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plaintiffdefendantattorneyappealtestimonymotionmotion to dismiss
lawsuitplaintiffdefendantattorneyliabilityappealmotionmotion to dismiss

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Troice v. Proskauer Rose, L.L.P., 816 F.3d 341

Facts

The case arose from a Ponzi scheme orchestrated by Allen Stanford, where investors purchased worthless certificates of deposit from Stanford Financial. The plaintiffs alleged that attorney Thomas Sjoblom and his law firms aided Stanford's fraud and obstructed the SEC's investigation. They claimed Sjoblom's actions included sending misleading letters to the SEC and failing to correct false statements made during SEC testimony. The district court initially dismissed the case based on SLUSA preclusion but later denied the defendants' motion to dismiss based on attorney immunity, leading to the appeal.

As a partner at the law firm of Chadbourne & Parke LLP, and later at Proskauer Rose LLP, Thomas Sjoblom represented certain companies (collectively, 'Stanford Financial') that Stanford used to perpetrate his scheme. Plaintiffs are various entities and individuals who purchased certificates of deposit ('CDs') issued by Stanford Financial; those CDs, plaintiffs allege, are now worthless.

Issue

Is the denial of a motion to dismiss based on attorney immunity under Texas law an appealable collateral order, and does the Texas attorney immunity doctrine protect the defendants from suit in this case?

We are now confronted with two issues. First, under Texas law, is attorney immunity a true immunity of suit, such that denial of a motion to dismiss based on attorney immunity is appealable under the collateral order doctrine? Second, should we reverse the district court's order denying defendants' motions to dismiss based on attorney immunity now that the Texas Supreme Court has clarified that there is no 'fraud exception' to attorney immunity?

Rule

Under Texas law, attorney immunity is considered a true immunity from suit, meaning that attorneys cannot be held liable for actions taken in the course of representing their clients, even if those actions are alleged to be fraudulent.

The Texas Supreme Court has described attorney immunity in the very same terms: Conduct covered by attorney immunity is 'not actionable,' and the doctrine provides 'immun[ity] from civil liability.'

Analysis

The court determined that the Texas Supreme Court's ruling clarified that there is no 'fraud exception' to attorney immunity. The court found that Sjoblom's alleged conduct, while potentially wrongful, fell within the scope of his representation of Stanford Financial. Therefore, the actions taken by Sjoblom were protected under the attorney immunity doctrine, leading to the conclusion that the district court erred in denying the motion to dismiss.

In short, because the policies underlying attorney immunity support the conclusion that Texas courts seek to protect attorneys against even defending a lawsuit, and because Texas courts describe conduct covered by attorney immunity as not actionable (and attorneys engaging in that conduct as immune from suit), we conclude that the Texas Supreme Court would consider attorney immunity to be a true immunity from suit.

Conclusion

The Court of Appeals reversed the district court's order denying the defendants' motions to dismiss and rendered judgment that the case is dismissed with prejudice.

Accordingly, we REVERSE the district court's order denying defendants' motions to dismiss and RENDER judgment that the case is dismissed with prejudice.

Who won?

Defendants (Sjoblom and law firms) prevailed because the court found that their actions were protected by attorney immunity under Texas law, which does not recognize a fraud exception.

Defendants contend that, because Cantey Hanger makes clear that the fraud exception does not exist, they should have been granted attorney immunity because 'the type of conduct alleged falls squarely within the scope of [Sjoblom's] representation' of his clients.

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