Fifth Circuit Reaffirms Attorney Immunity Doctrine
In Ironshore Europe DAC v. Schiff Hardin, LLP, No. 18-40101 (5th Cir. 2019), the Fifth Circuit recently reversed the district court decision we previously wrote about here. The district court denied an attorney’s motion to dismiss a lawsuit against it by an excess insurance carrier complaining it was misled about settlement, instead holding that the law firm could not be held liable to a nonclient under the attorney immunity defense doctrine. The lower court’s decision to allow the claim was primarily based upon the fact that the law firm had failed to report certain settlement offers to Ironshore, the excess carrier of the firm’s client Dorel. The court reasoned that since the law firm had made initial representations regarding the settlement demand, the firm had an affirmative duty to disclose the new information which “made the earlier representations misleading or untrue.” The lower court concluded that under current Texas law, the doctrine of attorney immunity does not foreclose a Restatement of Torts Section 552 negligent misrepresentation claim.
The Fifth Circuit disagreed, and held that the law firm’s conduct fell squarely within the protections of the attorney immunity because “…the conduct sued on occurred during the representation of the firm’s client.” Id. at 1. In its complaint, Ironshore alleged that the misrepresentations were made separate from its representation and defense of Dorel in the lawsuit and were not necessary to, or part of, the defense of Dorel. The Court, making an Erie guess and reviewing the relevant holdings of Cantey Hanger, LLP v. Byrd, 467 S.W.3d 477, 481 (Tex. 2015) and McCamish, Martin, Brown & Loeffler v. F.E. Appling Interests, 991 S.W.2d 787, 792-794 (Tex. 1999), determined that the Cantey Hanger court’s holding that attorneys are “immune from civil liability to non-clients for actions taken in connection with representing a client in litigation” was controlling law. Cantey Hanger, at 481. The Court emphasized that while the McCamish holding allowed a suit against an attorney for negligent misrepresentations under Section 552, the issue in that decision centered around privity and not the parameters of attorney client immunity. The Cantey court, on the other hand, expressly rejected the argument that the attorney immunity does not extend to fraudulent and other intentional conduct committed by an attorney in the course of representing his client. The court therefore concluded that the Supreme Court would similarly extend attorney immunity to the much less egregious conduct of negligent misrepresentation.
Having determined that Texas law would extend the attorney immunity doctrine to negligent misrepresentation, the Court then analyzed whether the requirements for attorney immunity were satisfied. Without weighing in on the wrongfulness of the conduct, the Court listed the conduct at issue as:
- reporting on the status of litigation and settlement discussions;
- providing opinions as to the strength and valuation of plaintiffs’ claims;
- providing opinions regarding litigation strategies employed by opposing counsel and potential prejudice of pre-trial developments;
- providing estimates of potential liability;
- reporting on the progress of a jury trial; and
- reporting on pre-trial rulings and settlement offers.
Finding that this conduct was within the routine conduct of attorneys engaged in this type of litigation, the court found that the firm’s conduct was firmly within the scope of the firm’s representation of its client, Dorel, and thus protected by the attorney client immunity.
Take Aways: In conclusion, the court seemed to remind Ironshore – and other excess insurers and interested third parties – that the firm’s paramount duty was to its client, Dorel, and if it was “dissatisfied” with any information or lack thereof, Ironshore should have retained its own counsel.