Updates to our Terms of Use

We are updating our Terms of Use. Please carefully review the updated Terms before proceeding to our website.

Wednesday, March 6, 2024 | Back issues
Courthouse News Service Courthouse News Service

Texas high court rules against law firm in anti-SLAPP case

A Texas law meant to deter speech-chilling litigation does not dictate dismissal of a legal malpractice lawsuit over a filing error, the state’s top court decided.

AUSTIN, Texas (CN) — A lending company that claims a Dallas law firm’s bungled filing cost it $1.2 million has a viable legal malpractice case, the Texas Supreme Court ruled Friday, rejecting the firm’s reliance on a state law that protects First Amendment rights.

USA Lending Group Inc., a small Austin-based company that provides business and home loans, hired Dallas-based Winstead PC and its attorney James Ruiz to represent it in a federal lawsuit against its former employee, Mike Ahmari.

Alleging breach of fiduciary duty, USA Lending said Ahmari had double-crossed it after it tapped him to lead marketing for a new home mortgage program and acquire domain names and toll-free phone numbers for the venture.

He abruptly resigned and USA Lending discovered he had acquired the assets in his own name for a competing business he and his wife had launched shortly before his resignation.

Ahmari did not answer the lawsuit, so Winstead’s Ruiz, after consulting with USA Lending’s CEO Jim Isaacs, prepared a default judgment motion.

A federal judge signed the default judgment in October 2017, and Winstead helped USA Lending recover the domain names and phone numbers.

Though happy to recover its assets, USA Lending took issue with an omission from Winstead’s filings.

It sued Winstead and Ruiz in January 2020 for legal malpractice in Texas state court, arguing their decision not to request damages in the default judgment motion cost it $1.2 million.

Winstead asked for dismissal per the Texas Citizens Participation Act, an anti-SLAPP bill – short for strategic lawsuit against public participation – meant to deter speech-chilling litigation. It allows for expedited dismissal of lawsuits based on a defendant exercising their First Amendment rights of free speech and to petition.

The trial court refused to dismiss, but the 12th Texas Court of Appeals in Tyler sided with Winstead and tossed the case.

USA Lending appealed to the Texas Supreme Court, which heard arguments in March.

In an unanimous opinion Friday, the high court revived the lawsuit and remanded it to the trial judge.

Justice Jane Bland determined USA Lending had overcome Winstead’s anti-SLAPP defense, at least in this initial stage of the case, by providing evidence for each essential element of its legal malpractice claim.

Bland noted USA Lending had linked Winstead’s conduct to a monetary injury.

She cited financial records from the lender showing it had transferred $60,000 to Ahmari in early 2013, paid  $8,000 to acquire a domain name and a toll-free phone number and paid $21 to maintain the phone number for three months before it discovered Ahmari’s fraud.

Though those losses are much less than $1.2 million, Bland said the statute does not call for proof of a specific amount of damages, only evidence Winstead’s actions caused USA Lending to “lose ‘some specific, demonstrable’ amount.” (Emphasis in original.)

The high court’s decision turned on the issue of collectability.

While Texas' 12th Texas Court of Appeals agreed with USA Lending the company had prima facie—meaning “at first sight” under the state anti-SLAPP statute—evidence the purported malpractice had caused it some damage, it decided USA Lending had no evidence it could have collected any judgment from Ahmari.

Ahmari lives in California and his wife is listed as the president and CEO of All Home Lending Inc., the business to which he diverted the assets he was supposed to acquire for USA Lending.

USA Lending provided expert testimony from a California lawyer who stated it was “reasonably likely” the company could have collected a judgment against Ahmari through All Home Lending’s assets or any salary his wife drew from the company, via California’s fraudulent transfer and community property laws.

The state’s community property law directs that any income Ahmari’s wife acquired during their marriage belongs to them both.

The appeals court found that testimony unconvincing and dismissed the case.

But the Texas Supreme Court deemed it credible.

“Some evidence supports the expert’s conclusion that Ahmari’s wife, as an owner or salaried employee [of All Home Lending], had assets reachable under California community property laws,” Bland wrote in a 17-page ruling.

Bland stressed Winstead call still try to convince the trial court any judgment against Ahmari would have been uncollectable.

But she opined the Texas Citizens Participation 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.”

“Because USA Lending adduced prima facie evidence to support its claim for legal malpractice, the court of appeals erred in ordering the case dismissed,” she added, in conclusion.

USA Lending said it was pleased with the order. But it noted the court did not address issues its attorney, Dylan Russell of the Houston office of Hoover Slovacek, raised in oral arguments in March.

“The Court’s clarification on what is required to meet the prima facie burden in this context is helpful for addressing TCPA appeals of legal malpractice cases in Texas,” the company said in an emailed statement.

“Because the Court limited its decisional analysis to the prima facie issue, however, a number of TCPA-related legal questions remain uncertain for Texas jurisprudence, including those questions discussed at length during oral argument and briefed by the parties.”

Winstead’s counsel, Robin O’Neil with Fogler, Brar, O’Neil & Gray of Houston, did not respond to a request for comment.

A bill in the state Legislature would clarify the Texas Citizens Participation Act cannot be used as a defense against legal malpractice claims. HB 527 appears to be headed for Governor Greg Abbott's desk for ratification after passage in the Texas Senate and Texas House.

Follow @cam_langford
Categories / Appeals, Civil Rights, Law, Regional

Subscribe to Closing Arguments

Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.

Loading...