Fitts v. Melissa Richards-Smith, the Law Firm of Gillam & Smith, LLP

• Decision Date: 17 February 2016
• Docket Number: No. 06-15-00017-CV,06-15-00017-CV
• Parties: BILLY FITTS AND FREIDA FITTS, Appellants v. MELISSA RICHARDS-SMITH, THE LAW FIRM OF GILLAM & SMITH, LLP, E. TODD TRACY, AND THE TRACY LAW FIRM, Appellees
• Court: Texas Court of Appeals

BILLY FITTS AND FREIDA FITTS, Appellants v. MELISSA RICHARDS-SMITH, THE LAW FIRM OF GILLAM & SMITH, LLP,E. TODD TRACY, AND THE TRACY LAW FIRM, Appellees

No. 06-15-00017-CV

Court of Appeals Sixth Appellate District of Texas at Texarkana

Date Submitted: November 18, 2015

February 17, 2016

On Appeal from the 71st District Court Harrison County, Texas

Trial Court No. 14-0150

Before Morriss, C.J., Burgess and Carter,^* JJ.

Memorandum Opinion by Justice CarterMEMORANDUM OPINION

This case illustrates the conflicts inherent in an attorney's representation of both the driver and a passenger involved in a car accident and the dangers of failing to provide the proper disclosures. Billy Fitts and William Fitts were passengers in a Lexus driven by their brother, George Fitts. The Lexus was involved in an accident that killed George and severely injured Billy and William. On the invitation of George's family, Billy, William, and their wives, Freida and Phyllis, agreed to join George's family in pursuing a product liability action against Toyota based on a claim that George's Lexus had suddenly accelerated prior to the accident. They hired Melissa Richards-Smith (Smith) and the Law Firm of Gillam & Smith, LLP (collectively the Smith Defendants), who partnered with E. Todd Tracy (Tracy) and the Tracy Firm (collectively the Tracy Defendants), to pursue litigation against Toyota.

Without their attorneys' knowledge, Billy and Freida made a claim under George's primary liability insurance and settled their claims against George for policy limits. In the course of doing so, Billy and Freida released George, George's wife, and the primary insurance carrier from all causes of action, claims, or demands for damages arising out of the accident. Billy and Freida then attempted to collect under an umbrella policy that George had purchased, but their claim was denied based on the settlement with the primary insurance carrier and the resulting written release of claims.

Because they were unable to collect under George's umbrella policy, Billy and Freida sued the Smith and Tracy Defendants for legal malpractice and breach of fiduciary duty.¹ Billy and Freida's causes of action were based on, among other things, Smith's and Tracy's (1) failure to advise them that they might have had a cause of action against George's estate for any negligence on George's part in causing the accident, (2) failure to disclose a conflict of interest arising from their joint representation of the entire Fitts family, and (3) failure to advise them about and preserve the statute of limitations on their viable claims. Billy and Freida alleged that had the proper disclosures been made, they could have recovered under George's umbrella policy.

The Smith and Tracy Defendants filed traditional motions for summary judgment arguing (1) that Billy and Freida's legal malpractice claims could not be fractured into breach of fiduciary duty claims, (2) that the affirmative defense of release was established as a matter of law because Billy and Freida executed a written release absolving George from legal liability, and (3) that the release conclusively negated the causation and damages elements of Billy and Freida's legal malpractice claims. The trial court granted the Smith and Tracy Defendants' motions for summary judgment. We affirm.

I. Factual Background

This case is factually unique. Because the history of this case is critical to understanding the parties' legal arguments, we recite the facts chronologically.

A. Freida Sells Insurance to George and Mary Fitts

Freida Fitts was a licensed insurance agent with the Red River Member Insurance Services branch of Bockman Insurance Agency. She sold to her brother-in-law, George, and his wife, Mary, a primary automobile insurance policy, policy number DK 462980, with a per person bodily injury liability limit of $250,000.00.

George and Mary also purchased from Bockman Insurance Agency a $5,000,000.00 personal umbrella liability policy, policy number 0380965 (the Umbrella Policy), underwritten by RLI Corporation.² The language of the Umbrella Policy explained,

We will pay an amount for which anyone covered by this policy becomes legally liable for Injury due to an Occurrence which takes place during the Policy Periodand in the Policy Territory. This insurance applies: . . . As excess insurance over and above the greater of:

(1) the Minimum Limit of Coverage as stated in the Declarations which is required to be provided by the Basic Policies; or

(2) the actual Limit of Coverage provided by the Basic Policies if such limit is greater than the Minimum Limit of Coverage as stated in the Declarations.

According to the Declarations page, the minimum coverage required was $250,000.00, which George and Mary met through their purchase of the primary insurance policy underwritten by Kemper.

B. George's 2009 Accident Prompts Freida To File Claims on George's Insurance Policies

On November 6, 2009, the Fitts brothers were driving on Highway 79 in George's Lexus. George drove, William sat in the front passenger seat, and Billy sat in the back. Ahead of George, in the same lane of travel, Shannon Budzisz stopped her truck in order to make a legal left turn. George was unable to avoid Budzisz' truck and collided into it from behind, killing himself and severely injuring his brothers.

Kemper was soon notified of the accident and began communicating with Freida, who was dealing with the insurance company on Billy's behalf. On November 23, 2009, Kemper requested Billy's hospital records. Soon thereafter, Freida filed a claim on Billy's behalf against the Umbrella Policy, and, on December 9, 2009, Freida forwarded to RLI the police report from the accident. That month, an RLI representative, Jill Tanner, informed Freida that RLI would obtain and include a copy of Kemper's entire file in the RLI investigation file.

C. The Whole Fitts Family Hires the Same Lawyers to Sue Toyota

George's son, Todd, was an attorney in Marshall, Texas. Sometime prior to December 30, 2009, Todd hired Smith to represent him, as well as George's estate, Mary, and his sister, Angela, in a sudden acceleration lawsuit against Toyota. Todd also initiated a property damage claim with Kemper for George's vehicle. Smith retrieved a copy of the police report from the accident. According to the report, the accident occurred at 4:02 p.m. The report further stated that George was "unable to avoid a collision . . . at the speed that he was travelling," "[p]ossibly due to impaired visibility caused by the setting sun." In December 2009, Gary Leinweber, a technical claims supervisor for Kemper, emailed Smith and Sharon Kristine Baker, a senior claims representative for Kemper, detailing Kemper's position regarding joining in the lawsuit against Toyota. Leinweber wrote,

Our investigator concluded that the position of the sun in relation to the vehicle legally stopped in the roadway to turn left resulted in the driver's vision being temporarily impaired and consequently unable to see the stopped vehicle. We did not find evidence of the mat being stuck under the accelerator or other product defects that resulted in this tragic event, so we are not at this time considering entering into or participating in a products liability action.

In spite of the police report and Leinweber's email, Todd decided to continue to pursue a sudden acceleration case against Toyota.

In February 2010, Todd asked the entire Fitts family to meet with the Smith Defendants to explore the possibility of involving the entire family in the lawsuit against Toyota. Smith, who had retrieved a copy of the police report, stated, "The accident report put some fault on George due to sun in his eyes, so I looked at that going on." However, by affidavit, Smith swore that she "strategically met" with Billy, Freida, William, and William's wife, Phyllis, "outside the presenceof Todd Fitts and Mary Fitts so that if they had anything to say about George Fitts or blamed him for the accident, they would feel free to speak openly." Smith recalled this meeting as follows:

6. During that same meeting with Billy Fitts, Freida Fitts, William Fitts and Phyllis Fitts, William told me that he believed that George Fitts not only did nothing wrong in the wreck, but his exact words were that George saved his life.

7. William Fitts stated that George was unable to stop the car, and swerved into the other car in order to take the brunt of the impact and save William's life.

8. In that same meeting[,] Billy Fitts told me that he yelled at George to stop the car, and George tried to pump the brake, but the car continued to accelerate even though George was hitting the brake.

9. In that same meeting, both Billy and William claimed that the sun was not a factor in the accident.

10. In that same meeting, both Billy and William stated that not only was George not at fault, but neither wanted to make a claim against him.

Based on this meeting, Smith prepared attorney-client agreements for Billy and Freida and William and Phyllis.

According to Smith, the Fitts family "retained Gillam & Smith, LLP[,] to investigate an automotive products liability case against Toyota." On February 9, 2010, Billy and Freida each signed separate, but essentially identical, contingent fee contracts with Gillam & Smith. The first paragraph of both contracts specifically stated, "We the undersigned 'Client' employ and retain the law firm of GILLAM & SMITH, L.L.P. 'Attorney' and designated co-counsel to represent me in my Claim against any automobile manufacturer or parts maker arising out of a defect in the automobile owned and driven by George Fitts on November 6, 2009 . . . ." Below that paragraph, under the heading "SCOPE OF REPRESENTATION," the contract read, "GILLAM & SMITH, L.L.P.[,] agrees to investigate and evaluate our possible claim or claims, against any and allresponsible parties who may be liable for personal injuries (if any) suffered by client." (Footnote omitted).

The...