Opinion
Civil No. 3: 03-CV-0133-H
January 26, 2004
MEMORANDUM OPINION AND ORDER
Before the Court are Defendants' Motion for Summary Judgment, filed December 8, 2003; Plaintiff's Response, filed December 29, 2003; and Defendants' Reply, filed January 13, 2004. Also before the Court is Defendants' Motion to Strike and Objections to Plaintiff's Summary Judgment Evidence, filed January 13, 2004. Defendants seek summary judgment on Plaintiff's four causes of action for professional negligence/attorney malpractice, negligent misrepresentation, fraud, and violations of the Texas Deceptive Trade and Consumer Protection Act. Defendants also seek to strike evidence upon which Plaintiff relies in its Response. Upon review of the pleadings, briefs, and relevant authorities, the Court is of the Opinion for the reasons stated below that Defendants' Motion for Summary Judgment should be GRANTED and Defendants' Motion to Strike and Objections to Plaintiff's Summary Judgment Evidence should be DENIED as moot.
I. BACKGROUND
The instant case arises from a failed insurance program, the Long-Haul Truckers' Insurance Program ("Truckers' Program"), between Plaintiff Guardian Underwriters Reassurance Limited ("Guardian") and a third party, Universal Insurance Exchange ("UIE"). ( See Compl. at 3). Defendants' Thompson, Coe, Cousins Irons, L.L.P. ("Thompson Coe"); Emory L. White, Esq. ("White"); and Rodney D. Bucker, Esq. ("Bucker") are attorneys who represented one or more of the parties during the formation of the Truckers' Program. ( See Compl. at 2-3). After the failure of the Truckers' Program, the details of which will not be discussed here except as needed, Guardian brought the instant litigation against Defendants for professional negligence/attorney malpractice, negligent misrepresentation, fraud and concealment, and violations of the Texas Deceptive Trade and Consumer Protection Act ("DTPA"). (Compl. at 10-28). On December 17, 2003, the Court struck all of Plaintiffs experts because of Plaintiffs failure to comply with the Court's Scheduling Order. Defendants now move for summary judgment on all of Plaintiffs claims.
Plaintiff claims Defendants represented the program, whereas Defendants contend they represented only UIE. These claims will be discussed below in greater detail.
II. SUMMARY JUDGMENT STANDARD
Summary judgment is appropriate where the facts and law as represented in the pleadings, affidavits, and other summary judgment evidence show that no reasonable trier of fact could find for the nonmoving party as to any material fact. FED.R.CIV.P. 56; Lujan v. National Wildlife Federation, 497 U.S. 871, 888 (1990); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 323-25 (1986); Innovative Database Systs. v. Morales 990 F.2d 217 (5th Cir. 1993). "The moving party bears the initial burden of identifying those portions of the pleadings and discovery in the record that it believes demonstrate the absence of a genuine issue of material fact, but is not required to negate elements of the nonmoving party's case." Lynch Properties, Inc. v. Potomac Ins. Co. of III., 140 F.3d 622, 625 (5th Cir. 1998) (citing Celotex, 477 U.S. at 322-25). If the movant fails to meet its initial burden, the motion must be denied, regardless of the nonmovant's response. Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994).
If the movant does meet its burden, the nonmovant must go beyond the pleadings and designate specific facts showing that a genuine issue of material fact exists for trial. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Edwards v. Your Credit, Inc., 148 F.3d 427, 431 (5th Cir. 1998). A party opposing summary judgment may not rest on mere conclusory allegations or denials in its pleadings unsupported by specific facts presented in affidavits opposing the motion for summary judgment. FED. R. CIV. P. 56(e); Lujan, 497 U.S. at 888; Hightower v. Texas Hosp. Assn., 65 F.3d 443, 447 (5th Cir. 1995).
In determining whether genuine issues of fact exist, "[f]actual controversies are construed in the light most favorable to the nonmovant, but only if both parties have introduced evidence showing that a controversy exists." Lynch, 140 F.3d at 625; see also Eastman Kodak v. Image Technical Services, 504 U.S. 451 (1992). However, in the absence of any proof, the Court will not assume that the nonmoving party could or would prove the necessary facts. Lynch, 140 F.3d at 625. A party must do more than simply show some "metaphysical doubt as to the material facts." Matsushita, 475 U.S. at 586. "If the record, taken as a whole, could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial." Friou v. Phillips Petroleum Co., 948 F.2d 972, 974 (5th Cir. 1991).
III. ANALYSIS
Defendants argue that summary judgment is appropriate for all claims because Plaintiff cannot offer any summary judgment evidence on causation or damages, as required by all four claims. Defendants also argue that summary judgment is appropriate on the professional negligence/attorney malpractice claims because Plaintiff can offer no evidence that Defendants breached the standard of care and because Plaintiff can offer no evidence that there was privity between Defendants and Plaintiff and thus no attorney-client relationship. Defendants argue that summary judgment is appropriate on the negligent misrepresentation claims because Plaintiff has no evidence of either affirmative misrepresentations or reliance, as required by both claims. Finally, Defendants argue that Plaintiff cannot raise a fact issue on several elements of the DTPA claim. The Court will address each of Plaintiffs claims separately below.
1. Professional Negligence/Attorney Malpractice
Plaintiff's first claim against Defendants is for professional negligence/attorney malpractice, specifically for breaches of the duties of honesty, diligence, and full disclosure. (Compl. at 10-11). In Texas, an attorney malpractice action is based on negligence, and thus the four elements that a plaintiff must prove to establish an attorney malpractice claim are the same as any other negligence claim: 1) that the defendant owed a duty to the plaintiff; 2) that the defendant breached that duty; 3) that the breach proximately caused the plaintiff injury; and 4) that damages occurred. See Cosgrove v. Grimes, 774 S.W.2d 662, 665 (Tex. 1989). In a malpractice action, the Texas Supreme Court has held that an attorney only has a duty to persons in privity with the attorney. See Barcelo v. Elliott, 923 S.W.2d 575, 578 (Tex. 1996); McCamish Martin, Brown Loeffler v. F.E. Appling Interests, 991 S.W.2d 787, 792 (Tex. 1999). In other words, there must be an attorney-client relationship between the plaintiff and defendant for the plaintiff to maintain an action for attorney malpractice. McCamish, Martin, Brown Loeffler, 991 S.W.2d at 792.
In the instant case, Defendants argue that there was never an attorney-client relationship between themselves and Guardian, and, therefore, Guardian's malpractice claim fails. ( See Def.'s Br. at 11-12). Defendants cite several excerpts from both Defendant Bucker's deposition and from the deposition of Robert Brown, an agent for Guardian. ( See Def.'s Br. at 12-13). These excerpts show that Bucker introduced himself as the attorney for UIE, that he told Brown that he represented UIE in the formation of the Truckers' Program, that he asked Brown if Guardian was represented by an attorney, and that Brown said Guardian was represented by an attorney. (Def.'s App. at 212-215). Defendants also cite testimony by another person affiliated with Guardian, Greg Corless, that he understood Bucker to be UIE's attorney. (See Def.'s App. at 37-38). Guardian argues Bucker's actions demonstrate that he was acting as an attorney for Guardian as well as UEE. (Pl.'s Br. at 4). Guardian cites twelve instances where Bucker either told Brown to do something or where Bucker discussed parts of the Truckers' Program with Brown and explained some of the formation or contract documents with Brown.( See id.).
Guardian also argues that Brown believed Bucker was the attorney for the Truckers' Program. Defendants' expert, W. Amon Burton, opines that "Texas law does not recognize an attorney-client relationship between a lawyer and a transaction or program, as opposed to a person or entity." (See Def.'s Br. at 15; Def.'s App. at 181). Guardian does not offer any evidence to support the argument that an attorney can form an attorney-client relationship with a program.
Under Texas law, an attorney-client relationship is contractual. See Terrell v. State, 891 S.W.2d 307, 312 (Tex.App. — El Paso 1994, pet. ref'd). It is formed either explicitly, or implicitly through the parties' actions. See id. "The determination of whether there was a meeting of the minds must be based on objective standards of what the parties said and did and not on their alleged subjective states of mind." Id. (citations omitted). In the instant case, nothing Guardian cites as actions showing the formation of an attorney-client relationship shows a meeting of the minds as required by Texas law. In fact, parts of Brown's deposition that Guardian cites to support its assertion that the actions created an attorney-client relationship specifically refute the idea that Bucker and Brown had an understanding that Bucker was acting as the attorney for either Guardian or for the Truckers' Program. All of the events listed by Guardian as evidence that an attorney-client relationship existed are expected when an attorney is representing one party to a transaction but not necessarily both parties; they do not imply the creation of an attorney-client relationship. See SMWNPF Holdings, Inc. v. Devore, 165 F.3d 360, 367 (5th Cir. 1999). The Court finds no objective evidence that a reasonable jury could use to determine that an attorney-client relationship was ever formed between Guardian and Defendants. Because there is no privity between Guardian and Defendants, an action for professional negligence/attorney malpractice will not lie. The Court GRANTS Defendants' Motion for Summary Judgment on Plaintiff's professional negligence/attorney malpractice claim.
For example, at one point, Bucker specifically asks Brown if Guardian had retained counsel. (PL's App. at 101).
2. Negligent Misrepresentation
Plaintiff's second claim against Defendants is for negligent misrepresentation. (Compl. at 12-15). Texas has adopted the tort of negligent misrepresentation as described in the Restatement (Second) of Torts § 552:
One who, in the course of his business, profession or employment, or in any transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.See McCamish, Martin, Brown Loeffler, 991 S.W.2d at 791. In Texas, a negligent misrepresentation claim does not require privity between the parties and, therefore, an attorney can be subject to a negligent misrepresentation claim even when she is not subject to a claim for attorney malpractice. See id. at 792.
In the instant case, Defendants argue that Guardian's negligent misrepresentation claim fails because there is no evidence of any affirmative misrepresentations by Defendants to Guardian. (Def.'s Br. at 17-19). For a negligent misrepresentation cause of action to lie in Texas, the defendant must make affirmative misrepresentations. See Sergeant Oil Gas Co., Inc. v. National Maintenance Repair, Inc., 861 F. Supp. 1351, 1360 (S.D.Tex. 1994). "Without a disclosure or representation, there can be no `supplying' of false information to support a negligent misrepresentation claim." Id. In the instant case, Guardian argues that Defendants made several misrepresentations that were false. ( See Pl.'s Br. at 8-10). However, the Court can find no evidence of these misrepresentations in the evidence submitted. For example, Guardian contends that Defendants represented to Guardian that Guardian "did not need its own counsel and that its interests were protected by Defendants." (Pl.'s Br. at 8). The evidence cited by Guardian in support of this argument, however, fails to show any affirmative representations by Defendants that Guardian did not need counsel. (See Pl's Br. at 8, n. 25). Similarly, the Court cannot find any support for the other alleged misrepresentations by Defendants to Guardian in any of the evidence cited by Guardian in support of its arguments, In fact, most of the evidence cited by Guardian in this portion of its brief has little or no relevance to the proposition it is cited as supporting.
The only exception is Guardian's claim that Defendants misrepresented the location of certain monies allegedly held in a trust account. ( See Pl.'s Br. at 10-11; Def.s' Br. at 18, n. 4). Defendants argue that Guardian has no evidence of either causation or damages resulting from this alleged misrepresentation. (Def.s' Br. at 18, n. 4). Guardian has produced no evidence that it relied on Defendants' representation that the money was in a trust account, an essential element in for negligent misrepresentation. Indeed, the evidence Guardian submitted to the Court supports the opposite conclusion, that Guardian never relied on the representation that the money was in another trust account and that Guardian conducted its own investigation as to the whereabouts of the money. ( See PL's App. at 239-241). Because Guardian has failed to produce evidence showing that it relied on Defendants' misrepresentations as to the location of the money, and has thus failed to create a material fact issue as to this element of the negligent misrepresentation claim, the Court GRANTS Defendants' Motion for Summary Judgment on Plaintiff's negligent misrepresentation claim.
3. Fraud and Concealment
Plaintiff's third claim against Defendants is for fraud and concealment. (Compl. at 16-21). "The elements of fraud are a material misrepresentation, which was false, and which was either known to be false when made or was asserted without knowledge of the truth, which was intended to be acted upon, which was relied upon, and which caused injury." DeSantis v. Wackenhut Corp., 793 S.W.2d 670, 688 (Tex. 1990).
Defendant argues that the deficiencies fatal to Guardian's negligent misrepresentation claims are also fatal to Guardian's fraud claim. (Def.s' Br. at 18). Specifically, Defendants argue that Guardian has no evidence that Defendants made any affirmative false misrepresentations to Guardian. The Court agrees, as discussed above.
Defendant also argues that only if there is a fiduciary relationship between the parties will a failure to disclose information constitute a fraud action. (Def.s' Br. at 18). "When no representations are made, the failure to disclose information does not constitute fraud in the absence of a fiduciary or other special relationship between the parties." Sergeant Oil Gas Co., Inc., 861 F. Supp. at 1358 (citations omitted). In the instant case, there is no fiduciary relationship between Guardian and Defendants, as discussed in the above section on Guardian's attorney malpractice claim.
The only representation Defendants made to Guardian regarded the trust account. ( See above, Negligent Misrepresentation). However, Guardian has adduced no evidence showing that it relied on Defendants' statements regarding the location of the trust account funds. The Court GRANTS Defendants' Motion for Summary Judgment on Plaintiff's fraud and concealment claim.
4. Texas Deceptive Trade Practices and Consumer Protection Act
Plaintiff's fourth claim against Defendants is for violations of the Texas Deceptive Trade Practices and Consumer Protection Act ("DTPA"). (Compl. at 21-28). The DTPA provides protection for consumers who suffer either economic or mental anguish damages as a result of a 1) "false, misleading, or deceptive act or practice" as defined in Texas Business and Commerce Code § 17.46(b) that was relied on by the consumer to his detriment, 2) for the breach of a warranty, 3) for "any unconscionable action or course of action," or 4) for "the use or employment by any person of an act or practice in violation of Article 21.21, Insurance Code." TEX.BUS. COM. CODE ANN. § 17.50(a) (Vernon 2002). There is an exemption under the Act, however, for professional services. § 17.49(c). The DTPA does not apply to a claim for damages based on the rendering of a professional service, the essence of which is the providing of advice, judgment, opinion, or similar professional skill. § 17.49(c). "The exemption does not apply to: 1) an express misrepresentation of a material fact that cannot be characterized as advice, judgment, or opinion; 2) a failure to disclose information in violation of Section 17.46(b)(24); 3) an unconscionable action or course of action that cannot be characterized as advice, judgment, or opinion; 4) breach of an express warranty that cannot be characterized as advice, judgment, or opinion; or 5) a violation of Section 17.46(b)(26)." § 17.49(c).
Defendant first argues that Guardian is not a consumer as defined by the DTPA and that therefore, Guardian cannot maintain an action against Defendants. (Def.s' Br. at 21). The Court agrees that Guardian and Defendants did not have an attorney-client relationship. ( See above, Attorney Malpractice). However, Texas courts have allowed a third party beneficiary to qualify as a consumer under the DTPA despite the lack of a contractual relationship when "the transaction was specifically required by or intended to benefit the third party and the good or service was rendered to benefit the third party." Bohls v. Oakes, 75 S.W.3d 473, 479 (Tex.App.-San Antonio 2002, pet. denied). "The relevant inquiries to be made in determining consumer status are 1) to whom the representations were made; 2) who suffered damages from the representations; and 3) who was affected by the alleged misconduct." Id. (citing NationsBank of Texas, N.A. v. Akin, Gump, Hauer Feld, L.L.P., 979 S.W.2d 385, 392 (Tex.App. — Corpus Christi 1998, pet. denied)), In the instant case, the alleged misrepresentations were made to Guardian. Guardian claims that it suffered damages from the alleged misrepresentations and that they were affected by the alleged misconduct. For purposes of the instant case, the Court concludes that Guardian was a consumer for DTPA purposes.
Defendants' next argument for summary judgment on Guardian's DTPA claim is that legal services qualify as professional services for the exemption pursuant to § 17.49(c). The Court agrees that legal services qualify as professional services for purposes of the DTPA. See Streber v. Hunter, 221 F.3d 701, 727 n. 38 (5th Cir. 2000) (explaining that § 17.49(c) expressly "applies to lawyers and limits that acts under which they can be sued under the DTPA"). Guardian argues that even if legal services are professional services for DTPA purposes, Defendants' conduct falls under the exceptions to protections for professional services: 1) express misrepresentations of material fact, and 2) "failing to disclose information concerning goods or services which was known at the time of the transaction if such failure to disclose was intended to induce the consumer into a transaction into which the consumer would not have entered had the information been disclosed," 3) unconscionable actions or course of action, and 4) breach of an express warranty. ( See PL's Br. at 15-17 ( citing § 17.46(b)(24) and § 17.50(c)(1) — (4).).
As discussed above, the Court can find no evidence of material misrepresentations that Defendants made to Guardian upon which Guardian relied to its detriment. Therefore, the first exception to the professional services exemption is not applicable to the instant case.
Additionally, the Court can find no evidence that Guardian would have failed to enter into any of the transactions with Defendants or UIE if Defendants had disclosed any of the information Guardian alleges it failed to disclose. ( See PL's Br. at 16). Indeed, evidence submitted by Defendants shows categorically that Guardian did know that UIE was under administrative oversight by the Texas Department of Insurance and that this did not make any difference to Guardian's action. ( See Def.'s App. at 145-153). Also, the Court has already discussed that the evidence Guardian submitted regarding the trust account funds shows that Guardian did not rely on Defendants' representations regarding the location of the funds. Therefore, the second exception to the professional services exemption does not apply in the instant case.
Guardian also argues that Defendants' actions were unconscionable and that Defendants breached an express warranty. Guardian cites, and the Court can find, no evidence to support either allegation. The last two exceptions do not apply to the instant case.
Because none of the exceptions listed in § 17.49(c)(1)-(4) apply to the instant case, Guardian cannot state a claim for violations of the DTPA. The Court GRANTS Defendants' Motion for Summary Judgment on Plaintiff's DTPA claim.
Guardian argues that Defendants' actions also violated parts of § 17.46(b). (See Pl.'s Br. at 15-16). However, because the Court has concluded that legal services are professional services and entitled to the exemption in § 17.49(c), Guardian could only complain if Defendants' conduct fell into one of the five enumerated exceptions to the professional services exemption. Defendants' professional services are exempt from claims that it violated § 17.46(b) except to the extent outlined in § 17.49(c). Guardian has not proved that Defendants' action violated any of the exceptions outlined in § 17.49(c) and cannot, therefore, claim violation of § 17.46(b).
IV. CONCLUSION
For the reasons stated above, Defendants' Motion for Summary Judgment is GRANTED.
Given the above ruling, the Court does not need to address Defendants' Motion to Strike and Objections to Plaintiff's Summary Judgment Evidence and it is therefore DENIED as moot.
Judgment will be entered accordingly.
SO ORDERED.