Tracy Parker STREBER; et al., Plaintiffs, Terry Parker Davis Delony, Plaintiff-Appellee-Cross-Appellant, v. Edwin K. HUNTER; et al., Defendants, Edwin K. Hunter; Edwin K. Hunter, A Professional Law Corporation; T. Glynn Blazier; Timothy O‘Dowd, Defendants-Appellants-Cross-Appellees.
No. 99-50054.
United States Court of Appeals, Fifth Circuit
Aug. 4, 2000.
Rehearing and Rehearing En Banc Denied Sept. 1, 2000.
221 F.3d 701
Before REYNALDO G. GARZA, JONES and EMILIO M. GARZA, Circuit Judges.
See also 70 T.C.M. (CCH) 1604, 1995 WL 754033, 138 F.3d 216.
Alison Holladay Moore (argued), Thompson, Coe, Cousins & Irons, Dallas, TX, for Hunter and O‘Dowd.
Wade Crosnoe, Thompson, Coe, Cousins & Irons, Dallas, TX, for Hunter.
Sidney Katherine Powell (argued), Powell & Associates, Dallas, TX, Deborah Ann Pearce-Reggio, River Ridge, LA, for Blazier.
EMILIO M. GARZA, Circuit Judge:
Edwin K. Hunter, T. Glynn Blazier, Timothy O‘Dowd, and Edwin K. Hunter, P.C. (the “firm“) (collectively “the attorneys“), appeal from a jury verdict holding them liable for legal malpractice, breach of fiduciary duties, and violations of the Deceptive Trade Practices Act (“DTPA“),
I.
In 1979, Larry Parker (“Parker“), a self-made entrepreneur, businessman, and land developer, discovered over four hundred acres of undeveloped land in a potentially lucrative residential area outside of Houston.1 Parker, however, lacked the funds to purchase the land, so he recruited a friend, California attorney Robert Bradish. Bradish came to Texas and took title to the land for himself, forming a joint venture with Jack Thoner. Parker never owned any of the land, or any of the equity interest in the joint venture. As part of the joint venture agreement, for Parker‘s substantial work bringing the deal together: (1) he would receive $2.5 million from the venture‘s initial profits, and (2) a large portion of the equity interest in the venture was placed in trust for Parker‘s daughters, Terry and Tracy (collectively “the sisters“),2 with Bradish as the trustee. Parker envisioned the gift as an early inheritance of sorts, a “nest egg” for Terry and Tracy.3
In 1981, Bradish sold the property, and Terry and Tracy each received a promissory note, payable in 1985 in the amount of $2 million. Bradish endorsed the notes to Terry and delivered them to her sometime in 1982, when Terry was nineteen years old and Tracy fourteen. Contemporaneously, Terry signed a “management agreement” which purported to place control over the money in Parker‘s hands until each of the girls reached the age of twenty-five. Tracy then placed the notes and the “management agreement” in her safety deposit box. After the notes became due in 1985, the sisters each received $1.7 million and a lot in the Northgate Forrest subdivision.4 At the time they received these large sums of money, Tracy was approximately twenty yeаrs old, and Terry was six months short of her twenty-fifth birthday.
After Terry and Tracy each received their $1.7 million, but before the family squabble, Parker had told Terry to make sure she paid the capital gains taxes on the income. Since Parker had cut off communication with Terry and Tracy, and neither had ever filed a tax return before, they asked their stepfather, Lee Berwick,6 if he knew of someone who could help them with their taxes. Berwick directed them to Edwin Hunter, a Lake Charles, Louisiana tax specialist who had done work for Berwick in the past.
With Berwick‘s recommendation, Terry and Tracy drove to Lake Charles and met with Hunter.7 After briefly examining a few documents which Tracy and Terry gave him, but before doing any legal research,8 Hunter presented the sisters with three options: (1) pay no taxes and hope the IRS did not find out about the transaction within the ten year statute of limitations, (2) treat the transaction as a 1981 gift and pay capital gains taxes on the income received in 1985, or (3) treat the transaction as a 1985 gift, in which case Parker would be liable for gift tax and they would be liable for nothing. Despite scoffing at the “management agreement” as unenforceable and calling it “not a legal document,”9 Hunter told Terry and Tracy that Parker had not given up control over the money until 1985, and that, accordingly, the gift did not occur until then.
While the sisters were somewhat wary of paying nothing to the IRS after receiving $1.7 million, Hunter told them that if they paid capital gains taxes on the money, the IRS might suspect they were “in cahoots” with their father to pay the lower caрital gains tax as opposed to the higher gift tax. Hunter expressed to the sisters
Hunter and his firm subsequently became involved in several other lawsuits revolving around this less-than-amicable family. Specifically, Parker, described as a “highly litigious individual,” filed several lawsuits against the sisters and the Berwicks. After Terry and Tracy refused to invest their money in Sovereign Energy, Parker sued them to recover the stock interest that he had given to them. Terry and Tracy were content to give the Sovereign Energy stock back to their father, but Hunter, who represented the sisters in the lawsuit, told them not to do so. Instead, Hunter recommended that they hold the stock as leverage against Parker to persuade him to pay the gift tax. Terry and Tracy, relying on Hunter‘s advice, agreed. Parker also threatened to file suit to enforce the “management agreement,” and if he filed such a suit (the record conflicts on whether such the suit was filed), Hunter would have represented Terry and Tracy.
Hunter was also advising Betty Berwick in connection with an “alienation of affections” suit that Parker brought against her and her husband. After investigating Parker‘s assets, Hunter told Betty that Parker had hid substantial assets from her during their divorce and encouraged Betty to file suit against Parker for hiding those assets. The documents and testimony at trial shows that Hunter‘s planned lawsuit against Parker could have potentially brought a recovery for Betty of $17 million, and, under their contingent fee agreement, if Betty won the lawsuit, Hunter could have received approximately $3 million.11 Hunter believed Betty‘s lawsuit against Parker to be very important for his firm.12
In 1986, Parker‘s attorney, David Gamble, wrote a letter to Hunter expressing his belief that the sisters’ position — that Parker had made a gift to Terry and Tracy in 1985 — was belied by the documents surrounding the land deal. Gamble claimed that the documents were exceptionally clear that, by the terms of the 1980 land deal, Terry and Tracy became owners of a joint venture interest immediately, not subject to Parker‘s control at all. Gamble specifically offered to send Hunter the documents underlying the land deal, some of which Hunter had never before read, in an effort to prove his point.13 Hunter, however, refused to follow up on Gamble‘s
In October 1991, the IRS issued notices of deficiency against both the sisters and Parker “in order to avoid a ‘whipsaw’ situation,” Streber, 138 F.3d at 218, and the cases were consolidated for trial in the Tax Court. Hunter, Blazier, and O‘Dowd represented the sisters in discovery and at the tax trial. In 1992, Hunter put O‘Dowd on the case, and he began (for the first time) to do legal research into what constituted a “gift” under Texas law14 and factual research into the particulars of the land deal.15 O‘Dowd (1) sent out an memorandum to a colleague, Mitch Vervoort, asking for help with the legal research,16 (2) requested more documentation of the land deal, (3) called and later deposed Bradish (who had never been contacted by any lawyer on the sisters’ case before), and (4) kept in contact with Parker‘s attorneys.
In 1993, there was a mediation between the sisters, Parker, and the IRS. Representing Terry and Tracy at the mediation were O‘Dowd, Blazier, and Houston attorney Diana Marshall. As the district court found, “[t]here was credible evidence at trial that the IRS would have settled [during the mediation] for between [$1 and $1.2 million].”17 The mediator, a former judge, and Parker‘s attorney, Bob White, both told Terry and Tracy that they would probably lose the tax trial. Further, both
The Tax Court ruled that the sisters were liable for the tax and accrued interest and also imposed negligence and substantial underestimation penalties. See Streber v. Commissioner, 70 T.C.M. (CCH) 1604, 1609, 1995 WL 754033 (1995). In deciding that Parker intended to make a gift to his daughters in 1980, the Court relied largely on the documents and on Bradish‘s testimony that Parker wanted the daughters to have an interest in the project “from the beginning” and wanted Terry and Tracy‘s interests “protected from him, so that he couldn‘t get his hands on the money.” Id. Finding that the notes had been delivered to and accepted by Terry, the Court found it clear that “the daughters are taxable on the proceeds of the $2 million notes and that Parker is not.” Id.
Shortly after the Tax Court‘s ruling, an IRS agent telephoned Terry, demanded an immediate meeting at her home, and began to catalogue the value of her home and other assets. Terry feared that the IRS would immediately seize her home and other assets. When she asked her attorneys if the IRS would act immediately, the attorneys responded “they might.” Terry visited the office of Conde Cox, an Austin bankruptcy attorney, who after investigating her cause advised her to file for bankruptcy. After reviewing the transaction resulting in such huge interest payments, Cox also advised Terry to seek out a consumer lawyer to investigate the conduct of her attorneys.
Simultaneously, Terry had to decide whether to appeal the decision of the Tax Court. After consultation with Cox and a tax expert, Mike Cook, Terry and Tracy decided not to appeal the underlying decision that they owed capital gains tax for a gift made in 1980,21 but to appeal the Tax
After being advised by several attorneys that they had been disserved by their counsel, Terry and Tracy filed suit under Texas tort law and the DTPA against many of their lawyers, including Hunter, O‘Dowd, and Blazier. The sisters argued that the attorneys had (1) failed to conduсt a thorough factual investigation, (2) failed to do adequate research in Texas law, (3) incorrectly advised the sisters on potential transferee liability should Parker be held liable for the gift tax, (4) failed to disclose material facts the lawyers knew about the law, (5) advised the sisters not to settle in 1993 even though they knew their position was wrong, and (6) used the sisters’ case as leverage in another case they had against Parker.
After a continuance was granted during which this court ruled on the penalties issue, the case against Hunter, Blazier, and O‘Dowd went to trial. The attorneys decided on a joint defense.23 After a two-
week trial, which included competing experts and testimony from all three defendants and both sisters, a jury found for Terry and Tracy on all substantive counts (negligence, breach of fiduciary duties, and violations of the DTPA) and awarded actual damages totaling $2,172,788. The largest portion of these damages represented the difference between the amount of money the sisters would have paid the IRS had the attorneys advised them correctly and the amount they eventually had to pay. This difference was represented by the “interest differential,” i.e. the difference between the interest the sisters actually earned while they possessed the $1.7 million each and the interest charged by the IRS for such possession. Actual damages also encompassed compensation for the time Terry and Tracy had spent trying to rectify the harm the attorneys had caused. The jury apportioned liability for these compensatory damages at 60% for Hunter, 20% for Blazier, 10% for O‘Dowd, and 10% for the firm. The jury also, finding that their DTPA violations were committed “knowingly,” imposed DTPA additional damages on each defendant, a total of $6 million against Hunter, $2 million against Blazier, $200,000 against O‘Dowd, and $3.2 million against the firm.
Terry moved for the entry of judgment, and the attorneys moved for judgment as a matter of law. The district court entered judgment for Terry. In doing so, after reviewing the jury verdict and the evidence presented in the case, it noted that the “failure to settle forms the basis of the sisters’ damages in this case, as they assert that had they not been misled about the merits of their case, they would have settled in 1993 and avoided the increasingly adverse series of events occurring after
The district court also reformed the jury‘s award of additional damages. Since DTPA additional damages can only be a total of twice the amount of actual damages awarded for a DTPA violation, see
Hunter, Blazier, O‘Dowd, and the firm appealed.
II.
We first consider Blazier‘s claims that the district court lacked personal jurisdiction over him and that, if personal jurisdiction existed, Louisiana law should have applied. Because Blazier is a Louisiana resident whose contacts with Texas were not continuous, the Constitution permits personal jurisdiction over Blazier in Texas only if he “purposefully availed” himself of the benefits and protections of Texas law by establishing “minimum contacts” with Texas and if the exercise of jurisdiction over Blazier does not offend “traditional notions of fair play and substantial justice.” See Access Telecom, Inc. v. MCI Telecommunications Corp., 197 F.3d 694, 716 (5th Cir. 1999) (calling this “specific” jurisdiction) (citing International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 160, 90 L.Ed. 95 (1945) and Asahi Metal Indus. Co. v. Superior Court, 480 U.S. 102, 113, 107 S.Ct. 1026, 1034, 94 L.Ed.2d 92 (1987)).
We find that the Texas district court had jurisdiction over Blazier. Blazier “purposefully availed” himself of Texas laws when he gave tax advice that he knew would be received by a Texas client, see Busch v. Buchman, Buchman & O‘Brien, 11 F.3d 1255, 1257 (5th Cir. 1994) (allowing Texas personal jurisdiction over New York attorney who only performed work in New York because he knew his tax opinion would be included in materials shipped to Texas), and thus he had “minimum contacts” with the forum state. Second, since at least some of the allegations forming the basis of this lawsuit arise out of Blazier‘s contacts with Texas — much of Blazier‘s alleged malpractice occurred during the 1993 mediation, which took place in Houston — the exercise of personal jurisdiction over Blazier comported with traditional notions of fair play and substantial justice.25 Accordingly, the district court did not err in asserting personal jurisdiction over Blazier. Cf. Trinity Industries v.
Blazier also argues that Louisiana law, specifically the Louisiana statute of limitations, which he argues would have barred the suit, should have applied to Terry‘s claims against him. The district court considered this claim thoroughly in a published opinion, see Streber v. Hunter, 14 F.Supp.2d 978, 984-84 (W.D. Tex. 1998), and we agree with its fine analysis. Federal courts apply the choice-of-law rules of the forum state, see Klaxon Co. v. Stentor Elec. Manu. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 1021-22, 85 L.Ed. 1477 (1941), and thus here we apply Texas‘s “most significant relationship” test. We examine the following factors:
- the needs of the interstate and international systems;
- the relevant policies of the forum;
- the relevant policies of other interested states and the relative interests of those states;
- the protection of justified expectations;
- the basic policies underlying the particular field of law;
- certainty, predictability and uniformity of result;
- ease in the determination and application of the law to be applied.
See Askanase v. Fatjo, 130 F.3d 657, 671 & n. 9 (5th Cir. 1997) (citing RESTATEMENT (SECOND) OF CONFLICT OF LAWS, §§ 6, 143 (1971)). In doing so, we are guided by the following factual inquiries:
- The place where the injury occurred;
- The place where the conduct causing the injury occurred;
- The domicile, residence, nationality, place of incorporation of the business of the parties;
- The place where the parties’ relationship is centered;
See id.
Blazier desires the protection of the Louisiana statute of limitation on legal malpractice claims, which contains an extremely limited discovery rule.27 The critical factor for the district court in its decision to apply Texas law was the Texas courts’ vigilance in protecting its citizens by allowing a discovery rule on the limitations period for malpractice claims; the Court held that the contrary Louisiana policy “directly contradicts Texas precedent protecting the rights of Texas clients
While “[a]mong the fundamental purposes underlying a state‘s statute of limitations is the protection of the resident defendants of that state,” Industrial Indemnity Co. v. Chapman & Cutler, 22 F.3d 1346, 1351 (5th Cir. 1994), Texas has an “interest in allowing its residents to recover for injuries sustained in a state that would recognize their claim as timely.” Id. at 1351 n. 9. In Texas, attorney malpractice claims are among the two types of claims that, because they are considered “inherently undiscoverable,” implicate an unlimited discovery rule. See S.V. v. R.V., 933 S.W.2d 1, 8 (Tex. 1996). The rationale underlying the discovery rule in such cases is that the attorney-client relationship presupposes a fiduciary duty between attorney and client, who is “either unable to inquire into the fiduciary‘s actions or unaware of the need to do so.” Id. While Texas law recognizes the burdens upon attorneys caused by the discovery rule, the Texas Supreme Court has made clear that “any burden placed upon an attorney by application of the discovery rule is less onerous than the injustice of denying relief to unknowing victims.” Willis v. Maverick, 760 S.W.2d 642, 646 (Tex. 1988). Texas‘s policy of protecting its citizens against the “inherently undiscoverable” malpractice of attorneys is well-established.
The facts guiding our inquiry, furthermore, are at best equivocal, and viewed in the light most favorable to Terry, are supportive of the district court. The “injury” occurred in Texas, and the conduct causing the injury occurred both in Texas (during the mediation) and in Louisiana (before and after the mediation). The attorneys are all residents and licenced practitioners in Louisiana, and Terry is a resident of Texas. We believe that the district correctly determined that “[t]he relationship cannot be said to be ‘centered’ either exclusively in Louisiana and Texas, since numerous contacts occurred in both states and both states have significant connections to the litigation.” Streber, 14 F.Supp.2d at 984. Given that the facts in this case weigh in favor of the application of Texas law, and that the Texas policy “is as strong if not stronger,” id. at 983, than that of Louisiana, Texas law was properly applied by the district court.
III.
Most of the attorneys’ remaining claims on appeal focus on the sufficiency of the evidence presented by Terry to find liability, causation, and damages for each of the alleged torts and for the DTPA violation. Accordingly, the standard of review over these claims is a critical issue. Terry argues that since the defendants did not move for a directed verdict at the close of all the evidence as required by
On this issue, we agree with the attorneys. At the end of the plaintiffs case in chief, the attorneys moved for judgment as a matter of law, which was denied. At the close of all of the evidence, the parties participated in a four-hour conference to discuss the jury charge. After the conference, but before closing arguments, the attorneys and the trial judge engaged in a colloquy about the timing of the remainder of the trial. The judge stated that while in light of the plethora of objections raised at the charge conference he had “no intention of waiving ... anything procedurally,” he would submit the charge to the jury and hear objections, on the record, while the jury was deliberating.28 While the jury was deliberating, the attorneys made objections, on the record, to the jury charge. During those arguments, the attorneys challenged the sufficiency of the evidence on all of the issues they bring up on appeal.
“This Court has repeatedly emphasizеd that the application of
However, while we agree that the attorneys have not waived the “more favorable” standard of review, we nevertheless “employ a deferential standard of review when examining a jury‘s verdict for sufficiency of the evidence.” Douglas v. DynMcDermott Petroleum Operations Co., 144 F.3d 364, 369 (5th Cir. 1998). We review the evidence in its strongest light in favor of Terry, giving her “the advantage of every fair and reasonable inference which the evidence justifies.” Bartley v. Euclid, Inc., 180 F.3d 175, 179 (5th Cir. 1999) (en banc); see also Reeves, 120 S. Ct. at 2110. On each issue, “[w]e will not disturb the jury‘s verdict unless, considering the evidence in the light most favorable to [Terry], the facts and inferences point so overwhelmingly to [the attorneys] that reasonable jurors could not have arrived at a verdict except in [their] favor.”
IV.
In Texas, a legal malpractice claim sounds in tort and is evaluated based on negligence principles. A plaintiff must prove four elements to recover: (1) the defendant owed a duty to the plaintiff; (2) the defendant breached that duty; (3) the breach prоximately caused the plaintiff injury; and (4) damages resulted. See SMWNPF Holdings v. Devore, 165 F.3d 360, 364 (5th Cir. 1999) (citing Cosgrove v. Grimes, 774 S.W.2d 662, 664-65 (Tex. 1989)); Simpson v. James, 903 F.2d 372, 376 (5th Cir. 1990). The attorneys challenge the evidence on each prong of the test.
A.
The attorneys first argue that the evidence was insufficient to prove duty, i.e. standard of care. They claim that Terry‘s expert witness on attorney malpractice, Mike Cook, did not sufficiently identify the standard of care for tax specialists (Hunter and Blazier) and trial attorneys (O‘Dowd). See Geiserman v. MacDonald, 893 F.2d 787, 793 (5th Cir. 1990) (“In most legal malpractice cases, expert testimony is necessary to establish the standard of care since only an attorney can competently testify to whether the defendant comported to the prevailing legal standard.“).
We find that Cook‘s testimony sufficiently identified the standard of care. Cook clearly stated that, to satisfy the standard of care, the attorneys had to act as an ordinarily prudent attorney would in the same or similar circumstances. He also stated that for tax specialists, the standard was higher because tax specialists “have been trained in ... a fairly complex—very complex area ... [and] our clients come to us believing that because we are tax specialists, we have this higher degree of knowledge that they are seeking.” Cook also testified to the specific duties that Hunter, Blazier, and O‘Dowd, owed their clients, Terry and Tracy. Specifically, he testified that the attorneys had a duty to carefully analyze the facts of their situation and the relevant state and federal law and make sure that their clients were “fully informed and not misled” about both the facts and the law. Accordingly, we reject the attorney‘s argument that Terry presented insufficient evidence to establish the standard of care.
B.
Next, the attorneys argue that there was insufficient evidence to prove that they committed malpractice, i.e., that there was insufficient evidence to prove breach of the standard of care. “A lawyer in Texas is held to the standard of care which would be exercised by a reasonably prudent attorney.... The standard is an objective exercise of professional judgment, not the subjective belief that his acts are in good faith.” Cosgrove, 774 S.W.2d at 664-65. The attorneys make several related arguments, which we address in turn.
1.
The attorneys’ initial assault on thе jury verdict is the claim that because we earlier found that the tax position they advised Terry and Tracy to report was supported by “substantial authority,” see Streber, 138 F.3d at 223, they satisfied the “reasonably prudent attorney” standard as a matter of law. Because the attorneys misstate the law and our prior opinion on this point, we disagree.
While intuitively it may seem that advising a position supported by “substantial authority” cannot constitute malpractice, our prior opinion dealt with “substantial authority” not in the dictionary definition sense, but rather as a term of art defined by the tax code. At the time it was enforced against Terry and Tracy,
As made clear by the reasoning in our prior opinion, one can have sufficient “substantial authority” to avoid a “substantial understatement” penalty without necessarily having a solid legal position. The reporting position advised by the attorneys turned on one factual issue: when Parker made the gift to his daughters.... The subsidiary facts relating to this transaction were complex, largely undisputed, and not materially affected by the Tax Court‘s assessment of the sisters’ lack of credibility. In a recent decision, the Eleventh Circuit explained that where the substantial authority issue turns on evidence going both ways, there is substantial authority from a factual standpoint for the taxpayer‘s position. Only if there was a record upon which the Government could obtain a reversal under the clearly erroneous standard could it be argued that from an evidentiary standard, there was not substantial authority. Streber, 138 F.3d at 223 (emphasis added) (citing Osteen v. Commissioner, 62 F.3d 356, 359 (11th Cir. 1995)). As described in our prior opinion, from a factual standpoint, taxpayers have “substantial authority” for their reporting position unless the factual evidence to the contrary is so clear that it would not survive the clearly erroneous standard of review.29 Accordingly, the fact that the positiоn advised by Hunter, from a factual standpoint, was supported by “substantial authority,” is hardly dispositive of whether it is a position that a reasonable attorney, let alone a reasonable tax specialist, would insist is correct.
2.
Second, the lawyers argue that their tax advice (to treat the transaction as a 1985 gift on which Parker owed the gift tax) was correct, or, at the very least, not negligent.30 However, Terry‘s malpractice argument is more nuanced than the attorneys characterize it: she bases her argument on many factors which she posits
Breach of the standard of care must generally be proven by expert testimony, see Geiserman, 893 F.2d at 793, and Terry provided it in the form of attorney Mike Cook.32 Contrary to the attorneys’ arguments, Cook did testify that treating the transaction as a 1980 gift was incorrect as a matter of law—while at one point during his testimony he refused to take a position on exactly when the gift was made, at another he testified that this reporting position was “not a position taken by a reasonably prudent attorney.” Cook testified that, in his view, their reporting position was so dubious that it might not even satisfy the low “substantial authority” threshold. Cook‘s most specific and damaging testimony was that, based on all the evidence available to the attorneys, at least by 1993, advising Terry and Tracy not to settle because they had a good chance to win at trial was far too high a risk. As he stated:
My opinion is that not only was the income tax position not a position taken by a reasonably prudent attorney, ... but that in addition, the entire risk involved with taking the position, that is the exposure to a huge gift tax, was not properly analyzed.... [I]f you win the income tax position and successfully show the Court that the gift was of cash made in 1985, then the Internal Revenue Service simply has a green light to come collect ... [a] very large gift tax from Terry and Tracy.
In short, Cook‘s testimony confirmed the plaintiffs’ theory that whatever happened at thе Tax Court trial was a “lose-lose” scenario: if their position that the gift was made in 1985 was incorrect (as it was proven to be), they would be liable for capital gains taxes and a large amount of interest; if their position was correct, they would be liable for the higher gift tax via transferee liability. See
The attorneys argue that they adequately informed Terry and Tracy of the risk of transferee liability. However, the testimony at trial and a plethora of documentary evidence belies that claim. For example, in a June 13, 1991 letter from the attorneys to Terry and Tracy, the attorneys noted that in pre-mediation discussions with the IRS,
The [IRS] hinted broadly that the Service believes your father insolvent. He makes this pitch: Your client may not directly owe the tax, but they have the money and they must pay if their father won‘t. This stretches the gift tax transferee liability statute beyond recognition.
The attorneys believed, and continuously and erroneously told Terry and Tracy, that if Parker was liable for the gift tax, the IRS would have to pursue him for the money before approaching the sisters and, accordingly, the risk of transferee liability was extremely remote.34 As described above, this statement about transferee liability is incorrect as a matter of law and, as Cook testified, it represented conduct below the standard of care for general practitioners, let alone tax specialists.
Terry points to Cook‘s testimony as the critical evidence supporting her claim of malpractice. However, it is not the only evidence that Hunter, Blazier, and O‘Dowd performed below the standard of care. The record shows that Hunter and Blazier‘s legal research and factual investigation was grossly inadequate, particularly in light of the fact that Terry and Tracy paid them approximately $300,000 for their work.35 The fact that O‘Dowd was the first (in 1992) to interview Bradish, to request much of the critical documentation, and to determine what state law applied, let alone what that state law was, is telling of the quantity and quality of their work. Further, the record contains evidence that Hunter and his colleagues, at least twice, rejected a settlement opportunity without first consulting with their clients, and once, without Terry and Tracy‘s consent, demanded a release for themselves and the
The attorneys contrast Cook‘s testimony with that of their malpractice expert, Chad Muller, which they claim was more specific and reliable. However, “in case[s] of conflicting expert testimony, the jury is entitled to make credibility determinations and believe the witness it considers more trustworthy.” Simpson, 903 F.2d at 377. We admit that the evidence of malpractice presented by Cook in this case was not insurmountable.36 However, given our standard of review and the existence of significant evidence of malpractice, we must affirm the jury verdict on this issue. See id. (“Although the evidence of [the attorney‘s] negligence is not overwhelming, we are not persuaded that the jury‘s conclusion is unreasonable.“).
C.
The attorneys also claim that there was insufficient evidence to prove that their malpractice, if any, was the proximate cause of Terry‘s injuries. The attorneys maintain that expert testimony was necessary to prove proximate cause, and that none was provided. Terry responds that expert testimony was unnecessary in this case because the issue was “one that lay people would ordinarily be competent to make.” Arce v. Burrow, 958 S.W.2d 239, 252 (Tex. App.—Houston [14th Dist.] 1997), rev‘d on other grounds 997 S.W.2d 229 (Tex. 1999); see also Delp v. Douglas, 948 S.W.2d 483, 495-96 (Tex. App.—Fort Worth 1997) (“[Defendants] urge[] us to adopt a rule that would require expert testimony regarding proximate cause in all legal malpractice cases.... While we agree that expert testimony on proximate cause may be required to prove some legal malpractice claims, we refuse to hold that it is required to prove all such claims. Instead, we believe that the proper rule is one that would only require expert testimony on proximate cause in cases where determination of that issue is not one that lay people would ordinarily be competent to make.“), rev‘d on other grounds 987 S.W.2d 879 (Tex. 1999). Terry posits that once liability for negligence and breach of fiduciary were established, “[a]ny rational juror, who could do simple math, could understand that Terry was severely damaged as a direct result of [the attorneys’ actions].”
Guided by the decisions of the Texas courts, we agree with Terry. In Delp, after an expert testified on negligence, the court held that the plaintiff, “as a lay person, was qualified to testify that the advice he received from [his lawyer] resulted in [his loss of assets] and in his subsequent bankruptcy filing.” Delp, 948 S.W.2d at 495-96. Here, once Cook‘s testimony established negligence and breach of fiduciary duties, lay testimony was sufficient to establish causation. Several witnesses testified that Terry thought she
V.
The attorneys also challenge the jury‘s finding of liability for actual and additional damages under the Texаs Deceptive Trade Practices Act. The DTPA “protect[s] consumers against false, misleading, and deceptive business practices, unconscionable actions, [and failures to disclose] ... in the course of any trade.”
A.
The attorneys first assert that Terry‘s DTPA claim is merely a claim that they provided bad advice and, therefore, that the claim is not cognizable under the DTPA. While they are correct that mere claims of attorney negligence may not be cognizable under the DTPA, see Latham v. Castillo, 972 S.W.2d 66, 69 (Tex. 1998); Greathouse v. McConnell, 982 S.W.2d 165, 172-73 (Tex. App.—Houston [1st Dist.] 1998, pet. denied),38 Terry has alleged that the attorneys affirmatively misrepresented facts and otherwise deceived them. If Terry produced evidence of specific deceptive acts, her claim was cognizable under the DTPA as well as under the common law of legal malpractice. As the Texas Supreme Court has held,
Recasting the [plaintiffs‘] DTPA claim as merely a legal malpractice claim would subvert the Legislature‘s clear purpose in enacting the DTPA—to deter deceptive business practices. If the [plaintiffs] had only alleged that [their attorney] had negligently failed to timely file their claim, their claim would properly be one for legal malpractice. However, the [plaintiffs] alleged and presented some evidence that [their attorney] affirmatively misrepresented to them that he had filed and was actively prosecuting their claim. It is the difference between negligent conduct and deceptive conduct. To recast this claim as one for legal malpractice is to ignore this distinction. The Legislature enacted the DTPA to curtail this type of deceptive conduct.
The attorneys’ argue that, even assuming their advice was incorrect, there was no evidence of “false, misleading, or deceptive acts or an unconscionable course of action” sufficient to constitute a DTPA violation. They claim that since their advice was purely opinion and they did not lie or mislead Terry on an issue of material fact, the DTPA does not apply. See Douglas, 987 S.W.2d at 885-86 (“[The DTPA is] intended to protect consumers against misrepresentations of material fact; statements of opinion alone are generally insufficient to rise to the level of actionable misrepresentations under the DTPA.“).
Terry, however, points to several acts which she claims violate the DTPA: failures to disclose, see
Though this is a close question, we agree with Terry. First, under Texas law, there was sufficient evidence for the jury to find that the attorneys had misrepresented facts in an effort to persuade Terry and Tracy to continue the tax fight as their attorneys’ fees accumulated. “Generally, an act is false, misleading, or deceptive if it has the capacity to deceive an ignorant, unthinking, or credulous person.” Doe, 907 S.W.2d at 479. The attorneys’ statements that any IRS attempts to collect gift tax from Terry via transferee liability would “stretch[] the gift tax transferee liability statute beyond recognition” were false and deceptive; in fact, they rose to the level of fraudulent misrepresentations which pushed Terry and Tracy into going to trial rather than settling their suit in 1993.40 The Texas Supreme Court has previously held similar claims to be cognizable under the DTPA. See Arthur Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812, 817 (Tex. 1997) (upholding DTPA violation against accounting firm whose incorrect financial analysis persuaded company to acquire an asset which promptly went bankrupt) (“The basis of a [DTPA] misrepresentation claim is that the defendant‘s false statement induced the plaintiff to assume a risk he would not have taken had the truth been known.“).
Second, Terry points to the attorneys’ “failures to disclose” the plethora of evidence, both factual and legal, which indicated that their original advice may have been wrong. The record shows that despite compiling evidence indicating that their original advice, at the very least, was dubious, the attorneys never expressed doubt to Terry and Tracy. To the contrary, they stated that the “documents would speak for themselves,” and that, if anything, the equities, rather than the law, were against them. The failure to disclose many facts material to the sisters’ settlement decision constitutes further grounds for upholding the jury‘s finding of a DTPA violation. See Latham, 972 S.W.2d at 69 (“It is the difference between negligent conduct and deceptive conduct.“).
Finally, as the district court held, there was evidence that the attorneys were “using the sisters in an effort to gain advantage for other clients [i.e. the sisters’ mother] in other cases [i.e. a potentially $17 million lawsuit against Parker].” None of the attorneys ever disclosed the potential conflict between the two representations—if Betty (and the Hunter firm) were to recover $17 million from Parker, his funds would undoubtedly have been exhausted, making Terry and Tracy‘s liability for the tax almost certain—to Terry or Tracy, and this failure to disclose an adverse representation is a deceptive act cognizable under the DTPA. Clearly, this was misleading and deceptive conduct that the jury could have inferred influenced the attorneys’ decision to advise Terry and Tracy not to settle in continued reliance on their 1985 advice.
Accordingly, we find sufficient evidence of “deceptive acts” cognizable under the DTPA to uphold the verdict.
B.
The attorneys next argue that any violation of the DTPA was not a “producing cause” of Terry‘s injuries. “A producing cause is a substantial factor which brings about the injury and without which the injury would not have occurred.” Doe, 907 S.W.2d at 481 (emphasis added); see also Haynes & Boone v. Bowser Bouldin, Ltd., 896 S.W.2d 179, 181 (Tex. 1994) (“Producing cause is an efficient, exciting, or contributing cause which in the natural sequence, produced injuries or damage complained of, if any.“). Plaintiffs need not show foreseeability to prove producing cause. Doe, 907 S.W.2d at 481.
The attorneys argue that there was no evidence that the sisters could have settled their tax liability at the mediation, that Terry‘s damages arise from her failure to “set aside a reserve” to pay her taxes, and that the damages arise from Terry‘s failure to appeal her tax liability to the Fifth Circuit. However, as described herein, there was substantial evidence from which the jury could have inferred that the IRS would have settled in 1993 for $1-$1.2 million. Further, there is substantial evidencе (especially in the testimony of Mike Cook) that any appeal of the underlying tax liability to the Fifth Circuit would have been fruitless. Accordingly, there is sufficient evidence to uphold the jury‘s determination that the attorneys’ deceptive conduct was a “substantial factor” in causing Terry‘s injuries.
C.
The attorneys argue that if they violated the DTPA, they did not do so “knowingly,” and are thus not liable for DTPA additional damages. “Knowing” violations connote “actual awareness,” which “means that a person knows that what he is doing is false, deceptive, or unfair. In
After a review of the evidence, the district court decided that the defendants knew that their advice was wrong at latest by 1993 (before the mediation and Tax Court trial). Accordingly, the district court ruled that “[b]ased on the evidence, the jury could reasonably have decided that the continuation of the battle was to vindicate, at any cost, Hunter‘s original advice without regard to the best interests of the sisters and that Defendants’ conduct was in knowing violation of the sisters’ best interest.”
After thoroughly reviewing the record, we do not share the district court‘s certainty on this issue. While there was some evidence presented that the attorneys—especially O‘Dowd—uncovered legal and factual evidence which called Hunter‘s original assessment into doubt, nothing was presented from which the jury could infer that the attorneys were aware of their misstatements of legal fact, let alone that those misstatements would persuade Terry and Tracy not to settle. The district court correctly determined that all that is necessary is that evidence be produced from which the jury could have inferred actual knowledge. See St. Paul Surplus Lines Ins. Co., Inc., 974 S.W.2d at 54. However, whether the chain of inferences suggested by the district court is supported by the record is a different, and substantially more difficult, question.
As described below, see supra at part V.A., because the district court failed to requirе separate findings on actual damages for the DTPA violation and the malpractice and breach of fiduciary duty counts, DTPA additional damages are unavailable as a matter of law. Accordingly, we need not decide whether those damages are supported, as a factual matter, by the record.
VI.
The attorneys also dispute the district court‘s allowance and calculation of damages. We review legal issues, such as the availability of a specific type of damages, de novo. See Nero v. Industrial Molding Corp., 167 F.3d 921, 929 (5th Cir. 1999). Factual issues, such as the computation of damages, are reviewed for clear error. See Barrett v. United States, 100 F.3d 35, 38 (5th Cir. 1996).
A.
The attorneys argue that because the jury charge did not separate the amount of actual damages from the DTPA violations from the other causes of action, DTPA additional damages are not recoverable. See Commonwealth Mortgage Corp. v. First Nationwide Bank, 873 F.2d 859, 868 (5th Cir. 1989) (holding that since “[t]he compensatory damage interrogatory did not ask the jury to apportion its damages according to specific theories of liability ... we cannot determine whether the jury made the findings necessary to support the award of additional damages [and] reverse that portion of the district court‘s judgment“). Terry responds that (1) any challenge to the jury charge by the attorneys on appeal was waived by the lack of a formal objection at trial, and (2) even if the attorneys have not waived the issue, Commonwealth Mortgage is inapposite.
In Commonwealth Mortgage, we held that since the trial court failed to separate the amount of actual damages awarded on a DTPA claim from those awarded on other tort claims and a breach of contract claim, the DTPA additional damages were
The jury charge in this case suffers from many of the same defects present in Commonwealth Mortgage. The jury answered “yes” to all three questions on liability, but was only asked to assess the damages generally, not relative to each count. Since the jury was not asked to allocate the actual damages between the three counts, and was only asked to consider “additional damages” for the DTPA count, it is impossible to determine whether the additional damages were calculated correctly. If, for example, the DTPA actual damages were only $100 and the rest of the large sum of actual damages was due to the tort claims, the “additional damages” available under the DTPA would only be $200, far less than the amount awarded by the jury. As a result, as in Commonwealth Mortgage, here “we cannot determine whether the jury made the findings necessary to support the award of additional damages.” Id.
Terry attempts to distinguish Commonwealth Mortgage with the argument that, in that case, the count other than the DTPA violation was breach of contract, for which additional damages were unavailable. However, in Hadley v. VAM P.T.S., 44 F.3d 372 (5th Cir. 1995), we considered a case where the jury separately found compensatory and punitive damages on a Title VII count, and found punitive damages on an intentional infliction of emotional distress count. We held that since there was no specific finding of an amount of actual damages on the intentional infliction count, and “a finding of actual damages is a prerequisite to receipt of punitive damages,” punitive damages for intentional infliction were precluded. Id. at 375. In Hadley, even though additional damages were available under both causes of action upon which the jury found actual damages, since they were available under a different standard, separate findings of an amount of actual damages were required. See id. at 375.
Terry argues that because the standard for the award of DTPA additional damages, i.e. that the violation be committed “knowingly,” is substantially higher than the standard for the imposition of punitive damages under either of the common law torts, any errоr in failing to secure a separate finding of actual damages on the DTPA count was harmless. We disagree. The standard for the imposition of punitive damages in negligence cases—gross negligence, see Transportation Ins. Co. v. Moriel, 879 S.W.2d 10, 19-23 (Tex. 1994), differs in theory and practice from the “knowingly” standard for the imposition of additional damages under the DTPA. At one time, the Texas Supreme Court had held that “the terms gross negligence, ‘knowingly,’ ‘willful,’ and intentional ... lie on a continuum with gross negligence being the lowest mental state and intentional being the highest.” St. Paul Surplus Lines Ins. Co., Inc., 974 S.W.2d at 53 (citing Luna v. North Star Dodge Sales, Inc., 667 S.W.2d 115, 118 (Tex. 1984)). However, in St. Paul, the Texas Supreme
To commit a “knowing” violation of the DTPA, an individual must decide to take a given course of action with the knowledge that the path is “false, deceptive, or unfair” to another. See St. Paul Surplus Lines Ins. Co., Inc., 974 S.W.2d at 53. By contrast, one is “grossly negligent” when “[s]ubjectively, the defendant [has] actual awareness of the extreme risk created by his or her conduct,” and “[o]bjectively, the defendant‘s conduct [involves] an extreme degree of risk.” Moriel, 879 S.W.2d at 22.42 Accordingly, while it is not altogether clear where the two standards lie on the post-Moriel “continuum” in their state of mind element, it is clear that recovery under the respective standards is based on different evidence. Recovery for “gross negligence” is based on the fact that the defendant is actually aware that his or her conduct created an extreme degree of risk that the plaintiff would be seriously injured. Recovery for “knowing” violations of the DTPA is based on the fact that defendant is actually aware that his conduct was “false, deceptive, or unfair.” Accordingly, a “knowing” violation of the DTPA does not necessarily connote “gross negligence“; conduct can be “false, deceptive, or unfair” and still not create an “extreme degree of risk of serious injury to the plaintiff.”
We thus cannot agree with the district court that it did not need to separate the actual damage award on the DTPA count from the actual damage award for the negligence and breach of fiduciary duty counts. As in Commonwealth Mortgage and Hadley, we are here unable to evaluate the propriety of the DTPA additional damage award because it is unclear what proportion of the actual damage award was attributable to the DTPA violation rather than the cоmmon law torts.43 Accordingly, we vacate the district court‘s award of additional damages to Terry.44
B.
In calculating actual damages, the jury assessed Hunter individually at fault for 60% of the damages and the firm at fault for 10%. Hunter and the firm dispute the imposition of damages on both entities, characterizing this action as “double counting.”
We reject this argument. As a threshold matter, neither Hunter nor the firm ever previously challenged the submission of both entities to the jury as potentially liable parties, and accordingly we review only for plain error. See Tompkins v. Cyr, 202 F.3d 770, 784 (5th Cir. 2000) (holding that a double recovery challenge was “essentially [an] objection[] to the jury instructions” and that the failure to object to the instructions on that ground “limits the defendants’ ability to appeal on these grounds“). Reviewing for plain error, we find none. Despite the fact that Hunter is the firm‘s sole shareholder and, under basic corporate law principles, the only one liable for the firm‘s debts, see Robert C. Clark, CORPORATE LAW § 1.2.1 (1986), Hunter and the firm are clearly separate legal entities whose involvement in the course of events at issue in this case, and corresponding level of culpability, differ. Accordingly, the district court properly submitted both entities to the jury and allowed the factfinder to decide their respective levels of guilt, if any.
C.
The attorneys object to the award of $97,500 in actual damages to Terry for the reasonable value of her time spent “attempting to resolve the situation.” The record reveals that this element of damages was thrown out by the trial judge during the charge conference, only to mysteriously appear in some copies of the jury charge, including the one read and presented to the jury. During the on-the-record objections to the jury charge, which occurred while the jury was deliberating, the following colloquy occurred:
The Court: With regard to the damage questions, I think there‘s one in there that was in one of the earlier drafts. We were going—I think it‘s the one with regard to the time, trouble and nuisance of them trying to recover the money.
Plaintiffs: Right.
The Court: We took that out, and all of a sudden it appeared again in the last draft, the one I read to the jury. I don‘t know where it came from. My operator-computer doesn‘t know where it came from. Because we remember specifically, I think, draft three or four don‘t [sic] have it in it. It appeared in the last one. So that‘s one that isn‘t supposed to be there.
Plaintiffs: I don‘t believe The Court read that to the jury, did they?
The Court: I think I did, but if we get something, I‘ll have to deal with that then. It didn‘t appear in the other copies and may not appear—
Defendants: It wasn‘t in my copy.
Plaintiffs: It was not in my copy.
The Court: Where it came from, we don‘t know what happened in the computer. But that‘s the one they have. We will just have to—that is an error that I have seen, so it‘s not supposed to be there.
The jury, which was instructed orally and in writing to consider such damages, awarded Terry and Tracy $97,500 each for the time spent correcting the problems caused by the attorneys. Inexplicably, however, despite the statements above showing its intent to eliminate this element, the district court entered judgment in that amount for each sister.
The attorneys argue that because the jury charge presented to them before closing arguments did not contain this element of potential damages, entering judgment for them violates due process because their lack of notice made them unable to argue the issue in closing arguments.45 We agree. It is well-settled that litigants have due process rights to fully litigate each issue. See du Pont v. Southern Nat‘l Bank of Houston, Texas, 771 F.2d 874, 881 (5th Cir. 1985). While that right in civil cases does not necessarily include the right to make a closing argument, cf. In the Matter of Generes, 69 F.3d 821, 825 (7th Cir. 1995) (“[Plaintiff has] supplied no authority for the proposition that closing arguments are a constitutional right in civil cases and nor have we
Here, even though the district court told the parties that damages for the “reasonable value of the time spent ... correcting or attempting to correct the problems caused by the Defendants’ conduct” would not be included in the verdict form or the jury charge, and admitted that inclusion was an “error” and that it “wasn‘t supposed to be there,” the court entered damages for $97,500 on this ground. We vacate this particular award.
D.
The most significant award of actual damages by the jury was in the form of “interest differential,” i.e. the difference between the interest earned by Terry from the $1.7 million while she had it and the interest charged by the IRS. Terry argues that because she would have paid the tax but for the attorneys’ actions, the loss represented by interest differential is a direct consequence of their misconduct. The attorneys argue that such damages are not recoverable as a matter of law.
Our research reveals that this is an issue of first impression in this, or any, court. The parties cite two lines of somewhat analogous cases. First, courts have forbidden recovery of tax interest (all interest paid to the IRS, rather than “interest differential“) as part of the “actual damages” available for securities fraud claims under
We hold that, in this particular case, “interest differential” is a recoverable form of damages. First, unlike recovery
Second, state law governs the availability of damages, see Jackson v. Johns-Manville Sales Corp., 750 F.2d 1314, 1325 (5th Cir. 1985) (“[E]nsuring the availability of compensation for injured plaintiffs is predominately a matter of state concern and, in the absence of congressional enactments, state law, both as to the extent of compensation available and punitive damages, must apply.“), and we believe that under the Texas law at issue in this case, interest differential damages are recoverable. First, the DTPA was enacted “to provide plaintiffs a remedy where the common law fails” and “is to be liberally construed and applied.” Latham, 972 S.W.2d at 68-69. “Actual damages” recoverable under the DTPA include all “those recoverable at common law,” id., and the DTPA envisions compensating plaintiffs for “the total loss sustained as a result of the deceptive trade practice ... includ[ing] related and reasonably necessary expenses.” Henry S. Miller Co. v. Bynum, 836 S.W.2d 160, 162 (Tex. 1992); see also Douglas, 987 S.W.2d at 885 (discussing the “importance of awarding sufficient damages to ensure that the plaintiff is made whole“); Arthur Andersen, 945 S.W.2d at 816 (“The amount of actual damages recoverable is the total loss sustained as a result of the deceptive trade practice.“) (citations omitted). A similar result is apparent under Texas legal malpractice law, which is “in keeping with the well-established principle that a plaintiff should receive an amount of damages sufficient to make her whole.” Douglas, 987 S.W.2d at 885. Without “interest differential” damages, Terry cannot be made whole; accordingly, under Texas law, they should be available.
The only limitation on consequential damages available under the DTPA and Texas malpractice law is that they be “foreseeable” and proven with “reasonable certainty.” See Arthur Andersen, 945 S.W.2d at 816 (asserting that damages must be “directly traceable to the wrongful act and result from it“); Higbie Roth Construction Co. v. Houston Shell & Concrete, 1 S.W.3d 808, 814 (Tex. App.—Houston [1st Dist.] 1999) (“Damages that are too remote, too uncertain, or purely conjectural are not recoverable.“). Given that Hunter was well-aware of the sisters’ plans to invest conservatively, this was clearly foreseeable. Further, Terry testified that she invested her money primarily in certificates of deposits, money market accounts, and annuities, with some invested in mutual funds and bonds. She testified to the exact amount of interest she earned on her investments, and to the exact amount charged by the IRS. Tom Glass, a certified public accountant, testified that Terry‘s investments, which earned approximately 4.5% interest, were those of a reasonably prudent investor. Reed Mendelson, the sisters’ investment advisor (and a defense witness in this case), testified similarly. All told, the testimony told the jury exactly how much interest Terry had earned on the $1.7 million and exactly how much interest the IRS charged her for holding on to it. This is sufficient “reasonable certainty” to uphold the damage award under the DTPA and Texas legal malpractice law.
VII.
Finally, the attorneys make several arguments concerning the evidence they were allowed to introduce, and the general conduct of the trial. They assert that because of a multitude of errors, the district court erred in denying their motion for a new trial.
A.
The attorneys first complain of the district court‘s failure to grant a continuance before trial. Our review of this decision is circumscribed. As we have previously held,
When the question for the trial court is a scheduling decision, such as whether a continuance should be granted, the judgment range is exceedingly wide, for, in handling its calendar and determining when matters should be considered, the district court must consider not only the facts of the particular case but also all of the demands on counsel‘s time and the court‘s. We will not substitute our judgment concerning the necessity of a continuance for that of the district court unless the complaining party demonstrates that it was prejudiced by the denial.
HC Gun & Knife Shows, Inc. v. City of Houston, 201 F.3d 544, 549-50 (5th Cir. 2000).
The attorneys claim that a continuance was warranted for two reasons. First, thirty-nine days before trial, counsel for all of the attorneys in a joint defense, Casey Dobson, wаs granted leave to withdraw from the case and replaced by new counsel.48 Dobson withdrew because representation of all of the attorneys in a joint defense involved conflicts of interest. Those conflicts were exposed when, shortly before trial, Terry and Tracy presented a settlement offer to Jamison Dupuy, then also a defendant in the case. The settlement offered to release Dupuy from the case not in exchange for a sum of money, but rather in exchange for his obtaining and presenting to Terry and Tracy‘s attorneys a defense file which could harm the other attorneys. Once the settlement offer was received, what appeared to be in Dupuy‘s best interests was contrary to those of the other attorneys.
Despite the fact that the particular problem which sparked Dobson‘s withdrawal was created by questionable tactics on the part of the sisters’ attorneys,49 we do not agree that a continuance was warranted on these grounds. Given that one attorney was representing a plethora of defendants, whose interests were clearly separable, it should not have been surprising that conflicts of interest arose. See generally Ronald E. Mallen & Jeffrey M. Smith, LEGAL MALPRACTICE § 29.9 (4th ed. 1996) (“The litigation attorney is susceptible to those conflicting interests indigenous to the representation of multiple parties. The consequences of such representation can be disqualification, discipline, loss of compensation and malpractice liability.“). For example, we agree with Terry that, given that Hunter provided the initial advice in this case, each of the other
Second, the attorneys argue that a continuance should have been granted to give them additional time to rеbut the sisters’ interest differential theory. The district court initially granted the attorneys’ motion for summary judgment, asserting that interest due to the IRS was not a recoverable form of damages.51 Shortly thereafter, Terry filed a motion for reconsideration, and Tracy filed a motion to reconsider or to clarify. Based on these motions, the district court decided to “allow testimony with regard to the rate of returns with regard to ... the difference between the rate of return and the interest rate charged by the IRS.” The two rulings are not entirely contradictory: the first granted summary judgment on the issue of whether all interest owed the IRS was recoverable, while the second denied summary judgment on whether “interest differential” was recoverable.
The attorneys claim that failing to grant a continuance was error, because (1) once the court granted partial summary judgment on this ground, they allowed their expert witness to go on vacation, and accordingly at trial they were without the testimony of their expert witness, and (2) they had insufficient notice to defend themselves against this particular claim. However, as Terry notes, the attorneys were well aware that both plaintiffs had filed motions for reconsideration which remained pending, and thus the issue remained alive. “A partial summary judgment order ... is not a final judgment but is merely a pre-trial adjudication that certain issues are established for trial of the case. Such an order is interlocutory in nature, is subject to revision by the district court, and has no res judicata effect.” F.D.I.C. v. Massingill, 24 F.3d 768, 774 (5th Cir. 1994). Furthermore, if the defendants wanted to dispute the interest differential theory, they had nine days between the time the court decided to entertain the theory and the time they began presentation of the defense case to prepare. Accordingly, while the partial reversal of the earlier summary judgment motion made it more difficult for the attorneys to defend themselves, there was no undue prejudice.
B.
The attorneys next complain of the district court‘s exclusion of the Tax Court opinion, specifically its finding that Terry was “not credible,” as evidence at the trial. The district court excluded the opinion under
The portion of the Tax Court opinion that the attorneys wanted the jury to hear included the following:
We did not find the daughters to be credible witnesses. [Terry] did not offer oral testimony, but her testimony was offered by deposition and affidavit. She also answered interrogatories. There are significant inconsistencies between (1) her testimony and her answers to interrogatories and (2) other evidence in this case. We believe that, in various important respects, [Terry] has failed to tell the truth.... Accordingly, we have accorded [Terry‘s] testimony very little weight.... Tracy did testify orally. In important respects, her testimony was vague and indefinite. She was contradicted by other witnesses. We do not have much confidence in her testimony, and, accordingly, we give it little weight.
Streber, 70 T.C.M. at 1611 (emphasis added). The attorneys argue that they should have been able to show the jury that the tax court judge found Terry and Tracy incredible, and they assert that exclusion deprived them of a fair trial.
We disagree. The district court excluded the opinion because it felt the opinion would confuse and/or mislead the jury. This is undoubtedly true. The tax court found Terry‘s written testimony contradictory, and stated that Terry “failed to tell the truth” even though Terry did not testify at the tax court trial and was absent for the entire proceeding; rather, she was in the midst of a high-risk twin pregnancy and was told by her doctor to avoid long trips. The district court was understandably wary that the jury would find the tax court to have some particular expertise in judging credibility, and that the opinion would mislead the jury into finding Terry incredible in this case.53
Moreover, as the district court noted, we reversed the Tax Court‘s opinion in part, finding that Terry and Tracy relied on Hunter‘s advice. See Streber, 138 F.3d at 221. Introduction of the Tax Court opinion would have inevitably led to arguments about our partial reversal of the Tax Court, which is legally complicated. The trial judge framed the problem concisely when he stated that “I think there‘s some real problems in dealing with trying to explain or trying to deal with what the 5th Circuit did with those issues.” Admitting the Tax Court opinion would have confused the issues in that
[I]n attempting to dispute or explain away the evidence thus offered, new issues will arise as to the occurrence of the instances and the similarity of conditions, new witnesses will be needed whose cross examination and impeachment may lead to further issues; and thus the trial will be unduly prolonged.
Plemer v. Parsons-Gilbane, 713 F.2d 1127, 1139 n. 11 (5th Cir. 1983) (citing 2 Wigmore, EVIDENCE § 443 at 528-29). In reading the Tax Court opinion, it is unclear how its judgment on Terry and Tracy‘s credibility affected the outcome. Its judgment that the gift was made in 1980 was based almost exclusively on the documents presented and the testimony of Bradish. While unclear from the opinion, it appears that the sisters’ credibility affected only the Tax Court‘s imposition of penalties, which we reversed on appeal. As we there noted, “[t]he subsidiary facts relating to [the land deal] were complex, largely undisputed, and not materially affected by the Tax Court‘s assessment of the sisters’ lack of credibility.” Streber, 138 F.3d at 223. The district court felt that explaining our partial reversal, which
We note that, if probative at all, the exclusion of the Tax Court opinion helped the attorneys as much as it hurt them. Despite the fact that the Tax Court judge (who did not hear testimony from Terry) found Terry incredible, the tax opinion shows that if Hunter had done a sufficient investigation into the facts of the case (by, for example, interviewing Bradish and collecting all the documents) and the Texas law of gifts, he would have not advised Terry and Tracy as he did. Reading the Tax Court opinion, one does not get the feeling that the sisters had a very good chance of success; rather, the Tax Court saw this as an easy case in deciding that the attorneys’ advice was wrong. Therefore, if the jury would have understood the entire Tax Court opinion, as the attorneys posit, admittance would have made liability more, rather than less, likely.
C.
The attorneys also argue that the district court‘s allowing Tracy‘s attorney, Brad Reagan, to describe how his attorneys’ fees were calculated to the jury warranted a mistrial. At trial, Reagan called himself as a witness and gave testimony as to how much money his client had paid him, the difference between paying a lawyer hourly or based on a contingent fee agreement, and the qualifications of himself and his staff. He testified as such because “reasonable and necessary” attorneys’ fees are available as damages for violations of the DTPA, see
The DTPA allows the recovery of “reasonable and necessary” attorneys’ fees, see id., and “it is the province of the jury to determine the reasonable value of an attorney‘s services.” Brown v. Bank of Galveston, 930 S.W.2d 140, 145 (Tex. App.—Houston [14th Dist.] 1996), aff‘d 963 S.W.2d 511 (Tex. 1998); see also Arthur Andersen, 945 S.W.2d at 819 (“[T]he jury must decide the question of attorney‘s fees specifically in light of the work performed in the very case for which the fee is sought.“). Since “[i]n actions under the DTPA, reasonableness of the fee claimed must be established by evidence,” Leggett v. Brinson, 817 S.W.2d 154, 157 (Tex. App.—El Paso 1991, n.w.h.), Reagan was merely attempting to present the jury with evidence by which they could adequately evaluate the claim for reasonable attorneys’ fees.55
However, this does not necessarily lead to the conclusion that the district court should have granted a mistrial; rather we “must consider the jury charge and any corrective measures taken by the trial court.” Id. While the jury was out of the courtroom, the parties and the judge engaged in a lengthy colloquy. The parties decided to leave attorneys’ fees up to the judge, and the judge commented that they would let the jury go for the day, and that he would give them proper instructions the following morning. Neither party objected, and neither party asked for the judge to immediately instruct the jury to disregard the testimony. When the jury returned for the day, the judge told the jury that the parties agreed to have the attorneys’ fees issue decided by him at the conclusion оf the case, and commented that “I‘ll give you some instructions with regard to how to handle [the evidence] in your determination of any damages, if any, that you decide as the case goes on and you look at those [jury] questions.” The next morning, after a further colloquy, the judge again instructed the jury that “since that particular issue is no longer before the jury for your consideration as a factfinder, you‘re instructed to disregard the evidence presented and not consider it for any purpose. Is that clear. Any question about that?”
To the extent Reagan‘s comments were improper, any harm was cured by the judge‘s instructions to disregard, and by the jury instructions,57 in which the jury was further instructed that the evidence it was told to disregard “can not be used by you in answering any of the questions propounded to you or for any other purpose.” Accordingly, the district court did not err in failing to grant a mistrial.
VIII.
In sum, while this is a close case, under our limited standard of review we find the evidence sufficient to sustain the jury‘s verdict on all counts of liability. However, we hold that the district court erred in awarding $97,500 in actual damages to Terry based on the reasonable value of her time in attempting to resolve the situation, and vacate the award of these particular actual damages. Further, we find that the district court erred in awarding DTPA additional damages because, under Commonwealth Mortgage and Hadley, the district court‘s failure to separate the actual damages on the DTPA claim from those on the negligence/breach of fiduciary duty claims makes additional damages unavailable. Accordingly, we affirm in part, reverse in part, and remand for the district court with instructions to enter judgment for Terry in the amount of $839,116.00 in actual damages, plus the reasonable attorneys’ fees identified by the district court.58
I concur in this good opinion, emphasizing only the narrowness of our holding on DTPA liability. First, the statute was significantly amended with respect to attorneys after the events before us occurred; our opinion doesn‘t bear on the amended law. Second, there was sufficient, if not overwhelming, evidence for the jury to find that actual misrepresentations not amounting to mere statements of legal opinion were made to the plaintiff. Third, I would not rely on the alleged undisclosed conflict of interest between the lawyers’ desire to capitalize on the mother‘s lawsuit against Parker and the presumably less-legally-remunerative attempt by the daughters to make Parker pay their taxes. Not only were the clients fully aware of Parker‘s financial condition, it also seems evident that mother and daughters were presenting a united front against Parker. There was no conflict of interest from the attorneys’ standpoint, rather, a misguided attempt at a pincer strategy.
Notes
There is no question that your clients acquired an interest in a joint venture in 1980. That interest was subsequently sold in return for notes which were paid in 1985. Under no circumstances can it be construed that your clients received any kind of a gift from their father in 1985. I encourage you to re-evaluate the reporting of your clients receipt of the proceeds of the notes. We will provide you with any background information that you might need; but other clients of yours, the Berwicks, have been aware since 1980 of the circumstances under which Teresa and Tracy acquired their original interests in the joint venture. I do not need to tell you how severe the consequences can be for the failure to report capital gains income in the year in which it was realized. Please call me if you have any questions.
Prior to that time, neither Hunter nor anyone involved with the sisters’ case had seen the letter.Dear Betty Parker,
This is to confirm that J. Robert Bradish holds in trust for Tracy Parker and Terry Parker 80% of the 50% venture interests (i.e. 40% of the venture) which is being negotiated between Jack Thoner and J. Robert Bradish. In the event J. Robert Bradish dies prior to termination of the venture, the trustee will be Larry Parker or a person chosen by him.
Id. While the general tenor of this passage supports the attorneys’ arguments, we note that the DTPA was not part of the plaintiff‘s case in Sledge, and that given the Texas Supreme Court‘s clear language in Latham, 972 S.W.2d at 69, to the extent Sledge implicates Terry‘s claims in this case, it is no longer good law.Nothing is to be gained by fracturing a cause of action arising out of bad legal advice or improper representation into claims for negligence, breach of contract, fraud or some other name. If a lawyer‘s error or mistake is actionable, it should give rise to a cause of action for legal malpractice with one set of issues which inquire if the conduct or omission occurred, if that conduct or omission was malpractice and if so, subsequent issues on causation and damages. Nothing is to be gained in fracturing that cause of action into three or four different claims and sets of special issues.