After losing a legal malpractice lawsuit, state Rep. Sergio Muñoz Jr. took the witness stand Monday to defend himself against claims he cost a client $1.2 million.
Muñoz lost the lawsuit in 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, disagreed with how Alvarez calculated the damages.
After a three-year delay caused by the pandemic, the case returned to court Monday for trial.
“Sergio Muñoz cost us a lot of money,” said George Prussin, who co-owned The Law Funder, a New Jersey-based company that loaned money to lawyers.
The Law Funder financed 21 lawsuits referred to attorneys by Wilfrido “Willie” Garcia through a Mexican law firm called Servicios Legales de Mesoamerica.
In 2005, when Garcia’s wife demanded a divorce, The Law Funder and other creditors intervened to protect their investments.
The Law Funder hired a small army of lawyers. Attorney Ray Thomas of McAllen, who represented The Law Funder, brought Muñoz onboard.
“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 had created a corporation — Contreras & Muñoz P.C. — in March 2008.
“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. A different state-court judge heard the motion and ordered Judge Contreras disqualified,” according to the 5th Circuit opinion. “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.”
The Law Funder sued Muñoz in 2014.
Alvarez, the federal judge, determined Muñoz had committed legal malpractice and signed a nearly $3 million judgment against him.
The judgment included $1.2 million The Law Funder attempted to recover during the divorce and nearly $1.8 million for legal bills.
The 5th Circuit sided with Muñoz and sent the case back to Alvarez for a trial on 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.”
After a three-year delay caused by the pandemic, the trial started Monday.
Attorney Francisco Tinoco of McAllen, who represents The Law Funder, asked the jury to award $1.2 million in damages. John F. Carroll of San Antonio, a lawyer who represents Muñoz, argued The Law Funder didn’t actually suffer any damages.
Both attorneys put their clients on the witness stand.
Prussin, who co-owned The Law Funder, testified that he didn’t know Muñoz had a conflict of interest.
“I would just like to get my money back,” Prussin said.
Muñoz took the witness stand on Monday afternoon.
Attorney Francisco “Frank” Rodriguez of McAllen, who represents Muñoz, asked questions about his background, his legal career and his connection with Contreras, the judge who handled the Garcia divorce.
“Mr. Rodriguez, the issue of liability has been determined,” Alvarez said. “So I’m not sure why you’re trying to get into whether or not he was negligent in this case, when that’s been determined already.”
Rodriguez kept asking background questions. Tinoco kept objecting.
After several objections, Alvarez intervened and started questioning Muñoz herself.
She asked if Muñoz explained the conflict of interest to The Law Funder.
“Judge, I don’t recall,” Muñoz said. “I had numerous conversations with the attorneys—”
Alvarez cut him off.
“I’m not talking about the attorneys,” Alvarez said. “I’m talking about your client, The Law Funder.”
Muñoz said he didn’t remember.
After the conflict of interest became public, though, Muñoz said he kept working for The Law Funder, which appealed the decision to remove Contreras from the case.
“And that was a decision that was made collectively,” Muñoz said.
Closing arguments are scheduled for Tuesday morning.