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In Texas, an attorney malpractice claim is based on negligence. A plaintiff in a malpractice action must prove four elements to recover: that 1) the defendant owed a duty to the plaintiff; 2) the defendant breached that duty; 3) the breach proximately caused the plaintiff injury; and 4) damages resulted.
Plaintiffs, Sheila Simpson and Lovie and Morelle Jones, were the sole stockholders in H.P. Enterprises Corporation. Plaintiff Sheila Simpson obtained the services of Attorney Ed Oliver, with the firm now known as Keeney, Anderson & James, to help sell the corporation. In 1983, Oliver formed a corporation for the investors interested in acquiring H.P. Enterprises; the investors’ corporation was named Tide Creek. Eventually, Tide Creek became bankrupt without fulfilling the agreed upon purchase price for H.P. Enterprises. The plaintiff filed a claim in bankruptcy court, but received nothing. Plaintiff filed a suit against the three partners of the law firm, alleging that Oliver’s acts of negligence proximately damaged the plaintiffs. The jury found that Oliver was negligent in his representation of plaintiff and awarded them $100,000.00 damages. Defendants challenged the decision, contending that the district court erred in awarding damages to the plaintiff for their alleged malpractice.
Did the district court err in awarding damages to the plaintiff for defendants’ alleged malpractice?
The court affirmed the district court’s order. First, under Fed. R. Civ. P. 8, which governed the pleading requirements in this diversity case, plaintiff pled sufficient facts to put the defense on notice that the discovery rule applied to toll the two-year statute of limitations for legal malpractice actions. Second, the evidence was sufficient to uphold the jury's finding that the discovery rule applied because plaintiff had little business experience, defendants reassured her of their loyalty, and plaintiff relief on defendants. Third, the evidence was sufficient for the jury to conclude that an attorney-client relationship existed, as manifested through the parties' conduct. Further, the jury's conclusion that defendants were negligent in representing both plaintiff, as seller, and the buyers in the same transaction, and then subsequently restructuring the buyers' note, was not unreasonable. And finally, plaintiff proved that she was damaged by defendants' failure to adequately protect her interests.