the Davis Law Firm v. James Bates and Consumers County Mutual Insurance Company ( 2014 )

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.
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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.
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$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.
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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
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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.
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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.
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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.
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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
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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.
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