NO PROOF OF DAMAGES PLUS NO “RELATION BACK” EQUALS NO RELIEF FROM SUMMARY JUDGMENT IN LEGAL MALPRACTICE CASE

Thomas v. Carnahan Thomas, L.L.P. 
Dallas Court of Appeals No. 05-11-01615-CV (February 4, 2014)
Justices Moseley, Lang-Miers, and Bridges (Opinion)
Plaintiff Thomas claimed his attorneys were negligent in litigating on his behalf in multiple lawsuits in which he sought to void his four non-compete agreements, and that they had breached their fiduciary duty to him in advising him with respect to those non-competes. Thomas contended the defendant attorneys had failed to add necessary parties in a timely manner, failed to file the non-compete termination claims in an arbitration as required by his employment agreement, and failed to move to compel arbitration. He further claimed they breached their fiduciary duty when they instructed him to violate his non-compete agreements simply in order to fulfill a contingency to being paid under their fee contract. But the Court of Appeals affirmed summary judgment against Thomas’s malpractice claims because he failed to produce competent evidence of damages, and against his fiduciary duty claims on limitations grounds.

Thomas distributed and sold mushrooms and other fresh produce. He and his supplier entered into several agreements that included covenants that Thomas would not compete in the mushroom-selling business for two years after ending his relationship with that supplier. When the relationship with his supplier soured, Thomas sued, seeking relief from his non-competes, and a jumble of lawsuits followed in Texas and Pennsylvania. Dissatisfied with the results in those cases, Thomas then sued his attorneys for legal malpractice. The attorneys filed both traditional and no-evidence motions for summary judgment on the negligence (malpractice) claims. Those motions were granted in all respects except on a statute of limitations defense. While those motions were pending, Thomas added breach of fiduciary duty claims by amendment. The attorneys responded with traditional motions for summary judgment, based on limitations, against the breach of fiduciary duty claims, which the trial court granted.

Pursuant to its usual procedure, the Court of Appeals first reviewed the no-evidence summary judgment on the negligence claim. To recover for legal malpractice, a plaintiff must prove damages caused by the alleged negligence. Thomas argued that his damages took the form of lost profits in the mushroom-selling business. The attorneys’ motion argued there was no competent evidence of lost profits. In affirming summary judgment on that ground, the Court itemized numerous flaws in Thomas’s asserted lost-profits evidence—including, for example, his reliance in part on gross revenues rather than actual net profits, that he had no non-compete in effect for eight months of the period for which he was alleging lost profits, and that performance in one market could not reliably substantiate lost profits in others. Ultimately, therefore, the Court held that the profits he projected were “merely speculative.” Because the no-evidence motion on damages was dispositive, the Court found it unnecessary to address the other grounds, sustained by the district court, that the attorneys had included in their traditional motion for summary judgment on the negligence claim.

The Court next reviewed the trial court’s granting of the attorneys’ traditional motion for summary judgment, on limitations grounds, against the breach of fiduciary duty claim. Thomas first argued the relation-back doctrine saved him from the four-year statute of limitations. Although he had added his fiduciary duty claim more than four years after the conduct on which it was based, he claimed the amendment related back to the filing of his malpractice claim against the attorneys. Unfortunately for Thomas, in response to an earlier motion for summary judgment, he had stated that his fiduciary duty claim was based on different key facts from the malpractice claim. That admission, coupled with the Court’s own description of the distinction between the legal malpractice and fiduciary duty claims, caused the Court to determine the fiduciary duty claim was “wholly based upon and grows out of a new, distinct, or different transaction or occurrence than the legal malpractice claim,” making the relation-back doctrine inapplicable.

Thomas then argued the fiduciary duty claim did not accrue in September 2006 when the attorneys were first paid after rendering the advice upon which the claim was based. He asserted the continuous or continuing tort doctrine postponed accrual of the cause of action until a point less than four years before he amended to add his fiduciary duty claim. But the Court agreed with the attorney defendants that while Thomas’s claim alleged continuing injury from the wrongful act, it did not allege repetitive tortious conduct. Therefore, Thomas’s invocation of the continuing tort doctrine was of no avail. 

Finally, Thomas urged fraudulent concealment of the breach of fiduciary duty. The Court had little difficulty holding that Thomas knew the pertinent facts and had failed to raise a genuine fact issue on concealment.

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