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