Vinson & Elkins v. Moran

• Decision Date: 27 March 1997
• Docket Number: No. 14-95-00348-CV,14-95-00348-CV
• Citation: 946 S.W.2d 381
• Parties: VINSON & ELKINS, Appellant, v. Ann MORAN and Jim Poinsett, Individually and as Assignees, and Patrick J. Moran, Appellees. (14th Dist.)
• Court: Texas Court of Appeals

Page 381

946 S.W.2d 381

VINSON & ELKINS, Appellant, v. Ann MORAN and Jim Poinsett, Individually and as Assignees and Patrick J. Moran, Appellees.

No. 14-95-00348-CV.

Court of Appeals of Texas Houston (14th Dist.).

March 27, 1997.

Rehearing Overruled June 12, 1997,

David E. Keltner, Fort Worth, Richerd H. Caldwell, Leslie C. Taylor, Thomas M. Farrell, Laura J. Ware Doerre, David M. Gunn, Houston, for appellants.

Patrick J. Moran, Houston, Paul E. Knisely, Broadus A. Spivey, Thomas Paul Prehoditch, Austin, for appellees.

Before MURPHY, C.J., and YATES and FOWLER, JJ.

OPINION

MURPHY, Chief Justice.

This is a legal malpractice case. Appellees Ann Moran and Jim Poinsett, individually and as assignees, sued Vinson & Elkins (V & E), appellant, alleging professional negligence (legal malpractice), breach of fiduciary duty, conspiracy, and violations of the Texas Deceptive Trade Practices Act (DTPA). The claims in this case arose out of V & E's alleged misconduct and mishandling of legal matters in connection with the administration of the Estate of W.T. Moran (the Estate). Following a jury verdict in favor of Ann Moran and Jim Poinsett, individually and as assignees, the trial court entered a judgment in excess of $35 million. V & E prosecutes this appeal and in fifty points of error, asks this court to reverse the judgment. Patrick J. Moran (Pat or Pat Moran) raises a conditional cross-point of error asking this court to reverse and remand to allow him the opportunity to prosecute any claims he might have against V & E. His cross-point is conditioned on this court's determining the assignments were invalid. We reverse and render in part, and reverse and remand in part.

I. FACTUAL BACKGROUND

W.T. Moran, an oil and gas mogul, died November 30, 1983. ¹ He left an estate worth $85 to $100 million. The estate consisted of family businesses including Moran Utilities, a gas supplier, Morgas Pipeline Corporation (Morgas), a gas pipeline company, Glen Rose, an oil and gas company, as well as large real estate and stock holdings. W.T. Moran left his estate to numerous beneficiaries, some in trust, in varying percentages:

(1) widow, Louise J. Moran, 26%, free of estate taxes;

(2) daughter, Betty Ann Franke, 24%, in trust for life;

(3) grandson, Patrick J. Moran, 20%, trust terminated;

(4) grandson, Michael R. Moran, 7.6%, in trust to age 45;

(5) Moran Employees' Trust, 6.06%, remainder interest to St. Joseph's Hospital;

(6) granddaughter, Ann Moran, 3.07%, trust terminated;

(7) grandson, W.T. Moran, III, 3.07%, trust terminated;

(8) Susan J. Moran McDonough, 3.07%, in trust to age 45;

(9) Leroy Poinsett Children's Trust, 2.03%;

(10) Margaret Ann Brougher Dell'Osso, 1.54%, in trust;

(11) Mae G. Shapley, 1.02%;

(12) Father N. Arthur Besse, S.J., 1.02%;

(13) Marie Byrne, 1.02%, in trust;

(14) nephew, Jim Poinsett, .5% in trust.

W.T. Moran's will designated three co-executors: Pat Moran; John McDonough (McDonough), Susan J. Moran McDonough's husband; and First City National Bank (the Bank). W.T. Moran's probate counsel was the firm of Hirsch & Westheimer. That firm prepared the last will and testament and was designated as the primary counsel for the Estate. In 1984, several issues arose concerning the proper construction of the will. The Bank hired V & E to file a will construction suit in March of 1984. V & E raised questions about whether Hirsch & Westheimer had erred in the wording of some of the language in the will; specifically the marital deduction to Louise J. Moran. Because this specter of legal malpractice might require Mark Westheimer to testify in the suit, Hirsch & Westheimer withdrew from representation of the Estate. The suit was ultimately resolved by a "friendly suit" agreement among the beneficiaries in October of 1985. After Hirsch & Westheimer withdrew, the Estate's legal work was assumed by V & E.

The facts from this point forward are in dispute. Appellees claim Pat Moran was W.T Moran's choice to preserve and manage the Moran businesses. They contend a majority of the Estate beneficiaries wanted to retain the Moran companies and wanted to distribute and close the Estate as soon as possible with that end in mind. Appellees say Pat Moran "tried valiantly" to do that and was supported in his efforts by Louise Moran, Ann Moran, Bill Moran, Jim Poinsett, the Moran employees, and "much of the time" by other beneficiaries. They also suggest that any dispute among the beneficiaries or between the beneficiaries and the executors was caused by the Bank, a V & E client, and its representative Tim Blair.

According to V & E, it was not support, but rather battle lines that existed between many of the beneficiaries. V & E claims the evidence shows that Pat Moran attempted to gain control of the Estate and wanted to keep the Moran businesses together in such a way that he would dominate those businesses. V & E contends that many beneficiaries were opposed to the actions Pat Moran was taking and that there was much infighting and revolt among the beneficiaries.

The thrust of the complaints in this suit concerns V & E's alleged failure to reveal conflicts of interest and to act in the best interest of the Estate rather than its own interest. According to appellees, dozens of V & E attorneys worked on the Estate. The principal attorneys were Don Wood (Wood), Boone Schwartzel (Schwartzel), and Jay Cuclis (Cuclis). Wood, Cuclis, and another V & E attorney, George Gerachis (Gerachis) allegedly befriended Pat Moran and a social relationship developed between these men. Appellees claim Wood was in charge of ethical standards related to the Estate, but he, along with Schwartzel and Cuclis, claimed a lack of familiarity with V & E's conflicts manual or the firm's computer system, which was used to check conflicts. According to Wood, each V & E attorney handled conflicts of interest as he or she saw fit.

Appellees assert that V & E's policy manual discouraged disclosure of conflicts of interest to clients and suggested that concerns about conflicts be discussed with J. Evans Attwell (Attwell), the firm's managing partner. Appellees argue the conflicts system used, if at all, by V & E was inadequate because it referenced only representational conflicts, but did not list any of the firm's or any individual attorney's interests, e.g., directorships, stock holdings, or proprietary and financial interests. Appellees claim Attwell was actively involved in the firm's representation of the Estate and frequently consulted with the principal attorneys involved in the representation.

Appellees assert that, eventually, numerous conflicts of interest were discovered, conflicts that had not been revealed by V & E and that affected major Estate transactions. Several of these conflicts involved W.J. Wooten (Wooten), who was hired as president of the Moran Corporation in 1984, after the Bank recommended Wooten to Pat Moran and McDonough. Wooten involved a Moran company in a $3.2 million oil and gas venture with HOFCO, a company in which Wooten was a board member. Cuclis allegedly worked on some of the documentation for the venture. HOFCO had serious financial problems and the Bank had loaned the company approximately $5 million. V & E allegedly represented both HOFCO and the Bank in the loan transaction and still represented HOFCO in other matters. Further, V & E owned stock in HOFCO as did individual firm attorneys.

Wooten also tried to involve the Moran Companies in a transaction with Entex. After he had a confidential conversation with Entex about Moran Utilities, Wooten and the Bank urged the Estate to contact Entex to discuss the possibility of a sale. Eventually, Entex made an offer, but several of the Moran family members formed a group and stated it would top all Entex offers. V & E represented the Estate in the negotiations and billed for the work. Although many of the beneficiaries knew the Bank favored the sale to Entex since it was a large Bank customer, they eventually learned that the Bank made credit advances to Entex to allow the purchase. Attwell denied V & E had any relationship with Entex; however, according to appellees, Pat Moran found a limited partnership agreement, entered into before the Entex negotiations even began, in which the V & E Lawyers Retirement Plan and the Bank's pension trust are partners whose stated purpose is to buy Entex properties and lease them back to Entex.

Eventually, appellees learned that Wooten was recommended to the Bank by Cuclis' supervisor at V & E. According to appellees, Wooten's tenure as president was a disaster and he cost the Estate a great deal of money. Wooten was eventually terminated.

Appellees presented evidence of other alleged conflicts that V & E did not disclose. V & E's plan for closing the Estate included the sale of Moran companies. The companies were to be sold to pay Estate taxes. The Moran family group still did not want to sell, but everyone agreed that if the companies were to be sold, a competitive bid system should be used. A bid system was set up for the purchase of Morgas and Moran Utilities. Offers were made by two companies, Seagull and Thrash, and a group of Moran family members. Some of the Moran beneficiaries heard a rumor about a possible transaction between Seagull and Morgas. Ann Moran investigated the rumor that the sale was "in the bag" and would "fall in the lap" of Seagull and the "senior partner" of V & E. When she asked about it however, she was told there was nothing to it. Later, Seagull and its undisclosed partner, Entex, made a bid for the companies. V & E allegedly wanted to represent the Estate in the transaction and sought a waiver of conflicts from the Estate after disclosing only that Seagull was a firm client. V & E disclosed no other conflicts.

Seagull's offer was allegedly resisted by a majority of the beneficiaries. Pat Moran ultimately filed suit on May 20, 1988, to stop the two other executors, McDonough and the...