Legal Malpractice In Texas: The Basics

Texas courts have always recognized a cause of action for legal malpractice. See, e.g., Morrill v. Graham, 27 Tex. 646 (1864). Before the 1980s, however, claims against attorneys were relatively rare. Today, legal malpractice actions are a common and prominent feature of the legal landscape, and Texas courts have become increasingly active in defining the rules and limits of lawyer liability.

Legal malpractice claims are unique. Claims against attorneys raise special public policy issues because of the fiduciary nature of the attorney-client relationship and the related concerns of confidentiality and privilege. Further, legal malpractice cases frequently involve thorny, multi-layered issues of causation and damages. These special considerations have led courts to adopt the privity requirement, to prohibit the assignment of legal malpractice claims, to impose additional rules for tolling the statute of limitations, and to require the plaintiff to prove the "case within a case." Lawyers who prosecute or defend legal malpractice claims must carefully consider these special doctrines in assessing and handling cases.

This outline covers the fundamentals of Texas law regarding legal malpractice and other claims against lawyers. The outline is meant to serve only as a basic reference, and naturally does not address every issue or controversy in this constantly developing area.

II. Negligence Claims.

A. Elements. "An attorney malpractice action in Texas is based on negligence." Cosgrove v. Grimes, 774 S.W.2d 662, 664 (Tex. 1989). Although in some circumstances a plaintiff may allege other causes of action against an attorney, it is well established that a traditional legal malpractice claim sounds in tort. A plaintiff in a legal malpractice claim must therefore prove the following elements:

1. there is duty owed to him by the defendant;
2. a breach of that duty;
3. that the breach proximately caused the plaintiff injury; and
4. that damages occurred.

Cosgrove v. Grimes, 774 S.W.2d at 665.

B. Duty. In general, to establish the element of duty the plaintiff must prove that an attorney-client relationship existed with respect to the matter at issue. With the limited exceptions discussed below, a person who was not a client may not sue an attorney for legal malpractice. See Barcelo v. Elliott, 923 S.W.2d 575 (Tex. 1996). The plaintiff’s burden of proving the existence of any attorney-client relationship is commonly referred to as the "privity" requirement. The determination of whether an attorney-client relationship exists must be based on an objective standard, not on the parties’ subjective beliefs. See SMWNPF Holdings, Inc. v. Devore, 165 F.3d 360, 364-65 (5th Cir. 1999).

There are two major exceptions to the privity requirement:

1. A non-client may sue a lawyer for negligence if, under the circumstances, the lawyer should have reasonably expected that the non-client would believe the lawyer represented him, and the lawyer failed to advise of the non-representation. Burnap v. Linnartz, 914 S.W.2d 142, 148-49 (Tex. App. – San Antonio 1995, writ denied).
2. An excess carrier may bring a legal malpractice claim against the lawyer for the insured, based on the theory of equitable subrogation. American Centennial Ins. Co. v. Canal Ins. Co., 843 S.W.2d 480 (Tex. 1992).

For some of the same reasons underlying the privity rule, Texas law prohibits the assignment of legal malpractice claims. See Section II.F.4 below.

To establish a breach of duty giving rise to a claim for legal malpractice, the client must show that the lawyer failed to comply with the applicable standard of care. In general terms, an attorney breaches the duty of care when the lawyer does something an ordinarily prudent lawyer would not have done, or fails to do something an ordinarily prudent lawyer would have done, under the same or similar circumstances. The Texas Supreme Court has expressed the standard of care in this way:

Cosgrove v. Grimes, 774 S.W.2d 662, 665 (Tex. 1989).

1. Proximate Cause. As in traditional negligence cases, the plaintiff in a legal malpractice case must prove that the alleged malpractice was the proximate cause of injury. Proximate cause consists of two elements: (1) cause in fact and (2) foreseeability. McClure v. Allied Stores of Tex., Inc., 608 S.W.2d 901, 903 (Tex. 1980).

"Cause in fact means that the act or omission was a substantial factor in bringing about the injury and without which no harm would have occurred." McClure v. Allied Stores of Tex., Inc., 608 S.W.2d 901, 903 (Tex. 1980). The cause in fact requirement has also been referred to as the "but for" test, because the plaintiff must show that the injury would not have occurred "but for" the alleged breach of duty. But the Texas Supreme Court has made clear that a "but for" showing alone is not enough; to qualify as cause in fact the negligence must also have been a substantial factor in bringing about the plaintiff’s harm. Union Pump Co. v. Allbritton, 898 S.W.2d 773, 775 (Tex. 1995).

The foreseeability element of proximate cause requires proof that the defendant, as a person of ordinary intelligence, should have anticipated the danger to others by his negligent act. See, e.g., Dyer v. Shafer, Gilliland, Davis, McCollum & Ashley, Inc., 779 S.W.2d 474, 478 (Tex. App. – El Paso 1989, writ denied) (bankruptcy of client was not reasonably foreseeable).

Mere speculation or surmise is not sufficient evidence of proximate cause. Haynes & Boone v. Bowser Bouldin, Ltd., 896 S.W.2d 179, 182 (Tex. 1995). Proximate cause may be decided as a matter of law if the attorney establishes that his conduct was not the cause of the damages in question. Id.

2. The "Case Within a Case" Requirement. When the alleged malpractice relates to a claim that was litigated, the plaintiff must prove that a more favorable judgment would have resulted if the case had been handled competently. This is known as the "case with a case" requirement. In litigation malpractice cases, therefore, the trial of the legal malpractice case actually involves proving two cases: 1) the malpractice case against the lawyer, and 2) a retrial of the underlying case. See Jackson v. Urban, Coolidge, Pennington & Scott, 516 S.W.2d 948 (Tex. Civ. App. – Houston [1st Dist.] 1974, writ ref’d n.r.e.). The case within a case requirement means that when the legal malpractice case is tried, the jury must decide how a reasonable jury would have resolved the issues in the underlying case if the alleged malpractice had not occurred. This can lead to some difficult evidentiary issues, some of which have not been conclusively resolved in Texas.

3. "Collectibility." A legal malpractice plaintiff who was the plaintiff in underlying litigation must prove both that he would have recovered a larger judgment and that the judgment would have been collectible against the underlying defendants. Jackson v. Urban, Coolidge, Pennington & Scott, 516 S.W.2d 948 (Tex. Civ. App. – Houston [14th Dist.] 1974, writ denied).

4. Appellate Malpractice. When a plaintiff accuses a lawyer of malpractice in connection with appellate representation, the trial court rather than the jury decides the issue of causation. Millhouse v. Wiesenthal, 775 S.W.2d 626, 628 (Tex. 1989). This is because deciding whether a properly handled appeal would have succeeded necessarily involves a question of law. Id.

5. Malpractice in Criminal Representation. A plaintiff alleging malpractice in a representation in a criminal matter that resulted in conviction must show that he or she has been exonerated on direct appeal, through post-conviction relief or otherwise. Peeler v. Hughes & Luce, 909 S.W.2d 494 (Tex. 1995).

1. Actual Damages. A plaintiff in a legal malpractice case may seek to recover foreseeable damages proximately caused by the negligent act or omission. In the litigation context, this is usually the amount that the client would have collected, or would have avoided paying, if the litigation had been properly handled. See, e.g., Keck, Mahin & Cate v. National Union Fire Ins. Co., 20 S.W.3d 692, 703 (Tex. 2000) (damages were to be calculated by comparing amount paid to settle case with amount that would have been lost at competently defended trial); Cosgrove v. Grimes, 774 S.W.2d 662, 666 (Tex. 1989) (jury should have been asked to determine the amount of damages "collectible from Stephens if the suit had been properly prosecuted").

2. Mental Anguish Damages. When a legal malpractice plaintiff’s alleged mental anguish is a consequence of economic losses caused by an attorney’s negligence, the plaintiff may not recover damages for that mental anguish. Douglas v. Delp, 987 S.W.2d 879, 885 (Tex. 1999). The Texas Supreme Court appears to have left open the question of whether mental anguish damages are recoverable in non-economic loss cases, such as when the client alleges loss of liberty, or in cases involving egregious misconduct. Id.

3. Exemplary Damages. Exemplary damages are only recoverable in legal malpractice case if the plaintiff proves by "clear and convincing evidence" that the harm resulted from fraud or malice. Tex. Civ. Prac. & Rem. Code § 41.003. "Malice" means a specific intent to cause the plaintiff substantial injury, or the commission of an act involving an "extreme degree of risk," carried out with actual, subjective awareness and conscious indifference to the rights, safety or welfare of others. Id., § 41.001(7). Gross negligence is no longer a ground for recovery of exemplary damages in legal malpractice cases. Id., § 41.003(a)(3).

Tex. Civ. Prac. & Rem. Code § 41.008 limits the amount of exemplary damages available in most cases. Unless the alleged malpractice also constitutes a felony listed in § 41.008(c), exemplary damages are capped at two times the economic damages or $200,000, whichever is greater. (Additional amounts are available if non-economic damages are recovered).

On the motion of the defendant, courts must bifurcate trials into compensatory and exemplary damages phases. Id., § 41.009. The net worth of the defendant is admissible in the exemplary damages phase. Id., § 41.011.

4. Fee Forfeiture. In Burrow v. Arce, 997 S.W.2d 229 (Tex. 1999), the Texas Supreme Court held that a client may seek the remedy of fee forfeiture in a suit against an attorney for breach of fiduciary duty, whether or not the client suffered actual damages from the conduct. The Burrow court held that fee forfeiture was an equitable remedy, and as such the trial court would decide whether fee forfeiture was appropriate and, if so, how much of the fees would be forfeited. The Burrow court listed a number of factors for trial courts to consider in the fee forfeiture analysis, and limits fee forfeiture to instances of "clear and serious" violations of duty.

5. Attorneys’ Fees. In Texas, attorneys’ fees are recoverable only when authorized by statute, and are not recoverable in common law tort cases such as suits for legal malpractice. See Huddleston v. Pace, 790 S.W.2d 47, 49 (Tex. App.—San Antonio 1990, writ denied). Texas cases differ on whether a legal malpractice plaintiff may seek to recover attorneys’ fees as damages, for example when the plaintiff alleges that as a result of the malpractice the plaintiff was required to incur additional or unnecessary fees in the underlying litigation. Compare Lesikar v. Rappeport, 33 S.W.3d 282, 306 (Tex. App. – Texarkana 2000, no pet.) (attorneys’ fees as damages are recoverable) with City of Garland v. Booth, 895 S.W.2d 766, 771-72 (Tex. App. – Dallas 1995, writ denied) (attorneys’ fees in underlying case not recoverable as damages).

Attorneys’ fees are recoverable in breach of contract claims, statutory fraud claims and claims under the Texas Deceptive Trade Practices Act, to the extent such claims may be legitimately asserted against lawyers. See Section III below.

1. Limitations. The statute of limitations for legal malpractice claims in Texas is two years. Willis v. Maverick, 760 S.W.2d 642 (Tex. 1988). If the claim is one for legal malpractice, the two-year limitations period applies whether the plaintiff pleads the claim in tort, contract, fraud or some other theory. Streber v. Hunter, 14 F. Supp. 2d 978, 985 (W.D. Tex. 1998); Burnap v. Linnartz, 914 S.W.2d 142, 148 (Tex. App.—San Antonio 1995, writ denied).

A legal malpractice claim accrues when the client suffers legal injury, meaning that facts have come into existence that authorize a claimant to seek a judicial remedy. Apex Towing Co. v. Tolin, 41 S.W.3d 118, 120 (Tex. 2001). Nevertheless, in many cases the limitations period is extended by one of two tolling doctrines. First, the "discovery rule" provides that limitations in legal malpractice cases do not begin to run until the client discovers or should have discovered through the exercise of reasonable care the facts establishing the elements of a cause of action. Willis v. Maverick, 760 S.W.2d 642, 645-46 (Tex. 1988); Apex Towing Co. v. Tolin, 41 S.W.3d at 120-21 (Tex. 2001). Second, when an attorney commits malpractice in the prosecution or defense of a claim that results in litigation, the statute of limitations on a malpractice claim against the attorney is tolled until all appeals on the underlying claims are exhausted or the litigation is otherwise concluded. Apex Towing Co. v. Tolin, 41 S.W.3d at 119 (Tex. 2001).

2. "Attorney Immunity." There is a growing body of case law holding that lawyers may not be sued by third parties, under any cause of action, for conduct engaged in as part of the discharge of the attorneys’ duties in representing a party in a lawsuit. In Bradt v. West, 892 S.W.2d 56, 71-72 (Tex. App. – Houston [1st Dist.] 1994, writ denied), the court held that attorneys are not subject to claims brought by the attorney by opposing counsel. Other courts have extended the rule to claims by opposing parties. See Renfroe v. Jones & Assoc., 947 S.W.2d 285, 286 (Tex. App. – Fort Worth 1997, writ denied) (affirming summary judgment in wrongful garnishment claim); Taco Bell Corp. v. Cracken, 939 F. Supp. 528, 532 (N.D. Tex. 1996) (applying Bradt v. West to claims by opposing parties based on allegedly wrongful attempt to maintain case in favorable forum); White v. Bayless, 32 S.W.3d 271, 274-77 (Tex. App. – San Antonio 2000, pet. denied) (opposing party could not sue lawyers for conspiracy to defraud when only conduct at issue was filing pleadings). In determining whether attorney immunity should be applied, courts focus on the type of conduct rather than whether the conduct was meritorious in the context of the underlying lawsuit. If the conduct is of the type that an attorney engaged in as part of the discharge of his duties in representing a party in a lawsuit, immunity applies. See The Chapman Children’s Trust v. Porter & Hedges L.L.P., 32 S.W.3d 429 (Tex. App. – Houston [14th Dist.] 2000, pet. denied) (immunity barred fraud and civil conspiracy claims by trusts when all acts or omissions were undertaken in discharge of lawyers’ duties); Taco Bell v. Cracken, 939 F. Supp. at 533 (immunity barred theories of fraud, abuse of process, conspiracy and negligent entrustment); but see Mendoza v. Fleming, 41 S.W.3d 781 (Tex. App. – Corpus Christi 2001, no pet.) (questionable decision refusing to apply attorney immunity because plaintiff alleged that wrongful garnishment was carried out with "wrongful and malicious motive" of interfering with plaintiff’s judicial campaign).

3. Contributory Negligence/Proportionate Responsibility. The common law doctrine of contributory negligence has been replaced in Texas with a statutory scheme currently known as "proportionate responsibility." Under this scheme, the jury is asked to assess the relative responsibility of each plaintiff, defendant, settling party, and "responsible third party." (If the plaintiff fails to sue a party who may be responsible for the plaintiff’s alleged damages, a defendant may join that party as a "responsible third party.") Based on the jury’s allocation of responsibility:

a) a plaintiff who is more than 50% responsible recovers nothing;

b) if the plaintiff is less than 50% responsible, the amount of damages is reduced by:

c) each liable defendant is responsible only for its own percentage of responsibility, unless that percentage is more than 50%. In other words, liability is joint and several only for defendants who are more than 50% responsible. (An exception applies in toxic tort cases.)

See Tex. Civ. Pract. & Rem. Code, § 33.001 et. seq.

4. Assignment. It is now well established that, for public policy reasons, legal malpractice claims may not be assigned in Texas. Zuniga v. Groce, Locke & Hebdon, 878 S.W.2d 313, 318 (Tex. App.—San Antonio 1994, writ ref’d); City of Garland v. Booth, 895 S.W.2d 766, 769 (Tex. App.—Dallas 1995, writ denied); see also Britton v. Seale, 81 F.3d 602 (5th Cir. 1996)(applying Texas law). The prohibition against assignment applies to all legal malpractice claims, not merely claims arising from litigation. See Britton v. Seale, 81 F.3d at 604; Vinson & Elkins v. Moran, 946 S.W.2d 381, 394-96 (Tex. App.—Houston [14th Dist.] 1997, pet. dism’d by agr.); City of Garland v. Booth, 895 S.W.2d at 771. Moreover, the prohibition against assignment extends to all causes of action arising from the attorney-client relationship, however denominated, and not merely to negligence claims. See City of Garland v. Booth, 971 S.W.2d 631, 634-35 (Tex. App.—Dallas 1998, pet. denied) (claims for breach of contract/restitution, breach of express warranty under DTPA, and unconscionability under DTPA could not be assigned); Vinson & Elkins v. Moran, 946 S.W.2d at 396 (claims against attorneys for conspiracy, violations of the DTPA and "other intentional torts" could not be assigned).

Although it not has been conclusively decided, it appears that the prohibition against assignment also extends to the assignment of proceeds from a legal malpractice claim if the assignee is also given substantial control over the litigation. See Tate v. Goins, Underkofler, Crawford & Langdon, 24 S.W.3d 627 (Tex. App.—Dallas 2000, pet. denied); see also Mallios v. Baker, 11 S.W.3d 157, 159-72 (Tex. 2000) (four justice concurrence would hold that proceeds assignment is invalid, even though majority declined to address the issue). In Mallios v. Baker, the Texas Supreme Court held that a legal malpractice defendant should not have obtained summary judgment based on the invalidity of a partial proceeds assignment, because the lawyer’s client remained the proper plaintiff in the malpractice suit whether or not the assignment was valid.

1. Case Within a Case. As discussed above, in the traditional legal malpractice case the plaintiff must retry the underlying case in order to prove what the result would have been if the case had been handled properly. The plaintiff may recover damages in the legal malpractice case only to the extent it proves that a "properly handled" case would have resulted in a collectable judgment in excess of the judgment actually awarded. (If the malpractice plaintiff was the defendant in the underlying case, it must show that the judgment in the "properly handled" case would have been lower than the actual judgment.)

Some commentators have suggested that a client should be allowed to prove causation by proving that the case had a certain "settlement value" that was impaired by the malpractice. Texas courts have not yet embraced this concept, possibly because proof of settlement value is inherently speculative. See, e.g., Keck, Mahin & Cate v. National Union Fire Ins. Co., 20 S.W.3d 692 (Tex. 2000) (to prove damages due to allegedly excessive settlement, plaintiff must show that if case had been tried with a reasonably competent, malpractice-free defense, judgment amount would have been less than actual settlement).

2. Admissibility of Disciplinary Rules. A violation of the Texas Disciplinary Rules of Professional Conduct (the "Disciplinary Rules") does not give rise to a private cause of action for malpractice. See Adams v. Reagan, 791 S.W.2d 284, 291 (Tex. App. – Fort Worth 1990, no writ). Indeed, the Disciplinary Rules themselves provide:

Tex. Disc. R. Prof. Cond., Preamble ¶ 15.

Although no reported Texas decision has addressed the admissibility of the Disciplinary Rules in a legal malpractice case, many states allow evidence of the Disciplinary Rules in order to prove the standard of care. See Kathleen J. McKee, Admissibility and Effect of Evidence of Professional Ethics Rules in Legal Malpractice Action, 50 A.L.R.5th 301 (1997). There are very good arguments against allowing evidence of the Disciplinary Rules, and it is not clear how Texas courts will resolve this issue. It is well established, however, that outside the legal malpractice context courts may refer to the Disciplinary Rules to determine whether a contract is contrary to public policy. See Shields v. Texas Scottish Rite Hosp., 11 S.W.3d 457 (Tex. App. – Eastland 2000, pet. denied) (citing cases).

3.Expert Testimony Requirement. As in most jurisdictions, in Texas it is essential for the plaintiff to offer competent expert testimony regarding the standard of care. Hall v. Rutherford, 911 S.W.2d 422 (Tex. App. – San Antonio. 1995, writ denied); see also Geiserman v. MacDonald, 893 F.2d 787, 792-93 (5th Cir. 1990). The requirement of expert testimony is excused only in very limited circumstances in which the negligence is egregious and would be obvious to a layperson. Geiserman v. MacDonald, 893 F.2d at 794.

A. Breach Of Fiduciary Duty. Lawyers owe fiduciary duties to their clients and may be held liable for breaching those duties. Although there have been many attempts to define a lawyer’s fiduciary duties, in general the duties require honesty, candor, confidentiality, and the absence of deception, and include the obligation to deal fairly and in good faith with the client.

When the essence of the client’s claim is that the lawyer mishandled the representation, courts will treat the claim as one for negligence rather than breach of fiduciary duty. See, e.g., Rodriguez v. Klein, 960 S.W.2d 179, 184 (Tex. App.—Corpus Christi 1997, no pet.). Although it is difficult to draw a precise line between claims for negligence and breach of fiduciary duty, one court has commented that a claim for breach of fiduciary duty "refers to unfairness in the contract" between the client and the lawyer. Judwin Properties, Inc. v. Griggs & Harrison, 911 S.W.2d 498, 506-07 (Tex. App.—Houston [1st Dist.] 1995, no writ)(claim of improper disclosure of confidences treated as legal malpractice claim). The clearest examples of breach of fiduciary duty claims include entering into an unfair transaction with a client, unfairly modifying the fee agreement during the course of the representation, and failing to deliver client funds.

The statute of limitations claims for breach of fiduciary duty claims in Texas is four years. Tex. Civ. Prac. & Rem. Code §16.004(a)(5). Nevertheless, courts have applied a two-year statute of limitations when the claim was based on the alleged breach of the attorney’s normal duties to the client. See Norman v. Yzaguirre & Chapa, 988 S.W.2d 460, 461 (Tex. App. –Corpus Christi 1999), rev’d on other grounds, 41 S.W.3d 118, 122 (Tex. 2001).

B. Gross Negligence. Although clients may assert claims for gross negligence against their attorneys, and frequently do so, there is no longer a reason to assume the higher burden of proof associated with a gross negligence claim. Except in wrongful death actions, a finding of gross negligence will no longer support exemplary damages in Texas. Tex. Civ. Prac. & Rem. Code § 41.003(a) (applicable as to causes of action accruing after September 1, 1995); Universal Servs. Co. v. Ung, 904 S.W.2d 638, 641 n.2 (Tex. 1995).

C. Negligent Misrepresentation. Non-clients may sue lawyers for negligent misrepresentation. McCamish, Martin, Brown & Loeffler v. F.E. Appling Interests, 991 S.W.2d 787 (Tex. 1999). The privity requirement does not apply to this claim. Id. at 795.

Texas has adopted the standard for negligent misrepresentation described by Restatement (Second) of Torts § 552 (1977):

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.

The McCamish court noted that attorney liability under §552 was limited to the narrow situation in which the attorney providing information is both aware of the non-client and intends for the non-client to rely on the information, and also observed that the attorney can avoid liability by written limitations and disclaimers. Further, liability under §552 requires that the non-client’s reliance be justified, a circumstance that cannot exist when the relationship between attorney and non-client is adversarial, and a non-client cannot rely on an attorney’s statement unless the attorney "invites" that reliance.

The statute of limitations for negligent misrepresentation in Texas is two years. See, e.g., Texas American Corp. v. Woodbridge Joint Venture, 809 S.W.2d 299, 303 (Tex. App.—Fort Worth 1991, writ denied).

D. Fraud. A non-client may sue a lawyer for fraud if the lawyer’s actions meet the test for fraud through misrepresentation. Bernstein v. Portland Sav. & Loan Ass’n, 850 S.W.2d 694, 701-05 (Tex. App. – Corpus Christi 1993, writ denied). An attorney may not, however, be sued by a non-client for fraudulent non-disclosure. "An attorney has no duty to reveal information about a client to a third party when that client is perpetrating a nonviolent, purely financial fraud through silence." Lesikar v. Rappeport, 33 S.W.3d 282, 319-20 (Tex. App. – Texarkana 2000, no pet.). Further, an attorney making representations on behalf of a client does not have a duty to correct those representations should they prove to be false. Id., Bernstein v. Portland Sav. & Loan Ass’n, 850 S.W.2d at 704.

Clients may not assert a cause of action for fraud when the claim is really one for professional malpractice. See, e.g., Burnap v. Linnartz, 914 S.W.2d 142, 148 (Tex. App. – San Antonio 1995, no writ). Nevertheless, when the alleged fraud relates to matters concerning the attorney-client contract, such a billing or fee related representations, a client may sue a lawyer for fraud. See Sullivan v. Bickel & Brewer, 943 S.W.2d 477 (Tex. App. – Dallas 1995, writ denied).

As discussed in Section II.F.2 above, several courts have held that lawyers may not be sued by non-clients for fraud based on conduct engaged in as part of the discharge of the lawyers’ duties in representing a party to a lawsuit.

In addition to common law fraud, Texas recognizes statutory causes of action for fraud in connection with the sales of real state or securities. Tex. Bus. & Comm. Code § 27.01 (allowing treble damages and attorney’s fees); Tex. Rev. Civ. Stat. Ann. art. 581-33 (Vernon 1964 & Supp. 2000).

The statute of limitations for fraud in Texas is four years. Tex. Civ. Pract. & Rem. Code § 16.004. The "discovery rule" applies to fraud cases in Texas. Berkley v. American Cyanamid Co., 799 F.2d 995, 998 (5th Cir. 1986).

E. DTPA. Attorneys may be sued for violations of the Texas Deceptive Trade Practices Act, Tex. Bus. & Comm. Code § 17.41 ("DTPA"), but potential DTPA liability has been greatly restricted by 1995 legislation. DTPA’s § 17.49(c) provides:

Nothing in this subchapter shall 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. This 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)(23);
3. an unconscionable action or course of action that cannot be characterized as advice, judgment, or opinion; or
4. breach of an express warranty that cannot be characterized as advice, judgment, or opinion.

The listed exceptions to § 17.49(c) thus allow a DTPA claim to be brought for misrepresentations or "unconscionable actions" that are not part of the lawyer’s advice, judgment or opinion. See Latham v. Castillo, 972 S.W.2d 66 (Tex. 1998) (DTPA claim allowed for missed limitations deadline when lawyer affirmatively misrepresented that suit had been filed; allegation sufficient to support claim of "unconscionability").

"Unconscionable action or course of action" is defined as "an act or practice which, to a consumer’s detriment, takes advantage of the lack of knowledge, ability, experience, or capacity of the consumer to a grossly unfair degree." DTPA § 17.45(5). It requires a showing that the resulting unfairness was "glaringly noticeable, flagrant, complete, and unmitigated." Chastain v. Koonce, 700 S.W.2d 579, 584 (Tex. 1985).

There are many important differences between a DTPA claim and a negligence claim, including the following:

• The DTPA is not available to very large business consumers ($25 million or more in assets). § 17.45(4).
• The DTPA does not apply to claims arising from transactions involving consideration by the consumer of more than $500,000, other than claims involving the consumer’s residence. § 17.49(g).
• DTPA claims must be brought within two years after the date of the consumer discovered or in the exercise of reasonable diligence should have discovered the deceptive practice. (The deadline may be extended 180 days if the attorney fraudulently concealed the claims.) § 17.56. Unlike legal malpractice claims, however, the statute of limitations on a DTPA claim against a lawyer is not tolled during the pendency of the underlying litigation. Underkofler v. Vanasek, No. 99-0557, 2000 WL 33191375, at *3 (Tex. Mar. 1, 2001).
• Privity is not required to assert a DTPA claim. Thompson v. Vinson & Elkins, 859 S.W.2d 617, 625 (Tex. App. – Houston [1st Dist.] 1993, writ denied). Nevertheless, a party does not qualify for a consumer status unless he "seeks or acquires by purchase or lease" goods or services, and courts will scrutinize the relationship of the parties in determining whether consumer status exists. See Vinson & Elkins v. Moran, 946 S.W.2d 381 (Tex. App. – Houston [14th Dist.] 1997, writ dism’d by agr.) (estate beneficiaries were not consumers as to legal services provided by attorneys for executor); Perez v. Kirk & Carrigan, 822 S.W.2d 261 (Tex. App. – Corpus Christi 1991, writ denied) (employee was consumer of legal services purchased by employer for employee’s benefit).
• The proximate cause standard for proving causation does not apply in DTPA actions. A successful DTPA claimant may recover all economic losses for which the deceptive act was the producing cause. Producing cause does not require proof of foreseeability, but is defined as "an efficient, exciting or contributory cause that, in a natural sequence," produces damages. Haynes & Boone v. Bowser Bouldin, Ltd., 896 S.W.2d 179, 182 (Tex. 1995).
• If the consumer can show the deceptive act was done knowingly, the jury may also award (a) mental anguish damages and (2) up to three times the amount of economic damages. (If the act was done intentionally, mental anguish damages may also be trebled). § 17.50(b)(1).
• Unlike in a legal malpractice claim, a consumer who prevails in a legal malpractice claim is entitled to reasonable and necessary attorney’s fees. § 17.50(d).

F. Breach Of Contract. Courts will not recognize a breach of contract claim that is, at bottom, a claim for legal malpractice. Sledge v. Alsup, 759 S.W.2d 1, 2 (Tex. App. – El Paso 1988, no writ); Black v. Wills, 758 S.W.2d 809, 814 (Tex. App. – Dallas 1988, no writ).

G. Civil Conspiracy. An attorney can be liable for civil conspiracy if he knowingly agrees to defraud a third party. Bernstein v. Portland Sav. & Loan Ass’n, 850 S.W.2d 694, 706 (Tex. App. – Corpus Christi 1993, writ denied); Likover v. Sunflower Terrace II, Ltd., 696 S.W.2d 468, 472 (Tex. App. – Houston [1st Dist.] 1985, no writ). Evidence of an attorney’s knowledge of the fraudulent nature of his and others’ actions and intent to share the fruits of that fraud can defeat a claim that the attorney was ignorant of the fraud and acting solely at the clients’ direction and can expose the attorney to liability for conspiracy. Bernstein v. Portland Sav. & Loan Ass’n, 850 S.W.2d at 706. Mere knowledge and silence are not enough to prove conspiracy, however; because of the attorney’s duty to preserve client confidences, there must be indications that the attorney agreed to the fraud. Id.