By John Council
2-19-2007
CALL WAITING. CLIENTS MAKE A FEDERAL CASE OUT OF A LAWYER’S ALLEGED BREACH OF FIDUCIARY DUTY AND WIN
If anything, the recent trial of Karin Jacobs, et al. v. William K. Tapscott Jr., et al. shows just how fractured the attorney-client relationship can become — even after lawyers obtain more than $2 million in settlement money for their clients.
Despite that settlement, three clients of Dallas’ Baron & Budd sued the firm and one of its former associates, Ken Tapscott, alleging the defendants breached their fiduciary duties in their handling of an asbestos wrongful-death case.
The client-plaintiffs alleged during a four-day jury trial that began on Feb. 5 that Tapscott and Baron & Budd — an 80-lawyer plaintiffs firm that made a name for itself in asbestos litigation — did not keep them fully informed about critical aspects of their case, which caused them to lose more than $200,000 in settlement money.
Baron & Budd and Tapscott countered at trial that they did nothing wrong, they negotiated a fair settlement and their clients were just after more money from them.
After more than four hours of deliberation, on Feb. 8 the jury found that Tapscott breached his fiduciary duty when he ‘deliberately lied’ to his clients by telling them that all of the asbestos defendants they sued in 1997 had agreed to settle their case when, in fact, one defendant had not settled. The jury awarded the plaintiffs $129,000 in damages against Tapscott.
However, the jury found that Dallas-based Baron & Budd did not breach its fiduciary duty to its clients by abusing the powers of attorney in its employment agreements with the plaintiffs.
Tapscott, a Democrat, was elected judge of Dallas County Court-at-Law No. 4 last November. He left Baron & Budd in January to join the bench.
As U.S. District Judge Sidney Fitzwater announced the verdict, Tapscott laughed incredulously and shook his head.
‘I did not deliberately lie to anyone,’ Tapscott said as he left the Earle Cabell Federal Building in Dallas.
Robert Greenberg, a Dallas solo who represents Tapscott and Baron & Budd, believes the jury was wrong in its verdict against Tapscott and hopes Fitzwater will set aside the jurors’ decision by granting his directed verdict motion that is pending before the court.
‘I think it’s dead wrong and the jury shouldn’t have had that issue before them in the first place,’ Greenberg says, arguing that the plaintiffs did not suffer any harm, because they received a generous settlement.
After the trial, Karin Jacobs said, ‘It is a just verdict. It was the principle of the thing. It didn’t have anything to do with money. We were lied to, our phone calls weren’t returned and we had just had enough.’
The plaintiffs are family members of Carl Jacobs, who died in 1996 at age 80 after he was diagnosed with malignant mesothelioma, a deadly lung disease associated with asbestos exposure. Widow Karin Jacobs and Carl’s daughters Patria Jacobs and JoeAnn Frost each hired Baron & Budd between 1997 and 1998 to pursue a wrongful-death case against numerous asbestos defendants.
The plaintiffs alleged during testimony in Jacobs that Tapscott, who was the case manager in their wrongful-death suit, told them on June 1, 1999, that their case had settled for $2.5 million in a Galveston state district court. They also alleged during testimony that Tapscott failed to tell them that one of the defendants, the Pittsburgh Corning Corp., rescinded its settlement offer a day later.
Tapscott’s failure to keep them informed about the problems with the settlement offer caused them to lose a trial date in the case and the ability to pursue a verdict against Pittsburgh Corning before the company filed for bankruptcy in 2000, the plaintiffs testified. The plaintiffs testified that when they discovered they had not recovered as much money as Baron & Budd promised them, they contacted Baron & Budd but the firm was not responsive to their inquiries about the reasons for the shortfall.
During the trial both sides’ testimony dealt primarily with Baron & Budd’s client management practices.
The Jacobs family members each testified that they hired Baron & Budd, because the firm came highly recommended from other attorneys the family knew.
Initially, they testified, a lawyer at the firm told them their claims against various defendants were likely worth $3 million.
Months after their initial consultation with the firm, the three Jacobs family members each signed employment agreements with Baron & Budd that included a specific power-of-attorney agreement. The agreements, executed in 1997 and 1998, entitled Baron & Budd to a 40 percent contingent fee. And the powers of attorney allowed the firm to execute all reasonable and necessary documents connected with the case ‘including pleadings, contracts, checks or drafts, [and] settlement agreements’ among other things.
On advice of other attorneys they knew, Karin Jacobs and Patria Jacobs added language to their employment agreements with Baron & Budd that states ‘attorneys agree to consult with client before executing any documents on client’s behalf.’ Frost did not include such language in her employment agreement with the firm.
The three plaintiffs each testified they were happy in 1999 when Tapscott told them their case had settled for $2.5 million.
But Patria Jacobs testified that Tapscott and Baron & Budd did not tell her that the total settlement amount would be less than $2.5 million.
Patria Jacobs also testified that Tapscott and Baron & Budd had not consulted with her about Rule 11 agreements the firm had entered into with individual defendants in the case that bound both sides to the settlement. Instead, Baron & Budd sent Patria Jacobs release forms, which she signed agreeing to specific settlement amounts with individual defendants in exchange for releasing those defendants from further liability. She testified that Baron & Budd did not consult with her about settlement before the firm agreed to the binding Rule 11 agreements.
Patria Jacobs testified that she believed Baron & Budd and Tapscott abused the power-of-attorney agreement she had with the firm by not telling her beforehand about the Rule 11 settlement agreements they entered into with the defendants on her behalf. That communication was critical — especially after one defendant, Pittsburgh Corning, rescinded a $225,000 settlement it had with the Jacobs family, she testified.
‘I believe Baron & Budd should have consulted with me about all of the different defendants,’ Patria Jacobs testified, noting the language she added to her employment agreement requiring that the lawyers consult with her before executing documents on her behalf mandated such communication. ‘I’m a client. They owe me that.’
‘Everything had been done without my knowledge until these [release] papers were sent to me,’ Jacobs testified. ‘I wanted to have some power or say so, even though I’m not an attorney.’
‘They should have told us the $2.5 million settlement wasn’t going to happen,’ Patria Jacobs added.
When Greenberg, who represents Baron & Budd and Tapscott, asked JoeAnn Frost on the witness stand why she hired another lawyer to act as a receiver for all of the releases Baron & Budd sent her, helping her account for the settlement money, she replied, ‘Because you people wouldn’t talk to me.’
Tapscott testified that the Jacobs family had total control of their case. The decision to accept a settlement with each of the individual defendants was theirs and theirs alone by signing the release agreements, he testified.
Tapscott also testified that he didn’t recall having a conversation with the Jacobs family about the Pittsburgh Corning bankruptcy. He also said he was truthful when speaking to the family members about their case.
‘I used real numbers when I told clients that their case would settle’ for $2.5 million, Tapscott testified. ‘I would not call the wife of a man who choked to death and tell her that the case had settled when it hadn’t settled.’
Russell Budd, the managing shareholder of Baron & Budd, testified that the Rule 11 agreements entered into with the defendants were a way of keeping track of the amounts of settlement dollars. The release papers that the clients signed were more important to their case than the Rule 11 agreements, he testified.
‘The companies won’t pay the money without the release. Without the release there is no settlement. And without a settlement, we go back on the trial docket,’ Budd testified.
He also testified that Baron & Budd and Tapscott had no way of knowing that Pittsburgh Corning would eventually file for bankruptcy.
‘It was a black day when Pittsburgh Corning . . . filed for bankruptcy,’ Budd testified.
‘There were thousands of clients that . . . didn’t get money because of the bankruptcy. We continue to pursue money from them through bankruptcy’ including on behalf of the Jacobs family, Budd testified.
Budd also testified that Tapscott had nothing to gain by lying to the Jacobs family and everything to lose.
‘He could have been fired by our firm,’ Budd testified.
Communication Matters
The verdict serves as a reminder that no matter how big a firm and its client list gets, a firm’s lawyers have a duty to communicate with the clients who employ them about all important aspects of their cases, say two Dallas attorneys who represent clients displeased with prior representation.
Daniel Sheehan says firms that place powers of attorney in their employment agreements with clients often open themselves to trouble.
‘I don’t like powers of attorney, because it puts law firms in the cross hairs,’ says Sheehan of Daniel Sheehan & Associates. ‘It allows them to make decisions for their client, and then questions arise about whether that’s what their client wanted.’
Randy Johnston says it’s crucial for lawyers to communicate with clients about their cases and not leave them in the dark.
‘If this case stands for nothing else it’s that bedside manner matters,’ says Johnston, a partner in Johnston Tobey. ‘Doctors started getting sued when they stopped making house calls. And when the practice of law becomes more business and less personal, lawyers are going to get sued about this kind of thing too.’
Jeff Lynch, a Dallas solo who represented the Jacobs family in their suit against Baron & Budd and Tapscott, says there is a lesson for lawyers to learn from this litigation.
‘You’ve got to be absolutely truthful, candid, straightforward and not hide or conceal anything from your client,’ Lynch says. ‘That is the bottom line.’
