continued argument II

II. Texas should follow the approach to fee forfeiture for attorneys developed in other jurisdictions

Fee forfeiture for attorneys is an unsettled area of law in Texas, and so it is helpful to look to how other jurisdictions have addressed the issue. Minnesota, Tennessee, and Florida have all decided their cases with an eye to equity and fairness.

Minnesota addressed fee forfeiture in a trilogy of cases called the Perl trilogy. In the first case, Rice v. Perl, 320 N.W.2d 407 (Minn. 1982), the court held that an attorney who breaches his fiduciary duty to a client must forfeit his entire fee. Tennessee cited that case in Crawford v. Logan, 656 S.W.2d 360, 365 (Tenn. 1983), but rejected Minnesota’s rule as too harsh. The Tennessee court held, instead, that each case involving misconduct by an attorney and the forfeiture of his fee must be viewed in the light of the particular facts and circumstances of the case. Id. Similarly, a Florida court held in Searcy, Denney, Scarola, Barnhart & Shipley, P.A. v. Scheller, 629 So.2d 947 (Fla. Dist. Ct. App. 1993) that there is no reason to abandon ordinary contract remedies just because the case involves a breaching lawyer. The court said that although the attorney-client relationship is infused with public policy considerations, the relationship is nevertheless contractual and public policy considerations do not require that only special rules be used to decide disputes when an attorney breaches his contract. Id. at 951. The court held that the amount of forfeiture should be determined by first determining the quantum meruit fee, and then setting off that amount for any damages to the client. Id. at 954. Following that, the court should consider whether it is appropriate in the situation to forfeit more of the fee than was set off by damages. Id.
Minnesota eventually abandoned its mandatory full-forfeiture rule for breaching attorneys. In the third case of the Perl trilogy, Gilchrist v. Perl, 387 N.W.2d 412 (Minn. 1986), the Minnesota court held that when the case does not involve actual fraud or actual damages to the client, and particularly when there are multiple plaintiffs, the better approach is to treat forfeiture as a kind of punitive damage and determine the amount of forfeiture by considering the factors in the Minnesota punitive damages statute. Id. at 417. The third case had the same facts as the first case, but the court distinguished the third case by noting that it involved 129 plaintiffs, rather than just one plaintiff as in the first case. Id. at 416. In addition, the court said that the issue of partial forfeiture was never raised in the first case, so they had not considered it there. Id. The court’s main thrust in distinguishing the cases, though, was that the third case involved so many more clients and so many more fees subject to forfeiture. The court seems to have determined that forfeiting 129 fees was just too unfair.


-sunil khemaney

Brief for the Defendants-Appellees - ARGUMENT

ARGUMENT

I. Mr. Burrow and his law firm conferred a benefit on Ms. Arce before their breach of fiduciary duty and therefore Ms. Arce should be required to pay for the value of that benefit.

Fee forfeiture is a form of equitable relief awarded when a fiduciary breaches his equitable duties. Russell v. Truitt, 554 S.W.2d 948, 955 (Tex. Civ. App.—Ft. Worth 1977, writ ref’d n.r.e.). As such, the court should consider equitable principles such as quantum meruit and fairness in determining the amount of fee to be forfeited. Mr. Burrow conferred a benefit on Ms. Arce before breach and should be compensated for that benefit according to quantum meruit. Not requiring her to pay for those pre-breach benefits would constitute a windfall. Additionally, attorneys do more than just represent their clients; they also help to make law for the rest of society. Aside from benefiting the client, an attorney should be compensated for benefiting society as a whole.

Brief for the Defendants-Appellee SUMMARY OF ARGUMENT

SUMMARY OF ARGUMENT

The court should not require that attorneys forfeit their entire fee every time fee forfeiture is an appropriate remedy for a breach of fiduciary duty. Rather, the court should assess the amount of forfeiture for each case individually, especially considering whether the attorney has conferred a benefit on either the client or society as a whole. This will result in the most just and fair remedy.
Mr. Burrow did confer a benefit on Ms. Arce prior to his breach. Quantum meruit requires that she pay for that benefit so as to prevent her from receiving a windfall. Although we recognize that in some instances, the attorney’s conduct may be so outrageous as to mandate forfeiture of even the quantum meruit fee, in this case Mr. Burrow’s misconduct was not so great as to override these equitable concerns.
Because fee forfeiture is an unsettled area of law in Texas, the court should look to how other jurisdictions have addressed the issue, and should approach fee forfeiture in a manner similar to other jurisdictions. The court should also seek guidance from the factors regarding forfeiture in the Restatement (Third) of the Law Governing Lawyers (Tentative Draft No. 4, 1991) and the factors in the Texas punitive damages statute.
A mandatory full forfeiture rule is unfair and in some cases is excessive, which could lead to its being unenforced, even when some forfeiture would be appropriate. Mr. Burrow’s conduct was not so egregious as to require full forfeiture. Forfeiting only those fees that he would have earned after his breach is more appropriate.

Brief for the Defendants-Appellees - STANDARD OF REVIEW

Since appellants challenge the Court of Appeals’ conclusion of law, the Supreme Court of Texas will review the case de novo. State v. Evangelical Lutheran Good Samaritan Society, 981 S.W.2d 509, 511 (Tex. Civ. App. 1998).

- sunil

Brief for the Defendants-Appellees - FACTS

On October 23, 1989, an explosion at the Phillps 66 Company’s petrochemical plant on the Houston Ship Channel in Pasadena, Texas killed twenty-three people and injured hundreds more. (R. 2) The appellants are survivors of the explosion or surviving relatives of persons killed in the explosion. (R. 2) They collectively hired appellees to file their individual lawsuits against Phillips, agreeing to a contingency fee payment arrangement. (R.2)

Appellees settled appellants’ lawsuits with Phillips, and believe the settlements were fair and adequate. (R.2-3) They claim appellants became unhappy with their settlements only after hearing rumors that other plaintiffs, with other attorneys, had received larger settlements. Appellees claim that appellants then began to believe their settlements were unfair and blamed their attorneys. (R.2-3) On the other hand, appellants claim appellees did not develop their lawsuits individually, but rather, without discussion or authority, settled their claims along with 126 other cases, in an aggregate settlement with Phillips. (R.2) Appellants allege that appellees lied and intimidated them into accepting the settlement. (R.2)


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STATEMENT OF FACTS

STATEMENT OF FACTS

PRELIMINARY STATEMENT

Plaintiff-Appellants Carol Arce, et al (Ms. Arce) appeal from the judgement of the Court of Appeals of Texas, 14th District, affirming the trial court’s granting of summary judgement in favor of appellees that Defendants-Appellees David Burrow, et al are not required to forfeit their entire attorney fee as a result of breaching their fiduciary duty, because partial forfeiture is appropriate in this case. (R. 3) The Supreme Court of Texas granted cert. (R. 1) Defendants pray that the Supreme Court affirm the decision of the Court of Appeals, because the Court of Appeals correctly defined a legal principle new to the State of Texas.

- sunil khemaney