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Legal Malpractice, Fraud, and Breach Of Fiduciary Duty in Texas

Alleged excessive and unnecessary legal fees, lawsuit mistakes that cost millions, and failing to inform his client of the most important facts surrounding a possible settlement.

Company Sues Lawyers, Firms for Legal Malpractice

October 20, 2014

An Austin County business has sued two Austin lawyers and their separate law firms for legal malpractice, alleging that one of them made mistakes handling a settlement agreement with another company, which eventually went bankrupt, and then the other lawyer botched a chance to recover at least some money during the bankruptcy.

In 2010, Compensation Sciences Enterprises Ltd. hired attorney D. Douglas Brothers of Austin's George & Brothers to represent the business "in a lawsuit against a former business partner for allegations of fraud … related to a business transaction," said the Oct. 13 first amended petition in Compensation Sciences Enterprises v. Brothers.

Brothers represented the company for one year, and then, in 2011, the parties settled.

"However, in drafting the settlement paperwork, defendant failed to account for or insert any language that would protect plaintiff, should the fraud-committing underlying defendant decide to breach the settlement agreement and convert what was potentially a nondischargeable fraud claim/suit into a dischargeable breach of contract claim," alleged the petition. "Not only did the underlying defendant breach the settlement agreement, he then filed bankruptcy, trying to discharge the debt entirely."

Gary Lewis, managing partner of George Brothers Kincaid & Horton—which was formerly called George & Brothers—said, "We believe the case is completely without merit, and we are going to defend it vigorously."

The petition said that next, Compensation Sciences Enterprises hired lawyer Joseph Martinec of Austin's Martinec, Winn, Vickers & McElroy in the bankruptcy matter. The underlying defendant proposed a "substantial settlement" of "several hundred thousand."

But the defendants "failed to advise plaintiff to settle the lawsuit, and failed to inform plaintiff of the difficulties of going forward, given the absence of any protective language in the underlying settlement agreement, and the pending certainty of dischargeable debt under the bankruptcy. Relying upon the defendants' advice, plaintiff did not settle the case during bankruptcy, and as a result, has lost all rights of recovery," alleged the petition.

Compensation Sciences Enterprises is suing the defendants for negligence, breach of fiduciary duty and violations of the Texas Deceptive Trade Practices and Consumer Protection Act. It seeks to recover actual damages including "the settlement amount contained in the original settlement agreement," costs, attorney fees and pre- and postjudgment interest.

The business claims that it "ran up excessive and unnecessary legal fees that were 'unconscionable' or 'excessive' in light of the results obtained." It ultimately cost the plaintiff "millions of dollars," said the petition. Compensation Sciences Enterprises also seeks to recover the fees and expenses it paid to the defendants.

Brothers, a partner in George Brothers, declined to comment. Martinec didn't return a call seeking comment, and neither did Ross Sears, partner in Williamson, Sears & Rusnak in Houston, who represents the plaintiff.

Originally posted by Angela Morris for Texas Lawyer.
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