On November 2, 2017, Judge Godbey entered an Order (available here) in Dorrell v. Proskauer Rose. In the case, plaintiffs were a group of investors who purchased fraudulent certificates of deposit issued by Stanford International Bank Limited (i.e., the Stanford of ponzi-scheme fame). Plaintiffs allege that Proskauer (a law firm), through one of its former partners, “conspired with Stanford to avoid regulation and detection, thereby extending the duration of Stanford’s scheme.” Proskauer moved to dismiss based on the attorney-immunity doctrine.
Judge Godbey agreed with Proskauer and dismissed the case. Judge Godbey summarized the attorney-immunity doctrine as follows:
It is well-settled in Texas that a third party may not generally hold an attorney liable for conduct undertaken in the representation of a client. This general rule is designed to encourage “loyal, faithful, and aggressive representation by attorneys employed as advocates,” which might be compromised if attorneys were subject to suit by third parties. An attorney is thus “given latitude to ‘pursue legal rights that he deems necessary and proper’ precisely to avoid the inevitable conflict that would arise if he were ‘forced constantly to balance his own potential exposure against his client’s best interest.’” The scope of the rule turns “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.” Hence, if an attorney conclusively establishes that his conduct was within the scope of his legal representation of a client, attorney immunity applies.
However, attorneys “are not protected from liability to non-clients for their actions when they do not qualify as ‘the kind of conduct in which an attorney engages when discharging his duties to his client.’” For example, an attorney who participates in a fraudulent business scheme with a client or assaults opposing counsel during trial is unprotected by attorney immunity, as such acts are “entirely foreign to the duties of an attorney.”
(citations omitted).
Plaintiffs argued that the attorney-immunity doctrine did not apply to the facts of the case, due to three purported exceptions: (i) the “litigation context exception” (i.e., the attorney-immunity doctrine does not apply to conduct that occurs outside of formal litigation); (ii) the “crime exception” (i.e., that the attorney-immunity doctrine does immunize an attorney’s criminal conduct); and (iii) the “Texas Securities Act exception” (i.e., that immunity does not extend to claims brought under the Texas Securities Act). Ultimately, Judge Godbey ruled none these exceptions do not exist under Texas law.