Baker v. Evans

• Decision Date: 17 October 2013
• Docket Number: No. 2011–CA–00110–SCT.,2011–CA–00110–SCT.
• Citation: 123 So.3d 387
• Parties: BAKER & McKENZIE, LLP and Joel Held v. S. Lavon EVANS, Jr., Laredo Energy Holdings, LLC, S. Lavon Evans Operating Texas, LLC, S. Lavon Evans Jr., Operating Company, Inc., S. Lavon Evans Drilling Ventures, LLC, E & D Service, Inc. and E & D Drilling Services, LLC.
• Court: Mississippi Supreme Court

123 So.3d 387

BAKER & McKENZIE, LLP and Joel Held

v.S. Lavon EVANS, Jr., Laredo Energy Holdings, LLC, S. Lavon Evans Operating Texas, LLC, S. Lavon Evans Jr., Operating Company, Inc., S. Lavon Evans Drilling Ventures, LLC, E & D Service, Inc. and E & D Drilling Services, LLC.

No. 2011–CA–00110–SCT.

Supreme Court of Mississippi.

Oct. 17, 2013.

David Wright Clark, Jackson, W. Wayne Drinkwater, Jr., Michael James Bentley, Margaret Oertling Cupples, Jackson, David C. Dunbar, Ridgeland, William Larry Latham, attorneys for appellants.

Mark A. Nelson, Hattiesburg, Jack W. Land, Susan Olivia McDonald, Eric A. Tiebauer, Jr., Waynesboro, Michael Jacob Shemper, Hattiesburg, Laurence E. Best, Mark E. Best, Peter Stephan Koeppel, attorneys for appellees.

EN BANC.

PIERCE, Justice, for the Court:

¶ 1. In November 2008, S. Lavon Evans Jr. and his companies S. Lavon Evans Jr. Operating Company, Inc.; S. Lavon Evans Jr. Drilling Ventures, LLC; and E & D Services, Inc. (collectively “Plaintiffs”) sued the law firm of Baker & McKenzie, LLP, and one of its partners, Joel Held (collectively, “Baker Defendants”) in the Circuit Court of Jones County, Mississippi. The complaint also named as defendants Laredo Energy Holdings, LLC, and its related subsidiaries S. Lavon Evans Operating Texas, LLC, and E & D Drilling Services, LLC. Plaintiffs listed seven causes of action in the complaint. Counts one and seven charged the Baker Defendants with legal malpractice and breach of contract. Counts two through six charged all the defendants with breach of fiduciary duty; negligent omission and misstatements of material facts; civil conspiracy, aiding and abetting; tortious interference; and breach of duty of good faith and fair dealing.

¶ 2. In January 2009, Defendants Laredo Energy Holdings, LLC; S. Lavon Evans Operating Texas, LLC; and E & D Drilling Services (collectively Cross–Plaintiffs), filed a cross-claim against the Baker Defendants in the Jones County Circuit Court, claiming legal malpractice, breach of contract, breach of duty of good faith and fair dealing, and breach of fiduciary duty.

¶ 3. Essentially, Evans asserted that in May 2007, he lost access to his companies' two largest assets (drilling Rigs 11 and 12) and was sued in Texas by the Baker Defendants on behalf of Reed Cagle (Evans's business partner), who was acting on behalfof Laredo Energy Holdings, LLC (“Laredo”). This triggered a storm of liens and suits by vendors against Evans and his companies—all because, as Evans claims, he made decisions and entered agreements based on advice and recommendations from the Baker Defendants, who Evans believed to be his lawyers. Evans claimed that his businesses once were worth more than $50 million but now were accountable for debts exceeding $31 million as a result of the conduct by the Baker Defendants.

¶ 4. The Mississippi case was tried in October 2010, and the jury returned a verdict of $103,400,000 in actual damages for Plaintiffs and Cross–Plaintiffs. S. Lavon Evans Jr. was awarded $1 million from defendant Joel Held and $30 million from Baker & McKenzie. S. Lavon Evans Operating Company, Inc., was awarded $1 million from Joel Held and $29 million from Baker & McKenzie. E & D Services, LLC, was awarded $1 million from Joel Held and $19 million from Baker & McKenzie. The jury also assessed Evans, individually, with ten-percent comparative fault. And the trial court reduced the $31 million amount awarded to Evans, individually, by ten percent. The Cross–Plaintiffs were separately awarded $22.4 million from Joel Held and Baker & McKenzie, collectively.

¶ 5. After Plaintiffs and Cross–Plaintiffs moved for punitive damages, the trial court held a punitive phase and then submitted the issue of punitive damages to the jury. A divided jury, nine jurors in favor of punitive damages and three jurors against, awarded $75,000 in punitive damages to Plaintiffs and $75,000 in punitive damages to Cross–Plaintiffs.

¶ 6. Plaintiffs and Cross–Plaintiffs were awarded $12,566,348.79 in attorneys' fees, which included an hourly-rate calculation plus a bonus fee equal to ten percent of the total verdict.

¶ 7. The trial court denied the Baker Defendants' post-trial motions for judgment notwithstanding the verdict (JNOV), new trial, and remittitur. This appeal followed.

¶ 8. We affirm as to the Baker Defendants' liability. But because we find the jury was not properly instructed, we reverse and remand for a new trial on proximate cause and damages.

FACTS

¶ 9. Plaintiff S. Lavon Evans Jr. is an oil and gas drilling contractor from Jones County, Mississippi. Plaintiff E & D Services, Inc. (“E & D”) is a drilling company owned by Evans, which provides drilling rigs, workover rigs, trucks, and swab rigs necessary to drill wells. And Plaintiff S. Lavon Evans Operating Company, Inc. (“Evans Operating”) is an operating company owned by Evans, which was responsible for operating, permitting, and producing wells in compliance with state and federal regulatory requirements through the time that the well is plugged and abandoned.

¶ 10. In 1999, Reed Cagle answered an advertisement Evans had placed in the Southeastern Oil Review advertising his drilling services, and Cagle negotiated for Evans to drill oil wells for him in Mississippi and Alabama. Cagle owned Reed Petroleum, LLC (“Reed Petroleum”), and Heartland Energy, Inc. (“Heartland”), and raised money from investors for joint-venture interests, which in turn would contract with others to permit, drill, and operate oil and gas wells. Defendant Joel Held had represented Cagle and Heartland since the 1990s.

¶ 11. Heartland prepaid Evans in an escrow account, and Heartland also handledcertain other costs such as legal expenses. Although Evans allegedly had concerns, he began extending Heartland credit. Evans testified that he voiced those concerns to Held, who told him that he should continue drilling for Heartland.¹ From 1999 to 2006, Evans drilled eighty wells for Cagle and received at least $80 million in payments from him.

¶ 12. In April 2001, the Mississippi Secretary of State, through a subpoena, sought information from Evans Operating in connection with Evans's involvement with Heartland. Evans then contacted both Heartland and Held. Evans asked Held to represent him, and Held agreed. Thereafter, Evans received an engagement letter on April 20, 2001, from the Baker Defendants, stating:

We are pleased that you have selected Baker & McKenzie to represent S. Lavon Evans, Jr. Operating Company, Inc. with respect to a subpoena issued by the Mississippi Division of Business Regulation and Enforcement. The purpose of this letter is to confirm the terms of our representation.

It is anticipated that this engagement will be supervised and principally discharged by Joel Held with the assistance of other Baker & McKenzie lawyers acting under his supervision. We may in our discretion, ask other Baker & McKenzie partners, associates or staff to assist in the discharge of your assignment. As you know, our firm has offices in many jurisdictions and relationships with associated firms in jurisdictions as well. Unless you instruct to the contrary, we will assume that we are authorized to enlist the assistance of lawyers in those other offices and related firms, as appropriate in discharging your assignment.

...

As you know, this Firm will continue to represent Heartland in connection with [sic] respect to the inquiry from Mississippi and matters totally separate and distinct from this engagement. While I do not believe that a present conflict of interest exists, there is potential for conflicts to arise at a future date.

Our representation of clients is governed by the Texas Disciplinary Rules of Professional Conduct, as adopted by the Supreme Court of Texas and the State Bar of Texas. Pursuant to those rules, a lawyer has a duty to exercise independent professional judgment on behalf of each client. When an attorney is requested to represent multiple clients in the same matter, he can do so if he concludes that he can fulfill this duty with regard to each of the clients on an impartial basis and obtains the consent of each client after the explanation of the possible risks involved in the multiple representation situation. While we will represent you and Heartland in connection with this engagement, we nonetheless intend to avoid any conflict of interest between you.

If I conclude that a conflict of interest has arisen between you and Heartland such that I can no longer adequately represent you, I will so inform you and may have to withdraw from representing you. We will continue to represent Heartland. If you believe a conflict of interest has arisen or is likely to arise between the parties or if you believe a conflict of interest has arisen or is likely to arise between the parties [sic], you have a duty to inform the Firm.

Both Evans and Heartland signed the engagement letter. Heartland signed because it would be paying the legal fees.

¶ 13. Held visited Evans's Mississippi office to gather documents and evidence to respond to the 2001 subpoena. Held responded to the subpoena on May 14, 2001, stating that Baker & McKenzie represented Evans Operating and the “Joint Ventures and therefore the venturers.” After speaking with the Mississippi Secretary of State, Held responded to the specific requests and spoke to the Secretary of State's office again in August of 2001 regarding the subpoena.

¶ 14. According to Evans, a servicing agreement was sent to him in February 2004 by Held's assistant. The servicing agreement specifically identified Evans Operating and Heartland as the parties. Evans believed that the Baker Defendants had drafted the agreement and structured the deal. The Baker Defendants dispute that the servicing agreement ever was signed. Although he did not retain a signed copy, Evans stated that he signed the agreement and believed he had sent it back to Heartland. Evans alleged that the...