This case involves a company, Henry S. Miller Commercial Company (“HSM”), who set up commercial property transactions by a buyer who claimed to be the beneficiary of a large trust fund. The buyer was in fact a truck driver who had no trust fund. When the deals failed to close, the prospective sellers were forced to liquidate their properties at a loss. They then sued HSM for fraud, and obtained a judgment in the amount of $8.9 million. HSM then sued its insurance carrier when it refused to pay the judgment. HSM eventually settled that action for close to $6 million.
HSM also sued its lawyers in the underlying case for legal malpractice and also for gross negligence. HSM asserted that the lawyers were grossly negligence for failing to name the truck driver in the underlying action. The trial judge in the legal malpractice action granted a direct verdict for the lawyers on the gross negligence claim, but permitted the legal malpractice claim to go forward. At trial, a jury found in favor of HSM in the amount of $4.6 million. The judge issued a final judgment with no monetary award, after applying the $6 million paid by the insurer. Both parties appealed.
The Fifth Circuit Court of Appeals reversed the directed verdict for the lawyers on gross negligence, and remanded the case for a new trial rejecting all other appellate issues. The Appeals Court found that the truck driver was a person the jury could have considered to be responsible for the unsuccessful real estate transactions, and that the lawyers’ failure to name him may have shifted additional liability on HSM. The court found that it was a factual question whether the lawyers were grossly negligence in failing to bring the truck driver into the case.