Opinion
No. 13-03-358-CV
Opinion delivered and filed November 3, 2005.
On appeal from the 214th District Court of Nueces County, Texas.
Before Justice YAZEZ, RODRIGUEZ, and GARZA.
MEMORANDUM OPINION
Appellants, Rogelio Flores, individually and as representative of the estate of Teresa Flores, and intervenors, Teodoro and Elida Flores, individually and as next of friends of June Flores, appeal a summary judgment granted in favor of appellee, Ann Skaro, on a claim for breach of an employment contract. We affirm.
Background
On July 1, 1995, Rogelio Flores and his wife, Teresa, retained appellee, as legal counsel, under a contingency-fee agreement ("agreement") to represent them in a personal injury case, individually and as next of friends of their daughter, June Flores, for a medication error committed by a pharmacy, whereby the pharmacy erred in filling a prescription for a drug prescribed to Teresa. This error resulted in the hospitalization of Teresa and ultimately caused her untimely death on November 30, 1995.
After Teresa's death, Rogelio's parents, Teodoro and Elida, proceeding pro se, instituted a suit affecting the parent-child relationship, requesting that the court appoint them as joint managing conservators of June. Appellee had recommended that a change in conservatorship was advisable because Rogelio's behavior apparently was adversely affecting the potential settlement value of the case. In support of this allegation, appellee cites, inter alia, Rogelio's application for marriage to a seventeen-year-old minor, which occurred about five months after Teresa's death. After Rogelio and his parents agreed to a change in conservatorship and Rogelio signed a waiver of service and appearance the court entered an order appointing Teodoro and Elida as joint managing conservators on August 2, 1996.
The record shows that Rogelio obtained parental consent from the minor's parents prior to filing his application for a marriage license.
In light of the conservatorship suit, on July 31, 1996, appellee and Rogelio also modified their agreement, which was changed to provide for appellee's representation of Teodoro and Elida Flores, as managing conservators and next of friend of June, in the personal injury case. Other than this change, the agreement remained the same — the parties agreed to pay appellee one-half (after litigation expenses) of "all monies, interest or property which may be recovered . . .," in exchange for her representation in the personal injury case. Sometime after Teresa's death, appellee filed a wrongful death suit ("underlying suit") in the case on behalf of Rogelio, individually and as representative of the estate of Teresa Flores, and Teodoro and Elida, individually and as next of friends of June. Shortly before trial, appellee negotiated a $6.5 million dollar settlement on her clients' behalf, which the court approved on April 30, 1997.
A lawyer has a duty not to collect an unconscionable fee from a client. See TEX. DISCIPLINARY R. PROF. CONDUCT 1.04(a); Nolan v. Foreman, 665 F.2d 738, 741 (5th Cir. 1982). A fee is unconscionable if a competent lawyer could not form a reasonable belief that the fee is reasonable. See TEX. DISCIPLINARY R. PROF. CONDUCT 1.04(a). The reasonableness of any fee depends on the circumstances of the services. See id. at 1.04(b) (detailing factors to weigh in determining reasonableness of fees); RESTATEMENT (THIRD) OF THE LAW GOVERNING LAWYERS, §§ 46, 47 (Proposed Final Draft No. 1, 1996). Here, the contingency-fee agreement compensated appellee for her representation in the underlying wrongful death suit. Although a lawyer should be fully compensated for the work and risks the lawyer assumes, in entering contingency-fee arrangements, lawyers should always remain mindful of their ethical obligations and the reasonableness of their fee. See TEX. DISCIPLINARY R. PROF. CONDUCT 1.04(a).
Approximately three years later, Rogelio sued appellee, asserting a single cause of action for breach of an employment contract on the basis that appellee extracted a fee in excess of the percentage distribution provided for by the parties' agreement. The record reflects that the $6.5 million dollar settlement was distributed as follows:
The record does not contain Rogelio's original petition. However, it does include his second amended original petition dated August 24, 2001. On appeal, it therefore is unclear as to the precise amount of time between the court's final judgment and the time Rogelio first filed suit.
On November 27, 2002, Teodoro and Elida, as next of friend of June Flores, filed a plea in intervention in Rogelio's suit, asserting a claim to any recovery if the trial court found that appellee breached the agreement.
On April 30, 2003, in response to the allegations, appellee moved for summary judgment on both traditional and no-evidence grounds, asserting affirmative defenses of waiver, ratification, and estoppel. The trial court subsequently granted appellee's motion. However, it did not explain the basis for its judgment and did not specify whether it was granting appellee's motion on traditional or no-evidence grounds.
Issues on Appeal
In four issues, Rogelio contends the court erred in granting summary judgment because (1) appellee waived her affirmative defenses, (2) fact issues existed that precluded appellee from establishing her defenses, (3) expert testimony was not required to support a claim for breach of an employment contract, and (4) ample evidence was adduced to support that appellee committed a breach. As a preliminary matter, we first determine whether appellee waived her affirmative defenses. We will then consider whether summary judgment was improper in light of the evidence and pleadings before the court.
Waiver
Regarding his first issue, Rogelio argues that appellee waived her affirmative defenses because she failed to plead them in her original answer. In contrast, appellee argues that the defenses were not waived because the trial court granted her leave to amend her pleadings.
Generally, a trial court's ruling on an amendment to pleadings is reviewed for an abuse of discretion. Affirmative defenses must be pleaded to give the opposing party notice of defensive issues to be tried. A party waives an affirmative defense if it is not pleaded. However, Texas Rule of Civil Procedure 63 provides that parties may file amendments to their pleadings at such time as not to operate as a surprise to the opposite party, but that filing within seven days of the trial date or thereafter requires leave of court, which leave should be granted absent a showing of surprise by the opposite party. A summary judgment proceeding is a trial within the meaning of rule 63. In considering the propriety of an amendment, appellate courts liberally construe rule 63.
See Stevenson v. Koutzarov, 795 S.W.2d 313, 321 (Tex.App.-Houston [1st Dist.] 1990, writ denied).
See TEX. R. CIV. P. 94; Barnett v. Coppell North Tex. Court, Ltd., 123 S.W.3d 804, 816 (Tex.App.-Dallas 2003, no pet.).
See Frazier v. Havens, 102 S.W.3d 406, 411 (Tex.App.-Houston [14th Dist.] 2003, no pet.).
See Lee v. Key West Towers, Inc., 783 S.W.2d 586, 588 (Tex. 1989); Goswami v. Metro. Sav. Loan Ass'n, 751 S.W.2d 487, 490-91 (Tex. 1988).
See TEX. R. CIV. P. 63; Goswami, 751 S.W.2d at 490.
See Diesel Fuel Injection Serv. v. Gabourel, 893 S.W.2d 610, 611 (Tex.App.-Corpus Christi 1994, no writ); Johnson v. Rollen, 818 S.W.2d 180, 183 (Tex.App.-Houston [1st Dist.] 1991, no writ) (finding that trial court granted leave to file late pleading where pleading was filed after deadline imposed by docket control order).
During pre-trial proceedings, appellee failed to plead any affirmative defenses in her original answer. Nevertheless, appellee asserted the defenses of waiver, ratification, and estoppel in her motion for summary judgment. Rogelio filed a response arguing, inter alia, that appellee had waived the defenses because they were not pleaded in her original answer. Shortly thereafter, appellee filed a motion for leave to amend her pleadings to include the defenses, which the trial court granted that same day. On the next day, the court entered a final order granting appellee's motion for summary judgment. The order stated, in relevant part, that the "Court . . . after hearing the arguments of counsel and examining the pleadings and . . . evidence . . . finds that [appellee] is entitled to summary judgment in all respects."
In analyzing this issue, we note that the record does not contain a docket control order setting a submission deadline for pleadings, nor does it reflect that a hearing was held on appellee's motion for summary judgment. Consequently, we are unable to determine the precise deadline for amendments to the pleadings. The record, however, establishes that appellee received permission to amend her pleadings one day prior to the court's entry of its order. Although the order was issued on the following day, Rogelio's summary judgment response addressed each defense asserted by appellee. Specifically, the response presented concise arguments in opposition to each defense. The court's order also reflects that the pleadings, which included Rogelio's response, were considered by the court prior to entering its order.
Although Rogelio argues waiver, he does not claim surprise as a result of the amendment, nor does the record support a finding that the amendment operated as a surprise. Because rule 63 provides the court with discretion to allow a party to amend pleadings, and the record does not support a finding of surprise, we conclude the defenses were not waived, and that it was not an abuse of discretion to allow the amendment. Appellant's first issue is overruled.
See TEX. R. CIV. P. 63; Lee, 783 S.W.2d at 588; Goswami, 751 S.W.2d at 490-91.
Traditional Motion for Summary Judgment
In his second issue, Rogelio contends summary judgment on traditional grounds was improper because fact issues precluded appellee from conclusively establishing any of the affirmative defenses of waiver, ratification, and estoppel.
Standard of Review
In a traditional summary judgment, the movant must establish that no genuine issue of material fact exists as to at least one element of the non-movant's claim and that the movant is entitled to judgment as a matter of law. When a defendant moves for summary judgment, it is required to either (1) disprove as a matter of law at least one essential element of each of the plaintiff's causes of action, or (2) plead and conclusively establish each essential element of an affirmative defense. In determining whether there is a disputed material fact issue precluding summary judgment, proof favorable to the non-movant is taken as true, and all reasonable inferences are indulged in his favor. If the trial court's judgment does not reflect the grounds upon which the defendant's motion was granted, we must affirm the summary judgment if any ground raised by the appellee in its motion for summary judgment is meritorious.
See TEX. R. CIV. P. 166a(c); Cate v. Dover Corp., 790 S.W.2d 559, 562 (Tex. 1990).
See Lear Siegler, Inc. v. Perez, 819 S.W.2d 470, 471 (Tex. 1991); City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 678 (Tex. 1979).
Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548-49 (Tex. 1985).
See Star Telegram, Inc. v. Doe, 915 S.W.2d 471, 473 (Tex. 1995); Rogers v. Ricane Enter., Inc., 772 S.W.2d 76, 79 (Tex. 1989).
Relevant Facts
Rogelio's second amended original petition asserted a single cause of action for breach of an employment contract on grounds that appellee failed to pay him according to the terms and conditions of the parties' contingency-fee agreement. The petition states, in relevant part:
By the terms of the employment contract . . . [appellee] was entitled to retain a fee of fifty percent (50%) of the settlement, or $1,681,250.00. She was also entitled to withhold and extract the sum of $110,426.48 as expenses, leaving a balance due and owing . . . in the amount of $1,570,823.52.
On or about the 1st day of May, 1997 . . . [appellee] paid to Rogelio Flores the sum of $295,141.00, retaining $1,275,682.52 which should have been paid immediately to your Plaintiffs. Same was not paid nor distributed . . . and such conduct on the part of . . . [appellee] constitutes a breach of the employment contract, all to the Plaintiff's damage in the amount of $1,275,682.52.
In response, appellee filed a motion for summary judgment, asserting affirmative defenses of waiver, ratification, and estoppel, and attached as evidence the following documents, which relate to her representation in the underlying suit: (1) the employment contract between the parties; (2) a transcript of two pre-settlement hearings; (3) appellee's sworn affidavit regarding her representation; (4) a "Compromise, Settlement, Release, and Indemnity Agreement;" (5) a final judgment from the underlying suit; (6) a settlement statement signed by appellee's clients; (7) a letter allegedly signed by Rogelio giving appellee settlement authority; (8) nine letters sent by appellee to Rogelio concerning the status of settlement proceedings; (9) the order appointing Teodoro and Elida as managing conservators; (10) deposition transcripts from appellee, Rogelio, Teodoro, and Elida; and (11) a list of designated witnesses.
The agreement reflects that after litigation expenses, appellee would receive fifty percent of any proceeds arising from resolution of the case. However, the agreement does not establish how the remaining fifty percent would be apportioned among the clients. The record also does not contain an express modification of the parties' agreement. Although the agreement does not indicate the precise amount to which Rogelio was entitled, the agreement nonetheless establishes that Rogelio had a right to an undetermined portion of the proceeds arising from the settlement.
Prior to the court's final approval of the settlement, appellee sent a letter dated January 1, 1997, to all her clients stating, in relevant part, the following:
Dear Flores Clients:
At the present time there exist [sic] a conflict between the interest of the estate of Teresa Flores, the child versus the interest of Rogelio Flores. I would advise that Rogelio Flores seek the services of another attorney. In order to maintain the trial setting and a resolution to this case . . . Mr. David Phillips is offering his services to Rogelio Flores as new and independent counsel. Rogelio Flores also may seek the services of an attorney of his choice.
On February 11, 1997, appellee sent a second letter to Rogelio advising him that the court was holding a hearing because he (Rogelio) "voiced some concern over the division of the funds." The letter further stated that
[The] hearing will be for the purpose of resolving that issue. For that reason, you may desire to select independent counsel to work with you. Since I represent all three plaintiffs, it would be difficult for me to represent you against June and the estate. However, I will give assistance to educate independent counsel in time for the hearing.
At the hearing, which was held on February 19, 1997, Rogelio, appellee, and an ad litem attorney were all present. At the beginning of the hearing, appellee stated that the purpose of the hearing was to allow Rogelio to approve or deny the settlement distribution on the record, and to approve the attorney's fees in this case. The ad litem then informed the court concerning the approximate distribution of the proposed settlement. However, Rogelio voiced no concern regarding the terms of the settlement or appellee's continued representation of him.
On April 7, 1997, appellee's clients signed a settlement statement that itemized how the settlement funds would be allocated amongst them. The statement provided, in relevant part, that (1) June would receive one-half of the entire settlement proceeds after expenses, and (2) after the deduction of attorney fees and medical and funeral costs from his share, Rogelio would receive $295,141. In his deposition testimony, Rogelio acknowledged that he signed the settlement statement.
On April 30, 1997, the trial court signed a final judgment approving the settlement. The judgment states, in relevant part, that:
ANN A. SKARO recover her attorney's fees and expenses for representation of ROGELIO FLORES, INDIVIDUALLY AND AS LEGAL REPRESENTATIVE OF THE ESTATE OF TERESA FLORES AND THEODORO FLORES AND ELIDA FLORES AS MANAGING CONSERVATORS OF JUNE FLORES, A MINOR, from the settlement proceeds paid to ROGELIO FLORES, INDIVIDUALLY AND AS LEGAL REPRESENTATIVE OF THE ESTATE OF TERESA FLORES.
The record shows Rogelio initialed each page of the final judgment.
Analysis
Although the agreement itself is unclear with respect to apportionment, the propriety of the settlement distribution depends on whether Rogelio waived the conflict of interest, thereby consenting to appellee's continued representation of him during settlement negotiations.
Ethical rules generally prohibit an attorney from jointly representing clients when the clients' interests are adverse to each other. Texas Disciplinary Rule of Professional Conduct 1.06(b)(1) provides that a lawyer shall not represent a person if the representation involves a substantially related matter in which that person's interests are materially and directly adverse to another client.
See TEX. DISCIPLINARY R. PROF. CONDUCT 1.06(b)(1).
The Texas Supreme Court has recognized that the Restatement of Law provides useful guidance concerning situations of dual representation. The Restatement of Law provides that a lawyer in a civil case may not "represent two or more clients in a matter if there is a substantial risk that the lawyer's representation of one client would be materially and adversely affected by the lawyer's duties to another client in the matter. . . ."
See In re B.L.D., 113 S.W.3d 340, 346 n. 5 (Tex. 2003) (discussing waiver for joint representation), cert. denied, 541 U.S. 945 (2004).
See RESTATEMENT (THIRD) OF THE LAW GOVERNING LAWYERS, § 128 (Representing Clients with Conflicting Interests in Civil Litigation) (2000).
However, clients may waive conflicts of interest and retain a single attorney to jointly represent them in trial by consenting after full disclosure of all material facts related to the dual representation. Although it is prudent for a lawyer to provide dual clients with at least a written summary of the considerations involved in instances of dual representation, it is not required that the disclosure and consent be in writing.
See In re B.L.D., 113 S.W.3d at 346, n. 5; see generally TEX. DISCIPLINARY R. PROF. CONDUCT 1.06(c).
See In re Cerberus Capital Mgmt., L.P., 164 S.W.3d 379, 383 n. 12 (Tex. 2005) (citing TEX. DISCIPLINARY R. PROF. CONDUCT 1.06 cmt. 8).
The January 1st letter establishes that a conflict of interest existed, that it would be difficult for appellee to represent Rogelio, and that he had the right to retain other counsel. The letter and subsequent hearing regarding Rogelio's concerns also establish that Rogelio knew a conflict of interest existed. Despite his knowledge of the conflict and the material facts related to such representation, during the settlement hearing, Rogelio did not voice any objections on the basis that a conflict existed, nor did he complain of appellee's continued representation of him. In the light most favorable to Rogelio, because Rogelio was provided with written notice regarding the conflict and the material facts related to such representation, but nonetheless proceeded toward settlement with appellee as his attorney of record, we conclude that Rogelio waived the conflict of interest. We next address whether the summary judgment evidence conclusively establishes appellee's defense of waiver with respect to Rogelio's right to contest the settlement distribution.
See In re B.L.D., 113 S.W.3d 340, 346 n. 5; In re Cerberus Capital Mgmt., L.P., 164 S.W.3d at 383, n. 12.
Affirmative Defense of Waiver
Regarding the affirmative defense of waiver, Rogelio argues that factual issues exist regarding the settlement and its terms. In contrast, appellee claims that after the parties executed the agreement, Rogelio, as well as her other clients, agreed to a distribution of proceeds as follows: (1) after expenses, June would receive half of the entire settlement amount; and (2) Rogelio would receive any remaining balance, after attorney's fees and medical and funeral expenses were deducted. Appellee further claims that Rogelio's conduct during the settlement proceedings and thereafter, establish that he waived his right to contest the settlement. Based on this claim, appellee argues that no fact issues exist regarding distribution of the settlement proceeds. As a result, she argues summary judgment on the grounds of waiver was proper.
Appellee claims Rogelio waived any right to challenge the apportionment on grounds of the affirmative defense of waiver.
The law on waiver is well established. Waiver occurs when a party either intentionally relinquishes a known right or engages in intentional conduct inconsistent with claiming that right. A party's express renunciation of a known right can establish waiver. Silence or inaction, for so long a period as to show an intention to yield the known right, is also enough to prove waiver.
See Motor Vehicle Bd. of the Tex. Dep't of Transp. v. El Paso Indep. Auto. Dealers Ass'n, 1 S.W.3d 108, 111 (Tex. 1999).
See Tenneco, Inc. v. Enterprise Prod. Co., 925 S.W.2d 640, 643 (Tex. 1996); Sun Exploration Prod. Co. v. Benton, 728 S.W.2d 35, 37 (Tex. 1987).
See Tenneco, 925 S.W.2d at 643.
See id.
Intent is the key element in establishing waiver. The law on waiver distinguishes between a showing of intent by actual renunciation and a showing of intent based on inference. In the latter situation, it is the burden of the party who is to benefit by a showing of waiver to produce conclusive evidence that the opposite party unequivocally manifested its intent to no longer assert its claim. Although waiver is ordinarily a question of fact, when the facts and circumstances are admitted or clearly established, the question becomes one of law.
See G.H. Bass Co. v. Dalsan Properties-Abilene, 885 S.W.2d 572, 577 (Tex.App.-Dallas 1994, no writ); Vessels v. Anschutz Corp., 823 S.W.2d 762, 765 (Tex.App.-Texarkana 1992, writ denied); FDIC v. Attayi, 745 S.W.2d 939, 946-47 (Tex.App.-Houston [1st Dist.] 1988, no writ).
See Attayi, 745 S.W.2d at 946-47.
See id.
See Tenneco, 925 S.W.2d at 643.
In this case, other than Rogelio's claim in his deposition that he did not consent to the settlement distribution, no other evidence supports his claim that the settlement constituted a breach of the employment contract. The agreement did not provide for the precise apportionment of the clients' settlement proceeds. The record further reflects that Rogelio, as well as appellee's other clients, signed an itemized settlement statement approving distribution of the settlement proceeds. In his deposition testimony, Rogelio acknowledged that he signed the settlement statement. He also acknowledged receipt of a substantial amount of correspondence related to the underlying suit, but could not recall whether he read the settlement statement. Despite receiving several letters related to distribution of the settlement, Rogelio nonetheless maintains that he did not consent to the settlement distribution. Rogelio's deposition testimony, without more, is insufficient to create a reasonable inference that he did not consent to the settlement distribution that was previously agreed to by all of appellee's clients. Rogelio also initialed each page of the court's final judgment, which stated that the attorney's fees would be paid by him, individually and in his capacity as representative of the estate of Teresa. For approximately three years after final settlement of the underlying suit, Rogelio voiced no objection and remained silent with respect to the propriety of the settlement. Based on this evidence, we conclude Rogelio's conduct established his intent to relinquish his right to challenge the distribution of the settlement proceeds. Accordingly, we find that appellee conclusively established the affirmative defense of waiver. Therefore, summary judgment on traditional grounds was proper. As such, we overrule Rogelio's challenge to the trial court's grant of summary judgment on appellee's defense of waiver.
See Jackson v. Fiesta Mart, 979 S.W.2d 68, 68 (Tex.App.-Austin 1998, no pet.) (concluding deposition testimony was insufficient to defeat summary judgment).
See Tenneco, 925 S.W.2d at 643; Attayi, 745 S.W.2d at 946-47.
Conclusion
Because the trial court's grant of summary judgment on traditional grounds was appropriate, we need not address the remaining issues on appeal. We affirm the trial court's grant of summary judgment in favor of appellee.
See TEX. R. APP. P. 47.1.