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Texas Supreme Court Holds, like New Jersey, that Attorneys' Fees in a Later Legal Malpractice Action are Compensable Damages

Akin Gump Strauss, etc. v. National Development and Research Corp. (07-0818).

Supreme Court of Texas- Decided October 30, 2009

The Supreme Court of Texas took a giant step  closer to  New Jersey’s rule in Saffer v. Willoughby, which permits a prevailing plaintiff in a legal malpractice action to recover as consequential damages attorneys’ fees and expenses from the negligent attorney, in order to make the plaintiff whole again.

The case involved an underlying trial and botched jury verdict questions caused by the attorney’s malpractice and then an appeal to correct the damage it caused.

Here’s what the High Court in Texas said:

A negligence claim, unlike a fee forfeiture claim for breach of fiduciary duty, is about compensating an injured party. See Douglas v. Delp, 987 S.W.2d 879, 885 (Tex. 1999) (“[W]hen the injuries caused by an attorney’s negligence are economic, the plaintiff can be fully recompensed by the recovery of any economic loss. Restoration of the pecuniary interest suffices to return a plaintiff to her prior circumstances.”); Thomas D. Morgan, Lawyer Law: Comparing the ABA Model Rules and the ALI Restatement (Third) of the Law Governing Lawyers 98 (2005) (“A key distinction between fee forfeiture and the malpractice remedy is that the amount forfeited need have no relation to actual damages suffered by the client.”) (emphasis omitted); Restatement (Second) of Torts § 903 cmt. a (1977) (“When there has been harm only to the pecuniary interests of a person, compensatory damages are designed to place him in a position substantially equivalent in a pecuniary way to that which he would have occupied had no tort been committed.”).

We see little difference between damages measured by the amount the malpractice plaintiff would have, but did not, recover and collect in an underlying suit and damages measured by attorney’s fees it paid for representation in the underlying suit, if it was the defendant attorney’s negligence that proximately caused the fees. In both instances, the attorney’s negligence caused identifiable economic harm to the malpractice plaintiff. The better rule, and the rule we adopt, is that a malpractice plaintiff may recover damages for attorney’s fees paid in the underlying case to the extent the fees were proximately caused by the defendant attorney’s negligence. See Alexander v. Turtur & Assocs., Inc., 146 S.W.3d 113, 119 (Tex. 2004); Knebel v. Capital Nat’l Bank, 518 S.W.2d 795, 799 (Tex. 1974); 3 Ronald E. Mallen & Jeffrey M. Smith, Legal Malpractice § 21:19 (2009). 

In Saffer, the New Jersey Supreme Court similarly held:

A client "may recover for losses which are proximately caused by the attorney’s negligence or malpractice." Lieberman v. Employers Ins., 84 N.J.325, 341, 419 A.2d 417 (1980)…The purpose of a legal malpractice claim is "to put a plaintiff in as good a position as he [or she] would have been had the [attorney] kept his [or her] contract."

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…,[the prevailing plaintiff] is nonetheless entitled to reasonable expenses and attorney fees, as consequential damages, incurred in a successful malpractice prosecution.

143 N.J.256, 272, 670 A.2d 535.

According to one Texas blogger:

So, in a later malpractice action, the additional portion of fees attributable to the original lawyer’s negligence — added hearings, procedures, or appellate procedures — might be recoverable.

Question: The "later malpractice action" is  an "added procedure". So, aren’t  the additional fees that a client has to pay to another lawyer to prosecute the later legal malpractice  action also "attributable to the original lawyer’s negligence"? The Texas Court made clear in the Akin Gump case, as did New Jersey in Saffer, that these cases  do not involve the "American Rule" nor fee shifting. They involve compensating the damaged client for his losses and making the client that is  damaged by his lawyer’s negligence whole again– even if doing that requires bringing a later legal malpractice action against the negligent lawyer.

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Posted in: Attorneys Fees, Damages, Litigation, New Jersey, Texas