Attorneys Sanctioned by Texas State Court for Collusive Settlement involving Minors Competing for Limited Insurance Coverage

In Legal Ethics & Professionalism, What's New in the Courts by gravierhouse1 Comment

The victim of a trucking accident was survived by two different sets of children with two different mothers.  Each instituted a separate wrongful death action, which were consolidated, on motion of the defendant, in Webb County.  The defendant’s insurer was willing to settle for policy limits, and initally proposed mediation or arbitration to apportion the insurance proceeds between and among the survivors.  Instead, however, the defendant settled with one group of plaintiffs, who filed suit seeking approval of the settlement in Nueces County.  The parties never informed the Nueces County Court that there were other minors involved, nor did they inform the competing group of survivors, (or the Webb County Court), of the settlement or the proceedings in Nueces County.  After everything came to light, the competing plaintiffs’ attorney brought a motion for sanctions, which was granted.  And affirmed by the Court of Appeals.

“At the sanctions hearing, Liles admitted the attorneys pursued the action in Nueces County to avoid Rodriguez — counsel for Contreras — and any effort he might make to disrupt the settlement. They point out Contreras had no authority or right to stop or interfere with the settlement even if the settlement had exhausted the insurance proceeds…. We do not disagree with this general proposition. But the attorneys’ avoidance of Contreras’s counsel suggests something more, particularly given the involvement of competing minors, and supports the trial court’s decision to impose sanctions under its inherent authority.

“It is undisputed that two sets of minors were competing over limited insurance funds — this was known by all parties.  When minors bring suit, trial courts have the responsibility to protect their best interests.  Here, when Navarro and Contreras filed suit, the Webb County trial court became responsible for the best interests of all four minor children. The attorneys’ decision to file suit in Nueces County to avoid Contreras’s counsel suggests a belief by the attorneys that not only would her counsel lodge objections to any settlement that awarded the Navarro minors more than half of the available settlement funds, but those objections might have found favor with the Webb County trial court given its duty to protect all of the minors under its jurisdiction, thereby impairing any settlement between Liles’s clients and R&G’s clients. Thus, we hold the Webb County trial court could have concluded, in its discretion, complicity by the attorneys to keep the court in the dark regarding their settlement actions, thereby unilaterally divesting the trial court of its jurisdiction over and ability to protect all the minors under its authority.

“Moreover, as the trial court recognized, attorneys have a duty of candor toward the tribunal…. They also have a duty not to engage in deceptive conduct….  Additionally, although attorneys are expected to act as zealous advocates for their clients, an attorney cannot allow his zealous representation to supersede the attorney’s obligation to maintain confidence in our judicial system.

“The attorneys argue their actions neither violated the disciplinary rules nor warrant sanctions because no misrepresentations were made to the trial court and all of the actions taken were legal actions in their clients’ best interests. Given the evidence and the context in which the attorneys’ conduct took place, we hold the trial court could have determined otherwise.”

Liles v. Contreras, No.04-16-00636, 2018 WL 1402062 (Tex. App. – San Antonio, March 21, 2018).

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