Case: 18-40101 Document: 00514779217 Page: 1 Date Filed: 01/02/2019
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
FILED
No. 18-40101 January 2, 2019
Lyle W. Cayce
IRONSHORE EUROPE DAC, Clerk
Plaintiff - Appellee
v.
SCHIFF HARDIN, L.L.P.,
Defendant - Appellant
Appeal from the United States District Court
for the Eastern District of Texas
Before DAVIS, COSTA, and OLDHAM, Circuit Judges.
W. EUGENE DAVIS, Circuit Judge:
Defendant Schiff Hardin, L.L.P. (“Schiff Hardin”), a law firm, challenges
the district court’s denial of its Rule 12(b)(6) motion to dismiss the complaint
and rejection of its attorney immunity defense. The Plaintiff, Ironshore Europe
DAC (“Ironshore”), issued an excess insurance policy to the firm’s client Dorel
Juvenile Group, Inc. (“Dorel”). Ironshore casts its complaint as one for
negligent misrepresentation against Schiff Hardin, alleging that the firm made
misstatements and omissions in the course of reporting on the litigation
against Ironshore’s insured Dorel, the firm’s client. Schiff Hardin argues that
it is entitled to attorney immunity against Ironshore’s negligent
misrepresentation claim. As discussed below, we conclude that the district
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No. 18-40101
court erred in rejecting Schiff Hardin’s attorney immunity defense because the
conduct sued on occurred during the representation of the firm’s client, Dorel.
We therefore REVERSE the denial of Schiff Hardin’s motion and RENDER
judgment dismissing the plaintiff’s complaint pursuant to Rule 12(b)(6). 1
I. Background
In 2015, Nicole and Cameron Hinson filed a lawsuit in the Eastern
District of Texas against Dorel, which allegedly designed, marketed, and sold
the forward-facing car seat in which their one-year-old child, C.H., was seated
when the Hinson vehicle was involved in an accident in Texas. The Hinsons
alleged that C.H. suffered a paralyzing spinal cord injury and a brain injury in
the accident. They asserted claims of negligence, gross negligence, marketing
defect, and failure to adequately warn consumers of the risks posed by the use
of forward-facing car seats with young children.
Dorel was self-insured up to $6 million. The appellee Ironshore issued a
policy of excess insurance to Dorel for liability above $6 million up to $25
million. The policy included an “assistance and cooperation” provision giving
Ironshore the right to associate with Dorel in the defense of any claim,
requiring Dorel to cooperate in the event Ironshore exercised that right, and
requiring Dorel to promptly provide any litigation-related information
requested by Ironshore.
Dorel retained the law firm Schiff Hardin, the defendant-appellant, to
defend it in the Hinson suit. Although Schiff Hardin did not represent
Ironshore, the firm did provide Ironshore with information about the litigation,
1 As discussed below, a district court’s order denying a defendant’s motion to dismiss
on the basis of attorney immunity under Texas law is an appealable collateral order. In this
appeal, this court only has jurisdiction over the district court’s immunity ruling and therefore
does not consider the other aspects of the district court’s ruling.
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including developments in the litigation and Schiff Hardin’s opinions of the
settlement value and potential judgment value of the case.
The Hinson case went to trial in June 2016, and the jury returned a
verdict adverse to Dorel and awarded total compensatory damages of
$24,438,000 and an additional $10 million in exemplary damages. After the
verdict, Ironshore retained its own counsel for the first time. The parties
participated in post-trial mediation, during which a confidential settlement
was agreed upon in an amount that reached Ironshore’s policy.
Ironshore then filed the instant lawsuit against Schiff Hardin asserting
a claim for negligent misrepresentation pursuant to the Restatement (Second)
of Torts § 552, 2 which has been adopted by the Supreme Court of Texas. 3
Ironshore alleged that the firm made various misrepresentations and
omissions in the course of reporting on the Hinson litigation to Ironshore,
including making false statements in verbal and written reports and failing to
disclose certain information about the underlying suit’s facts and settlement
and judgment value. Ironshore alleged that the firm’s conduct led it to believe
that the suit posed no threat of exposure to its policy.
Ironshore’s complaint alleged that the misrepresentations took place
“[i]n the course of Schiff’s business” representing Dorel but “were made by
Schiff separate from its representation and defense of Dorel in the Lawsuit and
were not necessary to, nor a part of, Schiff’s defense of Dorel in the Lawsuit.”
Ironshore also alleged that the firm failed to disclose certain developments in
2 RESTATEMENT (SECOND) OF TORTS § 552 (AM. LAW INST. 1977) (“One who, in the
course of his business, profession or employment, or in any other transaction in which he has
a pecuniary interest, supplies false information for the guidance of others in their business
transactions, is subject to liability for pecuniary loss caused to them by their justifiable
reliance upon the information, if he fails to exercise reasonable care or competence in
obtaining or communicating the information.”).
3 McCamish, Martin, Brown & Loeffler v. F.E. Appling Interests, 991 S.W.2d 787, 791
(Tex. 1999).
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the Hinson litigation, including adverse pre-trial rulings and a pre-trial
settlement offer of $3.25 million. Ironshore argued that it relied to its
detriment on the negligent misrepresentations and that had it known the true
facts about the developments in the lawsuit, settlement offers, and the danger
to its policy, it would have settled with the Hinsons for a much lower amount
than the ultimate verdict or post-verdict settlement.
Schiff Hardin filed a motion to dismiss under Federal Rule of Civil
Procedure 12(b)(6), asserting that it was entitled to attorney immunity under
Texas law. The firm argued that any communications with Ironshore were
part of the discharge of the firm’s duties to its client, Dorel.
The district court denied Schiff Hardin’s motion to dismiss based on
attorney immunity. 4 The district court ventured an Erie 5 guess to determine
that the attorney immunity doctrine under Texas law did not foreclose a
negligent misrepresentation claim. Schiff Hardin timely filed this appeal
challenging that ruling.
II. Standards of Review
A district court’s order denying a defendant’s motion to dismiss on the
basis of attorney immunity under Texas law is an appealable collateral order
because “attorney immunity is properly characterized as a true immunity from
4 The district court granted Schiff Hardin’s motion to dismiss as to Ironshore’s claims
based on 1) alleged misrepresentations related to predictions of future outcomes, such as a
possible jury verdict or settlement outcome; and 2) alleged misrepresentations related to
Schiff Hardin’s subjective assessments about trial, including that trial “was fine” or “went
pretty well.” Specifically, the district court determined that the former allegations did not
fall within the scope of a negligent misrepresentation claim and that the latter allegations
failed to state such a claim. However, the district court ventured an Erie guess to determine
that omissions can sometimes form the basis for a negligent misrepresentation claim under
Texas law, and it denied the motion to dismiss as to Ironshore’s allegation that the firm
misrepresented or failed to disclose information about offers to settle.
5 Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938).
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suit, not as a defense to liability.” 6 This court reviews de novo the denial of a
motion to dismiss based on immunity. 7
“The ultimate question in a Rule 12(b)(6) motion is whether the
complaint states a valid claim when all well-pleaded facts are assumed true
and are viewed in the light most favorable to the plaintiff.” 8 “Although
dismissal under [R]ule 12(b)(6) may be appropriate based on a successful
affirmative defense, that defense must appear on the face of the complaint.” 9
“The court’s review is limited to the complaint, any documents attached to the
complaint, and any documents attached to the motion to dismiss that are
central to the claim and referenced by the complaint.” 10 “[A]n attorney seeking
dismissal based on attorney immunity bears the burden of establishing
entitlement to the defense.” 11 “To meet this burden, the attorney must
‘conclusively establish that [the] alleged conduct was within the scope of [the
attorney’s] legal representation of [the] client.’” 12 “Texas courts occasionally
grant attorney immunity at the motion to dismiss stage [where] the scope of
the attorney’s representation—and thus entitlement to the immunity—[i]s
apparent on the face of the complaint.” 13
This court also reviews de novo a district court’s interpretation of state
law and is bound to resolve the issue as the state’s highest court would. 14 “In
6 Troice v. Proskauer Rose, L.L.P., 816 F.3d 341, 346, 348 (5th Cir. 2016).
7 Id. at 345 (citation omitted).
8 Lone Star Fund V (U.S.), L.P. v. Barclays Bank PLC, 594 F.3d 383, 387 (5th Cir.
2010) (citation omitted).
9 Kelly v. Nichamoff, 868 F.3d 371, 374 (5th Cir. 2017) (quoting EPCO Carbon Dioxide
Prods., Inc. v. JP Morgan Chase Bank, NA, 467 F.3d 466, 470 (5th Cir. 2006)).
10 Lone Star, 594 F.3d at 387 (citation omitted).
11 Kelly, 868 F.3d at 375 (citations omitted).
12 Id. (alterations in original) (citation omitted) (quoting Santiago v. Mackie Wolf
Zientz & Mann, P.C., No. 05-16-00394-CV, 2017 WL 944027, at *3 (Tex. App.—Dallas Mar.
10, 2017, no pet.) (mem. op.)).
13 Id. (citation omitted).
14 Troice, 816 F.3d at 345 (citation omitted) (quoting Occidental Chem. Corp. v. Elliott
Turbomachinery Co., 84 F.3d 172, 175 (5th Cir. 1996)).
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applying Texas law, we look first to the decisions of the Texas Supreme
Court.” 15 “If the Texas Supreme Court has not ruled on an issue, we ‘make an
Erie guess, predicting what [the Texas Supreme Court] would do if faced with
the [same] facts.’” 16 “In doing so, we typically ‘treat state intermediate courts’
decisions as the strongest indicator of what a state supreme court would do,
absent a compelling reason to believe that the state supreme court would reject
the lower courts’ reasoning.’” 17
III. Discussion
As discussed in greater detail below, the attorney immunity doctrine
under Texas law generally insulates a lawyer from civil liability to a non-client
for conduct performed as part of the discharge of the lawyer’s duties to his
client. We first make an Erie guess as to whether the Supreme Court of Texas
would extend the attorney immunity doctrine to claims of negligent
misrepresentation. Next, we consider whether the requirements of attorney
immunity are satisfied on the facts alleged in this case.
a. Attorney Immunity from Negligent Misrepresentation Claims
As indicated, this appeal raises the question whether the attorney
immunity doctrine under Texas law shields an attorney against claims by a
non-client based on negligent misrepresentation made in the course of
counsel’s representation of his clients. Having found no decisions from the
Supreme Court of Texas that directly address this issue, we make an Erie
guess that the Supreme Court of Texas would apply the attorney immunity
doctrine to shield attorneys for such negligent misrepresentation claims.
15 Kelly, 868 F.3d at 374 (quoting Hux v. S. Methodist Univ., 819 F.3d 776, 780 (5th
Cir. 2016)).
16 Id. (alterations in original) (quoting Hux, 819 F.3d at 780).
17 Id. (quoting Hux, 819 F.3d at 780-81).
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The Supreme Court of Texas recognized in McCamish, Martin, Brown &
Loeffler v. F.E. Appling Interests 18 that the absence of privity of contract does
not preclude a non-client from suing an attorney for negligent
misrepresentation under the Restatement (Second) of Torts § 552, which
creates liability for providing false information to persons other than his client.
In that 1999 decision, the court did not address the issue of attorney immunity
but focused its analysis on the issue of privity, which it found was not required
for a negligent misrepresentation claim against an attorney. 19
More recently, the Supreme Court of Texas clarified the scope and
application of the attorney immunity doctrine under Texas law in Cantey
Hanger, LLP v. Byrd 20 and Youngkin v. Hines. 21 In Cantey Hanger, the court
described this doctrine as “intended to ensure ‘loyal, faithful, and aggressive
representation by attorneys employed as advocates’” by avoiding “the
inevitable conflict that would arise if [they] were ‘forced constantly to balance
[their] own potential exposure against [their] client’s best interest.’” 22
The Cantey Hanger court made it clear that attorneys are generally
“immune from civil liability to non-clients ‘for actions taken in connection with
representing a client in litigation.’” 23 Attorney immunity does not extend to
actions that “do not qualify as ‘the kind of conduct in which an attorney
engages when discharging his duties to his client’” or that “are entirely foreign
to the duties of an attorney” because they do “not involve the provision of legal
18McCamish, 991 S.W.2d at 791, 795.
19See id. at 791-95.
20 Cantey Hanger, LLP v. Byrd, 467 S.W.3d 477 (Tex. 2015).
21 Youngkin v. Hines, 546 S.W.3d 675 (Tex. 2018).
22 Cantey Hanger, 467 S.W.3d at 481, 483 (first quoting Mitchell v. Chapman, 10
S.W.3d 810, 812 (Tex. App.—Dallas 2000, pet. denied); then quoting Alpert v. Crain, Caton
& James, P.C., 178 S.W.3d 398, 405 (Tex. App.—Houston [1st Dist.] 2005, pet. denied)).
23 Id. at 481 (citations omitted) (quoting Alpert, 178 S.W.3d at 405).
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services and would thus fall outside the scope of client representation.” 24
However, this immunity extends to even wrongful conduct that is “part of the
discharge of the lawyer’s duties in representing his or her client.” 25 The Cantey
Hanger court declined to find a general fraud exception to the doctrine of
immunity, reasoning that “the focus in evaluating attorney liability to a non-
client is ‘on the kind—not the nature—of the attorney’s conduct,’” so “[m]erely
labeling an attorney’s conduct ‘fraudulent’ does not and should not remove it
from the scope of client representation or render it ‘foreign to the duties of an
attorney.’” 26
In Cantey Hanger, the plaintiffs alleged that an attorney made
intentional misrepresentations in the “preparation of a bill of sale
[transferring] an airplane awarded to [the firm’s] client in an agreed divorce
decree,” for the purpose of shifting tax liability between the parties to the
divorce in violation of the decree. 27 The court reasoned that the preparation of
the bill of sale to facilitate the transfer of the airplane pursuant to the decree
“‘was conduct in which an attorney engages to discharge his duties to his client’
and was not ‘foreign to the duties of an attorney.’” 28 It found that the additional
allegations about the intentional misrepresentations to shift tax liability did
not bring the conduct outside the scope of the firm’s duties to its client. 29
24 Id. at 482 (citations omitted) (first quoting Dixon Fin. Servs., Ltd. v. Greenberg,
Peden, Siegmyer & Oshman, P.C., No. 01-06-00696-CV, 2008 WL 746548, at *9 (Tex. App.—
Houston [1st Dist.] Mar. 20, 2008, pet. denied) (mem. op. on reh’g); then quoting Poole v.
Hous. & T.C. Ry. Co., 58 Tex. 134, 137 (1882)).
25 Id. at 481-82 (citation omitted) (first quoting Toles v. Toles, 113 S.W.3d 899, 910-11
(Tex. App.—Dallas 2003, no pet.); then quoting Alpert, 178 S.W.3d at 406).
26 Id. at 483-84 (citations omitted) (first quoting Dixon Fin. Servs., 2008 WL 746548,
at *8; then quoting Alpert, 178 S.W.3d at 406).
27 Id. at 485 (quoting Byrd v. Vick, Carney & Smith LLP, 409 S.W.3d 772, 780 (Tex.
App.—Fort Worth 2013), rev’d sub nom. Cantey Hanger, 467 S.W.3d 477).
28 Id. (quoting Byrd, 409 S.W.3d at 780).
29 Id.
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The Cantey Hanger court included a footnote in its discussion stating:
In McCamish, we held that an attorney can be liable to a non-client
for negligent misrepresentation where “an independent duty to the
nonclient [arises] based on the [attorney’s] manifest awareness of
the nonclient’s reliance on the misrepresentation and the
[attorney’s] intention that the nonclient so rely.” The plaintiffs do
not assert such a claim here. 30
In April 2018, the Supreme Court of Texas reaffirmed in Youngkin that
Cantey Hanger “controls [its] analysis of attorney immunity” and summarized
the Cantey Hanger rule as follows: “[A]n attorney may be liable to nonclients
only for conduct outside the scope of his representation of his client or for
conduct foreign to the duties of a lawyer,” which “inquiry correctly focuses on
the kind of conduct at issue rather than the alleged wrongfulness of said
conduct.” 31 The court noted that “[t]he only facts required to support an
attorney-immunity defense are the type of conduct at issue and the existence
of an attorney-client relationship at the time.” 32
In Youngkin, the plaintiff alleged that the attorney knowingly
participated in a fraudulent scheme to deprive the plaintiff of property by
entering a settlement agreement on his clients’ behalf “knowing they had no
intention to comply,” helping his clients avoid compliance by preparing a deed
used to transfer the property to another person, and aiding that person in his
efforts to wrongfully assert ownership of the property. 33 The court noted that
it was required, under Cantey Hanger, to “look beyond [the plaintiff’s]
characterizations of activity as fraudulent and conspiratorial and focus on the
conduct at issue,” which it described as “negotiating and entering a settlement
30 Id. at 483 n.7 (alterations in original) (quoting McCamish, 991 S.W.2d at 792).
31 Youngkin, 546 S.W.3d at 681 (citations omitted).
32 Id. at 683.
33 Id. at 678-79.
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agreement, preparing transfer documents, and filing a lawsuit.” 34 The court
found that this “conduct was directly within the scope of [the lawyer’s]
representation of his clients, regardless of any disagreement over the
substance of the settlement agreement” and was “not foreign to the duties of a
lawyer.” 35
In this case, the district court denied Schiff Hardin’s attorney immunity
defense, venturing an Erie guess that the attorney immunity doctrine did not
foreclose a negligent misrepresentation claim. In so ruling, the district court
found that McCamish had not been overruled because the Supreme Court of
Texas had expressly declined to address it in the court’s more recent guidance
on the doctrine of attorney immunity, citing the Cantey Hanger footnote
referencing the McCamish case.
On appeal, Ironshore argues that the footnote in Cantey Hanger, upon
which the district court relied, creates an exception to attorney immunity for
negligent misrepresentation claims. However, this footnote does not bear the
weight Ironshore places on it. Rather, the footnote merely acknowledges that
the court was not ruling on a negligent misrepresentation claim because none
was before it in that case. The Cantey Hanger court’s rejection of the argument
that attorney immunity does not extend to fraudulent and other intentional
conduct committed by the attorney in the course of representing his client
makes it clear to us that the Supreme Court of Texas would extend immunity
to the much less egregious conduct of negligent misrepresentation, whether or
not the non-client relied on the negligent misrepresentation. The district court
therefore erred in determining that attorney immunity did not apply to claims
of negligent misrepresentation.
34 Id. at 682, 684 (citation omitted).
35 Id.
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b. Analysis of Schiff Hardin’s Conduct
Having made the Erie guess that the Supreme Court of Texas would
extend the attorney immunity doctrine to negligent misrepresentation claims,
we turn to the question whether the requirements for attorney immunity are
satisfied in this case.
Whether an attorney’s conduct was in the scope of his representation of
a client is a legal question. 36 Attorney immunity applies to all “actions taken
in connection with representing a client in litigation,” even wrongful conduct
that is “part of the discharge of the lawyer’s duties in representing his or her
client,” 37 as long as it is not “entirely foreign to the duties of an attorney.” 38
For this analysis, the Supreme Court of Texas has repeatedly instructed courts
to simply look to the general kind of conduct at issue and whether attorneys
engage in that kind of conduct when discharging duties to a client.
The factual allegations of the complaint in this case reflect that all of the
alleged misrepresentations and omissions were related to Schiff Hardin’s
representation of Dorel in the Hinson litigation. Looking beyond Ironshore’s
characterization of the firm’s conduct as wrongful, as we must, the type of
conduct at issue in this case includes: (1) reporting on the status of litigation
and settlement discussions; (2) providing opinions as to the strength and
valuation of plaintiffs’ claims; (3) providing opinions as to the perceived
litigation strategies employed by opposing counsel and the potential prejudice
of pre-trial developments; (4) providing estimates of potential liability;
(5) reporting on the progress of a jury trial; and (6) reporting on pre-trial
rulings and pre-trial settlement offers.
36 Id. at 683.
37 Cantey Hanger, 467 S.W.3d at 481-82 (citations omitted) (first quoting Alpert, 178
S.W.3d at 405; then quoting Toles, 113 S.W.3d at 910-11; and then quoting Alpert, 178 S.W.3d
at 406).
38 Id. at 482 (citations omitted) (quoting Poole, 58 Tex. at 137).
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We are satisfied that the kinds of conduct at issue in this case fall within
the routine conduct attorneys engage in when handling this type of litigation.
Schiff Hardin’s conduct falls squarely within the scope of the firm’s
representation of its client. This court is “not bound to accept as true
[plaintiff’s] legal conclusion” 39 that the misrepresentations were somehow
“separate from [Schiff’s] representation and defense of Dorel” and “not
necessary to, nor a part of, Schiff’s defense of Dorel in the Lawsuit.” Immunity
is established on the face of the complaint, which alleges only
misrepresentations and omissions related to the Hinson litigation, in which
Schiff Hardin undisputedly represented Ironshore’s insured Dorel in the
defense of a products liability case. Schiff Hardin’s first duty was to its client,
Dorel, and it was up to Ironshore to retain its own counsel if it was dissatisfied
with the comprehensiveness of the information it was receiving from its
insured’s attorneys. Therefore, we find that the requirements for attorney
immunity are met, Schiff Hardin’s Rule 12(b)(6) motion to dismiss should be
granted, and the plaintiff’s complaint should be dismissed.
IV. Conclusion
For these reasons, we conclude that the district court erred in denying
Schiff Hardin’s motion to dismiss plaintiff’s complaint. Accordingly, we
REVERSE the district court’s ruling and RENDER judgment dismissing
plaintiff’s complaint.
39Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Papasan v. Allain, 478
U.S. 265, 286 (1986)).
12