State Rep. Sergio Muñoz Jr. settles legal malpractice lawsuit

State Rep. Sergio Muñoz Jr. settled a legal malpractice lawsuit in January, ending more than eight years of litigation.

The lawsuit pitted Muñoz against The Law Funder, a New Jersey-based company that loaned money to lawyers.

After a two-day trial in August 2022, a jury determined that Muñoz had caused the company $1.2 million in damages. Muñoz appealed.

Attorney John F. Carroll of San Antonio, who represented Muñoz, informed the 5th U.S. Circuit Court of Appeals about the settlement last week.

“The parties to this appeal have reached a settlement in mediation through this Court’s mediation program,” Carroll wrote in a motion filed on March 24. “As a part of the settlement, Appellants have agreed to a withdrawal and dismissal of this appeal.”

Sergio Muñoz Jr.

Muñoz and attorney Francisco Tinoco of McAllen, who represented The Law Funder, said the settlement is confidential. They declined to discuss any of the details, including how much, if anything, Muñoz agreed to pay.

“Case is resolved, finished, done,” Muñoz said in a text message. “No admissions. Life goes on. Period.”

Tinoco said his client, George Prussin, who co-owned The Law Funder, was pleased with the settlement.

“He’s happy that it’s finally over after many years of litigation and stress and trying to show that he was right — and his company was wronged by Mr. Muñoz,” Tinoco said. “But he’s very happy that it’s over.”

The dispute started with a messy divorce between Wilfrido “Willie” Garcia and his wife, Maria De Jesus Garcia.

Willie Garcia connected attorneys with clients through Sevicios Legales de Mesoamerica, a Mexican law firm.

The Law Funder had purchased a share of the proceeds in 21 lawsuits from Willie Garcia’s firm. To protect that investment during the divorce, The Law Funder hired Muñoz and other attorneys in Hidalgo County.

“Unbeknownst to Law Funder, Munoz had a close professional relationship with Judge Jesus Contreras, who was presiding over the Garcia divorce: Munoz and Judge Contreras were coprincipals in a professional corporation, Contreras & Munoz, P.C. 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 an opinion from the 5th Circuit, which summarized the case in 2019. “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.”

The Law Funder sued Muñoz for negligence, breach of fiduciary duty and legal malpractice in 2014.

U.S. District Judge Micaela Alvarez struck Muñoz’s response from the record and signed a default judgment against him.

“Defendants have systematically delayed discovery, inadequately responded to discovery requests, failed to appear for scheduled hearings, and failed to timely appear for scheduled hearings,” according to an order Alvarez signed in 2016. “Though Defendants have been unrepresented during certain periods of time in this case, they have no excuse by virtue of their occupation and status—Defendant Sergio Munoz is a lawyer, and the other Defendant is his law firm.”

Alvarez ordered Muñoz to pay The Law Funder nearly $3 million, which included $1,767,430 in legal fees and $1.2 million that The Law Funder sought to collect in the Garcia divorce.

Muñoz appealed. The 5th Circuit upheld the default judgment against him but disagreed 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.”

Muñoz and The Law Funder returned to court in August 2022 for a trial on damages.

Tinoco, the attorney who represented The Law Funder, asked for $1.2 million. Attorneys for Muñoz argued The Law Funder hadn’t actually proved that he caused any damages.

The jury deliberated for less than an hour before awarding $1.2 million to The Law Funder.