Texas Real Estate Firm Prevails Over Malpractice Claim on Appeal

A commercial real estate firm and one of its attorneys won an appeal to reverse a jury trial’s verdict that made them liable for malpractice because they failed to timely assign someone as a responsible third party in a fraud lawsuit, a Texas appeals court ruled.

Real estate broker Henry S. Miller Commercial Co. was represented by Newsom, Terry & Newsom LLP in a lawsuit over damages from a property sale that fell through after buyer James Flaven disappeared. The company later sued the firm and attorney Steven Terry, claiming that they must pay the full $12 million in damages because Terry failed to designate Flaven as a responsible third-party until 24 days before the trial.

The case has been up to the Texas Court of Appeals, Fifth District, twice. This most recent time, the court recognized some of the language from the jury’s instruction as coming from its first opinion on this case, but said it was given to the jury out of context.

The excerpt said that the attorney didn’t have to prove that fraud was committed to designate the buyer as the responsible third party, making many jurors think that the attorney’s reasoning for designating the buyer so late in the case was flawed, the appeals court said wednesday

By explaining the instructions to specifically state what the attorney could have done, the trial court necessarily implied what it believed the attorney should have done, the court said. The Dallas appellate court therefore reversed the verdict and remanded the case.

The trial court said HSM takes nothing from Terry and the law firm because the commercial company had received a $6 million settlement with their insurance provider, but HSM appealed.

In the second trial, which only included questions about Terry and the law firm’s liability instead, the jury said Terry was liable for $6 million in exemplary damages and the law firm was liable for $1 million in exemplary damages, the court said.

The court signed a final judgment of over $15 million including actual damages, plus prejudgment interest.

Terry and the law firm appealed the result, contending that jury instructions improperly suggested how the jury should resolve the issues of his alleged negligence and gross negligence.

Terry argued that adding Flaven earlier would have caused a need to pursue discovery to support the designation.

Justice Amanda L. Reichek delivered the opinion. Justices Erin A. Nowell joined.

Justice Cory L. Carlyle dissented, saying that the trial judge followed the appellate court’s first opinion direction to avoid error.

Thompson, Coe, Cousins ​​& Irons LLP represented the law firm. Shields Legal Group PC and Clark Hill PLC represented HSM.

The case is Newsom v. Henry S. Miller Com. Co.,, Tex. App., 5th Dist., No. 05-20-00379-CV, 8/31/22.