                                                     United States Court of Appeals
                                                              Fifth Circuit
                                                           F I L E D
                  UNITED STATES COURT OF APPEALS
                       For the Fifth Circuit               October 1, 2003

                                                       Charles R. Fulbruge III
                                                               Clerk
                           No. 01-50981


                            B.J. HALL,

                          Plaintiff – Appellant – Cross-Appellee,


                              VERSUS


                 WHITE, GETGEY, MEYER & CO., LPA,

                          Defendant – Appellee – Cross-Appellant.




          Appeals from the United States District Court
                for the Western District of Texas


Before HIGGINBOTHAM, EMILIO M. GARZA, and DENNIS, Circuit Judges.

DENNIS, Circuit Judge:

     B. J. Hall brought this legal malpractice action against

White, Getgey, Meyer & Co., LPA (“White/Getgey”), the law firm that

represented him in a suit for disability benefits against Hartford

Life and Accident Insurance Company (“Hartford”).     Hall alleged

that the firm’s failure to supplement responses to interrogatories

led to the exclusion of his medical expert witnesses at trial and

forced him to settle with Hartford for a nominal amount.   This case

went to trial, and the jury returned a verdict in Hall’s favor and


                               -1-
awarded him $675,000 in damages.           When the magistrate judge who

presided over the trial entered judgment on the verdict, she found

that White/Getgey was entitled to a settlement credit equal to 40%

of the damages award on account of Hall’s release of his first

attorney in the underlying suit from malpractice liability in

exchange for the attorney’s release of Hall from any claim for

compensation under a 40% contingent-fee agreement.               The judge

reduced Hall’s award accordingly.           Both parties appeal.       Hall

challenges   the   reduction    of   his    damages   award;   White/Getgey

contends that an offset provision of the Hartford policy required

the magistrate judge to reduce the award even further.            We modify

the damages award and affirm the magistrate judge’s final judgment

as modified.

                           I.    BACKGROUND

     From July     5, 1989, to May 18, 1990, B.J. Hall was the

executive vice president and chief operating officer of Incarnate

Word Health Services (“Incarnate Word”), a company that operated

hospitals in Texas and Missouri. As an employee of Incarnate Word,

Hall was covered by a group disability policy issued by Hartford.

Under that policy, Hall was eligible for benefits if he became

“totally disabled” while employed at Incarnate Word.

     On May 7, 1990, Hall was injured in an automobile accident; in

particular, he suffered a whiplash injury and later complained of




                                     -2-
weakness in his extremities, loss of balance, and fatigue.1        In the

days following the accident, Hall attended one staff meeting but

did not otherwise return to work.       On May 11, 1990, Incarnate Word

notified Hall that his employment would be terminated effective May

18, 1990.    The termination was apparently unrelated to Hall’s

physical condition after the accident.

      During l990 and 1991, Hall consulted two physicians, and both

indicated that he had become totally disabled on May 7, 1990, as a

result of the automobile accident.       In April 1991, Hall submitted

a claim for disability benefits under the Hartford policy, but

Hartford denied the claim.

      In response to this denial, Hall retained Houston attorney

Harvill E. Weller, Jr., on a 40% contingent-fee basis.             Weller

filed suit against Hartford on Hall’s behalf in Bexar County,

Texas.    When Hall disagreed with certain recommendations that

Weller made concerning the case, their attorney-client relationship

began to suffer.    In February 1995, just a few months before the

trial    date,   Hall   and   Weller    decided   to   terminate   their

relationship. Hall replaced Weller with White/Getgey, a firm based

in Cleveland, Ohio.     Hall chose White/Getgey because the firm had

  1
     Hall had a preexisting condition—“post-polio syndrome.” As
its name implies, post-polio syndrome affects polio survivors,
usually many years after their initial bout with the disease. The
condition involves slow but progressive weakening of the muscles.
Although some of the impairments that Hall experienced after the
accident are symptoms of post-polio syndrome, Hall asserts that a
sudden trauma such as whiplash can trigger or exacerbate those
symptoms.

                                  -3-
previously represented him in Ohio in a similar lawsuit against New

England Mutual Life Insurance Company. On April 27, 1995, Hall and

Weller executed a “Mutual Release and Agreement to Terminate Legal

Relationship.”        Under the terms of that agreement, Hall reimbursed

Weller    for   his    out-of-pocket       expenses        and   released    him   from

malpractice liability; Weller, in turn, released Hall from any

claim for attorney’s fees.

      The suit against Hartford went to trial on June 5, 1995.

During a hearing on unresolved pretrial matters, the state district

judge granted Hartford’s motion to exclude Hall’s medical expert

witnesses because his attorneys had not supplemented his responses

to interrogatories relating to those witnesses.                      Without medical

experts, Hall had no possibility of winning his case, so he settled

with Hartford for $20,000.2

      Hall later filed this action against White/Getgey in Texas

state    court,   alleging       that   the       firm’s   failure    to    supplement

discovery responses constituted legal malpractice.                      White/Getgey

removed the case to federal court on the basis of diversity

jurisdiction      and     then     filed      a     third-party      complaint      for

contribution against Weller.               Weller filed a motion for summary

judgment, contending that (1) he was released from all liability

for potential malpractice claims in his April 27, 1995 agreement

with Hall; (2) Texas law provides that no defendant has a right of

  2
     Hall had originally sought over $1 million in disability
benefits under the Hartford policy.

                                         -4-
contribution against a “settling person”; and (3) by virtue of the

release, he was a “settling person” as a matter of law.                The

district court agreed that Weller was a “settling person” under the

relevant Texas statute because he gave up his attorney’s fees in

exchange for Hall’s releasing him from malpractice liability.           The

court therefore granted Weller’s motion for summary judgment and

dismissed him from the case.

      After dismissing Weller from the case, and upon the parties’

consent, the district court assigned this case to a magistrate

judge, who granted White/Getgey’s motion for summary judgment and

dismissed Hall’s complaint.3         The magistrate judge concluded that

the underlying suit was without merit because Hall could not show

that he was “totally disabled” as that term was defined in the

Hartford policy.     Hall appealed to this court, and we reversed and

remanded, finding that he had presented sufficient evidence of his

total disability to withstand summary judgment.4

      On   remand,   the   parties    filed   cross-motions   for   summary

judgment on an affirmative defense of offset that White/Getgey had

pleaded in its first amended answer.          That defense was based on a

provision of the Hartford policy that permitted Hartford to reduce

  3
     See 28 U.S.C. § 636(c)(1) (“Upon the consent of the parties,
a full-time United States magistrate . . . may conduct any or all
proceedings in a jury or nonjury civil matter and order the entry
of judgment in the case, when specifically designated to exercise
such jurisdiction by the district court or court he serves.”).
  4
     Hall v. White, Getgey, Meyer & Co., LPA, No. 99-51002 (5th
Cir. Feb. 20, 2001) (unpublished).

                                      -5-
the benefits it owed to Hall by the amount of income benefits he

had received from other sources as a result of his disability.5

Reasoning that a favorable damages award against Hartford in the

underlying suit would have been offset by Hall’s “other income

benefits,” White/Getgey argued that Hall’s recovery in this action

was likewise limited.6    But Hartford never pleaded its offset right

as an affirmative defense in the underlying suit.           Hall therefore

contended    that   Hartford   waived    the   defense    and   that,   as   a

consequence, White/Getgey could not raise it in a malpractice

action.     The magistrate judge agreed that Hartford’s failure to

plead offset amounted to a waiver of that defense under Texas law

and further found that “[i]n this case, Hall’s measure of damages

is the amount he would have received from the jury if his White,

Getgey lawyers had properly prosecuted his claim, considering all

the   applicable    affirmative   defenses     Hartford   pleaded    in   the

underlying lawsuit and nothing more.”           In accordance with this

finding, the magistrate judge entered an order granting Hall’s

cross-motion     for   partial    summary      judgment     and     striking

White/Getgey’s affirmative defense of offset.

  5
     Hartford specified those other sources in the policy’s lengthy
definition of the term “other income benefits.”
  6
     According to White/Getgey, those “other income benefits”
include Hall’s social security disability benefits, disability
benefits he recovered on a policy issued through the American
Institute of Certified Public Accountants, benefits he received
from New England Mutual Life Insurance Company, and his settlement
with Hartford in the underlying action. Those benefits exceed $1
million.

                                   -6-
      This case went to trial in August 2001.       The jury returned a

verdict in Hall’s favor in the amount of $675,000 and determined

that White/Getgey was responsible for 51% of the negligence that

resulted in Hall’s injuries and that Weller was responsible for the

remaining   49%.7   Soon   after   the   trial,   the   magistrate   judge

requested briefings from the parties to assist her in entering

judgment on the verdict.    White/Getgey contended in its brief, as

it had throughout this action, that it was entitled to a settlement

credit under § 33.012(b) of the Texas Civil Practice and Remedies

Code equal to 40% of the damages award.       Its theory was that Hall

had settled his malpractice claim against Weller for that amount

when they executed the mutual release.        In her “Order on Entry of

Judgment,” the magistrate judge agreed that the mutual release was

a “settlement” for purposes of § 33.012(b) and that White/Getgey

was entitled to a credit equal to the dollar amount of the

settlement.    The judge also agreed with White/Getgey that the

“dollar amount” of the settlement was 40% of Hall’s damages award

($270,000) and reduced the award accordingly.

      Both parties filed timely notices of appeal.

                            II.    ANALYSIS

      We face two issues.     First, Hall contends that the mutual



  7
     Under Texas law, a defendant is jointly and severally liable
for all recoverable damages if the percentage of responsibility
attributed to him is greater than 50%. See Tex. Civ. Prac. & Rem.
Code § 33.013(b).

                                   -7-
release was not a “settlement” and that, even if it was, the

magistrate judge misapplied § 33.012(b) of the Texas Civil Practice

and Remedies Code.   Second, White/Getgey challenges the magistrate

judge’s order striking its affirmative defense of offset. The firm

contends that Texas law does not limit a malpractice defendant to

the defenses actually raised in the underlying suit.8   Because both

of these issues concern the magistrate judge’s application of Texas

law, our review is de novo.9

                       A.   Settlement Credit

      Section 33.012(b) of the Texas Civil Practice and Remedies

Code provides that if a claimant in a tort action has settled with

a person who bears some responsibility for his injuries, the trial

court must reduce the claimant’s damages award to account for the

settlement:

      If the claimant has settled with one or more persons, the

  8
     Hall argues in his brief that White/Getgey waived its right to
appeal on this issue because it did not mention the magistrate
judge’s order striking the defense in its notice of appeal. This
argument is meritless, for an appeal from the final judgment draws
into question all prior nonfinal orders and all rulings that
produced the judgment.    See 20 James Wm. Moore et al., Moore’s
Federal Practice § 303.21[3][c][iii] (3d ed.). “Thus, a failure of
the notice of appeal to specifically refer to a preliminary or
interlocutory order does not prevent the review of that order on
appeal.” Id. (citing New York Life Ins. Co. v. Deshotel, 142 F.3d
873, 884 (5th Cir. 1998)).     In this case, the magistrate judge
expressly reaffirmed her pretrial ruling on White/Getgey’s
affirmative defense when she entered judgment on the jury’s
verdict. Because White/Getgey filed a timely notice of appeal from
that final judgment, it is now free to challenge the magistrate
judge’s ruling on its defense.
  9
      Salve Regina College v. Russell, 499 U.S. 225, 231 (1991).

                                 -8-
        court shall further reduce the amount of damages to be
        recovered by the claimant with respect to a cause of
        action by a credit equal to one of the following, as
        elected in accordance with Section 33.014:
             (1) the sum of the dollar amounts of all
                  settlements; or
             (2) a dollar amount equal to the sum of the
                  following percentages of damages found by the
                  trier of fact:
                  (A) 5 percent of those damages          up to
                       $200,000;
                  (B) 10 percent of those damages from $200,001
                       to $400,000;
                  (C) 15 percent of those damages from $400,001
                       to $500,000; and
                  (D) 20 percent of those damages greater than
                       $500,000.10

Although Chapter 33 of Civil Practice and Remedies Code contains no

definition of the term “settlement,” § 33.011(5) provides that a

“settling person” is “a person who at the time of submission has

paid or promised to pay money or anything of monetary value to a

claimant at any time in consideration of potential liability . . .

.”11    Tracking this language in part, the Texas Supreme Court has

held that “‘settlement,’ as used in the Comparative Responsibility

Law, means money or anything of value paid or promised to a

claimant in consideration of potential liability.”12

        A defendant seeking a settlement credit has the right to

choose between the two methods of calculation provided for in §

33.012(b)—dollar-for-dollar or sliding scale.      To obtain a dollar-

   10
        Tex. Civ. Prac. & Rem. Code § 33.012(b).
   11
        Id. § 33.011(5).
   12
     C & H Nationwide, Inc. v. Thompson, 903 S.W.2d 315, 320 (Tex.
1994).

                                  -9-
for-dollar credit, the defendant must file a written election of

that option before the case is submitted to the trier of fact.13

If he has made such an election, the defendant must then prove the

settlement credit amount.14     He can meet this burden by placing the

settlement agreement or some evidence of the settlement amount in

the record.15 If the defendant fails to prove the settlement credit

amount, he is not entitled to a dollar-for-dollar credit, and the

trial court is limited to using the sliding scale method to reduce

the damages award.16

       Here, we must first determine whether the mutual release

executed by Hall and Weller on April 27, 1995, was a settlement.

The answer is yes if Weller gave anything of value to Hall in

consideration of potential liability.17         As we discuss more fully

below, Weller had a claim against Hall for attorney’s fees upon the

termination of their contingent-fee agreement, and the record

indicates    that   Hall   pursued   the    release   to   avoid   having   to

compensate both Weller and White/Getgey for their services.18           When


  13
     See Tex. Civ. Prac. & Rem. Code § 33.014. If the defendant
does not file a written election, he is considered to have elected
the sliding scale method. Id.
  14
       Mobil Oil Corp. v. Ellender, 968 S.W.2d 917, 927 (Tex. 1998).
  15
       Id.
  16
       Id.
  17
       C & H Nationwide, 903 S.W.2d at 320.
  18
     Indeed, Hall and White/Getgey had entered into a contingent-
fee agreement in March 1995, but at Hall’s request, that agreement

                                     -10-
Weller executed the release, he gave up his claim for attorney’s

fees in exchange for Hall’s reimbursing him $21,027 in expenses and

releasing him from all liability arising out of the representation.

Because Weller’s relinquishment of his claim was valuable to Hall

and was done, at least in part, in consideration of potential

malpractice liability, the magistrate judge correctly held that the

mutual release was a settlement.

       Because   there   was   a   settlement,   Texas   law   required   the

magistrate judge to reduce Hall’s judgment.19            The only question

remaining   concerns     the   proper   amount   of   the   reduction.     In

accordance with § 33.014 of the Civil Practice and Remedies Code,

White/Getgey filed a written election seeking a dollar-for-dollar

settlement credit before this case was submitted to the jury.

Although White/Getgey acknowledged that, in the typical case, the

settlement to be credited against the judgment is expressed in a

fixed dollar amount, it sought a credit equal to 40% of Hall’s

recovery.    It explained that Weller was entitled to that same 40%

under his contingent-fee contract with Hall, but that Weller gave

up that interest when he signed the release.          White/Getgey further

explained that “[a]lthough the Weller contract was expressed in a



did not become effective until Hall and Weller executed the mutual
release.
  19
     See Ellender, 968 S.W.2d at 926 (“When there is a settlement
covering some or all of the damages awarded in the judgment,
section 33.012 requires the trial court to reduce the judgment
accordingly.”).

                                     -11-
percentage, there is a dollar figure that can be placed on the

value of the Weller settlement once the jury reaches its verdict.”

The magistrate judge agreed that the dollar-for-dollar value of

Hall’s settlement with Weller was 40% of the damages awarded by the

jury and reduced Hall’s recovery by that measure.

       We find that the 40% reduction was improper.    “Under Texas

law, whether and how to compensate an attorney when a contingent

fee contract is prematurely terminated depends on whether the

attorney was discharged, withdrew with the consent of the client,

or withdrew voluntarily without consent.”20 The attorney discharged

without cause can recover on the contingent-fee contract or in

quantum meruit, but if the client proves good cause for the

discharge, the attorney is limited to recovery in quantum meruit

for services rendered up to the time of the discharge.21   “When both

parties assent to the contract’s abandonment, the attorney can

recover for the reasonable value of the services rendered.”22    And

when the attorney abandons the contract before completion without

  20
     Augustson v. Linea Aerea Nacional-Chile S.A., 76 F.3d 658, 662
(5th Cir. 1996).
  21
     Id. (citing Mandell & Wright v. Thomas, 441 S.W.2d 841, 847
(Tex. 1969) (attorney discharged without cause can recover on the
contract); Howell v. Kelly, 534 S.W.2d 737, 739–40 (Tex. Civ.
App.—Houston [1st Dist.] 1976, no writ) (attorney discharged
without cause has a choice of remedies); Rocha v. Ahmad, 676 S.W.2d
149, 156 (Tex. App.—San Antonio 1984, writ dism’d) (attorney
discharged for good cause can recover only the reasonable value of
his services)).
  22
     Id. (citing Diaz v. Attorney General of Texas, 827 S.W.2d 19,
22–23 (Tex. App.—Corpus Christi 1992, no writ)).

                               -12-
good cause,         he    forfeits    his    right      to     compensation         under     the

contract;23 if, however, he has good cause for withdrawing without

the    client’s      consent,       the   attorney        is      probably    entitled         to

compensation, but the proper measure of that compensation is

unclear.24

       In this case, the record supports neither a finding that

Weller was discharged nor a finding that he withdrew without Hall’s

consent. Every indication, instead, is that Hall and Weller agreed

to terminate their attorney-client relationship in February 1995

and then      began       negotiating       the   terms      of    the     mutual    release.

Because      both        parties    assented       to    the       termination         of     the

representation contract, Weller was entitled, under Texas law, to

recover only the reasonable value of his services from Hall.25                                And

it was his claim for that reasonable value that Weller released in

exchange for Hall’s reimbursing his expenses and releasing him from

malpractice liability.              Therefore, the magistrate judge erred in

finding    that      the    value    of   the     settlement         was    40%   of     Hall’s

recovery.

       Although White/Getgey placed Hall and Weller’s contingent-fee

agreement     and        their   mutual     release     in     the    record,       it      never

introduced evidence concerning the reasonable value of Weller’s


  23
       Diaz, 827 S.W.2d at 22.
  24
       See Augustson, 76 F.3d at 662 & n.6.
  25
       See Diaz, 827 S.W.2d at 22–23.

                                            -13-
services.     Because it failed to introduce such evidence, the firm

did not satisfy its burden of proving the settlement credit amount.

It follows that White/Getgey was not entitled to a dollar-for-

dollar credit and that the magistrate judge should have used the

sliding scale method of § 33.012(b)(2) to reduce the damages

award.26    Applying that method of calculation in the light of the

damages found by the jury in this case yields a settlement credit

of $80,000.27    We modify Hall’s damages award so that it reflects

a reduction by this proper amount.

                              B.     Offset

       We now consider whether the magistrate judge’s ruling on the

offset issue was inconsistent with Texas legal malpractice law. In

Texas, a legal malpractice action sounds in tort and is governed by

negligence    principles.28    To    recover   on   a   claim   for   legal

malpractice, the plaintiff must establish that (1) the attorney

owed him a duty, (2) the attorney breached that duty, (3) the

breach proximately caused injury to the plaintiff, and (4) damages

resulted.29     If the claim concerns the attorney’s handling of a

litigated matter, proving causation is particularly challenging for


  26
       Ellender, 968 S.W.2d at 927.
  27
     The calculation under § 33.012(b)(2) proceeds as follows:
(.05*$200,000)+(.10*$200,000)+(.15*$100,000)+(.20*($675,000-
$500,000))=$80,000.
  28
       Cosgrove v. Grimes, 774 S.W.2d 662, 664 (Tex. 1989).
  29
       Id. at 665.

                                    -14-
the plaintiff, who must show that he would have prevailed in the

underlying suit but for the attorney’s negligence and that he would

have been able to collect some or all of a favorable judgment.30

This causation burden is commonly referred to as the “suit within

a suit” requirement.31

       In   an    effort    to    negate     the     causation     element   of     Hall’s

malpractice claim, White/Getgey argued that Hartford’s right to

offset      the   benefits       it   owed    Hall    against      the   “other     income

benefits” he had received as a result of his disability would have

severely      limited      his    recovery     in    the   underlying       suit.      The

magistrate judge found, however, that Texas law requires an insurer

to specifically plead offset as an affirmative defense and that

Hartford      waived    the      defense     by     failing   to    plead    it   in   the

underlying suit.32         White/Getgey does not challenge these findings

  30
     Ballesteros v. Jones, 985 S.W.2d 485, 489 (Tex. App.—San
Antonio 1998, pet. denied); Mackie v. McKenzie, 900 S.W.2d 445,
448–49 (Tex. App.—Texarkana 1995, writ denied); Jackson v. Urban,
Coolidge, Pennington & Scott, 516 S.W.2d 948, 949 (Tex. Civ.
App.—Houston [1st Dist.] 1974, writ ref’d n.r.e.).
  31
     Ballesteros, 985 S.W.2d at 489.     See generally Robert P.
Schuwerk & Lillian B. Hardwick, Handbook of Texas Lawyer and
Judicial Ethics: Attorney Tort Standards, Attorney Ethics
Standards, Judicial Ethics Standards § 2.08, in 48 Texas Practice
Series (2002) (discussing the “suit within a suit” requirement).
  32
     The magistrate judge based these findings on Article 21.58(b)
of the Texas Insurance Code and Rule 94 of the Texas Rules of Civil
Procedure. See Hall v. White, Getgey & Meyer Co., LPA, No. 97-320,
2001 WL 1910546, at *4—*6 (W.D. Tex. Aug. 16, 2001) (discussing
Tex. Ins. Code art. 21.58(b), Tex. R. Civ. P. 94, and cases
interpreting those provisions). The magistrate judge also found
that the state trial court would not have allowed Hartford to amend
its answer to add the defense during the trial. See id. at *5.

                                             -15-
in this appeal.               It has therefore abandoned any contention that

Hartford could have raised the defense of offset in the underlying

suit.33           The firm argues instead that Hartford’s waiver of the

defense has no bearing on whether it can raise it in this action.

           In support of this argument, White/Getgey relies exclusively

on        the    opinion      of    the    Texas    Fourteenth      Court      of    Appeals    in

Swinehart v. Stubbeman, McRae, Sealy, Laughlin & Browder, Inc., a

malpractice            case    in    which    the    court       held   that    the   defendant

attorneys could raise an affirmative defense that had not been

pleaded in the underlying suit.34                           In that case, however, the

plaintiff never raised a claim in the underlying action against

which           the   defendant      would    have        been    required      to    plead    the

affirmative defense at issue.35                       Thus, as the magistrate judge

correctly recognized, this case is distinguishable from Swinehart

because Hall asserted a claim in the underlying action against

which Hartford was required to plead offset as an affirmative

defense.              Despite this distinction, White/Getgey seizes on the

Swinehart court’s statement that “[a]n attorney’s defense to a

legal           malpractice        claim    should        not    rest   on     the    underlying




     33
     Friou v. Phillips Petroleum Co., 948 F.2d 972, 974 (5th Cir.
1991).
     34
     48 S.W.3d 865 (Tex. App.—Houston [14th Dist.] 2001, pet.
denied).
     35
           See id. at 876.

                                                   -16-
defendant’s handling of its own defense.”36    Although this broad

statement will hold true in some cases, White/Getgey contends that

we must apply it as an absolute rule of Texas law and reverse the

magistrate judge’s ruling that the firm could not raise the defense

of offset because Hartford waived it in the underlying action.   We

disagree.

       “Our goal, sitting as an Erie court, is to rule the way the

Texas Supreme Court would rule on the issue presented.”37 According

to that court’s seminal opinion in Cosgrove v. Grimes, to prove a

“suit within a suit,” a malpractice plaintiff must establish the

amount of damages he would have recovered and collected if his

attorney had properly prosecuted the underlying suit.38     In our

view, this description of the plaintiff’s burden admits of no hard

and fast rule prohibiting him from showing that his adversary’s

waiver of an affirmative defense in the underlying suit would have

allowed him to recover and collect a larger amount of damages than

he could have absent the waiver.       That parties sometimes reap

benefits as a matter of law even though they are not entitled to

those benefits as a matter of equity is a reality of the adversary

system and the procedural rules that govern it.   If a malpractice

  36
     Id. Although the court noted that it had found no authority
to the contrary, it cited no authority in support of this
statement. See id.
  37
     Hanson Prod. Co. v. Americas Ins. Co., 108 F.3d 627, 629 (5th
Cir. 1997).
  38
       774 S.W.2d at 666.

                                -17-
plaintiff proves that he would have benefitted from his adversary’s

failure to comply with a procedural rule, we are aware of no

principle of Texas law that would prevent the trier of fact from

considering that benefit in determining whether the attorney’s

breach of the applicable standard of care caused harm to the

plaintiff. We therefore predict that the Texas Supreme Court would

hold that when a malpractice plaintiff proves both the underlying

defendant’s waiver of an affirmative defense and the effect of that

waiver on the amount of damages he could have recovered and

collected if the underlying suit had been properly prosecuted, the

malpractice defendant cannot rely on that defense to negate the

causation element of the plaintiff’s claim.

     In this case, it is undisputed that Hartford waived its

affirmative defense of offset in the underlying suit and that Hall

was in a position to benefit from the waiver.                  Through its

negligence, White/Getgey deprived Hall of that benefit.             If the

firm had supplemented Hall’s discovery responses, his doctors would

have testified to his total disability, and he would have been

entitled to judgment against Hartford.        The jury’s verdict in this

case establishes as much.        And Hartford’s waiver meant that a

favorable damages award in the underlying suit would not have been

offset by the amount of Hall’s other disability benefits.          Because

Hall proved both the waiver and the effect of that waiver on the

amount   of   damages   he   could   have   recovered   and   collected   if



                                     -18-
White/Getgey   had   properly   prosecuted   the   underlying   suit,   we

conclude, in accordance with our Erie guess, that White/Getgey

could not rely on the offset provision of the Hartford policy to

negate the causation element of Hall’s malpractice claim. Thus, we

find no error in the magistrate judge’s ruling on this issue.

                           III.   CONCLUSION

     For the foregoing reasons, we affirm the magistrate judge’s

pretrial ruling on the offset issue, modify the damages award so

that it reflects the proper settlement credit of $80,000, and

affirm the final judgment as modified.       This case is remanded for

entry of an amended judgment in Hall’s favor in the amount of

$595,000.

        AFFIRMED AS MODIFIED; REMANDED WITH INSTRUCTIONS.




                                  -19-
