Failure to Formally End Representation is Key
A nanotechnology company, Quantum Materials Corp., cried foul claiming conflict of interest and deceptive business practices when its law firm represented lenders in a legal action against it while also allegedly representing the company. Quantum retained the firm as corporate counsel in 2016, however they stopped sending work to them. The company claims the representation never formally ended. When Quantum’s dispute with its lenders erupted and the firm represented the lenders, the firm stated that the company “had ever been or was currently a client of theirs.” The underlying suit seeks punitive damages of up to $100 million. On interlocutory appeal, the Texas Appeals Court held the claims the firm breached its fiduciary duty and engaged in deceptive trade practices could proceed but the legal malpractice claim could not. Rather the panel determined the malpractice claim is “in substance” a claim of breach of fiduciary duty.