Opinion

Opinion issued March 20, 2008

In The

Court of Appeals

For The

First District of Texas

NO. 01-06-00696-CV

DIXON FINANCIAL SERVICES, LTD. AND HYPERDYNAMICS

CORPORATION, Appellants

V.

GREENBERG, PEDEN, SIEGMYER & OSHMAN, P.C., GERALD

SIEGMYER, RON BEARDEN, AND R.F. BEARDEN ASSOCIATES, INC.,

Appellees

On Appeal from the 215th Judicial District Court

Harris County, Texas

Trial Court Cause No. 2001–06263A

MEMORANDUM OPINION ON REHEARING

Appellants, Dixon Financial Services, Ltd. and Hyperdynamics Corporation,

have filed a motion for en banc reconsideration of our opinion. We withdraw our

opinion of November 15, 2007 and substitute this opinion in its stead. Our

disposition and judgment remain unchanged. Because we grant rehearing and issue

a new opinion, appellants’ motion for en banc reconsideration of our prior opinion

is moot. See Brookshire Brothers, Inc. v. Smith , 176 S.W.3d 30, 40 (Tex.

App.—Houston [1st Dist.] 2004, pet. denied) (supp. op.); Butler v. State , 6 S.W.3d

636 , 637 n.1 (Tex. App.—Houston [1st Dist.] 1999, pet. ref’d).

The trial court granted summary judgment against appellants, Dixon Financial

Services, Ltd. (“Dixon Financial”) and Hyperdynamics Corporation

(“Hyperdynamics”), in favor of appellees, Greenberg, Peden, Siegmyer & Oshman,

P.C. (“Greenberg Peden”), Gerald Siegmyer (“Siegmyer”), Ron Bearden, and R.F.

Bearden Associates, Inc. (collectively, “Bearden”). The trial court then severed

appellants’ claims against appellees into a separate cause making the earlier

interlocutory summary judgment final and appealable. In two issues, appellants

contend that the trial court erred by granting summary judgment in appellees’ favor

and by granting the severance.

We affirm.

Background

On September 9, 1999, Bearden, Erin Oil Corporation, and Bill Knollenberg,

principal of Erin Oil (collectively “Erin Oil”), obtained an arbitration award against

Michael Watts, a securities broker, and Texas Capital Securities, the securities

brokerage firm for whom Watts worked. As part of the award, Bearden and Erin Oil

were awarded, jointly and severally, “140,000 shares of common stock and 200,000

warrants in Hyperdynamics.” In the arbitration proceeding, Greenberg Peden

represented Bearden, and the law firm of Johnson, Burnett, & Chang (“Johnson

Burnett”) represented Erin Oil.

On January 6, 2000, Johnson Burnett attorney James Chang sent a letter to

notify Hyperdynamics’s transfer agent, Fidelity Transfer Company, of the arbitration

award against Watts and Texas Capital Securities. Specifically, Chang wrote, in

relevant part,

[T]he purpose of this letter is to notify you in writing of such an

arbitration award and to demand that Fidelity Transfer Company

immediately cease and desist from transferring, conveying, or otherwise

delivering on the books of [Hyperdynamics] any shares of common

stock or other securities of [Hyperdynamics] that are legally or

beneficially owned, held, or in the name or custody of Texas Capital

and/or Watts or any of their respective affiliates or that are deposited in

any accounts maintained or managed by Texas Capital and/or Watts or

any of their respective affiliates.

On January 12, 2000, Chang sent another letter to Fidelity Transfer informing

Fidelity, “We have recently learned that some of [the] securities of [Hyperdynamics]

that our client is entitled to in accordance with the [arbitration award] are held or

deposited in an account in the name of Island Communications Investments, Ltd.”

Chang continued,

[T]he purpose of this letter is to demand in writing that Fidelity Transfer

Company immediately cease and desist from transferring, conveying, or

otherwise delivering on the books of [Hyperdynamics] any shares of

common stock or other securities of [Hyperdynamics] that are legally or

beneficially owned, held, or in the name or custody of Island

Communications Investments, Ltd.

Also on January 12, 2000, Bearden and Erin Oil filed a verified petition

(hereafter referenced as “the Watts litigation”) seeking confirmation of the arbitration

award and requesting injunctive relief “in aid thereof” against Texas Capital, Michael

Watts, and Hyperdynamics. Greenberg Peden attorney Gerald Siegmyer signed the

petition on behalf of Bearden, and Chang, who represented Erin Oil, signed the

petition’s verification.

The petition included the following allegations in support of injunctive relief:

[Bearden and Erin Oil] are the owners of certain brokerage accounts at

Texas Capital. The account numbers are 954666, 954682, and 062145.

Watts was the broker assigned to the accounts. The accounts are

supposed to contain 143,000 shares of HyperDynamics common stock,

and Warrants to purchase 200,000 additional shares of common

stock. . . .

. . . .

Watts has already admitted that, without authority to do so, he caused

some securities in the accounts to be sold and used to pay his personal

attorney. Hence, Watts and Texas Capital have already absconded with

some securities that should have been available to satisfy the [arbitration

award] and may very well do so again, if they have not already

liquidated the accounts.

. . . .

HyperDynamics is a publically traded corporation whose president,

chief executive officer, chief financial officer and principal individual

shareholder is Kent Watts, the brother of [Michael] Watts. [Michael]

Watts is listed in HyperDynamics’ [most recent] 10-K Report . . . as a

“consultant” to the company. . . .

At the arbitration hearing, the uncontested evidence showed that:

a.Watts had stated that he had removed shares of

HyperDynamics stock from [Bearden and Erin Oil’s]

accounts and sold them to pay his personal legal

fees.

b.Watts controlled at least two offshore Cayman

Island trusts which maintained brokerage accounts

at Texas Capital and for which Watts held trading

authorization. The accounts were denominated as

Island Communications Investments, Ltd. accounts,

and were numbered 954681 and 954836. Watts

transferred other shares from [Bearden and Erin

Oil’s] accounts into the Island Communications’

accounts and stated that he would transfer shares

and warrants of HyperDynamics into [Bearden and

Erin Oil’s] accounts; and

c.After Texas Capital ceased doing business, the

records of the Island Communications accounts

controlled by Watts had been removed from Texas

Capital’s file cabinet where they had been stored.

Watts had access to the file cabinet.

[Bearden and Erin Oil] now cannot locate their accounts, or the shares

or warrants of HyperDynamics that are supposed to be in the accounts.

Watts has openly represented to others that whatever assets he has are

located offshore and could never be reached by his creditors. It is

reasonable to suspect that Watts and/or Texas Capital may cause any

assets otherwise subject to execution in Texas to be moved offshore to

hide, delay or defraud [Bearden and Erin Oil]. [Bearden and Erin Oil]

have reason to believe that the Island Communications accounts contain

some 574,100 shares HyperDynamics stock.

Bearden and Erin Oil then alleged that “[t]here is nothing to stop Watts and

Texas Capital from absconding with securities before [Bearden and Erin Oil] are able

to carry out and execute the [arbitration award] . . . .” (Emphasis in original.) To

support their request for a temporary restraining order, Bearden and Erin Oil asserted

that “Defendants should be prevented from transferring, conveying, assigning, selling

or otherwise disposing of any securities of Hyperdynamics in which Texas Capital,

Watts, Island Communications, or [Bearden and Erin Oil] hold a legal or beneficial

interest . . . .”

On January 13, 2000, the trial court in the Watts litigation signed a temporary

restraining order, requiring that the defendants in that litigation and their “agents,

representatives and persons acting in concert with any or all of them” to

desist and refrain from directly or indirectly transferring, conveying,

assigning, selling, buying, disposing of, or otherwise delivering any

securities of HyperDynamics to any other party or parties that are legally

or beneficially owned by, or in the name of, Island Communications,

Watts and/or Texas Capital and that they be restrained from transferring

any securities out of the accounts that are or were previously account

nos. 954666, 954682, 062145, 954681 and 954836.

By letter dated January 13, 2000, Chang forwarded to Fidelity Transfer a copy

of the temporary restraining order. Chang informed Fidelity Transfer that Watts,

Texas Capital, and Hyperdynamics “are enjoined and prohibited from directly or

indirectly transferring or otherwise delivering securities of [Hyperdynamics] that are

owned, held, or in the name or custody of Texas Capital Securities, Inc., Michael

E. Watts, and/or Island Communications Investment, Ltd. ” (Emphasis in original.)

Chang pointed out as follows: “Please note that the TRO is specific in scope and is

not intended to prohibit the transfer, sale, and delivery of any of the securities of

[Hyperdynamics] by any other brokers, clearing agents, buyers, or sellers.”

On January 21, 2000, the trial court then signed an “Order Continuing

Temporary Restraining Order,” which contained the same restraints as described in

the original temporary restraining order except that Hyperdynamics was no longer

subject to those restrictions. Hyperdynamics was, however, restrained from

(1) permitting Michael Watts to exercise any warrant of

HyperDynamics, (2) knowingly allow[ing] Michael Watts to transfer

any warrant of HyperDynamics to a third-party who intends to exercise

it, (3) knowingly allowing Michael Watts to sell transfer, pledge, assign,

whether for value or not, (i) any share of HyperDynamics owned by him

of which it has actual knowledge, or (ii) any shares which are registered

in Michael Watts’ name, or in the name of Island Communications and

where the attempted conveyance is being made from Texas Capital

Scurities account nos. 954666, 95468, 062145, 9546881, and 954836.

Bearden and Erin Oil entered into a settlement agreement with Hyperdynamics

in the Watts litigation on February 4, 2000. Bearden and Erin Oil agreed to dismiss

Hyperdynamics from the suit, and Hyperdynamics agreed that it would not allow

Michael Watts “to sell, transfer, assign or exercise any warrant or option to purchase

any securities of HyperDynamics.”

On February 7, 2000, Chang e-mailed Fidelity Transfer requesting that it

provide him with information regarding the Hyperdynamics stock. In this regard,

Chang inquired,

[D]o you have and can you give me any account information regarding

the shares of [Hyperdynamics] held in the name of Island

Communications Investments, Ltd.? We would like account information

with regard to the following account numbers which were initially

established with Texas Capital [and owned by Bearden and Erin

Oil] . . .

Chang listed the Texas Capital account numbers and then inquired, “[A]re any

shares of Hyperdynamics issued in the name of Island Communications traceable to

the foregoing account numbers?” A handwritten notation on the hard copy of the e-mail indicated that Fidelity Transfer could not provide the requested account

information.

On February 9, 2000, Chang spoke with Fidelity Transfer’s attorney. The

attorney informed Chang that Kent Watts, principal of Hyperdynamics, had requested

that 575,500 shares of Hyperdynamics stock, evidenced by certificate numbers 1229,

1230, 1231, and 1232, and being held in Island Communications’s name, be

transferred to Dixon Financial. In a memo to the file, Chang noted that he had

informed Fidelity Transfer’s attorney that “there were adverse claimants to those

shares held in the name of Island and that [Hyperdynamics] may be prohibited from

transferring any shares in the name of Island.”

On February 2, 2001, Dixon Financial filed the instant suit against

Hyperdynamics, Fidelity Transfer, Greenberg Peden, Siegmyer, Bearden, Erin Oil,

Knollenberg, James Chang, Johnson Burnett, and two other partners of Johnson

Burnett. Dixon Financial alleged that it had owned “a significant number” of shares

of Hyperdynamics stock of which “certain shares” were “restricted shares” that

“could not be sold until the restriction expired on January 25, 2000.” Dixon Financial

alleged that it had requested Hyperdynamics to “issue unrestricted share certificates

when the restriction expired” and that Hyperdynamics had instructed Fidelity

Transfer “to cancel the restrictions” on the shares, “certificate nos. 1229, 1230, 1231,

and 1232 (representing 574,5000 shares) and issue unrestricted certificates.”

Dixon Financial alleged that it had intended “to sell these unrestricted shares

immediately” and that it was prevented from doing so by the named defendants.

Dixon Financial asserted that Bearden, Erin Oil, and their respective attorneys,

particularly, Chang, Johnson Burnett, Siegmyer, and Greenberg Peden, acting as co-conspirators, prevented Hyperdynamics from transferring timely the unrestricted

shares to Dixon Financial. According to Dixon Financial, “[t]he conspiratorial

conduct was performed in a[n] effort to gain possession of Hyperdynamics stock

which they could use to pay the arbitration award [against Watts and Texas Capital]

to the damage of Dixon.”

Dixon Financial asserted that Chang and his co-conspirators had falsely

claimed and misrepresented that Dixon Financial’s stock shares held in the name of

Island Communications were subject to the arbitration award obtained by Bearden

and Erin Oil. Specifically, Dixon Financial alleged that Chang had misrepresented

to Fidelity on January 6, 2000 that “the 574,500 shares of stock of Hyperdynamics

held in the name of Island Communications was in fact property of Chang and

Siegmyer’s clients and the subject of an arbitration award.” Dixon Financial further

alleged that, based on the misrepresentation, Fidelity Transfer had “placed a ‘hold’

on the 574,500 shares of Hyperdynamics stock” owned by Dixon Financial thereby

preventing Dixon Financial “from exercising any ownership rights to the stock,

including its ability to sell the stock at a time when the stock was trading large

volume at a higher price.”

Dixon Financial also claimed that “[t]he defendants intentionally and

knowingly misrepresented facts to the court in order to obtain the Temporary

Restraining Order” on January 12, 2000. Dixon Financial asserted that the restraining

order was “sought and obtained” by “using a false and perjurious affidavit signed by

Chang.” Specifically, Dixon Financial contended that Chang “committed aggravated

perjury when he falsely swore he possessed personal knowledge” of the facts stated

in the application on which the temporary restraining order was obtained.

Dixon Financial further alleged that Chang, “with the knowledge and consent

of his co-conspirators [including Bearden, Greenberg Peden, and Siegmyer],

intentionally and knowingly on numerous times contacted Fidelity [Transfer] . . . and

wrongfully advised the transfer agent” that the temporary restraining order

“prohibited Fidelity [Transfer] from converting the restricted shares and issuing the

unrestricted shares to Dixon [Financial]” and that “the unrestricted shares which were

to be issued to Dixon [Financial] were the same shares referenced in the Arbitration

Award and the Temporary Restraining Order.”

Based on these factual allegations, Dixon Financial asserted causes of action

against Bearden, Greenberg Peden, Siegmyer, Erin Oil, Chang, and Johnson Burnett

for conversion, abuse of process, tortious interference, and fraud. Dixon Financial

claimed that the defendants were jointly and severally liable based on theories of

conspiracy, agency, and concert of action.

Dixon Financial further alleged that, when Fidelity Transfer finally transferred

the stock to it, the stock “had dropped from a high in January 2000 of $7.75 per share

when Dixon Financial was entitled to receive the shares to less than $2.00 resulting

in a loss [to Dixon Financial] in excess of $3,000,000.”

Hyperdynamics also filed a cross-claim against Bearden, Greenberg Peden,

Siegmyer, Erin Oil, Chang, and Johnson Burnett alleging claims for negligent

misrepresentation, tortious interference, abuse of process, malicious prosecution of

a civil suit, and contribution. Like Dixon Financial’s claims, Hyperdynamics’s cross-claims were premised on allegations that Chang had misrepresented to the trial court

and to Fidelity Transfer the extent to which the arbitration award applied to

Hyperdynamics’s stock held in the name of Island Communications.

Hyperdynamics also asserted a cross-claim for breach of contract.

Hyperdynamics asserted that the defendants breached the February 4, 2000 settlement

agreement between it, Erin Oil, and Bearden. Hyperdynamics claimed that, contrary

to the terms of the settlement agreement, the defendants continued to interfere with

the transfer of its stock to Dixon Financial after the settlement agreement was signed.

Greenberg Peden and Siegmyer filed motions for summary judgment asserting

that Dixon Financial had no cause of action against them, as a matter of law, for

conduct undertaken in the representation of a client. The attorneys based the motions

for summary judgment on Dixon Financial’s pleadings. The motions were not

supported by summary judgment evidence. Dixon Financial responded by offering

evidence to demonstrate that the attorneys engaged in “illegal” conduct outside the

protections of the claimed privilege. Concomitantly, Bearden filed a motion for

summary judgment contending that, as a matter of law, it could not be liable for the

conduct of its attorneys.

Greenberg Peden, Siegmyer, Chang, and Johnson Burnett also filed a joint

motion for summary judgment against Hyperdynamics. Among the grounds asserted

in the joint motion for summary judgment was a no-evidence challenge that

Hyperdynamics could present no evidence of damages, an essential element for each

of its cross-claims.

The trial court granted the motions for summary judgment. After the trial court

severed Dixon Financial’s and Hyperdynamics’s claims against Greenberg Peden,

Siegmyer, and Bearden, this appeal followed.

Summary Judgment

In their second issue, appellants contend that the trial court erred by granting

summary judgment in favor of Greenberg Peden, Siegmyer, and Bearden based on the

summary judgment ground that Greenberg Peden was immune from liability because

the complained-of conduct was undertaken in the representation of a client.

Appellants generally recognize the existence of such qualified privilege, but contend

that the summary judgment record demonstrates that the conduct alleged in support

of their tort claims was outside the scope of this privilege. We first determine

whether Greenberg Peden properly obtained summary judgment on appellants’ tort

claims based on this privilege.

A. Applicable Summary Judgment Standard

As movants for summary judgment, Greenberg Peden had to negate the

existence of genuine issues of material fact and establish their right to judgment as

a matter of law. Gibbs v. Gen. Motors Corp ., 450 S.W.2d 827, 828 (Tex. 1970);

Higbie Roth Const. Co. v. Houston Shell & Concrete , 1 S.W.3d 808, 811 (Tex.

App.—Houston [1st Dist.] 1999, pet. denied). A defendant can prevail by summary

judgment by establishing that the law does not recognize the cause of action for

which the plaintiff seeks to recover. Peeler v. Hughes & Luce , 909 S.W.2d 494 ,

497–98 (Tex. 1995); Higbie Roth Const. , 1 S.W.3d at 811 . Thus, as in this case, a

movant may file a summary judgment motion that, instead of proving or disproving

facts, shows the non-movant has no viable cause of action based on the non-movant’s

pleadings.

Id.

To determine whether a cause of action exists under the circumstances pleaded,

the court must assume that all of the facts alleged by the non-movant are true and

indulge all reasonable inferences in the light most favorable to the non-movant. Id .

at 811–12. Though it must construe the non-movant’s pleadings broadly and indulge

all inferences in its favor in reviewing the summary judgment, a court is not required

to accept, as true, any legal conclusions stated in the pleadings. Id. at 812 .

B. Legal Principles Governing an Attorney’s Immunity from Suit

The public has an interest in “loyal, faithful and aggressive representation by

the legal profession.” Bradt v. West , 892 S.W.2d 56, 71 (Tex. App.—Houston [1st

Dist.] 1994, writ denied). Texas law authorizes attorneys to “practice their

profession, to advise their clients, and to interpose any defense or supposed defense,

without making themselves liable for damages.” Kruegel v. Murphy , 126 S.W. 343 ,

345 (Tex. Civ. App.—Dallas 1910, writ ref’d); see Renfroe v. Jones & Assoc ., 947

S.W.2d 285, 287 (Tex. App.—Fort Worth 1997, writ denied). The purpose behind

this well-established rule is to allow an attorney to fulfill his duty and zealously

represent his clients without subjecting himself to the threat of liability. See Bradt ,

892 S.W.2d at 71 . An attorney who could be held liable for statements made or

actions taken in the course of representing his client would be forced constantly to

balance his own potential exposure against his client’s best interest. Alpert v. Crain ,

Caton & James, P.C. , 178 S.W.3d 398, 405 (Tex. App.—Houston [1st Dist.] 2005,

pet. denied). Such a result would act as a severe and crippling deterrent to the ends

of justice because a litigant might be denied a full development of his rights. See

Bradt , 892 S.W.2d at 71 . To promote zealous representation, courts have held that

an attorney has “qualified immunity” from civil liability, with respect to nonclients,

for actions taken in connection with representing a client in litigation. Alpert , 178

S.W.3d at 405 .

This qualified immunity generally applies even if conduct is wrongful in the

context of the underlying lawsuit. Id. For example, a third party has no independent

right of recovery against an attorney for filing motions in a lawsuit, even if frivolous

or without merit, although such conduct is sanctionable or contemptible as enforced

by the statutory or inherent powers of the court. Id. (citing West , 892 S.W.2d at 72 ).

Courts have refused to acknowledge an independent cause of action in such instances

“because making motions is conduct an attorney engages in as part of the discharge

of his duties in representing a party in a lawsuit.” Id. (citing West , 892 S.W.2d at 72 ).

If an attorney’s conduct violates his professional responsibility, the remedy is public,

not private. Renfroe , 947 S.W.2d at 287 .

This rule of qualified immunity focuses on the type of conduct in which the

attorney engages rather than on whether the conduct was meritorious in the context

of the underlying lawsuit. Id. at 288 . “[I]t is the kind –not the nature –of conduct that

is controlling.” Taco Bell Corp. v. Cracken , 939 F. Supp. 528 , 532–33 (N.D. Tex.

1996) (emphasis in original). Thus, an attorney cannot be held liable to a third party

for conduct that requires “the office, professional training, skill, and authority of an

attorney.” Miller v. Stonehenge/Fasa-Texas, JDC, L.P. , 993 F. Supp. 461, 464 (N.D.

Tex. 1998) (citing Taco Bell , 939 F. Supp. at 532 ). “Incorrect, meritless, and even

frivolous conduct is not actionable if it satisfies this standard.” Id .

An attorney’s protection from liability is not boundless. An attorney can be

held liable by a third-party for actions that are not part of the discharge of his duties

to his client. See Bradt , 892 S.W.2d at 72 . That is, the law does not provide absolute

immunity for every tort committed by a lawyer that may be tangentially related to his

professional role or which may occur during litigation. See id. ; Miller , 993 F. Supp.

at 464 . By way of extreme example, an attorney who assaults the opposing party or

lawyer during trial could be held liable for action. See Bradt , 892 S.W.2d at 72 .

In addition, a cause of action may exist against an attorney who knowingly

commits a fraudulent act outside the scope of his legal representation of the client.

Alpert , 178 S.W.3d 406 (citing Likover v. Sunflower Terrace II, Ltd. , 696 S.W.2d

468, 472 (Tex. App.—Houston [1st Dist.] 1985, no writ)). If a lawyer participates

independently in fraudulent activities, his action is “foreign to the duties of an

attorney.” Id. (citing Likover , 696 S.W.2d at 472 (quoting Poole v. Houston & T.C.

Ry. Co. , 58 Tex. 134, 137 (1882)). Moreover, attorneys may also be liable to

nonclients for negligent misrepresentation, under certain circumstances, despite the

absence of a general negligence duty to nonclients. See McCamish, Martin, Brown

& Loeffler v. F.E. Appling Interests , 991 S.W.2d 787 , 791–94 (Tex. 1999).

C. Analysis of Immunity Claim

Appellants contend that summary judgment was improper because they alleged

and showed, through their summary judgment evidence, that Greenberg Peden

engaged in fraudulent conduct. Appellants’ tort claims rest on the premise that, in an

effort to satisfy their clients’ arbitration award, Greenberg Peden, primarily through

the conduct of alleged co-conspirator Chang, intentionally misrepresented the scope

of the arbitration award to obtain the Hyperdynamics stock owned by Dixon

Financial. The specific conduct cited by appellants is (1) Chang’s signing of the

verification in support of the petition for the temporary restraining order when Chang

did not have personal knowledge of the facts stated in the petition and (2) the

communications made by the attorneys, primarily by Chang, before and after the

issuance of the temporary restraining order, to Fidelity Transfer, which appellants

contend contained misrepresentations that all of the stock held in the name of Island

Communications was subject to the arbitration award when, in fact, the attorneys

knew only part of the stock was subject to the award.

To determine whether Chang’s conduct (and therefore Greenberg Peden’s) was

privileged, we focus on whether the conduct concerned the discharge of Chang’s

duties to his client. See Bradt , 892 S.W.2d at 72 . Here, the signing of the verification

and the filing of the petition to obtain the temporary restraining order to secure his

client’s arbitration award was conduct in which an attorney engages to discharge his

duties to his client. See id. at 72 . As mentioned, the focus is on the kind–not the

nature–of the attorney’s conduct. Taco Bell Corp. , 939 F. Supp. at 532–33. The

signing and filing of an application for a temporary restraining order to aid in the

recovery of monies owed to a client under an arbitration award is not conduct

“foreign to the duties of an attorney” and is the kind of conduct protected from

liability. See id ; see also Renfroe , 947 S.W.2d at 288 (holding no cause of action

against attorney for his participation in filing writ of garnishment with inaccurate

facts); McCampbell v. KPMG Peat Marwick , 982 F. Supp. 445, 448 (N.D. Tex. 1997)

(holding that plaintiff could not recover against attorney representing opposing party

in previous suit based on attorney’s allegedly false statements in affidavit and motion

for new trial filed in that suit).

Similarly, the communications between Chang and Fidelity Transfer were acts

taken and communications made to facilitate the rendition of legal services by Chang

to his client. See Alpert , 178 S.W.3d at 408 . Even when taken as true and construed

broadly, Dixon Financial’s petition alleges that the underlying purpose of the

communications was for the attorneys to secure satisfaction of their clients’

arbitration award. Again, such action is the kind of conduct in which an attorney

engages when discharging his duties to his client. Whether the substance of the

communications was incorrect or overstated does not change the kind of conduct in

which Chang engaged. As attorneys representing parties given an arbitration award,

Chang, his firm, and Greenberg Peden were entitled to advance their clients’ positions

and pursue satisfaction of the arbitration award without fear of personal liability.

Characterizing an attorney’s action in advancing his client’s rights as fraudulent does

not change the rule that an attorney cannot be held liable for discharging his duties

to his client. See Lewis v. Am. Exploration Co. , 4 F. Supp.2d 673, 679 (S.D. Tex.

1998) (citing Taco Bell , 939 F. Supp. 533 ). A plaintiff, such as Dixon Financial or

Hyperdynamics, should not be allowed to “salvage an otherwise untenable claim

merely by characterizing it as tortious.” Miller , 993 F. Supp. at 464 .

We recognize that this Court, in Likover v. Sunflower Terrace II, Ltd. , upheld

a jury’s award against an attorney based on conspiracy to defraud. 696 S.W.2d 468,

473 (Tex. Civ. App.—Houston [1st Dist.] 1985, no writ). However, Likover , unlike

our later decision in Bradt , involved allegations that an attorney assisted clients in

fraudulent business schemes and did not involve conduct taken in the context of

litigation or another adversarial proceeding. See Miller , 993 F. Supp. at 465 (noting,

“One distinction is that Bradt and its progeny involve actions taken in the context of

litigation, such as filing motions or making legal arguments. The other cases

[including Likover ] typically involve lawyers assisting their clients in perpetuating

fraudulent business schemes.”).

Here, the conduct cited by appellants occurred in an adversarial context.

Specifically, the attorneys engaged in the complained-of conduct as part of post-arbitration proceedings, an adversarial process similar to litigation. Much of the cited

conduct occurred as part of the initiation of, or subsequent to, the litigation filed to

confirm and to recover the arbitration award. Thus, the attorneys’ conduct alleged in

this case is distinct from that in Likover .

Appellants contend that the trial court’s decision to grant summary judgment

on Hyperdynamics’s negligent misrepresentation claim is contrary to the holding of

McCamish, Martin, Brown & Loeffler v. F.E. Appling Interests , 991 S.W.2d 787

(Tex. 1999). In McCamish , the supreme court held that, under certain limited

circumstances, a nonclient may bring a Restatement of Torts section 552 negligent

misrepresentation claim against an attorney.

991 S.W.2d 787 , 793–795 (Tex. 1999).

The McCamish court explained that, with respect to a section 552 suit between a

nonclient and an attorney, “[a] typical negligent misrepresentation case involves one

party to a transaction receiving and relying on an evaluation, such as an opinion

letter, prepared by another party’s attorney.” Id. at 793 . For example, in McCamish ,

a nonclient brought a section 552 claim against an attorney based on the attorney’s

representations indicating that a settlement agreement complied with a federal statute.

Id. at 789–90.

Here, Hyperdynamics did not allege that appellees, through Chang, conveyed

a legal opinion or evaluation to Fidelity Transfer regarding the Hyperdynamics stock;

rather, it alleged that appellees contacted Fidelity Transfer and asserted an ownership

interest in Hyperdynamics’s stock based on the arbitration award. Unlike the

representations mentioned in McCamish , the ones at issue here were objective, non-evaluative claims with respect to the stock.

The McCamish court also pointed out that the nature of the relationship

between the attorney and the nonclient is significant when determining whether a

nonclient may successfully bring a section 552 claim against an attorney. In this

regard, the court wrote,

Generally, courts have acknowledged that a third party’s reliance on an

attorney’s representation is not justified when the representation takes

place in an adversarial context. This adversary concept reflects the

notion that an attorney, hired by a client for the benefit and protection

of the client’s interests, must pursue those interests with undivided

loyalty (within the confines of the Texas Disciplinary Rules of

Professional Conduct), without the imposition of a conflicting duty to

a nonclient whose interests are adverse to the client. Because not every

situation is clearly defined as adversarial or nonadversarial, the

characterization of the inter-party relationship should be guided, at least

in part, by the extent to which the interests of the client and the third

party are consistent with each other.

Id. at 794 (internal citations and quotations omitted). Here, Hyperdynamics’s cross

claim, asserting a section 552 claim, indicates that the interests of appellees and

Fidelity Transfer were not consistent. The pleading alleges that appellees’

representations interfered with Fidelity Transfer’s duty to issue timely unrestricted

stock certificates of Hyperdynamics stock to Dixon Financial, as directed. Based on

Fidelity Transfer’s alleged failure to issue the stock certificates timely,

Hyperdynamics’s cross claim reflects that it also sued Fidelity Transfer. Hence, the

cross claim indicates that appellees’ and Fidelity Transfer’s interests were not aligned

and can most accurately be characterized as adverse.

Hyperdynamics’s cross claim further indicates that Fidelity Transfer’s reliance

on appellees’ representations was not “justifiable,” as required. See id.

Hyperdynamics alleged in its cross claim that “Fidelity Transfer knew or should have

known that the Dixon shares were certificated and could not have been shares in

which [appellees] held an interest.” Though it contends that Fidelity Transfer relied

on appellees’ representations regarding the stock, Hyperdynamics does not allege that

the reliance was reasonable or justifiable; rather, its allegations indicate that Fidelity

Transfer’s reliance was not justifiable.

In sum, we disagree with appellants that an analysis under McCamish requires

us to reverse the trial court’s summary judgment with respect to Hyperdynamics’s

negligent misrepresentation claim. The subject representations in this case are not

evaluative type representations like those described in McCamish . Moreover, given

the allegations in Hyperdynamics’s cross-claim, Fidelity Transfer did not justifiably

rely on appellees’ alleged misrepresentations .

Appellants also assert that immunity should not apply because Dixon Financial

was not a party in the Watts litigation and “most of Hyperdynamics’s claims are

derivative of Dixon’s.” This argument has been considered and rejected by other

courts. In Miller , the court wrote,

It seems to the Court that this is a distinction without a difference. The

rationale for the rule insulating a lawyer from liability for conduct that

requires “the office, professional training, skill, and authority of an

attorney” is equally applicable to actions brought by third-parties who

did not participate in the underlying litigation. The threat of liability

from any source could potentially deter a lawyer from exercising

independent professional judgment on behalf of her client.

993 F. Supp. at 464 at n.2; see also Collin County v. Johnson , No. 05-99-00034-CV,

1999 WL 994039 , at *4 (Tex. App.—Dallas Nov. 3, 1999, no pet.) (not designated

for publication) (rejecting assertion that attorney’s conduct was actionable because

plaintiff was not party to underlying litigation). We agree with the reasoning in

Miller. Whether a plaintiff who institutes the suit against an attorney was also a party

in the underlying litigation is not a determinative factor in deciding whether the

attorney’s conduct is actionable.

Construing the pleadings and summary judgment evidence liberally in favor

of appellants, the acts alleged by appellants constitute conduct undertaken by

attorneys to assist a client in securing and recovering an arbitration award. Such

conduct is the kind of conduct in which an attorney engages in discharging his duties

to his client. Labeling the conduct as fraudulent does not automatically make it

actionable and the attorneys liable for tort damages. We conclude that Greenberg

Peden, Siegmyer, and Bearden were, as a matter of law, not liable for the conduct

alleged in this case. Accordingly, we hold that the trial court properly granted

summary judgment in favor of Greenberg Peden, Siegmyer, and Bearden against

Dixon Financial and against Hyperdynamics with regard to its tort claims.

D. Hyperdynamics’s Breach of Contract Claim

In the second issue, Hyperdynamics also challenges the trial court’s summary

judgment against it on its breach of contract cross-claim. In its opening brief,

Hyperdynamics contends that “there can be no privilege to breach settlement

agreements[,] and the trial court erred in implicitly holding that there was.” In other

words, Hyperdynamics contends that, even if viable, the attorney privilege discussed

above does not act to preclude its breach of contract cross-claim.

The joint motion for summary judgment as to Hyperdynamics’s cross-claims

was both a traditional motion for summary judgment, based on the attorney privilege,

and a no-evidence motion for summary judgment. The no-evidence motion for

summary judgment asserted that “Hyperdynamics has offered no evidence of any

actual damages suffered.” (Emphasis in original.) The no-evidence motion for

summary judgment asserted that “damages” was an essential element of each of

Hyperdynamics’s cross-claims, which necessarily included Hyperdynamics’s breach

of contract claim. Greenberg Peden and Bearden asserted that Hyperdynamics could

produce no evidence that it suffered damages as a result of the alleged breach of

contract because the damages claimed by Hyperdynamics for that cause of action

were damages allegedly suffered by Dixon Financial, not Hyperdynamics.

When the trial court does not specify the basis for its summary judgment, as

here, the appealing party must show it is error to base it on any ground asserted in the

motion. Star-Telegram, Inc. v. Doe , 915 S.W.2d 471, 473 (Tex. 1995). If summary

judgment may have been rendered, properly or improperly, on a ground not

challenged, the judgment must be affirmed. Ellis v. Precision Engine Rebuilders ,

Inc. , 68 S.W.3d 894, 898 (Tex. App.—Houston [1st Dist.] 2002, no pet.) (citing

Holloway v. Starnes , 840 S.W.2d 14, 23 (Tex. App.—Dallas 1992, writ denied)).

In its opening brief, Hyperdynamics did not challenge this ground with respect

to its breach of contract claim. Nonetheless, the summary judgment against

Hyperdynamics on its breach of contract claim may have been granted, properly or

improperly, on this unchallenged ground. See id . Because it does not negate the

no-evidence ground with regard to damages, we hold that Hyperdynamics did not

meet its appellate burden to show that the trial court erred in granting summary

judgment on its breach of contract claim.

See id. ; see also Bynum v. Prudential

Residential Servs., Ltd. P’shp , 129 S.W.3d 781, 795 (Tex. App.—Houston [1st Dist.]

2004, pet. denied) (following Ellis ).

We hold that the trial court properly granted summary judgment in favor of

Greenberg Peden, Siegmyer, and Bearden on all of Dixon Financial’s and

Hyperdynamics’s claims.

We overrule appellants’ second issue.

Severance of Dixon Financial’s and Bearden’s Claims

In their first issue, Dixon Financial and Hyperdynamics contend that the trial

court erred by severing their claims against Greenberg Peden, Siegmyer, and Bearden

(referred to as “appellees” for purposes of this issue) from the remainder of the case.

As pointed out by appellees, Dixon Financial has waived its right to complain

about the severance on appeal because it did not object to the severance in the trial

court . Guerra v. Texas Dep’t of Protective & Regulatory Servs. , 940 S.W.2d 295,

299 (Tex. App.—San Antonio 1997, no pet.); see Tex. R. App. P. 33.1. For this

reason, only the severance of Hyperdynamics’s claims is at issue.

Rule 41 of the Texas Rules of Civil Procedure provides that “[a]ny claim

against a party may be severed and proceeded with separately.” Tex. R. Civ. P. 41.

We will not reverse a trial court’s order severing a claim unless the trial court abused

its discretion. Guar. Fed. Sav. Bank v. Horseshoe Op. Co. , 793 S.W.2d 652, 658

(Tex. 1990).

A claim is properly severable if (1) the controversy involves more than one

cause of action, (2) the severed claim is one that would be the proper subject of a

lawsuit if independently asserted, and (3) the severed claim is not so interwoven with

the remaining action that they involve the same facts and issues. Id . The Supreme

Court of Texas has explained that avoiding prejudice, doing justice, and increasing

convenience are the controlling reasons to allow a severance. F.F.P. Operating

Partners, L.P. v. Duenez , No. 02-0381, 2007 WL 1376357, at *11 (Tex. May 11,

2007).

Given that the severance of Dixon Financial’s claims against appellees must

remain undisturbed due to the lack of objection in the trial court, we cannot conclude

that the trial court abused its discretion by severing Hyperdynamics’s claims against

appellees. The record shows that Hyperdynamics’s claims are primarily derivative

of, or closely aligned with, Dixon Financial’s claims against appellees.

Hyperdynamics’s cross-claims against appellees are “interwoven with” Dixon

Financial’s claims against appellees, not with the remaining action. For this reason,

severance of Hyperdynamics’s cross-claims against appellees, along with Dixon

Financial’s claims, served to avoid prejudice, to do justice, and to increase

convenience. See id. Thus, we cannot say that the trial court abused its discretion by

severing Hyperdynamics’s claims against appellees.

We overrule appellants’ first issue.

Conclusion

We affirm the judgment of the trial court.

Laura Carter Higley

Justice

Panel consists of Justices Taft, Hanks, and Higley.