Peeler v. Hughes & Luce

• Decision Date: 27 October 1995
• Docket Number: No. 94-0041,94-0041
• Citation: 909 S.W.2d 494,38 Tex. Sup.Ct. J. 1117
• Court: Texas Supreme Court
• Parties: 38 Tex. Sup. Ct. J. 1117 Carol C. PEELER, Petitioner, v. HUGHES & LUCE and Darrell C. Jordan, Respondents.

Page 494

909 S.W.2d 494

38 Tex. Sup. Ct. J. 1117

Carol C. PEELER, Petitioner, v. HUGHES & LUCE and Darrell C. Jordan, Respondents.

No. 94-0041.

Supreme Court of Texas.

Argued Dec. 14, 1994.

Decided Aug. 1, 1995.

Rehearing Overruled Oct. 27, 1995.

Arnold Anderson Vickery, Houston, Barry Allen Brown, Houston, Paul F. Waldner, Houston, for petitioner.

James E. Coleman, Dallas, Marvin S. Sloman, Dallas, Tim Gavin, Dallas, Barbara J. Elias-Perciful, Dallas, for respondents.

ENOCH, Justice, delivered the opinion of the Court, in which HECHT, CORNYN and OWEN, Justices, join.

Carol Peeler committed a federal crime. She now sues her attorney because she was indicted, convicted, and punished for that crime. We are asked to decide whether Texas law permits her to do so. The public policy of this State dictates that Peeler's own conduct is the sole cause of her indictment and conviction. Consequently, without first establishing that she has been exonerated by direct appeal, post-conviction relief, or otherwise, Peeler cannot sue her attorney. The trial court so held, the court of appeals so held, and we so hold. The judgment of the court of appeals is affirmed. 868 S.W.2d 823.

I

Carol Peeler was an officer of both Hillcrest Equities, Inc. and its wholly-owned subsidiary Hillcrest Securities Corp., Inc. (collectively, "Hillcrest"), a corporation trading in government securities. She and other individuals came under federal criminal investigation by the United States Internal Revenue Service because they were suspected of engineering illegal tax write-offs for wealthy investors. Peeler hired Darrell C. Jordan, a partner with Hughes & Luce, L.L.P., to represent her. She paid Hughes & Luce a $250,000 non-refundable retainer fee and further agreed to pay any hourly fees exceeding that amount.

After nearly four years of investigation and negotiation, a federal grand jury indicted Peeler on twenty-one counts. That grand jury also indicted her husband, and the other Hillcrest principals on various charges. A deal was struck between Peeler and the United States. Peeler signed a plea agreement admitting her guilt to count eighteen--"aiding and assisting the filing of a false and fraudulent U.S. Partnership Return of Income for Byrd Investments." See 26 U.S.C. § 7206(2). She also appeared before the federal judge, admitting her guilt and further testifying that her admission was freely and voluntarily given. In exchange for this, the United States dropped the balance of the charges against her, dismissed all charges against her husband, and recommended a relatively short prison sentence. She was sentenced to a $100,000 fine, $150,000 in restitution, and five years of probation in lieu of incarceration.

II

This case comes to us in the posture of a summary judgment granted in favor of Jordan and Hughes & Luce. Many of the underlying facts in this case are not in dispute. Where they are, it is Peeler's summary judgment proof that we must accept as true. Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548-49 (Tex.1985).

Peeler complains that prior to the time she pled guilty, Jordan failed to tell her that the United States Attorney had offered her absolute transactional immunity. ¹ In other words, the United States Attorney had offered to not prosecute Peeler for her crime, if she would become a witness and testify against her colleagues. Peeler learned about this offer from a journalist three days after pleading guilty. She sued Jordan and Hughes & Luce for violations of the Texas Deceptive Trade Practices--Consumer Protection Act, TEX.BUS. & COM.CODE §§ 17.41-17.63, and for legal malpractice, breach of contract, and breach of warranty. ²

Jordan and Hughes & Luce moved for summary judgment on Peeler's claims. Among other grounds, Jordan and Hughes & Luce urged the trial court to grant their motion for summary judgment because Peeler's own conduct was the sole proximate or producing cause of her damages, and she did not seek to withdraw her plea or set aside her conviction. On these grounds, the trial court rendered summary judgment with respect to all of Peeler's causes of action. The court of appeals affirmed. 868 S.W.2d at 831. We agree.

III

Generally, to recover on a claim of legal malpractice, a plaintiff must prove that (1) the attorney owed the plaintiff a duty, (2) the attorney breached that duty, (3) the breach proximately caused the plaintiff's injuries, and (4) damages occurred. See Cosgrove v. Grimes, 774 S.W.2d 662, 665 (Tex.1989). In the context of a criminal matter we have not addressed whether the client's criminal conduct is, as a matter of law, the sole proximate or producing cause of the client's eventual conviction and damages, such that a legal malpractice claim may not be brought absent a showing that the plaintiff has been exonerated from the criminal conviction, either by direct appeal, post-conviction relief, or otherwise. We note that one Texas appellate court has held that the same elements apply to all legal malpractice cases, civil as well as criminal. Tijerina v. Wennermark, 700 S.W.2d 342, 344 (Tex.App.--San Antonio 1985, no writ). Another court required an appellant to show that the attorney's inaction was a proximate cause of some injury, but it did not confront the issue of whether a person who admits guilt would, as a matter of law, be able to prove such causation. Wright v. Lewis, 777 S.W.2d 520, 522 (Tex.App.--Corpus Christi 1989, writ denied). And in one case it was noted that the criminal defendant did not allege his innocence, but the court predicated its decision that the legal malpractice was not actionable upon the Texas Court of Criminal Appeals' holding that the defense lawyer had not rendered ineffective assistance. Garcia v. Ray, 556 S.W.2d 870, 872 (Tex.Civ.App.--Corpus Christi 1977, writ dism'd). None of these cases are helpful. Like the court of appeals below, however, nearly every court that has addressed the question of whether a convict may sue his or her attorney holds that, for reasons of public policy, the criminal conduct is the only cause of any injury suffered as a result of conviction. See, e.g., Walker v. Kruse, 484 F.2d 802, 804 (7th Cir.1973) (applying Illinois law); Orr v. Black & Furci, P.A., 876 F.Supp. 1270, 1276 (M.D.Fla.1995) (applying Florida law); Shaw v. Alaska, 861 P.2d 566, 572 (Alaska 1993); Weiner v. Mitchell, Silberberg & Knupp, 114 Cal.App.3d 39, 170 Cal.Rptr. 533, 538 (1981); Glenn v. Aiken, 409 Mass. 699, 569 N.E.2d 783, 788 (1991); Morgano v. Smith, 110 Nev. 1025, 879 P.2d 735, 737-38 (1994); Carmel v. Lunney, 70 N.Y.2d 169, 518 N.Y.S.2d 605, 607, 511 N.E.2d 1126, 1128 (1987); Bailey v. Tucker, 533 Pa. 237, 621 A.2d 108, 114-15 (1993); see also Stevens v. Bispham, 316 Or. 221, 851 P.2d 556, 566 (1993) (holding that a criminal defendant cannot satisfy the damages element of a professional negligence claim against his former attorney unless he has been exonerated).

One court in particular has articulated the public policy considerations at stake:

[P]ermitting a convicted criminal to pursue a legal malpractice claim without requiring proof of innocence would allow the criminal to profit by his own fraud, or to take advantage of his own wrong, or to found [a] claim upon his iniquity, or to acquire property by his own crime. As such, it is against public policy for the suit to continue in that it "would indeed shock the public conscience, engender disrespect for courts and generally discredit the administration of justice."

State ex rel. O'Blennis v. Adolf, 691 S.W.2d 498, 504 (Mo.Ct.App.1985) (quoting In re Estate of Laspy, 409 S.W.2d 725 (Mo.Ct.App.1966) (citations omitted)). See generally Sarno, Annotation, Legal Malpractice in Defense of Criminal Prosecution, 4 A.L.R.5th 273 (1992). As a result, only plaintiffs who have been exonerated are permitted to negate the sole proximate cause bar to their cause of action for professional negligence in these jurisdictions. See, e.g., O'Blennis, 691 S.W.2d at 503.

There are two states that have refused to impose an "innocence requirement" on convicts pursuing malpractice claims against their former attorneys. But they have done so without fully addressing the policy concerns of the jurisdictions that have adopted the innocence requirement. See Krahn v. Kinney, 43 Ohio St.3d 103, 105-06, 538 N.E.2d 1058, 1061 (1989); Gebhardt v. O'Rourke, 444 Mich. 535, 510 N.W.2d 900, 908 (1994). These courts entertain the possibility that a defense attorney's negligence may be the legal cause of a client's damages, treating legal malpractice suits against criminal and civil attorneys exactly alike. See, e.g., Krahn, 43 Ohio St.3d at 105-06, 538 N.E.2d at 1061.

IV

Because of public policy, we side with the majority of courts and hold that plaintiffs who have been convicted of a criminal offense may negate the sole proximate cause bar to their claim for legal malpractice in connection with that conviction only if they have been exonerated on direct appeal, through post-conviction relief, or otherwise. While we agree with the other state courts that public policy prohibits convicts from profiting from their illegal conduct, we also believe that allowing civil recovery for convicts impermissibly shifts responsibility for the crime away from the convict. This opportunity to shift much, if not all, of the punishment assessed against convicts for their criminal acts to their former attorneys, drastically diminishes the consequences of the convicts' criminal conduct and seriously undermines our system of criminal justice. See Shaw, 861 P.2d at 571-72. We therefore hold that, as a matter of law, it is the illegal conduct rather than the negligence of a convict's counsel that is the cause in fact of any injuries flowing from the conviction, unless the conviction has been overturned.

While urging us to apply the same standard for legal malpractice in the criminal law context as we do in civil contexts, Peeler...