Editors Choice

Fifth Circuit Says No Texas Lawyer is Gonna Pay $3M as it Orders a New Trial in Hopes Law Funder LLC is Out of Cash

Unbeknownst to Law Funder, Munoz had a close professional relationship with Judge Jesus Contreras, who was presiding over the Garcia divorce: Munoz and Judge Contreras were coprincipals in a professional corporation, Contreras & Munoz, P.C. About a year after Law Funder retained Munoz, an intervenor in the Garcia divorce with a competing claim to the SLM receiver funds discovered this conflict and moved to disqualify Judge Contreras.

They should make a book and a film on this Texas Law case….it shows why this State is a “Law Unto Itself” aka Republic.

KING, CARLOYN DINEEN, (MRS. REAVLEY)

WILLETT, DON R.

SMITH, JERRY E.

The Law Funder, L.L.C., sued Sergio Munoz, Jr., and his law firm for legal malpractice. Finding a series of discovery violations and related malfeasance, the district court struck Munoz’s answer. Munoz did not move to replead, and the district court entered default judgment against him. The district court then held a bench trial on damages and awarded Law Funder nearly $3 million. Munoz appeals, challenging both the default judgment and the district court’s award.

We AFFIRM the district court’s entry of default judgment against Munoz. But because we conclude the district court improperly calculated damages under Texas law, we VACATE the district court’s final judgment and REMAND for a new trial on damages.

In sum, Munoz’s negligence might have cost Law Funder the $1,200,000 it expected to recover from the SLM receivers, or it might have cost Law Funder whatever portion of $1,767,430 it incurred after Munoz’s negligence in fruitless pursuit of the SLM receiver funds.

But we can envision no scenario in which Munoz’s negligence cost Law Funder both. The district court accordingly issued Law Funder a double recovery by awarding it the attorney fees it spent litigating its claim in the Garcia divorce and its expected return on that litigation.

To the extent the district court concluded that Texas law allowed it to award the attorney fees and expenses Law Funder incurred in the Garcia divorce regardless of whether Munoz’s negligence proximately caused those fees and expenses, it erred as a matter of law.

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ORAL ARGUMENT HEARD before Judges King, Smith, Willett. Arguing Person Information Updated for: John F. Carroll arguing for Appellants Sergio Munoz, Et Al; Arguing Person Information Updated for: Michael Jonathan Smikun arguing for Appellee Law Funder.

Fifth Circuit Says No Texas Lawyer is Gonna Pay $3M as it Orders a New Trial in Hopes Law Funder LLC is Out of Cash
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