Troice v. Proskauer Rose, L.L.P.

• Decision Date: 10 March 2016
• Docket Number: No. 15–10500.,15–10500.
• Citation: 816 F.3d 341
• Parties: Samuel TROICE; Punga Punga Financial, Limited, individually and on behalf of a class of all others similarly situated; Pam Reed, Plaintiffs–Appellees v. PROSKAUER ROSE, L.L.P.; Chadbourne and Parke, Limited Liability Partnership; Thomas V. Sjoblom, Defendants–Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

816 F.3d 341

Samuel TROICE; Punga Punga Financial, Limited, individually and on behalf of a class of all others similarly situated; Pam Reed, Plaintiffs–Appellees

v.PROSKAUER ROSE, L.L.P.; Chadbourne and Parke, Limited Liability Partnership; Thomas V. Sjoblom, Defendants–Appellants.

No. 15–10500.

United States Court of Appeals, Fifth Circuit.

March 10, 2016.

Edward Frazer Valdespino, Judith R. Blakeway, Strasburger Price Oppenheimer Blend, San Antonio, TX, Douglas J. Buncher, Neligan Foley, L.L.P., Dallas, TX, Peter Michael Jung (argued), Strasburger & Price, L.L.P., Dallas, TX, Robert McRae O'Boyle, Strasburger & Price, L.L.P., Austin, TX, Edward C. Snyder, Castillo Snyder, P.C., San Antonio, TX, for Plaintiffs–Appellees.

James Paul Rouhandeh (argued), Davis Polk & Wardwell, L.L.P., New York, NY, Neil R. Burger, Bruce William Collins, Carrington, Coleman, Sloman & Blumenthal, L.L.P., Dallas, TX, Jonathan K. Chang, Esq., Craig M. Reiser, Daniel Jacob Schwartz, Davis Polk & Wardwell, L.L.P., New York, NY, Daniel Jacob Beller (argued), Daniel J. Leffell, Esq., William B. Michael, Paul, Weiss, Rifkind, Wharton & Garrison, L.L.P., New York, NY, Harry Max Reasoner, Esq., Vinson & Elkins, L.L.P., Houston, TX, William D. Sims, Jr., Attorney, Vinson & Elkins, L.L.P., Dallas, TX, Joshua R. Hochberg, Esq., Christina M. Carroll, Dentons US, L.L.P., Washington, DC, William Bryan Mateja, Esq., Polsinelli, P.C., Dallas, TX, for Defendants–Appellants.

Before BARKSDALE, CLEMENT, and HAYNES, Circuit Judges.

EDITH BROWN CLEMENT

, Circuit Judge:

This case represents more fallout from Allen Stanford's massive Ponzi scheme. Plaintiffs filed this putative class action against one of Stanford's lawyers, Thomas Sjoblom, and the law firms where he worked, arguing that they aided and abetted Stanford's fraud and conspired to thwart the SEC's investigation of Stanford's scheme. After this case went to the Supreme Court and back on an issue not relevant here, defendants moved to dismiss plaintiffs' complaint as barred by attorney immunity under Texas law. The district court denied that motion, holding that plaintiffs' allegations met a "fraud exception" to attorney immunity, and defendants appealed.

We are now confronted with two issues. First, under Texas law, is attorney immunity a true immunity of suit, such that denial of a motion to dismiss based on attorney immunity is appealable under the collateral order doctrine? Second, should we reverse the district court's order denying defendants' motions to dismiss based on attorney immunity now that the Texas Supreme Court has clarified that there is no "fraud exception" to attorney immunity?

For the reasons below, we answer both questions in the affirmative.

I.

As a partner at the law firm of Chadbourne & Parke LLP, and later at Proskauer Rose LLP, Thomas Sjoblom represented certain companies (collectively, "Stanford Financial") that Stanford used to perpetrate his scheme. Plaintiffs are various entities and individuals who purchased certificates of deposit ("CDs") issued by Stanford Financial; those CDs, plaintiffs allege, are now worthless. Plaintiffs believe that Sjoblom, while acting as "outside counsel to represent the interests of Stanford Financial ... in the SEC investigation," helped to cover up Stanford's scheme by thwarting that investigation in certain ways.

As a result, plaintiffs filed this putative class action against Sjoblom, Chadbourne & Parke, and Proskauer Rose,¹ asserting claims for (a) aiding and abetting violations of the Texas Securities Act, (b) aiding and abetting common law fraud, and (c) conspiring to defraud the putative class. Plaintiffs base their claims entirely on the following acts Sjoblom allegedly committed during his representation of Stanford Financial in the SEC investigation:

• Sending a letter to the SEC arguing that the SEC did not have jurisdiction over Stanford Financial's CD sales because the CDs were not securities under U.S. law;

• Making certain statements to the SEC regarding its document requests to Antigua (where Stanford Financial was based) and regarding Stanford Financial's credibility and legitimacy;

• Stating to SEC lawyers that certain of Stanford Financial's executives were better positioned to explain, in depositions, the details of Stanford Financial's business; and

• Failing to correct purported lies and suborning perjury during a Stanford Financial executive's sworn SEC testimony.

Defendants moved to dismiss plaintiffs' complaint on several grounds, including that it was precluded by the Securities Litigation Uniform Standards Act ("SLUSA") and that defendants were entitled to attorney immunity under Texas law. Without reaching the attorney immunity argument, the district court dismissed the complaint as precluded by SLUSA. We reversed, see Roland v. Green, 675 F.3d 503 (5th Cir.2012)

, and the Supreme Court affirmed that reversal, see Chadbourne & Parke LLP v. Troice, ––– U.S. ––––, 134 S.Ct. 1058, 188 L.Ed.2d 88 (2014).

On remand, the district court denied defendants' motions to dismiss, in which defendants argued that they were immune from suit under the attorney immunity doctrine. Troice v. Proskauer Rose, LLP, No. 3:90–CV–1600–N, 2015 WL 1219522 (N.D.Tex. Mar. 4, 2015)

. The district court held that plaintiffs had sufficiently pleaded a "fraud exception" to attorney immunity by asserting a "colorable claim for fraud," and denied the motions to dismiss. Id. at *4. Defendants moved for reconsideration, but the district court denied those motions as well. Defendants appealed. Plaintiffs then moved to dismiss the appeal, arguing that the district court's order denying the motions to dismiss is not an appealable collateral order. That motion was carried with the case.

The day after plaintiffs moved to dismiss the appeal—about a month after defendants appealed—the Texas Supreme Court held that "[f]raud is not an exception to attorney immunity" under Texas law. Cantey Hanger, LLP v. Byrd, 467 S.W.3d 477, 484 (Tex.2015)

. Thus, "[m]erely labeling an attorney's conduct ‘fraudulent’ does not and should not remove it from the scope of client representation or render it ‘foreign to the duties of an attorney’ " such that the attorney would not be immune. Id. at 483. Defendants therefore argue that because the Texas Supreme Court has now clarified that there is no fraud exception to attorney immunity, the district court erred by applying such an exception.

II.

We review de novo a district court's denial of a motion to dismiss based on immunity. See Doe v. Robertson, 751 F.3d 383, 386 (5th Cir.2014)

. We also review de novo a district court's interpretation of state law. Am. Bankers Ins. Co. of Fla. v. Inman, 436 F.3d 490, 492 (5th Cir.2006). We are "bound to answer the question the way the state's highest court would resolve the issue." Occidental Chem. Corp. v. Elliott Turbomachinery Co., 84 F.3d 172, 175 (5th Cir.1996).

III.

Plaintiffs moved to dismiss this appeal, arguing that the district court's order denying defendants' motions to dismiss is not an appealable collateral order. The collateral order doctrine permits appeals from orders that are deemed final under 28 U.S.C. § 1291

because they "(1) conclusively determine the disputed question; (2) resolve an issue that is completely separate from the merits of the action; and (3) would be effectively unreviewable on appeal from a final judgment." Walker v. U.S. Dep't of Hous. & Urban Dev., 99 F.3d 761, 766 (5th Cir.1996). Only the third element, reviewability, is implicated here because it is undisputed that the order conclusively determines the question of immunity and is separate from the merits of the action. And "orders denying certain immunities are strong candidates for prompt appeal under § 1291." Dig. Equip. Corp. v. Desktop Direct, Inc., 511 U.S. 863, 871, 114 S.Ct. 1992, 128 L.Ed.2d 842 (1994).

Whether the district court's order here would be effectively unreviewable on appeal from final judgment depends on whether attorney immunity in Texas "provides a true immunity from suit and not a simple defense to liability." Sorey v. Kellett, 849 F.2d 960, 962 (5th Cir.1988)

; see, e.g., McMahon v. Presidential Airways, Inc., 502 F.3d 1331, 1339 (11th Cir.2007) (querying whether defendants claiming immunity have "a substantial claim to a true immunity from suit: i.e., an immunity that not only insulates the party from liability, but also prevents the party from being exposed to discovery and/or trial").² "[I]t is not mere avoidance of a trial, but avoidance of a trial that would imperil a substantial public interest, that counts when asking whether an order is ‘effectively’ unreviewable if review is to be left until later." Will v. Hallock, 546 U.S. 345, 353, 126 S.Ct. 952, 163 L.Ed.2d 836 (2006)

. And "[a]lthough appellate jurisdiction under § 1291 is a matter of federal law, we look to state law to determine whether the basis of [defendants'] claim is properly characterized as an immunity from suit or merely a defense to liability." Shanks v. AlliedSignal, Inc., 169 F.3d 988, 992 (5th Cir.1999).

Although the Texas Supreme Court has never stated as much, attorney immunity is properly characterized as a true immunity from suit, not as a defense to liability. Two related considerations inform this conclusion: the policies underlying the doctrine of attorney immunity, and comparison with similar Texas-law doctrines that we have held to be true immunities.

The policies underlying the attorney immunity doctrine, as the Texas Supreme Court has explained, suggest that attorney immunity should be an immunity from suit. Cf. Sorey, 849 F.2d at 963

. The doctrine "stem[s] from the broad declaration ... that ‘attorneys are authorized to practice their profession, to advise their clients and interpose any defense or supposed defense, without making themselves liable for damages.’ " Cantey Hanger, 467 S.W.3d at 481 (quoting Kruegel v. Murphy, 126 S.W. 343, 345 (Tex.Civ.App.–Dallas 1910, writ ref'd) ). In other words,...