Hall v. White, Getgey, Meyer & Co., Lpa

Decision Date01 October 2003
Docket NumberNo. 01-50981.,01-50981.
Citation347 F.3d 576
PartiesB.J. HALL, Plaintiff-Appellant-Cross-Appellee, v. WHITE, GETGEY, MEYER & CO., LPA, Defendant-Appellee-Cross-Appellant.
CourtU.S. Court of Appeals — Fifth Circuit

Gary Forrest DeShazo (argued), Jerome John Schiefelbein, Gary F. DeShazo & Associates, Austin, TX, for Hall.

Humberto G. Garcia (argued), Curney, Garcia, Wise & Farmer, San Antonio, TX, for White, Getgey, Meyer & Co., LPA.

Appeals from the United States District Court for the Western District of Texas.

Before HIGGINBOTHAM, EMILIO M. GARZA and DENNIS, Circuit Judges.

DENNIS, Circuit Judge:

B.J. Hall brought this legal malpractice action against White, Getgey, Meyer & Co., LPA ("White/Getgey"), the law firm that represented him in a suit for disability benefits against Hartford Life and Accident Insurance Company ("Hartford"). Hall alleged that the firm's failure to supplement responses to interrogatories led to the exclusion of his medical expert witnesses at trial and forced him to settle with Hartford for a nominal amount. This case went to trial, and the jury returned a verdict in Hall's favor and awarded him $675,000 in damages. When the magistrate judge who presided over the trial entered judgment on the verdict, she found that White/Getgey was entitled to a settlement credit equal to 40% of the damages award on account of Hall's release of his first attorney in the underlying suit from malpractice liability in exchange for the attorney's release of Hall from any claim for compensation under a 40% contingent-fee agreement. The judge reduced Hall's award accordingly. Both parties appeal. Hall challenges the reduction of his damages award; White/Getgey contends that an offset provision of the Hartford policy required the magistrate judge to reduce the award even further. We modify the damages award and affirm the magistrate judge's final judgment as modified.

I. BACKGROUND

From July 5, 1989, to May 18, 1990, B.J. Hall was the executive vice president and chief operating officer of Incarnate Word Health Services ("Incarnate Word"), a company that operated hospitals in Texas and Missouri. As an employee of Incarnate Word, Hall was covered by a group disability policy issued by Hartford. Under that policy, Hall was eligible for benefits if he became "totally disabled" while employed at Incarnate Word.

On May 7, 1990, Hall was injured in an automobile accident; in particular, he suffered a whiplash injury and later complained of weakness in his extremities, loss of balance, and fatigue.1 In the days following the accident, Hall attended one staff meeting but did not otherwise return to work. On May 11, 1990, Incarnate Word notified Hall that his employment would be terminated effective May 18, 1990. The termination was apparently unrelated to Hall's physical condition after the accident.

During 1990 and 1991, Hall consulted two physicians, and both indicated that he had become totally disabled on May 7, 1990, as a result of the automobile accident. In April 1991, Hall submitted a claim for disability benefits under the Hartford policy, but Hartford denied the claim.

In response to this denial, Hall retained Houston attorney Harvill E. Weller, Jr., on a 40% contingent-fee basis. Weller filed suit against Hartford on Hall's behalf in Bexar County, Texas. When Hall disagreed with certain recommendations that Weller made concerning the case, their attorney-client relationship began to suffer. In February 1995, just a few months before the trial date, Hall and Weller decided to terminate their relationship. Hall replaced Weller with White/Getgey, a firm based in Cleveland, Ohio. Hall chose White/Getgey because the firm had previously represented him in Ohio in a similar lawsuit against New England Mutual Life Insurance Company. On April 27, 1995, Hall and Weller executed a "Mutual Release and Agreement to Terminate Legal Relationship." Under the terms of that agreement, Hall reimbursed Weller for his out-of-pocket expenses and released him from malpractice liability; Weller, in turn, released Hall from any claim for attorney's fees.

The suit against Hartford went to trial on June 5, 1995. During a hearing on unresolved pretrial matters, the state district judge granted Hartford's motion to exclude Hall's medical expert witnesses because his attorneys had not supplemented his responses to interrogatories relating to those witnesses. Without medical experts, Hall had no possibility of winning his case, so he settled with Hartford for $20,000.2

Hall later filed this action against White/Getgey in Texas state court, alleging that the firm's failure to supplement discovery responses constituted legal malpractice. White/Getgey removed the case to federal court on the basis of diversity jurisdiction and then filed a third-party complaint for contribution against Weller. Weller filed a motion for summary judgment, contending that (1) he was released from all liability for potential malpractice claims in his April 27, 1995 agreement with Hall; (2) Texas law provides that no defendant has a right of contribution against a "settling person"; and (3) by virtue of the release, he was a "settling person" as a matter of law. The district court agreed that Weller was a "settling person" under the relevant Texas statute because he gave up his attorney's fees in exchange for Hall's releasing him from malpractice liability. The court therefore granted Weller's motion for summary judgment and dismissed him from the case.

After dismissing Weller from the case, and upon the parties' consent, the district court assigned this case to a magistrate judge, who granted White/Getgey's motion for summary judgment and dismissed Hall's complaint.3 The magistrate judge concluded that the underlying suit was without merit because Hall could not show that he was "totally disabled" as that term was defined in the Hartford policy. Hall appealed to this court, and we reversed and remanded, finding that he had presented sufficient evidence of his total disability to withstand summary judgment.4

On remand, the parties filed cross-motions for summary judgment on an affirmative defense of offset that White/Getgey had pleaded in its first amended answer. That defense was based on a provision of the Hartford policy that permitted Hartford to reduce the benefits it owed to Hall by the amount of income benefits he had received from other sources as a result of his disability.5 Reasoning that a favorable damages award against Hartford in the underlying suit would have been offset by Hall's "other income benefits," White/Getgey argued that Hall's recovery in this action was likewise limited.6 But Hartford never pleaded its offset right as an affirmative defense in the underlying suit. Hall therefore contended that Hartford waived the defense and that, as a consequence, White/Getgey could not raise it in a malpractice action. The magistrate judge agreed that Hartford's failure to plead offset amounted to a waiver of that defense under Texas law and further found that "[i]n this case, Hall's measure of damages is the amount he would have received from the jury if his White/Getgey lawyers had properly prosecuted his claim, considering all the applicable affirmative defenses Hartford pleaded in the underlying lawsuit and nothing more." In accordance with this finding, the magistrate judge entered an order granting Hall's cross-motion for partial summary judgment and striking White/Getgey's affirmative defense of offset.

This case went to trial in August 2001. The jury returned a verdict in Hall's favor in the amount of $675,000 and determined that White/Getgey was responsible for 51% of the negligence that resulted in Hall's injuries and that Weller was responsible for the remaining 49%.7 Soon after the trial, the magistrate judge requested briefings from the parties to assist her in entering judgment on the verdict. White/Getgey contended in its brief, as it had throughout this action, that it was entitled to a settlement credit under § 33.012(b) of the Texas Civil Practice and Remedies Code equal to 40% of the damages award. Its theory was that Hall had settled his malpractice claim against Weller for that amount when they executed the mutual release. In her "Order on Entry of Judgment," the magistrate judge agreed that the mutual release was a "settlement" for purposes of § 33.012(b) and that White/Getgey was entitled to a credit equal to the dollar amount of the settlement. The judge also agreed with White/Getgey that the "dollar amount" of the settlement was 40% of Hall's damages award ($270,000) and reduced the award accordingly.

Both parties filed timely notices of appeal.

II. ANALYSIS

We face two issues. First, Hall contends that the mutual release was not a "settlement" and that, even if it was, the magistrate judge misapplied § 33.012(b) of the Texas Civil Practice and Remedies Code. Second, White/Getgey challenges the magistrate judge's order striking its affirmative defense of offset. The firm contends that Texas law does not limit a malpractice defendant to the defenses actually raised in the underlying suit.8 Because both of these issues concern the magistrate judge's application of Texas law, our review is de novo.9

A. Settlement Credit

Section 33.012(b) of the Texas Civil Practice and Remedies Code provides that if a claimant in a tort action has settled with a person who bears some responsibility for his injuries, the trial court must reduce the claimant's damages award to account for the settlement:

If the claimant has settled with one or more persons, the court shall further reduce the amount of damages to be recovered by the claimant with respect to a cause of action by a credit equal to one of the following, as elected in accordance with Section 33.014:

(1) the sum of the dollar amounts of all settlements; or

(2) a dollar amount equal to the sum of the...

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