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Nelson v. Sheedy

Court of Appeals of Texas, Fifth District, Dallas

May 30, 2018

ERIK L. NELSON, Appellant

          On Appeal from the County Court at Law No. 2 Dallas County, Texas Trial Court Cause No. CC-15-01798-B

          Before Justices Lang-Miers, Myers, and Boatright



         Appellant Erik L. Nelson sued appellees Jack Sheedy, Roger Crabb, and Scheef & Stone, L.L.P. (the lawyers) for legal malpractice concerning advice they gave him about the meaning of language in an agreement. The trial court granted summary judgment in favor of the lawyers. In two issues, Nelson argues that the trial court erred in granting no-evidence and traditional summary judgment. We affirm.


         Nelson owned 1, 000 shares and Deepak Ahuja owned 429 shares of Nelson Architectural Engineers, Inc. (Company). Nelson and Ahuja entered into an Agreement of Shareholders that included mandatory buy-sell provisions in article III.[1] In article VIII, it also stated the purchase price of shares and terms if certain events or conditions occurred.[2]

         In January 2014, Ahuja made an "Initialed Offer" under section 3.3 of the shareholder agreement for Nelson to buy Ahuja's 429 shares at $10, 800 per share. Ahuja stated that the price represented his assessment of the value of his shares as permitted under section 3.5 of the shareholder agreement.

         Nelson asked Crabb and Sheedy for their legal advice regarding Ahuja's demand. After a meeting, Nelson asked via e-mail for Crabb[3] to "confirm or advise" as to whether "[t]he response to the [']initialed offer['] can accept Deepak's sale of all his shares but counter the value with a different or lower cost per share without it being 'flipped' back on [him], the respondent." Crabb replied that he and Sheedy confirmed that he could. Nelson asked further questions that assumed "we respond with an acceptance of his [']initialed offer['] of all of his 429 shares but counter with a different price generally following Article 8[.]" Nelson asked Crabb if his response or counter would bind Ahuja to article 8 of the shareholder agreement, and Crabb replied that it would. Crabb stated, "OUR ANALYSIS IS THAT DEEPAK COULD MAKE AN OFFER WITH A PRICE THAT HE CHOSE - HENCE THE USE OF THE WORD "MAY" IN THE FIRST PARAGRAPH OF 3.3, AND IN 3.5. BUT THE INITIAL LANGUAGE OF 8.1 USES THE WORD "SHALL" - WHICH MAKES THE VALUATION MECHANISM IN THAT SECTION MANDATORY, AND TO REMOVE ANY AMBIGUITY, 8.1 ALSO REFERENCES ARTICLE III TRANSACTIONS AS FALLING WITHIN THE UNIVERSE OF TRANSACTIONS GOVERNED BY THAT SECTION." Nelson also asked:

Can he argue Article 8 doesn't apply to the Article 3 put clause? He mentioned to me he thought the language was "binary", either I accept or I flip- no other options. This makes me think he doesn't believe Article 8 applies. Is he wrong? I am trying to get 100% confidence level that it does apply.


         On January 24, 2014, Nelson responded to Ahuja's offer by letter. Nelson stated that, as Ahuja mentioned in his letter, article III of the shareholder agreement "does indeed permit" Ahuja "to make a personal assessment of the value of [his] shares." But Nelson then stated, "I note that Article VIII of our Agreement, which you did not mention as having any bearing on share value, specifies that any shares which are to be purchased under Article III 'shall be purchased at the fair market value thereof.'" And Nelson noted that article VIII specified how the fair market value of the shares was to be determined. Nelson then stated, "I accept your offer to sell all of your shares to me, and my valuation of your shares is $611, 754.00, or $1426.00 per share."

         On February 7, 2014, Ahuja responded by letter to Nelson:

As your January 24, 2014 letter correctly points out, I am permitted to make an assessment of my shares' value, and I have done that in accord with Section 3.3 of the Agreement. Your valuation of the Initialed Offer and the fair market value process you have suggested are irrelevant to this process. The Initialed Offer gave you two choices, and you made neither of those. Therefore, you are deemed to have accepted the Initialed Offer I made.

         Ahuja stated that closing of the share purchase would take place on March 4, 2014 and attached closing documents to his letter.[4]

         The following week, Nelson and the Company sued Ahuja for breach of contract, breach of fiduciary duty, and other claims. They engaged different attorneys to file the lawsuit. Nelson and the Company alleged that Ahuja "insist[ed] on ignoring the fair market value determination" for his shares as required by the shareholder agreement and "has, and continues to, refuse to sell his shares to Erik Nelson for the fair market value as determined by the shareholder agreement." The case settled with Nelson agreeing to pay Ahuja $3, 950, 000[5] for all of Ahuja's shares in the Company.

         Nelson then sued the appellee lawyers for negligence/negligent misrepresentation, legal malpractice, and breach of fiduciary duty. Nelson alleged that Sheedy "failed to draft the Agreement properly" and the lawyers "failed to properly advise" Nelson "regarding the application of the Agreement to a transaction between" Nelson and Ahuja. The lawyers answered, asserting a general denial and affirmative defenses. The trial court granted the lawyers' motion for leave to designate responsible third parties. The trial court subsequently granted summary judgment to the responsible third parties on Nelson's claims against them and granted summary judgment to the lawyers on all of Nelson's claims except for a claim of professional negligence based on the advice the lawyers gave to Nelson in 2014.

         The lawyers later moved for traditional and no-evidence summary judgment on the remaining professional negligence claim. The trial court granted the motion for summary judgment without specifying the grounds. Nelson then filed this appeal.

         Standard of Review and Applicable Law

         We review a trial court's grant of summary judgment de novo. Starwood Mgmt., LLC v. Swaim, 530 S.W.3d 673, 678 (Tex. 2017). We review the summary-judgment evidence in the light most favorable to the party against whom the summary judgment was rendered, crediting evidence favorable to that party if reasonable jurors could, and disregarding contrary evidence unless reasonable jurors could not. Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009). Because the trial court's order does not specify the grounds for granting summary judgment, we must affirm the summary judgment if any of the theories presented to the trial court and preserved for appellate review are meritorious. Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 216 (Tex. 2003). The party moving for traditional summary judgment must show that no genuine issue of material fact exists and it is entitled to judgment as a matter of law. Tex.R.Civ.P. 166a(c); see Mann Frankfort, 289 S.W.3d at 848. In a no-evidence motion for summary judgment, the nonmovant must present evidence that raises a genuine issue of material fact on the challenged elements of its claim. Tex.R.Civ.P. 166a(i); see Sw. Elec. Power Co. v. Grant, 73 S.W.3d 211, 215 (Tex. 2002).

          To prevail on a claim for legal malpractice, "the client must establish that (1) the lawyer owed a duty of care to the client; (2) the lawyer breached that duty; and (3) the lawyer's breach proximately caused damage to the client." Rogers v. Zanetti, 518 S.W.3d 394, 400 (Tex. 2017); see Stanfield v. Neubaum, 494 S.W.3d 90, 96 (Tex. 2016). "In every case, the plaintiff must supply a causal link between the attorney's alleged negligence and the client's damages." Rogers, 518 S.W.3d at 404. "A lawyer can be negligent and yet cause no harm." Id. at 400. "And, if the breach of a duty of care does not cause harm, no valid claim for legal-malpractice exists." Id. "[A]lthough causation is typically a question of fact, it may be determined as a matter of law when reasonable minds could not arrive at a different conclusion." Id. at 401.

         Proximate cause has two components: cause in fact and foreseeability. Id. at 402. "Cause in fact must be established by proof that (1) the negligent act or omission was a substantial factor in bringing about the harm at issue, and (2) absent the negligent act or omission ('but for' the act or omission), the harm would not have occurred." Akin, Gump, Strauss, Hauer & Feld, L.L.P. v. Nat'l Dev. & Res. Corp., 299 S.W.3d 106, 122 (Tex. 2009); Rogers, 518 S.W.3d at 403 ("[O]ur cause-in-fact standard requires not only that the act or omission be a substantial factor but also that it be a but-for cause of the injury or occurrence."). Foreseeability "addresses the proper scope of a defendant's legal responsibility for negligent conduct that in fact caused harm" and "asks whether the harm incurred should have been anticipated and whether policy considerations should limit the consequences of a defendant's conduct." Rogers, 519 S.W.3d at 402. "Causation must be proved, and conjecture, guess, or speculation will not suffice as that proof." Akin, Gump, Strauss, Hauer & Feld, L.L.P., 299 S.W.3d at 122.


         As part of his first issue, Nelson argues that the trial court erred in granting no-evidence summary judgment because he produced more than a scintilla of evidence of causation. Nelson contends that he testified that-"had the lawyers advised him properly" and told him that "the Article VIII appraisal process did not apply"-he would have "flipped the deal" and, as a result, "pocketed $10.8 million, "[6] and opened a competing company. Nelson also argues that his expert witness on causation, Jeff Levinger, testified to proximate cause. He contends that, taken together, the testimony by Nelson and Levinger constitute more than a scintilla of evidence on causation. The lawyers argue that the trial court properly granted no-evidence summary judgment because Nelson did not submit competent summary judgment evidence to raise a fact issue on the element.

         The parties disagree about two issues: (1) what testimony-expert or lay-the court could consider concerning causation and (2) whether Nelson submitted more than a scintilla of evidence of causation.

         Expert and Lay Testimony

         The lawyers contend that Nelson "does not dispute" that expert testimony was required to establish causation and that Nelson "relied solely" on the expert testimony of attorney Jeff Levinger to establish causation. In response, Nelson contends that the lawyers' "entire argument on proximate cause is flawed because no expert testimony is required."

         "Generally in a legal malpractice case, expert witness testimony is required to rebut a defendant's motion for summary judgment challenging the causation element." Swaim, 530 S.W.3d at 679. "And when the causal link is beyond the jury's common understanding, expert testimony is necessary." Alexander v. Turtur & Assocs., Inc., 146 S.W.3d 113, 119-20 (Tex. 2004). But "[i]n some cases the client's testimony may provide" the "causal link between the attorney's negligence and the client's harm." Id. at 119. Nelson argues that, if he proves a breach of the standard of care, "proximate cause becomes a factual matter (Nelson would have flipped the deal and Ahuja would have funded it) within the understanding of an average juror." And he contends that, because other expert testimony proves breach of the standard of care, "lay testimony from Nelson and Ahuja establishes causation[.]" Nelson cites Streber v. Hunter, 221 F.3d 701, 726-27 (5th Cir. 2000), as authority for this argument.

         But Streber is distinguishable. In Streber, a jury found attorneys liable for legal malpractice and other claims based on attorneys' tax advice and advice not to settle litigation. Id. at 717. Considering the malpractice claim on appeal, the court agreed with the client's contention that "[a]ny rational juror, who could do simple math, could understand that [the client] was severely damaged as a direct result of [the attorneys' actions]." Id. at 726. The court concluded that, in that case, where an expert established negligence and breach of fiduciary duties, "lay testimony was sufficient to establish causation." Id. The court noted that several witnesses testified that the client would have paid the tax but did not pay it "based solely on her attorneys' advice[, ]" the client testified that she would have settled but did not because of her attorneys' advice, and the client testified as to the "specific financial losses failing to settle caused her." Id. at 727. The court concluded ...

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