Petition in Guardian Media Technologies Ltd v. Howrey LLP

Texas Lawyer



No. 2008-20263

IN THE DISTRICT COURT
HARRIS COUNTY, TEXAS
234 JUDICIAL DISTRICT

GUARDIAN MEDIA TECHNOLOGIES, LTD. AND GMT MANAGEMENT CO.

v.

HOWREY L.L.P. and MICHAEL S. DOWLER

PLAINTIFFS' ORIGINAL PETITION



Plaintiffs, GUARDIAN MEDIA TECHNOLOGIES, LTD. and GMT MANAGEMENT COMPANY, complaint of Defendants, HOWREY L.L.P. and MICHAEL S. DOWLER, as follows:

I. PARTIES, JURSIDICTION AND VENUE

1. Plaintiffs request a Level 3 discovery control plan under Tex.R.Civ.Proc. 190.3.

2. Plaintiffs bring this action based on Defendants' clear and serious breaches of fiduciary duty to secure the forfeiture of legal fees previously paid Defendants and to secure a declaration that legal fees Defendants claim as currently due are not in fact due or owing. All conditions precedent have occurred.

3. Plaintiff GUARDIAN MEDIA TECHNOLOGIES, LTD. is a Texas limited liability partnership. Plaintiff GMT MANAGEMENT COMPANY is a Texas corporation. Collectively, Plaintiffs will be referred to herein as Guardian. At all times relevant, Tom Coverstone was acting as the principal for and entirely within the course and scope of his duties and responsibilities with Guardian.

4. Defendant HOWREY L.L.P. ("Howrey" or "the law firm") is a Texas professional limited liability partnership. Citation may be served on this Defendant by serving its registered agent, Thomas Miller, at its registered address, 111 Louisiana, 25th Floor, Houston, Texas 77002.

5. Defendant MICHAEL S. DOWLER ("Dowler" or "the lawyer") is an individual. At all relevant times and for all relevant acts and omissions, Dowler was a partner and employee of Howrey acting within the course and scope of his duties and employment with the law firm. Citation may be served on this Defendant at 1111 Louisiana, 25th Floor, Houston, Texas 77002.

6. Howrey maintained its principal office in Harris County, Texas at the time these causes of action accrued; Dowler was a resident of Harris County, Texas at the time these causes of action accrued; and all or substantial part of the events or omissions giving rise to Guardian's claims occurred in Harris County, Texas; making venue proper in Harris County, Texas pursuant to Texas Civil Practice & Remedies Code ยง15.002(a)(1)(2)(3). The amount in controversy exceeds the minimal jurisdictional limits of this Court.

7. Limitations do not bar any causes of action herein, but to the extent that Defendants may so allege, the discovery rule applies to toll accrual of Plaintiffs' causes of action because Plaintiffs did not discover, and should not have discovered in the exercise of reasonable care and diligence, the facts establishing the elements of Plaintiffs' causes of action alleged herein against Defendants, until such a time so that no applicable statute of limitations now prohibits the bringing of this action against Defendants. Further, the continuous representation rule tolls limitations to February of 2008.

II. FACTS

8. Howrey is a global law firm which prides itself on its antitrust, global litigation and intellectual property practice. Howrey has been "[n]amed Global Patent Law Firm of the Year in 2005, 2006 and 2007 by Who's Who Legal" and "Howrey's Houston IP practice is the largest and most prominent in the city," according to the firm website.

9. Guardian has acquired and is licensing patents. Based on the law firm's expertise in patent matters, Guardian through its principals, Tom Coverstone, hired Howrey in 2003 to represent Guardian in its patent matters. Howrey's representation of Guardian thereafter included patent investigation, acquisition, licensing, validity, infringement, enforceability, and litigation. Guardian has paid Howrey several millions of dollars in legal fees since 2003.

10. Early in the relationship, Dowler came to the principal partner in charge of the Howrey representation of Guardian. "Dowler was recognized by his peers as one of the best attorneys in Texas, having been named a Texas Rising Star in 2004 and a Texas Super Lawyer from 2005-2007," again according to the firm website as of the filing of this lawsuit.

11. By e-mail dated October 8, 2007, Dowler advised Guardian through Coverstone that he had been studying a patent, having "worked very hard doing the due diligence," which was owned by a personal friend of his, Hoyt Fleming, who was interested in selling the patent. The patent involved the coupling of GPS capability with radar detector used in automobiles to detect law enforcement speed detecting radar guns. Dowler also told Coverstone that "the patent looks about as good as I've seen." Dowler further advised that he was "putting together an investment group to buy the patent," asking whether Coverstone "might be interested in this opportunity" and declaring that he hoped so "since we work so well together."

12. Based on the trust Dowler had engendered over the course of representing Guardian, Coverstone responded to the solicitation of Dowler by expressing his feeling hat his companies would be potentially interested in buying the patent. Dowler proceeded to tell Coverstone that the patent was "very clean," as well as the best patent he had ever seen. Dowler told Coverstone that the selling price of $1,000,000.00 was non-negotiable. Coverstone justifiably assumed however that as the lawyer for Guardian, Dowler would look out for the best interests of Guardian.

13. Coverstone and Dowler thereafter met with Fleming at the Consumer Electronics Symposium in Las Vegas, Nevada. Both Dowler and Fleming further puffed up the value of the patent. Dowler told Coverstone that he had some "$600,000 in time" conducting due diligence into the patent.

14. Based on the representations of Dowler and Fleming as to the remarkable value of the patent and the analysis Dowler had allegedly committed to investigating the patent, Coverstone expressed his interest in Guardian possibly buying the patent for the $1,000,000.00 asking price, subject to Coverstone's review of the due diligence materials. Dowler then told Coverstone that he personally was demanding 50% of the net profits that Guardian would derive from the patent. When Coverstone asked Dowler what his contribution would be to the joint venture, Dowler replied that his investment of some $600,000.00 in due diligence investigating the patent and his bringing the patent to Guardian was his contribution.

15. Again based on the representations of Dowler and Fleming as to the remarkable value of the patent, Coverstone continued to express his interest in Guardian potentially buying the patent. Coverstone then asked Dowler about Guardian and Dowler entering into a written agreement memorializing the profit division, to which request Dowler responded that he did not desire to enter into a written agreement because such a document would be discoverable in any subsequent litigation involving the patent. Dowler stated to Coverstone that he wanted an oral agreement instead. Dowler told Coverstoner that he wanted no evidence created of any such profits coming to him and that his involvement had to be kept "under the radar." Coverstone thereafter responded that Guardian, if it were to purchase the patent at all and were to pay Dowler 50% of any profits, would file an I.R.S. Form 1099 declaration of income paid, to which Dowler very reluctantly acquiesced.

16. Both Fleming and Dowler pressured Coverstone to commit to purchase the patent. While in the course of traveling and at the insistence and urging of Dowler and Fleming, Coverstone was convinced to rush a $10,000 wire transfer to Fleming as earnest money on behalf of Guardian.

17. Coverstone on behalf of Guardian thereafter made his own inquiry as to the validity and value of the patent, unfortunately learning that the patent did not in fact, contrary to what had been represented by Dowler and Fleming, provide protection from the potential commercial competitors in the marketplace for the product envisioned by the patent and actually had little to no value. Coverstone learned that the principal makers of radar detectors were familiar with and not concerned about infringing the patent that Dowler had so highly touted. Contrary to the representations of Dowler and Fleming, Coverstone discovered that the principal makers of radar detectors were able to market, and were already marketing, GPS enabled radar detectors without fear of illegally infringing the patent Dowler had been fawning over.

18. After learning that Dowler and Fleming had misrepresented the value of the patent, Coverstone told Fleming that he had discovered the misrepresentations and the true value of the patent, and that the sale would therefore not go through. Consequent to the actions of Defendants, Fleming has filed lawsuits in federal district courts against Coverstone Individually, erroneously claiming that he personally agreed to pay Fleming $1,000,000.00 for the patent.

III. CAUSES OF ACTION

19. Plaintiffs bring the following causes of action against Defendants, incorporating the foregoing and all other paragraphs herein as if set out in full into each of the following causes of action. Plaintiffs being each of these causes of action in the alternative and without waiving any other cause of action.

A. FEE FORFEITURE FOR BREACH OF FIDUCIARY DUTY

20. The attorney-client relationship is a fiduciary relationship as matter of law. A fiduciary relationship is one of special trust and confidence. The law requires that all dealings between an attorney and client be characterized by the utmost loyalty, good faith, candor and honesty. An attorney must affirmatively disclose to his client all material facts bearing on the client, as well as the legal consequences flowing from the facts. Dowler and Howrey committed breaches of fiduciary duties owed Plaintiffs by him and Howrey, as described hereinfore. As fiduciaries, Defendants bear the burden of proof to establish that they did not breach their fiduciary duties to Plaintiffs.

21. Defendants committed clear and serious breaches of their fiduciary and other duties owed Plaintiffs. Such breaches command fee disgorgement. Dowler, and hence Howrey, breached their fiduciary duties owed to Guardian. Instead of looking out for the best interests of his clients, Dowler misrepresented the value of the patent to the advantage of his self and his "personal friend," Hoyt Fleming. Dowler never disclosed, fully or otherwise, to Coverstone or Guardian, Dowler's true interests, or of the nature and effect of the conflicts of interests engendered by the ongoing representation and the patent transaction. Dowler's personal interests and conflict with Guardian thereafter escalated when Dowler demanded a 50% cut in profits derived from the patent "under the radar."

B. DECLARATORY JUDGMENT

22. Howrey claims that Guardian owes it nearly $400,000.00 in legal fees for services rendered while Howrey and Dowler and Guardian suffered severe conflicts of interests.

23. Again, Defendants committed clear and serious breaches of their fiduciary and other duties owed Plaintiffs as heretofore set forth. Consequently, Plaintiffs do not and should not owe Defendants any more legal fees, which Plainitffs request that the Court so declare.

24. Plaintiffs therefore seek a declaration from the Court that such fees that Defendants currently claim are due are not due.

IV. PRAYER

Plaintiffs pray that upon final trial they have judgment against Defendants declaring that they owe Defendants no more legal fees, for forfeiture of legal fees previously paid Defendants, along with reasonable and necessary attorney's fees, prejudgment and postjudgment interest as allowed by law, costs of court, and for such other and further relief to which they may be justly entitled.

Respectfully submitted,

SMOOT LAW FIRM, P.C.

By:
Steven M. Smoot
S.B.N. 18774300
1301 McKinney, Suite 2900
Houston, Texas 77010
Telephone (713)654-0708
Telecopier (713)654-0706
ssmoot@smootlawfirm.com

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