A Houston-area man and his company filed a negligence and breach of fiduciary duty lawsuit against Thompson & Knight and partner Wilburn McDonald Jr. of Houston, alleging McDonald failed to act in the best interests of a client when inviting him to invest in a Houston company.
In a petition filed in Harris County on Nov. 8, Bill Walls Jr. and BTW Investments LP bring negligence, gross negligence and breach of fiduciary duty causes of action against the defendants and allege they violated the Deceptive Trade Practices Act.
Luke Ashley, a partner in Dallas who is general counsel of Thompson & Knight and who returned calls left for McDonald, said that “based on what we know, we see no basis of any legal malpractice claims.”
“It appears to be a situation where … Bill Walls and Bill McDonald were former friends and invested in this company and [it] ended up failing,” he said, adding, “We will vigorously defend the case.”
Emily Parker, managing partner of Thompson & Knight, declined comment on the allegations because she said she had not reviewed the suit.
Daniel Gartner of the Gartner Law Firm of Houston, who represents the plaintiffs, declined comment on the allegations.
The plaintiffs allege in Walls v. McDonald that Walls retained McDonald and Thompson & Knight in 2001 “to represent him in connection with certain investments” and the defendants set up numerous companies for Walls.
In 2005, the plaintiffs allege, McDonald approached them to invest in a company called Enertel Marketing LP, which would market a product named “SuperAll.” They allege McDonald represented that he had performed due diligence, the opportunity was a “solid investment,” and McDonald’s partners in the deal were “competent investors and had sufficient assets to fund the equity in the partnership and to make any required cash calls.”
“After Walls invested in Enertel, he learned it was losing money despite McDonald’s representations,” the plaintiffs allege, adding that the partnership “began requesting cash calls” and McDonald and the other partners failed to make equity contributions.
In late 2009, the plaintiffs allege, McDonald began issuing bonds from the partnership in exchange for his equity contributions, which gave him preference over the plaintiffs.
“Plaintiffs had believed that McDonald was acting in their best interests as their attorney, when in reality he was acting in his own self-interest,” the plaintiffs claim.
The plaintiffs allege Walls invested a total of $3.1 million in the company. They also claim that McDonald advised Walls during his divorce proceedings to pay his ex-wife $500,000 so he would own all of his Enertel investment, and McDonald drafted the documents for that transaction.
The plaintiffs, who say they paid McDonald and Thompson & Knight nearly $4 million in fees and expenses “for this substandard legal representation,” seek actual and punitive damages, interest, costs, attorney fees, profit disgorgement and fee forfeiture.
A phone number for Enertel Marketing is not available through directory information or online.
The plaintiffs allege in the petition they remain clients of McDonald and the firm, but Gartner said that is no longer the case because of the lawsuit.