7 BECK (DO NOT DELETE) 6/21/2018 12:17 PM LEGAL MALPRACTICE IN TEXAS THIRD EDITION David J. Beck and Alex B. Roberts* Foreword ..........................................................................................217 Introduction ......................................................................................218 Chapter I: Agency ............................................................................221 § 1 Agency .............................................................................221 § 2 Duty to Inform of Non-Representation ............................224 § 3 Termination of Relationship ............................................225 § 4 No Attorney-Client Relationship .....................................230 § 5 Involuntary Representation ..............................................236 Chapter II: Fees & Billing................................................................237 § 1 Generally .........................................................................237 § 2 Unconscionable Fees .......................................................239 § 3 Question of Fact ...............................................................246 § 4 Employment Contracts.....................................................248 § 5 Arbitration Agreements ...................................................252 § 6 Billing Guidelines ...........................................................255 Chapter III: Duties to Third Parties .................................................256 § 1 Privity of Contract............................................................256 § 2 Obligations to Third Parties Concerning Client’s Funds .267 § 3 Conduct Foreign to the Duties of an Attorney; Immunity from Suit .........................................................269 § 4 Negligent Misrepresentation ............................................274 § 5 Assignment of Legal Malpractice Claims........................280 Chapter IV: Nature of Legal Malpractice ........................................287 * Mr. Beck is a founding partner of Beck Redden, LLP in Houston, Texas, and a Fellow of the American College of Trial Lawyers and International Academy of Trial Lawyers, and a Diplomate of ABOTA. Mr. Roberts is a partner of Beck Redden, LLP in Houston, Texas. The authors wish to thank all who assisted with researching, editing, and revising this edition, including Joshua Smith, Kyle Lawrence, Nicholas Bruno, and Fatima Hassan Ali. 7 BECK (DO NOT DELETE) 6/21/2018 12:17 PM 214 BAYLOR LAW REVIEW [Vol. 70:2 § 1 Generally ..........................................................................287 § 2 Fiduciary Relationship .....................................................291 § 3 Standard of Care ..............................................................298 § 4 Question of Fact ...............................................................301 § 5 Application of Legal Standard .........................................302 A. Settlement ..................................................................307 B. Appeals ......................................................................310 C. Client Instructions ......................................................311 D. Supervision .................................................................312 § 6 Negligence as a Matter of Law ........................................313 § 7 Litigation Tactics .............................................................316 § 8 Proximate Cause ..............................................................320 § 9 Damages ...........................................................................326 A. Mental Anguish .........................................................332 B. Mitigation of Damages ..............................................335 C. Constructive Trust ......................................................337 § 10 Standard for Appellate Error ..........................................338 § 11 Specialization .................................................................339 § 12 Locality Rule ..................................................................340 § 13 Local Counsel ................................................................342 § 14 Expert Testimony ...........................................................343 § 15 Defenses .........................................................................346 A. Error-in-Judgment Defense ........................................347 B. Judicial Error Rule .....................................................349 C. Contributory Negligence ............................................351 D. Limitation of Liability ...............................................352 E. Collateral Estoppel .....................................................353 F. Settlement...................................................................355 G. Contribution or Indemnity .........................................357 H. Unclean Hands; In Pari Delicto ................................359 I. Other Defenses ...........................................................362 J. Personal Jurisdiction ...................................................363 § 16 Limitations / Statute of Limitations ...............................371 § 17 Waiver of Attorney-Client Privilege ..............................375 § 18 Vicarious Liability: Partnerships and Professional Corporations ....................................................................376 Chapter V: Insurance Defense .........................................................381 7 BECK (DO NOT DELETE) 6/21/2018 12:17 PM 2018] LEGAL MALPRACTICE IN TEXAS 215 § 1 Generally ..........................................................................381 § 2 Duty to Abstain From Representation of Conflicting Interests ...........................................................................385 § 3 Duty to Obtain Informed Consent and to Disclose Possible Conflict of Interests...........................................388 § 4 Independent Counsel ........................................................390 § 5 Multiple Insureds .............................................................392 § 6 Coverage Reservation ......................................................393 § 7 Collusion by Insured ........................................................395 § 8 Settlement ........................................................................399 § 9 Conflicting Interests—Texas Rule of Civil Procedure 13, Texas Civil Practice & Remedies Code Chapters 9 and 10, and Federal Rule of Civil Procedure 11 .............402 § 10 Insurer’s Liability for Defense Counsel’s Conduct .......408 Chapter VI: The Relationship Between the Texas Disciplinary Rules of Professional Conduct and Legal Malpractice ....................411 § 1 Effect of Violation of Ethical Codes and Rules ...............411 § 2 Following Client’s Instructions........................................414 § 3 Possessing Requisite Skill................................................416 § 4 Communicating with Client .............................................418 § 5 Preserving Confidentiality ...............................................418 § 6 Exceptions to Non-Disclosure of Confidential Information ......................................................................420 A. Criminal Activity ........................................................422 B. Fraud ...........................................................................423 § 7 Future Client Conduct ......................................................424 § 8 Past Client Conduct..........................................................427 § 9 Representing Conflicting Interests ...................................429 § 10 Conflict of Interest: Former Client ................................432 A. Liability ......................................................................434 B. Disqualification ..........................................................438 1. The Substantial Relationship Test .........................440 2. Chinese Walls ........................................................447 3. Government Service and Private Employment ......462 4. Non-Lawyer Employees ........................................464 § 11 Conflict of Interest: Intermediary ..................................470 § 12 Candor with the Court ....................................................471 7 BECK (DO NOT DELETE) 6/21/2018 12:17 PM 216 BAYLOR LAW REVIEW [Vol. 70:2 § 13 Attorney Serving as Witness ..........................................472 Chapter VII: Transactions with Client .............................................483 § 1 Generally ..........................................................................483 § 2 Breach of Fiduciary Duty.................................................489 Chapter VIII: Other Causes of Action .............................................491 § 1 Texas Deceptive Trade Practices-Consumer Protection Act ...................................................................................492 A. Unconscionability ......................................................494 B. Breach of Implied Warranty ......................................496 C. Laundry List Provisions ............................................497 D. Privity ........................................................................498 E. Damages.....................................................................502 F. Limitations .................................................................503 § 2 Bad Faith ..........................................................................504