TX: Underlying commercial transaction; litigation; bankruptcy
Student Contributor: Chelsea Tucker*
Facts: Billy Delp, his wife Gertrude Delp, and John Harvison were business partners who had formed various companies. Billy believed Harvison was attempting to buy businesses outside of the companies’ core business activities. Billy and Gertrude removed Harvison as an officer of two of the companies, Nu-Way and Economy Oil. Harvison filed suit against Billy and Gertrude. Billy and Gertrude were represented by Douglas and Douglas, Kressler & Wuester, P.C. (collectively DKW). Two days into a temporary injunction hearing in which Gertrude was the primary witness, the two sides began settlement negotiations. After a short meeting with DKW, Billy and Gertrude signed a compromise settlement agreement (finalized by Harvison’s attorneys) in which Gertrude was required to resign from the boards of Nu-Way and Economy Oil. The Delps soon lost all assets held through Nu-Way. Billy and Gertrude Delp brought a legal malpractice suit against DKW over its handling of the settlement agreement and for failing to adequately prepare Gertrude for her testimony in the temporary injunction hearing. Soon after, Billy filed for bankruptcy. Billy listed the malpractice claims against DKW as an asset. The bankruptcy trustee sold the claims to Philip Treacy & Associates, which was acting on behalf of DKW’s malpractice carrier. Treacy filed a trial court motion to dismiss Billy’s malpractice claims. This motion was granted. Following trial on Gertrude’s claims, the trial court granted a directed verdict for DKW. Gertrude and Billy appealed the directed verdict and the dismissal of Billy’s claims. The court of appeals reversed and remanded both Gertrude’s and Billy’s interest in the malpractice claims and part of Gertrude’s DTPA claims.
1) Whether Billy and/or Gertrude had standing to pursue their claims.
2) Whether a plaintiff may recover damages for mental anguish in a legal malpractice suit.
3) Whether DKW’s representation that the agreement would protect the Delps’ interests supports DTPA liability.
The Supreme Court held that:
1. Billy lacked standing to pursue claims in state court because the claims swept into his bankruptcy estate and Gertrude lacked standing because her claims for economic loss related to jointly managed business were part of her husband’s bankruptcy estate.
2. Mental anguish damages are not recoverable when the mental anguish is a consequence of economic losses caused by an attorney’s negligence; and (3) DKW’s representation that the agreement would protect the Delps’ interests was too vague to be actionable under DTPA.
1. A claim of mental anguish damages in a legal malpractice suit will generally not prevail.
2. Give your client enough information so that she is capable of making an informed decision before signing a settlement agreement.
3. Counsel clients on all legal aspects of documents they sign, especially those that may have a detrimental effect on the client.
4. Have the client sign a document saying that she has read and understands the agreement in its entirety, and acknowledges the possible negative results of signing the agreement.
*Chelsea Tucker is in her second year at Texas Tech School of Law and is a candidate for her Juris Doctor in May 2011. She is currently employed as a law clerk for a personal injury attorney and drafts petitions, motions, and appeals, consults with clients, and files documents at the courthouse. Chelsea has also interned with the District Attorney’s Office in Kerrville, Texas. During her first year at Texas Tech School of Law, Chelsea was awarded the Jurisprudence Award for Superior Academic Achievement in Legal Practice.