded that Gunn did not belong in federal court, because, no matter how the state courts resolved the allegations against his patent litigators, "it will not change the real-world result of the prior federal patent litigation," he wrote. "Minton’s patent will remain invalid."
The Supreme Court, he added, also has identified a "special and small category" of cases in which federal courts have "arising under" jurisdiction even when a claim has its origins in state rather than federal law, as Minton’s legal-malpractice claim did.
"Unlike the plaintiff in Gunn, Axcess has alleged direct violations of federal patent law, claiming (wrongly) that Baker Botts violated federal regulations pertaining to patent practice," according to Baker Botts’ brief regarding federal jurisdiction. "Further, Axcess seeks to establish an unprecedented principle of legal ethics—a ‘subject matter conflict’ rule—that would significantly affect the rights and obligations of all federal patent law practitioners."
Baker Botts’ brief also states that Furgeson "may not need to reach this issue because Axcess has apparently decided to abandon its claims here" because it filed an identical case against the firm in a Dallas County Court-at-Law on Feb. 28.
The Baker Botts brief states that, while the jurisdictional question is not clear, "what is clear is that the distinct conflict issues raised by Axcess potentially affect thousands of patent lawyers and may be ‘vitally important’ to more than the parties to this lawsuit. Given the uniquely federal nature of the patent practice, this might be just the type of rare patent malpractice case in which subject matter jurisdiction exists."
Axcess believes the case now belongs in state court and would like to get there as soon as possible, according to its March 13 brief on jurisdiction.
"Axcess would like to make any delay in reaching a resolution by trial to be as minimal as possible. The only thing that would be worse than the delay Axcess will undoubtedly encounter is the possibility of trying the case to a resolution in this Court, only to have the judgment rendered meaningless by a subsequent finding of no jurisdiction," Axcess’ brief states.
On March 19, Furgeson issued an electronic order stating that "it appears to the Court that plaintiff Axcess wishes to dismiss this federal action. If that is true, then IT IS ORDERED that the parties submit dismissal papers, an agreed motion to dismiss, an agreed final judgment, or some other procedural mechanism for the Court to close this case."
That same day, Furgeson issued another electronic order allowing Axcess to brief the court "on the effect of the concurrent state court case as to this Court’s jurisdiction."
Need for ruling
In its March 22 response to that order, Axcess stated that, while it did not believe Furgeson has jurisdiction to hear the case, he "cannot simply dismiss the case without a ruling on subject matter jurisdiction from this Court because Axcess would lose the limitations tolling protections" of Texas Civil Practices & Remedies Code § 16.064.
Section 16.064 provides that the period between the date of filing an action in a trial court and the date of filing the same action in a different court suspends the running of the applicable statute of limitations for the period if, because of lack of jurisdiction in the trial court where the action was first filed, the action is dismissed.
Jon Suder, a partner in Fort Worth’s Friedman Suder & Cooke who represents Axcess, says his client needs a ruling from Furgeson dismissing the federal case to avoid tolling problems with prosecution of the petition in state court. Without such a ruling, his client may lose the right to bring the claim in state court, he says.
"What my take on it is: Baker Botts just tried to bait us into just dismissing the case. And we didn’t take the bait," Suder says. "The judge has to make a ruling."
Paul M. Koning, a partner in Dallas’ Koning Rubarts who represents Baker Botts, refers a request for comment to George Lamb, Baker Botts’ general counsel. Lamb did not return a telephone call seeking comment.
Furgeson is expected to rule on the matter soon, as he is leaving the bench on May 31 to become the dean of the University of North Texas’ new law school.