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Mark Kentrell CHEATHAM, Sr., Luella Miller, Mark Cheatham, Jr. and Lacy Reese, Appellants v. Michael A. POHL, Law Offices of Michael Pohl, PLLC, Robert Ammons, the Ammons Law Firm, LLP, Donalda Pohl, Edgar Jaimes, and Helping Hands Financing, LLC, Appellees
OPINION ON REHEARING
A panel of this Court issued an opinion in this matter on January 27, 2022. Multiple parties moved for panel rehearing and en banc reconsideration. We grant the motions for panel rehearing, withdraw our January 27th opinion and judgment, and issue this opinion on rehearing and judgment in their place. The en banc motions are denied as moot.
This is a civil barratry suit. Two sets of wrongful-death claimants—from Louisiana and Arkansas—sued their Texas attorneys for barratry. More specifically, they alleged that the Texas attorneys and the wife of one of them set up a business arrangement to direct and finance Mississippi case runners to convince the grieving family members to hire one or both attorneys. The wife's company allegedly would “loan” money to cover funeral expenses but only if the family retained her husband. The Mississippi middlemen described their work as attorney “marketing services,” not case running. But the families asserted that the men would target potential clients in hospital rooms and at grave sites within days of catastrophic accidents. They allege that the Texas attorneys coordinated these efforts and funded them from their Texas offices.
All defendants moved for summary judgment on a number of theories, including that the Texas civil barratry statute does not apply to activity outside of Texas. The trial court granted summary judgment to all defendants. The clients appeal.
We reverse in part, affirm in part, and remand.
The Texas attorneys—Michael Pohl and Robert Ammons—were retained by family members of people killed in automobile accidents. The family members live in Louisiana and Arkansas. The Texas attorneys filed suits on their behalf in those two states against various auto and product manufacturers, among others. Those claims settled. The clients then sued their attorneys, asserting civil barratry claims, among others.
The underlying wrongful-death suits
The Louisiana case arose from the death of Ladonna Cheatham and two of her children in a car accident in February 2014. Three of her surviving family members—Mark Cheatham Jr., Mark Cheatham Sr., and Luella Miller (collectively, the Cheathams)—entered into a contingency fee agreement with the Law Offices of Michael A. Pohl and subsequently consented to the association of the Ammons Law Firm, L.L.P. Pohl filed a lawsuit in Louisiana on their behalf. They later entered into a new representation agreement with Ammons alone. Their case settled.
The Arkansas case arose from the death of David Reese in a car accident in July 2014. His wife, Lacy Reese of Arkansas, hired Pohl, who associated with Ammons. Pohl filed a lawsuit in Arkansas on her behalf, which later settled.
This civil barratry suit begins
The Cheathams filed this civil barratry suit in Harris County in June 2017. Initially, they sued Michael A. Pohl and the Law Office of Michael Pohl, PLLC; Donalda Pohl, who allegedly ran a side company that offered funeral loans but only if her husband's law firm was retained; and Robert Ammons and The Ammons Law Firm, LLP. The Cheathams alleged that Michael Pohl paid a sham company to solicit them, that Donalda Pohl ran a sham financing company to offer money to surviving family members who potentially had large tort claims as an incentive to hiring her husband's firm, that the Mississippi-based case runners worked in coordination with the Texas lawyers and others to lead clients to Pohl's firm, and that Pohl funded the project from Texas. They alleged that acts and omissions complained of occurred, in part, in Texas and that the tort occurred, in whole or in part, in Texas.
Reese joined the Cheathams’ barratry suit in April 2018. She too alleged that the Mississippi case runners solicited her to hire Pohl. She alleged that her barratry claim arose, in whole or in part, in Texas and that the acts and omissions occurred in Texas. Reese's pleadings relied on the permissive joinder rule and, alternatively, the intervention rule. No parties challenged her entry into the suit at the time.
Eventually, more defendants were added to the suit. The sixth amended petition, filed in April 2019, lists Mark Kentrell Cheatham, Sr., Luella Miller, Mark Cheatham, Jr., as the plaintiffs and Lacy Reese as an “intervenor.”1 It lists Michael A. Pohl, Law Office of Michael Pohl, PLLC, Donalda Pohl, Helping Hands Financing, LLC (Donalda's company),2 Edgar Jaimes (Donalda's employee and relative), Robert Ammons, and The Ammons Law Firm, LLP, as defendants.
The Cheathams and Reese assert claims for civil barratry, breach of fiduciary duty, civil conspiracy to commit barratry, aiding and abetting, and joint enterprise liability.
Ammons's Louisiana action to obtain attorney's fees out of Cheatham settlement
In August 2017—just two months after the Cheathams filed this barratry suit—Ammons filed a “petition for concursus” in Louisiana, asserting a claim for attorney's fees out of the Cheatham settlement. See La. Code Civ. Pro. art. 4651 (“A concursus proceeding is one in which two or more persons having competing or conflicting claims to money, property, or mortgages or privileges on property are impleaded and required to assert their respective claims contradictorily against all other parties to the proceeding.”); Ross v. Salomon, 756 So.2d 629, 631 (La. App. 2d Cir. 2000). Ammons deposited the Cheatham settlement funds—both the client's portion and the attorney's fee portion—into the registry of the Louisiana court and sought court-approved release of the attorney's fees to him.
Cheatham responded by filing a motion with the Texas court overseeing the barratry suit to force Ammons to deposit “disputed settlement funds” into the Texas court's registry and to pay out any “undisputed settlement funds,” meaning the client's portion of the settlement. He argued that Ammons was trying to circumvent the Texas court's jurisdiction by going to the Louisiana court to get attorney's fees that might be denied him in the Texas barratry suit.
Ammons responded. He argued that Cheatham's motion was “moot” because all disputed settlement funds were already in the registry of the Louisiana court and, therefore, not available to be placed into the registry of the Texas court, as Cheatham was requesting.
The Texas trial court held a hearing in September 2017. The court opened by asking what was currently pending in the Louisiana court, pointing out that the Louisiana court did not have the civil barratry claim before it, and expressing concern whether the barratry claim “is going to get adjudicated somewhere else, where the issue is not really present.” Ammons's counsel responded that it seemed “like no problem ․ The barratry issues are before you. All of the issues about the settlement are before the Louisiana court.”
Cheatham accused Ammons of using the Louisiana proceeding to obtain an injunction that would interfere with Cheatham's pursuit of the civil barratry claim in the ongoing Texas suit. The court responded that it could not prohibit Ammons from proceeding in Louisiana and then reassured Cheatham that, if he prevailed on his barratry suit, the Texas court still would be able to order Ammons to “pay here.”
Ammons's counsel took the position that no action was needed by the Texas court. He highlighted “the differences between the two cases,” saying, “This is a barratry case. It's not a lawsuit over the proceeds of a settlement.”
The court asked about the release Ammons was seeking in the Louisiana matter. Ammons's counsel responded that the release was to “those funds. That's not the barratry.”
The court agreed with Ammons's characterization of the two proceedings as distinct from one another and discussed the importance of the Louisiana court not taking any action that would impact the Texas barratry claims:
It further sounds like [this] transcript can be used in Louisiana to make sure that judge doesn't go contrary to the barratry claim that's pending in my court․ [Ammons is] an attorney here. I mean, the barratry portion of it should be here because he's a Texas licensed attorney. So, it sounds like it's all going to go like it should. I think the motion in front of me is moot and therefore denied.
Ammons was not required to place the settlement funds into the registry of the Texas court because they were already in the registry of the Louisiana court.
One month later, the Louisiana court held a hearing on Ammons's concursus petition. The record in this appeal contains the findings of fact the Louisiana court issued after that hearing. Summarized, the Louisiana court found that:
• one of the settling parties in the underlying wrongful death suit moved to enforce the Cheatham settlement, which Cheatham opposed, and the court later granted the motion to enforce;
• Ammons intervened in that suit, asserting a claim for disputed legal fees, which Cheatham also opposed by pleading that Ammons was not entitled to any attorney's fees because the fee agreement was procured through illegal and unethical solicitation;
• at the evidentiary hearing on Ammons's intervention, according to the court, “Cheatham withdrew his opposition to the intervention entirely” and presented no evidence to dispute Ammons's claim for attorney's fees;
• Cheatham, as a result, “failed to support his allegations of impropriety,” and the Court, in response, “rejected the allegations”;
• Ammons's contingency fee agreement was determined to be valid and enforceable; and
• Cheatham announced to the Louisiana court that he “purported to ‘reserve’ the ability ․ to seek disgorgement of Ammons[’s] ․ attorneys’ fees in a future proceeding,” but, in the Louisiana court's view, its “judgment awarding those fees ․ is conclusive of Ammons[ ]’s lawful entitlement to these fees.”
Ammons received his Cheatham-settlement attorney's fees from the registry of the Louisiana court in November 2017.
After several months of litigation and discovery, Pohl challenges Reese's participation in the Cheatham litigation
In August 2018, Pohl moved to strike the “intervention” by Reese. He argued that Reese did not meet the requirements for intervening because she did not have a justiciable interest in the pending suit, relying on In re Union Carbide Corp., 273 S.W.3d 152 (Tex. 2008) (per curiam). The trial court denied Pohl's motion in September 2018.
The attorneys’ summary-judgment motions and the evidence in the barratry suit
In June 2019, as the Texas barratry suit progressed, Ammons moved for summary judgment on multiple grounds. First, he argued that the Section 82.0651(a) barratry statute is not extraterritorial, meaning it does not permit recovery for out-of-state activities.
Second, Ammons argued that, after two years of discovery, there was no evidence that he had been involved in barratry or that he played any role in any case-running that Pohl might have orchestrated.3
Third, Ammons argued that res judicata prevented relitigation of the barratry claim because a Louisiana court already looked at the allegation of wrongful solicitation in connection with the disbursement of settlement funds and issued findings of fact that Ammons had not participated in any solicitation of the Cheathams. He argued that the Louisiana trial court's resolution of the issue was res judicata.
Fourth, Ammons argued that, as a matter of law, he had no duty to look behind his case referrals to determine if his referring lawyer had improperly solicited clients.
The trial court granted Ammons's summary-judgment motion without specifying the grounds for doing so.
Donalda Pohl, her company (Helping Hands Financing, LLC), and her employee (Edgar Jaimes) moved for traditional summary judgment on all claims. Like Ammons, they argued that the barratry statute has no extraterritorial application to alleged solicitation in Louisiana and Arkansas. The trial court granted their motion.
Pohl and his law firm also moved for traditional summary judgment on the grounds that the barratry statute has no extraterritoriality and that the derivative claims likewise fail. The trial court granted his motion. The trial court designated this last order as final and appealable.
The Cheathams and Reese appeal.
Standard of Review for Summary-Judgment Rulings
We review a trial court's grant of summary judgment de novo. Travelers Ins. Co. v. Joachim, 315 S.W.3d 860, 862 (Tex. 2010). When reviewing a summary judgment, we must (1) take as true all evidence favorable to the nonmovant and (2) indulge every reasonable inference and resolve any doubts in the nonmovant's favor. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005). If a trial court grants summary judgment without specifying the grounds, we must uphold the trial court's judgment if any one of the grounds is meritorious. Beverick v. Koch Power, Inc., 186 S.W.3d 145, 148 (Tex. App.—Houston [1st Dist.] 2005, pet. denied).
In a traditional summary judgment motion, the movant has the burden to show that no genuine issue of material fact exists and that the trial court should grant judgment as a matter of law. Tex. R. Civ. P. 166a(c); KPMG Peat Marwick v. Harrison Cnty. Hous. Fin. Corp., 988 S.W.2d 746, 748 (Tex. 1999). A defendant moving for traditional summary judgment must negate at least one essential element of each of the plaintiff's causes of action or establish each element of an affirmative defense. Sci. Spectrum, Inc. v. Martinez, 941 S.W.2d 910, 911 (Tex. 1997).
In a no-evidence motion for summary judgment, the movant asserts that there is no evidence to support an element of the nonmovant's claim on which the nonmovant would have the burden of proof at trial. See Tex. R. Civ. P. 166a(i); Hahn v. Love, 321 S.W.3d 517, 523–24 (Tex. App.—Houston [1st Dist.] 2009, pet. denied). The burden then shifts to the nonmovant to present evidence raising a genuine issue of material fact as to each of the elements specified in the motion. Mack Trucks, Inc. v. Tamez, 206 S.W.3d 572, 582 (Tex. 2006); Hahn, 321 S.W.3d at 524.
This appeal presents an issue of statutory construction, which we review de novo. Loaisiga v. Cerda, 379 S.W.3d 248, 254–55 (Tex. 2012). When courts construe statutes, they should start with the text because it is the best indication of the Legislature's intent. See Fresh Coat, Inc. v. K–2, Inc., 318 S.W.3d 893, 901 (Tex. 2010). “When the words of a statute are unambiguous, then, this first canon is also the last: ‘judicial inquiry is complete.’ ” Conn. Nat'l Bank v. Germain, 503 U.S. 249, 254, 112 S.Ct. 1146, 117 L.Ed.2d 391 (1992) (quoting Rubin v. United States, 449 U.S. 424, 430, 101 S.Ct. 698, 66 L.Ed.2d 633 (1981)). A court should interpret a statute by reference to its language alone when it can do so. Fresh Coat, 318 S.W.3d at 901. Courts, however, are not confined to isolated statutory words or phrases; instead, they review the entire act to determine legislative intent. Meritor Auto., Inc. v. Ruan Leasing Co., 44 S.W.3d 86, 90 (Tex. 2001); City of Houston v. Hildebrandt, 265 S.W.3d 22, 25 (Tex. App.—Houston [1st Dist.] 2008, pet. denied).
Civil Barratry Law
“Barratry is the solicitation of employment to prosecute or defend a claim with intent to obtain a personal benefit.” State Bar of Tex. v. Kilpatrick, 874 S.W.2d 656, 658 n.2 (Tex. 1994). The prohibition on barratry historically has been enforced in two ways.
First, the state prosecutes it as a criminal offense. State v. Mays, 967 S.W.2d 404, 408–09 (Tex. Crim. App. 1998) (noting that barratry has been against the law in Texas since 1901). The applicable statute is Texas Penal Code Section 38.12. Subsection (a) addresses those who actively solicit or pay money to solicit. Tex. Penal Code § 38.12(a). For example, under Subsection (a), it is an offense “if, with intent to obtain an economic benefit,” a person, among other things,
• “solicits employment, either in person or by telephone, for himself or for another,”
• “pays, gives, or advances or offers to pay, give, or advance to a prospective client money or anything of value to obtain employment as a professional from the prospective client,” or
• “pays or gives or offers to pay or give a person money or anything of value to solicit employment.”
Id. § 38.12(a)(2–4). Subsection (b) addresses those who finance the Subsection (a) activities. So, a person commits barratry under Subsection (b) if he
• “knowingly finances the commission of an offense under Subsection (a),”
• “invests funds the person knows or believes are intended to further the commission of an offense under Subsection (a),” or
• “is a professional who knowingly accepts employment within the scope of the person's license ․ that results from the solicitation of employment in violation of Subsection (a).”
Id. § 38.12(b)(1–3). There is an exception to prosecution if the person's conduct is authorized by the Texas Disciplinary Rules of Professional Conduct or a rule of court. Id. § 38.12(c).4
Second, clients have been able to rescind contracts obtained through solicitation in violation of Section 38.12 of the Penal Code or in violation of Rule 7.3 of the Texas Disciplinary Rules of Professional Conduct. Tex. Gov't Code § 82.065. Rule 7.03 concerns “prohibited solicitations and payments” and provides that a “lawyer shall not pay, give, or offer to pay or give anything of value to a person not licensed to practice law for soliciting prospective clients for, or referring clients or prospective clients to, any lawyer or firm, except that a lawyer may pay reasonable fees for advertising and public relations services rendered in accordance with this Rule ․” Tex. Disciplinary R. Prof. Conduct 7.03(b). Nor may a “lawyer, in order to solicit professional employment, ․ pay, give, advance, or offer to pay, give, or advance anything of value, other than actual litigation expenses and other financial assistance as permitted by Rule 1.08(d), to a prospective client or any other person ․” Id. R. 7.03(c).5
A third mechanism of enforcement was created in 2011 and amended in 2013. Now, improperly solicited clients and potential clients can bring a civil barratry cause of action against those who solicited them and recover fees due under a contract of representation as well as actual damages, penalties, and attorney's fees. Tex. Gov't Code § 82.0651(a–d). Like Section 82.065 discussed above, this section is tied to barratrous conduct that violates Section 38.12(a) or (b) of the Penal Code or Rule 7.03 of the Texas Disciplinary Rules of Professional Conduct. Tex. Gov't Code § 82.0651(a–d).
The remedies available for wrongful solicitation depend on the status of the plaintiff. A plaintiff who became a client under a contract for legal services is statutorily authorized to recover from any person who commits barratry:
(1) all fees and expenses paid to that person under the contract;
(2) the balance of any fees and expenses paid to any other person under the contract, after deducting fees and expenses awarded based on a quantum meruit theory ․;
(3) actual damages caused by the prohibited conduct;
(4) a penalty in the amount of $10,000; and
(5) reasonable and necessary attorney's fees.
Id. § 82.0651(b).
A plaintiff who did not become a client under a legal contract—in other words, a person who was solicited but remained only a “potential” client—may recover the third, fourth, and fifth categories of recovery listed above, as there is no basis to recover “fees and expenses paid ․ under [a] contract” listed in the first and second categories. See id. § 82.0651(d).
Extraterritorial Reach of Civil Barratry Statute
One of the grounds for summary judgment presented by the defendants was that Section 82.0651(a)—the statute that created a private cause of action—has no extraterritorial application.
A. The parties’ arguments
The Texas attorneys and related individuals and entities argued in their summary-judgment motions and on appeal that Section 82.0651 is not extraterritorial and does not cover out-of-state conduct because (1) under Texas law, a statute is not given extraterritorial effect unless the intent to do so is clear, Coca-Cola Co. v. Harmar Bottling Co., 218 S.W.3d 671, 682 (Tex. 2006); (2) Section 82.0651 says nothing about extraterritorial reach, and (3) Section 82.0651 refers to Penal Code Section 38.12 and Disciplinary Rule 7.03 without also citing to Penal Code Section 1.04 and Disciplinary Rule 8.05, which are the corresponding provisions that bring out-of-state conduct within the state's enforcement reach.
The Louisiana and Arkansas clients contend that the statute is extraterritorial, noting that the Legislature requires Section 82.0651 to be “liberally construed and applied to promote its underlying purposes, which are to protect those in need of legal services against unethical, unlawful solicitation and to provide efficient and economical procedures to secure that protection.” Tex. Gov't Code § 82.0651(e). They also note that the Texas Grievance Oversight Committee has commented on how robust the anti-barratry prohibition is in Texas compared to other states and that the civil-enforcement option was meant to help “curtail” barratry because “the criminal statute is difficult to enforce.”
Our research located over 25 cases that have cited to the 2011 civil barratry statute, but we appear to be the first appellate court called on to determine whether the statute is extraterritorial, covering out-of-state barratry.6 While it is an interesting question whether extraterritorial acts of barratry are covered by Section 82.0651, we have concluded that we need not answer that question to resolve this appeal.
Pohl and Ammons are Texas lawyers. They are licensed by the Texas Bar. The Cheathams and Reese allege 7 that Pohl and Ammons coordinated the barratry scheme from their Texas offices. They allege that Pohl directly funded, and his wife and her company further funded, the solicitation of prospective clients from Texas where they live and work. They further allege that Pohl directed case runners to contact and solicit potential clients on his behalf, including offering money from Pohl's firm and his wife's company. Finally, they allege that Ammons was part of the barratry scheme and participated in phone calls from Texas with case runners to discuss how the runners should solicit the clients. The clients provided some evidence in support of their assertions, including affidavits and deposition testimony from the alleged case runners. If the alleged actions–including knowingly financing solicitation and knowingly accepting employment that results from solicitation—occurred, they occurred in Texas. See Tex. Penal Code § 38.12(a), (b).
Pohl and Ammons focus on the location where the alleged case runners interacted with the clients: Louisiana and Arkansas.8 But this barratry suit is against the attorneys and Donalda Pohl, who allegedly financed and directed the barratry, not the middlemen. Thus, the focus is on their own acts that allegedly violate the barratry statute, which, if they occurred, undeniably occurred in Texas.9 The alleged acts of barratry simply are not extraterritorial. As such, the trial court erred in granting summary judgment to any of the parties on the basis that Section 82.0651 has no extraterritorial reach.
On rehearing, Pohl and Ammons make two arguments about the reach of Section 82.0651. First, they argue that an attorney can be civilly liable for financing the solicitation of employment under Penal Code Section 38.12(b) only if the underlying act of solicitation that violated 38.12(a) could lead to civil liability in the jurisdiction where it occurred. Tex. Penal Code § 38.12. We see no legal basis for this limitation. Section 82.0651 creates civil liability for violating Texas criminal law. Tex. Gov't Code § 82.0651. It is irrelevant if that same conduct violated Louisiana's or Arkansas's civil laws.
Second, they argue that we impermissibly imported Penal Code Section 1.04 into Government Code Section 82.0651 to make a civil statute with limited, in-state application reach extraterritorially to out-of-state conduct by alleged case runners. See Tex. Penal Code § 1.04. We disagree.
The Penal Code permits criminal liability to attach in some scenarios where at least part of the relevant events occurred out of state. See id. § 1.04 (“This state has jurisdiction over an offense that a person commits by his own conduct or the conduct of another for which he is criminally responsible if ․ (3) the conduct outside this state constitutes a conspiracy to commit an offense inside this state, and an act in furtherance of the conspiracy occurs inside this state ․”). If Section 1.04 makes the alleged case runners’ conduct a violation of Section 38.12(a), that analysis is taking place exclusively within the penal code. See id. §§ 1.04, 38.12. It is not that the civil barratry statute extended to out-of-state conduct; it is, instead, that the Penal Code did. Once it did, the civil barratry statute permits civil penalties for violation of Texas criminal law. In other words, any extraterritorial reach as it relates to the alleged case runners’ actions is occurring within the Penal Code to deem their conduct an offense under Subsection (a), not through the application of Subsection (b) to the attorneys whose conduct took place in Texas. See id. § 38.12(a)–(b).
Pohl and Ammons's extraterritoriality challenge has always been that the entirety of the alleged barratry occurred out of state and the civil barratry statute has no reach to that out-of-state conduct. That argument fails for two reasons. First, as said above, the extension to out-of-state conduct is happening within the Penal Code before the civil barratry provision opens criminal behavior to civil penalties and damages. Second, not all the alleged barratrous conduct occurred out of state. As already discussed, the attorneys’ civil liability, if at all, is linked to their alleged coordination and financing of the endeavor from Texas.
Because, in our view, (1) it is the criminal statute that is reaching to cover out-of-state conduct as it relates to the alleged case runners and not the civil statute, and (2) the attorneys’ conduct was in-state, we reject the arguments that we have impermissibly applied the civil barratry statute extraterritorially.
We turn next to the statute of limitations issue.
Statute of Limitations for Civil Barratry of Clients Under Section 82.0651(a)
Pohl and his firm separately moved for summary judgment on the argument that the Section 82.0651(a) claims against them are governed by a two-year statute of limitations and that more than two years passed before the plaintiffs brought suit. The trial court denied the motion, concluding that Section 82.0651(a) is subject to a four-year statute of limitations and that four years had not passed between the alleged barratry and the clients’ suits.
Pohl acknowledges that a denied summary-judgment motion generally is not appealable, but he argues that judgment in his and his firm's favor can be affirmed based on the improper denial of this motion because all parties filed competing summary-judgment motions. We conclude that we need not evaluate this alternative basis for affirmance because there is no error in the ruling that a four-year limitations period applies.
Whether a cause of action is barred by limitations is a question of law that we review de novo. Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 221 (Tex. 2003); Exxon Corp. v. Emerald Oil & Gas Co., 348 S.W.3d 194, 202 (Tex. 2011). Statutes of limitations vary by claim as determined by the Legislature. See generally Tex. Civ. Prac. & Rem. Code §§ 16.002–.051. As examples, a two-year limitations period applies to suits for trespass and conversion, while a four-year limitations period applies to suits for fraud and breach of fiduciary duty. Id. §§ 16.003(a), 16.004(a)(4), (5). For claims not expressly provided a statute of limitations, the Legislature has assigned a residual limitations period of four years. Id. § 16.051; Agar Corp., Inc. v. Electro Circuits Int'l, LLC, 580 S.W.3d 136, 139 (Tex. 2019). But there is an exception to rote application of the residual limitations period: for any tort that is not assigned a specific statute of limitations, courts “presume the tort is a trespass for purposes of determining the statute of limitations and apply the two-year limitations period as per civil practice and remedies code section 16.003(a).” David L. Smith & Ass'n, LLP v. Advanced Placement Team, Inc., 169 S.W.3d 816, 822–23 (Tex. App.—Dallas 2005, pet. denied); see Almazan v. United Servs. Auto. Assoc., 840 S.W.2d 776, 779–80 (Tex. App.—San Antonio 1992, writ denied) (applying presumption to statutory tort based on wrongful dismissal for filing workers’ compensation claim).
Civil barratry under Section 82.0651(a) is not covered by a statute of limitations, and the Supreme Court of Texas has not expressly held what the appropriate limitations period is for a civil barratry claim. If a civil barratry claim is a tort, then we will presume the two-year statute of limitations applies. Nguyen v. Watts, 605 S.W.3d 761, 780 (Tex. App.—Houston [1st Dist.] 2020, pet. denied) (citing Williams v. Khalaf, 802 S.W.2d 651, 654 (Tex. 1990)).
This Court recently held that a civil barratry claim by a non-client under Section 82.0651(c) is a tort claim with a two-year statute of limitations. Id. We noted that Section 82.0651(c) is limited to those plaintiffs who did not establish a contractual relationship with the attorney—which distinguishes them from the clients who sue under Section 82.0651(a), like the Cheathams and Reese—and that the recoveries permitted under Subsection (c) are typical tort-based remedies, such as money damages and attorneys’ fees. Nguyen, 605 S.W.3d at 781. We reconciled applying a two-year limitations period to tort-based claims under Section 82.0651(c) with an earlier holding that applied a four-year limitations period to a rescission claim under Section 82.065(b) because rescission claims are contract-based, arising out of the contractual relationship between the barratrous attorney and the client. Id. at 781. Permitting a different statute of limitations for tort-based and contract-based claims is consistent with our previous analysis of statute of limitations issues. See id.
This is not a Nguyen-type Section 82.0651(c) barratry claim by a non-client. Instead, it is a Section 82.0651(a) claim brought by a client who entered into a contract for legal representation. The client is seeking a disgorgement of contractual fees along with other remedies. This is closer to a contract-based rescission suit under Section 82.065(b) than the Nguyen tort-based damages suit under Section 82.0651(c). Thus, we conclude that these Section 82.0651(a) claims are governed by the four-year residual statute of limitations, unaffected by the tort exception. We further conclude that the trial court's ruling to apply a four-year statute of limitations offers no basis for reversal.10
The grant of summary judgment on limitations to Pohl and Ammons was error that requires reversal unless either of these movants presented an alternative basis on which to uphold the trial court's ruling. Pohl did not. Ammons did. Ammons filed a hybrid summary-judgment motion that offered an alternative basis for judgment in his favor. We turn now to his alternative arguments, including res judicata.
The Ammons defendants alternatively moved for summary judgment on the argument that a Louisiana court had already determined that they did not improperly solicit. We cannot affirm the summary-judgment order on this ground for multiple reasons.
First, Ammons is relying on actions by a Louisiana court in the Cheatham suit to obtain summary judgment on both the Cheatham and the Reese barratry claims. Reese was not a party to the Louisiana suit. The Louisiana court did not consider whether she had been wrongly solicited in Arkansas. That court's ruling on Ammons's Cheatham-settlement-fee dispute cannot act as a bar to Reese's civil barratry suit.
Second, in October 2017, which was before the Louisiana court issued any findings or released Ammons's fee, the Texas trial court held a hearing to discuss how the Louisiana action Ammons was pursuing related to the ongoing barratry claim in Texas. Ammons's counsel repeatedly assured the Texas trial court that the action Ammons pursued in Louisiana was “different” from the barratry suit. Only the Texas court had the barratry claim before it, he assured; the Louisiana matter was merely a fee dispute. Moreover, there was “no problem” of overlap between the two because the “barratry issues are before you [the Texas court]. All of the issues about the settlement are before the Louisiana court.” And Ammons's counsel assured the Texas court that the release Ammons sought in Louisiana was only to “those funds. That's not the barratry.”11
At that hearing, the trial court stated, “I get it. But as long as you guys think that it's different. This transcript, I think will be helpful ․ [and] can be used in Louisiana to make sure that judge doesn't go contrary to the barratry claim that's pending in my court․ [Ammons is] an attorney here. I mean, the barratry portion of it should be here because he's a Texas licensed attorney.”
We interpret these exchanges as the court and parties agreeing that what was to occur in Louisiana, as the Louisiana judge decided whether to release the attorney's fees to Ammons, was not the same matter as the barratry claim in Texas. Ammons's current assertion of a res judicata defense is irreconcilable with the position he took at the hearing. We agree with the trial court's view that the hearing transcript sets forth the distinction between the two matters and, therefore, conclude that Ammons is estopped from raising the defense of res judicata as to the Louisiana proceeding.12 See Johnson v. Johnson-McHenry, 978 S.W.2d 142, 145 (Tex. App.—Austin 1998, no pet.) (stating that a “party should not be allowed to profit from inconsistent positions” and holding that party who opposed a motion to consolidate was estopped from raising res judicata in the second suit); see also Burchfield v. Prosperity Bank, 408 S.W.3d 542, 547–48 (Tex. App.—Houston [1st Dist.] 2013, no pet.) (citing Gilbert v. Fireside Enter., Inc., 611 S.W.2d 869, 877 (Tex. Civ. App.—Dallas 1980, no writ) for “general rule” that “a party may waive the defense of res judicata”).
Third, the Louisiana court's findings establish that Cheatham withdrew his opposition to Ammons's legal action in Louisiana and presented no evidence on the matter. Cheatham specifically announced to the Louisiana court that he would pursue disgorgement through a different proceeding. Notably, civil barratry—through which an attorney's client asserts a claim for damages against his attorney—is not a recognized cause of action under Louisiana law, but it is in Texas, and disgorgement of fees is an available remedy under Texas law. Compare La. Stat. § 37:219 (criminalizing paying money to obtain representation of a client but creating no civil cause of action for disgorgement), with Tex. Gov't Code § 82.0651 (establishing a civil cause of action to benefit the client). Cheatham could not have brought a civil barratry claim in Louisiana, and he offered no evidence in opposition to Ammons's efforts to obtain his attorney's fees from the registry of the Louisiana court. We fail to see how a fee dispute that is admittedly “different” from a barratry claim that could only be brought in Texas is able to form the basis of a res judicata defense.
For these reasons, we conclude that res judicata was not a valid basis to grant Ammons's summary judgment.
Ammons had two other arguments for summary judgment. We address them together.
Disputed Evidence Will Not Support a No-Evidence Summary Judgment
Ammons argues that his summary judgment on the barratry and the breach-of-fiduciary-duty claims may be affirmed on the grounds that (1) he did not know of any barratry and had no duty to investigate his referral sources to ensure they were free from improper solicitation methods and (2) there is no evidence he was involved in any solicitation that would violate either the barratry statute or his fiduciary duties. In making those arguments, Ammons relies on the deposition transcript of Scott Walker that disavows his earlier affidavit testimony.
The record contains an affidavit of Scott Walker implicating Ammons in the barratry scheme. There is additional evidence in the record tying Walker and other alleged case runners to these specific clients, including contracts between Pohl and Walker, as a principal of a Mississippi entity, to provide “claims verification” and “client liaison” services to the Cheathams and Reese for a fee not to exceed 30% of Pohl's net fee interest in their claims.
The record also contains later deposition testimony by Scott Walker that his affidavit is, in effect, no evidence because the accusations about Ammons were added without his knowledge after he signed the affidavit. Ammons argues that Walker's assertions about his earlier affidavit must be accepted, leaving the affidavit's content, as it relates to Ammons, without any evidentiary value.
Finally, the record contains Walker's judgment of conviction showing that he pleaded guilty in 2014 to conspiracy to defraud the United States—a criminal offense charged under 18 U.S.C. § 371, unrelated to the alleged case-running scheme—and was sentenced to 18 months in federal prison followed by three years of supervised release. His conviction would be relevant to a factfinder's credibility determination. See Tex. R. Evid. 609(a) (evidence of criminal conviction offered to attack witness's character for truthfulness admissible if crime was felony or involved moral turpitude).
Under the City of Keller standard, a court must consider all the summary-judgment evidence in the light most favorable to the nonmovant, crediting evidence favorable to the nonmovant if reasonable jurors could and disregarding evidence contrary to the nonmovant unless reasonable jurors could not. City of Keller v. Wilson, 168 S.W.3d 802, 822–25 (Tex. 2005).
Here, there is some summary-judgment evidence—the original affidavit 13 —that Ammons participated in barratry. There is other summary-judgment evidence—the affiant's statement that his affidavit was altered after he signed it—indicating that the earlier assertion is not true. Looking at the summary-judgment evidence in the light most favorable to the nonmovants and crediting evidence favorable to the nonmovant if reasonable factfinders could, a fact issue exists. See Lujan v. Navistar, Inc., 555 S.W.3d 79, 89 (Tex. 2018) (discussing that contrary, material evidence from same witness presents fact issue).
Ammons would have us affirm summary judgment in his favor on no-evidence grounds, but to do so requires that we disregard Walker's earlier-in-time affidavit and credit his later testimony that the affidavit had been forged. That is not something an appellate court will do in the first instance. To the extent the affidavit could be disregarded, that would be a ruling within the trial court's discretion. Cf. Starwood Mgm't, LLC v. Swaim, 530 S.W.3d 673, 678–79 (Tex. 2017) (where trial court ruled that affidavits would not be considered for summary-judgment purposes, appellate court applied abuse of discretion standard to “trial court's decision to exclude evidence”). And it would require a ruling by the trial court to preserve the issue on appeal. See Scott v. Hunt, No. 01-11-00042-CV, 2012 WL 983339, at *5 (Tex. App.—Houston [1st Dist.] Mar. 22, 2012, no pet.) (mem. op.) (noting that an objection that an affidavit is a sham is a complaint about the form of the affidavit that must be made in writing and followed by a ruling, and holding that affidavit will not be disregarded on appeal where there is no indication in the record that party obtained a ruling).
We locate in the record where Ammons impugned the Walker affidavit and his adversaries’ reliance on it, but we do not find where he moved for the trial court to disregard the affidavit for summary-judgment purposes or where the trial court made a ruling.14 See id.; see also Seim v. Allstate Tex. Lloyds, 551 S.W.3d 161, 165–66 (Tex. 2018) (stating that ruling on motion for summary judgment and ruling on objections to summary-judgment evidence are not alternatives or concomitants and that neither implies a ruling on the other).
Moreover, Ammons presented a hybrid motion for summary judgment with alternative grounds for rejecting the claims against him. His alternative, no-evidence ground may have hinged on the trial court disregarding Walker's affidavit testimony in favor of his later, contradictory deposition testimony, but his traditional grounds did not. Cf. Trusty v. Strayhorn, 87 S.W.3d 756, 760–61 (Tex. App.—Texarkana 2002, no pet.) (concluding that ruling on objection to summary-judgment proof will not be implied where some basis for summary-judgment existed that was not dependent on favorable ruling on objection).
While it may be that Walker's earlier affidavit is false and his later deposition testimony is true, that is a fact question that had to be presented to the trial court for its resolution. A fact question cannot be disregarded on appeal to allow a no-evidence summary judgment. See Townsend v. Hindes, 619 S.W.3d 763, 770 (Tex. App.—San Antonio 2020, no pet.) (citing City of Keller). The existence of a fact issue regarding Ammons's involvement in the alleged solicitation precludes affirming summary judgment on no-evidence grounds. And, because a fact issue exists on whether Ammons was directly involved in unlawful solicitation, his no-duty argument that requires there be no evidence of him having direct knowledge of solicitation fails as well.
Because we conclude that none of Ammons's alternative arguments for summary judgment permits affirmance, we hold that the trial court erred in granting his hybrid summary-judgment motion.
Having reversed the Pohl summary judgment, we reach Pohl's cross-appeal. He contends that the trial court erred in denying his motion to strike the Reese intervention.
Reese entered ongoing litigation between the Cheathams, Pohl and Ammons, and other defendants through a pleading that relied on Texas Rule of Civil Procedure 37 for additional parties, Rule 40 for permissive joinder, and Rule 60 for interventions. See Tex. R. Civ. P. 37, 40, 60. After several months and some discovery, Pohl moved to strike the “intervention,” arguing that Reese had no justiciable interest in the Cheathams’ claims, relying on In re Union Carbide Corp., 273 S.W.3d 152 (Tex. 2008) (per curiam).
The trial court held a hearing and it noted that some time had passed since Reese entered the suit, without complaint, and that there was an overlap of discovery and attorney standards in both sets of claims. Pohl argued that it did not matter because Union Carbide compelled that Reese be stricken from the suit. Reese pointed out that her pleading to join the litigation did not rely on Rule 60 alone. She had alternatively moved to join under Rule 40 for permissive joinders. Counsel pointed out that the plaintiffs share the same counsel and they are aligned on the issue, bringing it within permissive joinder rules. Pohl argued that the trial court could not consider joinder and severance until it granted the motion to strike the intervention, again relying on Union Carbide. The trial court denied Pohl's motion. We conclude that it did not err in doing so.
In Union Carbide, an injured worker intervened in another worker's suit against Union Carbide. Id. at 154. Union Carbide moved to strike the intervention. Id. But the trial court did not rule on the motion. Id. Instead, it severed the second party's claims into a separate suit. Id. Union Carbide sought mandamus, which the Supreme Court of Texas conditionally granted. Id. at 154, 157. The Court held that, when a party intervenes under Rule 60 without a justiciable interest in the ongoing litigation and the opposing party moves to strike the intervention, the trial court does not have discretion to choose severance over the claims in lieu of striking the intervention. Id. at 155–56 (noting that the nonmovant moved to intervene, not to join the suit, which has a “distinct” standard).
Had Reese merely moved to intervene, Union Carbide would prevent permissive joinder with severance as an alternative ruling. See id. But she did not. Her pleading also relied on Rule 40 permissive joinder standards. Tex. R. Civ. P. 40. Reese's pleading is distinguishable from the pleading at issue in Union Carbide for which that trial court lacked discretion. We hold that the trial court did not abuse its discretion in relying on the alternative basis for joinder, under Rule 40, to deny Pohl's motion to strike, which treated Reese's pleading as having relied on Rule 60 exclusively. See Oistad v. Baker & Hostetler, L.L.P., No. 01-05-00493-CV, 2006 WL 488594, at *3 (Tex. App.—Houston [1st Dist.] Mar. 2, 2006, no pet.) (mem. op.) (noting wide discretion of trial court in ruling on joinder).
We overrule Pohl's cross-appeal.
We have concluded that the trial court erred in granting the following summary-judgment motions: (1) Robert Ammons and the Ammons Law Firm's June 4, 2019 motion; (2) Michael Pohl and the Office of Michael A. Pohl, PLLC's June 4, 2019 motion; and (3) Donalda Pohl, Helping Hands Financing, LLC, and Edgar Jaimes's June 7, 2019 motion based on extraterritoriality. We reverse those rulings. We affirm the trial court's grant of the summary judgment motion filed by Helping Hands Financing, LLC and Edgar Jaimes on July 19, 2019, asserting a limitations defense.
We remand for further proceedings. As to the barratry claim, we have concluded only that a fact issue continues to exist. We take no position on the validity of the barratry claim against any of these parties.
1. The designation “intervenor” continued to be used on filings even though the trial court ruled, in September 2018 that Reese was properly joined in the litigation under the permissive joinder rule, not the intervention rule. See Tex. R. Civ. P. 40 (permissive joinder), 60 (intervention).
2. We note that the alleged case runners had a separate Mississippi company called Helping Hands Group. Though the names are similar, these are two separate entities.
3. As will be discussed later, the record contains two items of testimony from one of the alleged case runners, Scott Walker, that contradict each other. The first is an affidavit by Walker stating that Pohl and Ammons were aware of the solicitation of potential clients and that he had phone conversations with Pohl and Ammons from inside potential clients’ hospital rooms to discuss the attorney “marketing services” he performed for Pohl and Ammons to those potential clients. The second is a later deposition by Walker asserting that his earlier affidavit had been forged. Walker testified that his lawyer must have added information to his affidavit after he signed it because the allegations about Ammons were not in the affidavit he signed. Walker testified that he had no knowledge of Ammons's involvement in solicitation. Walker did not disavow his own involvement in the solicitation, just Ammons's connection to it.Ammons's no-evidence challenge relies on acceptance of Walker's deposition testimony and rejection of his earlier affidavit testimony.
4. Section 1.04 of the Penal Code addresses when the State of Texas would have jurisdiction over a criminal offense committed out-of-state. Tex. Penal Code § 1.04(a). This state has jurisdiction over an offense a person commits, either himself or through the conduct of another person for which he is criminally responsible, if, among other options, “(1) either the conduct or a result that is an element of the offense occurs inside this state; (2) the conduct outside this state constitutes an attempt to commit an offense inside this state; [or] (3) the conduct outside this state constitutes a conspiracy to commit an offense inside this state, and an act in furtherance of the conspiracy occurs inside this state ․” Id. § 1.04(a)(1–3).
5. Rule 8.05 allowed disciplinary action by the state for out-of-state contacts in two ways: (1) for advertisements in the public media in another jurisdiction if it is intended to be received by prospective clients in Texas and is intended to secure employment to be performed in Texas, and (2) for written solicitations mailed to a Texas address or is intended to secure employment to be performed in Texas. Id. R. 8.05.
6. Other cases have applied Section 82.0651, Section 82.065, or both extraterritorially, but no case analyzes whether it is. See, e.g., Gauthia v. Arnold & Itkin, L.L.P., No. 01-19-00143-CV, 2020 WL 5552458, at *2 (Tex. App.—Houston [1st Dist.] Sept. 17, 2020, no pet.) (as to Louisiana clients of Texas law firm, stating, “Section 82.065(b) provides that any contingent fee contract for legal services procured as a result of’ violations of the laws of this state or the Disciplinary Rules of the State Bar of Texas regarding barratry is voidable by the client.” (citing Tex. Gov't Code § 82.065(b)) (internal quotation marks omitted)).The Cheathams and Reese rely on Cobb v. Stern, Miller & Higdon, 305 S.W.3d 36 (Tex. App.—Houston [1st Dist.] 2009, no pet.), as an example of a court holding that Section 82.065 is extraterritorial, but there, not all activity occurred out of state. The Louisiana client met with attorneys in Texas and signed the contingency fee contract in Texas. Id. at 39.
7. As discussed later in the opinion, the Cheathams and Reese presented more than a scintilla of evidence to support their allegations, such that Ammons's no-evidence summary judgment failed to provide an alternative basis to affirm summary judgment in his favor.
8. We note that Pohl and Ammons do not argue that the barratry statute does not apply because their clients live outside Texas. Instead, they argue that the statute does not apply because their alleged barratry occurred out of state and because the statute is not extraterritorial.
9. Focusing on the location of the defendants’ actions versus where the plaintiff was when approached is consistent with the statute's selection of available remedies.The civil barratry statute requires disgorgement of legal fees as a penalty for violation of the statute. Id. Tex. Gov't Code § 82.0651(b). Disgorgement is meant to deter disloyalty in a protected relationship, not to compensate an injured plaintiff. See Cooper v. Campbell, No. 05-15-00340-CV, 2016 WL 4487924, at *11 (Tex. App.—Dallas Aug. 24, 2016, no pet.) (mem. op.) (citing In re Longview, 464 S.W.3d 353, 361 (Tex. 2015) (orig. proceeding)); cf. Tex. Gov't Code § 82.0651(e) (stating purpose of statute to “protect those in need of legal services against unethical, unlawful solicitation and to provide efficient and economical procedures to secure that protection.”). When a client seeks disgorgement for a Section 82.0651(a) violation, the focus is on the impropriety of the conduct and the State's interest in deterring such conduct, not the damages it causes.
10. The trial court granted summary judgment to Helping Hands Financing, LLC and Edgar Jaimes on the civil barratry claims brought by Mark Cheatham, Sr., and Luella Miller. Their motion had argued that more than four years had passed between the alleged solicitation and the filing of suit against them. That ruling is consistent with our holding. Moreover, the discovery rule does not apply to the civil barratry claims at issue there. See Gandy v. Williamson, 634 S.W.3d 214, 238 (Tex. App.—Houston [1st Dist.] 2021, pet. denied). We affirm the trial court's order granting that summary-judgment motion.
11. Relatedly, Cheatham abandoned his defense to the release of the attorney's fees in the Louisiana concursus matter and presented no evidence at the hearing.
12. Because we conclude that Ammons is estopped from raising a res judicata defense based on his position in court regarding the Louisiana fee disbursement matter, we do not reach the issue whether the res judicata defense was even available to Ammons as a basis for summary judgment given that he did not add the defense until just five days before the summary-judgment hearing and did not obtain express leave of court for the late-added defense.
13. On rehearing, the Cheathams and Reese attach documents related to this issue that were not part of the appellate record. Ammons has objected to their consideration. We sustain the objection. The documents were not considered in the resolution of this appeal, including during rehearing.
14. We note here that the possibility of disregarding the Walker affidavit might appear to resemble the sham-affidavit arguments courts have dealt with in the past. But this scenario is markedly different. This is not an attempt to disregard a later-in-time affidavit that arguably was filed to create a fact issue where none exists. This scenario would require that later-in-time deposition testimony be allowed to nullify existing evidence that raised a fact question and, with the existing fact issue removed, allow the grant of a no-evidence motion for summary judgment. That is not a typical scenario in which the sham-affidavit rule is employed. The lack of fit further argues against disregarding the affidavit in the first instance on appeal.
Sarah Beth Landau, Justice
Response sent, thank you
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Docket No: NO. 01-20-00046-CV
Decided: August 30, 2022
Court: Court of Appeals of Texas, Houston (1st Dist.).
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