UNITED STATES COURT OF APPEALS

FIFTH CIRCUIT

____________

No. 99-50054

____________

TRACY PARKER STREBER; ET AL,

Plaint iffs,

TERRY PARKER DAVIS DELONY,

Plaintiff-Appellee-Cross-Appellant,

versus

EDWIN K. HUNTER; ET AL,

Defendants,

EDWIN K. HUNTER; EDWIN K. HUNTER, A PROFESSIONAL

LAW CORPORATION; T. GLYNN BLA Z IER; TIMOTHY

O’DOWD,

Defendants-Appellants-CrossAppellees.

Appeals from the United States District Court

for the Western District of Texas

August 4, 2000

Before REYNALDO G. GARZA, JONES, and EMILIO M. GARZA, Circuit Judges.1 The land, subsequently called the Northgate Forrest subdivision, is North of Houston,

off of FM (“Farm-to-Market”) 1960, adjacent to Champions Golf Course.

2 During the period at issue in this case, Terry had three surnames, Parker (her father’s

name), Davis (from her marriage to Steve Davis), and Delony (from her marriage to Dale Delony).

Tracy had t wo , Parker and Streber (from her marriage to Paul Streber). They will be referred

throughout the opinion as “Terry” and “Tracy,” respectfully.

3 B radish testified that Parker gave the interest to his daughters as part of a promise

Parker had made to his wife, Betty, to take care of the girls. Bradish testified that once the deal went

through Parker had no abilit y to take the venture interest, or later the notes, from Terry or Tracy.

-2- EMILIO M. GARZA, Circuit Judge:

Edwin K. Hunter, T. Glynn B lazier, Timothy O’Dowd, and Edwin K. Hunter, P.C. (“the

firm”) (collectively “the attorneys”), appeal from a jury verdict holding them liable for legal

malpractice, breach of fiduciary duties, and violations of the Deceptive Trade Practices Act

(“DTPA”), T EX

. B US

. & C OM

. C ODE A NN . § 17.41 et seq . We affirm in part and reverse in part.

I.

In1979, Larry Parker (“Parker”), a self-made entrepreneur, businessman, and land developer,

disco vered o ver four hundred acres of undeveloped land in a potentially lucrative residential area

outside of Houston. 1 Parker, however, lacked the funds to purchase the land, so he recruited a friend,

California attorney Robert Bradish. Bradish came t o Texas and took title to the land for himself,

forming a joint venture with Jack Thoner. Parker never owned any of the land, or any of the equity

interest in the joint ventur e. As part of the joint venture agreement, for Parker’s substantial work

bringing the deal together: (1) he would receive $2.5 millio n from the venture’s init ial profits, and (2)

a large porti on of the equity interest in the venture was placed in trust for Parker’s daughters, Terry

and Tracy (collectively “the sisters”), 2 with Bradish as the trustee. Parker envisioned the gift as an

early inheritance of sorts, a “nest egg” for Terry and Tracy. 3A letter written from Bradish to Betty, in Parker’s presence, stated that Bradish held the interests “in

trust” for Terry and Tracy and that Parker would become the trustee if Bradish died. However, the

document clearly shows that Terry and Tracy owned the interest in 1980, and Parker had no control

over it at any time thereafter.

4 The payor on the notes failed to pay when they were due, so Parker (whose claim to

$2.5 millio n from the venture’s init ial profits had been converted into promissory notes in the sale of

the venture interest), Terry, Tracy, and the other stakeholders filed suit against the payor. The $1.7

millio n and lot in the subdivision that Terry and Tracy each received came from a settlement of that

lawsuit. Terry signed the settlement agreement as “owner” and “holder” of the notes.

-3- In 1981, Bradish sold the prope rt y, and Terry and Tracy each received a promissory note,

payable in 1985 in the amount of $2 millio n. Bradish endorsed the notes to Terry and delivered them

to her sometime in 1982, when Terry was nineteen years old and Tracy fourteen.

Contemporaneously, Terry signed a “management agreement” which purported to place control over

the money in Parker’s hands until each of the girls reached the age of twenty-five. Tracy then placed

the notes and the “management agreement” in her safety deposit box. After the notes became due

in 1985, the sisters each received $1.7 millio n and a lot in the Northgate Forest subdivision. 4 At the

time they received these large sums of money, Tracy was approximately twenty years old, and Terry

was six months short of her twenty-fifth birthday.

When Terry and Tracy received t he money from the promissory notes, they promptly

deposited it in their own checking accounts and contemplated how to safely invest their “nest egg.”

The next day, however, Parker approached them and asked them to invest the money in one of his

companies, Bowman Development D/B/A Sovereign Energy (“Sovereign Energy”), in which they

were minority stockholders. Terry and Tracy both refused, t elling their father that they wanted to

invest the money in certificates of deposit and other safe investments. Parker became infuriated, fired

Terry (who, at the time, was working for him), and ceased communication with his daughters. The5 Parker died before the present suit went to trial.

6 In 1982, Parker and Betty Parker ( “Bet t y”), Terry and Tracy’s mother, divorced.

Betty married Lee Berwick shortly thereafter.

7 The attorney s argue that the sisters sought out legal assistance not to determine how

much tax to pay on the notes, but rather to hide the money from Parker. This argument belies the

evidence, which overwhelmingly supports Terry’s claim that they sought out legal assistance on how

to treat the $1.7 millio n for tax purposes. Terry, Tracy, Steve Davis (Terry’s ex-husband), and Lee

and Betty Berwick, all of whom were present at the meeting, testified that they went to see Hunter

because they believed they owed tax on the $1.7 millio n. This outweighs the evidence to the

contrary, which includes the testimony of Hunter and Reed Mendelson, who was not present at the

meeting.

8 The key question in determining who owed tax on the $1.7 million was who owned

the notes in 1985 and, as the Tax Court found, “[w]e examine Texas law to determine who owned

the $2 millio n notes when they were paid.” S treber v. Commissioner

, 70 T.C.M. (CCH) 1604, 1608,

1995 WL 754033 (T.C. 1995). At that time, Hunter was not a member of the Texas bar, and despite

the fact that “[s]tate law controls,” id. he did no legal research before rendering his opinion to Terry

and Tracy.

-4- record reflects that the family rift was never mended. 5

After Terry and Tracy each received their $1.7 millio n, but before the family squabble, Parker

had told Terry to make sure she paid the capital gains taxes on the income. Since Parker had cut off

communication with Terry and Tracy, and neither had ever filed a tax return before, they asked their

ste pfather, Lee Berwi ck, 6 if he knew of someone who could help them with their taxes. Berwick

directed them to Edwin Hunte r, a Lake Charles, Louisiana tax specialist who had done work for

Berwick in the past.

With Berwick’s reco mmendation, Terry and Tracy drove to Lake Charles and met with

Hunter. 7 After briefly examining a few documents which Tracy and Terry gave him, but before doing

any legal research, 8 Hunter presented the sisters with three options: (1) pay no taxes and hope the IRS

did no t find out about the transaction within the ten year statute of limitations, (2) treat the9 Hunter disputes that he ever believed the “management agreement” was

unenforceable, but several witnesses testified that, during their init ial meeting, Hunter had expressly

told them that this was t rue as a matter of law. Those witnesses included Steve Davis, Betty

Berwick, Terry, and Tracy. Further, in a letter sent by Hunter’s associate, C. Eston Singletary, to

Parker’s attorney

, David Gamble, on June 17, 1985, Hunter’s firm stated that “we continue to believe

that the document on which Mr. Parker’s assertion [to control the sisters’ funds] is based is null and

void and has no effect.”

10 Hunter did not tell Terry and Tracy that they could pay th e capital gai ns tax

conditionally, and sue for a refund, which would establish who owed the tax and, more importantly,

would stop the accrual of interest pending resolution of the issue.

-5- transaction as a 1981 gift and pay capital gains taxes on the income received in 1985, or (3) treat the

transaction as a 1985 gift, in which case Parker would be liable for gift tax and they would be liable

for nothing. Despite scoffing at the “management agreement” as unenforceable and calling it “not

a legal document,” 9 Hunter told Terry and Tracy that Parker had not given up control over the money

until 1985, and that, accordingly, the gift did not occur until then.

While the sisters were somewhat w ary o f paying nothing to the IRS after receiving $1.7

millio n, Hunter told them that if they paid capital gains taxes on the money, the IRS might suspect

they were “in cahoots” with their father to pay the lower capital gains tax as opposed to the higher

gift tax. Hunter expressed to the sisters both his fervent belief that Parker owed the gift tax and the

threat that paying capital gains taxes could place them at risk of IRS prosecution. 10 When the sisters

finally agreed to treat the transaction as a 1985 gift on which Parker owed gift tax, Hunter

“affirmat ively advise[d] and vigorously assist[ed] [in their] ch osen course of acti on.” S treber v.

Commissioner , 138 F.3d 216, 221 (5 th Cir. 1998).

Hunter and his firm subsequently became involved in several other lawsuits revolving around

this less-than-amicable family. Specifically, Parker, described as a “highly litigious individual,” filed

several lawsuits against the sisters and the Berwicks. After Terry and Tracy refused to invest their11 Hunter encouraged Betty to file this lawsuit, but Betty refused to do so.

12 At the time Hunter gave Terry and Tracy his original advice, Hunter worked for the

firm of Camp, Carmouche, Barsh, Hunter, Gray, Hoffman & Gill. In 1987, Hunter l eft Cam p,

Carmouche, and formed Hunter & Boland, and later left that firm to form Hunter, Blazier, O’Dowd

& Moreno. Terry and Tracy remained clients of Camp, Carmouche for a brief time after Hunter left,

but for all practical purposes “followed” Hunter throughout his travails.

-6- money in Sovereign Energy, Parker sued them to recover the stock interest that he had given to them.

Terry and Tracy were content to give the Sovereign Energy stock back to their father, but Hunter,

who represented the sisters in the lawsuit, told them not to do so. Instead, Hunter recommended that

they hold the stock as leverage against Parker to persuade him to pay the gift tax. Terry and Tracy,

relying on Hunter’s advice, agreed. Parker also threatened to file suit to enforce the “management

agreement,” and if he filed such a suit (the record conflicts on whether such the suit was filed), Hunter

would have represented Terry and Tracy.

Hunter was also advising Betty Berwick in connection with an “alienation of affections” suit

that Parker brought aga inst her and her husband. After investigating Parker’s assets, Hunter told

Betty that Parker had hid substantial assets from her during their divorce and encouraged Betty to

file suit against Parker for hiding those assets. The documents and testimony at trial shows that

Hunter’s planned lawsuit against Parker could have potentially brought a recovery for Betty of $17

millio n, and, under their contingent fee agreement, if Betty won the lawsuit, Hunter coul d have

received approximately $3 million. 1 1 Hunter believed Betty’s lawsuit against Parker to be very

important for his firm. 12

In 1986, Parker’s attorney

, David Gamble, wrote a letter to Hunter expressing his belief that

the sisters’ position )) that Parker had made a gift to Terry and Tracy in 1985 ) ) was belied by the

documents surrounding the land deal. Gamble claimed that the documents were exceptionally clear13 The letter provided, inter alia

,

There is no question that your clients acquired an interest in a joint venture in 1980.

That interest was subsequently sold in return for notes which were pai d in 1985.

Under no circumstances can it be construed that your clients received any kind of a

gift from their father in 1985. I encourage you to re-evaluate the reporting of your

clients receipt of the proceeds of the notes. We will provide you with any background

information that you might need; but other clients of yours, the Berwicks, have been

aware since 1980 of the circumstances under which Teresa and Tracy acquired their

original interests in the joint venture. I do not need to tel l y ou how severe the

consequences can be for the failure to report capital gains income in the year in which

it was realized. Please call me if you have any questions.

14 As O’Dowd testified, when he took over the case, neither he nor the firm even knew

what law applied in considering whether and when a gift had been made for tax purposes.

-7- that, by the terms of the 1980 land deal, Terry and Tracy became owners of a joint venture interest

immediat ely, not subject to Parker’s control at all. Gamble specifically offered to send Hunter the

documents underlying the lan d deal, some of which Hunter had never before read, in an effort to

prove his point. 13 Hunter, however, refused to follow up on Gamble’s offer, instead relying on his

original advice; as he testified at trial, he “understood the land deal” and did not need to investigate

further. Gamble also proposed so-called “global peace talks” t o resolve all the conflicts between

Parker and his daughters, which Hunter refused without first consulting with Terry and Tracy.

In October 1991, the IRS issued notices of deficiency against both the sisters and Parker “in

order to avoid a ‘whipsaw’ situation,” Streber

, 138 F.3d at 218, and the cases were consolidated for

trial in the Tax Court. Hunter, Blazier, and O’Dowd represented the sisters in discovery and at the

tax trial. In 1992, Hunter put O’Dowd on the case, and he began (for the first time) to do legal

research into what constituted a “gift” under Texas law 14 and factual research into the particulars of15 As O’Dowd testified, when he took over the case, the firm did not have possession

of many of the key documents, and he had to retrieve them from the key parties to the land deal. His

research revealed, inter alia

, the set t lement agreement from the 1985 lawsuit on the notes, which

identified Terry as the note’s owner, and a letter, written in 1980 by Bradish to Betty, stating:

Dear Betty Parker,

This is to confirm that J. Robert Bradish holds in trust for Tracy P arker and Terry

Parker 80% of the 50% venture interests (i.e. 40% of the venture) which is being

negotiated between Jack Thoner and J. Robert Bradish. In the event J. Robert

Bradish dies prior to termination of the venture, the trustee will be Larry Parker or a

person chosen by him.

Prior to that time, neither Hunter nor anyone involved with the sisters’ case had seen the letter.

16 The memorandum began “I have an emergency r equest.” After listing some of the

facts of this case, it asked, “Is this a Texas trust? Is it valid? Is it revocable? Remember this was

done in 1980. Is this some other relationship?” Vervoort’s response memo concluded that it was

unlikely a trust was created, and that the sisters controlled th e asset s at least since the notes were

endorsed and delivered in 1982.

17 The attorney s argue strenuously that there was no evidence that the IRS would have

settled at the 1993 mediation. However, the record shows that t he jury was presented with

substantial evidence from which they could have found thi s fact t o be true: O’Dowd specifically

testified that he believed (despite the lack of a formal offer) the IRS would have settled for $1.2

millio n, a letter allegedly signed by O’Dowd posited that Terry and Tracy could have settled for $1

millio n, and Diana Marshall testified that the $ 1.2 million dollar offer appeared to be on the table.

-8- the land deal. 15 O’Dowd (1) sent out an memorandum to a colleague, Mitch Vervoort, asking for

help with the legal research, 16 (2) requested more documentation of the land deal, (3) called and later

deposed Bradish (who had never been contacted by any lawyer on the sisters’ case before), and (4)

kept in contact with Parker’s attorneys.

In 1993, there was a mediation between the sisters, Parker, and the IRS. Representing Terry

and Tracy at the mediation w e re O’Dowd, Blazier, and Houston attorney Diana Marshall. As the

district court found, “[t]here was credible evidence at trial that the IRS would have settled [during

the mediation] for between [$1 an d $1.2 million].” 1 7 The mediator, a former judge, and Parker’sBoth Terry and Tracy testified that their understanding was that a settlement at that price was offered,

and that they could have afforded to settle at that price, but chose not to do so because settlement

was not recommended. The record also shows that settlement at this price was available from the

mediation until the Tax Court rendered its decision in December, 1995. The attorneys also argue,

in contradi ctory fashion, that they counseled Terry and Tracy to settle, but that they refused to

because Parker would not contribute to the settlement. Since there was conflicting testimony on this

issue, and we mu st believe the evidence presented by Terry, s ee Reeves v. Sanderson Plumbing

Products Inc.

, –S.Ct.–, 2000 WL 743663, at *10 (U.S. June 12, 2000), we assume that Terry would

have settled for between $500,000 and $600,000 (her half of the $1-$1.2 millio n), but did not based

on the advice of Hunter, Blazier, and O’Dowd.

18 “Transferee liabilit y” allows the government to collect gift tax from either the donor

or the donee. S ee 26 U.S.C. § 6901 (allowing the IRS to seek gift tax liabilit y from either the donor,

Parker, or the donees, Terry and Tracy); see also Tilton v. Commissioner , 88 T.C. 590, 594 (T.C.

1987) (“[S]ection 6901(a)(1)(A) authorizes the assessment of transferee liabilit y, at law or in equity,

in the same manner as the liabilit y for gift taxes. This provision, however, does not create any

separate liabilit y; it merely provides a secondary method for enforcing the exist ing liability of a

transferor.”).

19 O’Dowd and Blazier argue, in their individual briefs, that they advised Terry and Tracy

to se t t le because of the substantial risk of loss at trial. However, the evidence in the record is

o verwhelming as to the attorney’s certainty that their position would be vindicated at the tax

trial )) they claimed that the “documents would speak for themselves” and that the only risk was that

the equities weighed against two daughters who received a gift and sought to force their father to pay

taxes on the gift. Blazier and O’Dowd were unquestioning in their devotion to Hunter’s original

advice. As Diana Marshall testified, “You would have thought list ening t o the three of them that

Edwin Hunter was God.”

20 In a letter to O’Dowd short ly after the mediation, Gary Cornwell, one of Parker’s

lawyers, notified O’Dowd of Cornwell’s belief that Hunter and O’Dowd could no longer be objective

and, accordingly, that outside counsel should be called in to counsel Terry and Tracy on settlement.

As Cornwell claimed, “Given the fact that Mr. Hunter of your firm is a principal cause )) if not the

principle cause )) of both the present litigation, and the enormous tax liabilit ies that have accrued and

-9- attorney

, Bob White, both told Terry and Tracy that they would probably lose the tax trial. Further,

both opined that even if the sisters “won” the case by proving that Parker owed the gift tax, they

would still “lose” because they would probably be liable for the higher gift tax via transferee liabilit y. 18

Yet, confident that they would win the case, and dubious about the prospect of transferee liabilit y,

Blazier and O’Dowd insisted that they would win. 19 Based on that advice, the sisters did not settle. 2 0now are being pursued by the IRS against both your clients and mine, we believe that settlement

negotiations cannot be effectively pursued except t hro ugh an independent law firm.” It is unclear

whether this issue was ever resolved, but it is clear that the concern was never disclosed to Terry and

Tracy.

21 Terry and Tracy, through co unsel, offered Hunter, Blazier, and O’Dowd an

opportunity to appeal the substantive tax finding on their own, but, through counsel, the attorneys

-10- The Tax Court rul ed t hat t he sisters were liable for the tax and accrued interest and also

imposed negli gence and substantial underestimation penalties. S ee Streber v. Commissioner

, 70

T.C.M. (CCH) 1604, 1609, 1995 WL 754033 (T.C. 1995). In deciding that Parker intended to make

a gift to his daughters in 1980, the Court relied largely on the documents and on Bradish’s testimony

that Parker wanted the daughters to have an interest in the project “from the beginning” and wanted

Terry and Tracy’s interests “protected from him, so that he couldn’t get his hands on the money.”

Id. F inding that the notes had been delivered to and accepted by Terry, the Court found it clear that

“the daughters are taxable on the proceeds of the $2 million notes and that Parker is not.” Id.

Shortly after the Tax Court’s ruling, an IRS agent telephoned Terry, demanded an immediate

meeting at her home, and began to catalogue the value of her home and other assets. Terry feared

that the IRS would immediately seize her home and other assets. When she asked her attorneys if

the I RS wo uld act immediately, the attorneys responded “they might.” Terry visited the office of

Conde Cox, an Austin bankruptcy attorney

, who after investigating her cause advised her to file for

bankruptcy. After reviewing the transaction resulting in such huge interest payments, Cox also

advised Terry to seek out a consumer lawyer to investigate the conduct of her attorneys.

Simultaneously, Terry had to decide whether to appeal the decision of the Tax Court. After

consultation with Cox and a tax expert, Mike Cook, Terry and Tracy decided not to appeal the

underlying decision that they owed capital gains tax for a gift made in 1980, 21 but to appeal the Taxdeclined the opportunity, stating that they had no desire to “help [Terry and Tracy] mitigate

damages.”

22 Cook testified that appealing the imposition of the substantive tax finding “would have

affected our credibility on the entire appeal. And it was our fear that the appeals court would look

at what I think would have been next to a frivolous appeal and decided that )) and would have paid

very little attenti on to our penalty argument and would have simply affirmed the Tax Court on all of

its holdings.”

-11- Court’s imposition of “negligence” and “substantial underestimation” penaltie s

. Cook felt that

appealing the underlying tax would be worthless, as under our “clearly erroneous” standard of review

reversal of the Tax Court’s factual f inding that the gift had occurred in 1980 would be almost

impossible. He felt, however, that the Tax Court had erred in its imposition of the penalties, and that

they would be able to convince this court to reverse o n t ho se issues. Cook opined that appealing

both the tax and the penalties would make this court less likely to reverse the penalties, as “it would

take away from the focus on what we thought was a very good case, and that is the penalty appeal.” 22

This strategy worked, insofar as without disturbing the underlying tax finding, we reversed the

penalties. See Streber , 138 F.3d at 219.

After being advised by several attorney s that they had been disserved by their counsel, Terry

and Tracy filed suit u nder Texas tort law and the DTPA against many of their lawyers, including

Hunter, O’Dowd, and Blazier. The sisters argued t hat t he attorney s had (1) failed to conduct a

thorough factual investigation, (2) failed to do adequate research in Texas law, (3) incorrectly advised

the sisters on potential transferee liabilit y should Parker b e held liable for the gift tax, (4) failed to

disclose material facts the lawyers knew about the law, (5) advised the sisters not to settle in 1993

even though they knew their position was wrong, and (6) used the sisters’ case as leverage in another

case they had against Parker.23 Separate counsel has been retained to represent Blazier and O’Dowd on appeal. A

member of this court granted the attorneys’ motions to each file separate briefs, and they have done

so.

-12- After a continuance was granted during which this court ruled on the penalties issue, the case

against Hunter, Blazier, and O’Dowd went to trial. The attorneys decided on a joint defense. 2 3 After

a two-week trial, which included competing experts and testimony from all three defendants and both

s ist ers, a jury found for Terry and Tracy on all substantive counts (negligence, breach of fiduciary

duties, and violations of the DTPA) and awarded actual damages totaling $2,172,788. The largest

porti on of these damages represented the difference between the amount of money the sisters would

have paid the IRS had the attorneys advised them correctly and the amount they eventually had to

pay. This difference was represented by the “interest differential,” i.e. the difference between the

interest the sisters actually earned while they possessed the $1.7 millio n each and the interest charged

by the IRS for such possession. Actual damages also encompassed compensation for the time Terry

and Tracy had spent trying to rectify the harm the attorney s had caused. The jury apportioned

liabilit y for these compensatory damages at 60% for Hunter, 20% for Blazier, 10% for O’Dowd, and

10% for the firm. The jury also, finding that their DTPA violations were committed “knowingly,”

imposed DTPA additional damages on each defendant, a total of $6 millio n against Hunter, $2 millio n

against Blazier, $200,000 against O’Dowd, and $8.2 million against the firm.

Terry moved for the entry of judgment, and the attorney s moved for judgment as a matter of

law. The district court entered judgment for Terry. In doing so, after reviewing the jury verdict and

the evidence presented in the case, it noted that the “failure to settle forms the basis of the sisters’

damages in this case, as they assert that had they not been misled about the merits of their case, they

would have settled in 1993 and avoided the increasingly adverse series of events occurring after that24 Shortly before judgment on the verdict was rendered, Tracy settled her dispute with

the attorneys. Therefo re, t he judgment was rendered only for Terry, and her case is the only one

remaining on appeal.

-13- time.” Finding that there was sufficient evidence to support the jury’s finding on liability, the trial

court entered j udgm

ent for Terry

. 2 4 However, the court excluded the award of attorneys fees fo r

work done prior to the 1993 mediation; the court held that since Terry and Tracy’s damages flowed

from the failure to settle, these damages were not recoverable.

The district court also ref o rmed t he jury’s award of additional damages. Since DTPA

additional damages can only be a total of twice the amount of actual damages awarded for a DTPA

violation, see T EX

. B US

. & C OM

. C ODE § 17.50(b)(1), and the jury’s award of additional damages far

exceeded twice the amount of actual damages, the court could not enter judgmen t in the am ount

awarded by the jury. To recalculate, the court doubled the amount of actual damages (awarded for

all three substantive counts) to calculate a total additional damage award, and divided that amount

in proporti on to the jury’s finding of liabilit y for additio nal damages as to each defendant.

Accordingly, Hunter was held liable for 36.6% of the additional damages, O’Dowd for 1.2%, Blazier

for 12.2%, and the firm for 50% of the additional damages.

Hunter, Blazier, O’Dowd, and the firm appealed.

II.

We first consider Blazier’s claims that the district court lacked personal jurisdiction over him

and that, if personal jurisdiction exist ed, Lo uisiana law should have applied. Because Blazier is a

Louisiana resident whose contacts with Texas were not continuous, the Constitution permits personal

j urisdiction over Blazier in Texas only if he “purposefully availed” himself of the benefits and

protec t io ns o f Texas law by establishing “minimum contacts” with Texas and if the exercise of25 Terry’s allegations of Blazier’s failure to disclose material information from Louisiana

to her in Texas also forms a basis for personal jurisdiction. “[W]hen a lawyer chooses to represent

a client in another forum, that in itself does not confer personal jurisdiction if the claim does not arise

from the lawyer’s contacts with t he fo rum. However, when the claim arises from a breach of

fiduciary duty based on a failure to disclose material information, the fact that the lawyer continually

communicated with the forum while steadfastly failing to disclose material informatio n shows the

purposeful direction of material omissions to the forum state.” W ein Air Alaska, Inc. v. Brandt

, 195

F.3d 208, 213 (5 th Cir. 1999)

-14- jurisdiction over Blazier does not offend “traditional notions of fair play and substantial justice.” S ee

Access Telecom, Inc. v. MCI Telecommunications Corp.

, 197 F.3d 694, 716 (5 th Cir. 1999) (calling

this “specific” jurisdiction) (citing International Shoe Co. v. Washington

, 326 U.S. 310, 316, 66 S.

Ct. 154, 160, 90 L. Ed. 95,

__ (1945) and Asahi Metal Indus. Co. v. Superior Court

, 480 U.S. 102,

113, 107 S. Ct. 1026, 1034, 94 L. Ed. 2d 92, __ (1987)).

We find that the Texas district court had jurisdiction o ver Blazier. Blazier “purposefully

availed” himself of Texas laws when he gave tax advice that he knew would be received by a Texas

client, see Busch v. Buchman, Buchman & O’Brien

, 11 F.3d 1255, 1257 (5 th Cir. 1994) (allowing

Texas personal jurisdiction over New York attorney who only performed work in New York because

he knew his tax opinion would be included in materials shipped to Texas), and thus he had “minimum

contacts” with the forum state. Second, since at least some of the allegations forming the basis of

this lawsuit arise out of Blazier’s contacts with Texas )) much of Blazier’s alleged malpractice

occurred during t he 1993 mediation, which took place in Houston ) ) the exercise of personal

jurisdiction over Blazier com ported with traditional notions of fair play and sub st ant ial justice. 2 5

Accordingly, the district court did not err in asserting personal jurisdiction over Blazier. C f. Trinity

Industries v. Myers & Associates

, 41 F.3d 229, 230 (5 th Cir. 1995) (allowing jurisdiction over Illino is26 Blazier also argues that the district court lacked jurisdiction over him because his tax

advice concerned federal tax law rather than issues of Texas law. We disagree. As a t hresho ld

matter, as described in the Tax Co urt opinion, the tax advice given in this case was (or, at least,

should have been) based, in large part, upon the Texas law of gifts. S ee Streber

, 70 T.C.M. at 1608.

Further, the distinction alleged by Blazier would make little sense as a practical matter. For example,

if a Louisiana attorney committed malpractice while advising a Texas client in a Title VII case, a Rule

10(b)(5) securities law case, or, for that matter, a case invo lving interpretation of the United States

Constitution, the Texas courts c o uld still have personal jurisdiction over that attorney if (1) his

contacts with Texas satisfied the “minimum contacts” requirement, and (2) the exercise of jurisdiction

did no t o ffend traditional notions of fair play and substantial justice. The fact that these issues all

involve federal, rather than Texas, law is of no moment.

-15- lawyer who represented Texas company for eight years and occasionally came to Texas). 26

Blazier also argues that Louisiana law, specifically the Louisiana statute of limitations, which

he argues would have barred the suit, should have applied to Terry’s claims against him. The district

court considered this claim thoroughly in a published opinion, see Streber v. Hunter

, 14 F. Supp. 2d

978, 984-84 (W.D. Tex. 1998), and we agree with its fine analysis. Federal courts apply the choiceof-law rules of the forum state, see Klaxon Co. v. Stentor Elec. Manu. Co.

, 313 U.S. 487, 496, 61

S. Ct. 1020, 1021-22, 85 L. Ed. 1477,

__ (1941), and thus here we apply Texas’s “most significant

relationship” test. We examine the following factors:

(1) the needs of the interstate and international systems;

(2) the relevant policies of the forum;

(3) the relevant policies of other interested states and the relative interests of those

states;

(4) the protection of justified expectations;

(5) the basic policies underlying the particular field of law;

(6) certainty, predictability and uniformity of result;

(7) ease in the determination and application of the law to be applied.

See Askanse v. Fatjo , 130 F.3d 657, 671 & n.9 (5 th Cir. 1997) (citing R ESTATEMENT (S ECOND ) OF

C ONFLICT OF L AWS

, §§ 6, 143 (1971)). In doing so, we are guided by the following factual inquiries:

(1) The place where the injury occurred;

(2) The place where the conduct causing the injury occurred;27 The Louisiana statute of limitations for legal malpractice cases provides that such suits

must be brought within one year of the date that the malpractice occurred or it discovers, but limit s

the potential tolling offered by the discovery rule to two ye ars. See La. Rev. Stat. Ann. 9:5605A

(“[E]ven as to actions filed within one year from the date of discovery, in all events such actions shall

be filed at the latest within three years from the date of the alleged act.”); Reeder v. North

, 701 So.

2d 1291, 1296 (La. 1997) (“The Legislature was aware of the pit falls in this statute but deci ded,

within its prerogative, to put a three-year absolute limit on a person’s right to sue for legal

malpractice, just as it would be within its prerogative not to allow legal malpractice actions at all.”).

Since the attorneys’ alleged malpractice extended over a long time, depending on when a court would

determine the actual “acts” constituting malpractice occurred, the suit may have been barred under

Louisiana law.

-16- (3) The domicile, residence, nationality, place of incorporation of the business of the

parties;

(4) The place where the parties’ relationship is centered;

See id.

Blazier desires the protecti on of the Louisiana statute of limitation on legal malpractice claims,

which contains an extremely limited discovery rule. 27 The critical factor for the district court in its

decision to apply Texas law was the Texas courts’ vigilance in protecting its citizens by allowing a

discovery rule on the limitations period for malpractice claims; the Court held that the contr ary

Louisiana policy “ directly contradicts Texas precedent protecting the rights of Texas clients and

arguably violated the Open Courts provisions [of the Texas and Louisiana constitutions] by divesting

an individual of a cause o f act ion before he or she had reason to know it existed.” S treber

, 14 F.

Supp. 2d at 984. Further, “it was foreseeable [to the attorneys] when the representation began that

litigation could likely ensue in Texas, especially considering that litigation was already occurring in

Houston.” I

d. Accordingly, balancing the attorneys’ and Louisiana’s interests with those of Texas

and the sisters, the court held that Texas law applied.

While “[a]mong the fundamental purposes underlyin g a state’s statute of limitations is the

protecti on of the resident defendants of that state,” Industrial Indemnity Co. v. Chapman and Cutler

,-17-

22 F.3d 1346, 1351 (5 th Cir. 1994), Texas has an “int e rest in allowing its residents to recover for

injuries sustained in a state that would recognize their claim as timely.” Id. at 1351 n.9. In Texas,

attorney malpractice claims are among the two types of claims that, because they are considered

“inherently undiscoverable,” implicate an unlimit ed discovery rule. S ee S.V. v. R.V.

, 933 S.W. 2d 1,

8 (Tex. 1996). The rationale underlying the discovery rule in such cases is that the attorney-client

relationship presupposes a fiduciary duty between attorney and client, who is “either unable to inquire

into the fiduciary’s actions or unaware of the need to do so.” I d

. While Texas law recognizes the

burdens upon attorney s caused by the discovery rule, the Texas Supreme Court has made clear that

“any burden placed upon an attorney by application of the discovery rule is less onerous than the

injustice of denying relief to unknowing victims.” Willis v. Maverick , 760 S.W. 2d 642, 646 (Tex.

1988). Texas’s policy of protecting its citizens against the “inherently undiscoverable” malpractice

of attorneys is well-established.

The facts guiding our inquiry, furthermore, are at best equivocal, and viewed in the light most

favorable to Terry, are s uppo rt ive of the district court. The “injury” occurred in Texas, and the

conduct causing the injury occurred both in Texas (during the mediation) and in Louisiana (before

and after the mediation). The attorneys are all residents and licenced practitioners in Louisiana, and

Terry is a resident of Texas. We believe that the district correctly determined that “[t]he relationship

cannot be said to be ‘centered’ either exclusively in Louisiana and Texas, since numerous contacts

occurred in both states and both states have significant connections to the litigation.” S treber

, 14 F.

Supp. 2d at 984. Given that the facts in this case weigh in favor of the application of Texas law, and

that the Texas policy “is as strong if not stronger,” id. at 983, than that of Louisiana, Texas law was

properly applied by the district court.-18- III.

Most of the attorneys’ remaining claims on appeal focus on the sufficiency of the evidence

presented by Terry to find liabilit y, causation, and damages for each of the alleged torts and for the

DTPA violation. Accordingly, t he standard of review over these claims is a critical issue. Terry

argues that since the defendants did not move for a directed verdict at the close of all the evidence

as required by F ED

. R. C IV

. P. 50(b), the standard of review should be “plain error” and we should

affirm if there is “any evidence” to support the verdict. S ee Polanco v. City of Austin

, 78 F.3d 968,

973-74 (5 th Cir. 1996) (“The absence of a motion challenging the evidence prior to submission to the

jury precludes the appellate court from evaluating and weighing the evidence to test its sufficiency.”).

While the attorney s do not dispute their failure to technically comply with Rule 50(b), they assert that

their actions )) moving for judgment as a matter of law at the end of the plaint iff’s case in chief and

objecting to the jury charg e on the sam e grounds ) ) satisfy the “purposes” of Rule 50(b) and that,

therefore, they have not waived the more favorable “sufficiency of the evidence” standard of review.

See Bay Colony v. Trendmaker, Inc. , 121 F.3d 998, 1002 (5 t h Cir. 1998) (“[T]his Court has not

r equired strict compliance with Rule 50(b) and has excused technical noncompliance where the

purposes of the requirements have been satisfied.”).

On this issue, we agree wi t h the attorneys. At the end of the plaintiffs’ case in chief, the

attorney s moved for jud gment as a matter of law, which was denied. At the close of all of the

e v idence, the parties participated in a four-hour conference to discuss the jury charge. After the

conference, but before closing arguments, the attorney s and the trial judge en gaged in a colloquy

about the t iming of the remainder of the trial. The judge stated that while in light of the plethora of

objections raised at the charge conference he had “no intention of waiving

. . . anything procedurally,”28 The trial judge stated that because he “was appraised of the large number of arguments

tha t everyone had with regard to the inclusion and exclusion of items from the charge prior to the

reading

. . . for purposes of time and to make sure that the parties were not deprived of any of their

ability to take up on appeal any inclusions or exclusions out of the charge

. . . [he would] give them

an opportuni ty [after the charge was read] to just state into the record what the )) what their

arguments were for both inclusion or exclusion of items.”

-19- he wo uld submit the charge to the jury and hear objections, on the record, while the jury was

deliberating. 28 While the jury was deliberating, the attorneys made objections, on the record, to the

jury charge. During those arguments, the attorneys challenged the sufficiency of the evidence on all

of the issues they bring up on appeal.

“This Court has repeatedly emphasized that the application of Rule 50(b) should be examined

in the light of the accomplishment of its particular purposes as well as in the general context of

securing a fair trial for all concerned in the quest for truth.” B ay Colony

, 121 F.3d at 1003. We

apply the Rule “with a liberal spirit,” see Alcatel USA, Inc. v. DCI Technologies, Inc.

, 166 F.3d 772,

781 (5 th Cir. 1999), and excuse technical noncompliance with the Rule “where the purposes of the

rule are satisfied.” Polanco , 78 F.3d at 974.

Rule 50(b) “serves two basic purposes: to enable the trial court to re-examine the sufficiency

of the evidence as a matter of law if, after the verdict, the court must address a motion for judgment

as a matter of law, and to alert the opposing party to the insufficiency of his case before being

submitted to the jury.” P olanco

, 78 F.3d at 974. Here, the attorneys moved for summary judgment

before trial, moved for judgment as a matter of law after the plaint iffs’ case, and objected to the jury

charge, all on the identical grounds on which they appeal. Both the plaintiffs and the district court

were clearly aware of the defendant’s arguments before the case was submitted to the jury and,

accordingly, the purposes of Rule 50(b) were satisfied. S ee Greenwood v. Societe Francaise De

, 111-20-

F.3d 1239, 1244 (5 th Cir. 1997) (“These purposes [of Rule 50(b)] are met when the court and the

plaint iff are alerted to the grounds on which the defendant contends the evidence is insufficient prior

to the submission of the case to the jury.”).

However, while we agree that the attorney s have not waived the “more favorable” standard

of review, we nevertheless “employ a deferential standard of review when examining a jury’s verdict

for sufficiency of the evidence.” D ouglas v. DYNMcDermott Petroleum Operations Co. , 144 F.3d

364, 369 (5 th Cir. 1998). We review the evidence in its strongest light in favor of Terry, giving her

“the advantage of every fair and reasonable inference which the evidence justifies.” B artley v. Euclid,

Inc.

, 180 F.3d 175, 179 (5 th Cir. 1999) (en banc); see also Reeves

, 200 0 WL 743663, at *11. On

each issue, “[w]e will not disturb the jury's verdict unless, considering the evidence in the light most

favorable to [Terry], the facts and inferences point so overwhelmingly to [the attorneys] that

reasonable jurors could not have arrived at a verdict except in [their] favor.” D ouglas

, 144 F.3d at

369; see also FDIC v. Mmahat

, 907 F.2d 546, 552 (5 th Cir. 1990) (applying this standard of review

to a legal malpractice claim). With this in mind, we proceed to the attorneys’ substantive claims.

IV.

In Texas, a legal malpractice claim sounds in tort and is evaluated based on negligence

principles. A plaintiff must prove four elements to recover: (1) the defendant owed a dut y t o t he

plaint iff; (2) the defendant breached that duty; (3) the breach proximately caused the plaint iff injury;

and (4) damages resulted. S ee SMWNPF Hol dings v. Devore , 165 F.3d 360, 364 (5 t h Cir. 1999)

(citing Cosgrove v. Grimes

, 774 S.W. 2d 662, 664-65 (Tex. 1989)); Simpson v. James

, 903 F.2d 372,

376 (5 th Cir. 1990). The attorneys challenge the evidence on each prong of the test.

A.-21-

The attorney s first argue that the evidence was insufficient to prove duty, i.e. standard of care.

They claim t hat Terry’s expert witness on attorney malpractice, Mike Cook, did not sufficiently

identify the standard of care for tax specialists (Hunter and Blazier) and trial attorneys (O’Dowd).

See Geiserman v. MacDonald

, 893 F.2d 787, 793 (5 th Cir. 1990) (“In most legal malpractice cases,

expert testimony is necessary to establish the standard of care since only an attorney can competently

testify to whether the defendant comported to the prevailing legal standard.”).

We find that Cook’s testimony sufficiently identified the standard of care. Cook clearly stated

that, to satisfy the standard of care, the attorney s had to act as an ordinarily prudent attorney would

in the same or similar circumstances. He also stated that for tax specialists, the standard was higher

because tax specialists “have been trained in . . . a fairly complex ) ) very complex area

. . . [and] our

clients come to us bel

ieving t hat because we are tax specialists, we have this higher degree of

knowledge that they are seeking.” Cook also testified to the specific duties that Hunter, Blazier, and

O’Dowd, owed their clients, Terry and Tracy. Specifically, he testified that the attorneys had a duty

to carefully analyze the facts of their situation and the relevant state and federal law and make sure

that their clients were “fully informed and not misled” about both the facts and the law.

Accordingly, we reject the attorney’s argument that Terry presented insufficient evidence to

establish the standard of care.

B.

Next, the attorney s argue that there was insufficient evidence to prove that they committed

malpractice, i.e.

, that there was insufficient evidence to prove breach of the standard o f care. “A

lawyer in Texas is held to the st andard o f care which would be exercised by a reasonably prudent

attorney

. . . .The standard is an objective exercise of professional judgment, not the subjective belief-22-

that his acts are in good faith.” C osgrove

, 774 S.W. 2d at 664-65. The attorneys make several

related arguments, which we address in turn.

1.

The attorneys’ init

ial assault on the jury verdict is the claim that because we earlier found that

the tax position they advised Terry and Tracy to report was supported by “substantial authority,” see

Streber

, 138 F.3d at 223, they satisfied the “reasonably prudent attorney ” standard as a matter of law.

Because the attorneys misstate the law and our prior opinion on this point, we disagree.

While intuitively

it may seem that advising a position supported by “substantial authority”

cannot constitute malpractice, our prior opinion dealt with “substantial authority” not in the dictionary

definition sense, but rath er as a t erm o f art defined by the tax code. As the time it was enforced

against Terry and Tracy, 26 U.S.C. § 6661 provided for a 25% penalty for those who “substantially

underestimated” their tax liabilit y. S ee 26 U.S.C. § 6661(a) (1989) (“If there is a substantial

understatement of income tax for any taxable year, there shall be added to the tax an amount equal

to 25 percent of the amount of any underpayment attributable to such understatement.”). H owever,

those charged with “substantial underestimation” could claim, as a defense, that there was

“substantial authority” for their tax position. See 26 U.S.C. 6661(b)(2)(B)(I) (1989).

As made clear by the reasoning in our prior o pinion, one can have sufficient “substantial

authority” to avoid a “substantial understatement” penalty without necessarily ha ving a solid legal

position. The reporting position advised by the attorneys

turned o n o ne factual issue: when Parker made the gift to his daughters. . . . The

subsidiary facts relating to this transaction were complex, largely undisputed, and not

materially affected by the Tax Court’s assessment of the sister s’ lack of credibility.

In a recent decision, the Eleventh Circuit explained that where the substantial

authority issue turns on evidence going both ways, there is substantial authority from29 The definition of “substantial authority” in cases where a taxpayer’s position is based

on a legal a rgument, rather than the facts surrounding that argument, appears to differ. S ee

Westbrook v. Commissioner

, 68 F.3d 868, 882 (5 th Cir. 1995) (“Substantial authority exists when the

weight of the [legal] authorities supporting the treatment is substantial in relation to the weight of the

authorities supporting contrary positions.”); Cramer v. Commissioner

, 64 F.3d 1406, 1415 (9 th Cir.

1995) (“Appellants’ treatment of the options does not meet this test. They have relied heavily upon

ambiguous legislative history from [sic] 1976 Tax Reform Act that was created subsequent to the

enact ment of 83. The principle [sic] authorities supporting the contrary position include the plain

meaning of the statute, and a regulation promulgated by Treasury interpreting the statute.”).

30 Terry argues that the issue of who owed the tax was decided in the Tax Court (and

not appealed), and therefore that principles of issue or claim preclusion preclude our revisiting the

issue. We disagree. The attorney s were not parties to the Tax Court case, and the issue in the Tax

Court case (who owed the tax) is different from the issue in this case (whether the lawyers’ conduct

was reasonable). Thus, neither preclusion doctrine should apply. See United States v. Shanbaum

, 10 F.3d 305, 310-11 (5 th Cir. 1994) (holding that a necessary component of claim preclusion is “the

same claim or cause of action must be involved in both suits” and a key to issue preclusion is that “the

issue under consideration in a subsequent action must be identical to the issue litigated in the prior

-23- a factual standpoint for the taxpayer’s position. Only if there was a record upon

which the Government could obtain a reversal under the clearly erroneous standard

could it be argued that from an evidentiary st andard, there w as not substantial

authority.

Streber

, 138 F.3d at 223 (emphasis added) (citing Osteen v. Commissioner , 62 F.3d 356, 359 (11 th

Cir. 1995)). As described in our prior opinion, from a factual standpoint, taxpayers have “substantial

authority” for their reporting position unles s t he factual evidence to the contrary is so clear that it

would not survive the clearly erroneous standard of review. 29 Accordingly, the fact that the position

advised by Hunter, from a factual standpoint, was suppor t ed by “substantial authority,” is hardly

dispositive of whether it is a position that a reasonable attorney

, let alone a reasonable tax specialist,

would insist is correct.

2.

Second, the lawyers argue that their tax advice (to treat the tran saction as a 1985 gi f t on

which Parker owed the gift tax) was correct, or, at the very least, not negligent. 30 However, Terry’saction”). We are persuaded by the attorneys’ argument that “barring relitigation of the underlying

case would mean an attorney could never succeed in a malpractice case, since the prior, unappealed

loss would foreclose any defense.”

31 As the district court held,

Generally, a plaint iff in a malpractice suit has to establish that, absent the malpractice,

he would have prevailed (“a suit within a suit”). However, in the current case, there

is no requirement of estab lishing a suit within a suit because the alleged

negligence/malpra ct ice is in failing to adequately research the underlying facts and

properly advise the sisters to settle, with damages arising from the failure to settle.

32 The attorney s argue that Cook’s testimony to the effect that their conduct was below

the standard of care was merely a “conclusory statement” insufficient to prove malpractice.

However, even assuming that Cook’s testimony consisted merely of “conclusory statements,” it is

sufficient to uphold the jury verdict. The cases cited by the attorneys all stand for the proposition that

“conclusory statements made by an expert witness are insufficient to support summary judgment .”

Burrow v. Arce

, 997 S.W. 2d 229, 235 (Tex. 1999) (emphasis added). However, here we review a

jury verdict, and the standard of review differs subs t ant ially. The attorneys do not challenge the

admissibility of Cook’s expert testimony, as in First Financial v. U.S.F.& G. Co.

, 96 F.3d 135, 196

(5 th Cir. 1996) (“The admissibilit y of expert testimony is governed by the same rules, whether at trial

o r on summary judgment.”); rather, they challenge the testimony’s sufficiency to support a jury’s

finding of breach. For those purposes, “questions regarding the scientific bases of an expert’s opinion

affect the weight to be assigned that opinion rather than it s admissibility and should be left for the

jury’s consideration.” Slaughter v. Southern Talc , 919 F.2d 304, 306 (5 th Cir. 1990).

-24- malpractice argument is more nuanced than the attorney s characterize it: she bases her argument on

many factors which she posits were not the work of reasonably prudent attorneys, not merely on the

fact that the advice the attorney s gave turned out to be i ncorrect. 31 We must determine whether to

uphold the jury’s determination that the lawyers’ overall conduct, particularly their advice that they

would win at trial

and that, accordingly, the sisters should not settle in 1993, was not “reasonably

prudent.”

Breach of the standard of care must generally be proven by expert testimony, see Geiserman

,

8 93 F.2d at 793, and Terry provided it in the form of attorney Mike Cook. 3 2 Contrary to the

attorneys’ arguments, Cook did testify that treating the transaction as a 1980 gift was incorrect as-25-

a matter of law )) while at one point during his testimony he refus ed to take a posi ti on on exactl y

when the gift was made, at another he testified that this reporting position was “not a position taken

by a reasonably prudent attorney .” Cook testified that, in his view, their reporting position was so

dubious that it might not even satisfy the low “substantial authority” threshold. Cook’s most specific

and damaging testimony was that, based on all the evidence available to the attorneys, at least by

1993, advising Terry and Tracy not to settle because they had a good chance to win at trial was far

too high a risk. As he stated:

My o pinio n is t hat not only was the income tax position not a position taken by a

reasonably prudent attorney

, . . . but that in a ddit io n, the entire risk involved with

taking the position, that is the exposure to a huge gift tax, was not properly analyzed.

. . . [I]f you win the income tax position and successfully show the Court that the gift

was of cash made in 1985, then the Internal Revenue Service simply has a green light

to come collect . . . [a] very large gift tax from Terry and Tracy.

In short, Cook’s testimony confirmed the plaint iffs’ theory that whatever happened at the Tax Court

trial was a “lose-lose” scenario: if their position that the gift was made in 1985 was incorrect (as it

was proven to be), they would be liable for capital gains taxes and a large amount of interest; if their

position was correct, they would be liable for the higher gift tax via transferee liabilit y. S ee 26 U.S.C.

§ 6901 (allowing the IRS to seek gift tax liabilit y from either the donor, Parker, or the donees, Terry

and Tracy); see also Tilton v. Commissioner , 88 T.C. 590, 594 (T.C. 1987) (“[S]ection

6901(a)(1)(A) authorizes the assessment of transferee liabilit y, at law or in equity, in the same manner

as the liabilit

y for gift taxes. This provision, however, does not create any separate liabilit y; it merely

provides a secondary method for enforcing the existing liabilit y of a transferor.”). Accordingly

,

Cook’s testimony is consistent with the plaint iff’s theory, the jury verdict, and the distri c t court’s

entry of judgment: at least by 1993, based o n t he facts and the law, failing to advise the sisters to33 O’Dowd argues that Cook’s testimony is insufficient to sustain the jury’s finding that

he performed below the standard of care because Cook did not separately analyze whether O’Dowd

(a general practitioner) breached the lower “reasonably prudent attorney ” standard of care rather than

the higher “reasonably prudent tax attorney ” standard applicable to Blazier and Hunter. To the extent

separate evaluations were necessary, Cook’s t est imo ny, albeit not crystal clear, was that all three

attorney s did not even satisfy the lower standard of care, i.e. “reasonably prudent attorney ,” let alone

the tax specialist standard. Accordingly, O’Dowd’s challenge is unavailing.

34 The record reflects t hat all three defendants ) ) Hunter, Blazier, and O’Dowd )) had

told Terry that the IRS would have to go after Parker before attacking them for transferee liabilit y,

and that the risk of liabilit

y was “remote” at best. Further, the record reflects that O’Dowd had not

even by the time of this trial learned the law on this topic. As he testified at trial, “If Larry Parker

could absolutely pay any of the transferee liability, then that risk goes away.”

-26- settle because they had a good chance to win at trial was below the standard of care. 33

The attorney s argue that they adequately informed Terry and Tracy of the risk of transferee

liability. However, the testimony at trial and a plethora of documentary evidence belies that claim.

For example, in a June 13, 1991 letter from the attorney s to Terry and Tracy, the attorney s noted that

in pre-mediation discussions with the IRS,

The [IRS] hinted broadly that the Service believes your father insolvent. He makes

this pitch: Your client may not directly owe the tax, but they have the money and they

must pay if their father won’t. This stretches the gift tax transferee liability st atute

beyond recognition.

The attorneys believed, and continuously and erroneously told Terry and Tracy, that if Parker was

liable for the gift tax, the IRS would have to pursue him for the money before approaching the sisters

and, accordingly, the risk of transferee liabilit y was extremely rem

ote. 3 4 As described above, this

statement about transferee liabilit y is incorrect as a matter of law and, as Cook testified, it represented

conduct below the standard of care for general practitioners, let alone tax specialists.

Terry points to Cook’s testimony as the critical evidence supporting her claim of malpractice.

However, it is not the only evidence that Hunter, Blazier, and O’Dowd performed below the standard35 We are not persuaded by Blazier and O’Dowd’s arguments t hat they were so

minimally involved in the sisters’ case that they cannot be implicated in any malpractice. Clearly, both

were part of the legal team that continuously and erroneously underestimated the risks involved in

a tax strategy, and there was evidence that neither was honest with Te rry and Tracy about thei r

chances in the tax trial. To the extent Blazier and O’Dowd’s culpability was less than Hunter’s, the

jury was properly asked to allocate responsibility under Texas’s proporti onate liabilit y scheme. S ee

T EX

. C IV

. P RAC

. & R EM

. C ODE § 33.001; Duncan v. Cessna Aircraft C o. , 665 S.W. 2d 414, 425

(Tex. 1984) (“[T]he fundamental and underlying purpose of [our previous decision to adopt

comparative negl

igence] was to promote the equitable allocation of loss among all parties legally

responsible in proportion to their fault.") (citation omitted).

-27- of care. The record shows that Hunter and Blazier’s legal research and factual investigation was

grossly inadequate, particularly in light of the fact that Terry and Tracy paid them approxi m atel y

$300,000 f

or their work. 3 5 The fact that O’Dowd was the first (in 1992) to interview Bradish, to

request much of the critical documentation, and to determine what state law applied, let alone what

that state law was, is t elling of the quantity and quality of their work. Further, the record contains

evidence that Hunter and his colleagues, at least twice, rejected a settlement opportuni ty without first

consulting with their clients, and once, without Terry and Tracy’s consent, demanded a release for

themselves and the firm as a condition of settlement. Finally, the record contains evidence that the

attorneys’ representation of Betty Berwick in her potential suit against Parker to recover some $17

millio n Parker had hidden during their divorce was adverse to their representation of Terry and Tracy.

The jury could have inferred from this that the tax strategy the attorney s advised Terry and Tracy to

take was in part influence d by t heir desire to put “pressure” on Parker in this separate suit, to the

sisters’ disadvantage. Overall, the record is replete with examples of misconduct engaged in by the

attorneys during their representation of Terry and Tracy.

The attorney s contrast Cook’s testimony with that of their malpractice expert, Chad Muller,

which they claim was more specific and reliable. However, “in case[s] of conflicting expert36 Hunter, Blazier, and O’Dowd all separately argue that upholding the jury verdict in

this case would transform attorney s from advisors to guarantors of results and allow liabilit y for every

attorney who does not compel a client to settle when t he client subsequently loses at trial. This,

however, is a n exaggeration. In this case, there was substantial evidence: (1) that the attorneys’

position was very likely to lose, (2) that the attorney s repeatedly told their clients that they would win

at trial, and (3) that even if the attorney s did win at trial, the result would have been disadvantageous

to their clients because of the subsequent transferee liability. Accordingly, these facts are, in many

respects, sui generis

, and this case does not change the well-established standard for malpracti ce

liabilit y.

-28- testimony, the jury is entitled to make credibility determinations and believe the witness it considers

more trustworthy .” S impson

, 903 F.3d at 377. W e admit that the evidence of malpractice presented

by Cook in this case was not insurmountable. 36 However, given our standard of review and the

existence of significant evidence of malpractice, we must affirm the jury verdict on this issue. S ee id.

(“Although the evidence of [the attorney’s] negligence is not overwhelming, we are not persuaded

that the jury’s conclusion is unreasonable.”).

C.

The attorney s also claim that there was insufficient evidence to prove that their malpractice,

if any, was the proximate cause of Terry’s injuries. The attorneys maintain that expert testimony was

necessary to prove proximate cause, and that none was provided. Terry responds that expert

testimony was unnecessary in this case because the issue was “one that lay people would ordinarily

be competent to make.” Arce v. Burrow , 958 S.W. 2d 239, 252 (Tex.App. )) Houston [14 th Dist.]

1997), rev’d on other grounds 997 S.W. 2d 229 (Tex. 1999); see also Delp v. Douglas , 948 S.W.

2d 483, 495-96 (Tex.App. )) Fort Worth 1997) (“[Defendants] urge[] us to adopt a rule that would

require expert testimony

regarding proximate cause in all legal malpractice cases . . . . While we

agree that expert testimony on proximate cause may be required to pro ve so me legal malpractice

claims, we r efuse to hold that it is required to prove all such claims. Instead, we believe that the37 For example, Steve Davis, Terry’s ex-husband, testified that Ter ry “said that Mr.

Hunter was the tax expert and that she was paying him a large sum of money for his opinion on it,

for his expertise, and that we should go with what he was saying.”

-29- proper rule is one that would only require expert testimony on proximate cause in cases where

determination of that issue is not one that lay people would ordinarily be competent to make.”), rev’d

on other grounds 987 S.W. 2d 879 (Tex. 1999). Terry posits that once liability for negligence and

breach of fiduciary were established, “[a]ny rational juror, who could do simple math, could

understand that Terry was severely damaged as a direct result of [the attorneys’ actions].”

Guided by the decisions of the Texas courts, we agree with Terry. In Delp , after an expert

testified on negligence, the court held that the plaint iff, “as a lay person, was qualified to testify that

the advice he received from [his lawyer] resulte d in [his loss of assets] and in his subsequent

bankruptcy filing.” D elp

, 948 S.W.2d at 495-96

. H ere, once Cook’s testimony established

negligence and breach of fiduciary duties, lay testimony was sufficient to establish causation. Several

witnesses testified that Terry thought she owed the tax, and would have paid it at any time, but did

not pay based solely on her attorneys’ advice. 37 Terry testified that she would have settled, even by

paying up to $600,000, at the 1993 mediation, but did not because the attorney s had told her she was

going to win the tax trial. Terry also testified, in detail, to the specific financial losses failing to settle

caused her. This testimony was sufficient to sustain the proximate cause finding on each type of

damages awarded to Terry, which constitut ed t he direct economic loss from the attorney s’

misconduct. S ee Douglas

, 987 S.W. 2d at 885 (“The foreseeable result of an attorney’s negligence

. . . typically extends only to economic loss.”).

V.

The attorneys also challenge the jury’s finding of liability for actual and additional damages38 Even if Terry’s claims were solely that the attorneys’ advice was malpractice, those

claims alone might be cognizable under the version of th e DTPA in effect for this case. C ompare

Latham

, 972 S.W.2d at 69 (suggesting that claims for bad advice might not be cognizable under the

DTPA); with Sample v. Freeman

, 873 S.W.2d 470, 475 (Tex.App. )) Beaumont 1994, writ denied)

(“It is settled law that attorney malprac t ice is act io nable under the DTPA.”) (citing D eBakey v.

Staggs

, 612 S.W. 2d 924 (Tex. 1981). An amended version of the DTPA expressly applies to

lawyers and limits the acts under which they can be sued under the DTPA, excluding anything that

can “be characterized as advice, judgment, or opinion.” S ee Tex. Bus. & Com. Code 1749(c)

, (b)(23). However, as the lower co urt held (and neither party contests), the sisters filed their suit

before the effective date of the amendments and, therefore, the old version of the DTPA applies. We

should make clear that our analysis will not apply in cases brought under the amended DTPA.

-30- under the Texas Deceptive Trade Practices Act. The DTPA “protect[s] consumers against false,

misleading, and deceptive business practices, unconscionable actions, [and failures to disclose] .

. .

in the course of any trade.” T E X

. B US

. & C OM

. C ODE §§ 17.44, 17.46(a). To prove a violation of

the DTPA, plaint iffs must prove that: (1) they are a consumer, (2) victimized by false, misleading, or

deceptive acts, failures to disclose, or an unconscionable course of action, (3) which was a

“producing cause” of damages. S ee Doe v. Boys Clubs o f Greater Dallas , 907 S.W.2d 472, 478

(Tex. 1995). Violations produce liability for “actual damages”, and “knowing” violations allow for

“additional damages” which could raise the total damage award to as much as three times the amount

of actual damages. See T EX

. B US

. & C OM

. C ODE § 17.50(b)(1).

A.

The attorneys first assert that Terry’s DTPA claim is merely a claim that they provided bad

advice and, therefore, that the claim is not cognizable under the DTPA. While they are correct that

mere claims of attorney negligence may not be cognizable under the DTPA, see Latham v. Castillo

,

972 S.W. 2d 66, 69 (Tex. 1998); Greathouse v. McConnell

, 9 82 S.W.2d 165, 172-73 (Tex.

App. )) Houston [1 st Dist.] 1998, pet. denied), 38 Terry has alleged that the attorneys affirmatively

misrepresented facts and otherwise deceived them. If Terry produced evidence of specific deceptive39 The attorney s rely heavily on Sledge v. Alsup

, 759 S.W. 2d 1, 2 (Tex.App. )) El Paso

1988, n.w.h.), where a Texas Appeals Court held that:

Nothing is to be gained by fracturing a cause of action arising out of bad legal advice

o r improper representation into claims for negligence, breach of contract, fraud or

some other name. If a lawyer’s error or mistake is actionable, it should give rise to

a cause of action for legal malprac t ice with one set of issues which inquire if the

conduct or omission occurred, if that conduct or omission was malpractice and if so,

subsequent issues on causation and damages. Nothing is to be gained in fracturing

that cause of action into three or four different claims and sets of special issues.

Id. While the general teno r of this passage supports the attorneys’ arguments, we note that the

DTPA was not part of the plaint iff’s case in Sledge

, and that given the Texas Supreme Court’s clear

language in Latham , 972 S.W. 2d at 69, to the extent Sledge implicates Terry’s claims in this case,

it is no longer good law.

-31- acts, her claim was cognizable under the DTPA as well as under the common law of legal

malpractice. As the Texas Supreme Court has held,

Recasting the [plaintiffs’] DTPA claim as merely a legal malpractice clai m would

subvert the Legislature’s clear purpose in enacting the DTPA ) ) to deter deceptive

business practices. If the [plaintiffs] had only alleged that [their att o rney] had

negligently failed to t imely file their claim, their claim would properly be one for legal

malpractice. However, the [plaintiffs] alleged and presented some evidence that [their

attorney ] affirmat ively misrepre sent ed to them that he had filed and was actively

prosecuting their claim. It is the difference between negligent conduct and deceptive

conduct. To recast this claim as one for legal malpractice is to ignore this distinction.

The Legislature enacted the DTPA to curtail this type of deceptive conduct.

Latham

, 972 S.W.2d at 69. Accordingly, the attorneys’ claim that Texas law forbids the fracture of

a legal malpractice cause of action into malpractice and DTPA claims misses the mark; 39 rather, under

Latham , in cases such as this, both causes of action can apply.

The attorneys’ argue that, even assuming their advice was incorrect, there was no evidence

of “false, misleading, or deceptive acts or an unconscionable course of action” sufficient to constitute

a DTPA violation. They claim that since their advice was purely opinion and they did not lie or

mislead Terry on an issue of material fact, the DTPA does not apply. See Douglas

, 987 S.W. 2d at40 The attorney s claim that all of their alleged “misrepresentations” are merely opinions

and, as such, not cognizable under the DTPA. See Douglas , 987 S.W. 2d at 886. In Douglas , the

Texas Supreme Court held that a law firm’s general advice that a settlement agreement would protect

the plaintiffs’ interests was “too vague under the facts of this case to support DTPA liabilit y.” I d.

(“Without any evidence about which interests [the firm] represented would be protected, a jury would

have no standard by which to measure the accuracy of the representation. Accordingly, [plaintiffs’]

evidence constitutes, at most, nonactionable opinion.”). The case at bar, however, could not be more

different. The statement primarily at issue ) ) that the IRS must approach a donor for gift tax before

seeking satisfaction of a tax debt from a donee )) was not a vague, immeasurable opinion but rather

a legal, verifiable fact which the attorney s misrepresented. Further, the failure to disclose argument

hinges on facts that the attorney s uncovered )) which put doubt into their original assessment of the

sisters’ case )) and failed to disclose to Terry and Tracy.

-32- 885-86 (“[The DTPA is] intended to protect consumers against misrepresentations of material fact;

statements of opinion alone are generally insufficien t t o rise t o the level of actionable

misrepresentations under the DTPA.”). Terry, ho wever, points to several acts which she claims

violate the DTPA: failures to disclose, see T EX

. B US

. & C OM

. C ODE § 17. 46(23), unconsci onabl e

conduct, see id. at § 17.50(a)(3), and misrepresentations, see id. at §§ 17.46(5), (7), (12), (23).

Thoug h t his is a close question, we agree with Terry. First, under Texas law, there was

sufficient evidence for the jury to find that the attor neys had misrepresented facts in an effort to

persuade Terry and Tracy to continue the tax fight as their attorneys’ fees accumulated. “Generally,

an act is false, misleading, or deceptive if it has the capacity to deceive an ignorant, unthinking, or

credulous person.” D oe

, 907 S.W. 2d at 479. The attorneys’ statements that any IRS attempts to

collect gift tax from Terry via transferee liabilit y would “stretch[] the gi ft t ax transferee liability

statute beyond recognition” were false and deceptive; in fact, t hey ro se t o t he level of fraudulent

misrepresentations which pushed Terry and Tracy into going to trial rather than settling their suit in

1993. 40 The Texas Supreme Court has previously held similar claims to be cognizable under the

DTPA. S ee Arthur Andersen & Co. v. Perry Equip. Corp. , 945 S.W. 2d 812, 817 (Tex. 1997)-33-

(upholding DTPA violation against accounting firm whose incorrect financial analysi s persuaded

company to acquire an asset which pr o mpt ly went bankrupt) (“The basis of a [DTPA]

misrepresentation claim is that the defendant’s false statement induced the plaint iff to assume a risk

he would not have taken had the truth been known.”).

Second, Terry p o ints to the attorneys’ “failures to disclose” the plethora of evidence, both

factual and legal, which indicated that their original advice may have been wrong. The record shows

that despite compiling evidence indicating that their original advice, at the very least, was dubious,

the attorney s never expressed doubt to Terry and Tracy. To the contrary, they stated that the

“documents would speak for themselves,” and that, if anything, the equities, rather than the law, were

against them. The failure to disclose many facts material to the sisters’ settlement decision constitutes

further grounds for upholding the jury’s finding of a DTPA violation. See Latham

, 972 S.W. 2d at

69 (“It is the difference between negligent conduct and deceptive conduct.”).

Finally, as the district court held, there was evidence that the attorney s were “using the sisters

in an effort to gain advantage for other clients [i.e. the sisters’ mother] in other cases [i.e. a potentially

$17 millio n lawsuit against Parker].” None of t he at t o rneys ever disclosed the potential conflict

between the two representations )) if Betty (and the Hunter firm) were to recover $17 millio n from

Parker, his funds would undoubtedly have been exhausted, making Terry and Tracy’s liabilit y for the

tax almost certain—to Terry or Tra c y, and this failure to disclose an adverse representation is a

deceptive act cognizable under the DTPA. Clearly, this was misleading and deceptive conduct that

the jury could have inferred influenced the attorneys’ decision to advise Terry and Tracy not to settle

in continued reliance on their 1985 advice.

Accordingly, we find sufficient evidence of “deceptive acts” cognizable under the DTPA to-34-

uphold the verdict.

B.

The attorney s next argu e t hat any violation of the DTPA was not a “producing cause” of

Terry’s injuries. “A producing cause is a substantial factor which brings about the injury and without

whi c h the injury would not have occurred.” D oe

, 972 S.W.2d at 481 (emphasis added); see also

Haynes & Boone v. Bow ser Bouldin, Ltd.

, 896 S.W. 2d 179, 181 (Tex. 1994) (“Producing cause is

a n efficient, exciting, or contributing cause which in the natural sequence, produced injuries or

dam age complained of, if any.”). Plaintiffs need not show forseeability to prove producing cause.

Doe , 972 S.W. 2d at 481

.

The attorney s argue that there was no evidence that the sisters could have settled their tax

liability at the mediation, that Terry’s damages arise from her failure to “set aside a reserve” to pay

her taxes, and that the damages arise from Terry’s failure to ap peal her t ax liability to the Fifth

Circuit. However, as described herein, there was substantial evidence from which the jury could have

inferred that the IRS would have settled in 1993 for $1-$1.2 millio n. Further, there is substanti al

evidence (especially in the testimony of Mike Cook) that any appeal of the underlying tax liabilit y to

the Fifth Circuit would have been fruitless. Accordingly, there is sufficient evidence to uphold the

jury’s determination that the attorneys’ deceptive conduct was a “substantial factor” in causing

Terry’s injuries.

C.

The attorney s argue that if they violated the DTPA, they did not do so “knowingly,” and are

t hus no t liable for DTPA additional damages. “Knowing” violations connote “actual awareness,”

which “means that a person knows that what he is doing is false, deceptive, or unfair. In other words,-35-

a person must think to himself at some point, ‘Yes, I know this is false, deceptive, or unfair to him,

but I’m going to do it anyway.’” St. Paul Surplus Lines Ins. Co., Inc., v. Dal-Worth Tank Co., Inc.

,

974 S.W. 2d 51, 53-54 (Tex. 1998). Direct evidence of “actual awareness” is unnecessary, as it “may

be inferred when objective manifestations indicate that a person acted with actual awareness.” Id. ;

see also Etheridge v. Oak Creek Mobile Homes, Inc.

, 989 S.W. 2d 412, 418 (Tex.App. )) Beaumont

1999, no pet. h.) (“Actual awareness may be inferred from the circumstances.”).

After a review of the evidence, the district court decided that the defendants knew that their

advice was wrong at latest by 199 3 (before the mediation and Tax Court trial). Accordingly, the

distric t court ruled that “[b]ased on the evidence, the jury could reasonably have decided that the

continuation of the battle was to vindicate, at any cost, Hunter’s original advice without regard to the

best interests of the sisters and that Defendants’ conduct was in knowing violation of the sisters’ best

interest.”

After thoroughly reviewing the record, we do not share the district court’s certainty on this

issue. While there was some evidence presented that the attorneys ) ) e specially O’Do wd ) ) uncovered

legal and factual evidence which called Hunter’s original assessment into doubt, nothing was

presented from which the jury could infer that the attorneys were aware of their misstatement s o f

legal fact, l e t alone that those misstatements would persuade Terry and Tracy not to settle. The

district court correctly determined that all that is necessary is that evidence be produced from which

the jury could have inferred actual knowledge. See St. Paul Surplus Lines Ins. Co., Inc. , 974 S.W.

2d at 54. However, whether the chain of inferences suggested by the district court is supported by

the record is a different, and substantially more difficult, question.

As described below, see supra at part V.A., b ecause t he district court failed to require-36-

sep arat e findings on actual damages for the DTPA violation and the malpractice and breach of

fiduciary duty counts, DTPA additional damages are unavailable as a matter of law. Accordingly, we

need not decide whether those damages are supported, as a factual matter, by the record.

VI.

The attorney s also dispute the district court’s all o wance and calculation of damages. We

review legal issues, such as the availabilit y of a specific t ype of damages, d e novo

. S ee Nero v.

Industrial Molding Corp.

, 167 F.3d 921, 929 (5 th Cir. 1999). Factual issues, such as the computation

of damages, are revi ewed for cl ear error. S ee Barrett v. United States

, 100 F.3d 35, 38 (5 th Cir.

1996).

A.

The attorney s argue t h at because the jury charge did not separate the amount of actual

damages from the DTPA violations from the other causes of action, DTPA additional damages are

not recoverable. S ee Commonw ealth Mortgage Corp. v. First Nationw ide Bank

, 873 F.2d 859, 868

(5 th Cir. 1989) (holding that since “[t]he compensatory damage i nterrogatory did not ask the jury to

apporti on its damages according to specific theories of liabilit y

. . . we cannot determine whether the

jury made the findings necessary to support the award of additional damages [and] reverse that

portion of the district court’s judgment”). Terry responds that (1) any challenge to the jury charge

by the attorneys on appeal was waived by the lack of a formal objection at trial, and (2) even if the

attorneys have not waived the issue, Commonw ealth Mortgage is inapposite.

In Commonw ealth Mortgage

, we held that since the trial court failed to separate the amount

of actual damages awarded on a DTPA claim from those awarded on other tort claims and a breach

of contract claim, the DTPA additional damages were not recoverable because the jury instruction41 “Additional damages” awarded under the DTPA can be no more than twice t he

amount of actual damages resulting from a DTPA violation. See T EX

. B US

. & C OM

. C ODE A NN . §

17.50(b)(1).

-37- did “not require the DTPA [additional] damages to be independent of any contract damages.” I d. at

869. This holding was, at least in part, based on the observation that “[u]nder Texas law, exemplary

damages may not be awarded for a breach of contract.” I d. at 868. More generally, we held that the

jury instructions, in failing to separate liabilit y for actual damages for the various torts and the breach

of contract claim, incorrectly “implie[d] that the additional damages need only be proporti onal to the

entire award of actual damages

. . . , and not specifically to the DTPA award.” 41 I d. at 869.

Therefore since we could not determine “whether the jury made the findings necessary to support the

a ward o f additional damages,” i d.

, we reversed the district court’s award of DTPA additional

damages.

The jury charge in this case suffers from many of the same defects present in Commonw ealth

Mortgage. The jury answered “yes” to all three questions on liabilit y, but was only asked to assess

the damages generally, not relative to each count. Since the jury was not asked to allocate the actual

damages between t h e three counts, and was only asked to consider “additional damages” for the

DTPA count, it is impossible to determine whether the additional damages were calculated correctly.

If, for example, th e DTPA act ual damages were only $100 and the rest of the large sum of actual

damages was due to the tort claims, the “additional damages” available under the DTPA would only

be $200, far less than the amount awarded by the jury. As a result, as in C ommonw ealth Mortgage

,

here “we cannot deter mine whether the jury made the findings necessary to support the award of

additional damages.” Id.

Terry attem

pts to distinguish Commonw ealth Mortgage with the argument that, in that case,-38-

the count other than the DTPA violation was breach of contract, for which additional damages were

unavailable. However, in H adley v. VAM P.T.S., 44 F.3d 372 (5 th Cir. 1995), we considered a case

where the jury separately found compensatory and punitive damages on a Title VII count, and found

punitive damages on an intentional inflict ion of emotional distress count. We held that since there

was no specific finding of an amount of a ct ual damages on the intentional infliction count, and “a

finding of actual damages is a prerequisite to receipt of punitive damages,” punitive damages for

intentional infliction were precluded. Id. at 375. In H adley , even though additional damages were

available under both causes of action upon which t he jury found actual damages, since they were

available under a different standard, separate findings of an amount of actual damages were required.

See id. at 375.

Terry argues that because the standard for the award of DTPA additional damages, i.e. that

the violation be committed “knowingly,” is substantially higher than the standard for the imposition

of punitive damages under either of the common law torts, any error in failing to secure a separate

finding of actual damages on the DTPA coun t was harmless. We disagree. The standard for the

imposition of punitive damages in negligence cases )) gross negligence, see Transportation Ins. Co.

v. Moriel

, 879 S.W. 2d 10, 19-23 (Tex. 1994), differs in theory and practice from the “knowingly”

standard for the imposition of additional damages under the DTPA. At one time, the Texas Supreme

Court had held that “the terms gross negligence, ‘knowingly,’ ‘willful,’ and intentional . . . lie on a

continuum with gross negligence being the lowest mental st at e and intentional being the highest.”

St. Paul Surplus Lines Ins. Co.

, 974 S.W. 2d at 53 (citing Luna v. North Star Dodge Sales, Inc.

, 667

S.W. 2d 115, 118 (Tex. 1984)). However, in S t. Paul

, the Texas Supreme Court noted that after this

“continuum” was identified in Luna

, “the standard for recovery of exemplary damages

. . . has since42 “Extreme risk is a function of both the magnitude and the probability of the anticipated

injury to the plaintiff..

. . [T]he ‘extreme risk’ prong is not satisfied by a remote possibility of injury

or even a high probability of minor injury, but rather ‘the likelihood of serious injury’ to the plaintiff.”

Moriel , 879 S.W. 2d at 22 (citation omitted).

-39- been raised.” Id.

To commit a “knowing” violation of the DTPA, an individual must decide to take a given

course of action with the knowledge that the path is “false, deceptive, or unfair” to another. S ee St.

Paul Surplus Lines Ins. Co.

, 974 S.W. 2d at 53. By contrast, one is “gro ssly negligent” when

“[s]ubjectively, the defendant [has] actual awareness of the extreme risk creat ed by his or her

conduct,” and “[o]bjectively, the defendant’s conduct [involves] an extreme degree of risk.” M oriel

,

879 S.W. 2d at 22. 42 Accordingly, while it is not altogether clear where the two standards lie on the

post- Moriel “continuum” in their state of mind element, it is clear that recovery under the respective

standards is based on different evidence. Recovery for “gross negligence” is based on the fact that

the defendant is actually aware that his or her conduct created an extreme degree of risk that the

plaint iff would be seriously injured. Recovery for “knowing” violations of the DTPA is based on the

fact that defendant is actually aware that his conduct was “false, deceptive, or unfair.” Accordingly,

a “knowing” violation of the DTPA does not necessarily connote “gross negligence”; conduct can

be “false, deceptive, or unfair” and still not create an “extreme degree of risk of serious injury to the

plaintiff.”

We thus cannot agree with the district court that it did not need to separate the actual damage

award on the DTPA count from the actual damage award for the negligence and breach of fiduciary

duty counts. As in C ommonw ealth Mortgage and Hadley

, we are here unable to evaluate the

propriety of the DTPA additional damage award because it is unclear what proporti on of the actual43 Terry’s argument that the attorney s waived their Commonw ealth Mortgage challenge

to the jury charge by failing to object on that ground in the district court is unavailing. As we held

in Hadley

, “[t]he defendant has no duty to ensure that the plaintiff has furnished jury questions

covering all fact issues necessary to his cause of action. Texas law is clear that a plaintiff must allege,

prove and secure jury findings on the existence and amount of actual damages sufficient to support

an award of punitive damages.” H adley

, 44 F. 3d at 375 (citing Nabours v. Longview Sav. & Loan

Ass’n

, 700 S.W. 2d 901, 903 (Tex. 1985)); see also Commonw ealth Mortgage

, 873 F.2d at 869 (“An

appellant cannot be held accountab le fo r the failure of an appellee to secure separate jury findings

upon which an accurate judgment could be based.”).

44 The attorney s argue that since attorneys’ fees are available under the DTPA but not

for malpractice claims, if we reverse the finding of DTPA additional damages we must also reverse

the granting of attorneys’ fees. This is not the case, because even though we here reverse the DTPA

additional damages finding, DTPA actual damages still exist.

-40- damage award was attributable to the D TPA violation rather than the common law torts. 4 3

Accordingly, we vacate the district court’s award of additional damages to Terry. 44

B.

In calculating actual damages, the jury assessed Hunter individually at fault for 60% of the

damages and the firm at fault for 10%. Hunter and the firm dispute the imposition of damages on

both entities, characterizing this action as “double counting.”

We reject this argument. As a threshold matter, neither Hunter nor the firm ever previously

challenged the submission of both entities to the jury as potentially liable parties, and accordingly we

review only for plain error. S ee Tompkins v. Cyr , 202 F.3d 770, 784 (5 th Cir. 2000) (holding that a

double recovery challenge was “essentially [a n ] objection[] to the jury instructions” and that the

failure to object to the instructions on that ground “limits the defendants’ ability to appeal on these

grounds”). Reviewing for plain error, we find none. Despite the fact that Hunter is the firm’s sole

shareholder and, under basic corporate law principles, the only o ne liable for the firm’s debts, s ee

Robert C. Clark, C ORPORATE L AW § 1.2.1 (1986 ), Hunt er and the firm are clearly separate legal-41-

entities whose involvement in the course of events at issue in this case, and corresponding level of

culpability, differ. Accordingly, the district court properly submitted both entities to the jury and

allowed the factfinder to decide their respective levels of guilt, if any.

C.

The attorney s object to the award of $97,500 in actual damages to Terry for the reasonable

value of her time spent “attempting to resolve the situation.” The record reveals that this element of

damages was thrown out by the trial judge during the charge conference, only to mysteriously appear

in some copies of the jury charge, including the one read and presented to the jury. During the onthe-record objections to the jury charge, which occurred while the jury was deliberating, the following

colloquy occurred:

The Court: With regard to the damage questions, I think there’s one in there that

was in one of the earlier drafts. We were going ) ) I think it’s the one

with regard to the time, trouble and nuisance of them trying to recover

the money.

Plaint iffs: Right.

The Court: We took that out, and all of a sudden it appe ared again in the last

draft, the one I read to the jury. I don’t know where it came from.

My operator-com puter doesn’t know where it came from. Because

we remember specifically, I think, draft three or four don’t [sic] have

it in it. It appeared in the last one. So that’s one that isn’t supposed

to be there.

Plaint iffs: I don’t believe The Court read that to the jury, did they?

The Court: I think I did, but if we get something, I’ll have to deal with that then.

It didn’t appear in the other copies and may not appear ))

Defendants: It wasn’t in my copy.

Plaint iffs: It was not in my copy.45 Terry’s brief on appeal completely neglects to address the attorneys’ arguments on

this ground.

-42- The Court: Where it came from, we don’t know what happened in the computer.

But that’s the one they have. We will just have to )) that is an error

that I have seen, so it’s not supposed to be there.

The jury, which was instructed orally and in writing to consider such damages, awarded Terry and

Tracy $97,500 each for the time spent correcting the problems caused by the attorneys. Inexplicably,

however, despite the statements above showing its intent to eliminat e this element, the district court

entered judgment in that amount for each sister.

The attorney s argue that because the jury charge presented to them before closing arguments

did not contain this element of potential damages, entering judgment for them violates due process

because their lack of notice made them unable to argue the issue in closing arguments. 45 We agree.

It is well-settled that litigants have due process rights to fully litigate each issue. S ee du Pont v.

Southern Nat’l Bank of Houston, Texas

, 771 F.2d 874, 881 (5 th Cir. 1985). While that right in civil

cases does not necessarily include the right to make a closing argument, cf. In the Matter of Generes

,

69 F.3d 821, 825 (7 th Cir. 1995) (“[Plaintiff has] supplied no authority for the proposition that closing

arguments are a constitutional right in civil cases and nor have we been able to find any.”), if granted

the right to make closing arguments they must be afforded some procedural protections. Having the

correct version of the jury instructions in front of them, so as to have an opportuni ty to comment on

each part of those instructions should they so choose, m ust be protected. S ee Jones v. Southern

Pacific R.R., 962 F.2d 447, 451 (5 th Cir. 1992) (“The purpose of [Rule 51] is to permit counsel to

argue effectively on the evidence and to know in advance the guiding principles under which closing

argument should be made.”); Wright and Mi ller, F E DERAL P RACTICE AND P ROCEDURE

, Civil 2d §46 See DCD Programs, Ltd. v. Leighton

, 90 F.3d 1442, 1449 (9 th Cir. 1996) (“The

parties’ tax liabilit

ies resulted from the ineluctable requirements of the Internal Revenue Code, rather

than from any wrongful conduct on the part of defendants.”); Stone v. Kirk , 8 F.3d 1079, 1092 (6 th

-43- 2552 (Fed. R. Civ. P. 51 “requires the court to inform counsel of its proposed action on the requested

instructions before counsel make their arguments to the jury. This is intended to permit counsel to

argue intelligently based upon the evidence, within the applicable law as the court will give it to the

jury, and it serves the additional purpose of alerting counsel to make appropriate objections following

the charge.”).

Here, even though the district court told the parties that damages for the “reasonable value

of the time spent

. . . correcting or attempting to correct the problems caused b y the Defendants’

conduct” would not be included in the verdict form or the jury charge, and admitted that inclusion

was an “error” and that it “wasn’t supposed to be there,” the court entered damages for $97,500 on

this ground. We vacate this particular award.

D.

The most significant award of actual damages by the jury was in the form of “interest

differential,” i .e. the difference between the interest earned by Terry from the $1.7 millio n while she

had it and the interest charged by the IRS. Terry argues that because she would have paid the tax

but for the attorneys’ actions, the loss represented by interest differential is a direct consequence of

their misconduct. The attorneys argue that such damages are not recoverable as a matter of law.

Our research reveals that this is an issue of first impression in this, or any, court. The parties

cite two lines of somewhat analogous cases. First, courts have forbidden recovery of tax interest (all

interest paid to the IRS, rather than “interest differential”) as part of the “actual damages” available

for securities fraud claims under Rule 10b-5. 46 Second, courts are split over whether tax interest isCir. 1993) (“Neither are the [plaintiffs] entitled to recover the interest they had to pay on their back

taxes, at least insofar as the IRS charged a market rate of interest.”); Freschi v. Grand Coal Venture

, 767 F.2d 1041, 1051 (2d Cir. 1985) (“The interest and penalties were not really a damage suffered

by

. . . [plaintiff], but a return by him of what would otherwise be a windfall resulting from his

opportunity to use money to which he was not entitled.”).

47 Compare Ronson v. Talesnick

, 33 F. Supp. 2d 347, 352-53 (D.N.J. 1999) (allowing

recovery); Dail v. Adamson

, 570 N.E. 2d 1167, 1169 (Ill. App. Ct. 1991) (same); Jobe v. Int’l Ins.

Co.

, 933 F. Supp. 844, 860 (D. Ariz. 1995) (same), w ithdrawn as settled 1 F. Supp. 2d 1403 (1997)

with Eckert Cold Storage, Inc. v. Behl , 943 F. Supp. 1230, 1235 (E.D. Cal. 1996) (forbidding

recov ery); Alpert v. Shea Gould Climenko & Casey , 160 A.D. 2d 67,72 (N.Y. App. Div. 1990)

(same).

-44- recoverable in claims of accountant malpractice. 47 Courts that forbid recovery of tax interest do so

under the rationale that it would be “double recovery”: the plaint iff reaped the benefits of having the

money for the requisite period and would also be reimbursed for the interest charged by the IRS for

having the money during that period. By contrast, those courts that allow recovery of tax interest

assert that it is necessary to make the plaintiff whole.

We hold that, in this particular case, “interest differential” is a recoverable form of damages.

First, unlike recovery of all t ax int erest paid to the IRS, recovery of “interest differential” is not

double recovery. If Terry received full reimbursement of interest paid to the IRS, she would keep

the interest earned on the $1.7 millio n and not have to pay the IRS for having control over the money

unlawfully. That would, essentially, be double recovery. By contrast, asking for “interest

differential” is not asking to keep the money earned on the $1.7 millio n while possessing it unlawfully;

rather, it is asking to pay only the interest earned while possessing it unlawfully and not be penalized

for conservative investing.

Second, state law governs the availability of damages, see Jackson v. Johns-Manville, 750

F.2d 1314, 1325 (5 th Cir. 1985) (“[E]nsuring the availabilit y of compensation for injured plaint iffs is-45-

predominately a m atter of state concern and, in the absence of congressional enactments, state law,

both as to the extent of compensation available and punitive damages, must apply.”), and we believe

that under the Texas law at issue in this case, interest differential damages are recoverable. First, the

DTPA was enacted “to provide plaint iffs a remedy where the common law fails” and “is to be liberally

construed and applied.” Latham , 972 S.W. 2d at 68-69. “Actual damages” recoverable under the

DTPA include all “those recoverable at common law,” id., and the DTPA envisions compensating

plaint iffs for “the total loss sustained as a result of the deceptive trade practice

. . . includ[ing] related

and reasonably necessary expenses.” H enry S. Miller Co. v. Bynum

, 836 S.W. 2d 160, 162 (Tex.

1992); see also Douglas

, 987 S.W. 2d at 885 (discussing the “importance of awarding suf ficient

damages to ensure that the plaint iff is made whole”); Arthur Andersen

, 945 S.W. 2d at 816 (“The

amount of actual damages recoverable is the t o t al lo ss sustained as a result of the deceptive trade

practice.”) (citations omitted). A similar result is apparent under Texas legal malpractice law, which

is “in keeping with the well-established principle that a plaint iff should receive an amount of damages

sufficient to make her whole.” D ouglas

, 9 87 S.W. 2d at 885. Without “interest differential”

damages, Terry cannot be made whole; accordingly, under Texas law, they should be available.

The only limitation on consequential damages av ailable under the DTPA and Texas

malpractice l aw is that they be “foreseeable” and proven with “reasonable certainty.” S ee Arthur

Andersen, 945 S.W. 2d at 816 (asserting that damages must be “directly traceable to the wrongful

act and result from it”); Higbie Roth Construction Co. v. Houston Shell & Concrete

, 1 S.W. 3d 808,

814 (Tex.App. )) Houston [1 st Dist] 1999, ) (“Damages that are too remote, too uncertain, or purely

conjectural are not recoverable.”). Given that Hunter was well-aware of the sisters’ plans to invest

conservatively, this was clearly foreseeable. Further, Terry testified that she invested her money-46-

primarily in certificates of deposits, money market account s, and annuities, with some invested in

mutual funds and bonds. She testified to the exact amount of interest she earned on her investments,

and to the exact amount charged by the IRS. Tom Glass, a certified public accountant, testified that

Terry’s investments, which earned approximately 4.5% interest, were those of a reasonably prudent

investor. Reed Mendelson, the sisters’ investment advisor (and a defense witness in this case),

testified similarly. All told, the testimony told the jury exactly how much interest Terry had earned

on the $1.7 million and exactly how much interest the IRS charged her for holding on to it. This is

sufficient “reaso nable cert ainty” to uphold the damage award under the DTPA and Texas legal

malpractice law.

VII.

Finally, the attorney s make several arguments concerning the evidence they were allowed to

introduce, and the general conduct of the trial. They assert that because of a multitude of errors, the

district court erred in denying their motion for a new trial.

“Courts do not grant new trials unless it is reasonably clear that prejudicial error has crept into

the record or that substantial justice has not been done, and the burden of showing harmful error rests

on the party seek ing the new trial. Ultimately the motion invokes the sound discretion of the trial

court, and appellate review of its ruling is quite limited.” S ibley v. Lemaire , 184 F.3d 481, 487 (5 th

Cir. 1999). With this in mind, we review the district court’s rulings for abuse of discretion. S ee id.

A.

The attorney s first complain of the district court’s failure to grant a continuance before trial.

Our review of this decision is circumscribed. As we have previously held,

When the question for the trial court is a scheduling decision, such as whether a48 As Terry notes, the district court did not sua sponte order the substitution of counsel

in this case; rather, Dobson requested it and, in response, the court granted leave to withdraw.

49 Given that the duty of confidentiality unquestionably forbade accep tance of thi s

settlement offer, the defense attorney correctly determined that withdrawal from all aspects of this

joint representation was his only option. C f. Brennan’s Inc. v. Brennan’s Restaurants, Inc.

, 590 F.2d

169, 172 (5 th Cir. 1979) (“The obligation o f an attorney not to misuse information acquired in the

co urse o f representation serves to vindicate the trust and reliance that clients place in their

at t o rneys.”). Further, given that the plaintiffs’ attorneys knew that acceptance of the offer would

constitute an ethical violation , pro posing the offer may have itself violated the ethical rules. S ee

Model Rules of Professional Responsibility, Canon 9 (“A lawyer should avoid even the appearance

of professional impropriety.”).

-47- continuance shoul d be granted, the judgment range is exceedingly wide, for, in

handling its calendar and determining when matters should be considered, the district

court must consider not o nly t he facts of the particular case but also all of the

demands on counsel's time and the court's. We will not substitute our judgment

concerning the necessity of a continu ance for t hat of the district court unless the

complaining party demonstrates that it was prejudiced by the denial.

HC Gun &

Knife Show s, Inc. v. City of Houston , 201 F.3d 544, 549-50 (5 th Cir. 2000).

The attorney s claim that a continuance was warranted for two reasons. First, thirty-nine days

before trial, counsel for all of the attorney s in a joint defense, Casey Dobson, was granted leave to

withdraw from the case and replaced by new counsel. 48 Dobson withdrew because representation of

all of the attorn eys in a jo int defense involved conflicts of interest. Those conflicts were exposed

when, shortly before trial, Terry and Tracy presented a settlement offer to Jamison Dupuy, then also

a defendant in the case. The settlement offered to release Dupuy from the case not in exchange for

a sum of money, but rather in exchange for his o bt aining and presenting to Terry and Tracy’s

attorney s a defense file which could harm the other at t o rneys. Once the settlement offer was

received, what appeared to be in Dupuy’s best interests was contrary to those of the other attorneys.

Despite the fact that the particular problem which sparked Dobson’s withdrawal was created

by questionable tactics on the part of the sisters’ attorneys, 49 we do not agree that a continuance was50 The trial court reasoned that “Trial settings and deadlines have been extended

numerous times, making this case one of the oldest on the undersigned’s docket.

. . . Because of the

Court’s criminal duties and docket of civil cases, if this case is postponed the first time available for

a trial of this length is late fall [five months from now]. Because the Court does not wish to postpone

the resolution of this matter any longer, the Motion for Continuance is DENIED.”

51 Following the caselaw mentioned above, the court asserted that “[p]la intiffs have failed

to provide any evidence showing that the IRS charged them a higher rate of interest than the rate they

should have earned through appropriate investments.” (emphasis in original).

-48- warranted on these grounds. Given that one attorney was representing a pletho ra o f defendants,

whose interests were clearly separable, it should not have been surprising that conflicts of interest

arose. S ee generally Ronald E. Mallen & Jeffrey M. Smi th, L EGAL M ALPRACTICE § 29.9 (4 th ed.

1996) (“The litigation attorney is susceptible to t ho se conflicting interests indigenous to the

representation of mult iple parties. The consequences of such representation can be disqualification,

discipline, loss of compensation and malpractice liabilit y.”). For example, we agree with Terry that,

given that Hunter provided the init ial advice in this case, each of the other att orneys could have

brought a cross-claim for indemni t y o r co nt ribution against Hunter. Additionally, given that in

accordance with Texas law, see T EX

. C IV

. P RAC

. & R EM

. C ODE §§ 33.001, 33.003, damages would

be awarded in proporti on to percentage of fault, the potential for conflicts of interest in this case was

obvious. Given that the conflict of interest exposed here was not unpredictable, and that the time

remaining until trial, thirty-nine days, was not extrao rdinarily brief, the district court did not err in

failing to grant a continuance on this ground. 50

Second, the attorney s argue that a continuance should have been granted to give t hem

additional time to rebut the sisters’ interest differential theory. The district court initially granted the

attorneys’ motion for summary judgment, asserting that interest due to the IRS was not a recoverable

form of damages. 51 Shortly thereafter, Terry filed a motion fo r reco nsideration, and Tracy filed a-49-

motion to reconsider or to clarify. Based on these motions, the district court decided to “allow

testimony with regard to the rate of returns with regard to

. . . t he difference between the rate of

return and the interest rate charged by the IRS.” The two rulings are not entirely contradictory: the

first granted summary judgment on the issue of whether all interest owed the IRS was recoverable,

while the second denied summary judgment on whether “interest differential” was recoverable.

The attorney s claim that failing to grant a continuance was error, because (1) once the court

granted partial summary judgment on this ground, they allowed their expert witness t o go o n

vacation, and accordingly at trial they were without the testimony of their expert witness, and (2) they

had insufficient notice to defend themselves against this particular claim. However, as Terry notes,

the attorney s wer e well aware that both plaintiffs had filed motions for reconsideration which

remained pending, and thus the issue remained alive. “A partial summary judgment order . . . is not

a final judgment but is merely a pre-trial adjudication that certain issues are established for trial of the

case. Such an order is interlocutory in nature, is subject to revision by the district court, and has no

res judicata effect.” F.D.I.C. v. Massingill

, 24 F.3d 768, 774 (5 th Cir. 1994). Furthermore, if the

defendants wanted to dispute the interest differential theory, they had nine days between the time the

co urt decided to entertain the theory and the time they began presentation of the defense case t o

prepare. Accordingly, while the partial reversal of the earlier summary judgment motion made it

more difficult for the attorneys to defend themselves, there was no undue prejudice.

B.

The attorney s next co mplain of the district court’s exclusion of the Tax Court opinion,

specifically its finding that Terry was “not credible,” as evidence at the tri al. The district court52 Fed. R. Evid. 403 provides:

Alt ho ugh relevant, evidence may be excluded if its probative value is substantially

outweighed by the danger of unfair prejudice, confusion of the issues, or misleading

the jury, or by considerations of undue delay, waste of time, or needless presentation

of cumulative evidence.

-50- excluded the opinion under Federal Rule of Evidence 403, 52 claiming that introduction was minimally

probative and would unduly confuse the jury. We review the district court for abuse of discretion,

and as we have previously held, “Rule 403 determinations will not be disturbed on appeal absent a

showing of clear abuse.” Curtis v. M& S Petroleum , 174 F.3d 661, 673 (5 th Cir. 1999).

The porti on of the Tax Court opinion that the attorney s wanted the jury to hear included the

following:

We did not find the daughters t o be credible witnesses. [Terry ] did not offer oral

testimony, but her testimony was offered by deposition and affi d avit. She also

answered interrogatorie s

. There are significant inconsistencies between (1) her

testimony and her answers to interrogatories and (2) other evidence in this case. W e

believe that, in various important respects, [Terry] has failed to te l l the truth

. . . . Accordingly, we have accorded [Terry’s] testimony very little weight.. . . Tracy did

testify orally. In important respects, her testimony was vague and indefinite. She was

contradicted by other witnesses. We do not have much confidence in her testimony,

and, accordingly, we give it little weight.

Streber

, 70 T.C.M. at 1611 (emphasis added). The attorneys argue that they should have been able

to show the jury that the tax court judge found Terry and Tracy incredible, and they assert that

exclusion deprived them of a fair trial.

We disagree. The district court excluded the opinion because it felt the opinion would

confuse and/or mi slead t he jury. This is undoubtedly true. The tax court found Terry’s written

testimony contradictory, and stated that Terry “failed to tell the truth” even though Terry did not

testify at the tax court trial and was absent for the entire proceeding; rather, she was in the midst of53 The attorney s argue that the tax court opinion was the only evidence by which it could

challenge Terry’s credibility. This is untrue. If t he tax court found inconsistencies with Terry’s

testimony in her original deposi t ion and her answers to interrogatories, the attorney s were free to

question Terry about these inconsistencies when cross-examining her at trial. In fact, to some extent,

the attorney s did this. Accordingly, the issues of Terry’s credibility were before the jury, which chose

to believe her.

-51- a high-risk twin pregnancy and was told by her doctor to av oid long trips. The district court was

under st andably wary that the jury would find the tax court to have some particular expertise in

judging credibility, and that the opinion would mislead the jury into finding Terry incredible in this

case. 53

Moreover, as the district court noted, we reversed the Tax Court’s opinion in part, finding

that Terry and Tracy relied on Hunter’s advice. See Streber , 138 F.3d at 221. Introduction of the

Tax Court opinion would have inevitably led to arguments about our partial reversal of the Tax

Court, which is legally complicated. The trial judge framed the problem concisely when he stated that

“I think there’s some real problems in dealing with trying to explain or trying to deal with what the

5 th Circuit did with those issues.” Admitting the Tax Court opinion would have confused the issues

in that

[I]n attempting to dispute or explain away the evidence thus offered, new issues will

arise as to the occurrence of the instances and t he similarity of conditions, new

witnesses will be needed whose cross examination and impeachment may lead to

further issues; and thus the trial will be unduly prolonged.

Plemer v. Parsons-Gilbane

, 713 F.2d 1127, 1139 n.11 (5 th Cir. 1983) (citing 2 Wigmore, E VIDENCE

§ 443 at 528-29). In reading the Tax Court opinion, it is unclear how its judgment on Terry and

Tracy’s credibility effected the outcom e. Its judgment that the gift was made in 1980 was based

almost exclusively on the documents presented and the testimony of Bradish. While unclear from the

opinion, it appears that the sisters’ credibility affected only the Tax Court’s imposition of penalties,54 The attorney s rely primarily on Transcraf t, Inc. v. Galvin, Stalmack, Kirschner &

Clark

, 39 F.3d 812, 818-19 (7 th Cir. 1994), where the Seventh Circuit held that a district court abused

its discretion in refusing to admit a trial transcript of a trial in a malpractice case which judged the

conduct of the attorney s who participated in the trial. The court there held that “use of the transcript

of the underlying trial is not only routine in legal malpractice suits; it is also far superior to having the

participants in the trial testify to their recollections; and its admissibilit y for this purpose, that is, for

establishing the strength (or weakness) of the plaint iff’s case, the case he claims the lawyer botched

to h i s detriment, cannot be questioned.” I d. H owever, there is a tremendous difference between

admitting the transcript of the underlying trial, which can help the jury to evaluate the attorneys’

conduct for themselves, and admitting a judicial opinion resulting from that trial, which is by necessity

only a summary of that trial and fraught with legal judgments which the layman might only partially

understand. The introductio n o f the Tax Court opinion, therefore, would have been far more

problematic from a “confusion of the issues” standpoint than introduction of a trial transcript.

-52- which we reversed on appeal. As we there noted, “[t]he subsidiary facts relating to [the land deal]

were complex, largely undisputed, and not materially affected by the Tax Court’s assessment of the

sisters’ lack of credibility.” S treber

, 138 F.3d at 223. The district co urt felt that explaining our

partial reversal, which would be necessitated by admitting th e Tax Court opinion, would create

problems for the jury, reasoning that “I think it creates issues for my trying to explain, for anybody

trying to explain what the 5 th Circuit court actually did

. . . with the laymen that are sitting here [and]

going to be dealing with that.” This reasoning is plausible, and thus the ruling of the district court

was not an abuse of discretion. 54

We note that, if probative at all, the exclusion of the Tax Court opinion helped the attorney s

as much as it hurt them. Despite the fact that the Tax Court judge (who did not hear testimony from

Terry) found Terry incredible, the tax opinion shows that if Hunter had done a sufficient investigation

into the facts of the case (by, for example, interviewing Bradish and collecting all the documents) and

the Texas law of gifts, he would have not advised Terry and Tracy as he did. Reading the Tax Court

opinion, one does not get the feeling that the sisters had a very good chance of success; rather, the

Tax Court saw this as an easy case in deciding that the attorneys’ advice was wrong. Therefore, if55 The attorney s claim that Reagan’s testimony was a violation of lo cal rules, which

provide that “[a]ll motions for an award of attorney s shall be filed and served no later than fourteen

(14) days after entry of judgment pursuant to Rule 54 of the Federal Rules of Civil Procedure.” W .D.

-53- the jury would have understood the entire Tax Court opinion, as the attorney s posit, adm ittance

would have made liability more, rather than less, likely.

C.

The attorney s also argue that the district court’s allowing Tracy’s attorney

, Brad Reagan, to

describe how his attorneys’ fees were calculated to the jury warranted a mistrial. At trial, Reagan

called himself as a witness and gave testimony as to how much money his client had pa id him, the

difference between p aying a lawyer hourly or based on a contingent fee agreement, and the

qualifications of

himself and his staff. He testified as such because “reasonable and necessary”

attorneys’ fees are available as damages for violations of the DTPA, see T EX

. B US

. & C OM

. C ODE

A NN

. § 17.50(d), and, according to Reagan, it was his normal method of “proving up” attorneys’ fees

under that statute.

The DTPA allows the recovery of “reasonable and necessary” attorneys’ fees, see id.

, and “it

is the province of the jury to determine the reasonable value of an attorney’s serv ices.” Brown v.

Bank of Galveston

, 930 S.W. 2d 140, 145 (Tex.App. )) Houston [14 th Dist.] 1996), aff’d 963 S.W.

2d 511 (Tex. 1998); see also Arthur Anderson

, 945 S.W. 2d at 819 (“ [T]he jury must decide the

question of attorney’s fees specifically in light of the work performed in the very case for which the

fee is sought.”). Since “[i]n actions under the DTPA, reasonableness of the fee claimed must be

established by evidence,” Leggett v. Brinson

, 817 S.W. 2d 154, 157 (Tex.App. )) El Paso 1991,

n.w.h.), Reagan was merely attempting to present the jury with evidence by which they could

adequately evaluate the claim for reasonable attorneys’ fees. 55T EX

. R. CV-7j. However, since under the DTPA the jury is to determine what attorneys’ fees are

“reasonable,” this rule does not apply.

56 In terms of the fairness of the trial, it is irrelevant that the improper comments were

made by Tracy’s attorney and that she, and her attorney

, have settled and are not part of the appeal.

Since the claims were tried together, the attorneys’ case against Terry was equally prejudiced, if at

all, by the improper comments.

-54- Eventually, the testimony was cut off, and the parties all agreed to stipulate on attorneys’ fees

subject to the trial judge’s approval. Nonetheless, the attorneys are correct that, while on the stand,

Reagan made some inappropriate remarks, including that his firm takes very few malpractice cases

and that it screens cases carefully befor e agreeing to take them. These comments could arguably

constitute counsel’s personal comments on the merits of the cas e, and as such could be improper.

See Grizzle v. Travelers Health Netw ork, Inc. , 14 F.3d 261, 269 (5 th Cir. 1994). 56

However, this does not necessarily lead to the conclusion that the district court should have

granted a mistrial; rather we “must consider the jury charge and any corrective measures taken by the

trial c ourt.” Id . While the jury was out of the courtroom, the parties and the judge engaged in a

lengthy colloquy. The parties decided to leave attorneys’ fees up to the judge, and the judge

commented that they would let the jury go for t he day, and that he would give them proper

instructions the following morning. Neither party objected, and neither party asked for the judge to

immed iat ely instruct the jury to disregard the testimony. When the jury returned for the day, the

jud ge t o ld t he jury that the parties agreed to have the attorneys’ fees issue decided by him at the

conclusion of the case, and commented that “I’ll give you some instructions with regard to how to

handle [the evidence] in your determination of any damages, if any, that you decide as the case goes

on and you look at those [jury] questions.” The next morning, after a further colloquy, t he judge

again instructed the jury that “si nce t hat part icular issue is no longer before the jury for your57 In his separate brief, O’Dowd makes several vague challenges to the jury instructions,

all of which border on frivolous. We reject O’Dowd’s arguments.

58 Terry has filed a cross-appeal, asserting that the trial court erred in granting judgment

as a matter of law on pre-1993 interest differential d amages and by failing to include “negligent

misrepresentation” as a cause of action in the jury charge. To the extent that Terry has not waived

these claims, we reject her arguments and affirm the district court.

-55- consideration as a fact-finder, you’re instructed to disregard the evidence presented and not consider

it for any purpose. Is that clear. Any question about that?”

To t he extent Reagan’s comments were improper, any harm was cured by the judge’s

instructions to disregard, and by the jury instructions, 57 in which the jury was further instructed that

the evidence it was told to disregard “can not be used by you in answering any of the questi ons

propounded to you or for any other purpose.” Accordingly, the district court did not err in failing

to grant a mistrial.

VIII.

In sum, while this is a close case, under our limited standard of review we find the evidence

sufficient to sustain the jury’s verdict on al l co unts of liability. However, we hold that the district

court erred in awarding $97,500 in actual damages to Terry based on the reasonable value of her time

in attempting to resolve th e sit uation, and vacate the award of these particular actual damages.

Further, we find that the district court erred in awarding DTPA additional damages because, under

Commonw ealth Mortgage and Hadley

, the district court’s failure to separate the actual damages on

t he DTPA claim from those on the negligence/breach of fiduciary duty claims makes additional

damages unavailable. Accordingly, we affirm in part, reverse in part, and remand for the district court

with instructions to enter judgment for Terry in the amount of $839,116.00 in actual damages, plus

the reasonable attorneys’ fees identified by the district court. 58-56--57-

EDITH H. JONES, Circuit Judge, concurring:

I c o ncur in this good opinion, emphasizing only the narrowness of our holding on

DTPA liabilit y. First, the statute was significantly amended with respect to attorneys after the events

before us occurred; our opinion doesn’t bear on the amended law. Second, there was sufficient, if

not overwhelming, evidence for the jury to find that actual misrepresentations not amounting to mere

statements of legal opini o n were made to the plaintiff. Third, I would not rely on the alleged

und isclo sed co nflict of interest between the lawyers’ desire to capitalize on the mother’s lawsuit

against Parker and the presumably less-legally-remunerative attempt by the daughters to make Parker

pay their taxes. Not only were the clients fully aware of Parker’s financial condition, it also seems

evident that mother and daughters were pr esent ing a united front against Parker. There was no

conflict of interest from the attorneys’ standpoint, rather, a misguided attempt at a pincer strategy.