Henry S. Miller Commercial Company v. Newsom, Terry & Newsom, LLP and Steven K. Terry

Supreme Court of Texas
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No. 22-1143
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Henry S. Miller Commercial Company,
Petitioner–Cross-Respondent,

v.

Newsom, Terry & Newsom, LLP and Steven K. Terry,
Respondents–Cross-Petitioners

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On Petition for Review from the
Court of Appeals for the Fifth District of Texas
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JUSTICE BLAND, concurring in part and dissenting in part.

The Court agrees that the causation evidence is infirm. Yet it
remands for a third trial, theorizing it might be possible to confect a
hindsight allocation of responsibility that a competent expert could link
to some damage caused by legal malpractice. It is questionable whether
an attorney’s strategic decision to keep a putatively culpable but
judgment-proof codefendant out of a fraud case is negligent when one’s
own client also bears culpability. Whether adding another defendant
magnifies the harm or merely shifts it is open to reasonable debate.
Assuming such a decision one way or the other can be malpractice, it is
not enough to presume harm—any harm—to a client found to have
committed fraud and caused only that damage resulting from the client’s
own conduct.
I agree with most of the Court’s opinion, and in particular, the
moral hazard to our justice system that arises when a lawyer assumes
the role of judgment creditor to his former opponent and testifies
contrary to the position he has very successfully advanced. Beyond that
hazard, such expert testimony is neither consistent with the facts found
in the underlying case—as any competent expert opinion must be—nor
is it evidence of but-for causation of any damage. Because the expert
testimony in this case is legally insufficient to establish legal
malpractice as a cause of damage to the law firm’s client, the Court
should render judgment for the law firm. As it does not, I respectfully
dissent from that part of the Court’s opinion. I join the remainder of it.

I

In legal malpractice cases arising out of a lawyer’s actions in
representing a client in underlying litigation, the plaintiff must produce
evidence from which a jury can reasonably infer that the attorney’s
conduct caused the client’s harm. 1 Expert testimony is necessary to
support this causal link. 2 The ground rules for this expert testimony are
straightforward. First, the expert must show that, because of the
attorney’s negligence, the plaintiff either had to pay additional damages

1 Alexander v. Turtur & Assocs., 146 S.W.3d 113, 117 (Tex. 2004).

2 Id. at 119–20 (observing that “the wisdom and consequences of these

kinds of tactical choices made during litigation are generally matters beyond
the ken of most jurors” and therefore expert testimony is necessary).

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or failed to obtain the recovery it should have obtained. 3 Second, the
expert testimony must be based on facts in evidence. An expert cannot
assume facts contrary to undisputed underlying evidence to form an
opinion. “[I]f the record contains no evidence supporting an expert’s
material factual assumptions, or if such assumptions are contrary to
conclusively proven facts, opinion testimony founded on those
assumptions is not competent evidence.” 4 Speculation, subjective belief,
and surmise are not competent evidence. 5
The expert testimony in this case fails on both grounds. First, the
experts made no attempt to support their but-for causation opinions.
Henry S. Miller’s malpractice theory is that the judgment amount
against it would have remained exactly the same but allocated mostly,
if not entirely, to judgment-proof defendant James Flaven, had he been
added as a defendant. Even more, this theory relies on a hypothetical
jury’s allocation of fault to Flaven such that it would exceed the $6
million paid to satisfy the underlying judgment.
Henry S. Miller introduced the testimony of two witnesses to
attempt to establish this novel causation theory. Marc Stanley, the
attorney for the plaintiff in the underlying fraud case, testified that, had
Henry S. Miller’s lawyers designated Flaven as a responsible third

3 Elizondo v. Krist, 415 S.W.3d 259, 263 (Tex. 2013) (“[L]egal-
malpractice damages are the difference between the result obtained for the
client and the result that would have been obtained with competent counsel.”).
4Hous. Unlimited, Inc. Metal Processing v. Mel Acres Ranch, 443
S.W.3d 820, 833 (Tex. 2014).
5 Merrell Dow Pharms., Inc. v. Havner, 953 S.W.2d 706, 712 (Tex. 1997);

Gharda USA, Inc. v. Control Sols., Inc., 464 S.W.3d 338, 350–52 (Tex. 2015).

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party, the jury would have allocated 85% of the responsibility of the
fraud to Flaven. He based his answer on “two things”: first, “it’s what I
told my client could be a very likely outcome”—definitionally ipse dixit—
and second, based on his experience, Flaven would have “offended” the
jury, and thus it would have assigned 85 to 100% of the responsibility to
Flaven. Stanley offered no facts to support this conclusion, relying
totally on his significant litigation experience.
Stanley’s opinion ignores that the trial court instructed the jury
in the fraud case to award only those damages proximately caused by
Henry S. Miller’s fraud. Flaven’s conduct did not enter into the jury’s
measurement, which was based on an instruction to view damage only
as if Henry S. Miller’s “representations had never been made.” The jury
was instructed that Henry S. Miller could be held liable only for
representations it knew were false—Flaven’s misrepresentations were
to be excluded. As the trial court in the underlying case instructed:

A real estate agent is not liable for a misrepresentation of
a material fact made by buyer or its authorized
representative unless the real estate agent knew of the
falsity of the misrepresentation, and failed to disclose the
real estate agent’s knowledge of the falsity of the
misrepresentation.

The jury thus confined its fraud finding, and the damages resulting from
it, to Henry S. Miller. Henry S. Miller was not held liable for Flaven’s
conduct but for its own fraudulent concealment. An expert opinion that
the jury must have awarded damages attributable to Flaven due to the
attorney’s negligence in failing to name him as a responsible third party
lacks any but-for causation link.

4
Further, Stanley’s testimony is inherently incompetent given the
directly opposite position he advanced in the underlying fraud case: that
Henry S. Miller was exclusively to blame for his client’s injuries because
Henry S. Miller, not Flaven, had undertaken the obligation to represent
Stanley’s client, Nussbaum, as Nussbaum’s real estate agent. For that
reason, Stanley’s suit targeted Henry S. Miller, not Flaven. Had Stanley
concluded that Flaven was mostly, if not entirely culpable, as he testified
in this legal malpractice case, then it was Stanley’s prerogative to name
Flaven as a defendant among the others. He did not. Flaven was not
Nussbaum’s real estate agent. In a testimonial reversal, Stanley seeks
to impose a judgment-proof defendant’s putative culpability upon the
lawyers—culpability he affirmatively disavowed during the real trial.
Lawyers are not guarantors of an ephemeral recovery against a putative
defendant now in the wind.
The second piece of evidence is similarly bereft of probative value.
Expert Lewis Sifford testified “everyone agrees that Henry S. Miller was
the innocent defendant,” and had its attorneys designated Flaven as a
responsible third party, then the jury would have assigned 100% of the
liability to Flaven.
Sifford’s conclusion rests on a fact not in evidence and contrary to
established facts: the first jury did not find that Henry S. Miller was “the
innocent defendant.” Rather, the jury heard Henry S. Miller’s argument
that Flaven was solely responsible for the “carnage” and disbelieved it.
The jury determined that Henry S. Miller was liable for fraud, a finding
it was instructed not to make unless it found that Henry S. Miller knew
that Flaven had lied and failed to disclose what it knew to its own client.

5
We discarded expert testimony that similarly took irrefutably
false statements as the basis for its opinion in Rogers v. Zanetti, 6 another
case-within-a-case legal malpractice appeal. The client’s expert testified
that the jury in the underlying trial awarded damages against a
defendant due to legal malpractice. 7 But the expert disregarded the
finding that legally sufficient evidence supported the damages award.
“This basis for [the expert]’s opinion is thus in fatal tension with that
undisputed fact and cannot support a competent opinion.” 8 Sifford’s
testimony that Henry S. Miller was “innocent” is similarly in fatal
tension with the jury’s verdict rendered in the fraud case. His opinion is
thus not competent to support a causation finding.

II

The malpractice jury heard no probative evidence supporting
causation. When evidence of causation is speculative or conclusory, the
proper course is to render judgment for the defendant. We affirmed
summary judgment for the malpractice defendant in Zanetti after
determining that the proffered causation testimony was speculative and
unreliable. 9 Similarly, in Alexander v. Turtur & Associates, another
case-within-a-case legal malpractice appeal, this Court concluded that
the causation evidence did not support the inference that the attorney’s

6 518 S.W.3d 394 (Tex. 2017).

7 Id. at 410.

8 Id.

9 Id. at 404–12.

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negligence caused the client’s injuries. 10 For want of causation, we
rendered judgment that the client take nothing. 11 We likewise have
rendered judgment when other kinds of claims fail for want of expert
causation testimony. 12
Rendition is the proper disposition in this case as well. Though
the Court agrees that the expert testimony is speculative, it
characterizes it as failing to prove the amount of damages. The Court
does not identify any competent causation testimony, but instead takes
the experts at their word that of course the damages would have been
different—and more favorable to Henry S. Miller—absent legal
malpractice.
Because the Court characterizes the failure of causation evidence
as a partial failure of damages evidence, it remands for yet a third trial.
It cites Fortune Production Co. v. Conoco, Inc., 13 for the proposition that
“where there is evidence of some fraud damages, but there is no evidence

10 146 S.W.3d at 120–21.

11 Id. at 122.

12 E.g., Helena Chem. Co. v. Cox, 664 S.W.3d 66, 82 (Tex. 2023)
(rendering judgment where farmers’ experts failed to connect defendant’s
aerial herbicide application to the kinds of losses actually observed and failed
to exclude alternative causes); Pediatrics Cool Care v. Thompson, 649 S.W.3d
152, 164 (Tex. 2022) (rendering judgment where expert’s testimony failed to do
more than speculate that providers’ negligence caused the patient’s death);
Gharda USA, 464 S.W.3d at 350–53 (reinstating take-nothing judgment after
determining experts’ testimony on causation suggested only the possibility, not
the probability, that defendant’s conduct caused the plaintiff’s injuries); Hous.
Unlimited, 443 S.W.3d at 837–38 (rendering take-nothing judgment after
concluding expert failed to connect defendant’s conduct to claimed diminution
in market value of property and exclude other causes).
13 52 S.W.3d 671 (Tex. 2000).

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to support the full amount of damages found by the jury, remand for a
new trial is the appropriate remedy.” 14 That much is true. In this case,
however, the expert testimony is devoid of evidence of segregable
damage attributable to legal malpractice.
In Fortune Production, the jury awarded $5 million in damages to
natural gas sellers misled into signing unfavorable contracts, though the
sellers failed to distinguish between damages occurring before and after
they knew of the misrepresentations. 15 This Court determined that some
evidence supported the finding that the defendant’s misrepresentations
had caused the former—though not to the extent the jury had found—
but not the latter, and it remanded for the factfinder to determine the
amount of supportable damages. 16 We have no basis to make a similar
differentiation in this case.
The Court also cites Guevara v. Ferrer, 17 in which this Court
remanded an auto collision case for remittitur or a new trial after
determining that expert testimony was required to link the plaintiff’s
medical expenses related to respiratory and kidney failure to the
collision. 18 Our Court agreed that lay testimony could support that the
plaintiff’s “immediate post-accident condition which resulted in his

14 Supra at 3 n.5.

15 Fortune Prod., 52 S.W.3d at 675, 79–80.

16 Id. at 682 (determining that a contemporaneous agreement with a

nonparty was some evidence that the sellers could have negotiated a more
favorable contract, but not evidence of the full amount of damages awarded by
the jury).
17 247 S.W.3d 662 (Tex. 2007).

18 Id. at 669–70.

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being transported to an emergency room and examined in the
emergency room were causally related to the accident,” and thus we
concluded that the evidence was legally sufficient to support a finding
that some of his medical expenses were causally related to the
accident. 19
Fortune Production and Guevara are two of several cases
involving segregable damages remanded for a new trial. In Formosa
Plastics Corp. USA v. Presidio Engineers & Contractors, Inc., 20 the Court
determined that expert testimony supported a damages award of only
$231,000, not the $700,000 the jury awarded. 21 In Texarkana Memorial
Hospital, Inc. v. Murdock, 22 the Court concluded that the evidence
supported causation of a patient’s injuries related to meconium
aspiration but not causation of every expense incurred during the
patient’s hospital stay. 23
These cases highlight why the failure in this case is one of
causation, not the amount of damage. Fortune Production, Guevara,
Formosa Plastics, and Texarkana Memorial Hospital each involve only
a partial failure of damages evidence. In each case, the Court agreed
that causation was established as to some calculable amount but not the
full amount awarded. The Court’s opinions in those cases guide the trial
courts in distinguishing supported and unsupported damages. The

19 Id.

20 960 S.W.2d 41 (Tex. 1998).

21 Id. at 51.

22 946 S.W.2d 836 (Tex. 1997).

23 Id. at 840–41.

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Court’s opinion today remands the case with no more guidance than “try
again.” The omission is readily explicable: no legal expert, even with
decades of sophisticated experience, could testify as to an amount that
a hypothetical jury in the underlying fraud case would have awarded
had Flaven been designated. The real jury was confined to damages
resulting from Henry S. Miller’s conduct and instructed to exclude
Flaven’s conduct. The real jury awarded $12 million—far short of the
$20 million experts proffered as damages in the underlying trial. 24
Perhaps the missing $8 million is the amount the jury attributed to
Flaven’s conduct, and the hypothetical jury would have attributed $12
million in damages to Henry S. Miller regardless of Flaven’s
designation. To arrive at this or any number, however, is completely
speculative and at odds with the real jury’s findings.
Similarly, no facts exist that a legal malpractice expert could rely
on to demonstrate that the jury would have allocated 85% of the
responsibility for the fraud to Flaven. The real jury declined to credit
Henry S. Miller’s argument that Flaven was entirely responsible for the
fraud. No matter how qualified, a testifying expert in this case lacks the
underlying facts to demonstrate through competent testimony that
Flaven’s name on the verdict form would have changed Henry S. Miller’s
damages.

* * *

24 Defterios v. Dall. Bayou Bend, Ltd., 350 S.W.3d 659, 663 (Tex. App.—

Dallas 2011, pet. denied).

10
Proving a case-within-the-case outcome in legal malpractice is
difficult. While not foreclosing the possibility that an expert could
develop a reasoned basis, grounded in facts, for a hypothetical jury’s
allocation of responsibility, the expert testimony in this case falls well
short of the mark. The malpractice jury heard no probative evidence
supporting causation. When evidence of causation is speculative or
conclusory, the proper course is to render judgment for the defendant.
Because the Court does not, I respectfully dissent from its causation
opinion and the judgment remanding this case for a third trial.

Jane N. Bland
Justice

OPINION FILED: December 31, 2024

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