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Finding Baker Botts breached its fiduciary duty in connection with estate-planning work done for a wealthy widow in Kerrville, Texas, a jury in Kerr County returned a $65.5 million verdict on Feb. 25 against the Houston-based firm and other defendants. By a 10-2 vote, the jury found Baker Botts breached its fiduciary duty for failing to disclose “all important information” when doing estate-planning work for Kathleen C. Cailloux after the death of her husband, Floyd, in January 1997. The jury, however, found Baker Botts did not breach its fiduciary duty in three other areas — by failing to act with the utmost loyalty toward Cailloux, by participating in transactions that were not fair and equitable to Cailloux, or by failing to act in the utmost good faith and to exercise the most scrupulous honestly toward the widow. The jury also found Wells Fargo Bank Texas N.A. breached its fiduciary duty to Kathleen Cailloux and found that former bank official William Goertz, who also served on the board of the Floyd A. Cailloux and Kathleen C. Cailloux Foundation, individually participated in that breach. The jury assessed 25 percent of the responsibility for the injury to Cailloux, another 25 percent against Baker Botts, and 25 percent each against Wells Fargo and Goertz. Baker Botts partner Stephen T. Dyer and former partner S. Stacy Eastland were also named defendants in the suit, but the jury was not asked to make any findings against them. Cailloux had alleged in the Sixth Amended Petition in Kathleen C. Cailloux v. Baker Botts, et al. that the defendants conspired to convince her, right after Floyd Cailloux’s death in 1997, to disclaim her rights to her husband’s estate and transfer more than $60 million to the Cailloux Foundation — ostensibly to save more than $30 million in taxes — without informing her of other estate-planning options. The jury found that, for the breaches of fiduciary duty, Kathleen Cailloux should be compensated with $65.5 million — the value she would have received in trust had she not agreed to disclaim her rights to the money. Plaintiffs attorneys Rick Harrison and Richard Mosty, of Richard C. Mosty P.C. of Kerrville, say the verdict calls for the defendants to pay $65.5 million to the estate. But Joseph Cheavens, the Baker Botts partner who serves as the firm’s general counsel, says the firm doesn’t agree. “We do not believe that is an award of damages in her favor,” Cheavens says. “It would be double recovery to put $65.5 million in her trust,” he says, noting that the disclaimer Cailloux signed put 92 percent of the assets of the marital estate into the Cailloux Foundation and the rest to other charities. On March 3, Baker Botts filed a motion asking 198th District Judge Emil Karl Prohl to enter a take-nothing judgment. In the motion, Baker Botts alleges that there is no evidence Baker Botts failed to disclose any “important” information to Cailloux. “On the contrary, she never expressed any dissatisfaction with Baker Botts, either before or after this lawsuit was filed, and cannot do so now because she is non compos mentis, as she was when the fiduciary duty was allegedly ‘discovered’ by Kenneth F. Cailloux [her son] or lawyers acting on his behalf,” Baker Botts writes in the motion. Harrison says Cailloux, 90, has Alzheimer’s disease. Dyer and Eastland, now at Goldman Sachs in Houston, both refer comment to Cheavens. Wells Fargo will also seek a take-nothing judgment, says Dean Fleming, a partner in Fulbright & Jaworski in Austin, the bank’s defense attorney. Harrison, a partner in Austin’s Fritz, Byrne, Head & Harrison, says the plaintiff’s team is still working on a proposed judgment. Jury forewoman Susan Dennis, a nonpracticing lawyer in Kerrville, says the jury was “divided” on the degree of the breach of fiduciary duty on the part of Baker Botts and the other defendants. “To be honest, there was a pretty good split [on the jury] in terms of how much more the lawyers could have or should have done. Some members of the jury felt there was a great deal that the lawyers should have done … and then there were those who felt they did a pretty good job,” she says. Goertz settled before trial, and his attorney, Randy Howry, a partner in Herman, Howry & Breen in Austin, Texas, says his client would not be responsible for paying any money as a result of the verdict. Some of the jury findings went in the favor of the defense. The jury found Wells Fargo and Goertz did not participate in the breach of fiduciary duty on the part of Baker Botts, and found Baker Botts did not participate in any of the bank’s breaches of fiduciary duty. The jury also found no negligence against Baker Botts and found no malice in connection with the breach of fiduciary duty finding against the firm. The jury also found the bank did not act with malice in connection with its breach of fiduciary duty to the widow. Kathleen Cailloux’s son, daughter and grandson were plaintiffs, but they nonsuited their claims after the trial began on Feb. 8.

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