Texas Supreme Court: Legal malpractice client can recover fees it paid

The Texas Supreme Court has ruled that a legal malpractice plaintiff can recover fees it paid to its allegedly negligent law firm in the underlying litigation. Whether that kind of recovery was possible was the big issue in Akin Gump Strauss Hauer & Feld v. National Development and Research Corp. and Robert E. Tang --- a case in which Akin Gump was sued by its former client over how the firm handled a contract-dispute case. The most important issue before the Supreme Court in the case was whether under Texas law a plaintiff can recover attorneys' fees incurred in prior litigation with a third party as an element of economic damages when the fees are the natural and proximate result of the legal malpractice defendant's alleged negligence. And here’s what the high court said: “We see little difference between damages measured by the amount the malpractice plaintiff would have, but did not, recover and collect in an underlying suit and damages measured by attorney’s fees it paid for representation in the underlying suit, if it was the defendant attorney’s negligence that proximately caused the fees,” Justice Phil Johnston wrote for the court. Justice Eva Guzman did not participate in the decision. “In both instances, the attorney’s negligence caused identifiable economic harm to the malpractice plaintiff. The better rule, and the rule we adopt, is that a malpractice plaintiff may recover damages for attorney’s fees paid in the underlying case to the extent the fees were proximately caused by the defendant attorney’s negligence.”

-- John Council

Comments

[Ben Wasserman, Hempstead, NY]

New Jersey has a similar rule. Saffer v. Willoughby, 143 N.J. 256 (1996). Over the years of Appellate Division interpretation is that legal fees and expenses incurred in a legal malpractice action are compensable as consequential damages to the successful plaintiff in a legal malpractice case. Until Akin Gump v. NDR, New Jersey stood alone in the country with this rule. But the Texas Supreme Court, with Akin, has re-affirmed the wisdom of the rule first in making plaintiffs injured by lawyer malpractice whole again, but more than that. The rule provides a strong incentive to carriers to settle meritorious cases early. I'd call that a Win-Win for all.