the Davis Law Firm v. James Bates and Consumers County Mutual Insurance Company

• Court: Court of Appeals of Texas
• Decided: February 13, 2014
• Docket: 13-13-00209-CV
• Status: Published

Opinion

NUMBER 13-13-00209-CV

COURT OF APPEALS

THIRTEENTH DISTRICT OF TEXAS

CORPUS CHRISTI – EDINBURG

THE DAVIS LAW FIRM, Appellant,

v.

JAMES BATES AND CONSUMERS COUNTY MUTUAL INSURANCE COMPANY, Appellees.

On appeal from the County Court at Law No. 2 of Cameron County, Texas.

MEMORANDUM OPINION Before Justices Rodriguez, Garza, and Perkes Memorandum Opinion by Justice Garza

By several issues, appellant, the Davis Law Firm (“Davis”), contends the trial court

erred in granting summary judgment in favor of appellees, James Bates and Consumers

County Mutual Insurance Company (“Consumers”), and in denying Davis’s motion for summary judgment. We affirm.

I. BACKGROUND

On January 15, 2008, Marta Tapia and Bates were involved in an automobile

accident in Brownsville, Texas. Tapia sued Bates for injuries sustained in the accident.

Consumers defended Bates and, in May 2009, paid $200,000.00 to Tapia in settlement

of her claims against Bates.

Either the same day as the accident or the following day, Tapia visited Davis’s

Brownsville office. Tapia spoke with a Davis staff employee and signed a contingency

fee contract. The agreement provided for Davis to receive a thirty-five percent (35%)

contingency fee of any amount Tapia recovered before filing suit. After leaving Davis’s

office, Tapia felt uncomfortable and that she had not been treated with consideration. A

family friend called to check on her and recommended that she retain Javier Villarreal to

represent her. The following day, Tapia visited Villarreal’s office and asked that he

represent her. Tapia told Villarreal that she had signed a contingency fee agreement with

Davis. Villarreal prepared a letter for her signature advising Davis that she did not want

to retain the firm’s services. The letter was faxed to Davis’s office that day. 1

In February 2008, Davis advised Bates’s insurer, Travelers Insurance,2 that Tapia

had released Davis from representing her, but that Davis retained its interest in the claim.

The letter requested that Davis be included in any settlement check regarding Tapia’s

claims. In December 2009, after the settlement, Davis sent a demand letter to Travelers

1We note that the contingency fee agreement and the letter to Davis are both dated the same day, January 16, 2008.

2 Although the record does not explain the relationship between Travelers and Consumers, we note

that Davis’s Third Amended Petition refers to Davis’s notice and demand letters as having been sent to Consumers.

2 demanding payment of its fee in the amount of 33.3 percent of the settlement amount.

Davis sued Bates and Consumers for interference with a contract, conversion, and

enforcement of its fee agreement.3 Bates and Consumers each filed a traditional motion

for summary judgment, asserting that they were entitled to summary judgment on grounds

that: (1) the contingency fee contract was unconscionable as a matter of law and

unenforceable because it required Davis’s consent to any settlement in violation of Texas

Disciplinary Rule of Professional Conduct 1.02(a)(2), see TEX. DISCIPLINARY R. PROF’L

CONDUCT 1.02(a)(2), reprinted in TEX. GOV’T CODE ANN. tit. 2, subtit. G, app. A (West 2013)

(TEX. STATE BAR R. art. X, § 9), and therefore, that the agreement was voidable pursuant

to government code section 82.065(b), see TEX. GOV’T CODE ANN. § 82.065(b) (West

2013); and (2) Davis’s attempt to collect a $70,000 fee for no useful services to Tapia was

an attempt to collect an unconscionable fee. Consumers and Bates also asserted that

Davis’s tortious interference and conversion claims failed as a matter of law because: (1)

Tapia properly canceled the fee agreement before the alleged interference; and (2) Davis

had no right to possess the funds at the time of the alleged conversion.4

Consumers attached the following evidence to its traditional motion for summary

judgment: (1) excerpts from Tapia’s deposition testimony; (2) Davis’s responses to

Consumers’s discovery requests; and (3) an affidavit and report prepared by Frank

Costilla, a Brownsville attorney, regarding the unconscionability of Davis’s claim to the

3 Davis’s Third Amended Petition states that it brings its suit “by and through” its former client, Tapia. 4 We note that Bates’s and Consumers’s motions for summary judgment asserted the same grounds and relied on the same evidence except that Bates’s motion also asserted that: (1) Davis named Bates as a party but did not assert that he did anything wrong; and (2) Davis did not request issuance of citation and service on Bates until four months after the statute of limitations had expired on all claims against Bates. Because we conclude that the trial court properly granted summary judgment on grounds asserted by both parties, we address Bates’s and Consumers’s motions together.

3 $70,000 fee.5

Davis also filed a traditional motion for summary judgment asserting that: (1) Tapia

lacked good cause to discharge Davis; (2) Consumers was liable to Davis for the amount

of the fee because it had notice of Davis’s interest in the $70,000 fee; and (3) even if a

provision of the contingency fee contract was unconscionable, the trial court erred in

failing to eliminate the unconscionable provision and to enforce the remaining provisions

of the contract. Davis attached the following summary judgment evidence: (1) Tapia’s

deposition testimony; (2) the contingent fee agreement; (3) the February 2008 letter from

Davis to Consumers; (4) the deposition of William Edwards6; (5) a copy of the settlement

agreement; and (6) a copy of the settlement check.

Consumers and Bates filed objections to Edwards’s deposition testimony and

affidavit on grounds that Edwards offered opinions on questions of law, failed to employ

the correct legal standard, and that his opinions were speculative and conclusory. The

trial court overruled Davis’s objections to Consumers’s and Bates’s evidence, denied

Davis’s motion, sustained Consumers’ and Bates’s objections to Davis’s evidence, and

granted Consumers’s and Bates’s motions without stating the basis for its ruling.

II. STANDARD OF REVIEW AND APPLICABLE LAW

In a summary judgment case, the movant must show that there is no genuine issue

of material fact and that the movant is entitled to judgment as a matter of law. TEX. R.

CIV. P. 166a(c); Provident Life & Acc. Ins. Co. v. Knott, 128 S.W.3d 211, 215–16 (Tex.

5 Bates’s motion attached the excerpts of Tapia’s deposition testimony and Davis’s discovery

responses.

6William Edwards, a personal injury litigator and Davis’s retained expert, stated in his deposition testimony that the fee agreement was not unconscionable because the 35% fee was fair when Tapia signed the agreement.

4 2003). The movant has the burden of proof. Sw. Elec. Power Co. v. Grant, 73 S.W.3d

211, 215 (Tex. 2002); City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 678

(Tex. 1979). A defendant who conclusively negates at least one essential element of the

plaintiff’s cause of action, or who conclusively establishes all of the elements of an

affirmative defense, is entitled to summary judgment. Frost Nat’l Bank v. Fernandez, 315

S.W.3d 494, 508 (Tex. 2010). The burden to raise a fact issue shifts to the non-movant

only after the movant has established that it is entitled to summary judgment as a matter

of law. Rhone-Poulenc, Inc. v. Steel, 997 S.W.2d 217, 222 (Tex. 1999); Casso v. Brand,

776 S.W.2d 551, 556 (Tex. 1989).

We review a traditional motion for summary judgment de novo. Frost Nat’l Bank,

315 S.W.3d at 508. To determine if the non-movant raised a fact issue, we review the

evidence in the light most favorable to the non-movant, crediting favorable evidence if

reasonable jurors could do so and disregarding contrary evidence unless reasonable

jurors could not. See Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d

844, 848 (Tex. 2009).

When both sides move for summary judgment, and the trial court grants one and

denies the other, we review both sides' evidence and determine all questions presented.

See FM Props. Operating Co. v. City of Austin, 22 S.W.3d 868, 872 (Tex. 2000);

Lumbreras v. Rocha, No. 13-10-00459-CV, 2012 WL 29215, at *1 (Tex. App.—Corpus

Christi Jan. 5, 2012, no pet.) (mem. op.). The reviewing court must then render the

judgment that the trial court should have rendered. See FM Props. Operating Co., 22

S.W.3d at 872. “When a trial court's order granting summary judgment does not specify

5 the grounds relied upon, the reviewing court must affirm summary judgment if any of the

summary judgment grounds are meritorious.” Id.

III. DISCUSSION

Davis characterizes its issues as follows: (1) the trial court erred by granting

summary judgment in favor of Bates and Consumers and by denying summary judgment

in Davis’s favor; (2) Consumers had no standing to challenge the validity of the

contingency fee contract;7 (3) Davis was entitled to collect its contingency fee because

Tapia terminated the agreement without good cause and Consumers knew of Davis’s fee

interest; (4) Consumers failed to prove that the contingency fee contract was

unconscionable at the time of its formation; and (5) even if the clause requiring Davis’s

consent to settlement was invalid, the trial court erred in failing to sever the invalid clause

and in failing to enforce the remainder of the contract.

A. The Summary Judgment Motions

Bates and Consumers moved for summary judgment on the ground that the

contingency fee agreement was voidable by Tapia because it included a clause

prohibiting settlement without Davis’s consent in violation of Texas Disciplinary Rule of

7 Davis asserts that neither Consumers nor Bates had “standing” to challenge Tapia’s contingency fee contract with Davis. “[S]tanding focuses on the question of who may bring an action.” The M.D. Anderson Cancer Ctr. v. Novak, 52 S.W.3d 704, 708 (Tex. 2001) (quoting Patterson v. Planned Parenthood, 971 S.W.2d 439, 442 (Tex. 1998)); see Nootsie, Ltd. v. Williamson County Appraisal Dist., 925 S.W.2d 659, 661 (Tex. 1996) (“A plaintiff has standing when it is personally aggrieved.”). “Questions of standing turn upon the status of the plaintiff rather than the status of the defendant.” Robinson v. Neeley, 192 S.W.3d 904, 912 (Tex. App.—Dallas 2006, no pet.). Here, Davis, the plaintiff, sued Bates and Consumers, and then challenged their standing. We conclude Davis’s second issue is without merit, and we overrule it.

6 Professional Conduct 1.02(a)(2). See TEX. DISCIPLINARY R. PROF’L CONDUCT 1.02(a)(2).

Rule 1.02(a)(2) requires an attorney to “abide by a client’s decision” regarding whether to

accept a settlement offer. Id. Comment 5 following the rule provides, in pertinent part:

“An agreement concerning the scope of representation must accord with the Disciplinary

Rules of Professional Conduct and other law. Thus, the client may not be asked . . . to

surrender . . . the right to settle or continue litigation that the lawyer might wish to handle

differently.” Id. cmt. 5; see In re Plaza, 363 B.R. 517, 521–22 (2007) (“Clauses in a

contract between attorney and client which prohibit a settlement by the client without his

attorney’s consent are generally held to be unenforceable as against public policy.”)

(quoting Lewis v. S.S. Baume, 534 F.2d 1115, 1122 (5th Cir. 1976)); Sanes v. Clark, 25

S.W.3d 800, 805 (Tex. App.—Waco 2000, pet. denied) (holding that contingent fee

contract authorizing attorney to settle clients’ claims without consultation with clients was

voidable by clients because it violated rule 1.02(a)(2)). Here, the contingency fee contract

required Tapia to obtain Davis’s consent to settle (“Neither Client nor Attorney will make

a settlement of the claim herein or accept any sum without consent of the other . . . .”).

We conclude that the provision violates rule 1.02(a)(2) and is unenforceable as against

public policy. See TEX. DISCIPLINARY R. PROF’L CONDUCT 1.02(a)(2) cmt. 5; In re Plaza,

363 B.R. at 521–22; Sanes, 25 S.W.3d at 805; see also Cruse v. O’Quinn, 273 S.W.3d

766, 775 (Tex. App.—Houston [14th Dist.] 2008, pet. denied) (holding that “a court may

deem [the Disciplinary Rules] to be an expression of public policy, so that a contract

violating them is unenforceable as against public policy”). We hold that the trial court did

not err in granting summary judgment in favor of Bates and Consumers on this basis.

7 In its motion, Davis argued that it was entitled to summary judgment because

Consumers had notice of Davis’s claim to the 35% contingency fee, but Consumers

nonetheless failed to protect the firm’s interest. Davis argues that Consumers is therefore

liable for the $70,000 fee. Davis also argues that in determining whether a 35% fee is

unconscionable, we should look to the circumstances at the time the parties executed the

agreement, “rather than using hindsight to see what work was actually done on the case.”

We are unpersuaded by Davis’s arguments. We have already determined that

because the contingent fee agreement prohibited settlement without Davis’s consent, it

was unenforceable as against public policy. See TEX. DISCIPLINARY R. PROF’L CONDUCT

1.02(a)(2) cmt. 5; In re Plaza, 363 B.R. at 521–22; Sanes, 25 S.W.3d at 805. Moreover,

Tapia properly terminated the agreement less than twenty-four hours after she signed the

agreement. It is undisputed that Tapia terminated the agreement before she met or

consulted with any attorney at the Davis firm. Davis has not identified any legal work that

it performed on Tapia’s behalf. “Public policy strongly favors a client’s freedom to employ

a lawyer of his choosing and, except in some instances where counsel is appointed, to

discharge the lawyer during the representation for any reason or no reason at all.” Hoover

Slovacek LLP v. Walton, 206 S.W.3d 557, 562 (Tex. 2006); see TEX. DISCIPLINARY R.

PROF’L CONDUCT 1.15 cmt. 4 (“A client has the power to discharge a lawyer at any time,

with or without cause, subject to liability for payment for the lawyer’s services . . . .”).

Regardless, because the trial court could have properly determined that the contingency

fee contract was unenforceable as against public policy, it did not err in denying Davis’s

motion for summary judgment. We overrule Davis’s first issue.

8 By its second issue, Davis contends that neither Bates nor Consumers had

standing to step into Tapia’s shoes and challenge the validity of her contingency fee

contract with Davis. We agree with Consumers and Bates that Davis’s standing argument

is irrelevant and without merit. Davis is only entitled to its 35% contingency fee if the

contract is enforceable, and we have determined that it was unenforceable as against

public policy. We overrule Davis’s second issue.

By its third issue, Davis contends it was entitled to collect its contingency fee

because Tapia terminated her agreement with Davis without good cause. By its fourth

issue, it contends that Consumers has not shown that the 35% contingency fee was

unconscionable at the time Tapia signed the agreement. We have already determined

that the agreement is unenforceable as against public policy and that Davis was therefore

not entitled to the fee. We overrule Davis’s third and fourth issues as moot.

B. Severability of Unconscionable Provision

By its fifth issue, Davis argues that even if the provision prohibiting settlement

without its consent is invalid, the provision is severable and the remainder of the

agreement is enforceable. Davis cites Hoover Slovacek in support of the principle that if

a term within a contract is unconscionable at the time the contract is made, a court may

enforce the remainder of the contract or may limit the application of the objectionable

clause. See 206 S.W.3d at 565 (holding that a termination fee provision was

unconscionable, but that remainder of the fee agreement was enforceable). Assuming,

without deciding, that the provision prohibiting settlement without Davis’s consent was

severable, we nonetheless conclude that Davis is not entitled to enforcement of the

agreement because charging a $70,000 fee for no legal services performed is an

9 unconscionable fee. “A fee is unconscionable if a competent lawyer could not form a

reasonable belief that the fee is reasonable.” TEX. DISCIPLINARY R. PROF’L CONDUCT

1.04(a). Here, Davis has not identified any legal services it performed on Tapia’s behalf

in the twenty-four hours or less that it represented her. As noted, Tapia was interviewed

by a Davis employee and did not at any time meet or consult with a lawyer from the Davis

firm. Thus, even if we assume, without deciding, that Davis was discharged without

cause, its right to seek compensation in quantum meruit or in a suit to enforce the contract

is subject to the prohibition against charging or collecting an unconscionable fee. See

id.; Hoover Slovacek, 206 S.W.3d at 561. We conclude that Davis is not entitled to

enforcement of the remainder of the contract. We overrule Davis’s fifth issue.

IV. CONCLUSION

We affirm the trial court’s judgment.

DORI CONTRERAS GARZA, Justice

Delivered and filed the 13th day of February, 2014.