Insurance Company Attempts At Deceit

Dallas insurance lawyers who go to trial very often will have run across the situation presented in this 2006, Corpus Christi Court of Appeals opinion. The style of the case is, Perez v. Kleinert. In this case State Farm was sued for uninsured / underinsured motorist (UIM) benefits. The attorney for State Farm attempted to mislead the jury by stating he represented the supposedly at fault driver rather than State Farm. Here is some of the relevant information.
At the time of the accident giving rise to this lawsuit, Perez was a passenger in Garza’s automobile. The automobile was a rental car that had been lent to Garza by either Brian or Jeanne Spacek. Before lending the automobile to Garza, the Spaceks had purchased an insurance policy from State Farm. After the accident, Perez made a claim against State Farm for benefits under the Spacek policy. After State Farm allegedly refused to pay benefits, Perez named State Farm as a defendant in the lawsuit, asserting claims against State Farm for “underinsured or uninsured motorist benefits” under the Spacek policy and for violations of the Texas Insurance Code.
State Farm initially took the position that Garza was an insured person under the Spacek policy. Pursuant to that policy, State Farm provided Garza with legal representation by retaining on her behalf the services of Troy Gilreath. Attorney Gilreath appeared before the trial court as Garza’s attorney of record and filed Garza’s answer to the lawsuit. Garza denied liability and asserted a crossclaim against Kleinert. Notably, Garza also alleged, among other things, that Perez, her passenger, was negligent and that his negligence was the sole proximate cause of the accident.
State Farm ultimately sued Garza in an action for declaratory judgment.
The judge entered a default judgment against Garza.
At a later date the Judge allowed attorney Gilbreath to withdraw from representing Garza.
On the eve of trial, attorneys for Perez and State Farm submitted a set of written stipulations to the trial court. Among other things, they agreed that Perez was a “covered person” under the terms of the Spacek policy.
Perez’s personal injury case against Kleinert and Garza proceeded to trial, Judge Williams presiding. Although a trial court’s order rendered Garza a pro se litigant some five months before trial, Garza apparently never retained a new attorney in the matter and appeared neither in person nor through counsel at trial.
Without being designated attorney of record for Garza or having her consent to legal representation, attorney Castanon appeared on the first day of the personal injury trial and addressed the jury as Garza’s attorney. Although Castanon was recognized by the trial court and allowed to address the jury at trial, attorney Castanon never informed the jury that he was actually counsel for State Farm and not Garza. In fact, State Farm made no appearance at trial whatsoever, choosing instead to have attorney Castanon pretend to be an attorney for Garza. Castanon even apologized to the jury for Garza’s absence at trial.
Counsel for Perez objected to attorney Castanon’s actions and false representations to the jury. The trial court overruled the objection without explanation and allowed Castanon to appear before the jury as counsel for Garza, even though he was actually the attorney for State Farm. Castanon proceeded to “represent” Garza throughout trial, making an opening statement and closing argument and even examining witnesses. In this manner, State Farm was able to have attorney Castanon directly represent its interest in defeating Perez’s claims against Garza at trial without having to appear as State Farm before the jury.
After the jury returned a finding of no liability in favor of Kleinert and Garza, Perez filed a motion for new trial in which he argued, among other things, that the trial court had committed reversible error by allowing attorney Castanon to misrepresent his identity before the jury.
Perez complained of the trial court’s ruling regarding attorney Castanon’s conduct at trial. Rule 12 is often described as the “exclusive method” for questioning the authority of an attorney to represent a party in any court proceeding. In relevant part, rule 12 provides, “A party in a suit or proceeding pending in a court of this state may, by sworn written motion stating that he believes the suit or proceeding is being prosecuted or defended without authority, cause the attorney to be cited to appear before the court and show his authority to act.”
Attorney Castanon never suggested to the trial court that he actually represented Garza as her attorney. To the contrary, Castanon’s client remained State Farm throughout the litigation, a fact which has been admitted. On appeal, Castanon has filed an appellate brief on behalf of State Farm, not Garza. Garza has filed no appellate brief.
There is no question that Garza was pro se at the trial on Perez’s personal injury claims. Given that attorney Castanon was never designated of record to be Garza’s attorney and remained the attorney in charge for State Farm, there was simply no basis for invoking rule 12 to challenge his actions in misrepresenting his identity to the jury.
Castanon is admittedly State Farm’s attorney. With full knowledge of this fact, the trial court nevertheless allowed him to conceal his identity from the jury. In holding that the trial court erred in doing so, it is noted that, under rule 10, any substituted attorney must “be designated of record with notice to all other parties in accordance with Rule 21a.” Because there was no such designation or notice in this case, there was no basis for the trial court to recognize Castanon as Garza’s attorney.
Here, the uninsured and insured motorists were squarely at odds. Garza, the uninsured motorist, alleged among other things that Perez, State Farm’s insured, was the sole proximate cause of the accident, a perplexing allegation given that Perez was a passenger and not a driver. Perez, in contrast, blamed Kleinert and Garza for the accident. Thus, to defend Garza, State Farm was called to oppose its insured (Perez) in the lawsuit.
There is a substantial conflict of interest in State Farm doing so. Although attorney Castanon chose not to pursue Garza’s allegations that Perez was the sole proximate cause of the accident, the allegations were included in the live pleadings that were tried to the jury. At trial, attorney Castanon also abandoned Garza’s negligence per se claim against Kleinert. As noted above, attorney Castanon actually collaborated with opposing counsel for Kleinert to defeat Perez’s request for a jury instruction on negligence per se. Counsel for Kleinert and attorney Castanon also made a common defense on Perez’s pre-existing medical condition and damages.
In the face of these conflicts and despite Perez’s numerous objections to counsel’s participation on behalf of the absent, uninsured, and unrepresented Garza, attorney Castanon never attempted to meet State Farm’s burden of showing that there existed no substantial conflict of interest.
Furthermore, there is no merit in State Farm’s contention on appeal that the interests of State Farm were aligned with Garza at trial. To the contrary, it would further demonstrate a conflict of interest because State Farm had aligned itself with an uninsured motorist in order to defeat claims by its insured.
On this record, there is no basis for concluding that State Farm rebutted or attempted to rebut the presumption precluding its representation of Garza through common counsel.
At trial, attorney Castanon represented State Farm’s interests in minimizing the award it might have to pay to Perez. He argued and attempted to prove that a traffic light caused the accident and that Perez had suffered no compensable injuries. Far from advancing any interest in judicial economy, this ploy undermined the jury’s fact-finding ability as well as confidence that the trial court’s error did not probably lead to the rendition of an improper judgment. In overruling the relief requested in State Farm’s motion for rehearing, it is noted that at no time did attorney Castanon honestly represent to the jury the true capacity in which he participated at trial.
For these reasons, the judgment was reversed and the case is remanded for a new trial.

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