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Simpson v. James

United States Court of Appeals for the Fifth Circuit
903 F.2d 372 (1990)


Sheila Simpson (plaintiff) hired attorney Ed Oliver to help sell a family-owned corporation after her husband’s death. When interested purchasers approached Oliver, he helped them form the Tide Creek corporation. Oliver acted as the sole attorney advising both parties to the sale and drafted the documents for transferring the company’s assets. The sale agreement provided for a $100,000 initial payment, with the balance due in later installments. As security, the transaction included liens against Tide Creek stock and the personal guarantees of the investors. Oliver continued to act as Simpson’s attorney in other matters after the sale. Five months after the sale, a fire destroyed Tide Creek’s inventory. A partner in Oliver’s firm, David James (defendant) helped Tide Creek recover $200,000 in insurance proceeds. Thereafter, Oliver left the firm. When Tide Creek defaulted on its first payment obligation, Simpson consulted with James. James acknowledged that the company was having financial problems and advised Simpson to restructure Tide Creek’s payment agreement. Simpson asked James what would happen in the event of a conflict between her interests and Tide Creek’s interests. James indicated that the firm would represent Simpson’s interests. Simpson later heard rumors about Tide Creek going into bankruptcy and initiated a meeting with James. James informed Simpson that he was representing Tide Creek and that she would need to find a new lawyer. After failing to secure any compensation from the bankrupt corporation or the individual investors, Simpson filed malpractice claims against James and the other partners of his law firm. At trial, a jury awarded Simpson $100,000 on each of two negligence claims. James and his co-defendants appealed.

Rule of Law


Holding and Reasoning (Wisdom, J.)

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