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A Texas jury has awarded $8.8 million to an attorney who said he was duped into joining a Dallas law firm by negligent misrepresentations about the firm’s financial state and the relationship between the name partners.

The verdict followed a grueling, six-week trial that exposed the financial woes and internal feuding at Baron & Budd, a 50-lawyer, Dallas plaintiffs’ firm known for toxic tort litigation.

Plaintiff Gary Cruciani, a veteran commercial litigator, was recruited by firm co-founder Russell W. Budd and joined Baron & Budd in May 2006. Cruciani said he was persuaded to leave his position as a shareholder at McKool Smith in Dallas based on claims by Budd that his firm was poised “to have an even better year in 2006 than in 2005.”

Budd also reassured him, Cruciani said, that he and co-founder Fred Baron were on good terms.

Neither claim, it turned out, was true.

Nine months after Cruciani started working there, Baron & Budd laid off a third of its staff. And as Cruciani later discovered, a month before he joined the firm Baron’s lawyer had sent an angry, 10-page demand letter that threatened the firm with receivership. Baron had left the firm in 2002; he sued the firm and Budd in August 2006 for breach of contract. The suit subsequently settled. Baron died in 2008.

“Cruciani’s complaint was … that if he had been told the truth in the recruiting process, he never would have left McKool Smith,” said Jim Hartnett Jr., who represented Cruciani.

Cruciani left Baron & Budd after a year and returned to McKool Smith, where he is currently a partner, but not a shareholder.

Baron & Budd said in a statement that it will move to set aside the verdict because “the firm believes it is not supported by the evidence or the law. The firm will continue to fight allegations in the trial court and, if necessary, on appeal.”

Rod Phelan, who represented Budd individually, contends that Cruciani’s negligent misrepresentation claim is preempted by a two-year statute of limitations. In addition, he said, a large portion of Cruciani’s damages calculation is speculative.

“Baron & Budd gave Cruciani a job, not a lobotomy,” he said. “Nobody sewed his mouth shut; he can practice law as well as ever. He has not had a loss of earning capacity. He has been able to earn his full worth at all times.”

Hartnett responded that the trial judge already determined that the “discovery rule” applied to the two alleged misrepresentations. He also said that damages were determined based on the difference between what Cruciani would have received had he not left McKool Smith and what he earns now and will earn in the future.

“He was a shareholder at his old firm and went to Baron and Budd based on misrepresentations that were made to him,” Hartnett said.

Question of credibility

Conflicting testimony about the firm’s financial projections for 2006 and Budd’s relationship with Baron took up much of the trial.

Budd testified that he did not tell Cruciani, as Cruciani claimed, that his relationship with Baron “both professionally and personally” was “very good; that they remained friends,” and that there were no “lingering problems or issues between the two of them.”

In addition, Phelan asserted, “Cruciani learned litigation with Baron had been threatened in his [Cruciaini's] second month on the job, and admitted he did not claim then that he’d been misled.”

But Cruciani, who testified over five days, said that he was unaware of the bad blood between the firm’s founders.

“Nobody would have joined Baron & Budd,” Hartnett said, if Baron’s receivership threat had been made public.

“Fred Baron and Baron & Budd is like Colonel Sanders and Kentucky Fried Chicken,” Hartnett said. “If Colonel Sanders were suing Kentucky Fried Chicken, you wouldn’t want to be starting up a franchise.”

A key document, according to Hartnett, was Baron’s demand letter. Although the defense downplayed the significance of the letter, Hartnett described it as “remarkably strong” in tone.

Cruciani also testified that Budd told him that 2006 “even without the mass tort cases, was projected to be even better than 2005.”

The defense contended that during his first week on the job, Cruciani saw a presentation that said the firm’s profits depended on big cases.

But Hartnett said Cruciani’s claim about being given misleading financial projections was backed up by a document with the same information that was presented at a shareholder retreat shortly before Cruciani joined the firm.

Hartnett said Cruciani’s testimony was critical “because it was his word against theirs.”

“His case came down to credibility,” Hartnett said. “And our case was much more credible.”

Jurors deliberated about seven hours before voting 10 to 2 that the law firm and Budd were guilty of negligent misrepresentation, but not fraud.

They also found against Baron & Budd on two counterclaims, including an allegation that Cruciani breached his fiduciary duty when he left the firm and talked to several competitors about taking some contingent fee cases.

The jury found that the defendants were jointly and severally liable and awarded Cruciani a total of $8.8 million in compensatory damages. That includes $2.971 million for the difference between what he would have made if he had stayed at McKool Smith from May 2006 through the trial, and $5.8 million for what he’s likely to lose in future earnings.

Plaintiff’s attorneys: Jim Hartnett Jr. and Will Ford Hartnett of The Hartnett Law Firm in Dallas.

Defense attorneys: Rod Phelan and Susan Cannon of Baker Botts in Dallas for Russell Budd; William D. Sims Jr. and Daniel Tobey of Vinson & Elkins in Dallas for the Baron & Budd law firm.

The case: Cruciani v. Budd; May 19, 2010; 68th District Court, Dallas; Judge Martin Hoffman.

Questions or comments can be directed to the writer at: nora.tooher@lawyersusaonline.com

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