Texas Supreme Court rules Australian man’s breach of fiduciary duty and legal mal suit against Texas firm can proceed.
After a $1.29 million judgement against DLA Piper was thrown out by an intermediate court of appeals, the Texas Supreme Court has ruled an Australian businessman’s breach of fiduciary duty and legal mal suit against the firm can proceed. The background to the case Linegar v. DLA Piper is as follows. Chris Linegar of Australia was a major stockholder in a company called IdentiPHI. DLA Piper represented a company called Saflink that merged with IdentiPHI. Following the merger, DLA Piper was corporate counsel for IdentiPHI. During the merger process, IdentiPHI needed a short-term bridge loan. Linegar arranged to lend the company nearly $2 million Australian dollars from his retirement trust fund. DLA Piper represented IdentiPHI in the transaction and also worked directly with Linegar. When it became apparent the IdentiPHI was going to default on the loan, Linegar later discovered that his financing statement had not been perfected to protect his interest in IdentiPHI’s assets. IdentiPHI ultimately filed for bankruptcy in the United States. Had the security interest in the loan been protected, Linegar would have received the full amount of his loan back. Instead, he received $150,000 in a settled bankruptcy claim. Linegar sued DLA Piper for legal malpractice and breach of fiduciary duty in a Travis County district court claiming the firm had advised him individually regarding the loan assuring Linegar that it would be perfected. At trial, Linegar alleged the firm told him his loan was secured and “everything would be taken care of.” But the firm disputed those statements at trial and argued that they never agreed or implied that they would look after Linegar’s individual interests. A jury ruled against DLA Piper, finding among other things that the firm injured Linegar by negligently failing to advise him that the firm did not represent him, committed fraud by failing to disclose a material fact to Linegar and that there was an attorney client relationship between the parties. The jury awarded Linegar $1.29 million in damages. DLA Piper appealed the judgement in the case, raising eight issues on appeal. But Eastland’s Eleventh Court of Appeals only needed one issue to reverse and render judgement for DLA Piper–standing. The firm convinced the Eleventh Court that Linegar lacked standing because his company, not Linegar individually, was the holder of the note. The Eleventh Court also concluded that any misrepresentation about the secured status of the loan would have been made to Linegar’s company, which was named Zaychan. Linegar appealed the defense ruling to the high court, arguing that DLA Piper mischaracterized his claim as a suit on the note. Rather, Linegar sued the firm for legal malpractice, he argued. And after considering relevant case law, Justice Phil Johnson concluded that Linegar had standing to sue DLA Piper, reversing and remanding the case back to the Eleventh Court to consider the firm’s other appellate issues. “The case was pleaded, tried and submitted to the jury on claims that DLA Piper violated duties it owed to Linegar in his individual capacity and that those violations proximately caused damages to him individually,” Johnson wrote. “As noted above, there was evidence to support the allegations. That is sufficient to show standing, which is the only issue before us.” Lisa Hobbs, a partner in Austin’s Kuhn Hobbs who represents Linegar before the Texas Supreme Court, was elated with the decision. “It’s a big win. We’re excited,” Hobbs said. “The court did remand it back to the court of appeals because DLA has raised other issues. But we feel great about those issues as well.” Russell Post, a partner in Houston’s Beck Redden who represents DLA Piper before the high court, declined to comment on the decision. Originally posted by John Council on TexasLawyer.com. Legal Mal Suit Representation – Ball & Bonholtzer Trial Attorney – Los Angeles