Substantial Client Control and Creditor Participation in Legal Malpractice Claims:
Commentary on Henry S. Miller Commercial Co. v. Newsom, Terry & Newsom, LLP

I. Introduction

The Supreme Court of Texas’s decision in Henry S. Miller Commercial Co. v. Newsom, Terry & Newsom, LLP and Steven K. Terry (No. 22‑1143, opinion delivered Dec. 31, 2024) addresses two major and recurring issues in Texas legal-malpractice jurisprudence:

Whether and when a judgment creditor may participate in, and profit from, a debtor’s legal malpractice claim against its former lawyer without running afoul of Texas’s strong prohibition on assignment of such claims.
What type and quantum of expert testimony is sufficient to prove “case‑within‑a‑case” causation and damages in a litigation malpractice action, including whether negligence can be elevated to gross negligence.

The underlying dispute arose from a failed $90 million real-estate transaction involving a purportedly wealthy investor, James Flaven, who turned out to be a Massachusetts truck driver with no assets. Nussbaum, the investor‑seller, sued Henry S. Miller Commercial Company (HSM) and its associated agent, Steven Defterios, for fraud and negligent misrepresentation. Represented by lawyer Steven Terry, HSM lost at trial and a substantial fraud judgment (over $8.1 million plus interest) was rendered against it.

HSM then sued Terry and his firm for legal malpractice, claiming that Terry mishandled the fraud lawsuit—principally by failing timely to designate the obvious fraudster, Flaven, as a “responsible third party” under Chapter 33 of the Civil Practice and Remedies Code, and by stipulating to HSM’s vicarious liability for Defterios’s conduct. Meanwhile, Nussbaum, as HSM’s judgment creditor, forced HSM into bankruptcy and negotiated a reorganization plan and litigation agreement giving Nussbaum a large economic stake in any recovery from the malpractice case.

This arrangement raised a fundamental policy question: does such creditor participation effectively amount to an impermissible assignment of a legal malpractice claim (which Texas law generally forbids), particularly when the creditor must “flip” its litigation position and argue that it would not have won the first case but for the lawyer’s negligence? At the same time, the malpractice trial produced expert testimony from lawyers (including Nussbaum’s own trial counsel) opining that, had the responsible-third-party procedure been properly used, virtually all liability in the underlying case would have been placed on Flaven, not HSM. The Court had to decide how far such “jury prediction” testimony can go.

Against this complex backdrop, the Court both clarifies the limits of non‑assignability of legal malpractice claims and tightens the evidentiary requirements for proving causation and damages in litigation malpractice, while rejecting a claim for gross negligence and exemplary damages.

II. Summary of the Opinion

A. Core Holdings

No per se bar to the malpractice suit despite creditor involvement:
The Court holds that the bankruptcy reorganization plan and related litigation agreement between HSM (the malpractice plaintiff) and Nussbaum (its judgment creditor in the fraud case) do not constitute an impermissible assignment of a legal malpractice claim. Even though Nussbaum is economically aligned with HSM and has some conditional settlement-veto rights, HSM retains substantial control over the prosecution of the claim. Therefore, HSM may prosecute the malpractice claim in its own name.
Role reversal and changed litigation positions do not, by themselves, bar the malpractice claim:
The Court acknowledges that Nussbaum’s and HSM’s positions in the malpractice suit are diametrically opposed to their positions in the underlying fraud trial, and that such “demeaning” role reversals raise serious policy concerns. Nonetheless, this role reversal alone is not enough to bar prosecution of the claim when the client itself sues in its own name and retains substantial control. The proper remedy is full jury disclosure and careful trial management, not dismissal.
Evidence supports negligence, but not the full amount of damages found by the jury:
There is legally sufficient evidence that Terry was negligent—principally in failing timely to designate Flaven as a responsible third party—but there is no evidence that Terry’s negligence was the sole cause of the entire fraud judgment against HSM. The expert testimony that 85–100% of responsibility would have been shifted to Flaven is held to be conclusory “ipse dixit” as to the full amount of damages, and thus insufficient to support the jury’s finding that Terry was 100% responsible for the underlying judgment.
New trial required, but on negligence damages only; no gross negligence:
Because there is evidence that Terry’s negligence caused some damages, but not evidence to support the entire amount found by the jury, the Court remands the case for a third trial, limited to HSM’s ordinary negligence claim and damages. The Court holds there is no evidence of gross negligence—particularly no proof of Terry’s “conscious indifference” to an extreme risk—and thus renders a take‑nothing judgment on the gross negligence and exemplary‑damages claims.
Jury-charge error left unresolved:
The court of appeals had already held that part of the jury charge (an instruction on responsible-third-party designation) was an improper comment on the weight of the evidence. The Supreme Court notes this, but expressly does not address that ground for remand because it already remands on the no‑evidence damage issue.

B. Doctrinal Significance in One Sentence

The decision solidifies a key principle: a legal malpractice claim may not be assigned outright, but a judgment creditor can participate in, and benefit from, the client’s malpractice claim so long as the client retains substantial control, and role reversal is dealt with by disclosure and evidentiary safeguards—not by categorical dismissal.

III. Factual and Procedural Background

A. The Flaven Transaction and the Fraud Judgment (HSM I)

In 2004, real-estate investor Barry Nussbaum (through various entities) was approached by agent Steven Defterios, who held himself out as a “vice president” of Henry S. Miller Commercial Co. (HSM).
Defterios claimed to represent James A. Flaven, purportedly a beneficiary of a $300 million trust, ready to invest $100 million in Nussbaum’s Texas properties. None of that was true; Flaven was actually a truck driver with no significant assets.
Relying on Defterios’s representations and his association with HSM, Nussbaum contracted to sell nine properties to an entity created by Flaven for about $90 million. Closing was repeatedly delayed, with excuses about trust funding. Ultimately, the deal collapsed in May 2005.
Nussbaum sued HSM and Defterios (but not Flaven) for fraud and negligent misrepresentation, claiming he suffered losses as his properties declined in value while off the market under the failed contract.
HSM, represented by lawyer Steven Terry, denied involvement and knowledge of Flaven and initially resisted designating Flaven as a responsible third party, concerned that highlighting how obviously fraudulent Flaven was might boomerang and induce the jury to hold HSM responsible as the sophisticated broker who “should have known.”
Terry ultimately moved—days before trial—to designate Flaven as a responsible third party under Tex. Civ. Prac. & Rem. Code §33.004, but the motion was untimely and deficient; the trial court denied it.
A further strategic move: after evidence closed, Terry stipulated that Defterios was acting with HSM’s authority (despite HSM’s own denial of involvement), partly because Terry believed a statute then in force made brokers strictly liable for their salespeople’s conduct, and partly to avoid creating an overt split between HSM and its agent in front of the jury.
The jury found HSM and Defterios liable for fraud and negligent misrepresentation. In December 2008, judgment was rendered against HSM for more than $8.1 million in damages plus interest. HSM appealed the damages but not liability. The court of appeals affirmed in what the Supreme Court calls HSM I.

B. Bankruptcy, the Reorganization Plan, and the Litigation Agreement

In February 2009—two months after the fraud judgment and one month after HSM’s appeal—HSM sued its errors-and-omissions insurer, Diamond State Insurance Co., and Terry (and his firm) for malpractice and coverage.
Nussbaum, as a judgment creditor, filed an involuntary bankruptcy petition against HSM. A 2010 Chapter 11 reorganization plan was negotiated and approved.
Key features of the plan (and a parallel litigation agreement):
- HSM, “in its sole discretion”, could prosecute, settle, or dismiss its malpractice and insurance claims; all proceeds were property of HSM’s estate.
- The first $5 million of any recovery would go to Nussbaum (via his lawyer Stanley), with Nussbaum and Stanley to receive 70% of amounts between $5 and $13 million, and 30% above that.
- HSM could not settle for less than $5 million without Nussbaum/Stanley’s consent; above $5 million, HSM had “sole discretion” to settle.
- Nussbaum was enjoined from executing on the fraud judgment so long as HSM used its “best efforts and all reasonable means” to pursue the malpractice and coverage claims; the injunction would become permanent after the litigation concluded and HSM fulfilled its obligations.
- The bankruptcy court noted that the plan’s apparent sole purpose was to ensure that HSM diligently pursued claims against its insurer and lawyer, thereby benefiting Nussbaum and other creditors.
Diamond State eventually settled with HSM for $6 million—above the $5 million threshold—so Nussbaum’s veto power over low‑end settlements was never triggered.

C. First Malpractice Trial (2014) and HSM II

At the first malpractice trial (2014), HSM alleged Terry was negligent and grossly negligent by:
- Failing timely to designate Flaven as a responsible third party; and
- Stipulating to HSM’s responsibility for Defterios’s conduct, allegedly creating or cementing liability where none existed.
Now aligned against Terry, Nussbaum and HSM reversed their former adversarial roles. Marc Stanley (Nussbaum’s former trial counsel) and trial lawyer Lewis Sifford testified that:
- Had Flaven been designated, the fraud jury would have allocated 85–100% of responsibility to him; and
- By stipulating HSM’s responsibility for Defterios, Terry exposed HSM to liability it otherwise would not have had.
The trial court directed a verdict against HSM on gross negligence. The jury found Terry negligent and awarded damages reflecting a $4.6 million reduction in the underlying fraud judgment, but after crediting the insurer’s $6 million settlement, HSM had no net recovery.
On appeal (HSM II), the Dallas Court of Appeals:
- Rejected Terry’s argument that the bankruptcy plan and litigation agreement amounted to an unlawful assignment of the malpractice claim; HSM was still asserting its own claim in its own name.
- Found evidence of negligence.
- Affirmed the directed verdict on gross negligence for the stipulation issue, but held there was some evidence of gross negligence in failing to designate Flaven as a responsible third party, thus requiring a new trial on that issue.

D. Second Malpractice Trial (2019) and HSM III

At the second trial, the parties again litigated Terry’s failure to designate Flaven as a responsible third party, with the same basic expert testimony from Stanley and Sifford about how a reasonable jury would have allocated responsibility.
The jury charge included the text of the responsible-third-party statute (Tex. Civ. Prac. & Rem. Code §33.004) plus an additional instruction essentially telling the jury that Terry could have resisted an effort to strike the designation without having to prove Nussbaum’s entire fraud case—he just needed to point to the failed transaction and Flaven as the defaulting buyer.
Terry objected that this additional instruction improperly commented on the weight of the evidence and effectively told the jury that his strategic judgment was legally wrong.
The jury found Terry negligent and grossly negligent, and—by awarding roughly the full amount then due on the fraud judgment with interest—effectively found Terry 100% responsible for HSM’s losses in the underlying fraud case. It also awarded $7 million in exemplary damages ($6 million against Terry, $1 million against his firm).
On appeal (HSM III), the court of appeals:
- Again rejected the assignment argument and allowed HSM’s claim to proceed.
- Held there was legally sufficient evidence of negligence and of gross negligence (limited to the failure to designate Flaven).
- However, held that the extra jury instruction on responsible-third-party designation was an improper comment on the weight of the evidence, requiring a new trial.

E. Petitions for Review

Both sides petitioned the Supreme Court of Texas:

Terry challenged the legality of HSM’s malpractice suit (arguing it was effectively an impermissible assignment), the sufficiency of the evidence on causation/damages, and the gross negligence finding.
HSM defended the legality of its suit, the sufficiency of the evidence, and sought to preserve the gross negligence and exemplary damages award.

IV. Analysis of the Court’s Reasoning

A. Non‑Assignability of Legal Malpractice Claims, Creditor Participation, and “Substantial Control”

1. Background Doctrine: Zuniga, Gandy, and Mallios

At common law, choses in action (claims) were generally not assignable, partly to avoid multiplying litigation and partly because rights were viewed as personal. Over time, most claims became freely assignable, but public‑policy exceptions remain. Texas has long treated legal malpractice claims as one such exception, with the leading case being Zuniga v. Groce, Locke & Hebdon, 878 S.W.2d 313 (Tex. App.—San Antonio 1994, writ ref’d).

In Zuniga, a tort plaintiff settled with the defendant by taking an assignment of the defendant’s legal malpractice claim against its lawyer and allowing the defendant to transfer its remaining assets beyond reach. The Zunigas then sued the lawyer on the assigned malpractice claim. The Supreme Court (adopting the court of appeals’ reasoning) held that the assignment of a legal malpractice cause of action arising out of litigation is invalid as against public policy.

The Court there identified several policy concerns, which HSM revisits and applies:

Commercial trafficking in malpractice claims:
Allowing free assignability would create a market in legal malpractice claims, “demeaning” the profession by commodifying disputes about lawyer–client relationships.
Driving a wedge between attorney and client:
The threat that an opponent could acquire (or align with) a client’s malpractice claim could disrupt the attorney–client relationship, especially where the client is underinsured or judgment‑proof.
Demeaning role reversal and jury confusion:
In an assigned‑claim suit, the prior adversary (now plaintiff) must argue that he won the underlying case only because of the opponent’s lawyer’s negligence—directly contradicting his former position that he prevailed on the merits. The lawyer, in turn, must now argue that his former client lost because its position was weak. This opportunistic switch “gives prominence (and substance) to the image that lawyers will take any position, depending upon where the money lies,” and risks confusing jurors who hear parties reversing positions on the same incident.

In State Farm Fire & Casualty Co. v. Gandy, 925 S.W.2d 696 (Tex. 1996), and Mallios v. Baker, 11 S.W.3d 157 (Tex. 2000), the Court elaborated these concerns, particularly in the context of Mary Carter–type agreements and partial assignments or “investments” in legal malpractice claims.

Mallios is particularly important for HSM. There, Baker (injured plaintiff) hired Mallios to sue a bar under the Dram Shop Act; Mallios sued the wrong owner. After limitations expired, Baker entered into an agreement with Herron, who essentially financed the malpractice case in exchange for a share of recovery and a veto over settlement. A plurality upheld Baker’s right to sue; a concurrence (by Justice Hecht, joined by three Justices) would have held the Baker–Herron arrangement itself invalid as contrary to public policy, but agreed Baker could pursue his own malpractice claim in his own name.

Crucially, the Court in Mallios unanimously allowed Baker to prosecute his malpractice claim against his former lawyer—even though the same role‑reversal problem from Zuniga was present (Baker arguing the case was winnable, the lawyer arguing it was not). The case thus established that invalidity of an assignment or similar financing arrangement does not necessarily extinguish the client’s own malpractice claim.

2. Mary Carter Analogy and Full Disclosure

The Court in HSM analogizes the distortions created here to those created by Mary Carter agreements (secret or semi‑secret agreements where a settling defendant remains in the case and aligns with the plaintiff against non‑settling defendants). In Elbaor v. Smith, 845 S.W.2d 240 (Tex. 1992), Texas ultimately prohibited Mary Carter agreements because even full disclosure could not fully neutralize their distorting effect on trials.

In the legal-malpractice setting, the Court does not go as far as it did in Elbaor. Instead, it draws a more nuanced line:

Outright assignment of a litigation‑based legal malpractice claim to a former adversary remains invalid (Zuniga).
Client retaining and prosecuting its own claim in its own name is permissible, even if a former adversary has a significant financial stake and some control, as in Mallios—if the client retains “substantial control.”
The remedy for role reversal in such cases is primarily full jury disclosure of the changed positions and economic incentives, plus careful trial‑court management.

3. Application to HSM’s Bankruptcy Plan and Litigation Agreement

Terry argued that the reorganization plan and litigation agreement effectively assigned HSM’s malpractice claim to Nussbaum and his lawyer Stanley, making the claim non‑prosecutable under Zuniga. The Court disagrees, emphasizing several features:

HSM’s formal ownership and prosecution rights:
The plan expressly states that HSM, “in its sole discretion,” can prosecute, settle, or dismiss the malpractice and insurance claims, and that “all proceeds” of those claims belong to HSM. HSM selected and paid its own counsel.
Limited creditor control:
Nussbaum’s only direct control consisted of a veto over settlements below $5 million. Since the insurer’s settlement alone exceeded that figure, the veto was never triggered. Above $5 million, HSM had “sole discretion” to settle.
Economic alignment, not ownership transfer:
Nussbaum’s and Stanley’s right to receive a large share of any net recovery (70% up to $13 million, 30% thereafter) is an economic interest, but ownership and formal control remained with HSM.
Best‑efforts obligations and stay of execution:
HSM is required to use its “best efforts and all reasonable means” to pursue the malpractice case, and Nussbaum agreed not to execute on his fraud judgment while HSM does so. This is essentially an enforcement and incentive structure, not a transfer of the claim.

The Court explicitly compares this setup to Mallios: if Baker could prosecute his own malpractice claim despite having ceded substantial settlement control to his financier (Herron), then HSM—who retains at least as much control over the litigation as Baker did—can certainly prosecute its claim here.

The Court thus crystallizes a key principle:

Even when a former adversary has a large financial stake and some say over settlement, a legal malpractice claim is not barred so long as the client retains “substantial control” and sues in its own name. The mere fact of “role reversal” does not, standing alone, require dismissal.

4. Two Caveats the Court Flags for Future Cases

The Court carefully leaves two important questions open:

Enforceability of the HSM–Nussbaum arrangement between themselves:
The Court does not decide whether the plan and litigation agreement are enforceable as between HSM and Nussbaum. Justice Hecht’s earlier concurrence in Mallios would likely view such an arrangement as unenforceable if it confers substantial control on an investor purely as a commercial matter. But even if the agreement were invalid, the client’s own malpractice claim would survive, as in Mallios.
Whether the burden of proof should be raised in role‑reversal malpractice cases:
The Court notes, but does not resolve, whether in these role‑reversal circumstances (where parties must contradict their earlier stances to prove malpractice) the standard of proof on malpractice should be heightened from a preponderance of the evidence to clear and convincing evidence, in order to counterbalance the risk that self‑interested and distorted testimony will unduly sway the outcome. The parties did not brief this, so the Court declines to decide it.

5. Practical Implications

For creditors and bankruptcy practitioners:
This decision approves litigation arrangements that give creditors a large share of malpractice recoveries and even some limited say over settlements, provided the debtor‑client retains substantial control. Structuring plans and litigation trusts with that touchstone in mind is now critical.
For defense counsel and insurers:
Attempts to characterize such arrangements as outright assignments will often fail; the more promising line of defense is to attack causation, damages, and expert testimony, as the Court’s no‑evidence holdings underscore.
For trial courts:
The Court underscores the need to ensure “full disclosure” of the role reversal and financial incentives to juries and to watch closely for confusion or unfairness. Judges must be prepared to manage these dynamics through voir dire, instructions, and evidentiary rulings.

B. Negligence, Causation, and the Limits of Expert “Jury Prediction”

1. Negligence: Failure to Designate a Responsible Third Party

The Court accepts that there is legally sufficient evidence that Terry breached the standard of care by failing timely to designate Flaven as a responsible third party under Tex. Civ. Prac. & Rem. Code §33.004. Key points:

Flaven’s extensive fraudulent conduct was undisputed and clearly contributed to Nussbaum’s losses.
The responsible-third-party mechanism exists precisely to allow a jury to consider others’ fault (even nonparties) when allocating responsibility, thereby limiting a defendant’s percentage of liability.
Both Stanley and Sifford testified that failure to timely designate was below the standard of care for a reasonably prudent trial lawyer in similar circumstances. Terry’s strategic concerns (e.g., that designating Flaven might undermine his “no liability at all” defense) created a difficult tactical choice but did not absolve him of the duty to preserve allocation rights under Chapter 33.

The Court notes that this conclusion is reached “with considerable skepticism,” given the witnesses’ role reversals and financial interests, but nonetheless holds their testimony and the underlying record suffice as some evidence of negligence.

2. Causation and Damages: Some Evidence vs. No Evidence of “Total” Responsibility

In litigation malpractice, Texas traditionally uses a “case within a case” framework: the malpractice plaintiff must show that, but for the lawyer’s negligence, the outcome of the underlying lawsuit would have been more favorable.

In this case, the question is not whether HSM would have won the fraud case; HSM did not appeal liability. Rather, the question is how much of the fraud judgment was proximately caused by Terry’s negligence in litigating, particularly the failure to designate Flaven as a responsible third party.

Two experienced trial lawyers, Stanley and Sifford, opined that:

Had Flaven been properly designated, the jury would have allocated 85–100% of responsibility for Nussbaum’s damages to him.
Consequently, the judgment against HSM would have been substantially—almost entirely—reduced or eliminated.

However, their explanations for these precise percentages were thin:

Stanley admitted he had “no way to tell” what the jury would have done, and said his opinion was based only on what he had told his client was likely and on his own experience.
Sifford similarly relied on his experience, training, and file review, but did not articulate a concrete analytic framework or tie specific evidentiary features to the precise allocation percentages.

The Court draws a sharp evidentiary line:

As to whether Terry’s negligence caused some damage:
Given the overwhelming evidence of Flaven’s fraud and the clear function of responsible-third-party practice, there is some evidence that failure to designate Flaven caused HSM at least a portion of the fraud judgment it paid or faced. The fact that the jury was denied an opportunity to allocate fault to the most obvious wrongdoer itself supports a finding that “some” damage was caused.
As to whether Terry’s negligence was the sole cause of the entire judgment:
That is where the Court finds a lack of legally sufficient evidence. The expert opinions that the jury would have allocated 85–100% of responsibility to Flaven are deemed conclusory “ipse dixit”. As the Court reiterates from Burrow v. Arce, 997 S.W.2d 229, 235–36 (Tex. 1999), an expert cannot simply say “trust me, I’m an expert” without explaining the basis in the record and the reasoning process linking facts to conclusions.

Given Defterios’s own admitted lies and HSM’s president’s testimony (initially describing himself as “proud” of how Defterios handled the transaction), it is far from inevitable that a reasonable jury would have placed all responsibility on Flaven. Some allocation to HSM, even after proper designation, is entirely plausible.

Thus, the expert opinions could support a finding that Terry’s negligence caused some incremental liability—but not that it caused all of it.

3. Remedy: New Trial Where Evidence Supports Some but Not All Damages

Because HSM produced some evidence of damages caused by negligence, but no evidence supporting the full $13.6 million figure found by the jury, the Court follows its longstanding approach in similar situations:

In Guevara v. Ferrer, 247 S.W.3d 662 (Tex. 2007), there was evidence that some medical expenses were caused by a car wreck but no evidence that all were. The Court remanded for a new trial rather than rendering a take‑nothing judgment.
In Fortune Production Co. v. Conoco, Inc., 52 S.W.3d 671 (Tex. 2000), there was evidence of some fraud damages but no evidence supporting the full amount found by the jury; again, the Court ordered a new trial.

Applying that logic, the Court remands HSM for a third trial on the negligence claim and damages. It notes that Justice Bland’s partial dissent would go further—treating the expert testimony as no evidence of causation even of some damages and thus rendering a take‑nothing judgment—but the majority rejects that view, pointing to the substantial record evidence of Flaven’s fraud and the direct link between non‑designation and inability to apportion fault.

4. Important Doctrinal Signal: Conclusory Expert Testimony in “Case-Within-a-Case” Malpractice

The Court’s treatment of the expert testimony sends a strong message for future litigation-malpractice cases:

Experts may testify on how a hypothetical reasonable jury would likely have decided the underlying case, but their opinions must be grounded in a demonstrable, articulated analysis of record facts and trial dynamics, not merely in generic appeals to experience.
Precision must be justified: An opinion that a jury “would have” allocated 85–100% of fault to another actor must be backed by a reasoned explanation of why the underlying evidence compels that narrow allocation, especially where substantial evidence also points to fault by the client.
Ipse dixit is insufficient: The Court again underscores that conclusory expert assertions are legally “no evidence.” Lawyers cannot simply testify “this is what would have happened, because I’ve tried many cases” and expect that to sustain large malpractice verdicts.

Practically, this will require malpractice plaintiffs to develop more robust causation proofs—using more detailed, fact‑specific expert analyses, perhaps including:

Meticulous parsing of the trial record in the underlying case;
Comparisons to similar jury outcomes;
Clear logic about how particular pieces of evidence would influence apportionment decisions; and
Where appropriate, alternative scenario modeling tied concretely to the facts, not just to generalized “experience.”

C. Gross Negligence and Exemplary Damages

1. Legal Standard

Under Tex. Civ. Prac. & Rem. Code §41.001(11), “gross negligence” requires proof of two elements:

Objective extreme risk:
When viewed objectively from the actor’s standpoint at the time, the conduct involves an extreme degree of risk, considering the probability and magnitude of potential harm—not just a remote possibility of injury or a high probability of minor harm, but the likelihood of serious harm.
Subjective awareness and conscious indifference:
The actor has actual, subjective awareness of the extreme risk but proceeds with conscious indifference to the rights, safety, or welfare of others—meaning he knew about the peril but did not care about the consequences.

Exemplary damages for gross negligence must be proved by clear and convincing evidence. See §41.003.

2. Application to Terry’s Failure to Designate a Responsible Third Party

HSM pursued gross negligence only on the theory that Terry’s failure to designate Flaven as a responsible third party was grossly negligent. The Court’s analysis proceeds in two steps:

Extreme risk (objective):
It is undisputed that failing to designate a responsible third party can pose grave risk: it potentially exposes the defendant to greater liability by preventing the jury from allocating fault to the true or additional wrongdoers. Here, that risk is sharp because Flaven was clearly a prime culprit.

However, the Court notes that Terry faced competing risks: designating Flaven might undercut his position that HSM had zero liability and might instead signal to the jury that someone (including HSM) must be at fault. Thus, objectively, the risk landscape was complex.
Conscious indifference (subjective):
This is where HSM’s case fails. The record shows that Terry:
- Understood early that Flaven could be a candidate for responsible-third-party designation;
- Considered the issue and weighed strategic pros and cons;
- Ultimately made what he described as a “hard judgment call” not to timely designate, for reasons he articulated (though ultimately deemed negligent).
There is no evidence that he simply did not care about the consequences to HSM. Evidence that his decision was objectively unreasonable goes to ordinary negligence, not to subjective disregard.

The court of appeals had treated Terry’s intentional delay in filing the designation as some evidence of “conscious indifference.” The Supreme Court rejects this logic: the fact that a lawyer consciously makes a strategic choice that turns out to be negligent does not mean he was consciously indifferent. Negligence—even egregious negligence—is not the same as gross negligence.

The Court therefore holds that the trial court was correct in the first malpractice trial to direct a verdict on gross negligence, and it reverses the second trial’s gross‑negligence verdict, rendering judgment that HSM take nothing on that claim.

3. Consequences for Professional Liability Litigation

High bar for exemplary damages:
This decision confirms that, in professional‑negligence and legal‑malpractice contexts, plaintiffs will typically struggle to convert bad strategy or misunderstood law into gross negligence. They must show not only poor decisions but a genuine “don’t care” attitude toward serious risk to the client.
Documentation of strategic reasoning:
For practitioners, this underscores the importance of contemporaneously documenting strategic decision‑making and risk assessment. Such records may be critical in defeating gross‑negligence claims by showing that the lawyer actively grappled with risks rather than ignoring them.

V. Complex Concepts Simplified

A. Assignment of Legal Malpractice Claims vs. Creditor Participation

A few key distinctions:

Outright assignment:
Client transfers ownership of the malpractice claim to someone else (e.g., a former adversary), who then sues the lawyer in its own name. This is generally forbidden in Texas for litigation‑based legal malpractice claims.
Economic interest and partial control:
A creditor or third party may have a share of recovery and limited settlement rights, but the client remains the named plaintiff and retains control over key litigation decisions. Under HSM, this is permissible so long as the client retains substantial control.
Why the difference matters:
Outright assignments are barred because they commodify malpractice claims, distort litigation roles, and confuse juries. When the client still genuinely controls the litigation and sues in its own name, these dangers remain but are mitigated; the Court prefers disclosure and evidentiary safeguards over categorical bans.

B. Responsible Third Parties under Chapter 33

Under Tex. Civ. Prac. & Rem. Code §33.004:

A defendant can move to designate someone else (a “responsible third party”) who may be partly or wholly at fault for the plaintiff’s alleged harm.
If granted, the jury may apportion responsibility among the defendant and the responsible third party, even if that third party is not a defendant and even if they are insolvent or immune.
The defendant’s share of liability is then limited to its percentage of responsibility.
The motion generally must be filed at least 60 days before trial unless the court finds good cause for a later filing.

Failing to designate a key actor—like a fraudulent counterparty—may significantly increase the defendant’s exposure, because the jury’s apportionment is confined to those listed on the verdict form.

C. Mary Carter Agreements

A “Mary Carter agreement” is a settlement in which:

A defendant settles with the plaintiff, often guaranteeing the plaintiff a minimum recovery;
The settling defendant remains in the case and appears adverse to the plaintiff; but
The settling defendant’s net payment decreases as the plaintiff recovers more from non‑settling defendants, making the settling defendant effectively aligned with the plaintiff against the others.

Texas has prohibited Mary Carter agreements because even with full disclosure, they unduly distort the trial process and incentivize collusion. HSM uses the analogy to highlight similar distortive potential in role‑reversal malpractice arrangements, but opts for a more tailored solution (non‑assignability plus full disclosure) rather than a complete ban on creditor participation.

D. Conclusory Expert Testimony (“Ipse Dixit”)

In Texas, expert evidence must:

Be based on a reliable foundation; and
Explain the reasoning that connects facts to conclusions.

An expert cannot simply assert “because I say so” (ipse dixit). Even a highly experienced lawyer testifying about what a hypothetical jury “would have” done must:

Cite specific facts from the underlying record;
Explain how those facts would likely influence jurors; and
Provide a logical bridge from the data to the conclusion.

Where that bridge is missing, the testimony is “conclusory” and counts as no evidence, no matter how impressive the expert’s credentials.

VI. Broader Impact and Practical Guidance

A. For Lawyers and Law Firms

Strategic decisions about responsible-third-party designation are fertile ground for malpractice claims.
Failing to make a timely designation can be negligent where a plausible third party clearly bears substantial fault. Lawyers should:
- Identify potential responsible third parties early;
- Timely file designation motions, even if they complicate the primary defense theory;
- Preserve alternative theories (e.g., “no liability,” but if any liability, then allocate to X”).
Document risk assessments and strategy:
Given the Court’s focus on subjective awareness vs. conscious indifference, internal memos or communications showing careful weighing of risks can be crucial to defeating gross‑negligence allegations.
Be aware that former opponents may later become economic allies in malpractice litigation.
This can affect settlement strategies and defense postures in high‑stakes cases, especially where the client is financially distressed.

B. For Creditors and Bankruptcy Practitioners

Structuring litigation rights:
Creditors may safely structure plans and litigation agreements giving them significant economic interests in malpractice recoveries, and even modest settlement‑approval rights, so long as:
- The debtor-client remains the named plaintiff;
- The debtor retains “substantial control” over prosecution (counsel selection, litigation strategy, etc.); and
- Any creditor veto is narrow or conditioned (e.g., applying only to low‑end settlements).
Enforceability still uncertain:
While such arrangements do not bar the debtor’s malpractice claim, their enforceability between debtor and creditor remains an open question. Plans that push too close to pure “investment + control” may be vulnerable to challenge as contrary to public policy.

C. For Trial Courts

Disclosure to the jury is critical:
Courts should ensure that the jury understands:
- How and why prior adversaries are now aligned;
- What financial interests each party has in the malpractice claim; and
- How prior positions differ from current claims.
Careful management of expert testimony:
Trial courts should scrutinize “jury prediction” opinions, requiring a concrete explanation that connects the prior record to any asserted probability about what the underlying jury would have done.
Jury charges must avoid commenting on the weight of the evidence:
The court of appeals’ unaddressed holding about the improper instruction in the second malpractice trial is a reminder that, even when a statutory framework is relevant, charges should not frame the case in a way that implies a particular party’s conduct was legally or factually erroneous.

D. For Malpractice Plaintiffs

Build robust causation evidence:
Plaintiffs need more than generalized opinions that the underlying case was “winnable.” They must develop:
- Fact‑intensive expert analyses;
- Clear linkage between specific trial errors and specific adverse outcomes; and
- Support for any concrete percentages of hypothetical allocation.
Avoid overreaching on damages:
Demanding that the lawyer be held responsible for 100% of an adverse judgment where the client clearly bears some blame risks a partial no‑evidence ruling and a new trial. It may be more credible—and ultimately more successful—to seek a defensible subset of damages that can be linked convincingly to counsel’s negligence.

VII. Conclusion

Henry S. Miller Commercial Co. v. Newsom, Terry & Newsom, LLP is a major clarification of Texas law at the intersection of legal malpractice, assignment and creditor rights, and evidentiary sufficiency.

On the assignment and policy side, the Court reaffirms that litigation‑based legal malpractice claims cannot be assigned outright, but holds that a debtor‑client may pursue such a claim even where a judgment creditor has a substantial financial interest and some limited control—so long as the client retains substantial control and sues in its own name. Role reversal and self‑interested testimony are to be managed through transparency and careful trial procedures, not categorical bars.

On the evidentiary side, the Court draws a firm line between:

Evidence sufficient to show that an attorney’s negligence caused some incremental harm in the underlying case; and
Conclusive proof that the attorney’s negligence was responsible for the entire underlying judgment.

Concluding that the latter was supported only by conclusory ipse dixit testimony, the Court remands for a new trial on negligence damages while extinguishing the gross‑negligence and exemplary‑damages claims. The opinion thus tightens the standards for expert proof in “case‑within‑a‑case” malpractice while preserving a pathway for economically entangled clients and creditors to seek redress for true professional failures, under judicial supervision and with rigorous evidentiary demands.

Substantial Client Control and Creditor Participation in Legal Malpractice Claims: Commentary on Henry S. Miller Commercial Co. v. Newsom, Terry & Newsom, LLP