A Texas appellate court has thrown out a legal malpractice case against Fried Frank and one of its New York-based tax partners after finding a former client could not establish jurisdiction in the Lone Star State even though the plaintiff moved to Texas and the defendant lawyer held a meeting in Dallas.
The recent decision in Fried Frank Shriver & Jacobson v. Millennium Chemicals by Dallas’ Fifth Court of Appeals reverses a trial court decision rejecting an argument by the law firm and tax partner Richard A. Wolfe that they could not be sued in Texas because the conflict had no connection to the state.
Millennium, at the time based in New Jersey, was represented by Fried Frank and Wolfe in its “demerger” from its parent company Hanson. A dispute arose between Millennium and Hanson over a $65 million tax deduction that had been disallowed by the IRS prior to the demerger. Hanson, which was also represented by Fried Frank and Wolfe, was later audited and settled with the IRS. But Millennium alleged Fried Frank and Wolfe failed to inform them of the $65 million in expenditures by Hanson. Millennium sued Fried Frank and Wolfe in a Dallas state district court alleging fraud, breach of fiduciary duty, and legal malpractice, specifically claiming they omitted facts that led Millennium to sign a tax benefits agreement with Hanson that deprived them of tax benefit recovery rights and that the defendants took positions adverse to Millennium.
Fried Frank and Wolfe responded with a plea to the jurisdiction, arguing that they cannot be sued in Texas because the plaintiff had not proven it had established minimum contacts with the state.
Under the so-called long-arm statute, Texas courts can establish personal jurisdiction over civil disputes as far was the U.S. Constitution will allow, but a defendant must have established minimum contacts with the forum state such as doing business within its borders to be sued in the state. Millennium, in its appeal, pointed to a 2010 meeting Wolfe held in Dallas with IRS officials and the fact they had moved to their business to Texas as proof of minimum contacts with the state.
But in its July 31 decision, the Fifth Court rejected both of the plaintiff’s jurisdictional arguments and found they were not enough to reason to try the legal malpractice case in Texas.
“The record shows Millennium pleaded sufficient allegations to bring appellants within reach of Texas’s long-arm statute,” wrote Justice Douglas Lang.
However, Lang noted that Wolfe submitted an affidavit in the case stating that he had not practiced law in Texas and none of the legal services that he or Fried Frank performed for Millennium were done in Texas. “That evidence, on its face, negated plaintiffs’ allegations as to the June 2010 meeting,” he wrote.
Lang wrote that even though Millennium moved to Texas and was in continuous communication with Fried Frank and Wolfe, that also was also not enough to establish jurisdiction in Texas courts.
“Further, to the extent Millennium argues that the communications in question, together with Wolfe’s physical and virtual presence in Texas, establish sufficient minimum contacts with Texas to support specific jurisdiction over defendants, we concluded above that the physical and virtual presence of Wolfe alleged by Millennium does not support specific jurisdiction,” Lang wrote. “Millennium cites no authority, and we have found none, to support the position that combining those insufficient contacts with the communications described above would result in satisfying the requirements for personal jurisdiction.
The trial court rejected Fried Frank and Wolfe’s plea to the jurisdiction, which the defendants appealed to the Fifth Court.
George Kryder, a partner in Dallas office of Vinson & Elkins who represents Fried Frank and Wolfe, did not return a call for comment. Wolfe also did not return a call for comment.
Joseph Callister, a partner in Dallas’ Wick Phillips who represents Millennium, declined to comment on the decision.