Court Opinion

ID: 2857062
Source: CourtListenerOpinion
Date Created: 2015-09-04 19:28:09.846831+00
Date Added: 2024-06-11T12:42:35.673090
License: Public Domain

COURT OF APPEALS
                          SECOND DISTRICT OF TEXAS
                               FORT WORTH

                               NO. 2-07-317-CV

AVERY PHARMACEUTICALS, INC.                        APPELLANTS/CROSS-APPELLEES
AND AL SANKARY

                                        V.

HAYNES AND BOONE, L.L.P.,                          APPELLEES/CROSS-APPELLANTS
CRAIG PRICE, JOHN BUTLER
EATON, AND BILL NAIFEH

                                    ------------

           FROM THE 96TH DISTRICT COURT OF TARRANT COUNTY

                                    ------------

                         MEMORANDUM OPINION 1

                                    ------------

                                I. INTRODUCTION

      Appellants and Cross-Appellees Avery Pharmaceuticals, Inc. and Al

Sankary (collectively “Appellants”) appeal from the trial court’s order granting

summary judgment in favor of Appellees and Cross-Appellants Haynes and

      1
          … See Tex. R. App. P. 47.4.
Boone, L.L.P., Craig Price, John Butler Eaton, and Bill Naifeh (collectively

“Appellees”). In seven issues, Appellants argue that the trial court erred by

granting Appellees’ motion for summary judgment, by overruling Appellants’

objections to Appellees’ summary judgment evidence, and by denying

Appellants’ motion for new trial. In a single cross-issue, Appellees argue that

the trial court should have granted Appellees’ plea to the jurisdiction. We will

affirm.

                  II. F ACTUAL AND P ROCEDURAL B ACKGROUND

      John Ver Vynck, a former employee of Respiratory Druggist, Inc. (“RDI”),

an Alabama business, approached Sankary in 2000 with a business plan to

develop Avery—a business designed to be a wholesale distributor of generic

pharmaceuticals, including respiratory medications and plastic vials. Ver Vynck

and Sankary subsequently entered into a business relationship together, Avery’s

articles of incorporation were filed in July 2000, and Sankary made an initial

capital investment in Avery of approximately $300,000.         Ver Vynck and

Sankary each owned 50% of Avery;2 Ver Vynck, Sankary, and Herman initially

      2
      … Initially, however, according to Ver Vynck, at the time of Avery’s
formation, Ver Vynck owned 50% of Avery, Sankary owned 24%, Steve
Herman (Sankary’s nephew) owned 24%, and another individual owned 1%.

                                       2
served as Avery’s directors;3 Ver Vynck was Avery’s president; and Sankary

was Avery’s chief executive officer.

     Ver Vynck was the “key man” at Avery due to his pharmaceutical

experience, but Sankary played a substantial role in the day-to-day decision

making process at Avery, according to Ver Vynck and Mark Acker, a former

Avery employee.      At any given time, Avery employed between twenty to

twenty-two employees. Avery conducted business out of a building in Euless

owned by Sankary before moving to a location in Fort Worth in late 2002.

     Haynes and Boone represented Avery and Ver Vynck, individually, on a

number of different matters. According to Price and Eaton, Haynes and Boone

attorneys, Haynes and Boone was not general or corporate counsel for either

Ver Vynck or Avery, and Haynes and Boone did not provide day-to-day legal

counsel to Ver Vynck or Avery; Ver Vynck and Avery engaged Haynes and

Boone on a “project-based basis.”       For instance, according to Eaton, he

“reviewed and revised an independent contractor agreement for Avery on

March 30, 2001, and April 1, 2001”; in July 2001, at Ver Vynck’s request, he

“prepared a shell document for a stock purchase agreement between Ver Vynck

and [Sankary] where Ver Vynck would purchase Sankary’s Avery stock”; and

     3
         … Herman later sold his shares to Sankary and left the board.

                                        3
in November 2001, at Ver Vynck’s request, he “revised the draft stock

purchase agreement by removing certain provisions and forwarded it to Ver

Vynck.” 4

      In December 2001, at Ver Vynck’s request, Eaton prepared a promissory

note and security agreement between Avery and Sankary regarding a loan by

Sankary to Avery.    Pursuant to the note, Avery promised to pay Sankary

$393,039.00.    The security agreement gave Sankary a security interest in

various types of Avery collateral.

      At some point after Avery’s formation, RDI initiated litigation in Alabama

against Ver Vynck, Acker, and Tim Fickling (a former Avery employee)

complaining of alleged violations of noncompete agreements with RDI. Yancey

Burnett represented Ver Vynck in the Alabama litigation, but according to

Appellees, Haynes and Boone also provided advice to Ver Vynck and Avery

about the matter until January 2, 2001.5 Following a trial, the Alabama circuit

judge signed an “Order Granting Relief Pursuant to Breach of Employment

      4
       … According to Eaton, “Neither of these draft agreements contained any
sales price terms.”
      5
       … A January 2, 2001 letter addressed to Ver Vynck from Price concerns
“Respiratory Druggist, Inc., Respiratory Distribuitors, Inc./Richard Powell” and
states that “[i]t is my understanding that, at this time, we are not addressing
any outstanding legal issues for Avery Pharmaceuticals.”

                                       4
Agreements” on February 20, 2002, that enjoined Ver Vynck from certain

conduct—including competing with RDI—for eighteen months.6

      After entry of the Alabama injunction, Ver Vynck sought advice from

Haynes and Boone regarding his compliance with the enjoining order and the

order’s effect on Avery. In an effort to comply with the order, Ver Vynck sold

his shares in Avery to Fickling effective March 19, 2002. Eaton prepared “shell

document[s]” for a Stock Purchase Agreement and an Option Agreement (in

which Fickling granted Ver Vynck the option to purchase back the Avery shares

at a later date)7 for Ver Vynck and Fickling to carry out the transaction.8

      6
        … The order specifically enjoined Ver Vynck “from directly or indirectly
soliciting . . . or accepting . . . any business from any of RDI’s former
customers which involves respiratory medications or unit dose vials utilized in
the sale of respiratory medications”; “from hiring away or attempting to hire
away . . . any RDI employee”; “from directly or indirectly engaging in any
business dealing in any way with the home health care field as it relates to the
purchase or sale of respiratory medication and unit dose vials; “from operating
as a sole proprietor, or owning any interest in any person, firm, corporation,
partnership, or other entity engaged in the business of purchasing or selling
respiratory medications and unit dose vials and related equipment”; and “from
directly or indirectly owning any interest in, or becoming employed in, any
entity engaged in the business of the same or similar nature as [RDI].”
      7
      … According to Eaton, he “did not negotiate any of the terms of either
agreement,” and he “was unaware whether the agreements were ever executed
or consummated.”
      8
       … The summary judgment evidence is unclear regarding all of the details
surrounding the effect, if any, of the agreements. Fickling testified in his
deposition that he “signed back” the Avery stocks to Ver Vynck at some point,
but he also agreed that he “didn’t end up owning anything” after signing the

                                       5
      It was also (somehow) determined that Ver Vynck could sell veterinarian

products (not respiratory drugs) to veterinarian clinics and wholesalers yet still

comply with the Alabama order enjoining him from competing with RDI. To this

end, Haynes and Boone formed Avery Wholesale Pharmaceuticals, Inc.

(“AWP”).9 Ver Vynck was AWP’s sole shareholder and director. AWP was not

a subsidiary or division of Avery.

      Another business that Haynes and Boone formed at Ver Vynck’s request

was Infinity Custom Plastics, Inc. (“Infinity”). Avery purchased plastic vials

(about two million per month) from a Florida company and used the vials to

package medication. According to Ver Vynck, he and Sankary decided that

they should develop their own medication vial product. Consequently, they

conceived Infinity “to purchase these containers from the manufacturer and sell

them back to Avery.” Ver Vynck was Infinity’s sole shareholder and director.

Sankary, however, chose to be a capital investor in Infinity, not a shareholder,

agreements. Whatever the case, Eaton prepared the documents.
      9
       … Sankary opined that AW P was formed behind his back and to
circumvent the Alabama order and that Appellees did not inform him or reveal
that they were forming AWP; had they done so, he would have objected. Ver
Vynck and Acker, however, opined that Sankary was aware of AWP and the
nature of its business.

                                        6
according to Ver Vynck.10 Letson opined that he was the individual responsible

for developing the vial to implement the Avery/Infinity plan and that he

developed such a vial.

      In August 2002, Letson and Ver Vynck, on behalf of Infinity, met with

Naifeh, another Haynes and Boone attorney, to consult regarding the application

for a patent of the newly developed vial and process for filling and sealing the

vial.11 According to Naifeh, “It was confirmed at the meeting that [Infinity]

would own all patents related to the vial and the process.” Haynes and Boone

filed a provisional patent application for the vial on or about November 20,

2002, and the vial technology was assigned to Infinity.        At Ver Vynck’s

request, Haynes and Boone also prepared a Contract Supply Agreement

(“CSA”) between Avery and Infinity effective January 1, 2003, in which Infinity

agreed to sell and Avery agreed to purchase vials. 12

      10
        … Sankary said he had no idea that Infinity was being formed when it
happened and that Appellees did not inform him or reveal that they were
forming Infinity. Had they done so, he would have objected. But Nick Letson,
an Avery salesman, reasoned that Sankary worked independently on a “vial
tray,” and Ver Vynck opined that Sankary was involved in efforts to obtain
financing for leasing vial-sealing equipment to Infinity.
      11
       … The vial was designed to be sealed using an ultrasonic sealer instead
of a heat sealer. Naifeh said that Bernard Strong, a “California plastics
inventor, came up with the specific features of the vial.”
      12
       … Ver Vynck opined that Sankary was fully aware of the CSA, but
Sankary claimed at his February 2005 deposition that he did not learn about it

                                       7
      In March 2003, Ver Vynck and Sankary signed a letter addressed to

Standard Management Corporation (“Standard”) detailing the terms by which

Avery would sell its stock to Standard.13 But a sale of Avery to Standard never

happened.

      Ultimately, the Avery vial was never manufactured in commercially

feasible numbers, Infinity never sold any vials—including to Avery, Avery never

paid any money to Infinity, and Infinity never sold any products. The United

States Patent and Trademark Office also rejected the patent application for the

Avery vial.

      In April 2003, Sankary sued Ver Vynck and Avery to recover money

owed under the promissory note that Avery executed in favor of Sankary in

December 2001. 14     In May 2003, Sankary, Ver Vynck, and the other

defendants reached a settlement agreement.         The settlement agreement

provided in part that the parties “agree to the sale of the assets of Avery,

[Infinity], and [AWP] to Drugmax, Inc. . . . on the terms set forth in the Asset

until recently.
      13
        … According to Sankary, however, Haynes and Boone did not have the
authority to open a file for the sale of Avery to Standard.
      14
        … Sankary also sued A&R Pharmacy, a/k/a Airway Relief Pharmacy,
Inc., (“A&R”) to recover money owed under a promissory note that A&R
executed in favor of Sankary in December 2001. A&R is yet another Ver Vynck
pharmaceutical business that Sankary invested in.

                                       8
Purchase Agreement (“APA”).” Consistent with this term, Avery, AWP, and

Infinity sold all of their assets to Discount Rx, Inc. pursuant to the APA on May

14, 2003.15 Sankary remains Avery’s sole director and shareholder, and he

claims to hold shrareholder’s and director’s meetings, but Avery has no

employees, no business location, and no assets.

      Appellants sued Appellees in March 2004. Appellants’ seventh amended

original petition asserted claims against Appellees for legal malpractice, breach

of fiduciary duty, fraud, negligent misrepresentation, and conspiracy to

defraud.16 Appellees moved for summary judgment on Appellants’ claims on

no evidence and traditional grounds and filed a plea to the jurisdiction

      15
        … Sankary also obtained a temporary restraining order when he sued
Ver Vynck and Avery in April 2003 that enjoined Ver Vynck and the other
defendants from “taking actions that will diminish . . . Sankary’s security
interests.” Ver Vynck reasoned that Sankary forced him to agree to the sale
of Avery’s, Infinity’s, and AWP’s assets by way of the temporary restraining
order because Ver Vynck could not “have an income, provide for my family.
I was basically kicked out of the company.”
      16
         … Appellants alleged in part that Appellees failed to dissuade Ver Vynck
from breaching duties owed to Avery; charged or accepted payments from
Avery for legal work performed for or to benefit others; disclosed confidential
or privileged information to Ver Vynck at a time when he was enjoined from
owning or operating Avery; failed to render full and fair disclosure of facts
material to Appellants’ representation; failed to adequately perform a conflicts
check; and represented Appellants and Ver Vynck, AWP, and Infinity at a time
when such representation involved substantially related matters in which Ver
Vynck’s interests were materially and directly adverse to the interests of
Appellants.

                                       9
challenging Appellants’ standing.     The trial court signed an order granting

summary judgment to Appellees on June 18, 2007; the trial court did not rule

on Appellees’ plea to the jurisdiction.17

                            III. S UMMARY J UDGMENT

      Appellants argue in their first, second, third, fourth, and fifth issues that

the trial court erred by granting Appellees’ motion for summary judgment. In

their sixth issue, Appellants argue that the trial court erred by denying their

objections to part of Appellees’ summary judgment evidence.

      A.    Standard of Review

      After an adequate time for discovery, the party without the burden of

proof may, without presenting evidence, move for summary judgment on the

ground that there is no evidence to support an essential element of the

nonmovant’s claim or defense.      Tex. R. Civ. P. 166a(i).     The motion must

specifically state the elements for which there is no evidence. Id.; Johnson v.

Brewer & Pritchard, P.C., 73 S.W.3d 193, 207 (Tex. 2002). The trial court

must grant the motion unless the nonmovant produces summary judgment

evidence that raises a genuine issue of material fact.       See Tex. R. Civ. P.

      17
        … The trial court originally signed an order granting Appellees’ motion
for summary judgment on August 21, 2006. Thereafter, a visiting judge
granted Appellants’ motion for new trial, and Appellees filed their second
traditional and no-evidence motions for summary judgment in April 2007.

                                       10
166a(i) & cmt.; Sw. Elec. Power Co. v. Grant, 73 S.W.3d 211, 215 (Tex.

2002).

      When reviewing a no-evidence summary judgment, we examine the entire

record in the light most favorable to the nonmovant, indulging every reasonable

inference and resolving any doubts against the motion. Sudan v. Sudan, 199
S.W.3d 291, 292 (Tex. 2006). If the nonmovant brings forward more than a

scintilla of probative evidence that raises a genuine issue of material fact, then

a no-evidence summary judgment is not proper. Moore v. K Mart Corp., 981
S.W.2d 266, 269 (Tex. App.—San Antonio 1998, pet. denied). We review a

no-evidence summary judgment for evidence that would enable reasonable and

fair-minded jurors to differ in their conclusions.    Hamilton v. Wilson, 249
S.W.3d 425, 426 (Tex. 2008) (citing City of Keller v. Wilson, 168 S.W.3d 802,

822 (Tex. 2005)).

      When a trial court’s order granting summary judgment does not specify

the ground or grounds relied on for its ruling, summary judgment will be

affirmed on appeal if any of the theories presented to the trial court and

preserved for appellate review are meritorious. Provident Life & Accident Ins.

                                       11
Co. v. Knott, 128 S.W.3d 211, 216 (Tex. 2003); Star-Telegram, Inc. v. Doe,

915 S.W.2d 471, 473 (Tex. 1995).18

      B.     Sankary’s Legal Malpractice and Breach of Fiduciary Duty Claims

             1.   Malpractice

      In their third issue, Appellants challenge the trial court’s grant of summary

judgment in favor of Appellees on the ground that Sankary was not a client of

Appellees.    Appellees claimed in their no-evidence motion for summary

judgment that there is no evidence Sankary was ever their client and that they

never owed Sankary any duty.

      Legal malpractice is a tort cause of action based on negligence. Belt v.

Oppenheimer, Blend, Harrison & Tate, Inc., 192 S.W.3d 780, 783 (Tex. 2006).

To prevail on a legal malpractice claim, a plaintiff must show that (1) the

attorney owed the plaintiff a duty, (2) the attorney breached that duty, (3) the

breach proximately caused the plaintiff’s injuries, and (4) damages occurred.

      18
        … Appellees also filed a traditional motion for summary judgment on
Appellants’ claims. But when a party moves for summary judgment under both
rules 166a(c) and 166a(i), we will first review the trial court’s judgment under
the standards of rule 166a(i). Ford Motor Co. v. Ridgway, 135 S.W.3d 598,
600 (Tex. 2004). If the appellants failed to produce more than a scintilla of
evidence under that burden, then there is no need to analyze whether appellee’s
summary judgment proof satisfied the less stringent rule 166a(c) burden. Id.
Because we affirm the trial court’s grant of summary judgment on no-evidence
grounds, we do not set forth and utilize the traditional motion for summary
judgment standard of review.

                                       12
Alexander v. Turtur & Assocs., Inc., 146 S.W.3d 113, 117 (Tex. 2004); Grider

v. Mike O’Brien, P.C., 260 S.W.3d 49, 55 (Tex. App.—Houston [1st Dist.]

2008, pet. denied). At common law, the rule of privity limits an attorney’s

liability to those in privity with the attorney.   McCamish, Martin, Brown &

Loeffler v. F.E. Appling Interests, 991 S.W.2d 787, 792 (Tex. 1999).           An

attorney in Texas is therefore not liable for malpractice to anyone other than his

client. Id.; see also Barcelo v. Elliott, 923 S.W.2d 575, 577 (Tex. 1996);

Stancu v. Stalcup, 127 S.W.3d 429, 432 (Tex. App.—Dallas 2004, no pet.);

Gamboa v. Shaw, 956 S.W.2d 662, 664 (Tex. App.—San Antonio 1997, no

writ); Stonewall Surplus Lines Ins. Co. v. Drabek, 835 S.W.2d 708, 710 (Tex.

App.—Corpus Christi 1992, writ denied) (“It is well settled that persons outside

the attorney-client relationship do not have a cause of action for injuries they

might sustain due to the attorney’s failure to perform or his negligent

performance of a duty owed to his client.”).

      The attorney-client relationship is a contractual relationship whereby an

attorney agrees to render professional services for a client. Tanox, Inc. v. Akin,

Gump, Strauss, Hauer & Feld, L.L.P., 105 S.W.3d 244, 254 (Tex.

App.—Houston [14th Dist.] 2003, pet. denied). The relationship can be created

by an express contract or it can be implied from the actions of the parties. Id.;

Honeycutt v. Billingsley, 992 S.W.2d 570, 581 (Tex. App.—Houston [1st Dist.]

                                       13
1999, pet. denied).19 In determining whether a contractual relationship can be

implied, we use an objective standard, looking at what the parties said and did,

and we do not consider their unstated, subjective beliefs. Tanox, Inc., 105
S.W.3d at 254; Roberts v. Healey, 991 S.W.2d 873, 880 (Tex. App.—Houston

[14th Dist.] 1999, pet. denied).

      Difficulties in determining the existence of an attorney-client relationship

can often occur when a lawyer represents a small entity with “extensive

common ownership and management.”           MacFarlane v. Nelson, No. 03-04-

00488-CV, 2005 WL 2240949, at *4 (Tex. App.—Austin Sept. 15, 2005, pet.

denied) (mem. op.) (citing Restatement (Third) of the Law Governing Lawyers

§ 14 cmt. f (2000)).      Generally, however, rendering legal services to a

corporation does not, by itself, create privity between the attorney and the

corporation’s investors, its officers and directors, and its shareholders. Goeth

v. Craig, Terrill & Hale, L.L.P., No. 03-03-00125-CV, 2005 WL 850349, at *6

(Tex. App.—Austin Apr. 14, 2005, no pet.) (mem. op.); see also Gamboa, 956
S.W.2d at 664 (holding that purported shareholder was not in privity with

      19
        … For instance, the relationship can be implied from the parties’ conduct
indicating the intent to enter into such a relationship, or it can be implied from
the attorney’s gratuitous rendition of professional services. Sotelo v. Stewart,
No. 08-06-00145-CV, 2008 WL 2174425, at *3 (Tex. App.—El Paso May 22,
2008, pet. filed).

                                       14
attorney who represented corporation and thus could not maintain legal

malpractice claim based on attorney’s representation of corporation). This is

because a corporation is a legal entity separate and apart from the persons who

compose it, and a cause of action against one who has injured the corporation

belongs to the corporation and not to the shareholders. Walker v. Anderson,

232 S.W.3d 899, 918 (Tex. App.—Dallas 2007, no pet.); Hajdik v. Wingate,

753 S.W.2d 199, 201 (Tex. App.—Houston [1st Dist.] 1988), aff’d, 795
S.W.2d 717 (Tex. 1990).

       In the present case, Sankary argues that the evidence is such that he

“could have reasonably concluded that [Appellees] represented his interests

along with those of Avery.” Relying on deposition testimony and affidavits, he

thus contends that an attorney-client relationship between he and Appellees

could be implied from the parties’ conduct. See Tanox, Inc., 105 S.W .3d at

254.

       Sankary testified in his deposition that Haynes and Boone represented him

in connection with the preparation of the December 31, 2001 promissory note

made payable to him by Avery. He testified as follows:

       [Appellees’ attorney]: You were represented by Haynes and Boone
       in connection with your securing a note from Avery
       Pharmaceutical, correct?

                                       15
      [Sankary]: Evidently, yeah. They drew it up. And evidently if they
      worked for the - - if they worked for Avery, they were working for
      me.

Sankary similarly opined that Haynes and Boone represented him in connection

with the preparation of the December 31, 2001 security agreement that gave

him a security interest in Avery collateral. But Sankary’s subjective belief that

Haynes and Boone represented him simply because it drafted the note and

security agreement on behalf of Avery is insufficient to raise a fact issue that

Haynes and Boone also owed him any duty of care because Haynes and

Boone’s representation of Avery (the rendering of legal services to a

corporation) did not, by itself, create privity with Sankary. See Goeth, 2005
WL 850349, at *6; see also Tanox, Inc., 105 S.W.3d at 254; Gamboa, 956
S.W.2d at 664. Sankary points to no other evidence objectively demonstrating

that Haynes and Boone represented him individually with regard to the

preparation of the Avery promissory note and security agreement.

      Sankary further opined that Haynes and Boone represented him in

connection with its preparation of a promissory note made payable to him by

A&R and a security agreement with A&R. He also stated in his affidavit that

Haynes and Boone “represented [Avery] and the officers, directors[,] and

shareholders of [Avery] beginning in 2001” and that “[a]lthough I may have had

more than one attorney at times, I still considered [Haynes and Boon] to

                                       16
represent the interests of [Avery] and myself from 2001 into 2003.”        But

Sankary directs us to no summary judgment evidence objectively demonstrating

that Haynes and Boone represented him individually in regard to the A&R note

and security agreement, nor does he point to evidence supporting the

contentions set forth in his affidavit, which conflict with well-established

caselaw. See Walker, 232 S.W.3d at 918; Tanox, Inc., 105 S.W.3d at 254;

Goeth, 2005 WL 850349, at *6.

      Sankary also included in his summary judgment evidence the affidavit of

James McCormick. In the affidavit, McCormick detailed the “facts and issues”

that he considered in arriving at his opinions, and he opined that Sankary had

an attorney-client relationship with Appellees.   With a few exceptions, the

“facts and issues” relied upon by McCormick in arriving at his opinion consist

of many of the same facts detailed in the “Background” section above. These

facts, and those relied upon by McCormick, do not demonstrate that Appellees

had an attorney-client relationship with Sankary.     They instead show the

existence of an attorney-client relationship with Ver Vynck, Avery, or both.20

      20
        … One of our sister courts listed in a memorandum opinion several
factors to consider in determining whether an entity lawyer also represents an
individual associated with the entity. Those factors include the following:
whether the lawyer affirmatively assumed the duty of individual representation,
whether the individual had independent representation, whether the lawyer
previously represented the individual on a personal basis, and whether the

                                      17
         Examining the entire record in the light most favorable to Sankary and

indulging every reasonable inference and resolving any doubts against the

motion, Sankary failed to produce summary judgment evidence raising a

genuine issue of material fact that Appellees owed him a duty of care as a

result of an attorney-client relationship.       See Tex. R. Civ. P. 166a(i); F.E.

Appling Interests, 991 S.W.2d at 792 (holding that privity limits an attorney’s

liability to those in privity with the attorney); see also Estate of Bradburn v.

Sawko, No. 02-02-00192-CV, 2003 WL 21359514, at *3 (Tex. App.—Fort

Worth June 12, 2003, no pet.) (mem. op.) (affirming grant of no-evidence

motion for summary judgment on legal malpractice claim). Accordingly, we

hold that the trial court did not err by granting summary judgment in favor of

Appellees on Sankary’s legal malpractice claim. We overrule Appellants’ third

issue.

               2.    Breach of Fiduciary Duty

         In part of their fifth issue, Appellants challenge the trial court’s grant of

summary judgment in favor of Appellees on the breach of fiduciary duty claims.

evidence demonstrates the individual’s reliance on or expectations of the
lawyer’s separate representation. See MacFarlane, 2005 WL 2240949, at *4.
To the extent these factors are applicable to the analysis of whether an
attorney-client relationship existed between Sankary and Appellees, each of the
factors weighs in favor of a determination that no attorney-client relationship
existed.

                                          18
      To recover on a breach of fiduciary duty claim, a plaintiff must first show

that the defendant owed a fiduciary duty. Abetter Trucking Co. v. Arizpe, 113
S.W.3d 503, 508 (Tex. App.—Houston [1st Dist.] 2003, no pet.) (listing

elements of breach of fiduciary duty claim as existence of fiduciary duty, breach

of the duty, causation, and damages). Fiduciary duties arise when an attorney-

client relationship is created. Meyer v. Cathey, 167 S.W.3d 327, 330 (Tex.

2005); Trousdale v. Henry, 261 S.W.3d 221, 229 (Tex. App.—Houston [14th

Dist.] 2008, pet. filed) (stating that in Texas, a fiduciary relationship exists

between attorney and clients as a matter of law).

      Having determined that Sankary failed to produce summary judgment

evidence demonstrating the existence of an attorney-client relationship between

he and Appellees, Appellees therefore owed Sankary no fiduciary duties. There

being no evidence of the existence of a fiduciary duty owed to Sankary by

Appellees, we hold that the trial court did not err by granting summary

judgment in favor of Appellees on Sankary’s breach of fiduciary duty claim.

See Tex. R. Civ. P. 166a(i); Swank v. Cunningham, 258 S.W.3d 647, 666

(Tex. App.—Eastland 2008, pet. denied) (“An attorney-client relationship did

not exist between Beck Redden or Smyser Kaplan and AMPS. In the absence

of an attorney-client relationship, Beck Redden and Smyser Kaplan did not owe

                                       19
fiduciary duties to AMPS, and AMPS could not recover on a breach of fiduciary

duty claim against them.”). We overrule this part of Appellants’ fifth issue.

      C.    Avery’s Legal Malpractice and Breach of Fiduciary Duty Claims

            1.    Malpractice

      In another part of their fifth issue, Appellants argue that the trial court

erred by granting summary judgment in favor of Appellees on the legal

malpractice claims.    Appellees contended in their no-evidence motion for

summary judgment that Avery did not suffer any damages.

      While uncertainty as to the amount of damages is not fatal to recovery,

lack of evidence or uncertainty as to the fact of damages is. McKnight v. Hill

& Hill Exterminators, Inc., 689 S.W.2d 206, 207 (Tex. 1985); Pace Corp. v.

Jackson, 155 Tex. 179, 190, 284 S.W.2d 340, 348 (1955). Damages must

be ascertainable in some manner other than by mere speculation or conjecture

and by reference to some fairly definite standard, established experience, or

direct inference from known facts. A.B.F. Freight Sys., Inc. v. Austrian Import

Serv., Inc., 798 S.W.2d 606, 615 (Tex. App.— Dallas 1990, writ denied). If

damages are too remote, too uncertain, or purely conjectural, they cannot be

recovered. Arthur Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812, 816

(Tex. 1997); Swank, 258 S.W.3d at 667.

                                      20
      The two components of proximate cause are cause in fact and

foreseeability.   Rodgers v. Weatherspoon, 141 S.W .3d 342, 345 (Tex.

App.—Dallas 2004, no pet.). Cause in fact means that the defendant’s acts or

omissions were a substantial factor in bringing about the injury that would not

otherwise have occurred, and foreseeability of harm means that the actor could

anticipate that his actions could injure another. Id.

      Appellants included in their summary judgment evidence a July 2003

report that Letson prepared detailing Avery’s projected and “Estimated Sales”

of the vial that Letson developed had Avery ultimately sold the vial. Letson

reasoned in the report that “Avery concluded that an estimated 18,000,000

vials could be sold direct to end users within one month” and that “Avery

anticipated end user sales to exceed $900,000 per month.” Considering these

figures and the three-year CSA that Infinity had with Avery, Letson testified in

his deposition that Avery suffered approximately $22.5 million in lost profits

damages.

      Letson’s opinion that Avery suffered $22.5 million in lost profits damages

is laced with and reliant upon speculation and conjecture. In arriving at the

$22.5 million figure, Letson reasoned that the vials would be manufactured and

labeled at Infinity, that Avery would distribute the products, and that “large

national accounts would buy directly from Infinity.”     Letson identified five

                                      21
businesses (accounts) that he thought would purchase products directly from

Infinity, but he acknowledged that only one was actually a customer of Avery.

Two other accounts “wanted a demonstration of the equipment before

commitment,” and there was no evidence that the two remaining accounts

were Avery customers and no evidence that the four non-Avery customers

intended at any point to enter into a business relationship with Infinity or Avery

for the purpose of purchasing vials.

      The vial project also suffered from a lack of capital. Letson testified that

the new vial was never manufactured in commercially feasible numbers.

According to Letson, Avery had “one small capacity mold that would work. We

produced samples.     W e sealed vials.     We did demonstrations.”    However,

“[w]ith the mold capacity that [Avery] had, we could not supply our existing

customers” because the company lacked the capital to fund the project.

      Significantly, all of Avery’s assets were sold to Discount Rx pursuant to

the APA on May 14, 2003.          Letson testified that his damages model is

dependent on the sale of Avery’s assets to Discount Rx not happening, and he

agreed that it was the shareholders’ decision to sell the assets.

      Moreover, according to Appellants’ summary judgment evidence,

Discount Rx’s sales figures for the vial that it eventually began to sell after

purchasing Avery are considerably less than Letson’s projection that Avery

                                       22
would have sold approximately fifteen to eighteen million vials to end users per

month. Letson testified that it took Discount Rx two years to get the vial to the

market after the purchase of Avery and that according to “market knowledge,”

Discount Rx has had monthly sales in the amount of “half a million to three

quarters of a million vials a month.”

      Letson’s $22.5 million damages figure is based on lost profits from the

sale of the vial that he worked to develop while employed by Avery. Letson

and Ver Vynck met with Naifeh in 2002 to consult regarding the application for

a patent of the vial.   Appellants have offered no evidence that the patent

application for the new vial was ever approved.21 Avery’s damages figure is

speculative in the absence of an approved patent for the new vial.

      Appellants contend that Avery suffered damages from Appellees’

formation of AWP and Infinity. Appellants argue that Appellees caused the

formation of AWP to evade the RDI injunction and to defraud Appellants and

that a conflict of interest arose when Appellees formed AWP.          Regarding

Infinity, Appellants complain that Appellees performed no conflict checks.

      21
       … Indeed, Appellees supplemented their motions for summary judgment
with evidence that the patent had been rejected by the United States Patent
and Trademark Office.

                                        23
There is no summary judgment evidence that Avery was damaged as a result

of the formation of AWP and Infinity.

      Appellants   argue   that   Avery   suffered   damages   from   Appellees’

preparation of the Fickling Stock Purchase Agreement and Option Agreement.

They contend that Fickling was a “straw man” and that he was never in charge

of Avery, but there is no evidence that Avery was damaged as a result of

Appellees’ preparation of the Fickling documents.

      Appellants contend that Avery suffered damages as a result of Appellees’

preparation of the CSA between Avery and Infinity. Sankary agreed in his

deposition, however, that not a single product was sold under the CSA nor had

Avery ever paid a single dime to Infinity. Consequently, there is no evidence

that Avery was damaged as a result of Appellees’ preparation of the CSA.

      Appellants argue that Avery suffered damages as a result of Appellees’

preparation of the vial assignment documents and the provisional patent

application. As detailed above, however, Appellants produced no evidence that

the application for the patent has been approved, and Appellants’ evidence of

Letson’s opinion regarding lost profits damages is speculative.

      Appellants further argue that Avery suffered damages as a result of

Appellees’ fraudulent or negligent negotiations with Standard. They contend

that Appellees did not timely communicate an offer by Standard to purchase

                                        24
Avery, and they submitted an email from Price in which Price indicated a desire

to set up a conference call between Avery, Sankary, and their counsel to

discuss the sale. This email alone, however, is no evidence that Appellees’

alleged untimely communication of the Standard offer caused Standard not to

purchase Avery, nor does the extent of Appellants’ summary judgment

evidence indicate as much either.

      Avery’s evidence of damages is simply too remote, too uncertain, or

purely conjectural, such that the damages cannot be recovered as a matter of

law. See Arthur Andersen & Co., 945 S.W.2d at 816. Examining the entire

record in the light most favorable to Avery and indulging every reasonable

inference and resolving any doubts against Appellees’ motion for summary

judgment, we hold that Avery failed to produce summary judgment evidence

raising a genuine issue of material fact that it suffered damages resulting from

Appellees’ complained-of conduct or that Appellees’ complained-of conduct

proximately caused Avery damages. See Tex. R. Civ. P. 166a(i). Accordingly,

we overrule this part of Appellants’ fifth issue.

              2.   Breach of Fiduciary Duty

      In another part of their fifth issue, Appellants challenge the trial court’s

grant of summary judgment in favor Appellees on Avery’s breach of fiduciary

duty claim.

                                       25
      The essence of a claim for breach of fiduciary duty focuses on whether

an attorney obtained an improper benefit from representing the client. McGuire,

Craddock, Strother & Hale, P.C., v. Transcontinental Realty Investors, Inc., 251
S.W.3d 890, 894 (Tex. App.—Dallas 2008, pet. denied); Kimleco Petroleum,

Inc. v. Morrison & Shelton, 91 S.W.3d 921, 923 (Tex. App.—Fort Worth 2002,

pet. denied) (stating that the focus of a breach of fiduciary duty is whether an

attorney obtained an improper benefit from representing a client and that the

essence of a breach of fiduciary duty involves the integrity and fidelity of an

attorney). An attorney breaches his fiduciary duty to a client when he, among

other things, subordinates his client’s interests to his own, engages in self

dealing, fails to disclose conflicts of interest, or makes misrepresentations to

achieve these ends.   Transcontinental Realty Investors, Inc., 251 S.W.3d at

894. Fee forfeiture is appropriate only where there is a breach of a duty and

a clear and serious violation of a duty to a client that destroys or severely

impairs the attorney-client relationship. Bilodeau v. Webb, 170 S.W.3d 904,

916 (Tex. App.—Corpus Christi 2005, pet. denied).

      Avery generally directs us to Sankary’s affidavit, McCormick’s affidavit,

and Letson’s affidavit as evidence that Appellees breached one or more

fiduciary duties owed to Avery. It lists numerous acts or omissions allegedly

constituting one or more breaches of fiduciary duty, including that Appellees

                                      26
breached their fiduciary duties to Avery “in being disloyal,” “in violating firm

policies designed to prevent the type of conflicts, injuries, and damages

complained of,” “in favoring one client over the other,” “in continuing to work

against the interests of Avery and Sankary, even after [Appellees] anticipated

that they would be sued by Avery and/or Sankary,” and “in violating and/or

failing to comply with numerous provisions of the Texas Disciplinary Rules of

Professional Conduct.” None of Appellants’ evidence, however, demonstrates

that—by way of the complained of acts or omissions—Appellees obtained any

type of improper benefit.    There is no evidence to indicate that Appellees

subordinated Avery’s interests to their own, engaged in self dealing, failed to

disclose conflicts of interest, or made misrepresentations to achieve this end.

See Transcontinental Realty Investors, Inc., 251 S.W.3d at 894.         Avery’s

laundry list of alleged breaches of fiduciary duty instead compromises legal

malpractice complaints that Sankary has of Appellees. And a fee forfeiture is

not appropriate under these circumstances. Because Appellants failed to raise

a genuine issue of material fact to show that Appellees breached a fiduciary

duty to Avery, we hold that the trial court did not err by granting summary

judgment in favor of Appellees on Avery’s breach of fiduciary duty claim. See

Tex. R. Civ. P. 166a(i). We overrule this part of Appellants’ fifth issue.

      D.    Avery’s and Sankary’s Remaining Claims

                                      27
      In another part of their fifth issue, Appellants argue that the trial court

erred by granting summary judgment in favor of Appellees on the fraud, fraud

by nondisclosure, conspiracy to defraud, and negligent misrepresentation

claims.

            1.     Fraud, Fraud by Nondisclosure, and Conspiracy to Defraud

      The   elements    of   common     law   fraud   are   that   (1)   a   material

misrepresentation was made; (2) the representation was false; (3) when the

representation was made, the speaker knew it was false or made it recklessly

without any knowledge of the truth and as a positive assertion; (4) the

representation was made with the intention that it be acted upon by the other

party; (5) the party acted in reliance upon the representation; and (6) the party

suffered injury. Johnson & Higgins of Tex., Inc. v. Kenneco Energy, Inc., 962
S.W.2d 507, 524 (Tex. 1998).

      Fraud by nondisclosure is a subcategory of fraud. Schlumberger Tech.

Corp. v. Swanson, 959 S.W.2d 171, 181 (Tex. 1997). The elements of fraud

by nondisclosure require (1) a deliberate failure to disclose material facts, (2) by

one who had a duty to disclose such facts, (3) to another who was ignorant of

the facts and did not have an equal opportunity to discover them, (4) with the

intent the listener act or refrain from acting, and (5) the listener relies on the

nondisclosure resulting in injury. 7979 Airport Garage, L.L.C. v. Dollar Rent A

                                        28
Car Sys., Inc., 245 S.W.3d 488, 507 n.27 (Tex. App.—Houston [14th Dist.]

2007, pet. denied); see also Bradford v. Vento, 48 S.W.3d 749, 754–55 (Tex.

2001).

      The elements of a conspiracy-to-defraud claim are (1) a combination by

two or more persons; (2) an object to be accomplished; (3) a meeting of the

minds on the object or course of action; (4) one or more unlawful, overt acts;

and (5) damages as the proximate result. Massey v. Armco Steel Co., 652
S.W.2d 932, 934 (Tex. 1983); Hinojosa v. Ashcraft Law Firm, No. 11-03-

00145-CV, 2004 WL 1960217, at *3 (Tex. App.—Eastland Sept. 2, 2004, pet.

denied) (mem. op.); see also Schlumberger Well Surveying Corp. v. Nortex Oil

& Gas Corp., 435 S.W.2d 854, 857 (Tex. 1969) (including requirements that

persons undertake an intentional, concerted action to defraud). Civil conspiracy

is a derivative tort; that is, a defendant’s liability for conspiracy depends on

participation in some underlying tort for which the plaintiff seeks to hold at least

one of the named defendants liable. Tilton v. Marshall, 925 S.W.2d 672, 681

(Tex. 1996).    Recovery is not based on the conspiracy; it is based on an

underlying tort.    Lesikar v. Rappeport, 33 S.W.3d 282, 301–02 (Tex.

App.—Texarkana 2000, pet. denied).

      Appellants point to the following statements in their brief as evidence of

Appellees’ alleged fraud, fraud by nondisclosure, and conspiracy to defraud:

                                        29
•failing to make a full disclosure to Appellants of material facts
affecting Appellees’ representation;

•suppressing facts;

•failing to provide informed disclosure;

•failing to obtain informed consent;

•continuing to represent Ver Vynck, AWP, and Infinity with
interests adverse to Appellants;

•failing to inform Appellants that Ver Vynck owned a part of or all
of Avery and any business that competed with RDI;

•hiding the RDI injunction from Appellents;

•creating AWP and Infinity for Ver Vynck to compete with Avery;

•failing to take steps to prevent third party Ver Vynck from
accessing Avery’s funds or property in evading the RDI injunction;

•attempting to cover up Appellees’ misconduct;

•failing to keep Appellants adequately informed regarding
negotiations with attempted purchase by Standard, including
preventing the sale to Standard and making misrepresentations to
Standard;

•delaying in the disclosure of information which prevented the sale
of Avery to Standard;

•concealing or otherwise impairing the “verity,” legibility, or
availability of the RDI injunction, the Stock Purchase Agreement
and an Option Agreement with Fickling, corporate documents for
Infinity and AWP, the CSA, the assignment of the Avery vial
patent, and the acquisition of documents for Standard’s potential
purchase of Avery; and

                                30
      •not disclosing the existence, nature, implications, and possible
      adverse consequences of the Fickling Stock Purchase Agreement
      and Option Agreement, the formation and significance of AWP and
      Infinity, the CSA, and the ongoing representation of Ver Vynck and
      Ver Vynck’s interests contrary to Appellants’ interests.

      Considering the above statements and the extent of Appellants’ summary

judgment evidence, there is no evidence raising a genuine issue of material fact

that Appellees made to Appellants a material, false representation that was

known to be false or that was made recklessly and without any knowledge of

the truth. See Johnson & Higgins of Tex., Inc., 962 S.W.2d at 524. Because

Appellants failed to raise a genuine issue of material fact on one or more

challenged fraud elements, we hold that the trial court did not err by granting

summary judgment in favor of Appellees on Appellants’ fraud claims. See Tex.

R. Civ. P. 166a(i). We overrule this part of Appellants’ fifth issue.

      Appellants direct us to evidence apparently demonstrating that Appellees

failed to disclose various facts, but there is no summary judgment evidence that

Appellees deliberately failed to disclose the material facts with the intent that

Appellants act or refrain from acting based on the nondisclosed information.

See 7979 Airport Garage, L.L.C., 245 S.W.3d at 507 n.27.                Because

Appellants failed to raise a genuine issue of material fact on one or more

challenged fraud by nondisclosure elements, we hold that the trial court did not

err by granting summary judgment in favor of Appellees on Appellants’ fraud

                                       31
by nondisclosure claims. See Tex. R. Civ. P. 166a(i). We overrule this part of

Appellants’ fifth issue.

      Because there is no genuine issue of material fact on Appellants’ tort

claims, there is no genuine issue of material fact supporting Appellants’

derivative conspiracy to defraud claim. See Tilton, 925 S.W.2d at 681; Lesikar,
33 S.W.3d at 301–02.22 Because Appellants failed to raise a genuine issue of

material fact on one or more challenged conspiracy to defraud elements, we

hold that the trial court did not err by granting summary judgment in favor of

Appellees on Appellants’ conspiracy to defraud claims. See Tex. R. Civ. P.

166a(i). We overrule this part of Appellants’ fifth issue.

            2.     Negligent Misrepresentation

      An attorney can be subject to a negligent misrepresentation claim in a

case in which he is not subject to a legal malpractice claim.        F.E. Appling

Interests, 991 S.W.2d at 792. Under the tort of negligent misrepresentation,

liability is not based on the breach of duty a professional owes his or her clients

or others in privity, but on an independent duty owed to the nonclient based on

the professional’s manifest awareness of the nonclient’s reliance on the

      22
        … In any event, there is also no summary judgment evidence that
Appellees had a meeting of the minds to commit one or more unlawful, overt
fraudulent acts. See Massey, 652 S.W.2d at 934.

                                        32
misrepresentation and the professional’s intention that the nonclient so rely.

Id.   Thus, the elements of a negligent misrepresentation claim are (1) the

representation is made by a defendant in the course of his business or in a

transaction in which he has a pecuniary interest, (2) the defendant supplies

false information for the guidance of others in their business, (3) the defendant

did not exercise reasonable care or competence in obtaining or communicating

the information, and (4) the plaintiff suffers pecuniary loss by justifiably relying

on the representation. Fed. Land Bank Ass’n of Tyler v. Sloane, 825 S.W.2d
439, 442 (Tex. 1991); Grand Champion Film Prod., L.L.C. v. Cinemark USA,

Inc., 257 S.W.3d 478, 485 (Tex. App.—Dallas 2008, no pet.). For a negligent

misrepresentation, reliance must be justifiable. Ernst & Young, L.L.P. v. Pac.

Mut. Life Ins. Co., 51 S.W.3d 573, 577 (Tex. 2001).

       Appellants do not include a single record citation in their opening brief

directing us to evidence that they claim raises a genuine issue of material fact

to support their negligent misrepresentation claim. See Tex. R. App. P. 38.1(h)

(requiring that briefs contain a clear and concise argument for the contentions

made with appropriate citations to authorities and to the record). Nonetheless,

considering all of the evidence submitted by Appellants in their response to

Appellees’ motion for summary judgment, including the evidence detailed in the

bullet points immediately above, none of it raises a genuine issue of material

                                        33
fact that Appellees supplied Appellants with false information that Appellants

consequently justifiably relied on. See Sloane, 825 S.W.2d at 442. Appellants’

claims are instead mostly based upon Appellees’ alleged failures to disclose

information related to matters associated with Appellees’ rendering of services

for Ver Vynck, Avery, AWP, or Infinity. Because Appellants failed to raise a

genuine issue of material fact on one or more challenged negligent

misrepresentation elements, we hold that the trial court did not err by granting

summary    judgment     in   favor   of   Appellees   on   Appellants’   negligent

misrepresentation claims.     See Tex. R. Civ. P. 166a(i).      We overrule the

remainder of Appellants’ fifth issue.

      E.    Audio Cassette Tape Evidence

      In their sixth issue, Appellants argue that the trial court erred and abused

its discretion by overruling their objection to an audio cassette tape that

Appellees included in their summary judgment evidence. The tape contains a

recorded telephone conversation between Sankary and Ver Vynck. Appellants

contend that Appellees failed to properly authenticate the tape and failed to

show that the recording was accurate and that it had no changes, deletions, or

additions. Because we affirm the trial court’s grant of summary judgment in

favor of Appellees on no-evidence grounds, we hold that error, if any, in the

trial court’s overruling of Appellants’ objection to the tape was harmless. We

                                          34
do not consider Appellees’ summary judgment evidence submitted in support

of their traditional motion for summary judgment to arrive at our holdings. See

Tex. R. Civ. P. 166a(i); Tex. R. App. P. 44.1(a)(1). We overrule Appellants’

sixth issue.

                           IV. M OTION FOR N EW T RIAL

      In their seventh issue, Appellants argue that the trial court abused its

discretion by denying their motion for new trial. They contend that they “filed

their motion for new trial to bring the trial court’s attention to the errors

committed in granting the summary judgments.” Because we affirm the trial

court’s grant of summary judgment in favor of Appellees on all of Appellants’

claims, we hold that the trial court did not abuse its discretion by denying

Appellants’ motion for new trial. We overrule Appellants’ seventh issue.

      Because Appellants’ third, fifth, sixth, and seventh issues are dispositive,

we need not consider Appellants’ first, second, and fourth issues. See Tex. R.

App. P. 47.4.

                          V. P LEA TO THE J URISDICTION

      In their sole cross-point, Appellees argue that the trial court should have

sustained their plea to the jurisdiction. Because we affirm the trial court’s grant

of summary judgment in favor of Appellees on Appellants’ claims, we need not

consider Appellees’ argument complaining of the trial court’s failure to grant the

                                        35
plea to the jurisdiction. See id. Accordingly, we overrule Appellees’ cross-

point.

                                 VI. C ONCLUSION

         Having overruled Appellants’ third, fifth, sixth, and seventh issues,

Appellants’ dispositive issues, and having overruled Appellees’ cross-issue, we

affirm the trial court’s order granting summary judgment in favor of Appellees

on Appellants’ claims.

                                            PER CURIAM

PANEL: DIXON W . HOLMAN, J. (Senior Justice, Retired, Sitting by
Assignment); LIVINGSTON and DAUPHINOT, JJ.

DELIVERED: February 5, 2009

                                       36