Guardino v. Hart ( 2023 )

Case: 22-20278 Document: 00516775583 Page: 1 Date Filed: 06/05/2023
United States Court of Appeals
for the Fifth Circuit
United States Court of Appeals
Fifth Circuit
____________ FILED
June 5, 2023
No. 22-20278 Lyle W. Cayce
____________ Clerk
Kristin Guardino,
Plaintiff—Appellant,
versus
Jim Hart; Sean H. McCarthy; John Eddie Williams, Jr.;
Williams Kherkher Hart & Boundas L.L.P.; WKHB
L.L.C.; Williams Kherkher L.L.C.; Williams BHE L.L.C.;
Williams HBE L.L.C.; Williams Hart Boundas Easterby
L.L.P.,
Defendants—Appellees.
______________________________
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:21-CV-3721
______________________________
Before Dennis, Engelhardt, and Oldham, Circuit Judges.
Per Curiam: *
Plaintiff Kristin Guardino filed suit in federal court alleging violations
of the Racketeer Influenced and Corruption Organizations Act (“RICO”),
18 U.S.C. §§ 1961 et seq., and causes of action for fraud, breach of fiduciary
_____________________
*
This opinion is not designated for publication. See 5th Cir. R. 47.5.
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duty and conflict of interest, breach of implied contract for bailment,
conversion, theft, and vicarious liability. The district court dismissed
Guardino’s common law claims, holding they were barred by res judicata and
the doctrine of attorney immunity, and dismissed her RICO claims as
insufficiently pleaded.
Finding no error, we AFFIRM.
I. Factual and Procedural Background
In 2002, Guardino, then an attorney in Texas, represented a minor
plaintiff, Megan Madison, and her mother, Saskia Madison, 1 in a personal
injury suit against Warren Reid Williamson. Guardino obtained a default
judgment in her clients’ favor in 2005 and continued representing the
Madisons in post-judgment collection proceedings. At some point, Guardino
changed her fee arrangement with the Madisons to a contingency agreement.
In 2007, Guardino entered into a co-counsel agreement with Williams,
Kherkher, Hart, and Boundas, L.L.P. (“WKHB”), wherein the law firm
agreed to provide a $20,000 loan to Guardino and cover litigation costs and
expenses in exchange for 50% of Guardino’s contingency fees in the Madison
matter. The post-judgment collection proceedings would continue until
2017, but in 2009 the State Bar of Texas temporarily suspended Guardino’s
license to practice law. While Guardino was ineligible to practice law, WKHB
represented the management trust established on Megan Madison’s behalf
to pursue her claims in the collection proceedings. When Guardino’s
suspension ended, the trustee informed Guardino that it would continue to
be represented by WKHB and no longer use Guardino’s services. Guardino’s
law license was suspended again in 2011, and she was later disbarred.
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1
We use the pseudonyms assigned to the plaintiffs in the original personal injury
case.
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In 2011, Guardino filed a petition against WKHB, the trustee, and
several other defendants in Texas probate court. The case was transferred to
the 215th District Court of Harris County. Relevant here, Guardino asserted
claims of breach of fiduciary duty and conflict of interest, fraud, vicarious
liability, and breach of contract against WKHB arising out of WKHB’s
conduct in representing the trustee in the Madison collection proceedings.
Her petition also alleged that WKHB breached the co-counsel agreement by
requiring Guardino to pay expenses up front and to seek reimbursement from
WKHB, and by failing to adequately represent Megan Madison in the
collection proceedings after Guardino’s law license was suspended. It also
alleged that WKHB breached contractual and fiduciary duties it owed
Guardino by virtue of her “contractual lien” on the Madison judgment,
committed fraud, and created a conflict of interest, all by making certain
litigation decisions in the collection proceedings after Guardino was no
longer involved in the matter.
WKHB and the other defendants moved for summary judgment,
which the trial court granted without specifying grounds. Guardino appealed
to the Texas Fourteenth Court of Appeals, which affirmed summary
judgment for the defendants. The court held that Guardino failed to submit
any evidence of a breach of contract, that there is no stand-alone vicarious
liability claim under Texas law, and that any fraud or breach of fiduciary duty
claims arising out of WKHB’s in-court conduct in the course of representing
the trustee is shielded by judicial proceedings privilege. Additionally,
Guardino abandoned any professional malpractice or conflict of interest
claim by failing to address it before the court of appeals.
More than seven years later, Guardino filed her federal complaint in
the instant case. The complaint names as defendants WKHB, its member
attorneys, and various corporate entities that are alleged to be its
predecessors or successors in interest. It asserts three counts of violations of
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RICO, as well as causes of action for fraud, breach of fiduciary duty and
conflict of interest, breach of contract for bailment, conversion, theft, and
vicarious liability. Guardino’s complaint alleges substantially the same set of
facts as alleged in her prior state court petition, appearing in many cases to
have copied the allegations from the latter verbatim. Like her state-court
petition, Guardino’s complaint alleges that WKHB breached the co-counsel
agreement by requiring Guardino to pay expenses up front and to seek
reimbursement, and by failing to adequately represent Megan Madison in the
collection proceedings. And like her state court petition, her complaint also
alleges that WKHB’s in-court advocacy and litigation decisions constituted
fraud, as well as a conflict of interest and breach of fiduciary duty owed to
Guardino. Her complaint also asserts several new claims. Without specifying
which factual allegations are supporting, the complaint asserts claims for
violation of an implied contract of bailment, conversion, and theft. It also
asserts that the defendants, along with several “unnamed co-conspirators,” 2
formed an association-in-fact enterprise, whose affairs the defendants
conducted through a pattern of racketeering activity, namely by entering into
“Extortion Agreements,” committing theft, fraud, and witness tampering,
in violation of 18 U.S.C. §§ 1962(b), (c), and (d).
The district court dismissed Guardino’s complaint, taking judicial
notice of the filings from Guardino’s Texas state court proceedings. The
court held that Guardino’s common law claims arising from facts that
occurred prior to the state court judgment were barred by res judicata, that
her common law claims arising from facts that occurred after that judgment
were barred by the doctrine of attorney immunity, and that she failed to
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2
The complaint alleges that two other groups, the “Of Counsel Participants” and
the “Judicial Participants” also were part of this enterprise, but it does not identify or
describe who these participants are.
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sufficiently plead the existence of a RICO enterprise separate from the
alleged pattern of racketeering activity. Guardino appealed.
II. Standard of Review
We review a district court’s dismissal under Rule 12(b)(6) de novo,
accepting all well-pleaded facts as true and viewing them in the light most
favorable to the plaintiff. Molina-Aranda v. Black Magic Enters., L.L.C., 983
F.3d 779, 783 (5th Cir. 2020). To meet this standard, a plaintiff “must allege
‘enough facts to state a claim that is plausible on its face.’” Id. at 784 (quoting
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “Threadbare recitals
of the elements of a cause of action, supported by mere conclusory
statements, do not suffice.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
Additionally, allegations of fraud must meet Rule 9(b)’s heightened pleading
standard, which requires a plaintiff to “state with particularity the
circumstances constituting fraud.” Fed. R. Civ. P. 9(b).
III. Discussion
A. Res Judicata
Generally, res judicata cannot be raised in a motion to dismiss; it must
be pleaded as an affirmative defense. Test Masters Educ. Servs., Inc. v. Singh,
428 F.3d 559, 570 n.2 (5th Cir. 2005) (citing 5 Charles Alan Wright
& Arthur R. Miller, Fed. Prac. & Proc. § 1357 (3d ed.)).
However, we have permitted dismissal under Rule 12(b)(6) on the basis of
res judicata “when the elements of res judicata are apparent on the face of
the pleadings.” Stevens v. St. Tammany Par. Gov’t, 17 F.4th 563, 571 (5th Cir.
2021) (citing Murry v. Gen. Servs. Admin., 553 F. App’x 362, 364 (5th Cir.
2014) (per curiam) (unpublished)); see also Wright & Miller, Fed.
Prac. & Proc. § 1357). We may also “consider documents attached to or
incorporated in the complaint and matters of which judicial notice may be
taken.” United States ex rel. Willard v. Humana Health Plan of Tex. Inc., 336
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F.3d 375, 379 (5th Cir.2003); see also Dean v. Mississippi Bd. of Bar Admissions,
394 F. App’x 172, 175 (5th Cir. 2010) (per curiam) (unpublished).
“A federal court, asked to give res judicata effect to a state court
judgment, must apply the res judicata principles of the law of the state whose
decision is set up as a bar to further litigation.” Hernandez v. City of Lafayette,
699 F.2d 734, 736 (5th Cir. 1983). Under Texas law, a prior judgment has
claim preclusive effect if there is: “(1) a prior final judgment on the merits by
a court of competent jurisdiction; (2) identity of parties or those in privity
with them; and (3) a second action based on the same claims as were raised
or could have been raised in the first action.” Amstadt v. U.S. Brass Corp.,
919 S.W.2d 644, 652 (Tex. 1996). Guardino concedes that there was a prior
final judgment rendered by a court of competent jurisdiction. She contests
only whether there is identity or privity between the parties to her state court
action and this one and whether the two cases involve the same claims or
causes of action.
Some of the parties—Guardino and WKHB—in the two lawsuits are
identical. As to the remaining parties, there is privity under Texas law.
Parties “can be in privity in at least three ways: (1) they can control an action
even if they are not parties to it; (2) their interests can be represented by a
party to the action; or (3) they can be successors in interest, deriving their
claims through a party to the prior action.” Amstadt, 919 S.W.2d at 653.
Furthermore, “[w]hen the allegation is that the parties were in a vicarious
relationship, as it is here, a judgment for the principal bars a later suit against
the agent.” Soto v. Phillips, 836 S.W.2d 266, 270 (Tex. App.-San Antonio
1992, writ denied). Guardino’s state petition named WKHB as a defendant
and alleged vicarious liability based on the actions of the firm’s “owners,
officers, directors, managers, employees, agents or assigns.” Her federal
complaint names as defendants WKHB, the firm’s predecessors and
successors in interest, and three of its attorneys. It also alleges that all
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defendants are vicariously liable for the acts of their “employees, agents or
assigns” described in the complaint. Guardino’s complaint, therefore, only
names as defendants parties that are the same as, are successors in interest
to, or are vicariously liable to WKHB, the defendant in her state court action.
Her complaint thus alleges privity between the defendants and a defendant
in her prior state action.
The claims in the two cases—at least those arising out of facts alleged
to have occurred before the adjudication of the state court action—are the
same. Texas employs a transactional test to determine this element of res
judicata. Barr v. Resol. Tr. Corp., 837 S.W.2d 627, 631 (Tex. 1992). This test
precludes claims arising out of the same factual transaction or series of
connected transactions, thus barring claims that “were or could have been
raised in the first action.” Travelers Ins. Co. v. Joachim, 315 S.W.3d 860, 862
(Tex. 2010). The allegations in Guardino’s complaint about the defendants’
conduct during the Madison collection proceedings are substantially
identical to, and in some cases verbatim copies of, her allegations of the same
in her state court petition. For instance, both her complaint and petition
allege that Guardino entered into a co-counsel agreement with WKHB
wherein the latter would provide a loan of $20,000 and cover costs and
expenses in exchange for 50% of Guardino’s contingency fees. Both allege
that WKHB breached this agreement by requiring Guardino to pay court
costs first and seek reimbursement from WKHB, and also by failing to (in her
view) adequately represent Megan Madison. And both allege the same
“continuum of acts” committed by WKHB after Guardino was removed
from the litigation in derogation of her “contractual lien” on the Madison
judgment yet to be collected.
The claims in Guardino’s complaint of breach of contract, fraud,
breach of fiduciary duty, and “vicarious liability” premised on these
allegations are, for the purposes of res judicata, the same claims that
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Guardino asserted in her state action because they arise out of the same
transaction. Guardino’s new claims of theft, conversion, and breach of
implied contract for bailment—to the extent they depend on these already-
litigated allegations—are also barred by res judicata because they could have
been brought in Guardino’s original state action.
In sum, the district court did not err in determining that there was
privity between the parties in the two lawsuits and that the common law
claims based on facts that were or could have been litigated in her state court
action are the same. Res judicata bars Guardino’s claims for breach of
contract, fraud, breach of fiduciary duty, “vicarious liability,” theft,
conversion, and breach of implied contract for bailment arising out of facts
alleged in the complaint to have occurred before 2012.
B. Attorney Immunity
Guardino’s complaint also alleges that in 2016 Williamson, the
judgment debtor in the Madison matter, died. Guardino filed a claim for her
legal fees with the Williamson Estate, which the administrator rejected.
WKHB then filed a claim on behalf of Megan Madison in probate court
which, according to Guardino’s complaint, was denied because WKHB used
Megan Madison’s real name instead of the pseudonym assigned to her in the
litigation. According to Guardino, this mistake caused the “loss to Megan
Madison of her entire remaining claim and the entirety of [Guardino’s] lien.”
Her complaint alleges that WKHB took no steps to correct this error, such as
filing a claim against the Williamson Estate or otherwise seeking to enforce
Megan Madison’s claim. These “acts and omissions constituted the
misappropriation of [Guardino’s] fee.”
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The district court held that any legal claims 3 arising out of these
allegations of WKHB’s mistakes in litigation strategy were barred by the
doctrine of attorney immunity. In Texas, “an attorney is immune from
liability to nonclients for conduct within the scope of his representation of his
clients.” Youngkin v. Hines, 546 S.W.3d 675, 681 (Tex. 2018). Guardino has
not alleged that she was a client of WKHB. As a nonclient, any harm that
Guardino may have suffered through WKHB’s “acts or omissions” in the
course of representing Megan Madison in the Williamson probate matter is
not actionable by operation of attorney immunity. The district court did not
err in dismissing Guardino’s claims on this basis.
C. Failure to State a Claim Under RICO
Finally, the district court dismissed Guardino’s RICO claims, to the
extent they were not barred by res judicata and attorney immunity, for failure
to state a claim. Noting that Guardino’s complaint is “mainly comprised of
statutory text and conclusory statements,” the district court concluded that
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3
It is unclear from the complaint and Guardino’s briefing what claims she believes
these allegations give rise to. The complaint states that the defendants “converted her
property to their own use” when they “took further action to prevent her from being paid
for her services completely,” suggesting she may be premising her conversion claim on
these allegations. The complaint also states that the defendants “represented the interests
of Megan Madison” and, by operation of Guardino’s “lien” on Madison’s judgment, also
the interests of “Kristin Wilkinson Guardino” in the probate case against the Williamson
Estate. In doing, Guardino asserts, WKHB created both a conflict of interest and “an
implied in fact contract,” suggesting she may be asserting breach of contract claims and a
professional malpractice claim based on these facts. Finally, the complaint states that in
“representing Megan Madison” in the probate proceedings, the defendants “completely
ignored” Guardino’s “contractual lien” and breached their fiduciary duties, suggesting
she may be asserting another breach of fiduciary duty claim based on these allegations. We
cannot ascertain, however, whether Guardino is premising her theft, fraud, or violation of
bailment claims on these facts.
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the complaint failed to allege the existence of an enterprise separate from the
pattern of racketeering. We see no error in this determination.
18 U.S.C. § 1962(b) and (c) prohibit any person from gaining an
interest in or conducting the affairs of an enterprise through a pattern of
racketeering activity. While the RICO statute defines “enterprise” broadly
to include a “group of individuals associated in fact although not a legal
entity,” 18 U.S.C. § 1961(4), an association-in-fact enterprise must have an
existence “that can be defined apart from the commission of the predicate
acts.” Montesano v. Seafirst Com. Corp., 818 F.2d 423, 427 (5th Cir. 1987);
see also Ocean Energy II, Inc. v. Alexander & Alexander, Inc., 868 F.2d 740, 748
(5th Cir. 1989) (“[A]s we have noted on several occasions, ‘[a]n enterprise
must be ‘an entity separate and apart from the pattern of activity in which it
engages.’”).
Here, Guardino attempts to allege the existence of an association-in-
fact enterprise, “The John Eddie Williams Jr. Enterprise,” comprised of the
defendants as well as several other unnamed groups of individuals. She
alleged the enterprise “was created and used as a tool to effectuate
Defendants’ pattern of racketeering activity.” No other purpose, feature, or
function of the enterprise is alleged. Rather, the enterprise is alleged to be a
“group of ‘persons’ associated together for the common purpose of”
inducing others into entering “Extortion Agreements” and then through
fraud, threats, and extortion, converting the non-enterprise parties’ property
to the benefit of the enterprise. These allegations fail to state the existence of
an enterprise that is “an entity separate and apart from the pattern of
[racketeering] activity in which it engages,” and as such, fails to state a claim
under RICO. United States v. Turkette, 452 U.S. 576, 583 (1981). The district
court did not err in dismissing Guardino’s RICO claims.
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IV. Conclusion
For the foregoing reasons, Guardino’s claims are barred by res
judicata, attorney immunity, and are insufficiently pleaded. The judgment of
the district court is AFFIRMED.
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