Foley Must Face Texas Claims From Former Client Turned Opponent

Foley & Lardner LLP must face claims in Texas that it took confidential information from a former client and sought to use it to seize funds in that client’s bankruptcy proceeding, a state appeals court said Tuesday.

The global firm, once called Gardere Wynne Sewell, LLP, also is no longer entitled to more than $100,000 in fees awarded by a trial court. Instead, the trial court must now decide if Foley should be on the hook for fees, the Court of Appeals, First District said.

Reversing a Houston trial court, the appeals court said the judge shouldn’t have dismissed claims against Foley under the Texas Citizen’s Participation Act. The act is meant to dismiss harassing lawsuits that attack free speech protections, but it shouldn’t apply here because the claims against Foley relate to conduct, not communications, the unanimous opinion said.

Texas appellate courts “have declined to rewrite the TCPA to extend the definition of communication to include [a failure] to communicate,” the court said.

Justices April Farris and Richard Hightower joined the opinion of Justice Veronica Rivas-Molloy.

Foley was sued by partners in an oil and gas exploration and production company who the firm once represented. The partners, Stephen and David Dernick, say Foley used confidential information from their past representation of the Dernicks to try to seize funds the Dernicks obtained through a shareholder settlement.

Foley argues it didn’t represent the Dernicks in their individual capacities as officers of the company. The Dernicks say otherwise, that there was “an explicit attorney-client relationship.” Foley negotiated the Dernicks’ exit packages, valued at $25.8 million.

On remand, the trial court is to determine whether Foley’s motion to dismiss was frivolous or solely intended to delay, the appeals court said.

The case is Dernick v. Foley & Lardner LLP, Tex. App., 1st Dist., No. 01-22-00251-cv, 8/27/24.