Fleming v. Curry

412 S.W.3d 723, 2013 WL 4429905, 2013 Tex. App. LEXIS 10438
CourtCourt of Appeals of Texas
DecidedAugust 20, 2013
DocketNos. 14-11-01093-CV, 14-12-00300-CV
StatusPublished
Cited by13 cases

This text of 412 S.W.3d 723 (Fleming v. Curry) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Fleming v. Curry, 412 S.W.3d 723, 2013 WL 4429905, 2013 Tex. App. LEXIS 10438 (Tex. Ct. App. 2013).

Opinion

OPINION

TRACY CHRISTOPHER, Justice.

In these consolidated appeals, we review the summary judgments granted to several hundred plaintiffs on their breach-of-fiduciary-duty claims against the attorney and law firm that represented them in their personal-injury claims arising from their use of diet drugs. The law firm screened tens of thousands of clients for eligibility to opt out of a class-action settlement and pursue personal-injury suits against a pharmaceutical company, and ultimately obtained an aggregate settlement of the claims for over 8,000 clients. From the gross settlement funds of each settling client, the law firm deducted a portion of the expenses of screening the claims of tens of thousands of clients who were not part of the settlement. In a series of summary-judgment motions, each of which was granted, the clients asserted that the defendants were collaterally estopped from contesting that they had breached fiduciary duties; that the allocation of these expenses was unreasonable and improper as a matter of law; that the attorney and law firm failed to adequately disclose the charges; and that fee forfeiture was warranted. Because the plaintiffs concede that summary-judgment cannot be affirmed on collateral-estoppel grounds, and because there is a question of fact as to every other ground on which the plaintiffs expressly moved for summary judgment, we reverse the judgments and remand the cases to the trial court for further proceedings.

[729]*729I. Factual and Procedural Background

In these consolidated cases, some of the former clients of attorney George Fleming sued him and his firm for allegedly deducting improper expenses from their share of the settlement of a mass-tort claim. We discussed the origins of the case in Fleming v. Kinney ex rel. Shelton, S95 S.W.3d 917 (Tex.App.-Houston [14th Dist.] 2018, pet. filed) (sub. op.). Fleming asserted that the plaintiffs’ claims against the Wyeth pharmaceutical company for personal injuries attributed to their use of a combination of the prescription diet drugs fenfluramine and phentermine — “fenphen” for short. See id. at 920 (citing In re Diet Drugs, 553 F.Supp.2d 442, 449 (E.D.Pa.2008)). The claims were litigated in a nationwide class action before a federal multidistrict litigation (“MDL”) court. Id. (citing In re Diet Drugs, 385 F.3d 386, 389-90 (3d Cir.2004)). A claimant who wished to opt out of the class action and pursue individual claims had to establish his eligibility to sue by showing that an echocardiogram of his heart met certain criteria established by the MDL court. Id. The claims of a plaintiff failing to meet these criteria were subject to dismissal. Id.

Fleming expended more than $20 million on a nationwide echocardiogram program to screen potential clients and identify those meeting the MDL court’s opt-out requirements. Id. More than 40,000 potential clients were screened, and after eliminating those claims that Fleming did not believe could be successfully litigated, he was left with a group of approximately 8,000 clients. As relevant to this appeal, these individuals had signed contingency-fee agreements that expressly or implicitly allowed Fleming to recover the reasonable expenses of litigation.1 Id.

Wyeth and Fleming ultimately agreed to settle the claims of Fleming’s group of 8,051 clients for an aggregate amount of about $339 million. Id. at 921. One of the conditions of the settlement was that at least 95% of this group had to agree to the settlement. Id. Each client received a settlement packet that included a spreadsheet showing the' amount of the settlement funds allocated tb each client. Id. Each settlement packet also: included a statement showing certain deductions, including the amount deducted from the client’s allocated recovery for attorneys’ fees and expenses. Nearly all of Fleming’s clients accepted the settlement offer. Id.

After the claims were settled, Fleming and his firm were sued for fraud, breach of contract, breach of fiduciary duty, and other claims by more than 600 of his former clients. Id. The plaintiffs asserted that Fleming wrongfully deducted from their recovery a pro rata share of the expenses of the echocardiogram program, including expenses related to the screening of people whose echocardiograms were found not to meet the MDL court’s opt-out criteria. Id. Fleming argued that it was reasonable and appropriate to allocate expenses in this manner. Id.

Pursuant to a Rule 11 agreement, the trial court selected ten plaintiffs for trial. Id. These ten individuals non-suited their fraud claims, and the jury found that Fleming had breached his contract with only one of them; however, the jury found that Fleming breached his fiduciary duty to all ten clients. Id. at 922. The jury determined that some of the expenses charged to each of these clients was unreasonable, but the damages awarded for the unreasonable expenses varied. Id. at 923. The trial court rendered judgment that [730]*730Fleming pay these damages and additionally disgorge 32% of the. attorneys’ fees deducted from the settlement funds allocated to each of these ten clients. Id. The trial court severed these claims from the remainder of the lawsuit, and Fleming appealed. Id. We concluded that the trial court reversibly erred in admitting expert testimony that equated the violation of one of more of the Texas Disciplinary Rules of Professional Conduct with a breach of fiduciary duty. Id. at 930-33. A petition for review of that case .is now pending before the Texas Supreme Court.

A. The Curry Case

Meanwhile, back in the trial court, the trial court granted the remaining plaintiffs partial summary judgment as to liability on the ground ' that, as a result of the judgment rendered in the severed case, Fleming was collaterally estopped from re-litigating the question of whether he breached his fiduciary duty by charging unreasonable expenses. Although the plaintiffs prevailed on that motion, they nevertheless filed a second traditional motion for partial summary judgment on liability. In their second motion, the plaintiffs asserted that they were entitled to judgment as a matter of law because Fleming had breached his fiduciary duty by charging them unreasonable or improper expenses. Before Fleming responded to the motion, five of the plaintiffs (collectively, “the Curry plaintiffs”) successfully moved to sever their claims from those of the remaining plaintiffs. Fleming then filed a response to the summary-judgment motion as to the Curry plaintiffs. In his response, Fleming argued that there was at least a question of fact as to the reasonableness and propriety of the challenged expenses, and pointed out that he had pleaded waiver and ratification as affirmative defenses.2 In the Curry plaintiffs’ summary-judgment reply, they additionally argued that the expenses were unconscionable and that Fleming’s affirmative defense of waiver fails as a matter of law. In separate summary-judgment proceedings, the parties addressed the issue of damages.

The trial court signed an interlocutory order in the Curry plaintiffs’ favor as to both liability and damages, then addressed the issue of fee forfeiture. As in the Kinney case, the trial court ordered disgorgement of 32% of the attorneys’ fees charged to each of the plaintiffs.

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Bluebook (online)
412 S.W.3d 723, 2013 WL 4429905, 2013 Tex. App. LEXIS 10438, Counsel Stack Legal Research, https://law.counselstack.com/opinion/fleming-v-curry-texapp-2013.