Ernest Cannon is a legal legend from Texas’ golden age of big jury verdicts and larger-than-life plaintiffs attorneys.
He’s also a longtime rancher.
But maybe he’s a better lawyer than he is a rancher: His ranching operation lost $8.78 million over seven years, according to a new legal malpractice lawsuit he filed Wednesday.
Cannon has a beef with his estate-planning attorney, Cracy Jewett McCulley & Houren partner Jay Houren of Houston, Houren’s firm, plus two accountants and an accounting firm. He alleges they made a mistake in his estate plan that caused an $8.78 million ranching operation loss to come out of a trust he had established for his son.
Trust fund drained?
Cannon, a Stephenville solo practitioner who didn’t return a call seeking comment, was a law partner of legendary Houston litigator John O’Quinn. He represented O’Quinn in multiple legal tassels, like disciplinary charges by the State Bar of Texas and legal-fee fights over O’Quinn’s Big Tobacco settlement.
Cannon has represented Art Briles, the former Baylor University head football coach who was terminated during the university’s sexual assault scandal. He was involved in litigation against BP over the Deepwater Horizon disaster.
He hired Houren and accountants Gary Sult and Elizabeth Ann Minze in 2011 to set up his son’s trust, according to the petition in Cannon v. Crady Jewett McCulley & Houren, filed in Madison County’s 278th District Court.
Accountant Minze declined to comment, and Sult didn’t return a call or email seeking comment before deadline. Houran, the attorney-turned-defendant, also didn’t return a call or email seeking comment before deadline.
Cannon alleged Houran and the accountants set up an estate plan that structured the trust to own a principal asset of a 96% limited partnership in J Bar F Investments Ltd., which was supposedly worth millions of dollars.
J Bar F held a portfolio of securities and controlled affiliated companies in Cannon’s ranching operations, the complaint said.
One of those affiliated entities was the operating company of the ranching properties and equipment. It was losing money, and JBarF would cover for it, to the tune of $8.78 million from 2013 to 2018, alleged the petition.
“This financial situation was inadequately brought to the attention of the trustees by its lawyers and accountants … even thought its lawyers provided legal advice, and its accountants handled the fiscal oversight of all related operations,” the petition alleged.
The plaintiffs—Cannon and three others who are all trustees of the son’s trust—alleged it was professional negligence to include the ranching operations company in the trust. Plaintiffs counsel, Kelly Hart & Hallman partner Marshall M. Searcy Jr. of Fort Worth, declined to comment.
The petition claimed the trust was supposed to accumulate cash for the son’s future needs, but the opposite occurred. It claimed Cannon regularly made gifts to the trust, paid a gift tax and relied on the defendants’ legal and accounting advice to guide financial decisions for the trust.
Cannon’s filing said he discovered the trust’s financial predicament in 2018. It claimed Houren told him that if he wanted to maximize the trust’s assets, then Cannon himself should directly own and fund the ranching operation company. It said Cannon bought the company for $8.78 million in 2019, to restore the funds the company had siphoned from the trust.
“EHC never should have been part of the trust—a matter that Cannon did not and could not have known during the 2012 estate plan restructure,” the petition claimed.
If the defendants had properly advised him from the beginning, then J Bar F would never have owned the operations company, and Cannon wouldn’t have had to buy the company, the lawsuit claimed.
“The trust’s assets were imprudently concentrated in its ownership in JBarF,” the petition said. “The trust lost the use of approximately $8.78 million over the course of seven years, depriving it of earnings it otherwise would have achieved.”
This article originally appeared on Law.com.
