Baker Botts, L.L.P. v. Cailloux, — S.W.3d —-, 2007 WL 460643 (Tex.App.-San Antonio Feb 14, 2007)

This case, which I previously wrote about here, reminds me of an excellent ethics seminar I once attended where the speaker said something that has stayed with me to this day.  When it comes to representing multiple clients with conflicting interests, the attorney essentially assumes the economic risk of all clients being 100% satisfied with the case.  Even if you do everything right, if one of the clients is unhappy at the end of the day, the attorney might end up paying for that dissatisfaction – regardless of actual fault.

Here, the estate planning attorneys at Baker Botts, lead by nationally-known estate planner and speaker Stacy Eastland (currently Managing Director of Goldman Sachs & Company (Houston)), seem to have done everything right.

  • They identified the potential conflict of interest.
  • Disclosed the conflict to the clients and received written waivers.
  • They severed their relationship with one of the clients once it became clear the clients were no longer interested in pursuing a mutually-agreed-upon course of action.

See ACTEC Commentary on Model Rule of Professional Conduct 1.7.

During the course of the engagement, one of the clients grew unhappy with the results, he looked around for the cause of his dissatisfaction, then sued the attorneys.  As recounted in the linked-to appellate opinion, the jury found that the attorneys had in no way caused economic harm to their clients:

A jury . . . found that . . .  [client] had zero "lost income" damages and zero "economic loss" damages as a result of [the conflict of interest].

This same jury entered a $65.5 million verdict against the defendants, which was increased to $71 million by the trial judge to factor in prejudgment interest!  The sin the jury was apparently most concerned with was the conflict of interest, and the attorneys were made to pay – big time – even though they had cause no economic harm to their clients.

Lesson learned:

Don’t guarantee the deal.  Even if you do everything right, and even if you win once the client sues you – representing multiple clients with conflicting interests can morph into a nightmare.  Although Baker Botts won this round (see press release), this lawsuit must have been gut wrenching for the professionals involved – and it’s not over yet – the plaintiffs say they’re going to appeal (see here).