A Texas appeals court has reinstated legal malpractice claims against Akin Gump Strauss Hauer & Feld stemming from a troubled hotel deal in San Antonio.
In a reversal, the 4th Court of Appeals in San Antonio ruled on Nov. 14 that Riverwalk Cy Hotel Partners could move ahead with negligence and breach of fiduciary duty claims against the law firm it hired in 2005 to help develop a hotel.
The three-judge panel rejected Akin Gump’s argument that the statute of limitations blocked the developer from bringing the negligence action. The court also ruled that the developer properly pleaded claims that the firm overbilled for its services. The decision reversed a ruling by Bexar County District Court Judge Karen Pozza granting summary judgment to Akin Gump, and remanded the case to the trial court.
An Akin Gump spokesman declined to comment.
Riverwalk hired the law firm seven years ago to help purchase a San Antonio parcel and then contracted with Lyda Swinerton Builders Inc. to build the hotel. In the construction contract, Lyda agreed that its insurance carrier would defend Riverwalk in the event of litigation resulting from the development.
The following year, the owner of the property adjacent to the construction site, Auburn Investments, sued Riverwalk and Lyda for nuisance, business interference and trespass, claiming damages from dust and debris. Akin Gump represented Riverwalk and Lyda in that lawsuit.
While that action was pending, Riverwalk and Lyda, represented by separate counsel, entered mediation over the discontinuation of the construction. While the talks were under way, Riverwalk’s attorney in that matter allegedly learned that Akin Gump had not sought indemnification for Riverwalk from Lyda’s insurer in the nuisance litigation.
Riverwalk alleged that Akin Gump avoided seeking indemnification for months after Riverwalk’s mediation attorney confronted the firm about it in order to continue representing Riverwalk, rack up attorney’s fees and extend the life of the nuisance action.
The nuisance action eventually was settled, but not before Riverwalk filed its malpractice lawsuit against Akin Gump over the indemnification issue.
The lower court granted summary judgment last year to Akin Gump, finding that Riverwalk had filed its negligence claims too late and that its breach of fiduciary claims were subsumed by the negligence claims.
The appeals court disagreed, ruling that the statute of limitations was suspended while the nuisance action was pending. The court relied on a 1991 Texas Supreme Court case, Hughes v. Mahaney & Higgins, which held that the statute of limitations for a legal malpractice action is suspended until all appeals in the underlying litigation are exhausted.
The appeals court rejected Akin Gump’s argument that the statute of limitations should have continued to run against Riverwalk because the underlying nuisance action did not result from the law firm’s alleged malpractice. The appeals court, however, said the precedent established in Hughes did not require such a narrow reading.
“We hold the Hughes tolling rule applies because: 1. Riverwalk alleges Akin Gump ‘committed malpractice while defending’ Riverwalk in the Auburn lawsuit; 2. Riverwalk’s malpractice claims ‘arise out of’ the Auburn lawsuit; and 3. Akin Gump allegedly ‘committed legal malpractice while providing legal services in the context of litigation,’ ” Justice Catherine Stone wrote.
As for the breach of fiduciary duty claims, the appeals court determined that the allegations of overbilling were distinct from negligence claims and could be brought separately.
Representing Akin Gump were George Spencer and Kathryn Stephens at Clemens & Spencer in San Antonio. Representing Riverwalk was Robert Johnson Jr. in Corpus Christi. He did not return a call for comment.