Opinion issued=20
March 20, 2008 =
In=20
The
Court of =
Appeals
For =
The
First =
District of=20
Texas
NO. =
01-06-00696-CV
DIXON FINANCIAL SERVICES, LTD. AND =
HYPERDYNAMICS=20
CORPORATION, Appellants
V.
GREENBERG, PEDEN, SIEGMYER & =
OSHMAN, P.C.,=20
GERALD SIEGMYER, RON BEARDEN, AND R.F. BEARDEN ASSOCIATES, INC.,=20
Appellees
On Appeal from the 215th Judicial =
District Court=20
Harris County, =
Texas
Trial Court Cause No.=20
2001=E2=80=9306263A
MEMORANDUM OPINION =
ON=20
REHEARING
=
Appellants,=20
Dixon =
Financial=20
Services, Ltd. and Hyperdynamics Corporation, have filed a motion =
for en=20
banc reconsideration of our opinion. We withdraw our opinion of =
November=20
15, 2007 and substitute this opinion in its stead. Our disposition =
and=20
judgment remain unchanged. Because we grant rehearing and issue a =
new=20
opinion, appellants=E2=80=99 motion for en banc reconsideration of =
our prior=20
opinion is moot. See Brookshire Brothers, Inc. v. Smith, =
176 S.W.3d=20
30, 40 (Tex. App.=E2=80=94Houston [1st Dist.] 2004, pet. denied) =
(supp. op.);=20
Butler v. State, 6 S.W.3d 636, 637 n.1 (Tex. =
App.=E2=80=94Houston [1st=20
Dist.] 1999, pet. ref=E2=80=99d).
=
The=20
trial court granted summary judgment against appellants, =
Dixon=20
Financial Services, Ltd. (=E2=80=9CDixon Financial=E2=80=9D) and =
Hyperdynamics Corporation=20
(=E2=80=9CHyperdynamics=E2=80=9D), in favor of appellees, =
Greenberg, Peden, Siegmyer &=20
Oshman, P.C. (=E2=80=9CGreenberg Peden=E2=80=9D), Gerald Siegmyer =
(=E2=80=9CSiegmyer=E2=80=9D), Ron=20
Bearden, and R.F. Bearden Associates, Inc. (collectively, =
=E2=80=9CBearden=E2=80=9D). The=20
trial court then severed appellants=E2=80=99 claims against =
appellees into a=20
separate cause making the earlier interlocutory summary judgment =
final and=20
appealable. In two issues, appellants contend that the trial court =
erred=20
by granting summary judgment in appellees=E2=80=99 favor and by =
granting the=20
severance.
<=
/SPAN>We=20
affirm.
Background
<=
/SPAN>On=20
September 9, 1999, Bearden, Erin Oil Corporation, and Bill =
Knollenberg,=20
principal of Erin Oil (collectively =E2=80=9CErin Oil=E2=80=9D), =
obtained an arbitration=20
award against Michael Watts, a securities broker, and Texas =
Capital=20
Securities, the securities brokerage firm for whom Watts worked. =
As part=20
of the award, Bearden and Erin Oil were awarded, jointly and =
severally,=20
=E2=80=9C140,000 shares of common stock and 200,000 warrants in =
Hyperdynamics.=E2=80=9D In=20
the arbitration proceeding, Greenberg Peden represented Bearden, =
and the=20
law firm of Johnson, Burnett, & Chang (=E2=80=9CJohnson =
Burnett=E2=80=9D) represented=20
Erin Oil.
<=
/SPAN>On=20
January 6, 2000, Johnson Burnett attorney James Chang sent a =
letter to=20
notify Hyperdynamics=E2=80=99s transfer agent, Fidelity Transfer =
Company, of the=20
arbitration award against Watts and Texas Capital Securities.=20
Specifically, Chang wrote, in relevant part,
[T]he purpose of this letter is to =
notify you in=20
writing of such an arbitration award and to demand that Fidelity =
Transfer=20
Company immediately cease and desist from transferring, conveying, =
or=20
otherwise delivering on the books of [Hyperdynamics] any shares of =
common=20
stock or other securities of [Hyperdynamics] that are legally or=20
beneficially owned, held, or in the name or custody of Texas =
Capital=20
and/or Watts or any of their respective affiliates or that are =
deposited=20
in any accounts maintained or managed by Texas Capital and/or =
Watts or any=20
of their respective affiliates.
<=
/SPAN>On=20
January 12, 2000, Chang sent another letter to Fidelity Transfer =
informing=20
Fidelity, =E2=80=9CWe have recently learned that some of [the] =
securities of=20
[Hyperdynamics] that our client is entitled to in accordance with =
the=20
[arbitration award] are held or deposited in an account in the =
name of=20
Island Communications Investments, Ltd.=E2=80=9D Chang continued, =
[T]he purpose of this letter is to =
demand in=20
writing that Fidelity Transfer Company immediately cease and =
desist from=20
transferring, conveying, or otherwise delivering on the books of=20
[Hyperdynamics] any shares of common stock or other securities of=20
[Hyperdynamics] that are legally or beneficially owned, held, or =
in the=20
name or custody of Island Communications Investments, =
Ltd.
<=
/SPAN>Also=20
on January 12, 2000, Bearden and Erin Oil filed a verified =
petition=20
(hereafter referenced as =E2=80=9Cthe Watts =
litigation=E2=80=9D) seeking=20
confirmation of the arbitration award and requesting injunctive =
relief =E2=80=9Cin=20
aid thereof=E2=80=9D against Texas Capital, Michael Watts, and =
Hyperdynamics.=20
Greenberg Peden attorney Gerald Siegmyer signed the petition on =
behalf of=20
Bearden, and Chang, who represented Erin Oil, signed the =
petition=E2=80=99s=20
verification.
<=
/SPAN>The=20
petition included the following allegations in support of =
injunctive=20
relief:
[Bearden and Erin Oil] are the owners of =
certain=20
brokerage accounts at Texas Capital. The account numbers are =
954666,=20
954682, and 062145. Watts was the broker assigned to the accounts. =
The=20
accounts are supposed to contain 143,000 shares of HyperDynamics =
common=20
stock, and Warrants to purchase 200,000 additional shares of =
common=20
stock. . . .
. . . .
Watts has already admitted that, without =
authority=20
to do so, he caused some securities in the accounts to be sold and =
used to=20
pay his personal attorney. Hence, Watts and Texas Capital have =
already=20
absconded with some securities that should have been available to =
satisfy=20
the [arbitration award] and may very well do so again, if they =
have not=20
already liquidated the accounts.
. . . .
HyperDynamics is a publically traded =
corporation=20
whose president, chief executive officer, chief financial officer =
and=20
principal individual shareholder is Kent Watts, the brother of =
[Michael]=20
Watts. [Michael] Watts is listed in HyperDynamics=E2=80=99 [most =
recent] 10-K=20
Report . . . as a =E2=80=9Cconsultant=E2=80=9D to the company. . . =
.
At the arbitration hearing, the =
uncontested=20
evidence showed that:
a.Watts had stated that he had removed =
shares of=20
HyperDynamics stock from [Bearden and Erin Oil=E2=80=99s] accounts =
and sold them=20
to pay his personal legal fees.
b.Watts controlled at least two offshore =
Cayman=20
Island trusts which maintained brokerage accounts at Texas Capital =
and for=20
which Watts held trading authorization. The accounts were =
denominated as=20
Island Communications Investments, Ltd. accounts, and were =
numbered 954681=20
and 954836. Watts transferred other shares from [Bearden and Erin =
Oil=E2=80=99s]=20
accounts into the Island Communications=E2=80=99 accounts and =
stated that he would=20
transfer shares and warrants of HyperDynamics into [Bearden and =
Erin=20
Oil=E2=80=99s] accounts; and
c.After Texas Capital ceased doing =
business, the=20
records of the Island Communications accounts controlled by Watts =
had been=20
removed from Texas Capital=E2=80=99s file cabinet where they had =
been stored.=20
Watts had access to the file cabinet.
[Bearden and Erin Oil] now cannot locate =
their=20
accounts, or the shares or warrants of HyperDynamics that are =
supposed to=20
be in the accounts. Watts has openly represented to others that =
whatever=20
assets he has are located offshore and could never be reached by =
his=20
creditors. It is reasonable to suspect that Watts and/or Texas =
Capital may=20
cause any assets otherwise subject to execution in Texas to be =
moved=20
offshore to hide, delay or defraud [Bearden and Erin Oil]. =
[Bearden and=20
Erin Oil] have reason to believe that the Island Communications =
accounts=20
contain some 574,100 shares HyperDynamics stock.
<=
/SPAN>Bearden=20
and Erin Oil then alleged that =E2=80=9C[t]here is nothing =
to stop Watts=20
and Texas Capital from absconding with securities before [Bearden =
and Erin=20
Oil] are able to carry out and execute the [arbitration award] . . =
. .=E2=80=9D=20
(Emphasis in original.) To support their request for a temporary=20
restraining order, Bearden and Erin Oil asserted that =
=E2=80=9CDefendants should=20
be prevented from transferring, conveying, assigning, selling or =
otherwise=20
disposing of any securities of Hyperdynamics in which Texas =
Capital,=20
Watts, Island Communications, or [Bearden and Erin Oil] hold a =
legal or=20
beneficial interest . . . .=E2=80=9D
<=
/SPAN>On=20
January 13, 2000, the trial court in the Watts litigation =
signed a=20
temporary restraining order, requiring that the defendants in that =
litigation and their =E2=80=9Cagents, representatives and persons =
acting in=20
concert with any or all of them=E2=80=9D to
desist and refrain from directly or =
indirectly=20
transferring, conveying, assigning, selling, buying, disposing of, =
or=20
otherwise delivering any securities of HyperDynamics to any other =
party or=20
parties that are legally or beneficially owned by, or in the name =
of,=20
Island Communications, Watts and/or Texas Capital and that they be =
restrained from transferring any securities out of the accounts =
that are=20
or were previously account nos. 954666, 954682, 062145, 954681 and =
954836.
<=
/SPAN>By=20
letter dated January 13, 2000, Chang forwarded to Fidelity =
Transfer a copy=20
of the temporary restraining order. Chang informed Fidelity =
Transfer that=20
Watts, Texas Capital, and Hyperdynamics =E2=80=9Care enjoined and =
prohibited from=20
directly or indirectly transferring or otherwise delivering =
securities of=20
[Hyperdynamics] that are =
owned, held,=20
or in the name or custody of Texas Capital Securities, Inc., =
Michael E.=20
Watts, and/or Island Communications Investment, =
Ltd.=E2=80=9D (Emphasis=20
in original.) Chang pointed out as follows: =E2=80=9CPlease note =
that the TRO is=20
specific in scope and is not intended to prohibit the transfer, =
sale, and=20
delivery of any of the securities of [Hyperdynamics] by any other =
brokers,=20
clearing agents, buyers, or sellers.=E2=80=9D
<=
/SPAN>On=20
January 21, 2000, the trial court then signed an =E2=80=9COrder =
Continuing=20
Temporary Restraining Order,=E2=80=9D which contained the same =
restraints as=20
described in the original temporary restraining order except that=20
Hyperdynamics was no longer subject to those restrictions. =
Hyperdynamics=20
was, however, restrained from
(1) permitting Michael Watts to exercise =
any=20
warrant of HyperDynamics, (2) knowingly allow[ing] Michael Watts =
to=20
transfer any warrant of HyperDynamics to a third-party who intends =
to=20
exercise it, (3) knowingly allowing Michael Watts to sell =
transfer,=20
pledge, assign, whether for value or not, (i) any share of =
HyperDynamics=20
owned by him of which it has actual knowledge, or (ii) any shares =
which=20
are registered in Michael Watts=E2=80=99 name, or in the name of =
Island=20
Communications and where the attempted conveyance is being made =
from Texas=20
Capital Scurities account nos. 954666, 95468, 062145, 9546881, and =
954836.
<=
/SPAN>Bearden=20
and Erin Oil entered into a settlement agreement with =
Hyperdynamics in the=20
Watts litigation on February 4, 2000. Bearden and Erin Oil =
agreed=20
to dismiss Hyperdynamics from the suit, and Hyperdynamics agreed =
that it=20
would not allow Michael Watts =E2=80=9Cto sell, transfer, assign =
or exercise any=20
warrant or option to purchase any securities of =
HyperDynamics.=E2=80=9D=20
<=
/SPAN>On=20
February 7, 2000, Chang e-mailed Fidelity Transfer requesting that =
it=20
provide him with information regarding the Hyperdynamics stock. In =
this=20
regard, Chang inquired,
[D]o you have and can you give me any =
account=20
information regarding the shares of [Hyperdynamics] held in the =
name of=20
Island Communications Investments, Ltd.? We would like account =
information=20
with regard to the following account numbers which were initially=20
established with Texas Capital [and owned by Bearden and Erin=20
Oil] . . .
<=
/SPAN>Chang=20
listed the Texas Capital account numbers and then inquired, =
=E2=80=9C[A]re any=20
shares of Hyperdynamics issued in the name of Island =
Communications=20
traceable to the foregoing account numbers?=E2=80=9D A handwritten =
notation on the=20
hard copy of the e-mail indicated that Fidelity Transfer could not =
provide=20
the requested account information.
<=
/SPAN>On=20
February 9, 2000, Chang spoke with Fidelity Transfer=E2=80=99s =
attorney. The=20
attorney informed Chang that Kent Watts, principal of =
Hyperdynamics, had=20
requested that 575,500 shares of Hyperdynamics stock, evidenced by =
certificate numbers 1229, 1230, 1231, and 1232, and being held in =
Island=20
Communications=E2=80=99s name, be transferred to Dixon Financial. =
In a memo to the=20
file, Chang noted that he had informed Fidelity Transfer=E2=80=99s =
attorney that=20
=E2=80=9Cthere were adverse claimants to those shares held in the =
name of Island=20
and that [Hyperdynamics] may be prohibited from transferring any =
shares in=20
the name of Island.=E2=80=9D
<=
/SPAN>On=20
February 2, 2001, Dixon Financial filed the instant suit against=20
Hyperdynamics, Fidelity Transfer, Greenberg Peden, Siegmyer, =
Bearden, Erin=20
Oil, Knollenberg, James Chang, Johnson Burnett, and two other =
partners of=20
Johnson Burnett. Dixon Financial alleged that it had owned =
=E2=80=9Ca significant=20
number=E2=80=9D of shares of Hyperdynamics stock of which =
=E2=80=9Ccertain shares=E2=80=9D were=20
=E2=80=9Crestricted shares=E2=80=9D that =E2=80=9Ccould not be =
sold until the restriction expired=20
on January 25, 2000.=E2=80=9D Dixon Financial alleged that it had =
requested=20
Hyperdynamics to =E2=80=9Cissue unrestricted share certificates =
when the=20
restriction expired=E2=80=9D and that Hyperdynamics had instructed =
Fidelity=20
Transfer =E2=80=9Cto cancel the restrictions=E2=80=9D on the =
shares, =E2=80=9Ccertificate nos.=20
1229, 1230, 1231, and 1232 (representing 574,5000 shares) and =
issue=20
unrestricted certificates.=E2=80=9D
<=
/SPAN>Dixon=20
Financial alleged that it had intended =E2=80=9Cto sell these =
unrestricted shares=20
immediately=E2=80=9D and that it was prevented from doing so by =
the named=20
defendants. Dixon Financial asserted that Bearden, Erin Oil, and =
their=20
respective attorneys, particularly, Chang, Johnson Burnett, =
Siegmyer, and=20
Greenberg Peden, acting as co-conspirators, prevented =
Hyperdynamics from=20
transferring timely the unrestricted shares to Dixon Financial. =
According=20
to Dixon Financial, =E2=80=9C[t]he conspiratorial conduct was =
performed in a[n]=20
effort to gain possession of Hyperdynamics stock which they could =
use to=20
pay the arbitration award [against Watts and Texas Capital] to the =
damage=20
of Dixon.=E2=80=9D
<=
/SPAN>Dixon=20
Financial asserted that Chang and his co-conspirators had falsely =
claimed=20
and misrepresented that Dixon Financial=E2=80=99s stock shares =
held in the name of=20
Island Communications were subject to the arbitration award =
obtained by=20
Bearden and Erin Oil. Specifically, Dixon Financial alleged that =
Chang had=20
misrepresented to Fidelity on January 6, 2000 that =E2=80=9Cthe =
574,500 shares of=20
stock of Hyperdynamics held in the name of Island Communications =
was in=20
fact property of Chang and Siegmyer=E2=80=99s clients and the =
subject of an=20
arbitration award.=E2=80=9D Dixon Financial further alleged that, =
based on the=20
misrepresentation, Fidelity Transfer had =E2=80=9Cplaced a =
=E2=80=98hold=E2=80=99 on the 574,500=20
shares of Hyperdynamics stock=E2=80=9D owned by Dixon Financial =
thereby preventing=20
Dixon Financial =E2=80=9Cfrom exercising any ownership rights to =
the stock,=20
including its ability to sell the stock at a time when the stock =
was=20
trading large volume at a higher price.=E2=80=9D
<=
/SPAN>Dixon=20
Financial also claimed that =E2=80=9C[t]he defendants =
intentionally and knowingly=20
misrepresented facts to the court in order to obtain the Temporary =
Restraining Order=E2=80=9D on January 12, 2000. Dixon Financial =
asserted that the=20
restraining order was =E2=80=9Csought and obtained=E2=80=9D by =
=E2=80=9Cusing a false and=20
perjurious affidavit signed by Chang.=E2=80=9D Specifically, Dixon =
Financial=20
contended that Chang =E2=80=9Ccommitted aggravated perjury when he =
falsely swore=20
he possessed personal knowledge=E2=80=9D of the facts stated in =
the application on=20
which the temporary restraining order was obtained.
<=
/SPAN>Dixon=20
Financial further alleged that Chang, =E2=80=9Cwith the knowledge =
and consent of=20
his co-conspirators [including Bearden, Greenberg Peden, and =
Siegmyer],=20
intentionally and knowingly on numerous times contacted Fidelity=20
[Transfer] . . . and wrongfully advised the transfer =
agent=E2=80=9D that the=20
temporary restraining order =E2=80=9Cprohibited Fidelity =
[Transfer] from=20
converting the restricted shares and issuing the unrestricted =
shares to=20
Dixon [Financial]=E2=80=9D and that =E2=80=9Cthe unrestricted =
shares which were to be=20
issued to Dixon [Financial] were the same shares referenced in the =
Arbitration Award and the Temporary Restraining Order.=E2=80=9D =
<=
/SPAN>Based=20
on these factual allegations, Dixon Financial asserted causes of =
action=20
against Bearden, Greenberg Peden, Siegmyer, Erin Oil, Chang, and =
Johnson=20
Burnett for conversion, abuse of process, tortious interference, =
and=20
fraud. Dixon Financial claimed that the defendants were jointly =
and=20
severally liable based on theories of conspiracy, agency, and =
concert of=20
action.
<=
/SPAN>Dixon=20
Financial further alleged that, when Fidelity Transfer finally =
transferred=20
the stock to it, the stock =E2=80=9Chad dropped from a high in =
January 2000 of=20
$7.75 per share when Dixon Financial was entitled to receive the =
shares to=20
less than $2.00 resulting in a loss [to Dixon Financial] in excess =
of=20
$3,000,000.=E2=80=9D
<=
/SPAN>Hyperdynamics=20
also filed a cross-claim against Bearden, Greenberg Peden, =
Siegmyer, Erin=20
Oil, Chang, and Johnson Burnett alleging claims for negligent=20
misrepresentation, tortious interference, abuse of process, =
malicious=20
prosecution of a civil suit, and contribution. Like Dixon =
Financial=E2=80=99s=20
claims, Hyperdynamics=E2=80=99s cross-claims were premised on =
allegations that=20
Chang had misrepresented to the trial court and to Fidelity =
Transfer the=20
extent to which the arbitration award applied to =
Hyperdynamics=E2=80=99s stock=20
held in the name of Island Communications.
<=
/SPAN>Hyperdynamics=20
also asserted a cross-claim for breach of contract. Hyperdynamics =
asserted=20
that the defendants breached the February 4, 2000 settlement =
agreement=20
between it, Erin Oil, and Bearden. Hyperdynamics claimed that, =
contrary to=20
the terms of the settlement agreement, the defendants continued to =
interfere with the transfer of its stock to Dixon Financial after =
the=20
settlement agreement was signed.
<=
/SPAN>Greenberg=20
Peden and Siegmyer filed motions for summary judgment asserting =
that Dixon=20
Financial had no cause of action against them, as a matter of law, =
for=20
conduct undertaken in the representation of a client. The =
attorneys based=20
the motions for summary judgment on Dixon Financial=E2=80=99s =
pleadings. The=20
motions were not supported by summary judgment evidence. Dixon =
Financial=20
responded by offering evidence to demonstrate that the attorneys =
engaged=20
in =E2=80=9Cillegal=E2=80=9D conduct outside the protections of =
the claimed privilege.=20
Concomitantly, Bearden filed a motion for summary judgment =
contending=20
that, as a matter of law, it could not be liable for the conduct =
of its=20
attorneys.
<=
/SPAN>Greenberg=20
Peden, Siegmyer, Chang, and Johnson Burnett also filed a joint =
motion for=20
summary judgment against Hyperdynamics. Among the grounds asserted =
in the=20
joint motion for summary judgment was a no-evidence challenge that =
Hyperdynamics could present no evidence of damages, an essential =
element=20
for each of its cross-claims.
<=
/SPAN>The=20
trial court granted the motions for summary judgment. After the =
trial=20
court severed Dixon Financial=E2=80=99s and =
Hyperdynamics=E2=80=99s claims against=20
Greenberg Peden, Siegmyer, and Bearden, this appeal =
followed.
Summary Judgment=20
<=
/SPAN>In=20
their second issue, appellants contend that the trial court erred =
by=20
granting summary judgment in favor of Greenberg Peden, Siegmyer, =
and=20
Bearden based on the summary judgment ground that Greenberg Peden =
was=20
immune from liability because the complained-of conduct was =
undertaken in=20
the representation of a client. ![3DFootnote](3D"")
Appellants generally recognize =
the=20
existence of such qualified privilege, but contend that the =
summary=20
judgment record demonstrates that the conduct alleged in support =
of their=20
tort claims was outside the scope of this privilege. We first =
determine=20
whether Greenberg Peden properly obtained summary judgment on =
appellants=E2=80=99=20
tort claims based on this privilege.
A. Applicable=20
Summary Judgment Standard
<=
/SPAN>As=20
movants for summary judgment, Greenberg Peden had to negate the =
existence=20
of genuine issues of material fact and establish their right to =
judgment=20
as a matter of law. Gibbs v. Gen. Motors Corp., 450 S.W.2d =
827, 828=20
(Tex. 1970); Higbie Roth Const. Co. v. Houston Shell &=20
Concrete, 1 S.W.3d 808, 811 (Tex. App.=E2=80=94Houston [1st =
Dist.] 1999, pet.=20
denied). A defendant can prevail by summary judgment by =
establishing that=20
the law does not recognize the cause of action for which the =
plaintiff=20
seeks to recover. Peeler v. Hughes & Luce, 909 S.W.2d =
494,=20
497=E2=80=9398 (Tex. 1995); Higbie Roth Const., 1 S.W.3d at =
811. Thus, as=20
in this case, a movant may file a summary judgment motion that, =
instead of=20
proving or disproving facts, shows the non-movant has no viable =
cause of=20
action based on the non-movant=E2=80=99s pleadings.
Id.
<=
/SPAN>To=20
determine whether a cause of action exists under the circumstances =
pleaded, the court must assume that all of the facts alleged by =
the=20
non-movant are true and indulge all reasonable inferences in the =
light=20
most favorable to the non-movant. Id. at 811=E2=80=9312. =
Though it must=20
construe the non-movant=E2=80=99s pleadings broadly and indulge =
all inferences in=20
its favor in reviewing the summary judgment, a court is not =
required to=20
accept, as true, any legal conclusions stated in the pleadings. =
Id.=20
at 812.
B. Legal=20
Principles Governing an Attorney=E2=80=99s Immunity from =
Suit
<=
/SPAN>The=20
public has an interest in =E2=80=9Cloyal, faithful and aggressive =
representation=20
by the legal profession.=E2=80=9D Bradt v. West, 892 S.W.2d =
56, 71 (Tex.=20
App.=E2=80=94Houston [1st Dist.] 1994, writ denied). Texas law =
authorizes=20
attorneys to =E2=80=9Cpractice their profession, to advise their =
clients, and to=20
interpose any defense or supposed defense, without making =
themselves=20
liable for damages.=E2=80=9D Kruegel v. Murphy, 126 S.W. =
343, 345 (Tex.=20
Civ. App.=E2=80=94Dallas 1910, writ ref=E2=80=99d); see Renfroe =
v. Jones &=20
Assoc., 947 S.W.2d 285, 287 (Tex. App.=E2=80=94Fort Worth =
1997, writ denied).=20
The purpose behind this well-established rule is to allow an =
attorney to=20
fulfill his duty and zealously represent his clients without =
subjecting=20
himself to the threat of liability. See Bradt, 892 S.W.2d =
at 71. An=20
attorney who could be held liable for statements made or actions =
taken in=20
the course of representing his client would be forced constantly =
to=20
balance his own potential exposure against his client=E2=80=99s =
best interest.=20
Alpert v. Crain, Caton & James, P.C., 178 S.W.3d =
398,=20
405 (Tex. App.=E2=80=94Houston [1st Dist.] 2005, pet. denied). =
Such a result would=20
act as a severe and crippling deterrent to the ends of justice =
because a=20
litigant might be denied a full development of his rights. See=20
Bradt, 892 S.W.2d at 71. To promote zealous representation, =
courts=20
have held that an attorney has =E2=80=9Cqualified =
immunity=E2=80=9D from civil liability,=20
with respect to nonclients, for actions taken in connection with=20
representing a client in litigation. Alpert, 178 S.W.3d at =
405.=20
<=
/SPAN>This=20
qualified immunity generally applies even if conduct is wrongful =
in the=20
context of the underlying lawsuit. Id. For example, a third =
party=20
has no independent right of recovery against an attorney for =
filing=20
motions in a lawsuit, even if frivolous or without merit, although =
such=20
conduct is sanctionable or contemptible as enforced by the =
statutory or=20
inherent powers of the court. Id. (citing West, 892 =
S.W.2d=20
at 72). Courts have refused to acknowledge an independent cause of =
action=20
in such instances =E2=80=9Cbecause making motions is conduct an =
attorney engages=20
in as part of the discharge of his duties in representing a party =
in a=20
lawsuit.=E2=80=9D Id. (citing West, 892 S.W.2d at =
72). If an=20
attorney=E2=80=99s conduct violates his professional =
responsibility, the remedy is=20
public, not private. Renfroe, 947 S.W.2d at 287. =
<=
/SPAN>This=20
rule of qualified immunity focuses on the type of conduct in which =
the=20
attorney engages rather than on whether the conduct was =
meritorious in the=20
context of the underlying lawsuit. Id. at 288. =
=E2=80=9C[I]t is the=20
kind=E2=80=93not the nature=E2=80=93of conduct that is =
controlling.=E2=80=9D Taco=20
Bell Corp. v. Cracken, 939 F. Supp. 528, 532=E2=80=9333 (N.D. =
Tex. 1996)=20
(emphasis in original). Thus, an attorney cannot be held liable to =
a third=20
party for conduct that requires =E2=80=9Cthe office, professional =
training, skill,=20
and authority of an attorney.=E2=80=9D Miller v. =
Stonehenge/Fasa-Texas, JDC,=20
L.P., 993 F. Supp. 461, 464 (N.D. Tex. 1998) (citing Taco=20
Bell, 939 F. Supp. at 532). =E2=80=9CIncorrect, =
meritless, and=20
even frivolous conduct is not actionable if it satisfies this =
standard.=E2=80=9D=20
Id.
<=
/SPAN>An=20
attorney=E2=80=99s protection from liability is not boundless. An =
attorney can be=20
held liable by a third-party for actions that are not part of the=20
discharge of his duties to his client. See Bradt, 892 =
S.W.2d at 72.=20
That is, the law does not provide absolute immunity for every tort =
committed by a lawyer that may be tangentially related to his =
professional=20
role or which may occur during litigation. See id.; =
Miller,=20
993 F. Supp. at 464. By way of extreme example, an attorney who =
assaults=20
the opposing party or lawyer during trial could be held liable for =
action.=20
See Bradt, 892 S.W.2d at 72.
<=
/SPAN>In=20
addition, a cause of action may exist against an attorney who =
knowingly=20
commits a fraudulent act outside the scope of his legal =
representation of=20
the client. Alpert, 178 S.W.3d 406 (citing Likover v. =
Sunflower=20
Terrace II, Ltd., 696 S.W.2d 468, 472 (Tex. =
App.=E2=80=94Houston [1st Dist.]=20
1985, no writ)). If a lawyer participates independently in =
fraudulent=20
activities, his action is =E2=80=9Cforeign to the duties of an =
attorney.=E2=80=9D Id.=20
(citing Likover, 696 S.W.2d at 472 (quoting Poole v. =
Houston=20
& T.C. Ry. Co., 58 Tex. 134, 137 (1882)). Moreover, =
attorneys may=20
also be liable to nonclients for negligent misrepresentation, =
under=20
certain circumstances, despite the absence of a general negligence =
duty to=20
nonclients. See McCamish, Martin, Brown & Loeffler v. F.E. =
Appling=20
Interests, 991 S.W.2d 787, 791=E2=80=9394 (Tex. =
1999).
C. Analysis=20
of Immunity Claim
<=
/SPAN>Appellants=20
contend that summary judgment was improper because they alleged =
and=20
showed, through their summary judgment evidence, that Greenberg =
Peden=20
engaged in fraudulent conduct. Appellants=E2=80=99 tort claims =
rest on the premise=20
that, in an effort to satisfy their clients=E2=80=99 arbitration =
award, Greenberg=20
Peden, primarily through the conduct of alleged co-conspirator =
Chang,=20
intentionally misrepresented the scope of the arbitration award to =
obtain=20
the Hyperdynamics stock owned by Dixon Financial. The specific =
conduct=20
cited by appellants is (1) Chang=E2=80=99s signing of the =
verification in support=20
of the petition for the temporary restraining order when Chang did =
not=20
have personal knowledge of the facts stated in the petition and =
(2) the=20
communications made by the attorneys, primarily by Chang, before =
and after=20
the issuance of the temporary restraining order, to Fidelity =
Transfer,=20
which appellants contend contained misrepresentations that all of =
the=20
stock held in the name of Island Communications was subject to the =
arbitration award when, in fact, the attorneys knew only part of =
the stock=20
was subject to the award.
<=
/SPAN>To=20
determine whether Chang=E2=80=99s conduct (and therefore Greenberg =
Peden=E2=80=99s) was=20
privileged, we focus on whether the conduct concerned the =
discharge of=20
Chang=E2=80=99s duties to his client. See Bradt, 892 S.W.2d =
at 72. Here,=20
the signing of the verification and the filing of the petition to =
obtain=20
the temporary restraining order to secure his client=E2=80=99s =
arbitration award=20
was conduct in which an attorney engages to discharge his duties =
to his=20
client. See id. at 72. As mentioned, the focus is on the =
kind=E2=80=93not=20
the nature=E2=80=93of the attorney=E2=80=99s conduct. Taco Bell =
Corp., 939 F. Supp.=20
at 532=E2=80=9333. The signing and filing of an application for a =
temporary=20
restraining order to aid in the recovery of monies owed to a =
client under=20
an arbitration award is not conduct =E2=80=9Cforeign to the duties =
of an attorney=E2=80=9D=20
and is the kind of conduct protected from liability. See =
id; see=20
also Renfroe, 947 S.W.2d at 288 (holding no cause of action =
against=20
attorney for his participation in filing writ of garnishment with=20
inaccurate facts); McCampbell v. KPMG Peat Marwick, 982 F. =
Supp.=20
445, 448 (N.D. Tex. 1997) (holding that plaintiff could not =
recover=20
against attorney representing opposing party in previous suit =
based on=20
attorney=E2=80=99s allegedly false statements in affidavit and =
motion for new=20
trial filed in that suit).
<=
/SPAN>Similarly,=20
the communications between Chang and Fidelity Transfer were acts =
taken and=20
communications made to facilitate the rendition of legal services =
by Chang=20
to his client. See Alpert, 178 S.W.3d at 408. Even when =
taken as=20
true and construed broadly, Dixon Financial=E2=80=99s petition =
alleges that the=20
underlying purpose of the communications was for the attorneys to =
secure=20
satisfaction of their clients=E2=80=99 arbitration award. Again, =
such action is=20
the kind of conduct in which an attorney engages when discharging =
his=20
duties to his client. Whether the substance of the communications =
was=20
incorrect or overstated does not change the kind of conduct =
in=20
which Chang engaged. As attorneys representing parties given an=20
arbitration award, Chang, his firm, and Greenberg Peden were =
entitled to=20
advance their clients=E2=80=99 positions and pursue satisfaction =
of the=20
arbitration award without fear of personal liability. =
Characterizing an=20
attorney=E2=80=99s action in advancing his client=E2=80=99s rights =
as fraudulent does not=20
change the rule that an attorney cannot be held liable for =
discharging his=20
duties to his client. See Lewis v. Am. Exploration Co., 4 =
F.=20
Supp.2d 673, 679 (S.D. Tex. 1998) (citing Taco Bell, 939 F. =
Supp.=20
533). A plaintiff, such as Dixon Financial or Hyperdynamics, =
should not be=20
allowed to =E2=80=9Csalvage an otherwise untenable claim merely by =
characterizing=20
it as tortious.=E2=80=9D Miller, 993 F. Supp. at 464. =
<=
/SPAN>We=20
recognize that this Court, in Likover v. Sunflower Terrace II,=20
Ltd., upheld a jury=E2=80=99s award against an attorney based =
on conspiracy to=20
defraud. 696 S.W.2d 468, 473 (Tex. Civ. App.=E2=80=94Houston [1st =
Dist.] 1985, no=20
writ). However, Likover, unlike our later decision in =
Bradt,=20
involved allegations that an attorney assisted clients in =
fraudulent=20
business schemes and did not involve conduct taken in the context =
of=20
litigation or another adversarial proceeding. See Miller, =
993 F.=20
Supp. at 465 (noting, =E2=80=9COne distinction is that =
Bradt and its=20
progeny involve actions taken in the context of litigation, such =
as filing=20
motions or making legal arguments. The other cases [including=20
Likover] typically involve lawyers assisting their clients =
in=20
perpetuating fraudulent business schemes.=E2=80=9D).
<=
/SPAN>Here,=20
the conduct cited by appellants occurred in an adversarial =
context.=20
Specifically, the attorneys engaged in the complained-of conduct =
as part=20
of post-arbitration proceedings, an adversarial process similar to =
litigation. Much of the cited conduct occurred as part of =
the=20
initiation of, or subsequent to, the litigation filed to confirm =
and to=20
recover the arbitration award. Thus, the attorneys=E2=80=99 =
conduct alleged in=20
this case is distinct from that in Likover.
<=
/SPAN>Appellants=20
contend that the trial court=E2=80=99s decision to grant summary =
judgment on=20
Hyperdynamics=E2=80=99s negligent misrepresentation claim is =
contrary to the=20
holding of McCamish, Martin, Brown & Loeffler v. F.E. =
Appling=20
Interests, 991 S.W.2d 787 (Tex. 1999). In McCamish, the =
supreme=20
court held that, under certain limited circumstances, a nonclient =
may=20
bring a Restatement of Torts section 552 negligent =
misrepresentation claim=20
against an attorney.
991 S.W.2d 787, 793=E2=80=93795 =
(Tex. 1999). The=20
McCamish court explained that, with respect to a section =
552 suit=20
between a nonclient and an attorney, =E2=80=9C[a] typical =
negligent=20
misrepresentation case involves one party to a transaction =
receiving and=20
relying on an evaluation, such as an opinion letter, prepared by =
another=20
party=E2=80=99s attorney.=E2=80=9D Id. at 793. For example, =
in McCamish, a=20
nonclient brought a section 552 claim against an attorney based on =
the=20
attorney=E2=80=99s representations indicating that a settlement =
agreement complied=20
with a federal statute. Id. at 789=E2=80=9390.
<=
/SPAN>Here,=20
Hyperdynamics did not allege that appellees, through Chang, =
conveyed a=20
legal opinion or evaluation to Fidelity Transfer regarding the=20
Hyperdynamics stock; rather, it alleged that appellees contacted =
Fidelity=20
Transfer and asserted an ownership interest in =
Hyperdynamics=E2=80=99s stock based=20
on the arbitration award. Unlike the representations mentioned in=20
McCamish, the ones at issue here were objective, =
non-evaluative=20
claims with respect to the stock.
<=
/SPAN>The=20
McCamish court also pointed out that the nature of the =
relationship=20
between the attorney and the nonclient is significant when =
determining=20
whether a nonclient may successfully bring a section 552 claim =
against an=20
attorney. In this regard, the court wrote,
Generally, courts have acknowledged that =
a third=20
party=E2=80=99s reliance on an attorney=E2=80=99s representation =
is not justified when the=20
representation takes place in an adversarial context. This =
adversary=20
concept reflects the notion that an attorney, hired by a client =
for the=20
benefit and protection of the client=E2=80=99s interests, must =
pursue those=20
interests with undivided loyalty (within the confines of the Texas =
Disciplinary Rules of Professional Conduct), without the =
imposition of a=20
conflicting duty to a nonclient whose interests are adverse to the =
client.=20
Because not every situation is clearly defined as adversarial or=20
nonadversarial, the characterization of the inter-party =
relationship=20
should be guided, at least in part, by the extent to which the =
interests=20
of the client and the third party are consistent with each other.=20
Id. at 794 (internal citations =
and=20
quotations omitted). Here, Hyperdynamics=E2=80=99s cross claim, =
asserting a=20
section 552 claim, indicates that the interests of appellees and =
Fidelity=20
Transfer were not consistent. The pleading alleges that =
appellees=E2=80=99=20
representations interfered with Fidelity Transfer=E2=80=99s duty =
to issue timely=20
unrestricted stock certificates of Hyperdynamics stock to Dixon =
Financial,=20
as directed. Based on Fidelity Transfer=E2=80=99s alleged failure =
to issue the=20
stock certificates timely, Hyperdynamics=E2=80=99s cross claim =
reflects that it=20
also sued Fidelity Transfer. Hence, the cross claim indicates that =
appellees=E2=80=99 and Fidelity Transfer=E2=80=99s interests were =
not aligned and can most=20
accurately be characterized as adverse.
<=
/SPAN>Hyperdynamics=E2=80=99s=20
cross claim further indicates that Fidelity Transfer=E2=80=99s =
reliance on=20
appellees=E2=80=99 representations was not =
=E2=80=9Cjustifiable,=E2=80=9D as required. See id.=20
Hyperdynamics alleged in its cross claim that =
=E2=80=9CFidelity Transfer knew=20
or should have known that the Dixon shares were certificated and =
could not=20
have been shares in which [appellees] held an interest.=E2=80=9D =
Though it=20
contends that Fidelity Transfer relied on appellees=E2=80=99 =
representations=20
regarding the stock, Hyperdynamics does not allege that the =
reliance was=20
reasonable or justifiable; rather, its allegations indicate that =
Fidelity=20
Transfer=E2=80=99s reliance was not justifiable.
<=
/SPAN>In=20
sum, we disagree with appellants that an analysis under =
McCamish=20
requires us to reverse the trial court=E2=80=99s summary =
judgment with respect=20
to Hyperdynamics=E2=80=99s negligent misrepresentation claim. The =
subject=20
representations in this case are not evaluative type =
representations like=20
those described in McCamish. Moreover, given the =
allegations=20
in Hyperdynamics=E2=80=99s cross-claim, Fidelity Transfer did not =
justifiably rely=20
on appellees=E2=80=99 alleged =
misrepresentations.
<=
/SPAN>Appellants=20
also assert that immunity should not apply because Dixon Financial =
was not=20
a party in the Watts litigation and =E2=80=9Cmost of =
Hyperdynamics=E2=80=99s claims=20
are derivative of Dixon=E2=80=99s.=E2=80=9D This argument has been =
considered and rejected=20
by other courts. In Miller, the court wrote,
It seems to the Court that this is a =
distinction=20
without a difference. The rationale for the rule insulating a =
lawyer from=20
liability for conduct that requires =E2=80=9Cthe office, =
professional training,=20
skill, and authority of an attorney=E2=80=9D is equally applicable =
to actions=20
brought by third-parties who did not participate in the underlying =
litigation. The threat of liability from any source could =
potentially=20
deter a lawyer from exercising independent professional judgment =
on behalf=20
of her client.
993 F. Supp. at 464 at n.2; see also =
Collin=20
County v. Johnson, No. 05-99-00034-CV, 1999 WL 994039, at *4 =
(Tex.=20
App.=E2=80=94Dallas Nov. 3, 1999, no pet.) (not designated for =
publication)=20
(rejecting assertion that attorney=E2=80=99s conduct was =
actionable because=20
plaintiff was not party to underlying litigation). We agree with =
the=20
reasoning in Miller. Whether a plaintiff who institutes the =
suit=20
against an attorney was also a party in the underlying litigation =
is not a=20
determinative factor in deciding whether the attorney=E2=80=99s =
conduct is=20
actionable.
<=
/SPAN>Construing=20
the pleadings and summary judgment evidence liberally in favor of=20
appellants, the acts alleged by appellants constitute conduct =
undertaken=20
by attorneys to assist a client in securing and recovering an =
arbitration=20
award. Such conduct is the kind of conduct in which an attorney =
engages in=20
discharging his duties to his client. Labeling the conduct as =
fraudulent=20
does not automatically make it actionable and the attorneys liable =
for=20
tort damages. We conclude that Greenberg Peden, Siegmyer, and =
Bearden=20
were, as a matter of law, not liable for the conduct alleged in =
this case.=20
Accordingly, we hold that the trial court properly granted summary =
judgment in favor of Greenberg Peden, Siegmyer, and Bearden =
against Dixon=20
Financial and against Hyperdynamics with regard to its tort=20
claims.
D. Hyperdynamics=E2=
=80=99s=20
Breach of Contract Claim
<=
/SPAN>In=20
the second issue, Hyperdynamics also challenges the trial =
court=E2=80=99s summary=20
judgment against it on its breach of contract cross-claim. In its =
opening=20
brief, Hyperdynamics contends that =E2=80=9Cthere can be no =
privilege to breach=20
settlement agreements[,] and the trial court erred in implicitly =
holding=20
that there was.=E2=80=9D In other words, Hyperdynamics contends =
that, even if=20
viable, the attorney privilege discussed above does not act to =
preclude=20
its breach of contract cross-claim.
<=
/SPAN>The=20
joint motion for summary judgment as to Hyperdynamics=E2=80=99s =
cross-claims was=20
both a traditional motion for summary judgment, based on the =
attorney=20
privilege, and a no-evidence motion for summary judgment. The =
no-evidence=20
motion for summary judgment asserted that =E2=80=9CHyperdynamics =
has offered no=20
evidence of any actual damages suffered.=E2=80=9D (Emphasis in =
original.) The=20
no-evidence motion for summary judgment asserted that =
=E2=80=9Cdamages=E2=80=9D was an=20
essential element of each of Hyperdynamics=E2=80=99s cross-claims, =
which=20
necessarily included Hyperdynamics=E2=80=99s breach of contract =
claim. Greenberg=20
Peden and Bearden asserted that Hyperdynamics could produce no =
evidence=20
that it suffered damages as a result of the alleged breach of =
contract=20
because the damages claimed by Hyperdynamics for that cause of =
action were=20
damages allegedly suffered by Dixon Financial, not Hyperdynamics.=20
<=
/SPAN>When=20
the trial court does not specify the basis for its summary =
judgment, as=20
here, the appealing party must show it is error to base it on any =
ground=20
asserted in the motion. Star-Telegram, Inc. v. Doe, 915 =
S.W.2d 471,=20
473 (Tex. 1995). If summary judgment may have been rendered, =
properly or=20
improperly, on a ground not challenged, the judgment must be =
affirmed.=20
Ellis v. Precision Engine Rebuilders, Inc., 68 =
S.W.3d 894,=20
898 (Tex. App.=E2=80=94Houston [1st Dist.] 2002, no pet.) (citing =
Holloway v.=20
Starnes, 840 S.W.2d 14, 23 (Tex. App.=E2=80=94Dallas 1992, =
writ=20
denied)).
<=
/SPAN>In=20
its opening brief, Hyperdynamics did not challenge this ground =
with=20
respect to its breach of contract claim. Nonetheless, the summary =
judgment=20
against Hyperdynamics on its breach of contract claim may have =
been=20
granted, properly or improperly, on this unchallenged ground. =
See=20
id. Because it does not negate the no-evidence ground with =
regard to=20
damages, we hold that Hyperdynamics did not meet its appellate =
burden to=20
show that the trial court erred in granting summary judgment on =
its breach=20
of contract claim.
See id.; see also Bynum =
v.=20
Prudential Residential Servs., Ltd. P=E2=80=99shp, 129 S.W.3d =
781, 795 (Tex.=20
App.=E2=80=94Houston [1st Dist.] 2004, pet. denied) (following =
Ellis=20
).
<=
/SPAN>We=20
hold that the trial court properly granted summary judgment in =
favor of=20
Greenberg Peden, Siegmyer, and Bearden on all of Dixon =
Financial=E2=80=99s and=20
Hyperdynamics=E2=80=99s claims.
<=
/SPAN>We=20
overrule appellants=E2=80=99 second issue.
Severance of Dixon=20
Financial=E2=80=99s and Bearden=E2=80=99s Claims
<=
/SPAN>In=20
their first issue, Dixon Financial and Hyperdynamics contend that =
the=20
trial court erred by severing their claims against Greenberg =
Peden,=20
Siegmyer, and Bearden (referred to as =E2=80=9Cappellees=E2=80=9D =
for purposes of this=20
issue) from the remainder of the case.
<=
/SPAN>As=20
pointed out by appellees, Dixon Financial has waived its right to =
complain=20
about the severance on appeal because it did not object to the =
severance=20
in the trial court. Guerra v. Texas Dep=E2=80=99t of Protective =
&=20
Regulatory Servs., 940 S.W.2d 295, 299 (Tex. App.=E2=80=94San =
Antonio 1997, no=20
pet.); see Tex. R. =
App. P.=20
33.1. For this reason, only the severance of =
Hyperdynamics=E2=80=99s claims=20
is at issue.
<=
/SPAN>Rule=20
41 of the Texas Rules of Civil Procedure provides that =
=E2=80=9C[a]ny claim=20
against a party may be severed and proceeded with =
separately.=E2=80=9D Tex. R. Civ. P. 41. We =
will not=20
reverse a trial court=E2=80=99s order severing a claim unless the =
trial court=20
abused its discretion. Guar. Fed. Sav. Bank v. Horseshoe Op. =
Co.,=20
793 S.W.2d 652, 658 (Tex. 1990).
<=
/SPAN>A=20
claim is properly severable if (1) the controversy involves more =
than one=20
cause of action, (2) the severed claim is one that would be the =
proper=20
subject of a lawsuit if independently asserted, and (3) the =
severed claim=20
is not so interwoven with the remaining action that they involve =
the same=20
facts and issues. Id. The Supreme Court of Texas has =
explained that=20
avoiding prejudice, doing justice, and increasing convenience are =
the=20
controlling reasons to allow a severance. F.F.P. Operating =
Partners,=20
L.P. v. Duenez, No. 02-0381, 2007 WL 1376357, at *11 (Tex. May =
11,=20
2007).
<=
/SPAN>Given=20
that the severance of Dixon Financial=E2=80=99s claims against =
appellees must=20
remain undisturbed due to the lack of objection in the trial =
court, we=20
cannot conclude that the trial court abused its discretion by =
severing=20
Hyperdynamics=E2=80=99s claims against appellees. The record shows =
that=20
Hyperdynamics=E2=80=99s claims are primarily derivative of, or =
closely aligned=20
with, Dixon Financial=E2=80=99s claims against appellees. =
Hyperdynamics=E2=80=99s=20
cross-claims against appellees are =E2=80=9Cinterwoven =
with=E2=80=9D Dixon Financial=E2=80=99s=20
claims against appellees, not with the remaining action. For this =
reason,=20
severance of Hyperdynamics=E2=80=99s cross-claims against =
appellees, along with=20
Dixon Financial=E2=80=99s claims, served to avoid prejudice, to do =
justice, and to=20
increase convenience. See id. Thus, we cannot say that the =
trial=20
court abused its discretion by severing Hyperdynamics=E2=80=99s =
claims against=20
appellees.
<=
/SPAN>We=20
overrule appellants=E2=80=99 first issue.
Conclusion
<=
/SPAN>We=20
affirm the judgment of the trial court.
&=
nbsp; &n=
bsp; &nb=
sp; &nbs=
p; =
; Laura=20
Carter Higley
&=
nbsp; &n=
bsp; &nb=
sp; &nbs=
p; =
; Justice
Panel=20
consists of Justices Taft, Hanks, and=20
Higley. |