Linegar v. DLA Piper LLC

Justice Johnson (Opinion)

The Texas Supreme Court reinstated a legal malpractice case against DLA Piper, disagreeing with the lower court’s finding that the plaintiff lacked standing to sue. Plaintiff, Chris Linegar, was the Chairman, Director, and majority shareholder of Zaychan PTY, Ltd., which provided a short-term bridge loan to a company called IdentiPHI. DLA Piper represented IdentiPHI in the transaction, but also worked directly with Linegar. It eventually became clear that IdentiPHI was going to default on the loan and that Zaychan’s security interest in IdentiPHI’s assets had not been perfected, as Linegar claims DLA Piper had led him to believe. In order to avoid adverse consequences to the company resulting from the default, Linegar took a mortgage out on his home and paid the loan off himself. He then sued DLA Piper for legal malpractice, negligent misrepresentation, and other claims. The jury found in Linegar’s favor, but the court of appeals reversed, holding that Linegar lacked individual standing to sue because Zaychan, not Linegar, made the loan.

The Supreme Court disagreed. It acknowledged the general rule that “[a] corporate stockholder cannot recover damages personally for a wrong done solely to the corporation, even though he may be injured by that wrong.” But it insisted that was not what Linegar was trying to do. The Court noted that Linegar alleged the firm wrongfully advised him in his individual capacity and that, based on that advice, he directed Zaychan to make the loan to IndentiPHI, and the damages from the loss on the loan fell directly on him. The jury was only asked questions related to Linegar, individually, and there was evidence to support the jury’s answers. The Court therefore reversed the court of appeals judgment and remanded for the court to consider the issues it had not previously reached.