Legal malpractice case against state Rep. Sergio Muñoz Jr. returns to court

This article originally appeared in the Friday Aug. 16, 2019 issue of the Progress Times.

The long-running legal malpractice case against state Rep. Sergio Muñoz Jr. will head to trial — again.

Muñoz lost the case in September 2017, when U.S. District Judge Micaela Alvarez signed a nearly $3 million judgment against him. The 5th U.S. Circuit Court of Appeals, however, determined that Alvarez didn’t calculate the damages correctly.

Sergio Munoz JrAttorneys who represent Muñoz returned to court Tuesday and requested that a jury, not the judge, recalculate the damages after a new trial.

“We need to get this moving,” Alvarez said.

Alvarez asked Muñoz’s attorneys to submit arguments by Sept. 5 on why the court should hold a jury trial rather than a bench trial. Attorneys for The Law Funder LLC, a New Jersey-based company that accused Muñoz of malpractice, must respond within a week.

“I expect cooperation in this case,” Alvarez said, adding that she didn’t want attorneys to submit any last-minute motions.

If the timetable holds, Muñoz may receive a new trial in just a few months.

The long-running legal dispute between Muñoz and The Law Funder started in December 2014.

Muñoz had represented The Law Funder in a messy divorce between Wilfrido “Willie” Garcia, 56, of Mission and his wife, Maria De Jesus Garcia.

Willie Garcia, a reputed “case runner,” connected attorneys with clients through a Mexican law firm called Servicios Legales de Mesoamerica.

As part of the referral process, he apparently received a share of any payout. Willie Garcia sold his share of the payout in 21 cases to The Law Funder, a company that invests in personal injury lawsuits, according to court records.

The Law Funder hired Muñoz to protect that investment during the divorce.

“Unbeknownst to Law Funder, Munoz had a close professional relationship with Judge Jesus Contreras, who was presiding over the Garcia divorce,” according to the 5th Circuit opinion.

Contreras and Muñoz formed a professional corporation in March 2008, according to records filed with the Texas Secretary of State’s Office.

“About a year after Law Funder retained Munoz, an intervenor in the Garcia divorce with a competing claim to the SLM receiver funds discovered this conflict and moved to disqualify Judge Contreras,” according to the 5th Circuit opinion. “A different state-court judge heard the motion and ordered Judge Contreras disqualified. The state court subsequently voided all orders Judge Contreras had entered in the case, including the order appointing the receivers. At this point, Law Funder had expended almost $2 million in attorney fees and expenses trying to collect SLM’s debt. Left without enough funding to start over, Law Funder ceased pursuing its claims in the Garcia divorce.”

That prompted The Law Funder to file a federal lawsuit against Muñoz, accusing him of negligence, breach of fiduciary duty and legal malpractice. Muñoz denied the allegations.

After years of litigation, Alvarez determined that Muñoz had “materially impeded the discovery process,” according to court records. As punishment, Alvarez struck Muñoz’s answer to the lawsuit from the record and signed a default judgment against him.

Alvarez held a bench trial in September 2017 to determine the damages.

Attorney Francisco “Frank” Rodriguez of McAllen, who represented Muñoz during the bench trial, called no witnesses and made no arguments.

“I have no arguments, Judge, that would do any good,” Rodriguez said, according to the transcript.
“I don’t appreciate the sidebar remark, Mr. –,” Alvarez responded.

“Your Honor, I’m sincere,” Rodriguez said. “The Court has all the evidence before it, so –”

“I do,” Alvarez said. “But I do not appreciate the remark, nonetheless.”

Alvarez signed a nearly $3 million judgment against Muñoz, which included nearly $1.8 million that The Law Funder spent on the Garcia divorce case, $1.2 million that The Law Funder would have collected in the Garcia divorce case and about $21,000 that The Law Funder paid Muñoz.

Armed with the judgment, The Law Funder went after Muñoz’s brokerage account, bank accounts and ownership interests in various businesses.

The 5th Circuit didn’t agree with how Alvarez calculated the damages.

“In sum, Munoz’s negligence might have cost Law Funder the $1,200,000 it expected to recover from the SLM receivers, or it might have cost Law Funder whatever portion of $1,767,430 it incurred after Munoz’s negligence in fruitless pursuit of the SLM receiver funds,” according to the 5th Circuit opinion. “But we can envision no scenario in which Munoz’s negligence cost Law Funder both.”

The 5th Circuit sent the case back to Alvarez for a new trial and new calculation of damages.

Muñoz’s attorneys requested a jury trial, not a bench trial. Alvarez didn’t make any promises Tuesday.

“You did not appeal the denial of a jury trial,” Alvarez said, adding that the 5th Circuit didn’t address the issue. “So I will determine it.”

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