Appellate court upholds judgment against Rep. Muñoz

$3M judgment void; new trial called

The U.S. 5th Circuit Court of Appeals upheld a lower court ruling that connected State Rep. Sergio Muñoz Jr. to legal malpractice where the lawmaker failed to disclose a business relationship with former State District Judge Jesse Contreras during a case Muñoz, an attorney, took in Contreras’ courtroom.

Judges Carolyn Dineen King, Jerry E. Smith and Don R. Willett of the 5th Circuit also voided a nearly $3 million judgment issued by U.S. District Judge Micaela Alvarez of McAllen. The three-judge panel also called for a new trial in Alvarez’s McAllen courtroom on damages to Muñoz’s former client.

Click here to read the court documents.

In 2017, Alvarez ordered the plaintiff — Law Funder LLC — recover $2.98 million from Muñoz and the Law Offices of Sergio Muñoz Jr., according to court documents. But the 5th Circuit, in records released on Thursday, concluded that Alvarez “improperly calculated damages under Texas law.” The new trial in Alvarez’s courtroom to assess the damages to Law Funder is not yet scheduled.

Muñoz, D-Palmview, had previously represented Law Funder, which is a litigation funding company. In May 2011, Law Funder retained the services of Muñoz for representation in a divorce case in which Contreras was the presiding judge.

Nearly a year later, multiple motions were filed to disqualify and/or recuse Contreras due to a corporate relationship with Muñoz.

The 5th Circuit ruling upholds some of what Muñoz has argued in court filings, where he had sought relief from Alvarez’s multi-million dollar judgment because he was “unfairly surprised when the court scheduled parties for a ‘miscellaneous conference’ and actually it was a trial on damages before the court,” court documents state.

But the new trial in McAllen will seek to properly assess how much Muñoz’s failure to disclose his relationship with Contreras affected Law Funder. In July 2012, a hearing before state senior District Judge Dick Alcala of San Antonio resulted in the court disqualifying Contreras from hearing the divorce case “because of the corporate association with the defendant Sergio Muñoz Jr., that was in existence when they were lawyers together and continued through the time Muñoz appeared for Law Funder,” according to court documents.

Law Funder had “sustained a significant amount of damages,” which eventually led to Law Funder retaining McAllen attorney Francisco Tinoco, who then filed suit in federal court against Muñoz and his law offices for legal malpractice.

Muñoz was served with an initial request to produce documents and failed to produce any, court documents said. When asked in court filings to provide documents, Muñoz “promised to act in good faith and turn over appropriate documentation.”

After a second request went unanswered by Muñoz, Law Funder said that Muñoz and his legal counsel failed to “produce a single document” in response to Law Funder’s subpoena duces tecum.

Alvarez granted Law Funder’s motion and struck Muñoz’s answer from the record.

Previous coverage

State Rep. Muñoz ordered to pay nearly $3 million in legal malpractice case