» Legal Malpractice

Corporation’s Attorney Owed No Legal Duty to Minority Shareholder

On August 21, the Texas Court of Appeals at Dallas, Texas turned away a disgruntled shareholder’s legal malpractice complaint against the corporation’s outside counsel, finding that no attorney-client relationship existed between the attorney and the shareholder.

Curtis Pennington, a minority shareholder who was ousted from the board of directors and as president of Advantage Marketing and Labeling Inc., alleged that attorney Michael Collins negligently advised two other shareholders (who, together, owned a controlling interest in the corporation) to engage in oppression and breaches of their fiduciary duties. Pennington also alleged that Collins negligently failed to advise him to protect his interests against the misconduct of the other two shareholders.

Reviewing the trial court’s dismissal of Pennington’s malpractice claim, Justice Ada Brown’s opinion in Pennington v. Fields began by pointing out that merely rendering legal services to a corporation does not create an attorney-client relationship between the attorney and the corporation’s officers, directors or shareholders.

The court rejected Pennington’s argument that an attorney-client relationship was established by a pair of retainer agreements executed between attorney Collins and one of the majority shareholders in his capacity as president of Advantage. The retainer agreements described the legal services to be provided as “general corporate matters, including reviewing and revising your existing documents, negotiations with former employees, drafting notices and other corporate legal work as required by the board of directors.”

Nothing in these agreements created an attorney-client relationship between Pennington and Collins, the court ruled. First, the agreements were executed between Collins and the corporation. Pennington did not sign the retainer agreements nor was he mentioned in them, the court pointed out. The court rejected Pennington’s contention that language in the retainer agreements describing the attorney’s duties to include “representation of directors” and performing work “as required by the board of directors” created an attorney-client relationship between Pennington and Collins.

Finding no express agreement creating an attorney-client relationship, the court addressed — and rejected — Pennington’s additional argument that an attorney-client relationship could be implied from Collins’s dealings with board members, including Pennington. Regardless of Pennington’s subjective belief, nothing in the parties’ dealings objectively suggests that there had been a meeting of the minds about Collins’ representation of Pennington, the court said.

“An attorney–client relationship was not created between Collins and Pennington simply because Collins discussed matters with Pennington that were relevant to both Pennington’s and Advantage’s interests,” the court said.

The case is Pennington v. Fields, No. 05-17-00321-CV (Tex. Ct. App, 5th Dist., decided Aug. 21, 2018).

Pipeline owners file $300 million breach of contract lawsuit against midstream operator

An amended breach of contract lawsuit was filed by Magellan Midstream Partners and Plains All American Pipeline against Stampede Energy, seeking over $300 million in damages over an oil transport deal.

The lawsuit claims that Stampede did not meet minimum volume obligations on the BridgeTex pipeline from March 2015 through 2016, breaching its contract. The BridgeTex pipeline carries around 300,000 barrels per day from Colorado City, Texas to the Gulf Coast. Stampede is a privately held midstream operator.

From mid-2014 to early 2016, oil prices dropped by more than 70 percent, prompting production cuts and leading several energy firms to declare bankruptcy. Pipelines function like toll roads, so they are generally considered to be better protected from commodity price fluctuations, but with fewer barrels to ship, pipelines have been affected by output declines.

An amended petition filed March 22 claimed that Stampede owed the plaintiffs over $311.8 million, including interest and late fees, for breaching its shipping obligations. The BridgeTex firms also filed a claim against Ballengee Interests, which guaranteed payments owed by Stampede.

According to court documents, Stampede agreed in August 2014 to ship 30,000 barrels per day of crude and condensate on BridgeTex, which is about 10 percent of the pipeline’s capacity. Court filings state that Stampede executed a Transportation Service Agreement calling for the company to ship on the pipeline for 29 quarters.

Texas mental health center files breach of contract lawsuit against software provider

A mental health center in Texas is suing a software provider for breach of contract.

The lawsuit was filed in state district court in Waco by the Heart of Texas Region Mental Health Mental Retardation Center (MHMR), against CoCentrix Inc., a Florida-based company. The lawsuit seeks a refund of $250,000 that the agency claims it paid the software provider, as well as triple damages available under the Texas Deceptive Trade Practices Act.

According to the lawsuit, MHMR contracted with UNI/CARE Systems Inc. to provide software for a records system. CoCentrix later assumed all obligations under the contract, which specified that support documentation, training, installation and consulting would be provided.

MHMR claims that it paid $250,000 under the contract, but the software provider was not able to provide a system that met the necessary criteria. In fact, MHMR alleges that the software system provided could not even be tested successfully. The agency claims that the contract provides for the return of the $250,000 if the system could not be properly installed.

According to the lawsuit, CoCentrix missed more than 10 deadlines for the software to be completed. MHMR states that it terminated the contract on or about September 3, 2015 and demanded a refund of the money it had paid to the defendant, but CoCentrix did not refund the money.

Former Professor Sues University of Houston, Alleging Employment Discrimination

The University of Houston has been sued by a former life sciences professor who claims her employment was unlawfully terminated.

Adriana Alcantara filed the lawsuit in the Houston Division of the Southern District of Texas on February 25, naming the University of Houston as defendant and alleging employment discrimination.

The lawsuit argues that Alcantara was harassed by an assistant professor, Dr. Leigh Leasure, while she was employed as a professor at the university, beginning in September 2007. Alcantara taught phycology, the study of algae.

According to the suit, Leasure yelled at Alcantara, prevented her from using essential lab equipment, and interfered with her experiments and recruitment of students.

The suit also claims that Leasure was a participant in Alcantara’s tenure evaluation, and that Alcantara was denied tenure on May 29, 2012. Alcantara alleges that she was denied tenure because she is a Hispanic female.

Federal law and Texas law prohibit employment discrimination based on race or gender.

The lawsuit seeks back pay and benefits, damages, attorney’s fees, interest and court costs. The case is Houston Division Court Case No. 4:14-cv-00463.

The University of Houston is a state research university with nearly 41,000 students and over 3,000 academic staff members.

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