Malpractice Suit Against Texas Lawyer Over Search IP Can Proceed

A malpractice claim against a Texas lawyer who allegedly worked with a client to steal the intellectual property of his business partner can proceed after a Texas appeals court ruled that the statute of limitations hadn’t started until the client’s bankruptcy litigation appeals ended.

White Nile Software Inc., a search engine start-up, sued lawyer Jeffrey Travis years after it retained its legal malpractice claims following several legal battles between two business partners that founded the company, Steven Thrasher and Edward Mandel.

Thrasher alleged that Mandel and Travis conspired to relieve him of his intellectual property as the White Nile company deteriorated in 2006. Travis, who was hired by Mandel to represent him against Thrasher, allegedly developed a strategy to induce Thrasher to file litigation deadlocking White Nile, which would allow the business’s intellectual property to be moved to another entity solely owned by Mandel.

By 2011 the trial court approved a settlement between White Nile, Thrasher, and Jason Coleman, who alleged that he was co-inventor and co-owner of Thrasher’s search engine. In this settlement, White Nile retained its legal malpractice claims, the Texas Court of Appeals, Fifth District said.

White Nile was barred from pursuing the malpractice claim because Mandel filed for bankruptcy, and the issue of who had control of the company was in dispute. During trial, the court concluded that he wasn’t a co-inventor of any of Thrasher’s intellectual property. Appeals weren’t exhausted until October 1, 2018, when the US Supreme Court denied review of the case.

White Nile filed its petition against Travis November 2018, asserting claims of professional negligence, breach of fiduciary duty, and conspiracy.

The court held that the two-year limitations period was tolled until Thrasher and Coleman were in a position to assume control of White Nile and had the authority to assert the company’s legal malpractice claims.

The issue of who had control over the company was only resolved when the bankruptcy court ruled that Mandel wasn’t a co-inventor and thus had no shares in the company. At that point, which was in October 2018, after the appeals were exhausted, Thrasher and Coleman were “first in line” to prosecute the malpractice claims, the court said.

Justice Bonnie Lee Goldstein delivered the opinion. Justices Ken Molberg and Erin Nowell joined.

Holmgren Johnson Mitchell Madden LLP represented White Nile. Cobb Martinez Woodward PLLC represented Travis.

The case is White Nile Software, Inc. v. Travis, Tex. App., 5th Dist., No. 05-20-00354-CV, 8/29/22.