Robert J. Piro, Earle S. Lilly, Piro & Lilly, L.L.P. v. Linda Sarofim Lowe

  Opinion issued April 11, 2002

In The

Court of Appeals

For The

First District of Texas

____________

NO. 01-00-00398-CV

____________

ROBERT J. PIRO, EARLE S. LILLY, AND PIRO & LILLY, L.L.P., Appellants

V.

FAYEZ SAROFIM, INDEPENDENT EXECUTOR OF THE ESTATE OF LINDA SAROFIM LOWE, DECEASED, Appellee

and

FAYEZ SAROFIM, INDEPENDENT EXECUTOR OF THE ESTATE OF LINDA SAROFIM LOWE, DECEASED, Appellant

V.

ROBERT J. PIRO, EARLE S. LILLY, AND PIRO & LILLY, L.L.P., Appellees

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On Appeal from the 295th District Court

Harris County, Texas

Trial Court Cause No. 97-62103

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O P I N I O N  

Linda Sarofim Lowe hired Robert J. Piro, Earle S. Lilly, and the firm of Piro & Lilly, L.L.P. ("the lawyers") to represent her in her divorce from Fayez Sarofim. After the conclusion of the divorce proceeding, Lowe sued the lawyers for breach of fiduciary duty and other causes of action, claiming they charged her excessive fees for the divorce. Lowe also asked the trial court to forfeit the attorneys' fees.

The jury found that the lawyers breached their fiduciary duty to Lowe and awarded her $3,000,000 in actual damages. In the alternative, the trial court forfeited the attorneys' fees amounting to $3,000,000. The trial court in its judgment stated, "it is not the intention of the Court that Plaintiff obtain both actual damages and the equitable remedy of fee forfeiture for Defendants' breaches of fiduciary duty." The total award to Lowe in the final judgment was $3,000,000 alternatively based on breach of fiduciary duty or fee forfeiture.

On appeal, the lawyers bring eight issues. Fayez Sarofim, independent executor of the estate of Linda Sarofim Lowe, deceased, brings a single point of error. ⁽¹⁾ We affirm.

The Lawyers' Appeal

In issue one, the lawyers contend the trial court erred in refusing to disregard the jury's answer to question 1: "Did Earle Lilly and/or Robert Piro comply with his fiduciary duty to Linda Lowe?" ⁽²⁾ Question 1 was taken from Pattern Jury Charge 104.2. Comm. on Pattern Jury Charges, State Bar of Tex., Texas Pattern Jury Charges: Business • Consumer • Employment PJC 104.2 (2000). On appeal, the lawyers give three reasons the answer should have been disregarded: (1) Lowe had no tort claim, but only had breach-of-contract and fee-forfeiture claims; (2) question 1 was not supported by the pleadings; and (3) the existence of fiduciary duties and breaches thereof are legal questions that should not be submitted to a jury. We will only address the last reason because it was the only complaint made to the trial court with sufficient specificity to make that court aware of the complaint. See Tex. R. App. P. 33.1(a)(1)(A).

In their motion to disregard the jury's verdict, the lawyers claim question 1 was immaterial because it calls for a finding beyond the province of the jury, i.e., it is a question of law for the court to decide. See Spencer v. Eagle Star Ins. Co. of Am., 876 S.W.2d 154, 157 (Tex. 1994) (defining immateriality). The lawyers' specific argument follows:

Texas law is perfectly clear that the existence of and breaches of fiduciary duties are legal questions and not fact or jury questions as to both tortious and Arce varieties. However, any contested facts in an equitable action must be resolved, and a party is entitled to have that resolution made by a jury. If an issue is submitted to a jury on the existence of and breach of fiduciary duty, the answer must be disregarded by the court because they are questions of law to be determined by the court.

(Citations omitted). As authority, they cite to four cases--Burrow v. Arce, Taylor v. GWR Operating Co., Lacy v. Ticor Title Insurance Co., and Fuqua v. Taylor--that stand for the proposition that undisputed fact issues should not be submitted to the factfinder. Burrow, 997 S.W.2d 229, 246 (Tex. 1999); Taylor, 820 S.W.2d 908, 911 (Tex. App.--Houston [1st Dist.] 1991, writ denied); Lacy, 794 S.W.2d 781, 787 (Tex. App.--Dallas 1990, writ ref'd n.r.e.), writ denied per curiam on other grounds, 803 S.W.2d 265 (Tex. 1991); Fuqua, 683 S.W.2d 735, 737-38 (Tex. App.--Dallas 1984, writ ref'd n.r.e.).

Question 1, of course, did not ask the jury whether the lawyers owed a duty to Lowe (which they unquestionably did), but instead asked the jury to resolve fact questions regarding possible breaches of that duty. In their argument on appeal, which consists of the above-quoted paragraph, the lawyers do not argue with any specificity that the facts in this case related to breaches of their fiduciary duty were uncontested. We decline to conduct a de novo review of the record to see if there were, in fact, no contested fact issues related to question 1. See Tex. R. App. P. 38.1(h) (appellant's brief must contain clear and concise argument for contentions made, with appropriate citations to authority and to record).

We overrule issue one.

In issue two, the lawyers contend the trial court erred by (1) not excluding Lowe's expert witnesses on legal ethics (George Edwin Brooks, W. Amon Burton, Jr., and James M. McCormack), (2) refusing the lawyers' request for a "live gatekeeper hearing," as opposed to evaluating the proposed experts based on deposition and affidavit testimony, and (3) allowing the experts to use the Texas Disciplinary Rules of Professional Conduct in their testimony. The trial objections on which the lawyers base issue two were their request that the proposed experts be examined at the hearing and their written motion to exclude the experts' testimony based on Texas Rule of Evidence 702, Daubert v. Merrell Dow Pharmaceuticals, Inc., and E.I. DuPont de Nemours & Co. v. Robinson. Daubert, 509 U.S. 579, 113 S. Ct. 2786 (1993); Robinson, 923 S.W.2d 549 (Tex. 1995). ⁽³⁾ Regarding the testimony of Burton and McCormack, the lawyers contend it violates the Robinson factors because "[t]heir conclusions have not been tested, been subjected to peer review, or been generally accepted by the legal community, and all of their conclusions were carefully crafted for this lawsuit and clearly based on their subjective interpretation of the Disciplinary Rules or the facts about which they had no knowledge."

In deciding if an expert is qualified, trial courts "must ensure that those who purport to be experts truly have expertise concerning the actual subject about which they are offering an opinion." Gammill v. Jack Williams Chevrolet, Inc., 972 S.W.2d 713, 719 (Tex. 1998). The supreme court has explained that Daubert and Rule 702 demand that the district court evaluate the methods, analysis, and principles relied upon in reaching the opinion. The court should ensure that the opinion comports with applicable professional standards outside the courtroom and that it will have a reliable basis in the knowledge and experience of the discipline. Gammill, 972 S.W.2d at 725-26. In Gammill, the court recognized that the Robinson factors may not apply to certain testimony. Id. at 726. However, there still must be some basis for the opinion offered to show its reliability, and, ultimately, the trial court must determine how to assess reliability. Id. at 726.

There is a fundamental procedural difficulty with the lawyers' appellate argument. The record references they marshal to demonstrate why the experts do not meet the Robinson factors are all from testimony that occurred after the hearing on their motion. Nowhere in the lawyers' appellate brief do they demonstrate they specifically objected to the experts' testimony as offered to the jury. See Harvey Brown, Procedural Issues Under Daubert, 36 Hous. L. Rev. 1133, 1146-47 (1999) (suggesting overruling of Robinson motion does not preserve error). This means the lawyers have asked us to review the trial court's initial Robinson decision based on what the experts said later at trial. The lawyers also do not indicate that they reurged their Robinson objection before the case was submitted to the jury. Thus, we cannot hold that the trial court abused its discretion at the initial Robinson hearing.

We recognize the relationship between (1) requiring the lawyers to specifically object to the expert witnesses' trial testimony and (2) the trial court's decision to base the Robinson ruling on the experts' deposition and affidavit testimony, rather than calling the experts to testify at the hearing. The lawyers did not present authority--either at trial or on appeal--that Robinson requires such a live hearing, and we are not aware of any. The equivalent federal rule does not expressly require an evidentiary hearing, and the trial court's decision on how to hold such a hearing falls within its discretion:

The trial court must have the same kind of latitude in deciding how to test an expert's reliability, and to decide whether or when special briefing or other proceedings are needed to investigate reliability, as it enjoys when it decides whether or not that expert's relevant testimony is reliable. Our opinion in Joiner makes clear that a court of appeals is to apply an abuse-of-discretion standard when it "review[s] a trial court's decision to admit or exclude expert testimony." That standard applies as much to the trial court's decisions about how to determine reliability as to its ultimate conclusion. Otherwise, the trial judge would lack the discretionary authority needed both to avoid unnecessary "reliability" proceedings in ordinary cases where the reliability of an expert's methods is properly taken for granted, and to require appropriate proceedings in the less usual or more complex cases where cause for questioning the expert's reliability arises. Indeed, the Rules seek to avoid "unjustifiable expense and delay" as part of their search for "truth" and the "jus[t] determin[ation]" of proceedings.

Kuhmo Tire Co. v. Carmichael, 526 U.S. 137, 152-53, 119 S. Ct. 1167, 1176 (1999) (citations omitted); see Brown, Hous. L. Rev. at 1149-53.

Because the Texas Supreme Court permits Robinson objections when the evidence is offered at trial, it would likely also adopt the federal abuse-of-discretion review of a trial court's decision whether, when, and how to hold a Robinson hearing. In exercising this discretion, however, the trial court should keep in mind the supreme court's admonition that "[c]ourts should allow a party . . . to present the best available evidence." Merrell Dow Pharm., Inc. v. Havner, 953 S.W.2d 706, 720 (Tex. 1997).

We note that the trial court did place limits on the experts' use of the Texas Disciplinary Rules of Professional Conduct in their testimony. The lawyers neither point to anywhere in the record where they objected that the witnesses were testifying outside of the limits imposed by the trial court, nor do they explain how the specific testimony violated those limits. See Brown, Hous. L. Rev. at 1145 (discussing effect of trial court limiting expert's testimony).

Finally, the lawyers argue that the supreme court in Havner relieved opponents of expert testimony from the duty to preserve error. 953 S.W.2d at 712. We disagree. The supreme court's opinion in Maritime Overseas Corp. v. Ellis reiterates the necessity of objecting to the evidence before trial or when the evidence is offered. 971 S.W.2d 402, 409 (Tex. 1998); see also Tex. R. App. P. 33.1(a); Tex. R. Evid. 103(a)(1).

We overrule issue two.

In issue three, the lawyers contend the trial court erred in refusing their instruction limiting the breach-of-fiduciary-duty question to the time period on or before November 14, 1996, when Lowe paid the lawyers' legal fees in the underlying divorce proceeding. The lawyers cite general authority concerning charge practice, but no authority related to the specific fact scenario in this case, i.e., the relevant time periods in fee disputes.

Lowe points to evidence in the record which indicates the attorney-client relationship continued past November 14, 1996. The lawyers respond that Lowe's pleadings did not allege a breach of fiduciary duty past November 14, 1996, but do not show that they either specially excepted to Lowe's pleadings in this regard or objected to evidence offered at trial related to events past that time. Because there was a fact issue regarding the length of the attorney-client relationship, we cannot say the trial court abused its discretion in refusing the lawyer's instruction. See Texas Dep't of Human Servs. v. E.B., 802 S.W.2d 647, 649 (Tex. 1990) (abuse-of-discretion standard governs claims of error in jury charge).

We overrule issue three.

In issue four, the lawyers contend the trial court erred in excluding evidence that Lowe untruthfully testified that she had earned a master's degree. The lawyers offered the live testimony of Pamela Cay Lollar, registrar of the Mississippi University for Women, to show that Lowe had never earned a degree from that institution. The lawyers also offered Lowe's subsequent testimony on cross-examination that she had not earned the degree.

The lawyers cite to the Austin Court of Appeals' opinion in Poole v. State, thus inferentially acknowledging this is an impeachment on a collateral matter. Poole, 974 S.W.2d 892, 905-06 (Tex. App.--Austin 1998, pet. ref'd). Generally a witness may not be impeached regarding a collateral matter, which is a matter not relevant to proving a material issue in the case. Id. at 905; see also Tex. R. Evid. 608(b) ("Specific instances of the conduct of a witness, for the purpose of attacking or supporting the witness's credibility, other than conviction of crime as provided in Rule 609, may not be inquired into on cross-examination of the witness nor proved by extrinsic evidence."). Whether Lowe had a master's degree was clearly a collateral matter in this case. The case law, however, recognizes an exception to the impeachment-on-a-collateral-matter rule when a witness voluntarily gives misleading testimony, as Lowe did. Id. at 905.

We agree with the Dallas Court of Appeals that the trial court should be guided by Texas Rules of Evidence 401, 402, and 403 in deciding the ultimate admissibility of the collateral matter. See Keene Corp. v. Gardner, 837 S.W.2d 224, 230 (Tex. App.--Dallas 1992, writ denied); see also 1 Steven Goode et al., Texas Practice: Guide to the Texas Rules of Evidence: Civil and Criminal § 607.3 (2d ed. 1993 & Supp. 2001). Although Lowe's testimony was untruthful, the trial court could have applied Rules 401, 402, and 403 either to allow the impeachment by collateral evidence or not allow the impeachment. This is a matter entrusted to the trial court's discretion, and as such, we will not disturb it.

We overrule issue four.

In issue five, the lawyers contend the trial court erred in making a fee-forfeiture award based on unauthorized findings of fact. Attorney Piro, however, made the following request to the trial court:

Defendant Robert J. Piro understands that the Court is not required to make findings of fact in a jury case. Defendant Robert J. Piro does not believe that the Court could base its Arce judgment on facts other than those found by the jury and/or undisputed facts and that if the Court did so, it would be error. However, in the event the Court did base its Arce judgment on facts other than undisputed facts and/or those facts found by the jury, and without waiving Defendant's contention that contested fact issues, if any, were to be resolved solely by the jury, Defendant Robert J. Piro requests the Court to show what those factual findings were.

With regard to Conclusions of Law, Defendant Robert J. Piro suggests to the Court that under the Arce decision by the Supreme Court, this Court was required to find as a matter of law that a fiduciary duty existed which was breached by Defendant(s) and that such breach was clear and serious. Defendant Robert J. Piro requests that the Court make Conclusions of Law as to each and every act the Court believed resulted in a clear and serious breach of fiduciary as well as any other conclusions of law used by the Court so as to provide Defendant Robert J. Piro with a fair and reasonable opportunity to have this Court's Arce judgment properly reviewed.

The trial court made findings of fact and conclusions of law after noting that Piro's request was "confusing and contradictory." Those findings and conclusions are attached to this opinion as an appendix.

The lawyers do not point to anywhere in the record where they objected to the trial court's findings and conclusions. See Tex. R. App. P. 33.1(a)(1) (preservation of error). Accordingly, we need not decide whether the specific findings and conclusions improperly exceeded Piro's request, although we note the lawyers do not provide any specific analysis in their appellate brief.

We overrule issue five.

In issue six, the lawyers contend there is no evidence to support the jury's finding in question 1 that the lawyers did not comply with their fiduciary duty to Lowe, or, in the alternative, that finding is against the great weight and preponderance of the evidence. In deciding a no-evidence claim, we consider the evidence and inferences tending to support a jury's finding. Havner v. E-Z Mart Stores, Inc., 825 S.W.2d 456, 458 (Tex. 1992). We disregard all contrary evidence and inferences. Transport Ins. Co. v. Faircloth, 898 S.W.2d 269, 275-76 (Tex. 1995); Havner, 825 S.W.2d at 458. Any evidence of probative force supporting a finding requires us to uphold the jury's verdict. S. States Transp., Inc. v. State, 774 S.W.2d 639, 640 (Tex. 1989). When reviewing a jury verdict to determine the factual sufficiency of the evidence, we must consider and weigh all the evidence, and should set aside the judgment only if it is so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust. Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986); see also Pool v. Ford Motor Co., 715 S.W.2d 629, 635-36 (Tex. 1986).

The record contains evidence from which the jury could, and did find that the lawyers took advantage of Lowe and breached their fiduciary duty to her, ranging from the testimony of Lowe's expert witnesses (whose testimony is not challenged in this issue), to the lawyers' multiple billing and receipt of multiple payments by Lowe, to Lilly's inappropriate personal relationship with Lowe. We hold there is enough evidence to support the legal sufficiency of the evidence, and looking at all the evidence, the jury's verdict is not so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust.

We overrule issue six.

In issue seven, the lawyers contend there is no evidence to support the trial court award of fee forfeiture, or in the alternative, that award is against the great weight and preponderance of the evidence. The supreme court set forth the test and procedures for fee forfeiture in Burrow v. Arce:

[W]hen forfeiture of an attorney's fee is claimed, a trial court must determine from the parties whether factual disputes exist that must be decided by a jury before the court can determine whether a clear and serious violation of duty has occurred, whether forfeiture is appropriate, and if so, whether all or only part of the attorney's fee should be forfeited. Such factual disputes may include, without limitation, whether or when the misconduct complained of occurred, the attorney's mental state at the time, and the existence or extent of any harm to the client. If the relevant facts are undisputed, these issues may, of course, be determined by the court as a matter of law. Once any necessary factual disputes have been resolved, the court must determine, based on the factors we have set out, whether the attorney's conduct was a clear and serious breach of duty to his client and whether any of the attorney's compensation should be forfeited, and if so, what amount. Most importantly, in making these determinations the court must consider whether forfeiture is necessary to satisfy the public's interest in protecting the attorney-client relationship. The court's decision whether to forfeit any or all of an attorney's fee is subject to review on appeal as any other legal issue.

Arce, 997 S.W.2d at 246. The factors the trial court is to consider in applying the remedy of fee forfeiture to attorneys are: (1) the gravity and timing of the violation; (2) its wilfulness; (3) its effect on the value of the lawyer's work for the client; (4) any other threatened or actual harm to the client; (5) the adequacy of other remedies; and (6) the public interest in maintaining the integrity of attorney-client relationships. Id. at 243-44.

The lawyers in their appellate brief do not marshal the evidence under this issue in a manner that applies Arce factors to the tests for legal and factual sufficiency discussed in issue six. Instead, they argue in a conclusory fashion that the evidence is insufficient. The lawyers do argue that factor 5--the adequacy of other remedies--should preclude the award of $3,000,000 as a fee forfeiture because the trial court also awarded in the alternative $3,000,000 as damages for the lawyers' breach of fiduciary duty to Lowe. This argument has no merit, however, because the trial court awarded the $3,000,000 only once, based on the independent, alternative grounds of damages and fee forfeiture.

Forfeiture of an attorney's fee is an equitable remedy. Arce, 997 S.W.2d at 245. In this case, the trial court submitted the contested fact issues to the jury, and we have upheld the sufficiency of the jury's verdict in issue six. To the extent the lawyers' have requested us in issue seven to review the trial court's exercise of its equity in awarding the fee forfeiture, we uphold the trial court's award.

We overrule issue seven.

In issue eight, the lawyers contend no evidence supported the jury's verdict for $3,000,000 in actual damages for breach of fiduciary duty, or in the alternative, the verdict is against the great weight and preponderance of the evidence. Because the trial court's damage award was made in the alternative and we have overruled the lawyer's challenge to the $3,000,000 fee-forfeiture award, we do not reach this point.

Lowe's Appeal

In her appeal, Lowe brings a single point of error in which she contends the trial court erred in not rendering judgment on both the $3,000,000 damage award and the $3,000,000 fee-forfeiture award. See Tex. R. Civ. P. 301 ("judgment of the court . . . shall be so framed as to give the party all the relief to which he may be entitled either in law or equity."). Although we agree the trial court could have rendered judgment against the lawyers on both awards without creating a double recovery, the trial court did not err when it declined to render such a judgment.

Two of the Arce factors the trial court had to consider were the adequacy of other remedies and the public interest in maintaining the integrity of attorney-client relationships. Lowe has not demonstrated that the trial court, in considering those factors, abused its discretion in conditioning the equitable fee-forfeiture award as an alternative award to the breach-of-fiduciary-duty-damages award.

We overrule Lowe's sole point of error.

Conclusion

We affirm the trial court's judgment.

Sherry J. Radack

Justice

Panel consists of Chief Justice Schneider and Justices Taft and Radack.

Do not publish. Tex. R. App. P. 47.4

Appendix NO. 97-62101

Linda Sarofim Lowe § IN THE DISTRICT COURT OF

§

vs. § HARRIS COUNTY, TEXAS

§

Robert J. Piro, et al. § 295TH JUDICIAL DISTRICT

Finding of Facts and Conclusions of Law

On this date, the court considered the "Limited Request for Findings of Fact and Conclusions of Law" filed by Robert J. Piro and finds the request itself to be confusing and contradictory. While the case was on trial, the defendants initially took the position that the judge should decide the breach of fiduciary duty question and that the jury should answer specific factual questions. During the trial, I prepared a three-page list of questions to ask the jury about the disputed facts that I thought had a bearing on the breach of fiduciary duty question and handed it out to all the parties. After reviewing that list, the defendants changed their mind and agreed to ask the jury the global breach of fiduciary duty question. That question was submitted to the jury without objection by the defendants, as to the jury's role in deciding the issue. Now Mr. Piro is attempting to claim in his "Limited Request" that the jury should have been asked specific fact questions and is making some sort of argument that it would be error for me to make an independent review of the evidence or of the facts in coming to my conclusion that fee forfeiture was appropriate in this case.

The jury found that both defendants breached their fiduciary duty to Linda Lowe. The court agrees with that finding. The breaches of fiduciary duty by the defendants in the case were numerous, serious and clear.

In the event that the jury finding is insufficient, the court makes the following findings of fact and conclusions of law.

Findings of Fact:

• The fee agreement and the conduct of the attorneys were not fair and equitable to Linda Lowe.
• Robert Piro and/or Earle Lilly did not fully and fairly disclose all important information to Linda Lowe concerning the fee contract prior to entering into the contract, including the fact that contingent fees in divorce cases are rarely justified
• The fee contract did not adequately describe the method by which the contingent fee is to be determined.
• The contingent fee on the River Oaks house, the ranch and the art was not justified under the circumstances.
• The fee contract was not fair and equitable to Linda Lowe because the reduction in hourly rates of Piro was illusory, given the high retainer, and because Lilly was the attorney who handled the majority of the property issues.
• Because Robert J. Piro would have to be a witness in the litigation, the firm should not have undertaken Lowe's representation especially on a contingent fee basis where Piro's credibility as a witness would be undermined by his financial interest in the outcome. The non-disqualification agreement in the pre nuptial agreement only operates to prevent the opposing side from disqualifying an attorney. It should never be used to argue that there was no conflict in taking on the representation. Incredibly in post trial briefing, Piro claims that he withdrew as lead counsel because of the problem. This of course compounds the fee problem-charging both an hourly rate and a contingent fee when Lilly was doing all of the work.
• The change from an hourly representation to the contingent fee representation was not in Lowe's best interest. Lowe was not advised to have separate counsel review the agreement. Lowe and Piro & Lilly had a long-standing legal representation on an hourly rate basis, including a previous divorce filing as to Mr. Sarofim, on an hourly basis. The second divorce petition was filed and legal representation was begun before the contingent fee agreement was signed (notwithstanding the self serving statement in the fee agreement itself.) Although Piro & Lilly claim that it was Lowe's idea to have a contingent fee, the timing and preparation of the fee agreement and the letters prepared by Piro and Lilly do not support that claim.
• Robert J. Piro and Earle Lilly did not make reasonable use of the confidence that Linda Lowe placed in them.
• Earle Lilly did not maintain solely a professional relationship with Linda Lowe during this representation. The fact that Lilly and Lowe did not have sex (disputed by Lowe) is not determinative. Lilly engaged in a personal romantic relationship with Lowe during the course of the representation.

• Linda Lowe's emotional feelings for Earle Lilly impaired her ability to agree to the amount of attorney fees.