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Legal Malpractice Plaintiffs Can Recoup Fees Paid to Fix Lawyers' Mistakes
But Akin Gump prevails on majority of damages claims brought by former client
Texas Lawyer
November 09, 2009
The Texas Supreme Court ruled on Oct. 30 that a legal malpractice plaintiff can recover as damages the money it paid to fix a firm's negligence.
But the opinion is not a complete win for the plaintiff because it lost the majority of its damages claims against the firm.
Akin Gump Strauss Hauer & Feld, once on the hook for about $1.5 million in damages and interest, now will pay the plaintiff, a former client, a maximum of $360,000 including interest.
The background to the 8-0 decision in Akin Gump Strauss Hauer & Feld v. National Development and Research Corp. ,according to the opinion, is as follows: National Development and Research (NDR) filed a legal-mal suit against Akin Gump alleging the firm failed to submit a question to the jury in a contract dispute in which Akin Gump represented NDR.
In 1999, the Akin Gump jury found the firm negligent and awarded damages to NDR as follows: $168,667 for the judgment NDR paid in the contract dispute; $427,777 for money NDR would have recovered from stock involved in the contract dispute had NDR been successful in that portion of the case; $109,596 for "success fees" owed to NDR; and $216,590 for attorney fees and expenses NDR paid in the contract dispute case.
Akin Gump did not appeal the negligence finding or the award of $168,667 that NDR paid in damages to the opposing party in the contract dispute. However Akin Gump appealed the other damages awards. Dallas' 5th Court of Appeals reversed the award of attorney fees and expenses and affirmed the remainder of the judgment. Akin Gump and NDR A HREF="http://www.law.com/jsp/tx/PubArticleTX.jsp?id=1202426708919" target="new">appealed to the Texas Supreme Court.
In its decision, the Supreme Court agreed with Akin Gump that the evidence was insufficient to support the jury's findings that NDR would have collected for the value of the stock and success fees.
But the high court ruled that NDR could recover damages for legal fees it paid to separate counsel in the contract dispute to the extent the fees were proximately caused by Akin Gump's negligence.
The court also ruled that the evidence was legally sufficient to support a finding that some attorney fees paid by NDR were proximately caused by Akin Gump's negligence, but the evidence is legally insufficient to support the jury's finding of $216,590 in damages.
"There is no evidence that if NDR had recovered a favorable judgment in the [contract dispute] it would have not paid appellate fees to defend the judgment," Justice Phil Johnson wrote for the court. Justice Eva Guzman, who joined the court on Oct. 8, did not participate in the decision.
"[A]lthough the evidence is legally sufficient to support a finding of some amount, it is legally insufficient to support the entire amount the jury found," Johnson continued.
The high court said the evidence was legally sufficient to support the finding that Akin Gump's negligence was the reason NDR retained two law school professors to argue post-trial issues in the contract dispute. NDR claims it paid the professors nearly $60,000 -- an amount that is in dispute between Akin Gump and NDR.
"We see little difference between damages measured by the amount the malpractice plaintiff would have, but did not, recover and collect in an underlying suit and damages measured by attorney's fees it paid for representation in the underlying suit, if it was the defendant's negligence that proximately caused the fees," Johnson wrote.
"In both instances, the attorney's negligence caused identifiable economic harm to the malpractice plaintiff. The better rule, and the rule we adopt, is that a malpractice plaintiff may recover damages for attorney's fees paid in the underlying case to the extent the fees were proximately caused by the defendant attorney's negligence," Johnson wrote, reversing the 5th Court's decision.
QUESTION CLARIFIED
Jeff Levinger, a partner in Dallas' Hankinson Levinger who represents Akin Gump, says he is satisfied with the decision, because it dismisses the majority of NDR's damages claims.
He adds that it has been a long time since the Supreme Court ruled on the collectability of damages in a legal malpractice case.
"Sometimes the plaintiff has to go out and hire new lawyers to fix the problem or to defend themselves after their lawyer erred. The question has been whether those fees are recoverable as damages," Levinger says. "The Supreme Court has said that attorney's fees may well be recoverable if they were proximately caused by negligence." But NDR couldn't have shown proximate cause as to fees paid to Akin Gump, where NDR might have shown it as to the law school professors hired to make post-verdict arguments to the trial court in the contract dispute, Levinger says.
Barry Chasnoff, a partner in Akin Gump's San Antonio office who serves as the firm's general counsel, also is satisfied with the decision.
"It confirms what we believed was the case, which was that they had not put on the evidence [of proximate cause], which was required," Chasnoff says.
Michael L. Jones, a partner in Dallas' Henry & Jones who represents NDR in Akin Gump, says he plans to file a motion for rehearing with the high court.
While he is disappointed that the court reversed much of his client's damages awards, he is satisfied that the opinion clarifies a question about the recoverability of attorney fees in legal-mal cases.
"There had been a split in the courts of appeals that said you can never recover fees unless it's allowed by statute or contract," Jones says. NDR argued that it is an element of damages when a client has to hire another lawyer to fix what another lawyer messed up and correct that lawyer's negligence, he says. "That's been an issue of dispute for a long time under Texas law, so I'm glad the court clarified that."
Two experts say the decision will have an effect on the way most legal malpractice cases are handled.
"I think you're going to see larger damage claims because of that. But again, the plaintiff would have to prove their damages were proximately caused by the defendant," says Alison Moore, a partner in the Dallas office of Thompson Coe Cousins & Irons who defends attorneys in legal malpractice cases.
Dallas solo Jim Pennington, who represents plaintiffs in legal-mal suits, says situations where a legal malpractice plaintiff could recover attorney fees for correcting a lawyer's mistake are common.
"I've had cases where an attorney makes a mistake and the client has to file an appellate motion to correct the mistake. There's a number of ways this can come up," he says.
Notes Pennington, "That's the nice thing about realizing that this is a recoverable element of damages." Now a client doesn't have to worry about getting appellate fees back that it spent to correct a mistake.
