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In James O. Rogers, et al. v. Victor B. Zanetti, et al., ____ S.W.3d ____ (Tex. April 28, 2017), the Supreme Court of Texas recently provided significant guidance on the causation requirements for legal-malpractice actions. The Court held that classic proximate causation is required regardless of whether the malpractice claim stems from an underlying lawsuit.  The Court determined that the plaintiff failed to raise a fact issue on causation even though he presented the testimony of four experts. Finally, the Court addressed what evidence is necessary to prove that an attorney's alleged failure to communicate a settlement offer caused his client harm.

James Rogers and the majority owners of a home-healthcare company entered into an agreement in which Rogers agreed to contribute funds in return for an interest in the company's business. Rogers' attorney Victor Zanetti drafted the parties' investment agreement. Rogers assumed control of the company's receivables but failed to contribute funds. Rogers also transferred substantial sums from the company's account into his own account. Upon learning of Rogers' activities, the owners of the company sued him and others.

Zanetti recommended that Rogers retain attorney Charles Perry to defend him in the lawsuit. Zanetti and Perry were both lawyers at Andrews Kurth. For unspecified reasons, Andrews Kurth withdrew as counsel for Rogers before trial, and he found new counsel. The jury found Rogers liable for fraud and assessed damages at almost $2,500,000 based on the value of the home-healthcare company.

Rogers filed suit against Perry, Zanetti, and Andrews Kurth.  They in turn filed a motion for summary judgment, arguing that there was no evidence of causation to support Rogers' legal-malpractice claims. The trial court rendered summary judgment in favor of the defendants. The court of appeals affirmed.

On petition for review, the Supreme Court first discussed the longstanding requirements for satisfying the "case-within-a-case" standard in legal-malpractice actions. Rogers argued that this standard did not apply to his claims which were that (1) Zanetti was negligent in drafting the investment agreement, (2) Perry was negligent in failing to name Zanetti and Andrews Kurth as responsible third parties, (3) Perry was negligent in failing to designate a rebuttal expert on the value of the home-healthcare company, and (4) Perry was negligent for not advising Rogers of a settlement offer.

Rogers argued that his claim regarding Zanetti's negligence in drafting the investment agreement should be analyzed under a more relaxed "substantial factor" test because it involved transactional malpractice.   The Court disagreed, restating that the correct causation standard is proximate cause which already incorporates the substantial-factor test. The Court held that Rogers' own antecedent fraud conclusively negated that any malpractice committed by Zanetti in drafting the investment agreement caused Rogers harm.  This also meant that any malpractice committed by Perry in failing to designate Zanetti as a responsible third party was negated.

Next, the Court considered Rogers' claim regarding Perry's alleged failure to designate a rebuttal expert on the value of the home-healthcare company.  The Court rejected the defendant attorneys' contention that Rogers was required to prove that, but for the defendants' negligence, Rogers would have completely won the underlying trial: "malpractice claims do not always depend on ultimate victories . . .[but] can also involve imprudent attorney actions that materially and unfavorably affect the value of the client's underlying claim or defense."

The Court explained that to satisfy the causation requirement for this claim, Rogers was required to provide expert testimony.  Rogers presented summary-judgment evidence from four experts. However, the Court concluded this evidence was insufficient to raise a fact issue regarding causation.

The first expert merely opined on what he believed was the fair-market value of the home-healthcare company, but provided no opinion on whether his valuation would have changed the verdict below.

The second expert noted that the third expert apparently believed the failure to designate "was a significant contributing factor in the result," but the Court held this citation to some other expert's opinion was mere ipse dixit that did not trace the proper causation standard.

The third expert was the attorney for the prevailing plaintiff owners in the underlying lawsuit. He testified that Perry's failure to designate a rebuttal expert was a significant contributing factor in the jury's award because a lawyer who had been on the jury told him that the foreman was concerned they were awarding too much in damages and the jury ultimately concluded they had no competing valuation evidence. The Court-without considering whether the juror's statements were admissible evidence-held that the third expert's testimony was not "proof that, but for the attorney's alleged mistake, the claimed harm would not have occurred."  The Court held the juror's statements were not evidence regarding what would have happened if a rebuttal valuation had been provided.  Without such a comparison, the third expert's testimony was conclusory and incompetent.

The fourth expert was the attorney for one of Rogers' co-defendants in the underlying lawsuit.  He opined that "the proximate cause of the enormous verdict and the ensuing judgment was Mr. Perry's failure to designate a controverting damages expert."  However, the Court determined this opinion was conclusory because the fourth expert merely stated that he was familiar with the underlying lawsuit instead of explaining why the result would be different and he made unsupported assumptions about the evidence that supported the jury's verdict.

Lastly, the Court considered Rogers' claim that Perry committed malpractice by failing to communicate a $450,000 settlement offer to Rogers.  Rogers averred in an affidavit that, had he known of the offer, he would have instructed his "attorneys to negotiate the best possible resolution and release without incurring the time or expense of litigation."  The Court concluded this testimony failed to raise a fact issue on causation because there was no evidence that Rogers could have actually paid the $450,000 offered or that the underlying plaintiff owners would have accepted any lower settlement offer.

In sum, the Supreme Court in Zanetti provided detailed analysis of what evidence is needed to raise a fact issue on causation in a legal malpractice case that should guide attorneys defending such cases in the future.

The decision is 27 pages long and can be accessed here.

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