The Fifth Circuit found that the rule of lenity applied in a disciplinary proceeding involving this Louisiana ethics rule:

A division of fee between lawyers who are not in the same firm may be made only if: (1) the client agrees in writing to the representation by all of the lawyers involved, and is advised in writing as to the share of the fee that each lawyer will receive; (2) the total fee is reasonable; and  (3) each lawyer renders meaningful legal services for the
client in the matter.

It concluded that the rule was ambiguous when applied to successive rather than simultaneous counsel. In re Andry, No. 22-30231 (Nov. 29, 2022). The panel later granted rehearing and issued a revised opinion.

In Franklin v. Regions Bank. “Plaintiffs contracted with Regions Bank for it to manage, as their agent, their mineral interests in a large tract of land.” Under Louisiana law, the parties had “a principal-mandatary relationship, which is equivalent to a common-law principal-agent relationship.” In an Erie analysis, the Fifth Circuit noted that after the Louisiana Supreme Court limited a plaintiff’s ability to choose between a contract or tort remedy (with a large potential effect on limitations) in some mandatary relationships, the legislature then “shortened the limitations periods for claims against engineers, surveyors, professional interior designers, architects, real-estate developers, and home inspectors.  Instead of shortening the limitations period for all mandataries, the legislature chose to single-out certain professions for special treatment.” After then coupling that observation with general Louisiana legal principles about strict construction of limitation statutes, the Court held that the plaintiffs wereable to choose a tort remedy with a 10-year limitations period. No. 19-30684 (Sept. 18, 2020).

After reviewing comparable ethical rules nationwide, the Fifth Circuit held that under the Louisiana attorney-conduct rules: “[A] contingency fee arrangement resulting in an attorney owning part of the client’s business is a business transaction under Rule 1.8(a). Because the terms of the 2013 CFA give the Firms an ownership interest in LTSG, Rule 1.8(a) applies, and the Firms were required to advise Fox to seek the advice of independent counsel. Fox did not have to take this advice, but the Firms were obligated to give it. Thus, the 2013 CFA is void.”  Wiener, Weiss, & Madison v. Fox, No. 19-30688 (Aug. 21, 2020).

Paine Snider v. L-3 Communications involved a company’s legal malpractice claim against a firm that represented it in corporate matters, when a firm partner helped a company employee with a discrimination case against the company. The Fifth Circuit affirmed the dismissal of most of the malpractice claim on limitations grounds, observing:

L-3 knew in 2007 that . . . [i]t had access to emails between Edwards and Paine Snider reflecting that Edwards participated in drafting a detailed written internal complaint document cataloging the facts and incidents supporting Paine Snider’s claims. L-3 contacted Edwards and Elizabeth Quick, both partners at Womble, and expressly asserted that Edwards had a conflict of interest. L-3 failed to follow up with the Womble firm after it was apprised in writing by Bill Raper of that firm that he would investigate IT material, and subsequently, that he had investigated and was ready to talk to the general counsel of L-3’s parent company about Edwards’s involvement with Paine Snider’s claims against L-3.

. . .

We also know that when, late in 2011, L-3 subpoenaed documents from the Womble firm, the “new” information was somewhat more salacious and provided additional evidentiary support. But the nature of and essential facts supporting L-3’s claims against Edwards and Womble remained unchanged since 2007.

No. 16-60731 (Dec. 31, 2019).

The Cenacs sued Orkin after Formosan termites damaged their house. Based largely on the contract documents, the Fifth Circuit affirmed summary judgment for Orkin, with the exception of the Cenacs’ negligence claim:

None of the contracts between the Cenacs and Orkin—the 1991 Agreement, the CPP, or the SSA—required Orkin to recommend, instruct, or direct its customers on how to remedy conditions conducive to termite infestation. . . .  Under these circumstances, the Cenacs’ claim that Orkin recommended installation of a vapor barrier and approved its allegedly negligent installation does not involve the breach of a specific contractual duty. Rather, Orkin undertook the task of recommending and directing installation of a vapor barrier, which . . . it had no obligation to do under its contracts with the Cenacs.

Cenac v. Orkin LLC, No. 18-31121 (Oct. 18, 2019).

Texas’s robust attorney-immunity doctrine defeated claims about the Allen Stanford scheme in Troice v. Greenberg Traurig LLP., No. 17-11464 (April 17, 2019). The Fifth Circuit declined to certify the state-law issue, citing “the substantial treatment of the issues by the Texas courts of appeals and the ‘cogent and sound arguments’ presented by counsel,” and held:

1. “We are persuaded the Supreme Court of Texas would apply the attorney immunity doctrine in the non-litigation context”;
2. “[I]mmunity can apply even to criminal acts so long as the attorney was acting within the scope of representation” (noting that “[a]fter arguing there was a categorical bar to applying immunity in this context, the plaintiffs did not make an alternative argument that immunity does not apply because Greenberg’s acts were outside the scope of client representation”; and
3. “We conclude that the Supreme Court of Texas would not consider itself sure that the Texas Legislature intended to abrogate attorney immunity in the context of [Texas Securities Act] claims.” (emphasis in original).

Ironshore, an excess insurance carrier, alleged that the Schiff Hardin law firm made negligent misrepresentations to it while reporting on litigation involving Dorel – the firm’s client and Ironshore’s insured. The Fifth Circuit made “an Erie guess that the Supreme Court of Texas would apply the attorney immunity doctrine to shield attorneys for such negligent misrepresentation claims.” It then concluded:

“The factual allegations of the complaint in this case reflect that all of the alleged misrepresentations and omissions were related to Schiff Hardin’s representation of Dorel in the Hinson litigation. Looking beyond Ironshore’s characterization of the firm’s conduct as wrongful, as we must, the type of conduct at issue in this case includes: (1) reporting on the status of litigation and settlement discussions; (2) providing opinions as to the strength and valuation of plaintiffs’ claims; (3) providing opinions as to the perceived litigation strategies employed by opposing counsel and the potential prejudice of pre-trial developments; (4) providing estimates of potential liability; (5) reporting on the progress of a jury trial; and (6) reporting on pre-trial rulings and pre-trial settlement offers. We are satisfied that the kinds of conduct at issue in this case fall within the routine conduct attorneys engage in when handling this type of litigation. Schiff Hardin’s conduct falls squarely within the scope of the firm’s representation of its client.”

Ironshore Europe DAC v. Schiff Hardin LLP, No. 18-40101 (Jan. 2, 2019).

The plaintiff  in Bloom v. Aftermath Public Adjusters, Inc. tried to overcome a limitations problem with the tolling doctrine for malpractice claims recognized by Hughes v. Mahaney & Higgins, 821 S.W.2d 154 (Tex. 1991). The plaintiff’s claim involved the conduct  of a licensed public adjuster working for an insurance company; the Ffith Circuit characterized his argument as saying “that public adjusters are actually lawyers in disguise. Bloom concedes defendants are technically ‘non-lawyers,’ but he insists they effectively ‘provide[d] legal services,’ because there was once a time when Texas prohibited non-lawyers from engaging in public adjusting.” The Court was unpersuaded in this Erie case:

“But that was then, and this is now. Even assuming Texas law previously classified public adjusting as legal practice, under the relevant regime, these defendants are non-lawyers who were not engaged in legal practice. By definition, Bloom’s claims cannot implicate the unique relationship that triggers the bright-line rule from Hughes. Only Texas has the power to say where lawyer-ing ends and adjusting begins, just as its courts have the sole power to decide Hughes’s outer bounds.”

No. 17-41087 (Sept. 4, 2018).

The plaintiffs in Firefighters’ Retirement System v. Grant Thornton LLP alleged that Grant Thornton waived its right to insist on presuit review of the claims by a review panel, as ordinarily required by Louisiana law. The Fifth Circuit rejected this argument, finding:

• Judicial estoppel did not apply to an allegedly inconsistent litigation position by Grant Thornton when the district court did not accept it (notably, stating the elements of the doctrine in a way that does not require the statement to have been made in a different proceeding), and
• Grant Thornton did not waive this requirement, distinguishing (and criticizing) a Louisiana appellate opinion on the issue, and noting that the litigation had been stayed for a lengthy period such that GT had not yet even filed an answer.

Accordingly, the court affirmed the dismissal of plaintiffs’ claims because of preemption. No. 17-30274 (July 3, 2018).

Among other holdings in In re DePuy Orthopaedics, the Fifth Circuit observed: “Suppose we did believe [counsel]’s various and independent explanations for why he could pay his expert before and after trial without ever compromising the witness’s non-retained status. An opinion countenancing his behavior would read like a blueprint on how to evade Rule 26 with impunity. Parties could pay experts ‘for their time’ before trial and later exchange compelling ‘pro bono’ testimony for sizable, post-trial ‘thank you’ checks.” No. 16-11051 et seq. (April 25, 2018) (emphasis in original).

Attorney Martinez sued another law firm (“HLG”) for various torts related to the firm contacting his clients about alleged overbilling. The firm asserted absolute immiunity as a defense and the Fifth Circuit agreed, in a fact-specific holding, that the evidence “demonstrate[s] that the allegedly tortious statements at issue in this case were made in relation to a proposed arbitration and are therefore absolutely privileged under Texas law.” The firm already represented two Martinez clients in connection with the potential arbitration; the new clients did not originate contact with the firm; and all of them ultimately retained the firm. Martinez v. Hellmich Law Group, PC, No. 16-50305 (March 8, 2017, unpublished). This case joins a line of similar holdings in recent years in favor of attorney immunity.

Lowe brough a class action, alleging that company management breached its fiduciary duties to the employee pension plan, and that KPMG aided those breaches by ignoring the underfunding of the plan. KPMG contended that these claims necessarily implicated its engagement agreement with the company, which contained an arbitration clause, and thus required arbitration under the “direct-benefit estoppel” doctrine. Here, “Lowe did not know about the Engagement Letters, and has disclaimed any reliance on the Letters, and her claims rely on common law tort theories, not on the Letters.” The Court concluded that “[i]f that choice makes it harder for [Lowe] to prove her case, so be it,” but her claims as currently stated did not depend on KPMG’s engagment agreement and thus did not have to be arbitrated.” Lowe v. KPMG, No. 16-60263 (Jan. 5, 2017, unpublished).

OneBeacon Ins. Co. v. Welch & Assocs. involved insurance coverage for an attorney malpractice claim, arising for an exclusion for knowledge about “any actual or alleged act, error, omission or breach of duty arising out of the rendering or the failure to render professional legal services.” Since even the carrier agreed that “[o]n its face, this covers every single thing an attorney does or does not do, wrongful or not,” the Fifth Circuit found that the exclusion could not be applied literally without making the contract illusory. Focusing on the alleged “wrongful act,” the Court found that the relevant lawyer’s awareness of a discovery order and potential dispute was not equivalent to knowledge that a rare death-penalty sanction award would result. The Court also sustained an award of additional violations for an intentional violation of the Insurance Code with respect to the handling of the claim. No. 15-20402 (Nov. 14, 2016).

Cal Dive International sued Schmidt (a commercial diver), and Edwards (Schmidt’s attorney in a previous personal injury suit against Cal Dive), alleging that Schmidt had misrepresented his injuries, and seeking restitution of contingent fees paid to Edwards. Cal Dive specifically alleged that it did not believe Edwards knew of the purported fraud. Edwards sought coverage for defense costs, and the Fifth Circuit reversed a judgment in his favor: “Cal Dive’s complaint, for which Edwards seeks defense from Continental, contains no allegations against Edwards, save for his receipt of settlement funds in the nature of attorney’s fees as a result of his client’s alleged fraud. Acts or omissions in the rendering of legal services by Edwards to his client, Schmidt, are simply not at issue.” Edwards v. Continental Casualty Co., No. 15-30827 (Nov. 2, 2016).

Continuing a theme in cases involving attorney liability (most notably the recent Stanford-related opinion in Troice v. Proskauer Rose, 816 F.3d 341 (5th Cir. 2015)), the Fifth Circuit affirmed summary judgment for the law firm involved in a disputed foreclosure: “Under Texas law, the doctrine of qualified immunity has ‘long authorized attorneys to practice their profession, to advise their clients and interpose any defense or supposed defense, without making themselves liable for damages.” Lassberg v. Bank of America, No. 15-40196 (Aug. 23, 2016, unpublished).

Last Friday, I spoke about recent federal cases on sanctions and professional responsibility issues; for some ethics CLE self-study, here is the handout that I used.

A class sought damages from attorneys involved in Allen Stanford’s business affairs.  The Fifth Circuit, reversing the district court, found the claims barred by attorney immunity under Cantey Hanger LLP v. Byrd, 467 S.W.3d 484 (Tex. 2015): “Plaintiffs alleged that, in representing Stanford Financial in the SEC’s investigation, [Attorney] Sjoblom: sent a letter arguing, using legal authorities, that the SEC did not have jurisdiction; communicated with the SEC about its document requests and about Stanford Financial’s credibility and legitimacy; stated that certain Stanford Financial executives would be more informative deponents than others; and represented a Stanford Financial executive during a deposition. These are classic examples of an attorney’s conduct in representing his client.”  The Court rejected the “fraud exception” relied upon by the district court, and among arguments for other exceptions, rejected the argument that immunity only extended to litigation as not having been raised below.  Troice v. Proskauer Rose LLP, No. 15-00500 (March 10, 2016).

The Eastern District of Texas suspended attorney Robert Booker for three years.  While a magistrate issued a report, which was reviewed and adopted unanimously by the Eastern District Judges, the Fifth Circuit held: “[W]e cannot discern from the record whether the district court specifically found that Booker acted in bad faith under the clear and convincing evidence standard.”  Accordingly, the Court remanded for the district court to “specify whether it finds that Booker has committed any ethics violation based on clear and convincing evidence and whether Booker acted in bad faith in committing any such violations.”  In re: Booker, No. 14-41194 (Aug. 3, 2015, unpublished).  (Subsequently, the Fifth Circuit affirmed on the merits.)

The Fifth Circuit remanded to calculate an attorney fee award when: “At nearly every turn, this Department of Labor investigation and prosecution violated the department’s internal procedures and ethical litigation practices. Even after the DOL discovered that its lead investigator conducted an investigation for which he was not trained, concluded Gate Guard was violating the Fair Labor Standards Act based on just three interviews, destroyed evidence, ambushed a low-level employee for an interview without counsel, and demanded a grossly inflated multi-million dollar penalty, the government pressed on. In litigation, the government opposed routine case administration motions, refused to produce relevant information, and stone-walled the deposition of its lead investigator.”  Gate Guard Services v. Perez (Secretary, Department of Labor),  No. 14-40585 (July 2, 2015, unpublished).

In Zente v. Credit Management, L.P., an attorney sought to appeal the district court’s referral of a Rule 11 matter to the Western District of Texas disciplinary committee.  The Fifth Circuit found that he had no standing: “In accordance with the cases from our sister circuits, we conclude that a referral of attorney conduct to a disciplinary committee, absent a specific finding of misconduct, is not a sanction that confers standing to appeal.  Thus, [Attorney] has standing to appeal in the instant case only if the district court’s referral to the Admissions Committee was accompanied by a specific finding of misconduct.  In the circumstances of this case, we conclude that the court made no finding of misconduct. The district court made no findings like those that courts have found conferred standing to appeal. It made no factual findings or legal conclusions regarding the alleged misconduct, and made no implied or explicit finding that [Attorney] violated any ethical rule or canon. No. 14-50910 (June 15, 2015).

The Cantus filed for Chapter 11 bankruptcy, and after their case was converted to Chapter 7, sued their bankruptcy attorney for malpractice.  That suit settled for roughly $300,000, leading to a dispute between the Cantus and the Chapter 7 Trustee as to who should receive the proceeds.  The Fifth Circuit found that the estate suffered pre-conversion injury as a result of the alleged misconduct, including diversion of assets, time wasted with an unconfirmable Chapter 11 plan, and additional attorneys fees.  Therefore, the causes of action against the attorney “accrued prior to conversion and belong to the estate.”  Cantu v. Schmidt, No. 14-40597 (April 17, 2015).

The City of Alexandria settled a lawsuit with an electricity supplier for a $50 million recovery.  A sordid dispute then broke out among the City and various lawyers who worked on the case and asserted a contingency interest in the recovery.  City of Alexandria v. Brown, No. 12-30823 (Jan. 15, 2014).  The opinion, which affirms the district court’s resolution of the dispute, provides an overview of when “quantum meruit” principles control over the terms of a contingent fee agreement.  As to one lawyer, relevant factors included the end of her involvement relatively early in the matter, and seemingly unreliable time records during that involvement. As to another, the court noted that the contract created a “joint obligation” between him and another lawyer that became impossible of performance after he was disbarred, requiring a quantum meruit analysis.  (A related appeal was disposed of later in the year in deference to this panel opinion.)

In Ortega v. Young Again Products, the plaintiff sued a judgment creditor and its counsel, claiming that they took assets that belonged to him rather than the judgment debtor.  No. 12-20592 (Nov. 27, 2013, unpublished).  The Fifth Circuit recognized that Texas extends qualified immunity to claims by a third-party against an attorney for conduct requiring the “office, professional training, skill, and authority of an attorney.”  The focus is on the type of conduct, not its merit.  Accordingly, removal of the case was proper because the attorney was fraudulently joined, and dismissal for various reasons was affirmed.

In Colonial Freight Systems v. Adams & Reese, the Fifth Circuit affirmed summary judgment for a law firm on a malpractice claim and for unpaid fees.  No. 12-30853 (May 15, 2013, unpublished).  The plaintiff claimed, under Louisiana law, that the firm’s “negligent failure to advise the company of its right to a jury” was malpractice.  The Court rejected that claim because the plaintiff could only speculate about any loss resulting from that alleged failure.  (In the context of criminal law, a different framework applies because the policies at play are different, see United States v. Mendez, 102 F.3d 126 (5th Cir. 1996)).

A lawyer’s letter making a settlement offer contained a paragraph accusing the other side of giving a witness money for favorable testimony.  The accused party then sued for defamation.  In Lehman v. Holleman, applying Mississippi law, the Fifth Circuit affirmed that such statements are absolutely privileged from liability because they are “plainly related” to an underlying judicial proceeding.  No. 12-60814 (April 15, 2013, unpublished).

Smith v. Christus St. Michaels presented a wrongful death claim about an elderly man, who suffered from recurrent cancer, who died from a fall in the hospital while being treated for a blood disorder.  No. 12-40057 (Nov. 13, 2012) (unpublished).  The trial court granted summary judgment under the “lost chance” doctrine, finding a lack of evidence that the man would have been likely to survive his cancer.  The Fifth Circuit reversed because it found his death was caused by a fall unrelated to his cancer or other treatment protocol.  Id. at 8. The Court also reversed a ruling that the plaintiffs’ expert testimony on causation was conclusory, finding that it “sufficiently explained how and why” as to the allegedly inadequate monitoring of the patient’s bedside at night.  Id. at 10.  The opinion provides a general nuts-and-bolts summary of Texas tort causation law.

In the case of Downhole Navigator LLC v. Nautilus Insurance, an insured retained independent counsel after receiving a reservation of rights letter from its insurer, arguing that the insurer’s chosen counsel had a conflict at that point.    686 F.2d 325 (5th Cir. 2012).  Applying Northern County Mutual v. Davalos, 140 S.W.3d 685 (Tex. 2004), the Court found no conflict because “‘the facts to be adjudicated’ in the underlying . . . litigation are not the same ‘facts upon which coverage depends.'”  The Court did not see the recent case of Unauthorized Practice of Law Committee v. American Home Assurance Co., 261 S.W.2d 24 (Tex. 2008), which dealt with the responsibilities of insurers’ staff attorneys who defend a claim for an insured, as changing the basic analysis under Texas law.

In Amco Energy v. Capco Exploration (No. 11-20264, Jan. 30, 2012), the Court addressed two fundamental business tort issues.  The first involved a professional negligence claim about the evaluation of certain oil properties — the majority found that the professional’s contract did not extend to the matters complained of and thus created no professional duty, while the dissent “cannot fathom how one can conclude that there was no contract” for those matters.  Op. at 8, 10, 23.   The second found a contractual disclaimer of reliance that defeated a fraud claim, continuing the recent development of law on that issue in Italian Cowboy Partners, Ltd. v. Prudential Ins. Co., 341 S.W.3d 323, 333 (Tex. 2011) and LHC Nashua Partnership Ltd. v. PDNED Sagamore Nashua LLC, 659 F.3d 450, 460 (5th Cir. 2011).  Op. at 17.