Official Stanford Invstr Com v. Greenberg T ( 2019 )

Case: 17-11464 Document: 00514920032 Page: 1 Date Filed: 04/17/2019
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
April 17, 2019
No. 17-11464
Lyle W. Cayce
Clerk
SAMUEL TROICE, Individually and on behalf of a class of all others
similarly situated; MICHOACAN TRUST, Individually and on behalf of a
class of all others similarly situated; PAM REED, Putative Class
Representative,
Plaintiffs - Appellants
v.
GREENBERG TRAURIG, L.L.P.; YOLANDA SUAREZ,
Defendants - Appellees
Appeal from the United States District Court
for the Northern District of Texas
USDC No. 3:12-CV-4641
Before JONES, CLEMENT, and SOUTHWICK, Circuit Judges.
LESLIE H. SOUTHWICK, Circuit Judge:
Under Texas law, an attorney is immune from civil suits brought by a
non-client when the conduct at issue occurred within the scope of the attorney’s
representation of a client. This appeal concerns three purported exceptions to
that doctrine. The district court held that none of them exists. We AFFIRM.
FACTUAL AND PROCEDURAL BACKGROUND
This appeal has its roots in the R. Allen Stanford Ponzi Scheme that has
already been the subject of much litigation. See Janvey v. Democratic
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Senatorial Campaign Comm., Inc., 712 F.3d 185, 188-89 (5th Cir. 2013)
(detailing the Ponzi scheme and the civil and criminal actions it spawned). The
scheme was centered around the sale of certificates of deposit (“CDs”) through
Stanford International Bank, Ltd. and related entities. See id. at 188. The
basic workings of the fraud were to take the funds raised from the CD sales
and reissue them to purchasers as if they were returns from investments. See
id. The scheme eventually collapsed, and the Government and others brought
criminal prosecutions and civil suits against Stanford and others. See id. at
188-89. The only aspect of the scheme before us is the purported involvement
of an attorney then practicing at Greenberg Traurig (“Greenberg”).
The receiver for the Stanford Receivership Estate, the Official Stanford
Investors Committee, and three defrauded investors sued Greenberg under a
respondeat superior theory. They alleged a Greenberg attorney conspired with
Stanford to further the fraud. The investor plaintiffs (“plaintiffs” hereafter)
also sought class certification. Greenberg moved to dismiss the claims for lack
of subject matter jurisdiction, or in the alternative, for a judgment on the
pleadings. The district court granted judgment on the pleadings and denied
the motion for class certification as moot. The plaintiffs appealed. They have
also moved that we certify to the Supreme Court of Texas the state law
questions on which this case turns.
DISCUSSION
We review the grant of a judgment on the pleadings de novo, utilizing
“the same standard as a motion to dismiss under Rule 12(b)(6).” Doe v.
MySpace, Inc., 528 F.3d 413, 418 (5th Cir. 2008). That is, confined to the
pleadings and accepting the allegations as true, we ask if “the complaint states
a valid claim for relief.” Hughes v. Tobacco Inst., Inc., 278 F.3d 417, 420 (5th
Cir. 2001) (quoting St. Paul Mercury Ins. Co. v. Williamson, 224 F.3d 425, 440
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n.8 (5th Cir. 2000)). We will uphold the grant of judgment on the pleadings
“only if there are no disputed issues of fact and only questions of law remain.”
Id. Only questions of law remain here.
Greenberg’s winning argument in the district court was that attorney
immunity under Texas law precluded the plaintiffs’ claims. The plaintiffs
countered that multiple exceptions to the general rule exist and permit
Greenberg’s liability. The district court disagreed. The issues here are
primarily about Texas law. We first discuss why we will not certify and then
move to our analysis of Texas law.
I. Certification of issues to the Supreme Court of Texas
The Supreme Court of Texas has the discretion to accept certification of
“determinative questions of Texas law having no controlling Supreme Court
precedent.” TEX. R. APP. P. 58.1. In deciding whether to certify issues, we
consider whether there are “sufficient sources of state law” to allow us to make
“a principled rather than conjectural conclusion”; “the degree to which
considerations of comity [such as the likelihood of the issue’s recurrence] are
relevant”; and “practical limitations of the certification process” such as
“significant delay and possible inability to frame the issue so as to produce a
helpful response” from the relevant state appellate court. Florida. ex rel.
Shevin v. Exxon Corp., 526 F.2d 266, 275 (5th Cir. 1976). Certification, though,
“is not a panacea for resolution of those complex or difficult state law questions
which have not been answered by the highest court of the state.’”
Transcontinental Gas Pipeline Corp. v. Trans. Ins. Co., 958 F.2d 622, 623 (5th
Cir. 1992).
The Texas Supreme Court has not directly answered the issues that
confront us, and “this case involves an area of Texas law that appears to be
somewhat in flux.” Kelly v. Nichamoff, 868 F.3d 371, 377 (5th Cir. 2017).
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Nonetheless, the substantial treatment of the issues by the Texas courts of
appeals and the “cogent and sound arguments” presented by counsel give
sufficient guidance about what the Supreme Court of Texas would hold.
Compass Bank v. King, Griffin & Adamson P.C., 388 F.3d 504, 505 (5th Cir.
2004). Accordingly, we DENY the motion for certification.
II. Attorney immunity from liability to non-clients under Texas law
To determine the applicable law, “we look first to the decisions of the
Supreme Court of Texas,” and if that court has not ruled, we then project that
court’s likely resolution of a case presenting facts such as are before us. Kelly,
868 F.3d at 374 (citations omitted). In our evaluation, “we typically ‘treat state
intermediate courts’ decisions as the strongest indicator of what a state
supreme court would do, absent a compelling reason to believe that the state
supreme court would reject the lower courts’ reasoning.’” Id. (citation omitted).
“We may also consider Texas public policy interests.” Nationwide Bi-Weekly
Admin., Inc. v. Belo Corp., 512 F.3d 137, 143 (5th Cir. 2007).
Attorney immunity in Texas is a “comprehensive affirmative defense
protecting attorneys from liability to non-clients.” Cantey Hanger, LLP v.
Byrd, 467 S.W.3d 477, 481 (Tex. 2015). It protects an attorney where the
“alleged conduct was within the scope of . . . legal representation.” Id. at 484.
The plaintiffs contend that, despite that general grant of immunity, Texas law
provides for three circumstances that permit attorney liability to non-clients:
(1) acts outside of the litigation context, (2) criminal acts, and (3) acts that
violate the Texas Securities Act.
A. The non-litigation exception
In arguing that “attorney immunity does not extend to conduct outside
of litigation,” the plaintiffs largely rely on a dissent by four of the nine justices
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of the Supreme Court of Texas in Cantey Hanger. The majority opinion did not
make a holding on the issue. The dissent advocated limiting attorney
immunity “to statements or conduct in litigation.” Id. at 489 (Green, J.,
dissenting). Because conduct in “the scope of representation” is generally
immunized and the acts at issue in Cantey Hanger were litigation-based
“conduct . . . within the scope of . . . legal representation,” the majority declined
to answer the non-litigation exception issue. Id. at 484, 482 n.6 (majority
opinion).
The dissent relied on policy reasons and two early attorney immunity
cases. Id. at 488 (Green, J., dissenting). Neither of those cases expressly
answered the question here, but the dissent concluded “the only way to
reconcile [their holdings] . . . is to require the defendant-attorney’s conduct to
have occurred in litigation.” Id. at 488. The dissent further cited later
decisions from three of the Texas courts of appeals that, while also not
expressly deciding the issue, discuss attorney immunity in the litigation
context. Id. (citing Renfroe v. Jones & Assocs., 947 S.W.2d 285, 287-88 (Tex.
App.—Fort Worth 1997, pet. denied); Bradt v. West, 892 S.W.2d 56, 72 (Tex.
App.—Houston [1st Dist.] 1994, writ denied); Morris v. Bailey, 398 S.W.2d 946,
947-48 (Tex. App.—Austin 1966, writ ref’d n.r.e.)).
Plaintiffs, though, have not cited any opinions that have directly
confronted the issue and held in their favor. To the contrary, multiple courts
of appeals have endorsed the application of attorney immunity outside of
litigation. The Dallas Court of Appeals, for instance, has held “[e]ven if . . .
[counsel’s] actions occurred outside of the litigation context, the [immunity]
doctrine applied.” Santiago v. Mackie Wolf Zientz & Mann, P.C., No. 05-16-
00394-CV, 2017 WL 944027, at *4 (Tex. App.—Dallas Mar. 10, 2017, no pet.)
(mem. op.). The Supreme Court of Texas characterized an Austin Court of
Appeals decision as applying attorney immunity to conduct in the context of
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“attorneys hired to assist a mortgage beneficiary in the nonjudicial foreclosure
of real property.” Cantey Hanger, 467 S.W.3d at 482 n.6 (discussing Campbell
v. Mortg. Elec. Registration Sys., Inc., No. 03-11-00429-CV, 2012 WL 1839357,
at *6 (Tex. App.—Austin May 18, 2012, pet. denied) (mem. op.)). 1 Similarly,
the San Antonio Court of Appeals immunized attorneys sued for the non-
litigation conduct of sending debt acceleration/foreclosure notices. See Alanis
v. Wells Fargo Bank Nat’l Ass’n, No. 04-17-00069-CV, 2018 WL 1610939, at *1,
5 (Tex. App.—San Antonio Apr. 4, 2108, pet. denied) (mem. op.). Finally, the
Beaumont Court of Appeals approvingly cited the application of attorney
immunity to the non-litigation context in support of its decision to apply the
doctrine to an attorney’s acts in probate matters. See Rogers v. Walker, No. 09-
15-00489-CV, 2017 WL 3298228, at *1-2, 4-5 (Tex. App.—Beaumont Aug. 3,
2017, pet. denied) (mem. op.).
This trend among the Texas courts of appeals also comports with the
purpose of attorney immunity to “promote ‘loyal, faithful, and aggressive
representation’” in a comprehensive manner. Youngkin v. Hines, 546 S.W.3d
675, 682 (Tex. 2018) (citation omitted). Although not “limitless,” the doctrine’s
application “is broad.” Id. Its underlying rationale is to free attorneys “to
practice their profession” and “advise their clients . . . without making
themselves liable for damages.” Cantey Hanger, 467 S.W.3d at 481 (citation
omitted). The most likely understanding is that this includes the multitude of
attorneys that routinely practice and advise clients in non-litigation matters.
We are persuaded the Supreme Court of Texas would apply the attorney
immunity doctrine in the non-litigation context.
1 The plaintiffs contend that nonjudicial foreclosure cases do not support a rejection
of the non-litigation exception because of our statement in Kelly that “foreclosure
proceedings” are “a litigation-like setting.” 868 F.3d at 376. The Supreme Court of Texas,
though, cited nonjudicial foreclosure as an instance of attorney immunity’s application
outside the litigation context. See Cantey Hanger, 467 S.W.3d at 482 n.6.
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B. Crimes as a special category
The plaintiffs also argue “attorneys are not immune from suit when they
engage in criminal conduct.” Their contention is not that criminal conduct is
an exception to the general rule immunizing behavior in the scope of
representation but rather that criminal acts are categorically “never within”
that scope.
“Criminal conduct can negate attorney immunity.” Gaia Envtl., Inc. v.
Galbraith, 451 S.W.3d 398, 404 (Tex. App.—Houston [14th Dist.] 2014, pet.
denied). “[T]heft of goods or services on a client’s behalf” is an example the
Supreme Court of Texas provided of attorney behavior undoubtedly not
immunized. Youngkin, 546 S.W.3d at 682-83. When Texas courts address
criminal behavior in the immunity analysis, however, their framework
remains whether that behavior was in the scope of representation and not
whether it was criminal. See Sacks v. Hall, No. 01-13-00531-CV, 2014 WL
6602460, at *14 (Tex. App.—Houston [1st Dist.] 2014, no. pet) (mem. op.).
For example, the Houston Court of Appeals for the First District, while
stating “[c]riminal conduct can negate attorney immunity,” focused its
evaluation on whether “allegedly actionable conduct was undertaken in the
course of . . . representation of and discharge of . . . duties to [the] client.” Gaia
Envtl., 451 S.W.3d at 404. Similarly, the Eastland Court of Appeals provided
“fraudulent or criminal activity” as an example of “actions [consistently held to
be] foreign to the duties of an attorney.” Rawhide Mesa-Partners, Ltd. v.
Brown McCarroll, L.L.P., 344 S.W.3d 56, 60 (Tex. App.—Eastland 2011, no
pet.). The Dallas Court of Appeals has also examined attorney conduct alleged
to be “criminal,” yet it too applied the doctrine of immunity because the conduct
at issue was “‘squarely within the scope’ of . . . representation.” Highland
Capital Mgmt., LP v. Looper Reed & McGraw, P.C., No. 05-15-00055-CV, 2016
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WL 164528, at *6 (Tex. App.—Dallas Apr. 13, 2016, pet. denied) (mem. op.)
(citation omitted).
We conclude that criminal conduct does not automatically negate
immunity, but in the usual case it will be outside the scope of representation.
The only case the plaintiffs cite that clearly describes the criminal nature of an
attorney’s conduct as the appropriate standard is Reagan Nat’l Advert. of
Austin, Inc. v. Hazen, No. 03-05-00699-CV, 2008 WL 2938823, at *10 (Tex.
App.—Austin July 29, 2008, no pet.) (mem. op.). That court, however, used a
burden-shifting framework that is the sort of “confus[ing] and complex[] . . .
analysis” Cantey Hanger cited as a reason to avoid creating exceptions to
attorney immunity. See Regan Nat’l, 2008 WL 2938823, at *4, *9; Cantey
Hanger, 467 S.W.3d at 483-84.
Perhaps most persuasive are the complications that would arise between
our precedent and decisions of the Supreme Court of Texas if we held criminal
conduct to be categorically excluded from immunity. The Cantey Hanger court
emphasized that “the focus in evaluating attorney liability to a non-client is ‘on
the kind — not the nature — of the attorney’s conduct.’” 467 S.W.3d at 483
(citation omitted). That is, the analysis does not “focus[] on . . . the alleged
wrongfulness of” the purported conduct such that “a lawyer is no more
susceptible to liability for a given action merely because it is alleged to be . . .
wrongful.” Youngkin, 546 S.W.3d at 681. As an example of the doctrine at
work, the Supreme Court of Texas cited “assaulting opposing counsel during
trial” — a presumably criminal action — as an example of unimmunized
conduct. Id. at 683; see also TEX. PENAL CODE ANN. § 22.01 (West 2017). The
court held such behavior to fall outside the protections of immunity, not
because it could be criminal, but “because it does not involve the provision of
legal services and would thus fall outside the scope of client representation.”
Cantey Hanger, 467 S.W.3d at 482.
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Thus, immunity can apply even to criminal acts so long as the attorney
was acting within the scope of representation. After 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. Thus, we do
not need to address any factual questions on this issue.
C. The TSA exception
Among the plaintiffs’ allegations are that Greenberg aided and abetted
Stanford in violating the Texas Securities Act. They argue that Texas attorney
immunity is a common law rule that the TSA abrogated. Common law
defenses may be abrogated by statute. See Dugger v. Arredondo, 408 S.W.3d
825, 836 (Tex. 2013). Statutes purporting to abrogate common law principles,
though, must do so either expressly or by “necessary implication[].” Forest Oil
Corp. v. El Rucio Land & Cattle Co., 518 S.W.3d 422, 428 (Tex. 2017) (citation
omitted). 2 Courts “must look carefully to be sure” the Texas Legislature
intended to “modify common law rules.” Energy Serv. Co. of Bowie, Inc. v.
Superior Snubbing Servs., Inc., 236 S.W.3d 190, 194 (Tex. 2007). Statutes
“creat[ing] a liability unknown to the common law . . . will be strictly
construed.” Smith v. Sewell, 858 S.W.2d 350, 354 (Tex. 1993). Texas courts of
appeals have held the TSA abrogated at least some common law defenses
because those defenses conflict with the Act’s purpose or language. See, e.g.,
2 Greenberg emphasizes that “attorney immunity is properly characterized as a true
immunity from suit” as opposed to “a defense to liability.” Troice v. Proskauer Rose, L.L.P.,
816 F.3d 341, 346 (5th Cir. 2016). Greenberg asserts that consequently, statutory abrogation
of the doctrine must be evaluated like the abrogation of sovereign immunity, which must be
“beyond doubt” with ambiguities construed in favor of granting immunity. Wichita Falls
State Hosp. v. Taylor, 106 S.W.3d 692, 701 (Tex. 2003). That characterization does not
meaningfully change our analysis of whether attorney immunity, a common law doctrine,
has been clearly abrogated by statute. See Cantey Hanger, 467 S.W.3d at 481.
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Duperier v. Texas State Bank, 28 S.W.3d 740, 753 (Tex. App.—Corpus Christi
2000, pet. dism’d by agr.) (discussing the common law defense of ratification).
The Act contains no explicit abrogation of immunity. The plaintiffs
argue public policy reasons and how such immunity would undermine the
protection of investors. See TEX. REV. CIV. STAT. ANN. art. 581-10-1(B) (West.
Supp. 2017). We acknowledge that the Supreme Court of Texas has held that
Section 33 of the TSA, one of the provisions under which the plaintiffs sued,
“should be given the widest possible scope.” Flowers v. Dempsey-Tegeler & Co.,
472 S.W.2d 112, 115 (Tex. 1971).
Still, we consider the best indication of the proper result is that attorney
immunity has been applied to bar claims under a statute similar to the TSA,
namely the Texas Deceptive Trade Practices Act (“DTPA”). See Sheller v.
Corral Tran Singh, LLP, 551 S.W.3d 357, 359, 362-66 (Tex. App.—Houston
[14th Dist.] 2018, pet. denied). “The provisions of the DTPA and TSA are
entirely consistent,” suggesting the jurisprudence of one may assist in
interpreting the other. See Frizzell v. Cook, 790 S.W.2d 41, 45 (Tex. App.—
San Antonio 1990, writ denied). Regardless, it is not clear that the purposes
of the TSA are impeded if attorneys are immunized while they work within the
scope of their representation of clients. 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 TSA claims.
AFFIRMED.
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