City of Garland v. Booth

• Decision Date: 27 January 1995
• Docket Number: No. 05-93-00134-CV,05-93-00134-CV
• Citation: 895 S.W.2d 766
• Parties: CITY OF GARLAND, Texas, Appellant, v. Frank R. BOOTH, et al., Appellees.
• Court: Texas Court of Appeals

Page 766

895 S.W.2d 766

CITY OF GARLAND, Texas, Appellant, v. Frank R. BOOTH, et al., Appellees.

No. 05-93-00134-CV.

Court of Appeals of Texas Dallas.

Jan. 27, 1995.

Rehearing Denied March 21, 1995.

Brad Neighbor, Dorothy G. Palumbo, Charles M. Hinton, Jr., First Asst. City Atty. and Asst. City Atty., The City of Garland, Tex., Garland, for appellant.

Schuyler B. Marshall, Beverly Ray Burlingame, Thompson & Knight, P.C., Dallas, for appellees.

Before THOMAS, C.J., ¹ and OVARD and BARBER, JJ.

OPINION

THOMAS, Chief Justice.

This appeal presents two basic issues. First, we must decide whether a party can assign its legal malpractice claims to its adversary in the underlying litigation. Second, we must determine whether attorneys' fees expended to disqualify an opponent's attorney are recoverable in a separate malpractice action. The City of Garland appeals a summary judgment rendered in favor of attorneys Frank R. Booth and Bernard D. "Skip" Newsom and their firm, Booth & Newsom P.C. (collectively, appellees). In six points of error, Garland contends generally that (i) legal malpractice claims can be assigned in Texas and (ii) fact issues exist precluding summary judgment on its direct claims. We affirm in part and reverse and remand in part.

FACTUAL BACKGROUND

In 1977, Garland entered into contracts with the cities of Rowlett and Sachse to treat their wastewater. Robin Lloyd, a partner in a predecessor firm to Booth & Newsom, negotiated and drafted the sewer contracts on behalf of Garland. Frank Booth was a partner in the firm. In 1984, the firm split. Lloyd formed a new firm, and Booth formed Booth & Newsom. Lloyd's firm continued to represent Garland.

In 1988, a dispute arose over the rates Garland charged to treat the wastewater. Garland filed a declaratory judgment action against Sachse and Rowlett, seeking a declaration of rights and obligations under the contracts. Sachse and Rowlett hired appellees to represent them and counterclaimed against Garland. Garland sought to disqualify appellees on the basis that they formerly represented Garland in a substantially related matter, i.e., drafting of the contracts in dispute. Following a ten-day hearing, the trial court disqualified appellees. Nine months later, the three cities settled the underlying litigation. As part of the settlement, Rowlett and Sachse assigned to Garland any of their causes of action against appellees and waived the attorney-client privilege.

Subsequently, Garland sued appellees, alleging it was forced to spend $675,000 in attorneys' fees to disqualify appellees from representing Rowlett and Sachse. Garland asserted disqualification was necessary to protect confidential information disclosed to appellees during the former representation and to prevent appellees from using that information against Garland in the wastewater litigation. Garland alleged direct claims of malpractice, breach of fiduciary duty, and unconscionable conduct under the Deceptive Trade Practices Act (DTPA). As damages, Garland claimed its attorneys' fees and costs associated with both the disqualification proceeding and being prevented from entering settlement negotiations until the dispute over legal representation was resolved.

Additionally, Garland, as assignee of Rowlett and Sachse, sued appellees for breach of contract/restitution, negligence, breach of fiduciary duty, and DTPA violations of breach of express warranty and unconscionability. As damages, Garland sought the attorneys' fees and costs incurred by Rowlett and Sachse in the disqualification proceeding.

The trial court granted summary judgment in favor of appellees. The court specifically granted summary judgment on the assigned claims on the basis that legal malpractice claims are not assignable in Texas. As to Garland's direct claims, the court found there were no genuine issues of material fact. We will address the arguments presented under each set of claims.

SUMMARY JUDGMENT

The function of a summary judgment is not to deprive a litigant of the right to a full hearing on the merits of any real issue of fact but to eliminate patently unmeritorious claims and untenable defenses. Gulbenkian v. Penn, 151 Tex. 412, 416, 252 S.W.2d 929, 931 (1952). In reviewing a summary-judgment record, this Court applies the following standards:

1. The movant for summary judgment has the burden of showing there is no genuine issue of material fact and that it is entitled to judgment as a matter of law.

2. In deciding whether there is a disputed fact issue precluding summary judgment, we must take the evidence favorable to the nonmovant as true.

3. We indulge every reasonable inference in favor of the nonmovant and resolve any doubts in its favor.

See Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548-49 (Tex.1985).

The purpose of the summary-judgment rule is not to provide either a trial by deposition or a trial by affidavit. Rather, its purpose is to provide a method of summarily terminating a case when it clearly appears only a question of law is involved and no genuine issues of fact remain. Port Distrib. Corp. v. Fritz Chem. Co., 775 S.W.2d 669, 671 (Tex.App.--Dallas 1989, writ dism'd by agr.).

To prevail on summary judgment, a defendant as movant must either (1) disprove at least one element of each of the plaintiff's theories of recovery, or (2) plead and conclusively establish each essential element of an affirmative defense, thereby rebutting the plaintiff's cause of action. City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 679 (Tex.1979). A matter is conclusively established if ordinary minds cannot differ as to the conclusion to be drawn from the evidence. Triton Oil & Gas Corp. v. Marine Contractors & Supply, Inc., 644 S.W.2d 443, 446 (Tex.1982).

When the summary judgment order does not specify the ground or grounds on which it is based, we will uphold the order on any ground asserted by the movant that is meritorious. Rogers v. Ricane Enters. Inc., 772 S.W.2d 76, 79 (Tex.1989). When the order specifies the grounds on which it bases summary judgment, we limit our review to those grounds. See Delaney v. University of Houston, 835 S.W.2d 56, 58 (Tex.1992). But c.f. State Farm Fire & Casualty Co. v. S.S., 858 S.W.2d 374 (Tex.1993) (plurality op.) (in concurring and dissenting opinions, five justices indicated they would consider grounds not expressed in the trial court's order under proper circumstances).

ASSIGNABILITY OF MALPRACTICE CLAIMS

A. Negligence/Breach of Fiduciary Duty

In the first point of error, Garland asserts summary judgment was improper on the assigned claims of negligence and breach of fiduciary duty because, contrary to the trial court's ruling, legal malpractice claims may be assigned in Texas. Garland reasons that because causes of action for personal injuries may be sold or assigned and legal malpractice is a tort, such claims should be assignable.

Appellees argue in response that policy considerations and the nature of the attorney-client relationship preclude such assignments. Because we agree with appellees and the reasoning set forth in Zuniga v. Groce, Locke & Hebdon, 878 S.W.2d 313 (Tex.App.--San Antonio 1994, writ ref'd), we hold that legal malpractice claims are not assignable.

In Zuniga, the court held that "assignment of a legal malpractice claim arising from litigation is invalid." ² Zuniga, 878 S.W.2d at 318. In so holding, the court followed a majority of states that have rejected assignability of such claims, primarily on public policy grounds. See Schroeder v. Hudgins, 142 Ariz. 395, 399, 690 P.2d 114, 118 (Ct.App.1984); Goodley v. Wank & Wank, Inc., 62 Cal.App.3d 389, 133 Cal.Rptr. 83, 87 (1976); Roberts v. Holland & Hart, 857 P.2d 492, 495-96 (Colo.Ct.App.1993, cert. denied); Aaron v. Allstate Ins. Co., 559 So.2d 275, 276-77 (Fla.Dist.Ct.App.) (per curiam), review denied, 569 So.2d 1278 (1990); Brocato v. Prairie State Farmers Ins. Ass'n, 166 Ill.App.3d 986, 117 Ill.Dec. 849, 850, 520 N.E.2d 1200, 1201 appeal denied, 121 Ill.2d 567, 122 Ill.Dec. 434, 526 N.E.2d 827 (1988); Picadilly, Inc. v. Raikos, 582 N.E.2d 338, 339-45 (Ind.1991); Bank IV Wichita, Nat'l Ass'n v. Arn, Mullins, Unruh, Kuhn & Wilson, 250 Kan. 490, 827 P.2d 758, 765 (1992); Coffey v. Jefferson County Bd. of Educ., 756 S.W.2d 155, 157 (Ky.Ct.App.1988); Moorhouse v. Ambassador Ins. Co., 147 Mich.App. 412, 383 N.W.2d 219, 221 (1985, appeal denied); Wagener v. McDonald, 509 N.W.2d 188, 191 (Minn.Ct.App.1993); Chaffee v. Smith, 98 Nev. 222, 645 P.2d 966, 966 (1982) (per curiam). ³

The policy considerations underlying these courts' rejection of assignability of claims was perhaps best articulated by the California appellate court in Goodley. There, the court focused on the unique quality of legal services, the personal nature of the attorney's duty to the client, and the confidentiality of the attorney-client relationship. The court reasoned that to allow assignability of such claims would relegate the legal malpractice action to the marketplace and convert it to a commodity to be exploited and transferred to an economic bidder who may have had no professional relationship with the attorney. The commercial aspect of assignability of choses in action arising out of legal malpractice is rife with probabilities that could only debase the legal profession. The almost certain end result of merchandizing such causes of action is the lucrative business of factoring malpractice claims which would encourage unjustified lawsuits against members of the legal profession, generate an increase in legal malpractice litigation, promote champerty and force attorneys to defend themselves against strangers. The endless complications and litigious intricacies arising out of such commercial activities would place an undue burden on not only the legal profession but the already overburdened judicial system, restrict the availability of competent legal services, embarrass the...