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Stuart v. Bayless

Supreme Court of Texas
Mar 13, 1998
964 S.W.2d 920 (Tex. 1998)

Summary

holding that loss of contingency fees that lawyers might have earned from other clients was not foreseeable and directly traceable to clients' failure to pay amounts due under contract

Summary of this case from Southern Elec. Servs., Inc. v. City of Houston

Opinion

No. 96-1298.

March 13, 1998.

Appeal from the 190th District Court, Harris County, Eileen O'Neill, J.

Randall J. Cook, Gregory D. Smith, Andy G. Navarro, Tyler, Charles R. Dunn, Chris C. Pappas, Houston, Steven D. Strickland, Belaire, Sarajane Milligan, James D. Smith, Houston, for Petitioner.

Julius Glickman, Houston, Eddie M. Krenek, Katy, Bobbie G. Bayless, Spencer W. Creed, Buta Rhoads Raborn, Houston, for Respondents.


OPINION


In this case, we address whether, in a fee dispute between a lawyer and a client, a lawyer may recover, in addition to the fees owed, lost contingency fees from other cases. We conclude that in this case lost contingency fees were not reasonably foreseeable and thus are not recoverable. Accordingly, we reverse the judgment of the court of appeals in part and affirm in all other respects. 945 S.W.2d 131.

Burta Rhodes Raborn, Bobbie Bayless, and the law firm of Bayless Stokes (B S) represented Kae Stuart in a divorce proceeding and in two subsequent cases arising out of that divorce. Ultimately, Bayless, B S, and Raborn (Plaintiffs) sued Stuart to recover their unpaid legal fees and expenses and also sought damages for slander. Stuart counterclaimed and asserted, among other claims, breach of contract, breach of fiduciary duty, and legal malpractice. The jury found that Stuart had breached her contracts with Plaintiffs and had committed fraud but failed to find that Stuart had slandered any of the Plaintiffs. The jury rejected Stuart's counterclaim. The trial court rendered judgment against Stuart in accordance with the verdict. In addition to an award for fees due under the fee agreements between Stuart and Plaintiffs, the trial court awarded B S $500,000 in lost contingent fees that B S contended it would have earned from other cases. The trial court also awarded mental anguish and punitive damages.

On appeal, the court of appeals held that there was no evidence of fraud and deleted the awards for mental anguish and punitive damages. The court of appeals affirmed the trial court's judgment in all other respects, including the award of lost contingent fees.

Both Stuart and Plaintiffs filed applications for writ of error in this Court. We address only the question of whether lost contingency fees were recoverable by B S, and because of our disposition of that issue, we do not consider whether the evidence was legally sufficient to establish that B S did in fact forego contingency fees it otherwise would have collected.

B S offered evidence that it pays its overhead and expenses out of collections from clients who are charged for legal services based on hourly rates. B S also accepts some contingent fee matters. B S contended at trial that as long as the firm is able to collect the hourly rate fees from clients, it can financially afford to take on contingent fee cases. B S took the position that Stuart's failure to pay the fees she owed resulted in the firm's inability to take on contingent fee matters.

B S was awarded lost contingency fees as consequential damages arising out of Stuart's breach of contract. Consequential damages are those damages that "result naturally, but not necessarily, from the defendant's wrongful acts." Arthur Andersen Co. v. Perry Equip. Corp., 945 S.W.2d 812, 816 (Tex. 1997). They are not recoverable unless the parties contemplated at the time they made the contract that such damages would be a probable result of the breach. Mead v. Johnson Group, Inc., 615 S.W.2d 685, 687 (Tex. 1981) (citing Hadley v. Baxendale, 9 Ex. Ch. 341, 354 (1854)). Thus, to be recoverable, consequential damages must be foreseeable and directly traceable to the wrongful act and result from it. Arthur Andersen, 945 S.W.2d at 816; Mead, 615 S.W.2d at 687. We conclude that as a matter of law this type of injury was not foreseeable under the facts presented here. Indeed, it would be a rare case in which an attorney or law firm could demonstrate that the failure of a client to pay its bills gave rise to a recovery of contingent fees that might have been earned from other clients. The fee agreement between B S and Stuart makes no mention of this possibility and certainly contains no agreement to pay damages for the loss of potential contingent fees from other client matters. Because such a loss was not reasonably foreseeable, the $500,000 awarded for lost contingent fees was not a proper element of recovery. The court of appeals erred in affirming this award.

Accordingly, we grant Stuart's application for writ of error, deny the cross-application of B S, and, without hearing oral argument, reverse the judgment of the court of appeals to delete the award for lost contingent fees. We affirm the judgment of court of appeals in all other respects. TEX.R.APP. P. 59.1.


Summaries of

Stuart v. Bayless

Supreme Court of Texas
Mar 13, 1998
964 S.W.2d 920 (Tex. 1998)

holding that loss of contingency fees that lawyers might have earned from other clients was not foreseeable and directly traceable to clients' failure to pay amounts due under contract

Summary of this case from Southern Elec. Servs., Inc. v. City of Houston

concluding attorney's loss of contingency fees in unrelated cases was not foreseeable consequence of breach of contract by client

Summary of this case from Dall. Area Rapid Transit & Nancy K. Johnson v. Amalgamated Transit Union Local No. 1338

affirming in all respects except an award of unpled special damages

Summary of this case from Burns v. Bishop

reversing contingency-fee award under usual rules of contract law for consequential damages and affirming non-contingency remainder of fee award

Summary of this case from McRay v. Dow Golub Remels & Beverly, LLP

recognizing that if defendant's breach of contract or fraud reduces volume of plaintiff's business, but creates no reasonable opportunity for plaintiff to reduce its general overhead expenses, then appropriate measure of damages is amount of lost revenue, without deduction for portion of the fixed overhead expenses

Summary of this case from F.S. New Products, Inc. v. Strong Industries, Inc.

defining consequential damages as "those damages that result naturally, but not necessarily, from the defendant's wrongful acts"

Summary of this case from Alexander v. Holden Business Forms, Inc.

requiring lost-profits damages from breach of contract to be directly traceable to the wrongful conduct and to result from it

Summary of this case from AZZ Inc. v. Morgan

discussing Mead and stating that to be recoverable, consequential damages in a breach of contract case must have been contemplated by the parties as the probable result of a breach at the time they made the contract, foreseeable, and directly traceable to and resulting from the breach

Summary of this case from Gotch v. Gotch

stating that consequential damages in a contract action "are not recoverable unless the parties contemplated at the time they made the contract that such damages would be a probable result of the breach"

Summary of this case from Avco Corp., Textron Lycoming Reciprocating Engine Division of Avco Corp. v. Interstate Southwest, Ltd.

In Bayless, the First Court of Appeals found that lost contingency fee cases are in the nature of lost business, and held that when "a defendant's breach of contract or fraud reduces the volume of the plaintiff's business, but creates no reasonable opportunity for the plaintiff to reduce its general overhead expenses, then the appropriate measure of damages is the amount of lost revenue, without deduction for a portion of the fixed overhead expenses."

Summary of this case from Strauss v. Continental Air

In Stuart v. Bayless, 964 S.W.2d 920, 921 (Tex. 1998), the Texas Supreme Court held that it was improper to award damages based on losses from contracts other than the breached contract "unless the parties contemplated at the time they made the contract that such damages would be a probable result of the breach."

Summary of this case from Wyatt Energy v. Motiva Entr.
Case details for

Stuart v. Bayless

Case Details

Full title:Kae STUART f/k/a Kae Sandifer Chamberlain, Petitioner, v. Bobbie BAYLESS…

Court:Supreme Court of Texas

Date published: Mar 13, 1998

Citations

964 S.W.2d 920 (Tex. 1998)

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