By John Council
Special Report ’05 Year in Review:
The Impact Players: The Angry Client: See You In Court
2005 demonstrated that clients and plaintiffs lawyers are more willing than ever to sue law firms — litigation largely unheard of 15 years ago.
One legal-mal lawyer attributes that increase, at least in part, to the tort reform measures that have sent some plaintiffs lawyers in search of new practice areas.
Serving as examples of this new willingness are several Texas law firms that were busy this year defending themselves from malpractice suits filed by former clients upset about the representation they received. Clients alleged that their lawyers entered into self-serving contracts, gave bad bankruptcy advice, made ill-advised estate-planning decisions, and mishandled settlement negotiations.
Daniel Sheehan, a legal malpractice lawyer with Dallas’ Daniel Sheehan & Associates, says there are two basic types of claims clients file against their attorneys — negligence and breach of fiduciary duty.
‘The more serious violation is the breach of fiduciary duty that the lawyers owe to the client. And I’m seeing more of that,’ Sheehan says. ‘And that’s because law firms are becoming like businesses — they’re financially driven. And a lot of it has to do with a lawyer [continuing to litigate] a case that could have been resolved.’
The litany of suits against Texas firms spans a range of practice areas.
Earlier this year, two former clients sued Dallas-based Godwin Gruber. ‘I don’t think these types of suits happen that often. It just so happens that we got two of them in one year,’ says Darrell Jordan, a partner in the firm. ‘I don’t think we did anything wrong in either circumstance.’
Godwin Gruber faced one suit by a national radio celebrity and faces another involving allegations concerning a former client’s use of the NASCAR logo.
In May, Seattle-based national radio show host Delilah Rene filed a suit alleging breach of fiduciary duty against Godwin Gruber partner Brian Hail and the firm in the U.S. District Court for the Western District of Washington. In her complaint in Delilah Rene v. Godwin Gruber, Rene alleges that Hail and the firm improperly took a percentage interest in a media company they set up as part of her new radio contract.
Jordan says Hail and the firm returned their interest in Rene’s company to her shortly after she filed the suit. Jordan adds that Hail and the firm had no idea Rene was upset until after she sued them. The firm and Hail settled the case with Rene two months ago, and no money changed hands, Jordan says. Katherine Hendricks, a partner in Seattle’s Hendricks & Lewis who represents Rene, did not return a telephone call seeking comment before presstime on Dec. 15.
In August, another former client, Consolidated Sports Media Group, sued Godwin Gruber over allegations involving stock promotion, NASCAR’s trademark and a video titled ‘Race Track Girls Go Nutz’ featuring nude women. [See 'Former Client Sues Godwin Gruber and Partner Over Blast Fax,' Texas Lawyer, Aug. 29, 2005, page 8.]
‘It’s in the discovery stage right now, and we deny that we are obligated to them in any way,’ Jordan says of Consolidated Sports Media Group v. Godwin Gruber.
Lewis R. Sifford, president of Sifford, Anderson & Co., who represents CSMG, says he has noticed an increase in serious malpractice cases filed against law firms recently.
‘I think a lot of it has to do with laxness in what attorneys know about conflicts and disclosures,’ Sifford says. ‘We ask them if they have a fiduciary duty to their clients, and they say they don’t think so. It’s appalling and shocking.’
In another suit, Sheehan represents the plaintiffs in National Association of the Christian Church (Disciples of Christ), et al. v. Weil Gotshal & Manges. In that suit, Sheehan’s client, a nonprofit charitable organization, alleges that Weil Gotshal lawyers negligently advised it to file bankruptcy in Texas, and pursued a litigation plan designed to generate excessive fees for the firm rather than saving its client from financial ruin. [See 'Church Charity Sues Weil Gotshal Over Bankruptcy Advice,' Texas Lawyer, Sept. 26, 2005, page 5.]
Weil Gotshal denies any wrongdoing and says that the decision for the nonprofit to file for bankruptcy became necessary after negotiations with the nonprofit’s creditors failed to produce an acceptable agreement, according to a statement the firm released earlier this year. ‘The firm believes the litigation is wholly without merit,’ says Mike Ford, a spokesman for the firm.
In February, a Kerr County jury found that Baker Botts breached its fiduciary duty in connection with estate-planning work done for a wealthy widow in Kerrville. The jury returned a $65.5 million verdict against the Houston-based firm and other defendants.
The jury found Baker Botts breached its fiduciary duty for failing to disclose ‘all important information’ when doing estate-planning work for a client, Kathleen C. Cailloux. [See 'Jury Returns $65 Million Verdict Against Firm, Other Defendants,' Texas Lawyer, March 7, 2005, page 8.]
Joseph Cheavens, a Baker Botts partner who serves as the firm’s general counsel, says the firm did nothing wrong; it has appealed the jury verdict.
Cheavens believes that law firms are more vigilant now than ever about protecting themselves against breach-of-fiduciary-duty claims.
‘Law firms are much more tuned in to the potential of problems like this and are much more focused on it than they were a number of years ago, simply because, putting aside moral issues, people are focused on the cost that a big claim presents,’ Cheavens says. ‘Very seriously, these days . . . the best way to handle a claim is not to have a claim.’
Lawyers who represent plaintiffs in legal-mal suits are also aware of breach-of-fiduciary-duty claims and are more willing to file such suits, says Rick Harrison, a partner in Austin’s Fritz, Byrne, Head & Harrison who represents the plaintiff in Kathleen C. Cailloux v. Baker Botts, et al.
‘I think that lawyers are more willing to look at the plaintiffs’ side of malpractice cases. There was an era up until 15 years ago where lawyers didn’t want to sue other lawyers. And now lawyers are more willing to pursue litigation claims on behalf of their clients,’ Harrison says.
Probate and estate cases are especially sensitive areas for legal malpractice, because the lawyer’s duties to a client can become complicated in litigation that involves families, Harrison says.
In June, Randy Johnston, a legal malpractice lawyer and partner in Dallas’ Johnston o Tobey, filed a malpractice suit on behalf of a client against Dallas’ Cooper & Scully.
The third-party intervention in Stout, et al. v. Rockmore, et al. concerns a bus crash that killed four children. Johnston’s client, Phoenix-based Republic Western Insurance Co., alleges that it received bad legal advice from Cooper & Scully, and the firm refused or failed to respond to numerous settlement demands within policy limits. Instead the firm advised the insurance company to challenge coverage of a policy written to the defendant bus company. The insurance company was hit with more than $70 million in two jury verdicts stemming from the crash.
R. Brent Cooper, a partner in Cooper & Scully, said earlier this year that his firm did nothing wrong, and that he believes that the malpractice allegations are a mistake. [See 'Gambling on Coverage,' Texas Lawyer, June 27, 2005, page 5.] Cooper did not return a telephone call seeking comment.
Johnston says the suit against Cooper & Scully is part of a continuing trend involving insurance companies that have become aggressive about suing their law firms, when they have to pay big jury verdicts.
Part of the reason lawyers are more willing to file legal-mal suits may be that recent tort reform legislation has cut off revenue streams for many plaintiffs lawyers, so they’re filing legal malpractice suits as a means to recoup fees.
‘When you see an area that seems to be growing, it’s moths to the fire,’ Johnston says. ‘Damn it.’