## Facts

- A real estate venture was organized to purchase an apartment complex through a single-asset Texas limited partnership, Lodges Investors, L.P.
- The partnership’s counsel (an attorney and his law firm) formed the entity and prepared transaction documents, including the limited partnership agreement and exhibits reflecting partners’ capital contributions and percentage interests.
- The investor group included fifteen Class A limited partners, including trustees of a family trust that purchased a limited partnership interest.
- Investors received partnership materials with an exhibit listing anticipated contributions and a cover letter stating that “final percentages” would be determined at closing.
- At closing, the partnership lacked sufficient cash for required contributions, and the seller advanced a short-term loan to cover the shortfall.
- After closing, counsel circulated executed partnership documents and an updated exhibit reflecting percentage interests and contributions based on information provided by the venture’s principals.
- The venture later failed, the partnership filed bankruptcy, and the limited partners suffered losses.
- The investors sued multiple participants, including the partnership’s counsel, alleging (as relevant on appeal) negligent misrepresentation and aiding and abetting breach of fiduciary duty and securities fraud.

## Issues

1. Whether non-client limited partners raised a fact issue that partnership counsel committed negligent misrepresentation in providing partnership/closing information to investors.
2. Whether the evidence raised a fact issue that partnership counsel aided and abetted a breach of fiduciary duty by other participants through knowledge and substantial assistance.
3. Whether the evidence raised a fact issue that partnership counsel aided and abetted securities fraud through knowing, substantial assistance in any primary securities violation.

## Decision

- The court of appeals affirmed summary judgment for the attorney and law firm on all claims pursued on appeal.
- On negligent misrepresentation, the investors failed to produce more than a scintilla of evidence of an actionable misrepresentation by counsel, lack of reasonable care, or that counsel supplied information for the specific purpose of guiding the investors’ decisions as required for non-client liability.
- On aiding and abetting breach of fiduciary duty, the record did not raise a fact issue that counsel knew of any primary breach or substantially assisted it; ordinary transactional legal services were insufficient on this record.
- On aiding and abetting securities fraud, the investors failed to present evidence that counsel knowingly and substantially assisted any securities fraud in connection with the sale of partnership interests.

## Legal Principles

- A negligent misrepresentation claim against a professional by a non-client requires evidence that the professional supplied false information for the guidance of a limited group in a transaction, failed to use reasonable care in obtaining or communicating the information, and caused justifiable reliance and pecuniary loss.
- In evaluating non-client claims against entity counsel, courts examine whether the alleged statements were directed to and intended to influence the non-client in a manner that supports liability, not merely that the non-client received documents prepared in the representation of the entity.
- Secondary-liability theories framed as “aiding and abetting” require evidence of knowledge of the primary wrong and substantial assistance; providing routine legal services, without evidence of knowing participation in wrongdoing, does not satisfy these elements.
- A no-evidence summary judgment is proper when the nonmovant fails to produce more than a scintilla of evidence on essential elements of the claim.

## Conclusion

The court held that the investors’ evidence did not create a fact issue that partnership counsel negligently misrepresented transaction facts to non-clients or knowingly and substantially assisted any fiduciary breach or securities fraud, and it affirmed summary judgment for the attorney and law firm.


Kastner v. Jenkens & Gilchrist, P.C., 231 S.W.3d 571 (Tex. App.—Dallas 2007)