Opinion

Opinion issued February 18, 2010

In The

Court of Appeals

For The

First District of Texas

NO. 01-07-00233-CV

__________

DIXON FINANCIAL SERVICES, LTD. AND HYPERDYNAMICS

CORPORATION, Appellants

V.

JAMES CHANG, NICK H. JOHNSON, RILEY L. BURNETT, JR.,

JOHNSON, AND BURNETT & CHANG, L.L.P., Appellees

On Appeal from the 215th Judicial District Court

Harris County, Texas

Trial Court Cause No. 2001–06263

OPINION DISSENTING IN PART

The majority errs in holding that an attorney, “based on qualified immunity,”

cannot be held liable, as a matter of law, for fraudulently misrepresenting to a stock

transfer agent that the attorney’s client, pursuant to an arbitration award, had

ownership rights to shares of stock which were, in fact, wholly owned by another.

The majority’s holding extends qualified immunity for attorneys beyond its logical

bounds and contradicts the Texas Supreme Court’s express holding that an attorney

may be held liable for negligent misrepresentations made to a non-client. See

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

788–95 (Tex. 1999) (applying Restatement (Second) of Torts § 552).

Accordingly, I respectfully dissent from the portion of this Court’s judgment

affirming the trial court’s summary judgment against appellant, Dixon Financial

Services, Ltd. (“Dixon”), in its lawsuit against appellees, James Chang, Nick Johnson,

Riley Burnett, and Johnson, Burnett & Chang, L.L.P. (“JBC”) . I otherwise join the

remainder of the majority opinion and this Court’s judgment.

Factual and Procedural Background

In their third amended original petition, appellants, Dixon and Hyperdynamics

Corporation (“Hyperdynamics”), allege that appellees, Chang, Johnson, Burnett, and

JBC , while representing Erin Oil Exploration, Inc. (“Erin Oil”), contacted Fidelity

Transfer Company (“Fidelity”) and misrepresented that “574,500 shares of

Hyperdynamics stock . . . [were] in fact the property of [Erin Oil] and the subject of

an arbitration award.” However, Chang knew that “at most, only 60,000 shares of

Hyperdynamics stock . . . could be owned by any of the parties to that litigation.”

Relying on Chang’s misrepresentations, Fidelity placed a “hold” on all 574,500

shares of Dixon’s Hyperdynamics stock, which prevented Dixon “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.” Specifically, Dixon and

Hyperdynamics allege that Dixon had intended to sell its Hyperdynamics stock in

January 2000, when the stock was worth approximately $4.45 million. Dixon was

able to sell its stock only after “Chang and his co-conspirators admitted to Fidelity

that the stock truly belonged to Dixon” and its value had dropped to less than $1.15

million.

In their summary judgment motion, Chang, Johnson, Burnett, and JBC asserted

that all of Dixon’s “causes of action should be dismissed as barred by absolute

privilege: an attorney’s conduct undertaken in the context of litigation is not

actionable.” The trial court granted summary judgment against Dixon and in favor

of Chang, Johnson, Burnett, and JBC.

Qualified Immunity In its first issue, Dixon argues that the trial court erred in granting summary

judgment in favor of Chang, Johnson, Burnett, and JBC because they do not, as a

matter of law, enjoy qualified immunity for fraudulently misrepresenting to Fidelity

that Dixon’s shares of Hyperdynamics stock were subject to an arbitration award.

When a party moves for summary judgment based solely on the nonmovant’s

pleadings, we “must accept all facts and inferences in the pleadings as true in the light

most favorable to” the nonmovant. Positive Feed, Inc. v. Guthmann , 4 S.W.3d 879,

882 (Tex. App.—Houston [1st Dist.] 1999, no pet.).

In support of its holding that Chang, Johnson, Burnett, and JBC enjoy qualified

immunity, the majority relies upon, “as law of the case,” Dixon Fin. Servs., Ltd. v.

Greenberg, Peden, Siegmyer & Oshman, P.C. , No. 01-06-696-CV, 2008 WL 746548

(Tex. App.—Houston [1st Dist.] Mar. 20, 2008, pet. denied) . In Greenberg , th is

Court reasoned:

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, Siegmeyer, [R.F. Bearden Associates ,] and Bearden were, as a

matter of law, not liable for the conduct alleged in this case.

Id. at *11 (emphasis added). This Court held that the trial court did not err in

granting summary judgment in favor of Greenberg, Peden, Siegmeyer, R.F. Bearden

Associates , and Bearden against Dixon, on its fraudulent misrepresentation claim, and

against Hyperdynamics, on its negligent misrepresentation claim. Id.

It is true that, generally, Texas case law has discouraged lawsuits against an

opposing counsel if the lawsuit is based on the fact that counsel represented an

opposing party in a judicial proceeding. Alpert v. Crain, Caton & James, P.C. , 178

S.W.3d 398 (Tex. App.—Houston [1st Dist.] 2005, no pet.). As we explained in

Alpert ,

An attorney has a duty to zealously represent his clients within the

bounds of the law. . . . In fulfilling this duty, an attorney has the right

to interpose defenses and pursue legal rights that he deems necessary

and proper, without being subject to liability or damages . . . . If an

attorney could be held liable to an opposing party for statements made

or actions taken in the course of representing his client, he would be

forced constantly to balance his own potential exposure against his

client’s best interest . . . . Thus, to promote zealous representation,

courts have held that an attorney is “ qualifiedly immune ” from civil

liability, with respect to non-clients, for actions taken in connection with

representing a client in litigation .

Id . at 405 (citations omitted).

In determining whether an attorney enjoys such immunity, the focus is on the

“type of conduct” engaged in by the attorney. Id . at 406. For example, if a lawyer

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

of an attorney.” Id . at 406. Thus, a lawyer “cannot shield his own willful and

premeditated fraudulent actions from liability simply on the ground that he is an

agent of his client .” Id. (emphasis added). Moreover, even when acting in a

representative capacity, attorneys are not immune from liability when they engage in

conduct that a non-attorney could have performed. See Miller v. Stonehenge/FASA-Tex., JDC, L.P. , 993 F.Supp. 461 , 464–65 (N.D. Tex. 1998) (discussing development

of qualified immunity for attorneys in Texas courts and synthesizing various

holdings).

In Greenberg , this Court erred in holding that the attorney defendants, “based

on qualified immunity,” could not be held liable, as a matter of law, for fraudulently

misrepresenting to Fidelity that Erin Oil, pursuant to an arbitration award, had

ownership rights to shares of Hyperdynamics stock which were, in fact, wholly

owned by Dixon. Here, likewise, the majority so errs. Taking the pleadings of Dixon

and Hyperdynamics as true, as we must, Chang knowingly misrepresented to Fidelity

that Erin Oil had an ownership interest in shares of stock which were wholly owned

by Dixon. In making the misrepresentation to Fidelity, Chang was not engaged in an

adversarial relationship with Fidelity. As alleged, his fraudulent action, “foreign to

the duties of an attorney,” is not subject to qualified immunity.

Under Texas law, an attorney may be liable to a non-client for making a false

statement of material fact to a known person who justifiably relies on the false

statement, even if the attorney’s purpose is to advance his client’s interests.

McCamish , 991 S.W.2d at 794–95. In McCamish , the McCamish law firm

represented Victoria Savings Association (“VSA”). Id. at 788. VSA was attempting

to reach a settlement agreement with Boca Chica Development Company, but the

managing partner of Boca Chica refused to sign the settlement agreement unless the

law firm affirmed that the settlement agreement had “been approved by the Board of

Directors of [VSA]. . . .” Id. Ralph Lopez, a McCamish attorney, assured Boca

Chica’s managing partner that the VSA Board of Directors had approved the

settlement agreement. Id. In fact, VSA’s Board of Directors had not approved the

agreement. Id. As a result of Lopez’s misrepresentation, Boca Chica did not receive

the benefit of the settlement agreement and sued McCamish for negligent

misrepresentation. Id. at 789–90. Similarly, here, Chang’s misrepresentation

prevented Dixon from selling its stock, causing Dixon to realize a loss of over $3

million.

Conclusion

This Court’s erroneous holding in Greenberg and the panel’s similarly

erroneous holding in the instant case are contrary to the Texas Supreme Court’s

reasoning and ultimate holding in McCamish . Accordingly, I would overrule

Greenberg , sustain the first issue of Dixon, and hold that the trial court erred in

granting summary judgment in favor of Chang, Johnson, Burnett, and JBC on

Dixon’s claims. I would, in regard to the claims of Dixon against Chang, Johnson,

Burnett, and JBC, reverse the judgment of the trial court and remand for further

proceedings.

Terry Jennings

Justice

Panel consists of Justices Jennings, Keyes, and Higley.

Justice Jennings, dissenting in part.