Efrem D. Sewell v. Zurich American Insurance Company ( 2017 )

In The
Court of Appeals
Ninth District of Texas at Beaumont
____________________
NO. 09-16-00078-CV
NO. 09-16-00079-CV
____________________
EFREM D. SEWELL, Appellant
V.
JOSEPH GUILLORY II, Appellee
And
EFREM D. SEWELL, Appellant
V.
ZURICH AMERICAN INSURANCE COMPANY, Appellee
________________________________________________________________________
On Appeal from the County Court at Law No. 1
Jefferson County, Texas
Trial Cause No. 127,976
________________________________________________________________________
MEMORANDUM OPINION
This dispute relates to the payment of attorney’s fees. In cause number
127,976, filed in the Jefferson County Court at Law No. 1, attorney Efrem Sewell
1
(Appellant or Sewell), filed suit against two parties: his former client, Joseph
Guillory II (Guillory), and the insurance company that paid a personal injury
settlement to Guillory, Zurich American Insurance Company (Zurich). Sewell
alleged that Guillory and Zurich settled the personal injury claim without paying
Sewell’s contingent fee. In two separate orders, the trial court granted Guillory’s no-
evidence motion for summary judgment and Zurich’s traditional motion for
summary judgment. Sewell appeals the summary judgments in favor of Guillory and
Zurich.1
Facts Regarding the Underlying Personal Injury Lawsuit
In June of 2012, Guillory was riding his motorcycle when he was involved in
an accident with another vehicle allegedly driven by Darius Clifton and owned or
operated by Diakon Logistics, Inc. (Diakon). Guillory initially hired Sewell to act as
his attorney with respect to his claims against Clifton and Diakon. Guillory and
Sewell executed a document styled “Contract for Legal Representation” dated June
28, 2012 (hereinafter the “Sewell Fee Agreement”). Pertinent provisions of the
Sewell Fee Agreement include the following:
1
A notice of appeal was filed as to both orders. At the direction of the clerk
of this Court, the appeal was docketed as two separate appeals. Because the factual
and legal issues are interrelated, we address both appeals in this Memorandum
Opinion.
2
1.02 In consideration of the services rendered and to be rendered to
Client by said Attorney, the Client does hereby grant, sell, assign and
convey to the said Attorney as his compensation herein the following
present undivided interest in said claim, 33 1/3% of all funds including
PIP that are recovered before suit is filed, and 40% if a collection or
settlement is made after suit is filed.
....
1.05 . . . The Attorney may, in his absolute discretion, terminate this
agreement at any time by giving me notice of such termination orally
or in writing . . . .
....
2.03 No settlement shall be made without Client’s approval, nor shall
Client obtain any settlement on the aforesaid claims without the
Attorney’s approval.
....
2.05 However, if in the Attorney’s opinion, a fair and reasonable
settlement offer is made by an adverse party and [C]lient rejects the
advice [of] Attorney to settle, then at Attorney’s option, Client shall
immediately be obligated to reimburse Attorney for costs and expenses
incurred to that time and Attorney may withdraw from the case,
retaining a lien for the Attorney fees as outlined in Paragraph Three[2],
based upon the value of the offer made at the point of such withdrawal,
and the expenses referred to above.
On June 29, 2012, Sewell sent a letter to Zurich (the insurance carrier for
Diakon) notifying Zurich that Sewell had been hired to represent Guillory. The June
2
There is no paragraph 3 in the Sewell Fee Agreement included in the
appellate record.
3
29th letter stated that Sewell had been “assigned an undivided interest in this claim
and cause of action.” On or about February 5, 2013, Guillory sent Sewell a letter
notifying Sewell that Guillory was terminating Sewell and that Guillory had retained
another attorney. Guillory asked Sewell to forward his file to the new attorney. Clay
Dugas was hired by Guillory and in February of 2013, Dugas sent Sewell a letter
requesting the Guillory file. Dugas, as the attorney for Guillory, filed suit against
Clifton and Diakon in March of 2013. In July 2014, Guillory, represented by Dugas,
entered into a Settlement Agreement and Release with Diakon and their “assigns,”
“attorneys,” and “insurers[.]” In the Settlement Agreement and Release, in exchange
for the payment of $735,000, Guillory released his claims against Diakon, Clifton,
and their “assigns,” “attorneys,” and “insurers,” and agreed to indemnify and hold
them harmless from “any and all claims, actions, demands, . . . liens, . . . attorney’s
fees, . . . which have been asserted or which may be asserted by any person, . . .
claimed by[,] through or under [Guillory.]” Guillory also expressly represented to
the released parties that he had not “assigned[]” any portion of his claim prior to the
execution of the Settlement and Release Agreement except as to Dugas, and
expressly agreed to “Indemnify And Hold Harmless Defendants and their insurers
from any liability for any such liens or expenses, regardless of any negligence or
other fault shown to have been committed by Defendants.”
4
On or about March 9, 2015, Sewell sent Dugas a letter and email wherein
Sewell informed Dugas that he was aware that Guillory had obtained a settlement of
the claim, and although Guillory had requested a withdrawal by Sewell’s firm and
Sewell complied, Sewell alleged he “maintained a full attorney fee interest in this
matter.” Sewell demanded that Sewell’s attorney’s fees be paid “ASAP.” Thereafter,
Sewell and Dugas exchanged email communications regarding Sewell’s claim to
attorney’s fees.
On March 12, 2015, Dugas filed a petition in the County Court at Law in
Jefferson County, Texas, under Cause No. 127,289, styled Clay Dugas d/b/a Clay
Dugas & Associates v. Efrem Sewell, seeking a declaratory judgment that Sewell
was not entitled to any part of the settlement.
Facts Regarding Sewell’s Lawsuit for Attorney’s Fees
On April 6, 2015, Sewell filed a lawsuit against Zurich and Guillory in Dallas
County, Texas, alleging that Zurich knew or constructively knew of “[Sewell]’s
power of attorney and assignment of and retention of an interest in [Guillory]’s case
in June 2012 [and] chose to settle with [Guillory]’s new attorney, Clay Dugas only.”
According to Sewell, Guillory breached the Sewell Fee Agreement and Zurich
breached “the assignment agreement.” Zurich filed an answer to the Dallas County
suit, and Guillory filed a motion to transfer venue, a plea in abatement, and an answer
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to the Dallas County suit. The Dallas County court granted the motion to transfer
venue and the suit was then transferred to Jefferson County, Texas, and assigned to
cause number 127,976.
Zurich filed a traditional Motion for Summary Judgment in cause number
127,976, arguing that it owed no duty to Sewell and that it had no contractual
agreement with Sewell. Zurich argued that Sewell’s remedy is against his former
client and not against Zurich. Sewell filed a Response to Zurich’s Motion for
Summary Judgment, arguing that Zurich is liable to Sewell because Zurich settled
with Guillory and failed to “protect an assignment that [Zurich was] aware of”
making Zurich directly liable for such fees and that Zurich has “to pay twice.”
Guillory filed a no-evidence motion for summary judgment in cause number
127,976, arguing that there was no evidence that a valid contract exists or that
Guillory breached such agreement, and further that because the matter involves a
contract for legal services, Sewell would have to prove that his termination “was
without good cause[.]” And, he argued there was no evidence that Sewell’s
termination was without good cause. Sewell filed a response to Guillory’s no-
evidence motion for summary judgment, attaching his own affidavit and including
among other documents, a copy of the Sewell Fee Agreement, and the Settlement
Agreement and Release. In cause number 127,289, Sewell filed a no-evidence
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motion for summary judgment as to the declaratory judgment claims filed by Dugas.
Dugas filed a response to Sewell’s no-evidence motion for summary judgment,
attaching Guillory’s affidavit with exhibits attached thereto, as well as an Affidavit
from Dugas.
On February 4, 2016, the trial court held a combined hearing on all summary
judgment motions. At the conclusion of the hearing, the trial court entered an order
granting Zurich’s motion for summary judgment and a separate order granting
Guillory’s no-evidence motion for summary judgment.3 Sewell filed a notice of
appeal as to each order entered in Cause No. 127,976. In his appellate briefs, Sewell
contends the trial court erred in granting Guillory’s no-evidence motion for summary
judgment and in granting Zurich’s motion for summary judgment.
Standard of Review
We conduct a de novo review of an order granting a traditional motion for
summary judgment. Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211,
215 (Tex. 2003). In our review, we deem as true all evidence that is favorable to the
nonmovant, indulge every reasonable inference to be drawn from the evidence, and
resolve any doubts in the nonmovant’s favor. Valence Operating Co. v. Dorsett, 164
3
The appellate record does not include an order on Sewell’s no-evidence
motion for summary judgment filed in cause number 127,289, and none of the
parties filed an appeal from any such order.
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S.W.3d 656, 661 (Tex. 2005). When the trial court does not specify the basis for its
ruling, we must affirm a summary judgment if any of the grounds on which judgment
is sought are meritorious. Merriman v. XTO Energy, Inc., 407 S.W.3d 244, 248 (Tex.
2013). To be entitled to traditional summary judgment, a movant must establish that
there is no genuine issue of material fact and that the movant is entitled to judgment
as a matter of law on the issues set forth in the motion. Tex. R. Civ. P. 166a(c); Mann
Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009).
Once the movant produces evidence entitling it to summary judgment, the burden
shifts to the nonmovant to present evidence raising a genuine issue of material fact.
Walker v. Harris, 924 S.W.2d 375, 377 (Tex. 1996). A defendant moving for
summary judgment who conclusively negates a single essential element of a
plaintiff’s cause of action is entitled to summary judgment on that claim. Frost Nat’l
Bank v. Fernandez, 315 S.W.3d 494, 508-09 (Tex. 2010).
In a no-evidence summary judgment motion, the movant contends that
although a reasonable time has passed for discovery, no evidence supports one or
more essential elements of a claim or cause of action for which the nonmovant would
bear the burden of proof at trial. Tex. R. Civ. P. 166a(i); KCM Fin. LLC v. Bradshaw,
457 S.W.3d 70, 79 (Tex. 2015). The trial court must grant the no-evidence motion
unless the nonmovant raises a genuine issue of material fact on each challenged
8
element. Id. (citing Hamilton v. Wilson, 249 S.W.3d 425, 426 (Tex. 2008)). In
conducting our analysis, we must take as true all evidence favorable to the
nonmovant, and we indulge every reasonable inference and resolve any doubts in
the nonmovant’s favor. King Ranch, Inc. v. Chapman, 118 S.W.3d 742, 751 (Tex.
2003). A no-evidence motion for summary judgment is improperly granted if the
nonmovant brings forth more than a scintilla of probative evidence to raise a genuine
issue of material fact. Id. More than a scintilla of evidence exists when the evidence
“rises to a level that would enable reasonable and fair-minded people to differ in
their conclusions.” Id. (quoting Merrell Dow Pharms., Inc. v. Havner, 953 S.W.2d
706, 711 (Tex. 1997)). Less than a scintilla of evidence exists when the evidence is
“‘so weak as to do no more than create a mere surmise or suspicion’” of a fact. Id.
(quoting Kindred v. Con/Chem, Inc., 650 S.W.2d 61, 63 (Tex. 1983)). When, as here,
the order granting summary judgment does not specify the grounds relied upon by
the trial court for its ruling, we must affirm the judgment if any theory presented to
the trial court in the motion for summary judgment is meritorious. Knott, 128 S.W.3d
at 216; State Farm Fire & Cas. Co. v. S.S., 858 S.W.2d 374, 380 (Tex. 1993); Carr
v. Brasher, 776 S.W.2d 567, 569 (Tex. 1989).
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Guillory’s No-Evidence Motion for Summary Judgment
Sewell argues that the trial court erred in granting the no-evidence summary
judgment because he provided “more than a scintilla” of evidence showing a contract
and breach, and that he did not bear the burden of proof to show his termination was
“without good cause.” In Guillory’s no-evidence motion for summary judgment,
Guillory argued that there was no evidence that a valid contract exists or that he
breached such agreement, and further that because the matter involves a contract for
legal services, Sewell would have to prove that his termination “was without good
cause.” In Sewell’s response to the no-evidence motion for summary judgment,
Sewell disputed that he had not produced evidence of a valid contingent fee contract
and he argued:
[] Contrary to Defendant Joseph Guillory, II’s assertion, Plaintiff has
no summary judgment burden to prove a negative, i.e., that the
contingent fee contract was not terminated for good cause.
....
[] Whether Defendant Joseph Guillory, II terminated Plaintiff with or
without good cause is a genuine issue of material fact that must be
decided by the trier of fact. Further if Defendant Joseph Guillory, II
terminated Plaintiff with good cause the amount of Plaintiff’s quantum
meruit claim is another genuine issue of material fact that must be
decided by the trier of fact. These genuine issues of material fact
preclude summary judgment.
....
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[] Plaintiff is entitled to his full 33% assigned interest unless Defendants
can prove Plaintiff is entitled to a lesser sum. Defendants have set forth
no summary judgment evidence whatsoever that even raises a genuine
issue of material fact concerning termination of the contingent fee
agreement for just cause and so Defendants are not entitled to summary
judgment.
Sewell argues on appeal that he is entitled to seek a recovery of the “Mandell
Remedies” as outlined in Mandell & Wright v. Thomas, 441 S.W.2d 841, 847 (Tex.
1969), and that he supplied more than a scintilla of evidence on each of the elements
raised in the no-evidence motion for summary judgment. Guillory responds and
argues that the Sewell Fee Agreement is “unenforceable because of a critical
omission in the fee contract: how a fee was to be calculated in the event of
termination of the attorney-client relationship by the client.” Guillory also argues
that the Sewell Fee Agreement is “unconscionable because a competent lawyer
could not form a reasonable belief that Sewell’s claimed contingent fee was
reasonable since his work did nothing to advance the client’s claim.” Guillory
contends that Sewell’s claim based on quantum meruit is improper because “[t]he
number of hours which Sewell claims to have worked on the case is patently
excessive and impossible to believe[,]” and “Sewell’s affidavit did not address all of
the factors set forth in the Texas Disciplinary Rules of Professional Conduct [Section
1.04 (b)] or in relevant case law, Arthur Andersen & Co. v. Perry Equip. Corp., 945
S.W.2d 812, 818 (Tex. 1997), which would establish the reasonableness of the
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claimed fee.” In his reply brief, Sewell contends that Guillory’s arguments on appeal
regarding unconscionability and reasonableness of his fee, as well as the complaints
regarding Sewell’s affidavit and the application of the factors set forth in Arthur
Andersen, were not presented to the trial court by Guillory’s pleadings or filings and
should not be considered by this Court on appeal.
Enforceability of Sewell Fee Agreement
The first argument asserted by Guillory in his no-evidence motion for
summary judgment was that “there is no evidence that a valid, enforceable contract
existed between Plaintiff and Joseph Guillory.” Guillory did not elaborate in his
motion as to why the Sewell Fee Agreement would be invalid or unenforceable. In
Sewell’s response to the no-evidence motion for summary judgment, Sewell
attached his own affidavit with a copy of the Sewell Fee Agreement, and he stated
in his affidavit that “Section 1.02 of the contingent fee agreement assigns 33 and
1/3% of Joseph Guillory, II’s cause of action to me.” On appeal, Sewell contends
that he supplied “prima facie proof” of a contract, signed by both parties, that “went
on to set forth specific terms, including the assignment of an ‘undivided interest in
said claim’ and 33% to 40% of funds collected, depending on the stage of the
litigation.” Sewell did not directly address the validity or enforceability of the Sewell
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Fee Agreement in his response to the no-evidence motion for summary judgment,
nor did he address it in his opening appellate brief.
Texas law generally provides that “if an attorney hired on a contingent-fee
basis is discharged without cause before the representation is completed, the attorney
may seek compensation in quantum meruit or in a suit to enforce the contract by
collecting the fee from any damages the client subsequently recovers.” Hoover
Slovacek LLP v. Walton, 206 S.W.3d 557, 561 (Tex. 2006) (citing Mandell &
Wright, 441 S.W.2d at 847). “Both remedies are subject to the prohibition against
charging or collecting an unconscionable fee.” Id. (citing Tex. Disciplinary R. Prof’l
Conduct 1.04(a), reprinted in Tex. Gov’t Code Ann., tit. 2, subtit. G app. A (West
2013) (Tex. State Bar R. art. X, § 9)). Subsection (h) of Rule 1.08 prohibits a lawyer
from acquiring a lien or other proprietary interest in litigation the lawyer is
conducting for a client except the attorney may acquire a lien for a contingent fee
interest pursuant to an appropriate written contract. Tex. Disciplinary R. Prof’l
Conduct 1.08(h). Guillory argues on appeal that the Sewell Fee Agreement is
unenforceable and unconscionable. Whether an agreement is an enforceable contract
is a question of law. Crisp Analytical Lab, L.L.C. v. Jakalam Props. Ltd., 422 S.W.3d
85, 89 (Tex. App.—Dallas 2014, pet. denied). However, a determination of
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unconscionability involves both questions of law and fact. Hoover Slovacek, 206
S.W.3d at 561-62.
As stated above, if an attorney hired on a contingent-fee basis is discharged
without good cause before the representation is completed, the attorney may seek
compensation from his client under either the contract or in quantum meruit. Id.
(citing Mandell & Wright, 441 S.W.2d at 847). These remedies are known as the
Mandell remedies. The Mandell remedies are strictly construed, and the Texas
Supreme Court looks unfavorably upon contingent fee contracts that purport to
contract around them. Id. Alternatively, if an attorney is terminated for good cause,
the attorney is not entitled to recover under the contingent fee contract but he may
still be entitled to seek a recovery for services rendered up to the time of discharge
under quantum meruit. Rocha v. Ahmad, 676 S.W.2d 149, 156 (Tex. App.—San
Antonio 1984, writ dism’d). Both remedies are subject to the prohibition against
charging or collecting an unconscionable fee. Hoover Slovacek, 206 S.W.3d at 561
(citing Tex. Disciplinary Rules Prof’l Conduct R. 1.04(a)). “A fee is unconscionable
if a competent lawyer could not form a reasonable belief that the fee is reasonable.”
Tex. Disciplinary Rules Prof’l Conduct R. 1.04(a).
Taking as true all evidence favorable to the nonmovant, and after indulging
every reasonable inference and resolving any doubts in the nonmovant’s favor, as
14
we must, we conclude that the trial court erred in granting Guillory’s no-evidence
summary judgment. See Valence Operating Co., 164 S.W.3d at 661. Sewell brought
forth more than a scintilla of evidence to create a genuine issue of material fact
regarding whether he was terminated for good cause, and even if he was terminated
for good cause, there remains a genuine issue of material fact pertaining to his claim
for a recovery of his fees based on quantum meruit.4 Therefore, we sustain Sewell’s
issue as to the motion for summary judgment in favor of Guillory. We reverse the
trial court’s order granting Guillory’s no-evidence motion for summary judgment,
and we remand regarding Sewell’s alleged claim against Guillory.
Zurich’s Traditional Motion for Summary Judgment
In the Zurich Motion for Summary Judgment, Zurich argued that Zurich owed
no duty to Sewell and that Zurich was not liable for the payment of the fee sought
by Sewell. Zurich argued that it had no contractual relationship with Sewell, it owed
no duty to Sewell, Zurich did not cause damages to Sewell, and Sewell’s remedy, if
any, would be an action against Guillory, as the former client and signatory to the
attorney’s fee agreement. Zurich also argued that Sewell’s rights were derivative of
4
Guillory’s argument that the contract between Guillory and Sewell was
unenforceable was not presented to the trial court and raised for the first time on
appeal. Therefore, we need not address the argument as Guillory has not preserved
it for our review. See Aero Energy, Inc. v. Circle C Drilling Co., 699 S.W.2d 821,
822 (Tex. 1985).
15
Guillory’s rights, and that once the trial court dismissed the case with prejudice and
Zurich paid the settlement, Guillory’s rights against Zurich were extinguished.
Sewell filed a response to Zurich’s motion and argued that Zurich paid
$735,000 to Guillory and to Guillory’s second attorney, Dugas. According to Sewell,
Zurich knew prior to settling the claim that Sewell had retained an interest for
recovery of his contingency fee. Sewell attached an affidavit to his response and
attached thereto a letter dated June 29, 2012, addressed to Zurich. The letter stated
in part that Sewell had “been assigned an undivided interest in this claim and cause
of action.” Sewell alleged two causes of action in his suit against Zurich, breach of
an assignment interest in his former client’s cause of action and quantum meruit.
As a general rule, a discharged or terminated attorney cannot recover under
either theory against the opposing party or its insurance company. See, e.g., Dow
Chemical Co. v. Benton, 357 S.W.2d 565, 568 (Tex. 1962); Honeycutt v. Billingsley,
992 S.W.2d 570, 584 (Tex. App.—Houston [1st Dist.] 1999, pet. denied). There is
an exception to this rule when the discharged attorney alleges and proves that his
former client and the opposing party conspired to vitiate the attorney’s rights under
the contingent-fee agreement. See Honeycutt, 992 S.W.2d at 584 (citing Dow Chem.,
357 S.W.2d at 568). Sewell neither pleaded nor argued in the trial court action that
his former client, Guillory, and Diakon (or its insurer, Zurich) conspired to deprive
16
him of any rights he had under his contingent-fee contract with Guillory. Therefore,
this case is controlled by the general rule and the exception does not apply.
Sewell’s quantum meruit claim is an extra-contractual claim and that claim is
not cognizable against Zurich given that the services rendered by Sewell, if any,
were for Guillory’s benefit, and not for the benefit of Zurich (or its insured, Diakon).
Cf. Hoover Slovacek, 206 S.W.3d at 561 (allowing discharged attorney to seek
compensation in quantum meruit or in a suit to enforce the contract from former
client); Dow Chem., 57 S.W.2d at 567-68 (explaining that a “lawyer’s rights, based
on the contingent fee contract, are wholly derivative from those of his client[]” and
that an attorney working on a contingent fee “elects to litigate his interest
simultaneously with his client’s interest [and] in his client’s name[]”); see also
generally Heldenfels Bros., Inc. v. City of Corpus Christi, 832 S.W.2d 39, 41 (Tex.
1992) (To recover under the doctrine of quantum meruit, the plaintiff must establish,
among other things, that the party sought to be charged agreed to and accepted
valuable services or materials from the plaintiff.). Under the facts before us, the
quantum meruit claim, if any, would only be viable against Guillory, Sewell’s
former client. See Hoover Slovacek, 206 S.W.3d at 561. Moreover, Sewell’s
contingent fee agreement with Guillory would not allow Sewell to pursue a separate
claim against Zurich. See id. We further note that according to the terms of the
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Settlement Agreement and Release, Guillory settled with Zurich (as an “insurer”)
for “any and all” claims “resulting from the above described incidents[,]” and that
Guillory agreed to indemnify and hold harmless Zurich (as an “insurer”). We
overrule Guillory’s issue and affirm the trial court’s summary judgment in favor of
Zurich.
In appellate cause number 09-16-00078-CV, we reverse the trial court’s
summary judgment in favor of Guillory, and we remand Sewell’s claim against
Guillory. In appellate cause number 09-16-00079-CV, we affirm the trial court’s
summary judgment in favor of Zurich.
REVERSED AND REMANDED; AFFIRMED.
_________________________
LEANNE JOHNSON
Justice
Submitted on July 11, 2017
Opinion Delivered December 21, 2017
Before McKeithen, C.J., Horton and Johnson, JJ.
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