McALLEN — It took less than an hour for a 12-person jury to find state Rep. Sergio Muñoz liable for paying $1.2 million in damages due to legal malpractice.
The verdict came down after just two days of trial against the Edinburg attorney who had previously been found guilty of committing legal malpractice in his representation of a litigation funding firm known as The Law Funder.
The Law Funder’s principal investor, George Prussin, 77, of Florida, said he was “shocked” when he realized he had won the lawsuit against Muñoz — a case that had stagnated since it was filed in December 2014.
“It’s been long coming. This has taken its toll, I gotta be honest with you,” Prussin said outside the McAllen federal courthouse shortly after the jury returned its decision Tuesday.
In 2009, Muñoz failed to disclose that he had a “close professional relationship” with Jesus “Jesse” Contreras, who, at the time, was a state district judge presiding over a divorce case that The Law Funder had an interest in.
The New Jersey company made its money by investing in personal injury lawsuits across the country. The company would advance plaintiffs or their attorneys’ loans to cover legal fees in exchange for a stake in whatever winnings resulted from the lawsuits.
The Law Funder had such interests in a series of 21 lawsuits being handled by a Mexican law firm known as Servicios Legales de Mesoamerica, or SLM, which was owned by Wilfrido “Willie” Garcia.
But in the early 2000s, Garcia and his wife, Maria de Jesus Garcia, divorced and SLM became one of many marital assets that were contested in the messy, yearslong affair.
The Law Funder was among several entities that intervened in the Garcia divorce to try to recover the assets it had an ownership stake in. For the company, that was the winnings from the 21 SLM lawsuits, which it had invested $1.2 million into funding.
Ultimately, so many people staked a claim in the Garcia divorce that Contreras ordered a receivership be established to collect whatever debts were owed to SLM. The receivership would then be responsible for seeking court orders to disburse those debts to SLM’s creditors.
In turn, The Law Funder hired Muñoz “to help locate these funds and secure their ultimate disbursement to Law Funder,” according to court records.
But what Muñoz failed to tell the company was that he and Contreras had formed a law firm together — something that created a conflict of interest that should have prompted the attorney to withdraw his representation.
It wasn’t until 2009 that Maria de Jesus Garcia and a separate intervenor discovered the conflict and subsequently filed motions for Contreras to recuse himself.
But Contreras refused to step down, forcing an outside judge to make the decision for him.
That judge found that Contreras was “constitutionally disqualified” from presiding over the divorce case while Muñoz was one of the attorneys before him.
As a result, the outside judge not only removed Contreras, but also voided any orders he had handed down since Muñoz first made an appearance in the divorce case.
The decision wiped out three years of progress made in the Garcia case between 2009 and 2012.
Among the orders now considered nonexistent was the order establishing the receivership. With it no longer in place, The Law Funder no longer had a mechanism to recover its money.
And the company had sunk so much money — some $1.8 million — on legal fees while trying to recover its investment that it no longer had enough to start all over again, Prussin testified on Monday.
So, Law Funder sued Muñoz for malpractice in 2014. But for years, the state representative shirked his duties in the lawsuit.
He and his attorneys repeatedly failed to show up for court hearings. They failed to turn over discovery materials, even after being ordered to do so by the court.
At one point, Alvarez found Muñoz in contempt and fined him $500 for failing to appear for a status conference, and then failing to appear for a so-called “show cause” hearing to explain his absence.
Finally, in 2017, Alvarez entered a default judgment against Muñoz and awarded The Law Funder nearly $3 million in damages.
However, Muñoz appealed the judgment and damages to the Fifth U.S. Circuit Court of Appeals.
The appellate court wound up splitting the baby — a three-judge panel upheld the default judgment, but found that Alvarez had erred in awarding The Law Funder “a double recovery.”
The $3 million damages award was comprised of the $1.2 million Law Funder had originally invested in the SLM lawsuits, as well as the $1.8 million the company had spent trying to recover that money from the Garcia divorce.
The Law Funder could go after one or the other, but not both, the appellate court ruled. It remanded the case for a new trial to decide what — if any — damages Muñoz was liable to pay.
Alvarez began the trial Monday morning by explaining to the jury that Muñoz’s liability had already been established as a matter of law. He had committed legal malpractice.
It was the jury’s job, then, to decide if that malpractice was the “proximate cause” of damage to The Law Funder.
Muñoz’s defense attorneys tried to argue that making such a finding wasn’t so cut-and-dry.
They repeatedly implied that Law Funder had retained Muñoz precisely because of his close connection to Contreras in the hopes that his rulings would fall their way.
“They were trying to keep Judge Contreras,” attorney Francisco Javier Rodriguez said during closing arguments Tuesday morning.
To bolster that argument, the defense cited how Law Funder continued to retain Muñoz while Contreras appealed his removal. Law Funder didn’t ask Muñoz to resign once they learned of the conflict.
Prussin disputed that.
“(Muñoz) came to our guys and said, ‘I’ll get it overturned,’” Prussin said after the trial.
“That’s the only reason I believed that — look, I didn’t get involved with the nuts and bolts of the attorneys,” he said.
“This is not a slam dunk,” Rodriguez, the defense attorney, said to the jury.
But they apparently disagreed.
The group of six men and six women retired for deliberations at approximately 9:56 a.m.
At 10:40 a.m., they sent a note to the judge asking if there was a specific amount in dollars and cents that they could consider awarding in damages.
About nine minutes later, the jury returned with a finding that Muñoz owes The Law Funder the full amount the company was seeking — $1.2 million.
“I’m glad it’s over,” Prussin said, adding that he had felt a moment of depression after Monday’s testimony.
As an out-of-towner, Prussin said he worried Muñoz would have a “home court” advantage with the jury.
“I figured they’re local, I’m gonna get housed (sic), okay. I gotta be honest with you,” Prussin said.
Instead, he found himself happily incredulous.
“When we left, I said (to my attorney), ‘We won?’”
