AUSTIN, Texas (Legal Newsline) - A law firm can’t escape a malpractice suit by citing a state law designed to protect free speech, the Texas Supreme Court ruled, finding the plaintiff had presented enough evidence to allow the case to proceed.
The high court never got to the question of whether filing a motion for a client in court was a protected “communication” under the Texas Citizens Participation Act, a law that allows judges to throw out lawsuits intended to harass citizens engaged in public speech. Instead, the Texas Supreme Court cited the law’s requirement to allow suits to proceed if they have the minimum amount of evidence required to establish claims.
“The motion to dismiss stage is not a battle of evidence; it is the clearing of an initial hurdle,” the Supreme Court ruled in a May 19 decision. “The Act does not select for plaintiffs certain to succeed; it screens out plaintiffs certain to fail—those who cannot support their claims with clear and specific evidence.”
USA Lending Group hired Winstead PC to sue former employee Mike Ahmari for breach of fiduciary duty after he allegedly bought domain names and toll-free numbers in his own name instead of the company’s and took them with him when he left to start up a competing firm.
Ahmari didn’t respond to the lawsuit filed in federal court and Winstead drafted a motion for default judgment. The firm also drafted an affidavit from USA Lending’s chief executive stating damages from lost income. The affidavit was revised three times, twice with damages of $1 million or more but the third and final version omitted the claim for lost income.
USA Lending denies approving the third version. Winstead attached it to the motion for default judgment and a federal judge awarded USA Lending ownership of the domain name and phone number, but no money.
After learning about the lack of money damages, USA Lending sued Winstead and attorney James Ruiz in Harris County state court, seeking more than $1 million in damages. Winstead moved to dismiss the case under TCPA, saying the default motion was protected speech. A trial judge denied the motion but Winstead won on appeal, with the appeals court ruling that the court motion was a protected “communication” under TCPA and that while USA Lending had made a prima facie case for malpractice, it didn’t have any evidence it could have collected money from Ahmari, a California resident.
The TCPA requires courts to dismiss lawsuits if they threaten “(A) the right of free speech; (B) the right to petition; or (C) the right of association.” But plaintiffs can continue to sue if they provide “clear and specific evidence” for a prima facie case, which the law defines as the “minimum quantum of evidence necessary” to support a claim.
USA Lending’s expert witnesses included a retired state judge who said a reasonably prudent lawyer would have sought money damages and more likely than not a judge would have awarded them in a default judgment. Other experts said USA Lending could have collected from Ahmari in California and he had more than $1 million in assets.