H., R. & C., Appellant v. I., W. & H., P.C., Appellee.

Reset A A Font size: Print

Court of Appeals of Texas,Houston (14th Dist.).

H., R. & C., Appellant v. I., W. & H., P.C., Appellee.

No. 14–12–00685–CV.

Decided: December 31, 2013

Panel consists of Chief Justice FROST and Justices CHRISTOPHER and DONOVAN. Pritesh Soni, for H., R. & C.. Lansford O. I., for I., W. & H., P.C.

PLURALITY OPINION

Appellant, H., R. & C. (“the H. firm”), appeals a judgment apportioning attorney's fees among that firm and appellee, I., W. & H., P.C. (“the I. firm”) for their representation of a plaintiff in an underlying claim. The judgment is affirmed.

I. Background

Timothy H. was previously a partner, and Alexandra M. was an associate, with the I. firm. During their employment, the I. firm began representing a plaintiff (“client”) in a suit for personal injuries sustained in an automobile accident during the scope of his employment. The representation was pursuant to a contingency fee contract, under which attorney's fees and expenses would be paid from any recovery.

On August 22, 2011, H. resigned from the I. firm and created the H. firm. M. became associated with the H. firm. On August 31, 2011, client signed a document stating as follows:

Re: TRANSFER OF CASE TO [THE H. FIRM]

To whom it may concern:

I, [client], understand that Timothy R. H., Ivan C. are leaving, or have left, the firm of [the I. firm], and starting, or joining another firm, [the H. firm] (incorporation status is pending and a new name or different name does not change this agreement, as long as Timothy R. H. is a partner). I hereby request that my case be transferred to [the H. firm] and/or Timothy R. H. and/or Ivan C. and that Timothy R. H. and/or Ivan C. is hereby authorized to act, and is appointed by me, as my sole legal counsel and representative. I request that all original file materials, in any form (computer stored, hard copied, etc.) be given to Timothy R. H.. I hereby terminate my attorney client relationship with [the I. firm].

I understand the terms of my contract shall continue with both the new firm and old the firm [sic], [the I. firm] and hereby authorize the new firm to justly, equitably and fairly apportion all legal fees received and expenses paid consistent with the State Bar Rules. However, I shall never be obligated to pay a greater attorney fee or expense other than what is in the original contract.

This document was not signed by the H. firm, and there was no separate contract between client and the H. firm regarding attorney's fees. Additionally, the document was not signed by the I. firm. The record does not otherwise contain any evidence demonstrating the I. firm agreed to the statement authorizing the H. firm “to justly, equitably and fairly apportion all legal fees received and expenses paid consistent with the State Bar Rules.” The record contains no agreement, written or otherwise, between the H. firm and the I. firm regarding apportionment of fees earned on client's case.

There were originally three defendants in client's suit: (1) the other driver, who was insured under a liability policy1 ; (2) client's own uninsured/underinsured (“um”) carrier; and (3) the um carrier for client's employer. The employer's worker's compensation carrier, who had paid benefits to client, also became involved in settlement negotiations because client wished to obtain the carrier's reduction of its lien on any settlement funds.

Shortly before client signed the above transfer request, the other driver's carrier and employer's um carrier tendered their policy limits of $25,080 and $100,000, respectively. These tenders were formally accepted shortly after the transfer. At mediation approximately two and a half months after the transfer, client's um carrier agreed to pay $43,500 of its $50,000 policy limits. Acceptance of this offer was contingent on resolution of the worker's compensation lien.

Before the transfer, the worker's compensation carrier offered to reduce its lien from $87,479.22 to $57,418.57, but the offer was not accepted at that time. After the mediation, client sued the worker's compensation carrier, alleging it committed fraud by breaching an agreement to appear at the mediation. In January 2012, the worker's compensation carrier agreed to reduce its lien (which had increased slightly due to interim additional medical bills) to $50,000—a further reduction of approximately $9,000 from the offer made before the transfer.

Client received his proceeds of the settlement, and the lien was paid and released. The attorney's fees due from the settlement totaled $56,928.15, and the expenses totaled $4,723.69.2 The I. firm intervened in the suit, requesting its contingency fee interest in the settlement funds. The two firms agreed on apportionment of the expenses, leaving only a dispute over apportionment of the attorney's fees. Because of the dispute, the defendants to the underlying claim deposited a portion of the total fees and expenses into the registry of the court, and the H. firm held the remainder in its trust account.

The trial court conducted a bench trial. After hearing evidence, the trial court orally announced it would apportion the fees in the manner requested by the I. firm: $49,482 to the I. firm; and $7,446.15 to the H. firm. The H. firm filed a motion to reconsider, which the trial court denied by written order after a hearing. On July 19, 2012, the trial court signed an amended final judgment, apportioning the attorney's fees in amounts consistent with its oral announcement at the close of trial. Based on this allocation and the parties' agreement regarding apportionment of expenses, the trial court (1) awarded the I. firm $52,238.88 to be paid from the funds deposited into the registry of the court and a portion of the funds held in trust by the H. firm, and (2) awarded the H. firm $9,412.96, to be paid from the funds it held in trust.3 The H. firm filed a motion for new trial, which was denied by written order. Additionally, the trial court issued written findings of fact and conclusions of law. The H. firm now appeals.

II. Analysis

In its two stated issues, the H. firm asserts the trial court (1) applied an illegal methodology to apportion the fees, and (2) erred by awarding “89%” of the total fees to the I. firm when it performed, at most, 50% of the work.

A. Basis for the Trial Court's Ruling

Preliminarily, an issue must be addressed regarding the basis for the trial court's ruling.

After hearing evidence at the bench trial, the trial court orally remarked it would apply Texas Government Code section 82.065, which provides, “A contingent fee contract for legal services must be in writing and signed by the attorney and client.” Tex. Gov't Code Ann. § 82.065(a) (West 2013). The trial court remarked the H. firm was not entitled to any portion of the fees because it had no valid contract with client but the court would award $7,446.15 to the H. firm because the I. firm consented. In its motion to reconsider, the H. firm argued that section 82.065 is inapplicable. After hearing arguments, the trial court orally ruled it was denying the motion and would render judgment in accordance with its previous oral announcement.

After the trial court signed its amended judgment, it issued a writing entitled “Findings of Fact and Conclusions of Law,” containing eleven items. However, the trial court did not separate these items according to whether they were findings of fact or conclusions of law. We construe the items more as findings of fact than conclusions of law. Nos. 1 through 8 are factual recitations regarding the background of the dispute. Nos. 9, 10, and 11 are the findings that seem pertinent to the basis for the trial court's ruling:

9. [Client] did not enter into a written contingency fee agreement with [the H. firm].

10. There is no evidence of a written consent in compliance with Texas Disciplinary Rule No. 1.04(f) that was signed by [client] and both law firms for the division of fees between lawyers who are not in the same firm.

11. The reasonable value of legal services provided to [client] by [the H. firm] is $7,446.15.

The trial court did not expressly make any conclusions of law to correspond with one or more of these findings and provide the legal basis for the court's ruling. If read in isolation, each particular finding implicitly indicates a legal basis for the trial court's ruling. However, when read together, the implicit legal conclusions are inconsistent. No. 9 indicates the trial court concluded that, under Government Code section 82.065, the H. firm was not entitled to any portion of the fees because it had no written contingency fee agreement with client, although the finding did not specifically mention section 82.065. No. 10 indicates the trial court concluded that, even if there were such an agreement, the H. firm was precluded from sharing in the fees because there was no consent to division of fees complying with Disciplinary Rule 1.04(f).4 Then, No. 11 indicates the trial court concluded that determining the reasonable value of the services performed by each firm was the proper method for apportioning fees; this conclusion is inconsistent with Nos. 9 and 10 indicating the H. firm was not entitled to any share of the fees unless the I. firm consented.

Regardless, if the reviewing court determines a conclusion of law is erroneous, but the trial court rendered the proper judgment, the erroneous conclusion of law does not require reversal. BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex.2002). It follows that the judgment may be upheld although the trial court made no express conclusions of law if the court rendered the proper judgment. Further, an incorrect conclusion of law will not require reversal if alternate findings of fact and conclusions of law provide a valid, alternative basis for the judgment. See Stephens v. Beckham & Jones Co., No. 11–00011–CV, 2013 WL 364228, at *3 (Tex.App.-Eastland Jan. 31, 2013, no pet.) (mem.op.); In re J.J.L .-P., 256 S.W.3d 363, 376 (Tex.App.-San Antonio 2008, no pet.). Therefore, the judgment may be upheld if any one of the trial court's findings of fact and implicit conclusions of law provides a valid basis for the judgment.

In this regard, the H. firm suggests Government Code section 82.065 is inapplicable to the present case although it also asserts the trial court abandoned that provision before rendering judgment. Further, the H. firm argues the trial court erred by applying Disciplinary Rule 1.04(f).5 However, both parties seem to agree that determining the reasonable value of the services provided to client by each firm is the proper method for apportioning the fees although they disagree on the proper apportionment under this method. As discussed below, the evidence is legally and factually sufficient to support Finding No. 11. Accordingly, it is not necessary to decide whether the trial court erred by applying Government Code section 82.065 or Disciplinary Rule 1.04(f). This opinion will assume, without deciding, that the trial court correctly concluded (1) the H. firm is entitled to a portion of the fees, and (2) calculating the reasonable value of services provided by each firm is the proper legal method for apportioning the fees.

B. Finding on the Reasonable Value of the Services

When challenging the trial court's apportionment of the fees, the H. firm presents two interrelated contentions: (1) the trial court applied “illegal” and “contradictory” methods to determine the reasonable value of each firm's services by adopting the I. firm's proposed apportionment, and (2) the evidence is legally and factually insufficient to support the apportionment.

1. Standard of Review

In a bench trial, the trial court's findings of fact have the same weight as a jury verdict. Catalina v. Blasdel, 881 S.W.2d 295, 297 (Tex.1994). An appellate court reviews sufficiency of the evidence to support the findings under the same standards applicable to review of a jury's verdict. Id.

When examining a legal-sufficiency challenge, an appellate court reviews the evidence in the light most favorable to the challenged finding and indulge every reasonable inference that would support it. City of Keller v. Wilson, 168 S.W.3d 802, 822 (Tex.2005). The court credits favorable evidence if a reasonable fact finder could and disregard contrary evidence unless a reasonable fact finder could not. Id. at 827. The evidence is legally sufficient if it would enable a reasonable and fair-minded person to reach the verdict under review. Id. The court may sustain a legal-sufficiency challenge only when (1) there is a complete absence of a vital fact, (2) the court is barred by the rules of law or of evidence from giving weight to the only evidence offered to prove a vital fact, (3) the evidence to prove a vital fact is no more than a scintilla, or (4) the evidence establishes conclusively the opposite of the vital fact. Id. at 810. The fact finder is the sole judge of witness credibility and the weight to give their testimony. Id. at 819.

To evaluate factual sufficiency of the evidence, an appellate court considers and weighs all the evidence and will set aside the finding only if the evidence supporting the finding is so weak or so against the overwhelming weight of the evidence that the finding is clearly wrong and unjust. Mar. Overseas Corp. v. Ellis, 971 S.W .2d 402, 406–07 (Tex.1998); Pool v. Ford Motor Co., 715 S.W.2d 629, 635 (Tex.1986); Cain v. Bain, 709 S.W.2d 175, 176 (Tex.1986) (per curiam).

2. Trial Court's Method for the Apportionment

At trial, the I. firm argued the evidence supported its proposed apportionment of fees as follows:

• The settlements totaling $125,080 (from the other driver and the employer's um carrier) were tendered before transfer of the case; thus, the I. firm performed all services, and was entitled to all fees, associated with those settlements: 33.77% of $125,080 = $42,240.6

• The settlement of $43,500 (from client's um carrier) was tendered after the transfer; but the I. firm performed 70% of the services, and was entitled to the fee associated with 70% of that settlement: 33.77% of 70% of $43,500 = $10,283.

• The worker's compensation carrier, which had agreed to a substantial reduction of its lien before the transfer, agreed to an additional reduction of $9,000 after the transfer, increasing the client's net; thus, the H. firm should be credited with 33.77% of $9,000 = $3,039.

• These calculations result in $49,482 to the I. firm ($42,240 + $10,283 − $3,039), and the remaining $7,446.15 to the H. firm.

With respect to the fees associated with the settlements totaling $125,080, the H. firm contends the trial court applied an “illegal present value methodology,” forbidden by the Supreme Court of Texas in Hoover Slovacek LLP v. Walton, 206 S.W.3d 557 (Tex.2006). Then, with respect to the fees associated with the settlement of $43,500, the H. firm contends the trial court applied a “contradictory” method. According to the H. firm, the trial court apportioned this part of the fee based on the amount of work performed by each firm toward procuring the settlement which is inconsistent with apportioning the rest of the fee using the “present value method.”

As argued by the I. firm, Hoover Slovacek is wholly inapplicable to the present case. In Hoover Slovacek, the client hired a law firm on a contingency fee basis to prosecute the client's claims. Id. at 559. The contingency fee contract included a provision stating that, in the event the firm were discharged before completing the representation, the client must immediately pay the firm “the then present value of the Contingent Fee ․ “ Id. The client discharged the firm before one of the client's claims was resolved and retained another firm. Id. at 560. At the time of the discharge, the defendant had offered to settle the client's claim for $6,000,000, but the new firm ultimately settled the claim for $900,000. Id. Pursuant to the above-cited provision in the fee contract, the discharged firm billed the client $1.7 million (the contingency fee percentage of $6,000,000.). Id. The Supreme Court of Texas held that the provision was unconscionable and therefore unenforceable. See id. at 565.

That case concerned solely a dispute between the client and the discharged firm regarding whether the “present value” provision in its fee agreement was unconscionable. The court's reasoning focused on the ethical duties owed by an attorney to his client and the potential pitfalls to the client from enforcement of the provision. See id. at 560–66. For instance, enforcement of the provision would have resulted in the firm being paid a fee that did not depend on when and whether the client ultimately recovered and a fee that exceeded the client's recovery. See id. at 563. In contrast, there is no dispute in the present case between client and either firm regarding the fee charged to client. The I. firm did not attempt to collect a fee from client equaling a percentage of the present value of the case at the time of the transfer. The fee actually charged to client was an agreed percentage of the total settlement. Instead, the present case is a dispute between the I. firm and the H. firm regarding the apportionment of that fee between both firms.

The H. firm cites no authority extending Hoover Slovacek to such a dispute. Nonetheless, the trial court did not apply any present value method by adopting the I. firm's proposal; i.e., the court did not award the I. firm the entire 33.77% of $125,080 merely because an offer to settle for that amount had been made at the time of the file transfer. Rather, the actual, ultimate settlement included the $125,080. The significance of the fact the $125,080 had been tendered at the time of the transfer is that the trial court consequently concluded the I. firm was 100% responsible for procuring that portion of the settlement and awarded it all of the associated fees.

The H. firm is incorrect that the trial court then applied a “contradictory” method with respect to the $43,500 portion of the settlement. Unlike the settlements totaling $125,080, the $43,500 settlement was tendered after the transfer and after the H. firm performed additional work. Therefore, the I. firm was not 100% responsible for procuring that settlement. Thus, the trial court determined that the I. firm contributed 70% of the work necessary to procure that settlement and awarded it 70% of the associated fee.

The H. firm argues the trial court was required to apportion the total fee according to the amount of work performed by each firm on the entire case. The H. firm contends that under such method, the evidence conclusively establishes the total fee should be split 50/50. The H. firm relies on (1) the testimony of M., the associate who worked on the case for each firm, opining that 50% of the work was performed before the transfer and 50% after the transfer, and (2) a timeline presented at trial by the H. firm listing tasks performed on the case, with a relatively equal number of entries before and after the transfer.

Assuming without deciding that the trial court, as sole judge of witness credibility, believed M.'s testimony, the H. firm offers no authority that the trial court was required to apportion the total fee according to the amount of work performed by each firm on the entire case. Additionally, the H. firm cites no evidence establishing such a method was the only proper manner in which to determine the “reasonable value of legal services provided to [client]” by each firm. To the contrary, the evidence supports an implicit finding that adopting the I. firm's proposal was a proper method for determining the “reasonable value of legal services provided to [client]” by each firm.

Specifically, it is undisputed the total fee was not based on the amount of work necessary to prosecute client's case; instead, it was a contingency fee set by contract as a defined percentage of client's total recovery. Thus, the trial court rationally concluded the reasonable value of each firm's services to client should be calculated by applying the defined percentage to the portion of the settlement funds attributable to each firm's work; i.e, if supported by the evidence, the I. firm was (1) 100% responsible for the settlements totaling $125,080 and entitled to the entire 33.77% of those funds, and (2) 70% responsible for the $43,500 settlement and entitled to 33.77% of 70% of those funds; and the H. firm was 30% responsible for the $43,500 settlement and entitled to 33.77% of 30% of those funds—plus the credit for further reducing the worker's compensation lien after the transfer).

Further, the evidence supports a finding that adopting the H. firm's proposal was not a proper method for determining the “reasonable value of legal services provided to [client]” by each firm. First, the evidence negates that each firm was responsible for procuring 50% of the total settlement. Accordingly, splitting the fee 50/50 simply because each firm performed an equal amount of work would not constitute an apportionment based on the reasonable value of each firm's services to client. In contrast, adopting the I. firm's proposal ensures that each firm's share corresponds with the extent to which its services benefitted client.

Second, because the fee contract was undisputedly a contingency agreement, the I. firm, when it accepted the case, had an expectation of receiving a defined percentage of the total recovery—not a fee based on the amount of work it performed. In other words, the I. firm bargained for a fee based on the results obtained for client by the firm's efforts. It is a rational inference that the I. firm expended its best efforts to obtain a maximum result for client. As discussed below, the evidence supports a finding the I. firm's efforts contributed to a substantial portion of the settlement funds recovered by the client. Then, it is also undisputed client chose to discharge the I. firm without cause. Consequently, splitting the total fee 50/50 simply because the H. firm performed an equal amount of work after the involuntary discharge would, in effect, (1) not only retroactively convert the I. firm's fee from a contingency fee into one based on the amount of work performed, (2) but also award the I. firm significantly less than the fee it bargained for and earned—the defined percentage of the settlement funds procured by its efforts.7

By the same token, assuming without deciding the H. firm had a contract with client, it was a contingency fee arrangement—again a fee based on the result obtained for client. A 50/50 split would effectively transform this arrangement from a contingency fee into one based on the amount of work performed and give the H. firm a larger fee than one consistent with the result it obtained for client. Additionally, it is a rational inference that by representing client on a contingency fee basis, the H. firm assumed a risk its fee would be disproportionate to the amount of its work necessary to prosecute the case. Accordingly, it is reasonable that the H. firm's share of the fees is limited to the defined percentage of the settlement funds procured by its efforts (plus the credit) even if that formula yields a lower amount than a share based on the amount of work performed.

Accordingly, the H. firm fails to demonstrate the trial court applied an improper method to apportion the total fee.

3. Sufficiency of the Evidence

The H. firm also suggests that, even under the method applied by the trial court, the evidence is insufficient to support its finding regarding the reasonable value of the services performed by each firm.

Settlements totaling $125,080

The H. firm apparently contends the I. firm should not be deemed 100% responsible for procuring the settlements totaling $125,080. The H. firm advances one argument to support this contention: acceptance of the $125,080 was contingent on resolution of the worker's compensation lien. At trial, the H. firm emphasized that it could not simply accept the “low hanging fruit” of those offers without also resolving the lien because (1) the firm was obligated to obtain the optimal net for the client, and (2) the employer's um carrier (which had tendered the $100,000) was also the worker's compensation carrier, albeit a different branch; thus, the H. firm needed leverage when requesting that the um branch persuade the worker's compensation branch to reduce the lien. According to the H. firm, the I. firm allowed the H. firm to “suffer through” attempting to resolve the lien and then “swooped in” to claim all fees associated with the $125,080 settlements.

However, the tenders totaling $125,080 were accepted before the worker's compensation lien was resolved. The $100,000 offer was accepted approximately two weeks after the transfer—approximately four months before the lien was resolved. In fact, M. requested assistance from the attorney from the employer's um carrier to persuade the worker's compensation branch to resolve the lien issue; but the attorney was unable to assist, and the $100,000 settlement offer was accepted a few days later. The record is not clear regarding the date on which the $25,080 offer was accepted, but M. acknowledged it was accepted before the worker's compensation lien was resolved. Consequently, the evidence supports a finding that the I. firm was responsible for procuring the settlements totaling $125,080 without acceptance of those offers being contingent on the H. firm obtaining reduction of the lien.

The H. firm presented evidence that it did later perform work to resolve the lien. However, this work was performed around the time of, and after, the mediation and was pertinent to the client's attempt to settle with his own um carrier—the $43,500 settlement agreement reached at mediation contingent on resolving the worker's compensation lien. The trial court gave the H. firm full credit toward its share of the fees for this work performed to further reduce the lien by $9,000 because the court credited the H. firm 33.77% of $9,000.

Settlement of $43,500

The H. firm apparently contends the evidence is insufficient to support a finding that the I. firm was 70% responsible for procuring the $43,500 settlement from client's um carrier. The evidence pertinent to this issue included the following: testimony of H. and M., who were originally called as adverse witnesses by the I. firm but also testified on behalf of the H. firm; client's original petition; various correspondence relative to client's case; and the H. firm's timeline.

The evidence demonstrated that the I. firm began representing client in March 2010 and remained its counsel until the transfer at the end of August 2011. The H. firm represented client from that point until the case was nonsuited in April 2012, several months after the last issue (the worker's compensation lien) was resolved. The evidence further reflected the nature of the tasks performed by each firm on the case.

Before the transfer, the I. firm conducted the following activities toward advancing the claim against all defendants or client's um carrier in particular: met or communicated with client multiple times; sent representation letters; made a pre-suit demand; filed the petition; followed up on status of service on client's um carrier; answered discovery; received discovery responses from defendants; obtained and filed medical records and bills; prepared a motion for default judgment against client's um carrier (which eventually answered); filed an amended petition; and wrote an extensive letter to two defendants, including client's um carrier, demanding policy limits, with supporting analysis of client's damages. Counsel for the um carrier responded that it could not fully evaluate the demand until it reviewed client's past medical records to determine if he had pre-existing injuries, verified client's alleged lost wages, and took client's deposition.

Moreover, the trial court could have rationally inferred that the work performed by the I. firm also encompassed the following responsibilities, typically attenuate to representing a personal-injury plaintiff: ensuring suit was filed within the limitations period; determining the proper defendants; locating all possible insurance coverage, such as the um coverage; ensuring the parties were properly served; analyzing client's medical records and lost wages information; and calculating a damages model. These services were relevant to all the settlements eventually tendered, including the $43,500.

After the transfer, the H. firm conducted the following activities toward settling the claim against client's um carrier, exclusive of activities toward resolving the worker's compensation lien: received and filed additional records regarding client's past medical history and employment records; supplemented discovery responses; prepared and presented client for deposition; and attended mediation.

The trial court could have reasonably concluded (1) the I. firm's activities, and attenuate responsibilities, were integral to advancing and settling the claim against the client's um carrier, and (2) the remaining work performed by the H. firm after the transfer—obtaining some additional records and supplementing discovery, presenting the client for deposition, and attending mediation—were the final steps toward obtaining the $43,000 settlement. Therefore, some evidence supports a finding that the I. firm was 70% responsible for procuring the $43,500 settlement, and the evidence is not so weak or against the overwhelming weight of the evidence that the finding is clearly wrong and unjust.

In summary, the H. firm's challenge to the trial court's apportionment of the fees lacks merit, and the evidence is legally and factually sufficient to support the judgment.

Accordingly, both of the H. firm's issues are overruled, and the trial court's judgment is affirmed.

CONCURRING OPINION

Intervenor/appellee I., W. & H., P.C. (the “I. Firm”) has a valid and enforceable contingency-fee contract with the plaintiff in the trial court below (the “Client”). Under this contract, the I. Firm is entitled to recover the entire contingency fee at issue in this appeal. Intervenor/appellant H., R. & C. (the “H. Firm”) does not have any contingency-fee contract with the Client, nor does the H. Firm claim to have one.

The I. Firm intervened in the trial court below seeking to protect its contingency-fee interest in the amounts paid by the defendants in settlement of the Client's claims. Timothy H., individually and on behalf of the H. Firm, intervened in the trial court below. But, this intervention was based on ongoing disputes between H. and the I. Firm and its other shareholders. In this intervention, Ira W., a shareholder of the I. Firm, was named as a defendant.

In their intervention petition, H. and the H. Firm (collectively the “H. Parties”) alleged that (1) W. and the I. Firm breached fiduciary duties that they owed to the H. Parties and caused damages to the H. Parties by using proceeds from the I. Firm's accounts receivables to pay off more than $200,000 on a bank note that H. had not guarantied rather than to pay a bank note that H. had guarantied, on which approximately $160,00 was owed; (2) because of these alleged breaches of fiduciary duty, W. and the I. Firm should be required to pay off the note that H. had guarantied; (3) the I. Firm is not entitled to recover any part of its contingency fee under its agreement with the Client until the note H. guarantied is paid in full and until H. receives a fair and equitable distribution of the I. Firm's assets according to the I. Firm “partnership documents”; (4) the trial court should render a declaratory judgment ordering W. and the I. Firm to recover the $200,000 paid on the note not guarantied by H., to pay in full the note guarantied by H., and to place the remainder of these funds in the registry of the court for distribution consistent with the findings of a jury or the trial court.

Notably, the H. Firm did not assert any quantum-meruit claim against the Client or against the I. Firm. Nor did the H. Firm plead that it had an enforceable contingency-fee contract with the Client, and at trial there was no evidence of such a contract. The H. Firm did not plead that it had an agreement or arrangement with the I. Firm under which the I. Firm agreed to divide or share part of the I. Firm's contingency fee with the H. Firm, and at trial there was no evidence of such an agreement or arrangement.

At the end of the bench trial on the interventions, the trial court granted the I. Firm's motion to strike the H. Parties' interventions to the extent these interventions deal with “partnership issues” or claims regarding the assets and liabilities of the I. Firm. On appeal, the H. Firm has not challenged the striking of this part of its intervention.

To the extent subsections (f) and (g) of Texas Disciplinary Rule of Professional Conduct 1.04 apply in the case under review, the H. Firm has not pleaded or presented evidence of a written consent by the Client in compliance with subsection (f)(2). See Tex. Disciplinary R. Prof'l Conduct 1.04(f),(g) (adopted by order of Jan. 28, 2005, effective Mar. 1, 2005, and reprinted in Tex. Gov't Code Ann., tit. 2, subtit. G app. A). Indeed, the H. Firm has not pleaded or presented evidence of any arrangement or agreement between the I. Firm and the H. Firm for a division of the I. Firm's contingency fee that could have been the subject of such a consent by the Client. See id. Even if subsections (f) and (g) of Texas Disciplinary Rule of Professional Conduct 1.04 did not apply in the case under review, the H. Firm has not pleaded or proved a legal theory under which the H. Firm has rights to all or a part of the contingency-fee interest that the Client assigned to the I. Firm under the contingency-fee contract. After the trial court's order striking part of the H. Firm's intervention, the H. Firm is not asserting a claim against the Client or the I. Firm for a money judgment. On this record, the pleadings and the trial evidence do not entitle the H. Firm to recover any part of the I. Firm's contingency-fee interest. The I. Firm agreed at trial that the H. Firm could receive $7,446.15 of the $56,928.15 contingency fee, and the trial court rendered judgment on this basis. The pleadings and trial evidence do not provide a basis for awarding the H. Firm more than $7,446.15.

Based on this analysis, this court should affirm the trial court's judgment. Because it does not, I respectfully decline to join the plurality opinion, but I concur in the judgment.

DISSENTING OPINION

In the often-quoted maxim attributed to Abraham Lincoln, “A lawyer's time and advice are his stock in trade.”1 Here, the client received a favorable settlement as a result of the time and advice provided by the attorneys employed successively by two law firms. Although the evidence is uncontroverted that the attorneys' time spent in working on the case was divided equally between the two firms, the trial court apportioned the legal fees to award one firm nearly seven times the amount awarded to the other firm. Because the majority affirms this result, which I believe is contrary to the overwhelming weight of the evidence concerning the division of the attorneys' time, I respectfully dissent.

The majority fails to analyze the “reasonable value of legal services” provided by the H. firm under the factors established by the Supreme Court in Arthur Andersen & Co. v. Perry Equipment Corp., 945 S.W.2d 812, 818 (Tex.1997). There the court held that the factors to consider when determining the reasonableness of an attorney's fee include the following:

(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill required to perform the legal service properly;

(2) the likelihood ․ that the acceptance of the particular employment will preclude other employment by the lawyer;

(3) the fee customarily charged in the locality for similar legal services;

(4) the amount involved and the results obtained;

(5) the time limitations imposed by the client or by the circumstances;

(6) the nature and length of the professional relationship with the client;

(7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and

(8) whether the fee is fixed or contingent on results obtained or uncertainty of collection before the legal services have been rendered.

Because the total fee is undisputed, factors 4 and 8 are not at issue. Factors 2, 3, 5, 6, and 7 are the same for both firms because the same lawyers were doing the work. This left only factor 1 for the trial court to consider.

The only testimony at trial came from H. and M.. M. testified that fifty percent of their time was spent at each firm. There was no testimony from the I. firm as to the reasonableness of splitting the fee in the manner adopted by the trial judge and affirmed by the majority. There also is no evidence that the novelty and difficulty of the questions involved in the case were different at the two firms, or that the attorneys rendered more skillful representation while employed by one of the firms.

We are left, then, with the question of time, and on that issue, there is no question of fact. The undisputed evidence is that during fifty percent of the time that the attorneys worked on the case, they were employed by the I. firm, and fifty percent of the time they were employed by the H. firm.

I therefore would conclude that the trial court's finding that $7,446.15 is the reasonable value of the H. firm's services is against the overwhelming weight of the evidence. Because the majority upholds the trial court's judgment based on that finding, I respectfully dissent.

FOOTNOTES

1.  The record varied on whether she was the other driver or merely the owner of the other car. That distinction is immaterial to this appeal, so this opinion will refer to her as “the other driver.”

2.  According to the H. firm, after the settlements, the firm and client (1) agreed to reduce the contingency fee from 40%, as prescribed in the contract between client and the I. firm, to 33.77%, and (2) agreed to the amount of expenses payable from the settlement funds. The I. firm does not challenge these agreements or dispute the above-mentioned total fees (33.77%) of the recovery) and expenses were the correct amounts due from the settlement funds.

3.  The court amended its original final judgment to add a requirement that the district clerk's check to the I. firm from the funds in the registry of the court include interest.

4.  Rule 1.04(f) provides,(f) A division or arrangement for division of a fee between lawyers who are not in the same firm may be made only if:(1) the division is:(i) in proportion to the professional services performed by each lawyer; or(ii) made between lawyers who assume joint responsibility for the representation; and(2) the client consents in writing to the terms of the arrangement prior to the time of the association or referral proposed, including:(i) the identity of all lawyers or law firms who will participate in the fee-sharing agreement, and(ii) whether fees will be divided based on the proportion of services performed or by lawyers agreeing to assume joint responsibility for the representation, and(iii) the share of the fee that each lawyer or law firm will receive or, if the division is based on the proportion of services performed, the basis on which the division will be made; and(3) the aggregate fee does not violate paragraph (a) [which prohibits illegal or unconscionable fees].Tex. Disciplinary Rules of Prof 1 Conduct R. 1.04(f), reprinted in Tex. Gov't.Code Ann., tit. 2, subtit. G, app. A (West 2013) (Tex. State Bar R. art. X, § 9).

5.  Appellant suggests (1) Rule 1.04(f) applies only to a situation in which a firm seeks a referral fee, (2) the rule contains no requirement that the law firms sign the consent to a division of fees, and (3) the I. firm did not raise the rule at trial and instead first mentioned this theory in its proposed findings of fact and conclusions of law.

6.  Some of the totals proposed by the I. firm involve minor rounding from the exact calculations, and the figures recited herein are those proposed by the I. firm.

7.  The I. firm bargained for a defined percentage of the total recovery, as though it would complete the representation. However, the I. firm concedes that, because of the premature discharge, it is limited to the defined percentage of the settlement funds procured by its efforts. Accordingly, its “bargain” was at least the defined percentage of the settlement funds procured by its efforts.

1.  Attributed to Abraham Lincoln, Oxford Dictionary of American Legal Quotations 257 (Fred R. Shapiro ed.1993).

JOHN DONOVAN, Justice.

FROST, C.J., concurs. CHRISTOPHER, J., dissents.

Copied to clipboard