Texas Appellate Lawyer & Attorney : D. Todd Smith Law Firm : Appeals, Sanctions, Summary Judgment : Austin, Texas

The Texas Supreme Court issued four decisions with this week's regular orders.

In City of Waco v. Lopez (No. 06‑0089), a retaliatory discharge action in which the City filed a plea to the jurisdiction, the Court held that  the Texas Commission on Human Rights Act  provided the exclusive state statutory remedy.  The Court reversed the court of appeals’ judgment and dismissed the case because the only pleaded theory was not actionable and because plaintiff had not satisfied the administrative prerequisites for maintaining a retaliation claim.

In David J. Sacks, P.C. v. Haden (07‑0472) (per curiam), the Court concluded that an unambiguous written attorney's fee agreement specifying only hourly rates could not be modified by any oral agreement to cap the total fees to be charged.  Because the court of appeals held that evidence of an oral agreement raised a fact issue on whether the parties had a meeting of the minds, the supreme court reversed and reinstated the trial court's judgment awarding damages to the law firm for breach of contract.

In a related case, David J. Sacks, P.C. v. Haden (07‑0487) (per curiam), the court of appeals reversed a turnover order in the law firm's favor after reversing the trial court's money judgment.  Because of the result reached in No. 07-0472, the supreme court reversed and remanded so the court of appeals could consider whether the turnover order was proper under Section 31.002(e) of the Civil Practice and Remedies Code. 

In Sells v. Drott (07‑0848) (per curiam), the Court reversed a default judgment granted after the trial court struck facially valid answers filed on defendant's behalf without notice to defendant that the answers' validity was in dispute.

This set of orders marks the beginning of "summer recess."  A few opinions and rulings on petitions may trickle out over the next several weeks, but the Court has no conferences scheduled until mid-August.

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Anyone want to hire me for a flat fee of $200,000 for a single case? 

Didn't think so.  But then again, I'm not the former Solicitor General of the United States.

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The Texas Supreme Court issued 11 decisions, all but three of them per curiam, with this week's orders.  They are:

• In re H.V. (No. 06-0005), a juvenile justice case involving the suppression of evidence and appellate review under Section 56.03(b) of the Texas Family Code.
  
  
• Lewis v. Funderburk (No. 06-0518), resolving a 12-2 split among the intermediate courts of appeals and concluding that those courts have jurisdiction to review allegedly inadequate expert reports in health care liability cases.
  
  
• Following Lewis and reversing contrary decisions from the Fort Worth and Waco courts, the supreme court issued per curiam opinions in Moore v. Gatica (No. 07-0094), Diaz-Rohena v. Melton (No. 07-0173) (which actually came from the First District), Center for Neurological Disorders, P.A. v. George (No. 07-0174), Collini v. Pustejovsky (No. 07-0227), Graham Oaks Care Center, Inc. v. Farabee (No. 07-0228), Danos v. Rittger (No. 07-0312), Hill Regional Hospital v. Runnels (No. 07-0368), and Metwest Inc. v. Rodriguez (No. 07-0422).
  
  
• Medical City Dallas, Ltd. v. Carlisle Corp. (No. 06-0660), holding that an action for breach of warranty is a claim for breach of contract for which Chapter 38 of the Civil Practice and Remedies Code permits recovery of attorney's fees.

Osler McCarthy's detailed summaries are available here.

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I have been surprised at the variety of ways in which contingent-fee agreements address what will happen if the case goes up on appeal.  Some don't deal with it at all, other than to say that the trial attorney is not obligated to pursue or defend an appeal should one be taken.  At the other end of the spectrum, agreements that encompass any appeal sometimes kick the lawyer's cut of any recovery up by 5 or 10 percent.

Like most other attorney-client issues, this one is probably best spelled out up front.  Selfishly, I like the "10 percenters" because the trial lawyer is usually willing if not eager to part with the increase to have a specialist handle the appeal, especially if 10 percent is all it takes.  But some don't like a 10 percent kicker because that arrangement leaves the client with less than half the recovery after costs are taken off the top.

Depending on the case, the trial lawyer might assign the differential plus some part of his or her original share, sometimes blended with a flat-fee portion to offset the risk.  Another alternative is to take some portion of the trial lawyer's contingency, as well as some other portion of the gross recovery directly from the client.

There really is no right or wrong way to do it, but in my view, contingent-fee agreements should always spell out what happens in the event of an appeal.

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In Texas Comptroller of Public Accounts v. Attorney General of Texas (No. 03-07-00102-CV), the Third Court of Appeals has agreed with an attorney general opinion that state employees' birth dates are public information subject to disclosure under the Texas Public Information Act.  Justice Diane Henson (pictured) wrote the panel opinion (joined by Chief Justice Law and Justice Waldrop) affirming the trial court's summary judgment for the AG.  The appellate court also rejected a request for attorney's fees by The Dallas Morning News, which made the public information request that generated the controversy.

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In this post from last summer, I mentioned reverse contingent fees as a potential means of compensating appellate counsel.  Spurred by a question I asked in response to one of his recent posts, Blawgletter (a/k/a Susman Godfrey's Barry Barnett) expounded on how his firm approaches reverse contingent fees in business litigation matters.  The methodology would depend on the case, its procedural posture, and the client's financial well being/creditworthiness, but the basic idea is to assign a dollar value to the client's exposure and base the fee on the "savings" obtained by the result.  With reports of $1,000 hourly rates and in-house counsel under increasing pressure to rein in outside lawyer fees, we may see more of this approach in the future, especially from solos and small firms who have the flexibility to implement it.

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As promised, here are some very brief summaries of the latest Texas Supreme Court opinions.

In In re Pirelli Tire, L.L.C. (No. 04-1129) (orig. proceeding), a case brought by non-U.S. residents, the Court held that the trial court abused its discretion by denying a motion to dismiss based on forum non conveniens.  The Court relied on the private and public interest factors set out in Gulf Oil Corp. v. Gilbert, 330 U.S. 501 (1947) and held that they "clearly and overwhelmingly favor a Mexican forum for resolution of this dispute."  The Court further held that the "[e]rroneous denial of an forum-non-conveniens motion . . . cannot be adequately rectified on appeal."  Justice Willett (joined by Justice Wainwright) issued a concurring opinion, and Justice Johnson (joined by Chief Justice Jefferson) dissented.

In both Springer v. Springer (No. 06-0382) (per curiam) and Sprowl v. Payne (No. 06-0533) (per curiam), the Court held that dismissal of an appeal was improper even though the appellant failed to either pay the filing fee or file an affidavit of indigence "with or before" the notice of appeal as TRAP 20.1(c)(1) requires.  Relying on TRAP 44.3, the Court reversed the court of appeals' judgment of dismissal in both cases, concluding that "failure to file an affidavit of indigence 'with or before' a notice of appeal will not support dismissal unless the appellant is given a reasonable time to correct the defect and fails to do so."

In Knapp Medical Center v. De La Garza (No. 06-0575) (per curiam), the Court held that TRCP 11 barred enforcement of a disputed oral settlement agreement reached during trial.

In Bossier Chrysler-Dodge II, Inc. v. Rauschenberg (No. 06-0874) (per curiam), the Court reversed and remanded the case to the court of appeals in light of Barker v. Eckman, 213 S.W.3d 306 (Tex. 2006), which held that the issue of attorney's fees should ordinarily be retried when damages are significantly reduced on appeal.

In In re J.A.J., (No. 07-0511), the Court held that an appellant whose parental rights have been terminated must specifically assign error to the Department of Family and Protective Services' appointment as conservator.  If the parent appeals only the termination decision, any error in the conservatorship appointment is waived.

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The Texas Supreme Court issued four opinions with today's orders.

In National Plan Administrators, Inc. v. National Health Insurance Co. (No. 05-0006), the Court held that a third-party administrator did not owe a general fiduciary duty to an insurer in light of the parties' agreement and certain provisions in the Insurance Code.  The Court therefore reversed the court of appeals' judgment affirming a monetary awardand rendered judgment that the insurer take nothing.

In Texas Parks & Wildlife Department v. E.E. Lowrey Realty, Ltd. (No. 05-0157) (per curiam), the Court applied its recent decision in Texas A&M University System v. Koseoglu, 233 S.W.3d 835 (Tex. 2007) and held that Government Code § 51.014(a)(8) provided the court of appeals with jurisdiction to consider the appeal of Department employees named as codefendants in the suit.  Reversing the court of appeals' judgment, the Court dismissed the plaintiff's claims against the employees and the Department after concluding that they were incurably defective and therefore should not be remanded.

In A.G. Edwards & Sons Inc. v. Beyer (No. 05-0580), the Court rejected the contention that Probate Code § 439(a) barred the plaintiff's breach of contract claim against A.G. Edwards and affirmed the court of appeals' judgment affirming a $791,200 jury verdict.  However, the Court reversed and remanded for a new trial on attorney's fees because the plaintiff failed to segregate fees between her breach of contract and tort causes of action.

In Lamesa Independent School District v. Booe (No. 05-0959) (per curiam), the Court reiterated its holding in Satterfield & Pontikes Construction, Inc. v. Irving Independent School District, 197 S.W.3d 390 (Tex. 2006) that Education Code § 11.151(a) is not a clear and ambiguous waiver of sovereign immunity.  Because the court of appeals determined otherwise, the supreme court reversed and remanded the case to the court of appeals to consider issues it did not reach.

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In Osborne v. Jauregui, Inc., a dispute over a defectively built home,a divided panel of the Third Court of Appeals has reversed and remanded the trial court's judgment declining to award the plaintiffs attorney's fees and denying an intervening insurer's subrogation claim.

Plaintiffs sued the architect/builder and several subcontractors, alleging DTPA violations and other causes of action.  Their homeowners insurer (State Farm) intervened to assert subrogation rights for benefits previously paid.  Plaintiffs settled with all defendants except the builder, against whom they proceeded to trial and obtained an $835,158 jury verdict.  After applying a dollar-for-dollar credit for the $1,260,500 in settlement proceeds, the trial court refused to award attorney's fees under the DTPA, denied State Farm's subrogation claim, and rendered a take-nothing judgment. Plaintiffs and State Farm appealed.

The appellate court first concluded that plaintiffs were "prevailing parties" entitled to attorney's fees under the DTPA, even though the settlement credit negated the jury's damage award.  Noting a split of authority on this issue, the court distinguished this case on the basis that it did not involve prior payments by the same defendant against whom plaintiffs had gone to trial.  Because plaintiffs prevailed against the lone remaining defendant, who had not contributed to the settlement, they were entitled to fees.  The court remanded for calculation of the appropriate amount.

Addressing State' Farm's issues, the court of appeals acknowledged the Texas Supreme Court's recent decision in Fortis Benefits v. Cantu, which held that contract-based subrogation rights trump equitable considerations.  Although the court of appeals criticized the positions State Farm took in the litigation and noted that State Farm did not allocate the settlement proceeds to losses covered by insurance payments, it nevertheless reversed and remanded the subrogation issue so that the trial court could review the contractual subrogation language under Fortis Benefits and determine whether the policy or equitable principles control.

Justice Puryear dissented, citing his belief that plaintiffs were not prevailing parties in light of the one-satisfaction rule and thus are not entitled to attorney's fees.  Applying Fortis Benefits, Justice Puryear further concluded that the insurance contract governed the subrogation issue and that State Farm was entitled to subrogation against the settlement funds.

This is a very interesting case.  When the dust settles, I expect the supreme court will give it a close look.

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A recent post from Susan Cartier Liebel over at Build a Solo Practice, LLC (entitled The Cockroach of the Legal Profession—The Billable Hour) has spurred me to comment on the continuing viability of the billable hour as it relates to appellate practice.

In my previous life as a big-firm lawyer, the billable hour was ingrained in the very fabric of my being.  Every aspect of my days (and sometimes my nights) was measured in 6-minute increments.  Since opening my own shop last year, I have come to believe that appellate law is particularly well suited to alternative fee structures and have offered some different fee alternatives to my clients.

Certain features of appellate practice make breaking away from the billable hour possible, depending on the point at which the appellate lawyer becomes involved.  In a pure appeal situation—when the trial court has signed an appealable interlocutory order or final judgment—the universe of facts and information is limited by a finite record, sharply restricting the number of curve balls your opponent can legitimately throw your way.  In this situation, based on the length of the trial, the volume of the underlying pleadings, and the issues involved, it is possible to estimate the time that will be required to handle the appeal and come up with a flat fee proposal that makes sense for both the lawyer and the client.

In the right situation, a contingent fee may be a possibility.  This alternative makes the most sense when a client has obtained a significant judgment and the other side is taking an appeal.  However, a reverse contingent fee may be suitable when appealing a large monetary judgment.  In that instance, appellate counsel would be paid based on the savings obtained from the original judgment amount.

The billable hour is often criticized for encouraging lawyers to generate revenue by churning files and for providing little or no direct reward for good performance.  Yet, we seem to have difficulty parting with the billable hour as the standard for measuring our worth.  By offering other options (including hybrid billable-alternative structures), appellate counsel can assure clients that they are adding value to the case while (hopefully) increasing their own bottom line.

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Yesterday, Texas Lawyer released the results of its annual salary and billing survey.  The accompanying article quotes a couple of corporate general counsels about how BigLaw's ever-increasing rates may affect their choice of outside lawyers.  Comparing annual rate increases to "death and taxes, you know it's coming every year," one says that smaller boutique firms may get projects his company used to give to larger firms.  Another, whose legal department handles most matters in-house,says he looks for lawyers with specific expertise when hiring outside counsel and tries "to hire the lawyer, not so much the law firm."

Many have predicted that increasing big firm rates will drive more business to specialized solos and small firms.  Common observations are that clients don't want to pay for the extra overhead associated with large firms or to train young lawyers to whom their work might get "pushed down."  Solos and small firms are well positioned to offer the same expertise at significantly lower hourly rates or under alternative fee arrangements that big firms have been slow to implement.

Hiring large firms is considered a "safe" choice, but it is also an expensive one.  Here's hoping that more corporate counsel open their minds to hiring the lawyer rather than the law firm. They might just get better service at a better price.

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In another chapter of the most recent school-finance case, Neeley v. West Orange-Cove Consolidated Independent School District, the Third Court of Appeals has rejected the State's challenge to the district court's $4 million attorneys' fee award.  The court of appeals held that the State waived its argument that certain constitutional provisions precluded the districts from recovering such fees by failing to raise the argument in its direct appeal to the Texas Supreme Court.  Applying the Uniform Declaratory Judgments Act, the court further held that that the award was "equitable and just."

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It's been a busy week at the Texas Supreme Court.  Today's orders included opinions in the following six cases:

In Citizens Insurance Co. v. Daccach, the court of appeals affirmed the trial court's certification of a worldwide class of securities purchasers. The supreme court reversed,decertified the class, and remanded the case to the trial court, concluding that the trial court failed to consider how res judicata affected the class representative's adequacy, the superiority of litigating the case as a class action, the typicality of claims within the class, and the predominance of common issues.  Chief Justice Jefferson and two other justices concurred.

In Moki Mac River Expeditions v. Drugg, the Court held that the plaintiffs did not establish specific jurisdiction over a nonresident defendant.  The Court reversed and remanded the case with instructions that the court of appeals consider whether the defendant is subject to general jurisdiction in Texas.  Justice Johnson, joined by Justice Medina, dissented.

In City of Galveston v. State of Texas, the Court held that the state bears the burden of showing that the legislature allows the state to sue cities.  Because the state failed to meet that burden in this negligence case involving water damage to a highway, the Court reversed and rendered.  Justice Willett, along with three others, dissented.

In In re Discount Rental, Inc., the per curiam Court conditionally issued a writ of mandamus directing the trial court to vacate an order that a judgment debtor's property be sold to satisfy a void judgment.

In Varner v. Cardenas, the per curiam Court concluded that the court of appeals correctly reversed and remanded the trial court's judgment for segregation of recoverable from unrecoverable attorney's fees, but modified the court of appeals' judgment on the basis that the lower court defined recoverable fees too narrowly.

In Ontiveros v. Flores, the per curiam Court held that the court of appeals erred by reversing the trial court's summary judgment on claims the appellant had not raised on appeal.

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In Cluck v. Commission for Lawyer Discipline, the Third Court of Appeals has affirmed a summary judgment disciplining a lawyer who deposited $20,000 from a client into his operating account rather than his trust account.  The fee agreement described the money as "a nonrefundable retainer" against which the lawyer would bill at his hourly rate.

Lawyers considering charging their clients "nonrefundable" fees should study this case closely to appreciate the difference between what the Court calls a "true retainer" and a mere "advance fee."  Here, contractual language labeling the money "nonrefundable" was not enough to qualify it as a "true retainer," which the Court defined as a payment "to secure a lawyer's services, and remunerate him for loss of the opportunity to accept other employment" (quoting Tex. Comm. on Prof'l Ethics, Op. 431, 49 Tex. B.J. 1084 (1986)).

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