Jal B. Guzder v. Haynes and Boone, LLP, Sarah Teachout, and Paul Searles ( 2015 )

Opinion issued May 28, 2015
In The
Court of Appeals
For The
First District of Texas
————————————
NO. 01-13-00985-CV
———————————
JAL B. GUZDER, Appellant
V.
HAYNES AND BOONE, LLP, SARAH TEACHOUT,
AND PAUL SEARLES, Appellees
On Appeal from the 113th District Court
Harris County, Texas
Trial Court Case No. 2013-31165A
MEMORANDUM OPINION
Appellant, Jal B. Guzder, challenges the trial court’s order dismissing his
fraud and civil-conspiracy claims against appellees, Haynes and Boone, LLP,
Sarah Teachout, and Paul Searles (collectively, “Haynes and Boone”). In three
issues, Guzder contends that the trial court erred in granting Haynes and Boone’s
motion to dismiss his claims and awarding it attorney’s fees. 1
We affirm.
Background
In his petition, Guzder, a chemical engineer, alleges that in 1997, he entered
into a consulting relationship with Kodi G. Irani (“Irani”), the “sole owner” of
MKM Engineers, Inc. (“MKM”), an environmental remediation company. Guzder
became a director of MKM and its executive vice president, and he generated
“millions of dollars” in business for MKM.
In 2001, “a dispute arose between Irani and Guzder that resulted in a
lawsuit,” and Haynes and Boone represented Irani and MKM in that lawsuit. The
parties settled the lawsuit, and, pursuant to their settlement agreement, Guzder
resigned his positions at MKM and returned to being a consultant. Also, under a
separate agreement with MKM, it was to pay Guzder a portion of its profits.
Guzder further alleges that after MKM did not pay him as promised, he sued
Irani and MKM, among others, in a Fort Bend County district court.2 He also filed
in a United States District Court a qui tam action 3 against Irani and MKM “for
1
See TEX. R. CIV. P. 91a.
2
EETCO, et al. v MKM Eng’rs, Inc., et al., No. 01-CV-155803 (434th Dist. Ct.,
Fort Bend Cnty., Tex.).
3
Jal B. Guzder v. MKM Eng’rs, Inc., No. H-05-895 (S.D. Tex.).
2
defrauding the government in connection with their participation” in a program
under the Small Business Act. 4 “After years of litigation and several mediations
and conferences,” MKM “agreed to pay [Guzder] a portion of the funds he was
owed under the terms of his consulting agreement.”
On May 27, 2011, Haynes and Boone, on behalf of MKM, sent Guzder a
written “Rule 11 Settlement Agreement” (the “Agreement”), under which MKM
“agreed to pay Guzder $1.7 million in exchange for his releases and dismissals of
the pending lawsuits.” 5 Guzder asserts that Haynes and Boone “knew at the time
that the [Agreement] was conveyed to [him] that their clients had no intention of
paying [him] the money offered in the [Agreement] without the inclusion of terms
not contained in the [Agreement].” And he “accepted” MKM’s settlement offer by
“countersigning” the Agreement and returning it to Haynes and Boone.
“Within days” of executing the Agreement, Guzder’s counsel sent to Haynes
and Boone drafts of the motions to dismiss his Fort Bend County and United States
District Court lawsuits. And Haynes and Boone “made no indication that the
[Agreement] was not a binding agreement and that [he] and [his] counsel should
4
15 U.S.C. § 637 (2012).
5
The parties dispute whether this document actually constituted a final settlement
agreement or was simply a letter proposing settlement of certain terms. They are
currently litigating this issue in a separate lawsuit. MKM Eng’rs, Inc. v. Guzder,
No. 2008-17570 (127th Dist. Ct., Harris Cnty., Tex.), No. 14-14-00077-CV (Tex.
App.—Houston [14th Dist.], filed Jan. 21, 2014). The Agreement is not in the
record before us.
3
not rely upon it.” Rather, Haynes and Boone “affirmed the settlement,” filing a
joint motion to dismiss the qui tam lawsuit and advising the United States District
Court that they had reached a settlement. Guzder asserts that on the day after the
federal court dismissed his qui tam lawsuit, Haynes and Boone sent him an email
“feigning confusion as to why the Lawsuit had been dismissed, and suggesting that
the [Agreement] was merely ‘an agreement to agree.’” He further alleges that
“Haynes and Boone, Teachout, and Searles all had independent duties to the
Federal Court to be truthful and accurate in factual statements made” and “each
breached those duties by making admittedly false representations to the Federal
Court about the existence of a settlement amongst the parties.”
Guzder then sued Haynes and Boone and others for breach of contract, and
the trial court granted summary judgment in his favor.6 Guzder also filed the
instant lawsuit, alleging that Haynes and Boone had committed fraud and civil
conspiracy to commit fraud.
As to his fraud claim, Guzder alleges as follows:
46. Each and every one of [Haynes and Boone’s] representations
[to him], described above, concerned material facts without which
[he] would not have acted and which [Haynes and Boone] knew were
false or made recklessly without any knowledge of their truth as a
positive assertion. Specifically, [Haynes and Boone] and [he]
engaged in settlement discussions over a period of days, negotiating
the terms that ultimately formed the [Agreement] that was signed on
May 27, 2011. [Haynes and Boone] thereafter represented to the
6
See MKM Eng’rs, Inc. v. Guzder, No. 14-14-00077-CV.
4
Federal Court that the case had settled, participated in seeking an
abatement due to settlement, and participated in seeking a dismissal
due to settlement.
47. [Haynes and Boone’s] representations to [him] of a settlement
were false statements of fact because [Haynes and Boone] never
intended the [Agreement] to be binding or to resolve the disputes
amongst them, which they have since admitted.
48. [Haynes and Boone] made the false representations of
settlement knowing they were false because they never intended to
honor the terms of the agreement that they drafted and submitted to
[him] for acceptance.
49. [Haynes and Boone] made the false representations with the
intent that [he] would rely on the false representations by moving
forward with the dismissal of the Qui Tam Lawsuit. Indeed, [Haynes
and Boone] even represented to the Federal Court that the Qui Tam
Lawsuit settled. And, [Haynes and Boone] remained silent when the
parties sought and obtained the dismissal of the Qui Tam Lawsuit
while knowing that they did not believe the parties had a settlement.
50. [He] relied on [Haynes and Boone’s] false representations when
he sought and obtained the government’s consent to dismiss the Qui
Tam Lawsuit. In seeking the dismissal, [he] was injured. That injury
was exacerbated when the Qui Tam Lawsuit was actually dismissed,
again, as a direct result of [Haynes and Boone’s] false statement.
As to his civil-conspiracy claim, Guzder alleges as follows:
51. [Haynes and Boone] formed an agreement [with MKM and
Irani] to cause [him] to enter into [the Agreement], which on its face
contains all the terms necessary to create a binding and enforceable
agreement, but all the while intended not to perform under the same.
Instead, they used the [Agreement] to cause [him] to dismiss his
causes of action, damage his Qui Tam Lawsuit by seeking consent to
dismiss from the government, and prejudice his ability to prosecute
any of his very real claims against Irani. They accomplished this goal
through a series of misrepresentations to both [him] and the courts,
and in so doing proximately caused [him] injury.
5
Haynes and Boone moved to dismiss 7 Guzder’s fraud and civil-conspiracy
claims on the ground that they have “no basis in law,” asserting that in the spring
of 2011, the parties had attempted to negotiate a global settlement of all claims.
On May 27, 2011, they signed a letter, which Guzder refers to as a “Rule 11
Settlement Agreement,” outlining “some of the terms of a proposed settlement.”
The “letter itself specifically contemplated the execution of a final settlement
agreement” and numerous future actions. Also, the parties filed a “Joint Notice of
Settlement and Request for 30-Day Stay in the Qui Tam Litigation,” asking the
federal court to temporarily stay the case “as the parties worked towards
consummating the settlement.” Haynes and Boone further asserted that Guzder’s
allegations are not true. And, even taking them as true, “which is required at this
stage, the allegations unequivocally arise out of actions taken by [Haynes and
Boone] in the course of representing and discharging [its] duties to Irani and MKM
in this litigation.” Thus, “under well-established Texas law, Guzder’s claims fail
as a matter of law.”
In response, Guzder asserted that “a cause of action against an attorney for
fraud does exist in Texas,” and, here, “[a]t no time did [Haynes and Boone]
represent or disclose that the [Agreement] was anything other than a Rule 11
Agreement or that [he] was acting at his own peril by accepting it as a Rule 11
7
See TEX. R. CIV. P. 91a.
6
Agreement.” And Haynes and Boone later “took the position that the [Agreement]
was not a binding agreement, but rather an ‘agreement to agree.’” In representing
the Agreement “as binding when it was not meant to be,” Haynes and Boone “went
beyond the protected class of litigation behaviors.”
In its reply, Haynes and Boone explained that “a claim against an attorney
may be actionable if it arises out of conduct outside of litigation.” However,
“Texas law is clear” that “a party does not have an independent right of recovery,
under any cause of action, against the attorney of an opposing party arising from
the conduct the attorney engaged in as part of the discharge of his duties in
representing an opposing party in a lawsuit.” And, here, Guzder did not dispute
that his allegations against Haynes and Boone arose out of conduct that occurred
within its representation of their clients in litigation.
The trial court granted Haynes and Boone’s motion, dismissed the case, and
awarded it attorney’s fees in the amount of $4,500. It then severed Guzder’s fraud
and civil-conspiracy claims against Haynes and Boone into a separate case, making
its judgment final.
Standard of Review
Texas Rule of Civil Procedure 91a.1, which became effective March 1,
2013, provides, in pertinent part, as follows:
[A] party may move to dismiss a cause of action on the grounds that it
has no basis in law or fact. A cause of action has no basis in law if the
7
allegations, taken as true, together with inferences reasonably drawn
from them, do not entitle the claimant to the relief sought. A cause of
action has no basis in fact if no reasonable person could believe the
facts pleaded.
TEX. R. CIV. P. 91a.1.
“[W]hether a cause of action has any basis in law and in fact are legal
questions that we review de novo, based on the allegations of the live petition and
any attachments thereto.” Wooley v. Schaffer, 447 S.W.3d 71, 76 (Tex. App.—
Houston [14th Dist.] 2014, pet. filed) (analyzing applicable standard of review in
appeal from dismissal under Rule 91a.1); see also GoDaddy.com, LLC v. Toups,
429 S.W.3d 752, 754 (Tex. App.—Beaumont 2014, pet. denied) (applying de novo
standard of review to dismissal under rule 91a.1 and noting it is analogous to
Federal Rule of Civil Procedure 12(b)(6)); Dailey v. Thorpe, 445 S.W.3d 785, 788
(Tex. App.—Houston [1st Dist.] 2014, no pet.) (same). We construe the pleadings
liberally in favor of the plaintiff, look to the pleader’s intent, and accept as true the
factual allegations in the pleadings to determine whether the cause of action has a
basis in law or fact. Wooley, 447 S.W.3d at 76.
Dismissal
In his first and second issues, Guzder argues that the trial court erred in
dismissing his fraud and civil-conspiracy claims as having “no basis in law”
because his claims “are cognizable under Texas law” and fall “within the exception
to qualified immunity for fraud and conspiracy.”
8
Texas law authorizes attorneys to “practice their profession, to advise their
clients, and to interpose any defense or supposed defense, without making
themselves liable for damages.” Kruegel v. Murphy, 126 S.W. 343, 345 (Tex. Civ.
App.—Dallas 1910, writ ref’d). This well-established rule allows attorneys to
fulfill their duty to zealously represent their clients without subjecting themselves
to the threat of liability. Bradt v. West, 892 S.W.2d 56, 71 (Tex. App.—Houston
[1st Dist.] 1994, writ denied). Subjecting attorneys to liability for statements made
or actions taken in the course of representing their clients would force attorneys to
constantly balance their own potential exposure against their client’s best interests.
Alpert v. Crain, Caton & James, P.C., 178 S.W.3d 398, 405 (Tex. App.—Houston
[1st Dist.] 2005, pet. denied).
In light of these principles, courts have held that “an attorney’s conduct is
not independently actionable by an opposing party to the suit if the conduct is part
of the discharge of the lawyer’s duties in representing his or her client.” Id. at 406.
Generally, this “qualified immunity” applies even if the attorney’s conduct is
wrongful in the context of the underlying lawsuit. Id. (citing Renfroe v. Jones &
Assocs., 947 S.W.2d 285, 288 (Tex. App.—Fort Worth 1997, writ denied) (“Under
Texas law, attorneys cannot be held liable for wrongful litigation conduct.”)).
“To determine whether immunity attaches, courts focus on the type or kind
of conduct in which the attorney is engaged to determine whether the conduct is
9
actionable or merely conduct undertaken in the representation of the client.” Gaia
Envt’l, Inc. v. Galbraith, 451 S.W.3d 398, 403 (Tex. App.—Houston [14th Dist.]
2014, pet. denied). “An attorney cannot be held liable to a third party for conduct
that requires ‘the office, professional training, skill, and authority of an attorney.’”
Dixon Fin. Servs., Ltd. v. Greenberg, Peden, Siegmyer & Oshman, P.C., No. 01-
06-00696-CV, 2008 WL 746548, at *7 (Tex. App.—Houston [1st Dist.] Mar. 20,
2008, pet. denied) (mem. op.) (quoting Miller v. Stonehenge/Fasa–Texas, JDC,
L.P., 993 F. Supp. 461, 464 (N.D. Tex. 1998)). “Incorrect, meritless, and even
frivolous conduct is not actionable if it satisfies this standard.” Id.
For instance, “a third party has no independent right of recovery against an
attorney for filing motions in a lawsuit, even if frivolous or without merit, although
such conduct [may be] sanctionable or contemptible as enforced by the statutory
and inherent powers of the court.” Alpert, 178 S.W.3d at 406; see also Bradt, 892
S.W.2d at 71–72 (holding “an attorney does not have a right of recovery, under any
cause of action,” against another attorney for conduct taking place during
litigation). Courts have refused to acknowledge an independent cause of action in
such instances because “making motions is conduct an attorney engages in as part
of the discharge of his duties in representing a party in a lawsuit.” Alpert, 178
S.W.3d at 406.
10
Under this same reasoning, an attorney “may not be held liable for . . . fraud
merely for making representations to the opposing party in litigation that further
the best interests of his own client.” Essex Crane Rental Corp. v. Carter, 371
S.W.3d 366, 378 (Tex. App.—Houston [1st Dist.] 2012, pet. denied). For instance,
in Authorlee v. Tuboscope Vetco International, Inc., the plaintiffs sued the
defendant’s attorneys for fraud and civil conspiracy, asserting that they had
“knowingly agreed to insert false statements” into settlement documents to conceal
the existence of an aggregate settlement. 274 S.W.3d 111, 119 (Tex. App.—
Houston [1st Dist.] 2008, pet. denied). The trial court held that “there can be no
conspiracy to commit fraud in the litigation setting.” Id. at 120. This Court
agreed, noting that “it is the type of conduct in which the attorney engages, and not
whether it was meritorious in the underlying lawsuit, that governs a party’s right to
recovery against an adversary’s former attorney.” Id. And we held that all of the
complained-of actions by the attorneys “were in connection with the settlement of
a lawsuit” and “no private cause of action” exists for litigation conduct. Id.
Similarly, in Chapman Children’s Trust v. Porter & Hedges, L.L.P., the
plaintiffs, who had intervened in the underlying lawsuit, alleged that an opposing
party’s law firm had committed fraud and civil conspiracy in its handling of a
settlement. 32 S.W.3d 429, 441, 443 (Tex. App.—Houston [14th Dist.] 2000, pet.
denied). The plaintiffs alleged that the law firm had concealed information related
11
to the settlement, “despite the fact that it knew [its client] had other creditors
attempting to seize” the proceeds; made improper deductions; accused the
plaintiffs of fraud; and “did nothing to assist” the plaintiffs, even though it “knew
that [its client] had told the [plaintiffs] that they would ‘never see “one dime” of
the net proceeds unless they agreed to reduce their interest in the net proceeds.’”
Id. at 441. The Fourteenth Court of Appeals, after noting that it was required to
focus on the type of conduct in which the attorneys had engaged rather than on
whether the conduct was meritorious in the context of the underlying lawsuit,
concluded that the plaintiff’s allegations did no more than demonstrate that the
attorneys had attempted to negotiate a smaller settlement on their clients’ behalf.
Id. at 442.
Also, in Sacks v. Hall, a plaintiff sued her dentist’s attorney for improper
litigation conduct in her malpractice action against the dentist. No. 01-13-00531-
CV, 2014 WL 6602460, at *1 (Tex. App.—Houston [1st Dist.] Nov. 20, 2014, no
pet.) (mem. op.). The plaintiff asserted that the attorney had obtained her dental
records in violation of her privacy rights and federal law. Id. at *2. And he had
acted with malice in filing the records in the trial court, knowing that they
contained an erroneous entry indicating that she had abused prescription
medications and knowing that her dentist had later corrected the entry. Id. She
further asserted that the attorney had disclosed the erroneous version of her records
12
to other attorneys to give them an advantage in another lawsuit. Id. In his defense,
the attorney asserted the attorney-immunity doctrine, and the trial court granted
him summary judgment. Id.
On appeal in Sacks, this Court concluded that the filing of the dental records
was the kind of conduct in which attorneys engage in discharging their duties to
their clients and did not constitute an action “foreign to the duties of an attorney.”
Id. at *13. We noted that “[w]hether the substance of the records was incorrect
[did] not change the kind of conduct in which [the attorney] engaged.” Id. We also
explained that the attorney was “entitled to advance his client’s position pursuant
to the rules of evidence and to pursue his trial strategy without fear of personal
liability.” Id. (citing Renfroe, 947 S.W.2d at 288 (holding no cause of action
against attorney for his participation in filing writ of garnishment with inaccurate
facts); McCampbell v. KPMG Peat Marwick, 982 F. Supp. 445, 448 (N.D. Tex.
1997) (holding plaintiff could not recover against attorney representing opposing
party in previous suit based on attorney’s allegedly false statements in affidavit and
new-trial motion)). And we held that the attorney was, as a matter of law, not
liable for the alleged conduct. Id. at *15.
Further, in Jurek v. Kivell, a father and daughter executed a mediated
settlement agreement (“MSA”), in which the father promised that certain real
estate would be conveyed to her upon his death. No. 01-10-00040-CV, 2011 WL
13
1587375, at *1 (Tex. App.—Houston [1st Dist.] Apr. 21, 2011, no pet.) (mem.
op.). The father was represented in the mediation by his attorney, Kivell. Id.
After the father died, the daughter learned that a year before the mediation, Kivell
had prepared the father’s will, in which he left his estate to the daughter’s siblings.
Id. The daughter sued the attorney, alleging that he had defrauded her into signing
the MSA by failing to disclose the existence or contents of the will. Id. She
further asserted that, because Kivell had prepared the will, he knew at the time that
her father had executed the MSA that his promise was false. Id. at *2.
In affirming the trial court’s summary judgment in favor of the attorney, we
noted that the plaintiff had not argued that the attorney had failed to disclose any
information to her independent of his participation in the mediation of the lawsuit.
Id. at *6. And we explained that “a party does not have an independent right of
recovery ‘under any cause of action’ against the attorney of an opposing party
arising from conduct the attorney engaged in as part of the discharge of his duties
in representing” his client. Id.
Finally, we note that in Dixon Financial Services, Ltd. v. Greenberg, Peden,
Siegmyer & Oshman, the plaintiffs sued a law firm for fraud and civil conspiracy,
alleging that the firm had intentionally misrepresented the scope of an arbitration
award in order to obtain all of the stock held, when in fact the attorneys knew that
only a part of the stock was subject to the award. 2008 WL 746548, at *8. The
14
attorneys filed a petition to obtain a temporary restraining order to secure the
arbitration award. Id. We noted that the signing and filing of an application for a
temporary restraining order to aid in the recovery of monies owed to a client under
an arbitration award is not conduct “foreign to the duties of an attorney.” Id. And
“[w]hether the substance of the communications was incorrect or overstated [did]
not change the kind of conduct in which [the attorney had] engaged.” Id. at *9.
We explained that “[c]haracterizing an attorney’s action in advancing his client’s
rights as fraudulent does not change the rule that an attorney cannot be held liable
for discharging his duties to his client.” Id. And we held that “[a] plaintiff . . .
should not be able to ‘salvage an otherwise untenable claim merely by
characterizing it as tortious.’” Id. If an attorney’s conduct violates his professional
responsibilities, the remedy is public, not private. Id.
However, the protections afforded an attorney from liability arising out of
his representation of a client are not “boundless.” See McCamish, Martin, Brown
& Loeffler v. Appling Interests, 991 S.W.2d 787, 794 (Tex. 1999). “An attorney
who personally steals goods or tells lies on a client’s behalf may be liable for
conversion or fraud in some cases.” Chu v. Hong, 249 S.W.3d 441, 446 & n.19
(Tex. 2008). Thus, a cause of action may exist against an attorney who knowingly
commits a fraudulent act outside the scope of his legal representation of his client.
See Alpert, 178 S.W.3d at 406. If the attorney participates independently in
15
fraudulent activities, his action is “foreign to the duties of an attorney,” and he
cannot “shield his own willful and premeditated fraudulent actions from liability
simply on the ground that he is an agent of his client.” Id.
For example, in Likover v. Sunflower Terrace II, Ltd., an attorney and his
clients joined together in a scheme to exact money, to which they were not legally
entitled, from the plaintiffs. 696 S.W.2d 468, 474 (Tex. App.—Houston [1st Dist.]
1985, no writ). There, the plaintiffs purchased an apartment complex from the
defendants and paid them for architectural services and rehabilitation of the
property. Id. at 469–70. However, the parties did not execute a contract for
rehabilitation, and the defendants, who were not licensed architects, did not
prepare plans or blueprints. Id. at 470. On the advice of the attorney, the
defendants then refused to sign the deed to the apartment complex as promised,
unless the plaintiffs paid them an additional $400,000. Id. at 471. On appeal, the
attorney asserted that he “merely gave legal advice to a client.” Id. at 474. This
Court held, however, that “an attorney is liable if he knowingly commits a
fraudulent act that injures a third person, or if he knowingly enters into a
conspiracy to defraud a third person.” Id. at 472 (citing Poole v. Hous. & T.C. Ry.,
58 Tex. 134, 137 (1882)).
In Poole, a railroad station agent was notified to stop a carload of goods in
transit to an insolvent buyer. 58 Tex. at 137. The buyer, after learning that the
16
shipment was to be stopped, procured his attorney to intercept the goods at an
intermediate station, obtain possession of the goods, and re-mark them with a
fictitious name. Id. The goods then passed from the hands of the company into the
hands of the insolvent. Id. The Court held that the attorney,
[h]aving assumed the apparent ownership of the goods, for the
purpose and with the intention of consummating the fraud upon [the
plaintiff], he will not be heard to deny his liability to [the plaintiff] for
the loss sustained by reason of his wrongful acts, under the privileges
of an attorney at law, for such acts are entirely foreign to the duties of
an attorney; neither will he be permitted, under such circumstances, to
shield himself from liability on the ground that he was the agent of the
[defendant], for no one is justified on that ground in knowingly
committing willful and premeditated frauds for another.
Id. at 137–38. Similarly, in Essex Crane, this Court held that “[a]ttorneys have no
immunity from knowingly drafting fraudulent documents to evade the lawful
seizure of property by a judgment creditor.” 371 S.W.3d at 378–79.
Also, in JJJJ Walker, LLC v. Yollick, the Fourteenth Court of Appeals held
that “an attorney can be held liable for his own fraudulent conduct even though it
was performed on a client’s behalf.” 447 S.W.3d 453, 468 (Tex. App.—Houston
[14th Dist.] 2014, pet. filed). In Yollick, after a hospital system filed for
bankruptcy relief, a group of investors sought to purchase its assets, namely, three
hospitals, from the creditor bank. Id. at 455. The bank’s attorney, Yollick,
negotiated with the investors, created a company to hold the assets, and provided
the purchase money and funds for initial working capital. Id. at 455–56. When the
17
investors needed additional working capital, they executed a letter agreement,
assigning their membership interests in the company that was holding the hospitals
to a new entity under the bank’s control. Id. at 456. Yollick then appointed his
wife, using a fictitious name, and two of his friends to act as the board of directors
of the new entity. Id. And he executed an elaborate scheme to take over the
company that was holding the hospitals. Id. at 457. He removed each of the
investors as officers and replaced them with himself as sole officer, manager,
president, secretary, and chief executive officer. Id. He then sold the hospitals for
$55 million and paid the investors nothing. Id. at 458.
In the investors’ appeal from the trial court’s judgment in favor of Yollick
on their fraud claim, Yollick argued that he was entitled to immunity as a matter of
law because an attorney is not liable for statements made in the course of
representing his client in adversarial proceedings. See id. at 468–69. The
Fourteenth Court explained that Yollick, in signing the letter agreement “as the
Bank’s agent,” was “not relying on his professional knowledge and training as an
attorney to make a statement in the course of representing his client in an
adversarial context.” Id. at 469–70. Rather, “he was simply signing his name,
acting as the Bank’s agent with actual authority to bind his principal to a promise
of future performance.” Id. at 70. And because he did so “knowing that the Bank
did not intend to perform as promised, he can be held liable for his conduct just as
18
any other agent or corporate representative would be.” Id. The court noted that
Yollick was “not [to be] held to a lower standard” simply because he happened to
also be the principal’s attorney. Id.; see also Galbraith, 451 S.W.3d at 404 (noting
“if a lawyer knowingly participates in fraudulent activities independent of the
lawyer’s representation of the client, the lawyer’s actions are ‘foreign to the duties
of an attorney’”).
Here, to determine whether Haynes and Boone has immunity from Guzder’s
claims, we “focus on the type or kind of conduct” in which, as alleged by Guzder,
Haynes and Boone engaged to determine “whether the conduct is actionable or
merely conduct undertaken in the representation of the client.” See Galbraith, 451
S.W.3d at 403. We limit our analysis to the allegations in the live pleadings.
Wooley, 447 S.W.3d at 81; see TEX. R. CIV. P. 91a.6. And we consider whether
these allegations, “taken as true, together with inferences reasonably drawn from
them” entitle Guzder to the relief sought. See TEX. R. CIV. P. 91a.1.
In his petition, Guzder alleges that Haynes and Boone committed fraud 8 by
making “false representations of settlement”; not indicating that the Agreement
8
The elements of a fraud claim are: (1) the defendant made a material
representation that was false; (2) knew the representation was false or made it
recklessly as a positive assertion without any knowledge of its truth; (3) intended
to induce the plaintiff to act upon the representation; and (4) the plaintiff acted in
reliance on the representation and thereby suffered injury. See Aquaplex, Inc. v.
Rancho La Valencia, Inc., 297 S.W.3d 768, 774 (Tex. 2009). The elements of
fraud by nondisclosure, or fraud by omission, are (1) the defendant failed to
19
“was not a binding agreement” and that he and his counsel “should not rely upon
it”; acting with intent that Guzder rely on the “false representations” by moving
forward with the dismissal of the qui tam lawsuit; representing to the federal court
that “the case had settled”; and “participat[ing] in seeking” an abatement and
dismissal due to settlement.
Construing the pleadings liberally in favor of Guzder and accepting as true
his factual allegations, we conclude that engaging in such settlement negotiations
and filing such motions in the court, including “seeking an abatement” and
“participating in seeking a dismissal due to settlement,” constitute acts taken and
communications made to facilitate the rendition of legal services. The actions and
communications thus fall within the context of Haynes and Boone’s discharge of
its duties to represent MKM. See Alpert, 178 S.W.3d at 408. Whether the
substance of the communications was incorrect does not change the kind of
conduct in which Haynes and Boone engaged. See Authorlee, 274 S.W.3d at 119–
20 (holding “no private cause of action” against attorney for having “knowingly
agreed to insert false statements” into settlement documents); Chapman Children’s
disclose facts to the plaintiff when the defendant had a duty to disclose such facts;
(2) the facts were material; (3) the defendant knew of the facts; (4) the defendant
knew that the plaintiff was ignorant of the facts and did not have an equal
opportunity to discover the truth; (5) the defendant was deliberately silent and
failed to disclose the facts with the intent to induce the plaintiff to take some
action; (6) the plaintiff relied on the omission; and (7) suffered injury as a result.
See Horizon Shipbuilding, Inc. v. Blyn II Holding, LLC, 324 S.W.3d 840, 850
(Tex. App.—Houston [14th Dist.] 2010, no pet.).
20
Trust, 32 S.W.3d at 441–42 (holding no cause of action where law firm,
“knowing” its client did not intend to pay as agreed, “did nothing to assist”
plaintiffs in settlement); Jurek, 2011 WL 1587375, at *6 (noting plaintiff did not
assert attorney’s failure to disclose any information to her independent of his
participation in mediation of lawsuit and holding no independent right of recovery
where attorney did not notify opposing party of existence of facts bearing on
client’s assertions in MSA); Dixon Fin. Servs., Ltd., 2008 WL 746548, at *9
(“Characterizing an attorney’s action in advancing his client’s rights as fraudulent
does not change the rule that an attorney cannot be held liable for discharging his
duties to his client.”).
The attorney conduct complained of here, unlike the complained-of conduct
by the attorneys in Likover, Poole, Essex Crane, and Yollick, involves acts or
omissions undertaken as part of the discharge of the attorneys’ duties as counsel to
an opposing party. See Chapman Children’s Trust, 32 S.W.3d at 442
(distinguishing Likover, 696 S.W.2d at 471–72); see also Essex Crane Rental
Corp., 371 S.W.3d at 382 (noting plaintiff did not sue attorneys for representations
made within scope of representation in litigation but for actions in conspiring to
hide assets); Yollick, 447 S.W.3d at 469–70 (noting attorney, in signing letter
agreement “as the Bank’s agent,” “not relying on his professional knowledge and
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training as an attorney to make a statement in the course of representing his client
in an adversarial context”).
Because Guzder does not allege any conduct by Haynes and Boone
independent of its settlement of the lawsuit, his allegations do not constitute
conduct foreign to the duties of an attorney in the representation of a client, and,
thus, they cannot serve as the basis for an actionable fraud claim against Haynes
and Boone. See Wooley, 447 S.W.3d at 78 (applying TEX. R. CIV. P. 91a.1); see
also Authorlee, 274 S.W.3d at 120 (concluding no cause of action existed where
“[a]ll of the actions of the defendants were in connection with the settlement of a
lawsuit”). Accordingly, we hold that the trial court did not err in dismissing
Guzder’s fraud claim against Haynes and Boone. See TEX. R. CIV. P. 91a.1; see
also GoDaddy.com, LLC, 429 S.W.3d at 754 (noting dismissal appropriate if court
determines plaintiff “can prove no set of facts to support a claim that would entitle
him to relief”); Alpert, 178 S.W.3d at 404–05, 407–08 (affirming trial court’s order
granting special exceptions and dismissing case because plaintiff “failed to set
forth a claim or plead a cause of action against [defendant-law firm] recognized
under Texas law”); Chapman Children’s Trust, 32 S.W.3d at 440–43 (holding
plaintiff did not raise issue of fraud with allegations opposing attorney denied
knowledge of and concealed facts, filed motions, and pushed settlement).
22
We further hold that because the trial court did not err in dismissing
Guzder’s fraud claim, it did not err in dismissing his civil-conspiracy-to-commit-
fraud claim. See Gary E. Patterson & Assocs., P.C. v. Holub, 264 S.W.3d 180,
204 (Tex. App.—Houston [1st Dist.] 2008, pet. denied) (“Civil conspiracy is a
derivative action premised on an underlying tort.”).
We overrule Guzder’s first and second issues.
Conclusion
Having overruled Guzder’s first and second issues, we do not reach his third
issue, in which he asserts that “[u]pon reversal, the Court should vacate the award
of attorney’s fees.” See TEX. R. CIV. P. 91a.7 (providing for mandatory award of
attorney’s fee to prevailing party).
We affirm the judgment of the trial court.
Terry Jennings
Justice
Panel consists of Justices Jennings, Massengale, and Lloyd.
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