Legal Malpractice: Andrews Kurth Hit With $200M Verdict

Legal Malpractice Andrews Kurth $200 Million VerdictBloomberg BNA reported that Houston-based oil and gas law firm Andrews Kurth was hit with a $200M legal malpractice verdict by a Harris County District Court jury, a figure equal to about two-thirds of the firm’s reported gross revenue in 2014.

Background

The claim arises out of a dispute between Scott Martin and his brother Ruben over management of Martin Resources Management Corp. (MRMC), a drilling rig supply company that was started in 1951 as a successor to a firm founded by their father. In 2002, it became the general partner in Martin Mid-stream, which stores and distributes natural gas, provides marine transportation, and manufactures sulfur. MRMC also owns 35% of publicly-traded Martin Midstream Part-ners, L.P.

Ruben Martin was CEO of MRMC, and chairman of the company’s board of directors, while Scott Martin was Executive VP and a member of the board.

According to a court ruling in another case involving Scott Martin and MRMC, an “in-ternecine power struggle over the control of MRMC arose between Ruben and Scott. Ruben contended that Scott was trying to take control of the company, while Scott took the position that it was Ruben’s goal to “freeze” Scott out from corporate management. Beginning in 2006, the brothers’ relationship began to deteriorate regarding the general direction of the company, and their collegial relationship was finally fractured in 2007, when Ruben decided that MRMC should seek to acquire a refinery, while Scott opposed the move.”

According to the original petition in this case, and other court filings, by January, 2008, the situation had deteriorated to the point that litigation “was imminent”, as Scott Martin believed his brother was trying to marginalize his role in the company, and dilute his shares.

Their mother Margaret attempted to mediate a settlement, and after several discussions in which Andrews Kurth “was closely involved” as counsel for Scott Martin, a document entitled “Margaret’s Settlement Proposal”, signed by Ruben Martin, was presented to Scott Martin and Andrews Kurth.

Andrews Kurth “then altered the document in a number of respects”, and “assured Scott that it would protect his and SKM’s interests while settling the dispute with Ruben”. (SKM is a partnership owned by Scott Martin and his wife Kim).

Scott Martin signed the settlement agreement, but a few months later, concluded that his brother wouldn’t comply with the agreement’s terms, and had Andrews Kurth sue Rue-ben Martin on his behalf in an attempt to enforce it.

However, although Scott Martin won some damages, “the Settlement Agreement was ultimately held to be unenforceable upon appeal. The Texas appellate courts determined that…it was no more than an unenforceable agreement to agree.” Further, Andrews Kurth billed Scott Martin over $3M in fees and costs for what was “ultimately a doomed effort”.

After that, “nearly a dozen lawsuits followed that engulfed” Scott Martin and SKM, which wouldn’t have occurred “if the Settlement Agreement did what it was intended to do: settle the disputes between Scott and his brother.”

The dispute and litigation finally ended when Scott Martin sold his interest in MRMC back to the company, however, he alleges that he had to do so at a discount.

Legal Malpractice Suit

Scott Martin sued Andrews Kurth for making “a number of errors…which prejudiced Plaintiffs in the litigation” against Ruben Martin, including:

  • “Not advising Scott to resign as a trustee for a trust for Ruben’s heirs” when their dispute  led to litigation. “This led to an adverse judgment against Scott of over $3,000,000.” (The award was overturned on appeal)
  • “Failing to draft an enforceable agreement.”
  • “Failing to advise Scott of the fiduciary/liability ramifications of filing a shareholder derivative lawsuit against MMRC’s directors and employees”. As a result, “Scott was sued three times…resulting in two adverse judgments against him.”

He also alleged that internal firm emails mocked him and his “precarious financial condition”

Trial and Verdict

A trial was held, and on Nov. 11, a 12-person jury found Andrews Kurth 100% negligent, and awarded Scott Martin $167 million for the loss of his ownership in MRMC, if cal-culated as of 10/2/2012, and more than $29 million for fees and expenses incurred.

Post-trial motions

After the trial, Martin requested a hearing for judgment, which the judge set for November 23rd. Andrews Kurth then filed a motion to continue the hearing until at least Dec. 14.

Among other things, the firm wants the court to examine the date of injury used to calculate damages. The court asked the jury to calculate Scott’s loss-of-stock-value claim based on three possible dates of injury, Oct. 2, 2012, Aug. 12, 2010 and June 10, 2008. The jury calculated damages at $167 million, $99 million and $82 million for each of the dates, respectively.

Attorneys for the firm claim the plaintiff did not pick the date until after the jury decision, and then picked Oct. 2, 2012, the date with the highest value.

“Tens of millions of dollars hang on the determination of this issue alone, yet we have no authorities to support their post-verdict selection,” the firm said in its filing.

Firm’s statement

“We will remain committed to the post-verdict and appellate process and we are confident that we will ultimately be vindicated,” said Bob Jewell, managing partner of Andrews Kurth, in a statement.

Shortly after the suit was filed in 2013, Jewell described Scott Martin’s suit as simply an attempt to avoid paying the more than $2 million in outstanding fees. “Scott Martin’s claim has no merit…Andrews Kurth represented him in a professional and competent manner more than five years ago, and he received an unquestionably positive result in connection with that representation.” Jewell added that Martin was intricately involved in directing the litigation, and expressed no complaints about legal services he was receiving when he signed a promissory note in 2010 to pay the fees.

Martin et al. v. Andrews Kurth LLP, case number 2013-61098, 234th Judicial District Court of Harris County, Texas.

4/21/16
UPDATE:

Texas Lawyer reported that the case been settled, although “terms of the pre-judgment settlement are confidential”.  The case went to mediation in January. The parties filed a Motion to Dismiss on April 6, and the judge signed it on April 7th.

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About Curtis Cooper

Curtis Cooper is principal of Lawyers Insurance Group – Broker For Great Law Firms, which helps attorneys optimize their malpractice coverage. Contact him by phone: (202) 802-6415, or email: ccooper “at” lawyersinsurer.com.