Shrader & Associates, L.L.P. v. Crissy Carrasco and David Carrasco, Jr. ( 2019 )

Opinion issued September 24, 2019
In The
Court of Appeals
For The
First District of Texas
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NO. 01-19-00042-CV
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SHRADER & ASSOCIATES, L.L.P., Appellant
V.
CRISSY CARRASCO AND DAVID CARRASCO, JR., Appellees
On Appeal from the 295th District Court
Harris County, Texas
Trial Court Case No. 2018-57553
MEMORANDUM OPINION
Shrader & Associates, L.L.P. filed a declaratory judgment action seeking an
order compelling Crissy Carrasco and David Carrasco, Jr. to arbitrate their legal
malpractice claim against the firm. The Carrascos disputed personal jurisdiction. The
trial court agreed with the Carrascos and dismissed the firm’s suit. We affirm.
BACKGROUND
Malpractice Suit
The Carrascos, California residents who have no contacts with Texas, retained
Shrader & Associates, a Texas law firm, to represent them in a personal-injury
matter. After the statute of limitations had expired as to the personal-injury claim
and without filing suit, the law firm informed the Carrascos that it would be unable
to represent them or pursue litigation on their behalf and therefore ended its
representation of the Carrascos. The Carrascos then sued the firm in California state
court, alleging legal malpractice.
Declaratory Judgment Action
Shrader & Associates filed this declaratory judgment action against the
Carrascos seeking an order compelling arbitration of their legal malpractice claim.
The firm alleged that the Carrascos had signed a fee agreement containing a
mandatory arbitration clause as to any attorney-client disputes.
In relevant part, the fee agreement’s arbitration clause states:
XVII. Arbitration. Any disagreement, dispute, claim or cause of action
arising pursuant to the performance of this agreement shall be resolved
through binding arbitration. The arbitration shall take place before a
panel of three (3) arbitrators in conformance with the rules of the
American Arbitration Association in Houston, Harris County, Texas.1
1
The original text appears in bold font and ALL CAPS. These qualities have been
omitted here for ease of readability.
2
It is undisputed that the Carrascos signed the fee agreement and that a representative
of Shrader & Associates did not do so despite a separate signature block for the firm.
Above the parties’ signature blocks, the agreement provides that, “This Attorney-
Fee Contract was entered into on ______.” The blank provided for the date of
execution is empty.
The Carrascos filed a special appearance contesting personal jurisdiction.
Shrader & Associates responded that the trial court had personal jurisdiction over
the Carrascos for the limited purpose of compelling arbitration because the fee
agreement’s arbitration clause provided for arbitration in Houston.
The trial court granted the Carrasco’s special appearance and dismissed the
firm’s declaratory judgment action for lack of personal jurisdiction. The trial court
did not specify the rationale underlying its dismissal order.
Arbitral Proceeding
On the same day that it filed its declaratory judgment action, Shrader &
Associates filed an arbitration demand with the American Arbitration Association.
The Association administratively determined that the firm’s arbitration clause
violated its consumer arbitration rules, in part because the clause’s requirement that
the arbitration be held in Houston was not reasonably convenient for both parties.
The Association requested that Shrader & Associates waive this aspect of the
arbitration clause as a prerequisite to arbitration. The firm disputed that the consumer
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arbitration rules applied and refused the waive the clause’s specification of Houston
as the location of the arbitration. The Association therefore declined to administer
the arbitration.
DISCUSSION
Shrader & Associates appeals from the trial court’s order granting the
Carrasco’s special appearance. The firm does not contend that there is general or
specific personal jurisdiction over the Carrascos. Instead, it contends that the fee
agreement’s arbitration clause provides personal jurisdiction over the Carrascos for
the limited purpose of compelling them to arbitrate their legal malpractice claim.
The Carrascos contend that the fee agreement, including its arbitration clause, is not
enforceable because the firm neither signed the agreement nor submitted other
evidence of its intent to be bound by the fee agreement. The Carrascos additionally
contend that the American Arbitration Association’s administrative dismissal of the
firm’s arbitration demand makes the firm’s continued demand for arbitration futile.
Standard of Review
We review de novo whether a trial court has personal jurisdiction. Old
Republic Nat’l Title Ins. Co. v. Bell, 549 S.W.3d 550, 558 (Tex. 2018). Because the
trial court did not issue findings of fact and conclusions of law, we imply all facts
necessary to support its judgment that are supported by the record. Id. To the extent
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that the facts relevant to our jurisdictional inquiry are undisputed, whether those
facts establish personal jurisdiction is question of law. Id.
Applicable Law
When a party signs an agreement with a forum-selection clause, the party
consents to personal jurisdiction in that forum, rendering ordinary principles of
general and specific jurisdiction irrelevant. See Guam Indus. Servs. v. Dresser–Rand
Co., 514 S.W.3d 828, 833 (Tex. App.—Houston [1st Dist.] 2017, no pet.). An
arbitration clause is a type of forum-selection clause. Id. The fee agreement’s
arbitration clause in this case provided for arbitration in Houston. The dispositive
question therefore is whether the arbitration clause is enforceable. See id.
An arbitration clause in a valid attorney-client agreement generally is
enforceable. See Royston, Rayzor, Vickery & Williams, LLP v. Lopez, 467 S.W.3d
494, 500 (Tex. 2015); see also Labidi v. Sydow, 287 S.W.3d 922, 928 (Tex. App.—
Houston [14th Dist.] 2009, no pet.) (attorney-client disputes involving contract,
relationship, services rendered, or fees charged are arbitrable). In deciding whether
to compel arbitration in a given case, a trial court must ascertain whether a valid,
enforceable arbitration agreement exists, and, if so, whether the claims asserted fall
within the scope of that agreement. Chambers v. O’Quinn, 305 S.W.3d 141, 146
(Tex. App.—Houston [1st Dist.] 2009, pet. denied).
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The existence of an enforceable arbitration agreement is a legal question
resolved by ordinary contract principles. Parker v. Schlumberger Tech. Corp., 475
S.W.3d 914, 922 (Tex. App.—Houston [1st Dist.] 2015, no pet.). Thus, the party
that is trying to enforce the agreement must show that it “meets all requisite contract
elements.” J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 228 (Tex. 2003). These
elements include an offer, an acceptance, a meeting of the minds, each party’s
consent to the terms, and the execution and delivery of the contract with the intent
that it be mutual and binding. APMD Holdings, Inc. v. Praesidium Med. Prof’l Liab.
Ins. Co., 555 S.W.3d 697, 707 (Tex. App.—Houston [1st Dist.] 2018, no pet.); see
also S.C. Maxwell Family P’ship v. Kent, 472 S.W.3d 341, 344 (Tex. App.—
Houston [1st Dist.] 2015, no pet.) (contract-formation issues going to very existence
of agreement containing arbitration clause must be resolved by trial court).
The party trying to compel arbitration bears the burden of proving the
existence of a valid arbitration agreement. Chambers, 305 S.W.3d at 146. Once the
party trying to compel arbitration has done so, the burden shifts to the opposing party
to establish a defense to the arbitration agreement, such as fraud, unconscionability,
or waiver. See Lopez, 467 S.W.3d at 500; Chambers, 305 S.W.3d at 146.
Analysis
Shrader & Associates contends that the fee agreement’s arbitration clause is
enforceable even though a representative of the firm did not sign the agreement. In
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support, the firm primarily relies on our decision in Chambers, a legal malpractice
suit in which we affirmed the trial court’s order compelling arbitration based on an
arbitration clause contained in fee agreements that had been signed by the clients but
not by the attorney. See Chambers, 305 S.W.3d at 147, 152–53.
The Carrascos initially contend that the firm’s failure to sign the fee agreement
makes its arbitration clause unenforceable. They rely on section 82.065(a) of the
Government Code, which requires contingent-fee contracts for legal services to be
in writing and signed by the attorney and the client. TEX. GOV’T CODE § 82.065(a).
In Chambers, this court rejected the position that section 82.065(a) makes an
arbitration clause in a fee agreement unsigned by the attorney unenforceable. 305
S.W.3d at 152–53. The court reasoned that the purpose of section 82.065(a), which
is a statute of frauds, was fulfilled because the client—the party against whom the
arbitration clause was being enforced—had signed the fee agreement. See id. at 152;
accord Law Office of Thomas J. Henry v. Cavanaugh, No. 05-17-00849-CV, 2018
WL 2126936, at *4 (Tex. App.—Dallas May 7, 2018, pet. denied) (mem. op.) (firm’s
failure to sign fee agreement, standing alone, did not make its arbitration clause
unenforceable). Accordingly, Shrader & Associates’ failure to sign the agreement—
in and of itself—does not render the agreement’s arbitration clause unenforceable.
The Carrascos further contend, however, that the record lacks any evidence
that the firm intended to be bound by the fee agreement. Because the firm neither
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signed the agreement nor introduced other evidence that the firm had accepted the
agreement’s terms, the Carrascos contend, Chambers is not dispositive.
We agree that Chambers is not dispositive. While that decision is controlling
as to section 82.065(a)’s effect, the firm’s failure to sign the fee agreement still
presents a contract-formation issue under ordinary contract principles. See RSL
Funding v. Newsome, 569 S.W.3d 116, 124 (Tex. 2018) (characterizing “whether a
party ever signed a contract” as a contract-formation defense). In Chambers, there
was ample evidence that the attorney had accepted the fee agreement and intended
to be bound by it, despite the absence of his signature. Specifically, the attorney
provided legal services under the agreement, representing the clients in litigation and
settling their claims. See Chambers v. O’Quinn, 242 S.W.3d 30, 31 (Tex. 2007) (per
curiam). Similarly, in Cavanaugh, the firm filed suit on its client’s behalf and
represented him in litigation for more than a year, which evidenced an intent to be
bound by the agreement’s terms. See Cavanaugh, 2018 WL 2126936, at *4.
In contrast, the record in this case does not contain equivalent evidence of
performance, or other evidence, showing that the firm bound itself to the agreement.
Shrader & Associates admits that several months after the Carrascos signed the fee
agreement, the firm “communicated to Chrissy that it would be unable to proceed
with the representation” and then sent a formal letter a week later explaining that the
firm “would be ‘unable to represent you or otherwise pursue a case.’”
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Shrader and Associates maintains that before ending its representation of the
Carrascos, the firm evaluated their claims and that this work undertaken on their
behalf is sufficient performance to evidence the firm’s acceptance of the fee
agreement. Assuming without deciding that the firm’s pre-suit evaluation of its
clients’ claims could serve as proof of the requisites of contract formation, the record
is devoid of evidence that the firm made a pre-suit evaluation of the Carrascos’
claims or that it engaged in any other activities on their behalf. Because the firm
bears the burden of proving an enforceable arbitration agreement, the absence of
evidence supporting contract formation is fatal to its suit to compel arbitration.
Shrader & Associates contends that the requisites of contract formation are
immaterial because an assertion that any of these requisites is lacking constitutes an
attack on the validity of the fee agreement as a whole rather than its arbitration clause
in particular. The firm argues that the Carrascos must successfully challenge the
enforceability of the arbitration clause, not the entire agreement, in order to escape
the arbitration clause. When a party challenges the very existence of an agreement
on contract-formation grounds, however, these challenges present threshold issues
that must be decided by the trial court before it can compel arbitration. RSL Funding,
569 S.W.3d at 124–25; S.C. Maxwell, 472 S.W.3d at 344.
Finally, Shrader & Associates contends that the Carrascos cannot avoid the
arbitration clause because their legal malpractice claim depends on the fee
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agreement’s existence. An attorney-client relationship, however, may exist without
a written contract. See Span Enters. v. Wood, 274 S.W.3d 854, 858 (Tex. App.—
Houston [1st Dist.] 2008, no pet.) (attorney-client relationship may be created by
express contract or implied from parties’ conduct). The Carrasco’s legal malpractice
claim therefore does not depend on the existence of the fee agreement. See id.
In sum, the material facts are not in dispute. Shrader & Associates did not sign
the fee agreement and the blank for indicating its date of execution is unfilled. There
is no evidence that the firm performed under the fee agreement. Nor is there evidence
showing that the firm otherwise intended to be bound by the fee agreement. On this
record, the trial court did not err by implicitly concluding that the there was not a
valid, enforceable fee agreement and that personal jurisdiction over the Carrascos
therefore could not be asserted on the basis of that agreement’s arbitration clause.
As the fee agreement’s arbitration clause is unenforceable, it is not necessary
for us to consider the Carrascos’ alternative argument that it would be futile to order
them to arbitrate their legal malpractice claim due to the American Arbitration
Association’s administrative refusal to hear the dispute. See TEX. R. APP. P. 47.1.
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CONCLUSION
We affirm the judgment of the trial court.
Gordon Goodman
Justice
Panel consists of Justices Lloyd, Goodman, and Landau.
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