Texas Supreme Court building (Wikimedia Commons/WhisperToMe)
Can Houston-based Andrews Kurth be sued for allegedly failing to convey a $450,000 pre-trial settlement offer to its former clients in a fraud case in which those clients were eventually hit with a $3 million jury verdict?
That’s just one of the questions the Texas Supreme Court is set to answer in a legal malpractice case it recently accepted for review.
The case, Rogers v. Zanetti, involves an appeal of Dallas Fifth Court of Appeals decision, which dismissed a legal malpractice case filed against Andrews Kurth and two of its attorneys, Victor B. Zanetti and Charles Perry, by former clients.
The background to that case, according to the Fifth Court’s decision, is as follows.
James O. Rogers, William M. Burmeister and Conservative Care Inc. hired Zanetti to represent them in an agreement in which they would invest and manage a company called Accent Home Health. Under the agreement, Andrews Kurth’s clients acquired 80 percent of Accent from Daniel and Leslie Alexander.
When a dispute arose between the clients and the Alexanders, the Alexanders sued the clients for misallocating Accent funds. The clients asked Zanetti to refer them a lawyer to defend them in the lawsuit and he referred them to his law partner Perry. Perry defended the clients for some time before Andrews Kurth suggested that they get new lawyers, which they did.
The case went to trial in 2004 and the jury found the clients had committed fraud and breached fiduciary duties and assessed over $3 million in damages against them. The clients later sued Andrews Kurth and the two attorneys for legal malpractice in 2012, alleging they mishandled the defense in several ways, including failing to tell the clients that Perry had received a $450,000 settlement offer from the Alexanders that would have released them from liability and given them control over Accent among other things.
After Andrews and Kurth argued that the former clients had no evidence of causation to support their claims, the trial court dismissed the legal malpractice case — a decision affirmed by the Fifth Court of Appeals last year.
“Here, the clients contend that they would have avoided a much larger liability and acquired Accent as well if they had known about the settlement offer. For this to be true, they would have had to both reach a settlement and perform its term,” wrote Justice Bill Whitehill in the decision. “But they adduced not evidence that they could pay the Alexanders $450,000, as the actual settlement offer demanded, or any lesser amount that the Alexanders would have accepted. Without such evidence, there is a fatal gap in the but for cause evidence.”
The client appealed the decision to the Supreme Court, arguing among other things that the lower courts erred by applying the “but for” legal malpractice causation evidence standard to the clients’ claims. That standard requires that plaintiffs prove that they would have prevailed at trial but for their attorney’s alleged legal malpractice.
And on Oct. 21 the Supreme Court accepted the case for review and set it for oral argument on Jan. 11, 2017.
Brian Lauten, a partner in Dallas’ Deans & Lyons who represents Andrews Kurth’s former clients on appeal, said the high court’s decision to review their case — and whether the “but for” legal malpractice causation evidence should be applied to it — is a big deal.
“The standard that should have been applied is the substantial factor causation test. It means I don’t have to prove I would have won this case, but the lawyer’s negligence was substantial in causing some quantifiable harm,” Lauten said.
“Had the trial court and the Dallas Court of Appeals applied the correct standard, there is absolutely no question that this case should have been decided by a jury and not a court in a one-page order,” he said.
George Kryder, a partner in Vinson & Elkins who represented Andrews Kurth and its attorneys in the case, did not immediately return a call for comment. Zanetti and Perry also did not immediately return a call for comment.
In their brief to the Supreme Court, Andrews Kurth and its attorneys argued that their former clients attempt to avoid the legal malpractice causation standard should fail in this case. They also argued that their former clients lost settlement opportunity is based on “sheer speculation” — and not evidence of causation.
“For example, there is no evidence in the summary judgment record that plaintiffs had the financial capacity or desire to settle the case at any amount — much less the (as of yet, hypothetical and unspecified) amount acceptable to Accent,” the brief alleges.
“Instead, plaintiffs ask the court to reverse summary judgment based on their sheer speculation that an agreement would have been reached. But plaintiffs’ assertions of ‘possibility, speculation, and surmise’ are ‘no evidence of causation.’” the brief alleges. “Plaintiffs’ lost settlement opportunity thus fails as a matter of law.”