negotiating fee contracts and recovering fees in …

NEGOTIATING FEE CONTRACTS AND RECOVERING FEES

IN FIDUCIARY LITIGATION

FRANK N. IKARD, JR.IKARD & GOLDEN, P.C.

Attorney at Law106 East Sixth Street, Suite 500

Austin, Texas 78701

State Bar of Texas27TH ANNUAL ADVANCED

ESTATE PLANNING AND PROBATE COURSEJune 4-6, 2003San Antonio

CHAPTER 11

FRANK N. IKARD, JR.IKARD & GOLDEN, P.C.

Attorney at Law106 East Sixth Street, Suite 500

Austin, Texas 78701(512) 472-2884

www.ikardgolden.com

EDUCATION:- University of Texas School of Law, J.D., 1968- University of the South and University of Texas, B.A., 1965

- Phi Alpha Delta

PROFESSIONAL ACTIVITIES:Board Certified, Estate Planning and Probate Law, Texas Board of Legal SpecializationAmerican Bar Association, Real Property Probate and Trust Law Section, Estate and Trust Litigation

and Controversy CommitteeAmerican College of Trust and Estate Council, Fellow 1979 - present

Member, Fiduciary Litigation Committee; Chairman, Breach of Fiduciary Duty Subcommittee,1990 - 2001

Austin Monthly’s Best Lawyers in Austin, 2002Greater Austin Crime Commission, 1999 - present

Board of Director, 2000 - 2003Fifth Circuit Judicial Conference , 1983Real Property Probate and Trust Law Section -American Bar Association,

Estate and Trust Litigation Committee; Continuing Legal Education SubcommitteeReal Estate, Probate and Trust Law Section, State Bar of Texas, Member and Past Chairman;

Past member of the Trust Code Committee and Legislative CommitteeTexas Academy of Real Estate, Probate and Trust Lawyers, Co-Founder and Member Board of

Directors, ???- presentTexas Bar Foundation, Fellow 1991 - presentThe Best Lawyers in America, 1982-2002The Texas Lawyer Go-To Guide , 2002Travis County Bar Association, Estate Planning and Probate SectionUniversity of Texas, Dean’s Round Table , 2002

SPEECHES AND PUBLICATIONS:

Negotiating Fee Contracts and Recovering Fees in Fiduciary Litigation, Dallas Bar Association,November 2002

Discretionary Distributions, 26th Annual Estate Planning and Probate Course, June 2002;Texas Society of CPA’s Estate Planning and Probate Seminar, August 2002

Trust Litigation in Texas, Tarrant County Probate Association Litigation Seminar, April 2002Specialty Drafting Regarding the Fiduciary, Travis County Bar Association, Probate and Estate

Planning Seminar, March 2001Fiduciary Duties: What are They and How to Modify Them, Texas Banker’s Association Estate

Administration Seminar, October 2000.What Property Are You Administering?/Conducting Inventory/Making Consistent Valuation of

Assets/Sections 177 and 706 Issues, Co-Author Alvin J. Golden, Wills, Estates, and Probate(A Satellite Production), State Bar of Texas, Janaury 2000.

Administration of Community Property After a Spouse’s Death, Co-Author Alvin J. Golden, TrustFinancial Services Division’s Estate Administration Seminar, Texas Banker’s Association,October, 1999.

Disclosure by a Fiduciary/Trustee Outside Formal Discovery: Non-Traditional Rules and AlternativeMethods, Advanced Estate Planning and Probate Course, June 1999.

Privity, Privilege, and Practical Problems of Personal Representatives and Probate Practitioners, 4th

Annual Advanced Estate Planning Strategies Course, April 1997

Drafting to Avoid Will Contests and Fiduciary Litigation, 7th Annual Advanced Drafting Estate Planningand Probate Course, November 1996.

Administration of Community Property After a Spouse’s Death, Co-Author Alvin J. Golden, AdvancedEstate Planning and Probate Course, June 1996.

Trust Litigation Suing and Defending a Trustee for Breach of Fiduciary Duty, Docket Call in ProbateCourt Seminar, March 1996.

Exculpatory Clauses and Their Effectiveness to Protect Drafters and Fiduciaries, 18th AnnualAdvanced Estate Planning and Probate Course, June 1994.

Exculpatory Clauses and Their Effectiveness to Protect Drafters and Fiduciaries, Central TexasEstate Planning Council, May 1994.

Trust Litigation from the Perspective of Both the Plaintiff and Defendant, Southwestern LegalFoundation, Institute on Wills and Probate, May 1994.

Current Industry Litigation Review, Southwest Trust Conference, April 1994.Suggestions for Drafting Needed Clauses in Wills and Trusts to Avoid or Minimize Potential Liability

in Fiduciary Litigation, Southwestern Legal Foundation, Annual Institute on Wills and Probate,May 1993.

1991 Legislative Update, Advanced Estate Planning and Probate Course, June 1991 and published inthe State Bar Newsletter of the Real Estate, Probate and Trust Law Section, October 1991.

Liability of Executors and Trustees for Breach of Fiduciary Duty, Texas College of Probate Judges,Annual Meeting, September, 1991.

Risk Management for Corporate Trustees, Texas Bankers Association, Trust Financial ServicesDivision, Administration and Taxation Seminar, October, 1991.

Jurisdiction in Probate Practice, Co-Author Mary E. Fullmer, Texas College of Probate Judges, AnnualMeeting, September, 1990.

Pleading-Discovery-Special Issues-Order, Co-Authors Edward V. Smith, III, Michael Cenatiempo andthe Honorable Nikki T. DeShazo, State Bar of Texas, Advanced Drafting: Estate Planning andProbate Seminar, November, 1990.

Fiduciary Duties of Executors and Trustees, Co-Author Bob D. Harrison, Texas Bankers Association,Trust Financial Services Division, Trust Compliance Seminar, October, 1988.

Negotiating Fee Contracts and Recovering Fees in Fiduciary Litigation Chapter 11

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TABLE OF CONTENTS

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

FACTORS TO CONSIDER PRIOR TO ACCEPTING REPRESENTATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Evaluate the Client . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Personally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Compatibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Truthfulness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2Reasonableness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Unreasonable Expectations Regarding the Outcome of the Case . . . . . . . . . . . . . . . 2Unreasonable Demands on the Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Motive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2Willingness to Go to Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2Ability to Accept the Rigors of Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Financially . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Ability to Pay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Willingness to Pay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Understands the Fee Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Evaluate the Representation (Primarily with Respect to Litigation) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Does the Potential Client Have Reasonable Expectations? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Can You Achieve the Client’s Expectations? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Do the Economics Make Sense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Does the Recovery Justify the Cost of Litigation? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Should the Representation Be Done on a Contingent Basis? . . . . . . . . . . . . . . . . . . . . . . . . . 3What Is the Likelihood That the Client Will Be Able to Recover His or Her Attorney’s Feesfrom the Other Side? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Conflicts of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4Rule 1.06 - CONFLICT OF INTEREST GENERAL RULE . . . . . . . . . . . . . . . . . . . . . . . . . 5Rule 1.07 - CONFLICT OF INTEREST INTERMEDIARY . . . . . . . . . . . . . . . . . . . . . . . . 6Rule 1.08 - CONFLICT OF INTEREST: PROHIBITED TRANSACTIONS . . . . . . . . . . . . . 7Rule 1.09 - CONFLICT OF INTEREST: FORMER CLIENT . . . . . . . . . . . . . . . . . . . . . . . 8Rule 1.10 - SUCCESSIVE GOVERNMENT & PRIVATE EMPLOYMENT . . . . . . . . . . . . . 9Rule 1.11 - ADJUDICATORY OFFICIAL OR LAW CLERK . . . . . . . . . . . . . . . . . . . . . . 10

FEE CONTRACTS ENTERED INTO PRIOR TO THE ESTABLISHMENT OF THE ATTORNEY CLIENTRELATIONSHIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

The Restatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11Johnson v. Cofer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11A Word of Caution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12Initial Duty to Inform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

WHEN THE ATTORNEY CLIENT RELATIONSHIP BEGINS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12The Restatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12Texas Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12Factors to Consider . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14Establishment of the Attorney/client Relationship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

The Initial Consultation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14Situations Where There Is Never A Formal Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15


ii

Estate Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15Guardianship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15Estate Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

THE ATTORNEY/CLIENT RELATIONSHIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15The Nature of the Attorney Client Relationship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Loyalty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17Good Faith and Fair Play . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18Impartiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

The Texas Constructive Fraud Doctrine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

ENTERING INTO OR MODIFYING A FEE CONTRACT AFTER AN ATTORNEY CLIENTRELATIONSHIP HAS BEEN ESTABLISHED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Distinction Between Fee Contracts Entered into Before and after the Establishment of an Attorney ClientRelationship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Barnes v. McCarthy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20Johnson et al. v. Stickney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20Jacobs v. Middaugh . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Archer v. Griffith . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20Plummer v. Bradford . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21Ames, supra . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22Honeycutt v. Billingsley . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

CONSTRUCTION OF ATTORNEY FEE CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22The General Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Stern v. Wonzer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22The Levine Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23Effect of Levine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

TYPES OF ATTORNEY CLIENT FEE ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24The Engagement Letter (Used Primarily for Non-contingent Fee Representation) . . . . . . . . . . . . . . . . . . . . 24The Contingent Fee Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Tex. Gov. Code Ann. §82.065 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24Enochs v. Brown . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24In re Godt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25Tillery & Tillery v. Zurick Insurance Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

In Re Polybutylene Plumbing Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26Special Problems Relating To Contingent Fee Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Contingent Fee Conflict of Interest in Representing Multiple Parties . . . . . . . . . . . . . . . . . . 29Calculation of Contingent Fee Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Can The Client Transfer the Contingent Interest? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

COLLECTING LEGAL FEES WITHOUT A CONTRACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31Quantum Meruit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Enochs v. Brown . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32Quasi-estoppel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32Common Fund Doctrine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Knebel v. Capital National Bank In Austin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

SUING TO COLLECT LEGAL FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32


iii

Suing Your Client . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32Suing Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

New Amsterdam Casualty Company v. Texas Industries, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33Hartman v. Solbrig . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

STATUTORY GROUNDS FOR RECOVERY OF ATTORNEY’S FEES IN FIDUCIARY LITIGATION . . . . . . . 33ESTATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Tex. Prob. Code Ann. §113(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33Tex. Prob. Code Ann. §149(C) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33Tex. Prob. Code Ann. §243 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33Tex. Prob. Code Ann. §245 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34Tex. Prob. Code Ann. §322A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Guardianships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34Tex. Prob. Code Ann. §665B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34Tex. Prob. Code Ann. §665C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34Tex. Prob. Code Ann. §666 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35Tex. Prob. Code Ann. §668 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35Tex. Prob. Code Ann. §883 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36Tex. Trust Code §114.064 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Declaratory Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37Tex. Civ. Practice & Rem. Code §37.009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Civil Practice & Remedies Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37Tex. Civ. Practice & Rem. Code, Section 38.001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37Tex. Civ. Practice & Rem. Code, Section 38.002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37Tex. Civ. Practice & Rem. Code, Section 38.003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37Tex. Civ. Practice & Rem. Code, Section 38.004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38Tex. Civ. Practice & Rem. Code, Section 38.005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38Tex. Civ. Practice & Rem. Code, Section 38.006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

APPENDIX A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

APPENDIX B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

APPENDIX C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

APPENDIX D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56


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NEGOTIATING FEE CONTRACTS AND RECOVERINGFEES IN FIDUCIARY LITIGATION

1INTRODUCTION

This paper deals with attorney fees contracts in the context of estate planning, probate, guardianship and trustmatters. It does not deal with any other areas of practice.

The focus of this paper is primarily engagement contracts for non-contingent representation (either directly orindirectly based on the attorney’s hourly rate) and for pure contingent fee representation. It does not addressother hybrid forms of fee contracts.

I recommend Hal Moorman’s excellent article Don’t Come To My Office With Suing Me On Your Mind,Ethical Engagement Letters given to the South Texas College of Law Wills & Probate Institute in Septemberof 2002. This article has been the source of numerous topics in this paper.

Because I specialize in fiduciary litigation this paper will have a bias toward legal fees negotiated and incurredin connection with litigation. “Litigation,” however, includes traditional probate and trust proceedings.

Because I do a lot of work on the plaintiff’s side of the docket, I am often contending that someone breachedfiduciary duties. In most of my cases I am seeking attorney’s fees from the other side. I have to be very carefulthat the same arguments that I use in presenting my breach of fiduciary duty case are not used against me whenI try to prove up my legal fees!

The laws applicable to attorney fee contracts apparently change after an attorney client relationship comes intoexistence. Prior to the establishment of the attorney client relationship, Texas law purports to treat the attorneyand the client as any other contracting parties (as explained below, there are, however, exceptions to this rule).After the attorney client relationship comes into existence, the attorney becomes a fiduciary for the client. Thisrelationship imposes numerous fiduciary duties on the attorney. It also causes any contract that an attorney entersinto with his client to be presumed to be fraudulent. Consequently, an attorney should always cause his or herfee contract to be negotiated and signed prior to commencing legal representation.

If you do not already know it, take my word for the fact that juries do not like attorneys. In litigation between anattorney and his client all doubts will usually be resolved against the attorney. Consequently, it is very difficultfor an attorney to prevail in a dispute with a client. This is especially true when the client is elderly orunsophisticated. For these reasons, it is almost always advisable to include an arbitration clause in your feecontract.

2FACTORS TO CONSIDER PRIOR TO ACCEPTING REPRESENTATION

2.1 EVALUATE THE CLIENT:

2.1.1 PERSONALLY:

2.1.1.1 COMPATIBILITY: The relationship between a client and his or her attorney isextremely personal. It is the author’s opinion that a breakdown of this relationship ona personal level is a principal cause of malpractice litigation. It is extremely importantthat, prior to accepting representation, the attorney determine whether or not his or herpersonality is compatible with that of the potential client and whether or not there is a


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reasonable expectation for a close working relationship between the attorney and theprospective client.

An intuitive feeling that I may not be able to work closely with a potential clientusually results in my decision to decline representation.

2.1.1.2 TRUTHFULNESS: It is essential that a client tell his or her lawyer the truth. If possibleI will “check out” a client’s factual representations. If I find that the client hasmaterially misrepresented facts to me, or that he or she has failed to disclose materialfacts to me, I will refuse to accept representation.

2.1.1.3 REASONABLENESS:

2.1.1.3.1 Unreasonable Expectations Regarding The Outcome of the Case:Clients will frequently have unreasonable expectations regarding theresults that they expect their attorney to achieve. In litigation, it isespecially important to evaluate the reasonableness of your client’sexpectations at the initial interview.

2.1.1.3.2 Unreasonable Demands On The Attorney: I have had potential clientsask me to insure them that their case will take precedence over all ofmy other cases. These are the types of expectations that can causeproblems later in the representation.

2.1.1.4 MOTIVE: A client’s motive should be considered prior to undertaking representation.

This is especially true with respect to litigation. Is the client driven by anger towards thedefendant, a desire for revenge or a desire to terrorize and harass a defendant? Mosttrial lawyers have been involved in cases where the parties hated each other so muchthat they were willing to sacrifice their economic self interest in order to perpetuatelitigation. I, for one, would not knowingly represent such a client.

2.1.1.5 WILLINGNESS TO GO TO TRIAL: If you are being retained to initiate litigation, itis important to ascertain whether or not the potential client is actually willing to try thecase. I have had numerous potential clients attempt to retain me to file pleadings for thesole purpose of obtaining a settlement. In order for me to represent a potential client,I must be convinced that, if necessary, the client is willing to go to trial.

2.1.1.6 ABILITY TO ACCEPT THE RIGORS OF LITIGATION: Litigation is a tremendouslyconsuming endeavor. It takes a high emotional and financial toll on the client. Manypeople are simply not strong enough (either emotionally and/or financially) to endure therigors of litigation. It is extremely important to evaluate a prospective client’s ability toactually go to trial prior to the initiation of the attorney-client relationship.

2.1.1.7 CAPACITY: An attorney must determine whether or not a potential client has thesufficient mental capacity to enter into a contract for legal services. It is also importantto determine if the potential client is being unduly influenced by another person.

While these issues probably arise most frequently in estate planningrepresentation, they also arise in litigation. It is much easier do deal with theissue of a potential client’s capacity prior to the time that an attorney-clientrelationship is established than afterward.


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If there is a serious question regarding a potential client’s mental capacity anattorney should probably not attempt to enter into a contract with him or her forestate planning services. If the representation involves litigation, however, anattorney may have remedies such as having a “next friend” file the litigation orgoing into court pursuant to Tex. Prob. Code Ann. §885 and seeking courtapproval of the contract for legal fees. This is especially true if therepresentation is on a contingent fee basis.

2.1.2 FINANCIALLY:

2.1.2.1 ABILITY TO PAY: Legal services are expensive. Not everyone can afford them. Anattorney should make a reasonable effort to determine if a potential client canreasonably afford to pay for his or her services. Often a refundable retainer is anexcellent vehicle to ascertain a potential client’s ability to pay his or her legal fees.

2.1.2.2 WILLINGNESS TO PAY: If at the initial conference the client questions thereasonableness of your hourly rate, your costs for copying etc. you can assume that theclient will question your bills. I have found that life is too short to spend large blocks ofit dealing with accounts receivable problems. If you detect an inherent dissatisfactionwith the fees that you quote at the initial conference you should seriously considerdeclining the representation.

2.1.2.3 UNDERSTANDS THE FEE ARRANGEMENTS: All questions regarding the feearrangement should be fully disclosed to the client prior to the establishment of theattorney-client relationship. The client should know what your billing rate is and how youexpect to be paid. If a retainer is charged, the amount of the retainer should bedisclosed as well as the manner in which it will be applied to the legal fees. Even detailssuch as how your firm charges for copying, telephone, mail etc. should be discussed.The relationship should always be reduced to a written agreement in the form of anengagement contract or a contingent fee contract. Both the attorney and the clientshould sign the agreement.

2.2 EVALUATE THE REPRESENTATION (PRIMARILY WITH RESPECT TO LITIGATION):

2.2.1 DOES THE POTENTIAL CLIENT HAVE REASONABLE EXPECTATIONS? It is importantto determine what the client’s expectations are regarding the outcome of the representation. This isuniquely important in litigation. Clients sometimes have unreasonable expectations about their chancesof recovery and/or the amount of damage that they have suffered. If this is the case, and if you are notreadily able to redirect their expectations, then you should probably not represent them.

2.2.2 CAN YOU ACHIEVE THE CLIENT’S EXPECTATIONS? An attorney should provide the clientwith a fair evaluation of the client’s case at the initial interview. This evaluation should include both anobjective analysis of the strengths and weaknesses of the client’s case and an objective analysis of yourqualifications to achieve the results that the client desires.

2.2.3 DO THE ECONOMICS MAKE SENSE? These considerations are uniquely related to litigation.When evaluating a potential litigation client the following matters should be taken into consideration:

2.2.3.1 Does the recovery justify the cost of litigation? No client will be happy paying $50,000in legal fees to obtain a $25,000 judgment. I am constantly amazed at the number ofcases that are initiated without any apparent thought given to the economics of the case.


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2.2.3.2 Should the representation be done on a contingent basis? Our firm will not offer takea contingent fee case unless we believe that: (1) there is a potential for a substantialrecovery and (2) we have a very high chance of winning the case.

Substantial Recovery: If our firm takes a case on a contingent fee basis, it willusually front all litigation expenses. This being the case, we attempt toapproximate: (1) the number of attorney and staff hours it will take to prosecutethe case (we almost always underestimate this number); (2) the expenses thatour firm will incur in connection with the lawsuit (we almost alwaysunderestimate this number also).

The potential litigation costs may exceed what our firm can afford.Consequently we may be faced with joint venturing the case with another lawfirm that will contribute attorneys and staff and/or bear a portion of the litigationexpenses.

In order for our firm to realistically consider taking a case on a contingencybasis, we must estimate our potential recovery to be at least four to five timesthe amount of our projected litigation costs.

High Chance Of Winning: The real expertise in determining whether or not totake a case on a contingency basis is the ability to evaluate the outcome of acase. This is more of an art than a science. The secret to successful contingentfee litigation is simple to state but very difficult to apply - don’t take any caseson a contingent fee basis that you will lose. In order for our firm to take a caseon a contingency basis we have to be convinced that we will win it if it is tried.Even when we are, we sometimes wrong.

2.2.3.3 What is the likelihood that the client will be able to recover his or her attorney’s feesfrom the other side? It is important to evaluate the defendant’s ability to satisfy ajudgment prior to undertaking litigation.

2.3 CONFLICTS OF INTEREST: Prior to accepting representation an attorney should ascertain whether or nothe or she has any conflicts that prevent the representation. There have been several excellent articles writtenon this subject which were referred to by Hal Moorman in his paper on this subject. See American College ofTrust and Estate Counsel, Engagement Letters: A Guide For Practitioners, 1999; Brink, Rhonda, VisitingConflicts In Estate Planning From a Different Perspective, State Bar of Texas Advanced Drafting: EstatePlanning and Probate Course, 1998; McMahan, Kent H. Who Is Your Client? Multi-Representation andConflicts of Interest, Wills, Estates and Probate Program, State Bar of Texas, 2000; Wall, III, Louis D. CheckLists for Engagement Letters In Probate and Estate Planning - The Hazards of Joint Representation AndRepresenting Children of the Husband and Wife and Conflicts Therein, 10th Annual State Bar of TexasAdvanced Drafting: Estate Planning and Probate Course.

2.3.1 This determination involves an attorney’s fiduciary duty of loyalty as set forth in paragraph 5.1.2 below.

2.3.2 Many estate planning attorneys who represent both spouses in estate planning matters, or other partieswho may have conflicts, will have the potential clients execute waivers of conflict of interest. Can aclient waive a conflict of interest? The answer apparently lies in State Bar Rule 1.06 (c) which providesthat a lawyer may represent clients where there reasonably appears to be a conflict if:

each affected or potentially affected client consents to such representationafter full disclosure of the existence, nature, implications, and possible


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adverse consequences of the common representation and theadvantages involved, if any [of the joint representation]. (emphasissupplied)

Can one client execute a waiver that will allow an attorney to represent both him or her andanother client in a situation where the waiver provides that the attorney will subordinate suchclient’s interest to that of the other client? This is a much harder question to answer. While I amnot aware of any law on point, there may well be public policy restraints that prevent this typeof waiver.

Several other problems involving waivers of conflict come to mind. When an attorney drafts awaiver of conflict, who is he representing? When the attorney explains the consequences of thewaiver of conflict to potential clients, who is he or she representing? Has he or she establishedan attorney client relationship with the potential clients? Who benefits from the waiver ofconflict? If it is the attorney, is the waiver a self dealing transaction?

2.3.3 This determination also involves numerous rules set forth in Article X of the State Bar Rules:

2.3.3.1 Rule 1.06 - CONFLICT OF INTEREST GENERAL RULE, provides as follows:

(a) A lawyer shall not represent opposing parties to the samelitigation.

(b) In other situations and except to the extent permitted byparagraph (c), a lawyer shall not represent a person ifrepresentation of that person:

(1) involves a substantially related matter inwhich the person’s interests are materially anddirectly adverse to the interests of anotherclient of the lawyer or the lawyer’s firm; or

(2) reasonably appears to be or becomeadversely limited by the lawyer’s or law firm’sresponsibilities to another client or to a thirdperson or by the lawyer’s or law firm’s owninterests. (emphasis supplied)

(c) A lawyer may represent a client in the circumstancesdescribed in (b) if:

(1) the lawyer reasonably believes the representationof each client will not be materially affected; and

(2) each affected or potentially affected clientconsents to such representation after full disclosureof the existence, nature, implications, andpossible adverse consequences of the commonrepresentation and the advantages involved, ifany.


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(d) A lawyer who has represented multiple parties in amatter shall not thereafter represent any of such partiesin a dispute among the parties arising out of the matter,unless prior consent is obtained from all such parties tothe dispute.

(e) If a lawyer who has accepted representation inviolation of this Rule, or if multiple representationproperly accepted becomes improper under this Rule,the lawyer shall promptly withdraw from one or morerepresentations to the extent necessary for anyremaining representation not to be in violation of theseRules.

(f) If a lawyer would be prohibited by this Rule from engagingin particular conduct, no other lawyer while a member orassociated with that lawyer’s firm may engage in thatconduct.

2.3.3.2 Rule 1.07 - CONFLICT OF INTEREST INTERMEDIARY, provides as follows:

(a) a lawyer shall not act as intermediary between clientsunless:

(1) the lawyer consults with each client concerningthe implications of the common representation,including the advantages and risks involved, and theeffect on the attorney-client privileges, and obtainseach client’s written consent to the commonrepresentation;

(2) the lawyer reasonably believes that the mattercan be resolved without the necessity of contestedlitigation on terms compatible with the clients’ bestinterests, that each client will be able to makeadequately informed decisions in the matter and thatthere is little risk of material prejudice to the interestsof any of the clients if the contemplated resolution isunsuccessful; and

(3 the lawyer reasonably believes that the commonrepresentation can be undertaken impartially andwithout improper effect on other responsibilities thelawyer has to any of the clients.

(b) While acting as intermediary, the lawyer shall consult witheach client concerning the decision to be made and theconsiderations relevant in making them, so that each client canmake adequately informed decisions.

(c) A lawyer shall withdraw as intermediary if any of theclients so requests, or if any of the conditions stated in


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paragraph (a) is no longer satisfied. Upon withdrawal, thelawyer shall not continue to represent any of the clients in thematter that was the subject of the intermediation.

(d) Within the meaning of this Rule, a lawyer acts asintermediary if the lawyer represents two or more parties withpotentially conflicting interests.

(e) If a lawyer would be prohibited by this Rule fromengaging in particular conduct, no other lawyer while amember of or associated with that lawyer’s firm may engagein that conduct.

2.3.3.3 Rule 1.08 - CONFLICT OF INTEREST: PROHIBITED TRANSACTIONS, providesas follows:

(a) A lawyer shall not enter into a business transaction witha client unless:

(1) the transaction and terms on which the lawyeracquires the interest are fair and reasonable to theclient and are fully disclosed in a manner which canbe reasonably understood by the client;

(2) the client is given a reasonable opportunity toseek the advice of independent counsel in thetransaction; and

(3) the client consents in writing thereto.

(b) A lawyer shall not prepare an instrument giving thelawyer or a person related to the lawyer as a parent,child, sibling, or spouse any substantial gift from a client,including a testamentary gift, except where the client isrelated to the donee.

(c) Prior to the conclusion of all aspects of the matter givingrise to the lawyer’s employment, a lawyer shall not make ornegotiate an agreement with a client, prospective client,or former client giving the lawyer literary or mediarights to a portrayal or account based in substantial parton information relating to the representation.

(d) A lawyer shall not provide financial assistance to a clientin connection with pending or contemplated litigation oradministrative proceedings, except that:

(1) a lawyer may advance or guarantee court costs,expenses of litigation or administrative proceedings,and reasonably necessary medical and livingexpenses, the repayment of which may be contingenton the outcome of the matter; and


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(2) a lawyer representing an indigent client may paycourt costs and expenses of litigation on behalf of theclient.

(e) A lawyer shall not accept compensation for representinga client from one other than the client unless:

(1) the client consents;

(2) there is no interference with the lawyer’sindependence of professional judgment or with theclient-lawyer relationship; and

(3) information relating to representation of a client isprotected as required by Rule 1.05.

(f) A lawyer who represents two or more clients shallnot participate in making an aggregate settlement of theclaims of or against the clients, or in a criminal case anaggregated agreement to guilty or nolo contendre pleas,unless each client has consented after consultation,including disclosure of the existence and nature of allthe claims or pleas involved and of the nature andextent of the participation of each person in thesettlement.

(g) A lawyer shall not make an agreement prospectivelylimiting the lawyer’s liability to a client for malpracticeunless permitted by law and the client is independentlyrepresented in making the agreement, or settle a claim forsuch liability with an unrepresented client or former client without first advising that person in writing that independentrepresentation is appropriate in connection therewith.

(h) A lawyer shall not acquire a proprietary interest in thecause of action or subject matter of litigation the lawyer isconducting for a client, except that the lawyer may:

(1) acquire a lien granted by law to secure thelawyer’s fee or expenses; and

(2) contract in a civil case with a client for acontingent fee that is permissible under Rule 1.04.

(i) If a lawyer would be prohibited by this Rule from engagingin particular conduct, no other lawyer while a member of orassociated with that lawyer’s firm may engage in thatconduct.

(j) As used in this Rule, “business transactions” does notinclude standard commercial transactions between the lawyer


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and the client for products or services that the client generallymarkets to others.

2.3.3.4 Rule 1.09 - CONFLICT OF INTEREST: FORMER CLIENT provides as follows:

(a) Without prior consent, a lawyer who personally hasformerly represented a client in a matter shall not thereafterrepresent another person in a matter adverse to the formerclient:

(1) in which such other person questions the validityof the lawyer’s services or work product for theformer client;

(2) if the representation in reasonable probability willinvolve a violation of Rule 1.05; or

(3) if it is the same or a substantially related matter.

(b) Except to the extent authorized by Rule 1.10, whenlawyers are or have become members of or associated witha firm, none of them shall knowingly represent a client if anyone of them practicing alone would be prohibited from doingso by paragraph (a).

(c) When the association of a lawyer with a firm hasterminated, the lawyers who were then associated with thatlawyer shall not knowingly represent a client if the lawyerwhose association with that firm has terminated would beprohibited from doing so by paragraph (a)(1) or if therepresentation in reasonable probability will involve a violationof Rule 1.05.

2.3.3.5 Rule 1.10 - SUCCESSIVE GOVERNMENT & PRIVATE EMPLOYMENT, providesas follows:

(a) Except as law may otherwise expressly permit, a lawyershall not represent a private client in connection with a matterin which the lawyer participated personally and substantiallyas a public officer or employee, unless the appropriategovernment agency consents after consultation.

(b) No lawyer in a firm with which a lawyer subject toparagraph (a) is associated may knowingly undertake orcontinue representation in such a matter unless:

(1) The lawyer subject to paragraph (a) is screenedfrom any participation in the matter and is apportionedno part of the fee therefrom; and

(2) written notice is given with reasonablepromptness to the appropriate government agency.


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(c) Except as law may otherwise expressly permit, a lawyerhaving information that the lawyer knows or should know isconfidential government information about a person or otherlegal entity acquired when the lawyer was a public officer oremployee may not represent a private client whose interestsare adverse to that person or legal entity.

(d) After learning that a lawyer in the firm is subject toparagraph (c) with respect to a particular matter, a firm mayundertake or continue representation in that matter only if thatdisqualified lawyer is screened from any participation in thematter and is apportioned no part of the fee therefrom.

(e) Except as law may otherwise expressly permit, a lawyerserving as a public officer or employee shall not:

(1) Participate in a matter involving a private clientwhen the lawyer had represented that client in thesame matter while in private practice ornongovernmental employment, unless under applicablelaw no one is, or by lawful delegation may be,authorized to act in the lawyer’s stead in the matter;or

(2) Negotiate for private employment with anyperson who is involved as a party or as attorney for aparty in a matter in which the lawyer is participatingpersonally and substantially.

(f) As used in this rule, the term “matter” does not includeregulation-making or rule-making proceedings or assignments,but includes:

(1) Any adjudicatory proceeding, application, requestfor a ruling or other determination, contract, claim,controversy, investigation, charge, accusation, arrestor other similar, particular transaction involving aspecific party or parties; and

(2) any other action or transaction covered by theconflict of interest rules of the appropriategovernment agency.

(g) As used in this rule, the term “confidential governmentinformation” means information which has been obtainedunder governmental authority and which, at the time this ruleis applied, the government is prohibited by law from disclosingto the public or has a legal privilege not to disclose, and whichis not otherwise available to the public.


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(h) As used in this Rule, “Private Client” includes not only aprivate party but also a governmental agency if the lawyer isnot a public officer or employee of that agency.

(i) A lawyer who serves as a public officer or employee ofone body politic after having served as a public officer ofanother body politic shall comply with paragraphs (a) and (c)as if the second body politic were a private client and withparagraph (e) as if the first body politic were a private client.

2.3.3.6 Rule 1.11 - ADJUDICATORY OFFICIAL OR LAW CLERK, provides as follows:

(a) A lawyer shall not represent anyone in connection with amatter which the lawyer has passed upon the merits orotherwise participated personally and substantially as anadjudicatory official or law clerk to an adjudicatory official,unless all parties to the proceeding consent after disclosure.

(b) A lawyer who is an adjudicatory official shall notnegotiate for employment with any person who is involved asa party or as attorney for a party in a pending matter in whichthat official is participating personally and substantially. Alawyer serving as a law clerk to an adjudicatory official maynegotiate for employment with a party or attorney involved ina matter in which the clerk is participating personally andsubstantially, but only after the clerk has notified theadjudicatory official.

(c) If paragraph (a) is applicable to a lawyer, no other lawyerin a firm with which that lawyer is associated may knowinglyundertake or continue representation in the matter unless:

(1) the lawyer who is subject to paragraph (a) isscreened from participation in the matter and isapportioned no part of the fee therefrom; and

(2) written notice is promptly given to the otherparties to the proceeding.

3FEE CONTRACTS ENTERED INTO

PRIOR TO THE ESTABLISHMENT OF THE ATTORNEY CLIENT RELATIONSHIP

3.1 THE RESTATEMENT: Restatement of The Law Third, The Law Governing Lawyers §18 provides that:

(1) A contract between a lawyer and client concerning the client-lawyer relationship, includinga contract modifying an existing contract, may be enforced by either party if the contract meetsother applicable requirements, except that:

(a) if the contract or modification is made beyond a reasonable time after the lawyerhad begun to represent the client in the matter, the client may avoid it unless the lawyer


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shows that the contract and the circumstances of its formation were fair and reasonableto the client; and

(b) if the contract is made after the lawyer finished providing services, the client mayavoid it if the client was not informed of facts needed to evaluate the appropriatenessof the lawyer’s compensation or other benefits conferred on the lawyer by the contract.

(2) A tribunal should construe a contract between client and lawyer as a reasonable person inthe circumstances of the client would have construed it.

While this provision has not been specifically adopted by any Texas court, it probably expresses the state towhich Texas law will evolve.

3.2 JOHNSON V. COFER: In Johnson v. Cofer et al, 113 S.W.2d 963 (Tex. Civ. App. – Austin 1938) the courtheld that:

The rule is well settled that the relationship of an attorney to his client is one of uberrima fides,and transactions between them affecting the subject matter which the attorney is employed toprotect will be strictly scrutinized against the attorney, even to the extent of being consideredprima facia fraudulent. Bell v. Ramirez, Tex. Civ. App., 229 S.W. 655; Baird v. Laycock,Tex. Civ. App., 94 S.W.2d 1185, 1189; 5 Tex. Jur. §37, p. 437. This rule, however, appliesas between them after that relationship of attorney and client has come into existence;and does not apply to a contract of employment, whereby such relationship is created,and by which the attorney’s compensation is fixed. This was the express holding inLaybourn v. Bray & Shifflet, Tex. Civ. App., 214 S.W. 630, writ refused. (emphasis supplied)

3.3 A WORD OF CAUTION: Given the above stated holdings, caution would seem to dictate that an attorney takecare to negotiate and consummate his or her initial fee contract with the client prior to the establishment ofthe attorney client relationship.

3.4 INITIAL DUTY TO INFORM: An attorney may have a duty to at least inform his or her client of the basisor rate of the fee prior to commencing legal representation. The Texas Supreme Court held in Lavine v. Bayne,Snell & Krause, Ltd., 40 S.W.3d 92 (Tex. 2001) that:

Our holding is not novel; rather, it simply emphasizes one facet of a lawyer’s duty to the client,i.e. to inform a client of the basis or rate of the fee at the outset of the matter.

A determination of exactly when the attorney client relationship is established is often very difficult. As will beshown below, this difficulty makes the Johnson distinction very difficult to apply in many situations.

4WHEN THE ATTORNEY CLIENT RELATIONSHIP BEGINS:

4.1 THE RESTATEMENT: Restatement of The Law Third, The Law Governing Lawyers §14 provides that:

A relationship of client and lawyer arises when:

(1) a person manifests to a lawyer the person’s intent that the lawyer provide legalservices for the person; and either:

(a) the lawyer manifests to the person consent to do so; or

http://www.TexasBarCLE.com/CLE/PMCasemaker.asp?table=TX_caselaw&volume=113&edition=S.W.2d&page=963&id=46061_01




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(b) the lawyer fails to manifest lack of consent to do so, and the lawyer knowsor reasonably should know that the person reasonably relies on the lawyer toprovide the services; or

(2) a tribunal with power to do so appoints the lawyer to provide the services.

4.2 TEXAS LAW:

4.2.1 The most recent case dealing with the inception of the attorney client relationship is the unreported caseof Tanox, Inc. v. Akin, Gump, Strauss, Hauer & Feld, L.L.P., 2002 WL 1988153 (Tex. App. -Houston [14th Dist], August 29, 2002) in which the court held that:

The attorney-client relationship is a contractual relationship whereby anattorney agrees to render professional services for a client. Mellon Serv. Co.v. Touche Ross & Co. , 17 S.W.3d 432, 437 (Tex.App.- Houston [1st Dist.]2000, no pet.). The relationship may be expressly created by contract, or it maybe implied from the actions of the parties. Sutton v. Estate of McCormick, 47S.W.3d 179, 182 (Tex.App.-Corpus Christi 2001, no pet.); Vinson & Elkins v.Moran, 946 S.W.2d 381, 405 (Tex.App.-Houston [14th Dist.] 1997, writ dism'dby agr.). The determination of whether there is a meeting of the minds must bebased on objective standards of what the parties did and said and not on theiralleged subjective states of mind. Terrell v. State, 891 S.W.2d 307, 313(Tex.App.-El Paso 1994, pet. ref'd). A question of fact exists when theevidence does not conclusively establish the existence of an attorney-clientrelationship. Sutton, 47 S.W.3d at 182; Kanow v. Brownshadel, 691 S.W.2d804, 805-06 (Tex.App.-Houston [1st Dist.] 1985, no writ).

Tanox also argues a fiduciary relationship between an attorney and his clientextends to preliminary consultations concerning the possible retention of theattorney. See Nolan v. Foreman, 665 F.2d 738, 739 n. 3 (5th Cir.1982). InNolan, the attorney was retained to appeal a conviction for marijuanatrafficking. Id. at 739. The court rejected the attorney's argument that therewas no attorney-client relationship prior to reaching an agreement on the fee.Id. at n. 3. Instead, observing that the parties may manifest an intent to createan attorney-client relationship explicitly or by their conduct, the Nolan courtfound the attorney's fiduciary duties attached when he entered into a discussionof the client's legal problems "with a view toward undertaking representation."

We find Nolan distinguishable from the facts of this case. For example, whilethe Lawyers and Tanox were involved in the negotiation of the fee agreement,Tanox was still considering other attorneys for representation. For example, onJuly 21, 1994, Anderson received a letter from Osborne J. Dykes of Fulbright& Jaworski stating, "As per your request of Tuesday, July 19, 1994, we haveendeavored to prepare a preliminary proposal to Tanox Biosystems, Inc.('Tanox') for the engagement of Fulbright & Jaworski L.L.P ('Fulbright &Jaworski') to represent Tanox' interest in connection with the referencedmatter."

Moreover, the fee agreement states, "the attorneys have agreed to providesuch representation ... subject to the following terms, conditions, andunderstandings." Anderson acknowledged that representation isconditioned upon agreeing to the terms of the fee agreement. In other









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words, if the terms in the fee agreement are not agreed to then thereis no representation. An attorney's agreement to represent a client maybe conditioned on the negotiation of a fee arrangement.RESTATEMENT (THIRD) LAW GOVERNING LAWYERS § 14 cmt.e (2000). The fee agreement also provides it was the subject of negotiations,each party had the opportunity to consult with counsel during negotiations, andthere is no presumption of construction of the fee agreement against eitherparty. Anderson also conceded that these terms are evidence of arm's-lengthnegotiations. (emphasis supplied)

4.2.2 But, see also Nolan v. Foreman, 665 F.2d 738, 739 n. 3 (5th Cir.1982):

This interpretation of DR2-106 finds support in Braselton v. Nicolas &Morris, 557 S.W.2d 187 (Tex.Civ.App.-Corpus Christi 1977, no writ).Braselton held a flat $18,000 fee charged for services rendered in connectionwith a divorce and property settlement reviewable for excessiveness under thestandard of DR2-106.

A slightly different approach to the issue is evident in a line of Texas decisionsholding that an attorney, upon entering into a professional relationship, assumesa common law fiduciary obligation to his client. Cole v. Plummer, 559 S.W.2d87 (Tex.Civ.App.-Eastland 1977, writ ref. n. r. e.); Archer at 739; Holland v.Brown, 66 S.W.2d 1095 (Tex.Civ.App.-Beaumont 1933, writ ref.). Within sucha relationship, it is presumed that negotiations between the attorney and clientwere not at arm's length, but that the client relied upon his attorney, as anadvisor in a position of trust, to consider the client's interests and to refrain fromturning these interests to the attorney's advantage. Indeed, Cole, relying onArcher, held not only that the fee was reviewable for reasonableness, but thatthe fiduciary nature of the relationship between the attorney and his clientdemanded that the burden of proving the reasonableness of the fee be placedon the attorney. Cole at 89, citing Archer at 739. Examination of thesecases indicates that the attorney's common law fiduciary duty to hisclient, like his duty under DR2-106, exists without regard to the natureof the fee agreement. The attorney fee at issue in Cole was set bycontract in advance of rendition of services as a one-third interest inreal property owned by the client. That fee differed from the fee in thiscase only in that it was quantified by reference to the ascertainablevalue of certain real estate. Archer applied the same approach to theevaluation of the reasonableness of a contingent fee. (emphasis supplied)

That the attorney and the client did in fact stand at arm's-length, in a bargainingrelationship between parties of roughly equivalent strength, may be consideredby the jury in its evaluation of whether the attorney breached his fiduciary duty.Nowell v. Dick , 413 F.2d 1204, 1210 (5th Cir. 1969). So, of course, may be theclient's capacity to contract, and indicia of the presence or absence of fraud,misrepresentation, or over-reaching. Braselton at 188; Archer at 739. Thoseconsiderations, however, like the form in which the fee is to be paid, are notdeterminative of whether a fee agreement is susceptible to review.

On remand, then, the jury is to consider whether Foreman breached hisfiduciary duty to Rick Nolan, and whether, in consideration of DR2-106's








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nonexclusive list of factors relevant to an evaluation of the reasonableness ofa fee, as well as such other factors as may be appropriate and helpful to thisevaluation, the $25,000 charged by Foreman to represent Rick Nolan wasclearly excessive.

4.3 FACTORS TO CONSIDER: A comprehensive analysis of all of the factors that establish the attorney clientrelationship is clearly beyond the scope of this paper. A detailed analysis of these factors is contained in 48 Am.Jur. Proof of Facts 2nd 525 §§7 et seq., 22 et. seq.

While the attorney client relationship depends on the existence of some form of agreement between an attorneyand his or her client, the acts of the parties may establish the relationship without any express understandingregarding the amount of fees charged. Herein lies the problem.

4.4 ESTABLISHMENT OF THE ATTORNEY/CLIENT RELATIONSHIP: Attorneys frequently findthemselves in situations where the relationship of attorney and client may be established prior to the executionof any formal contract with the client. While this paper does not purport to list all of these situations, a few ofthem are listed below:

4.4.1 The Initial Consultation: Attorneys frequently meet with a potential client to evaluate his or her legalstatus prior to deciding to accept the representation. During such consultation the attorney sometimesinforms the client that he or she will represent the client and then proceeds to render legal advice to theclient prior to the negotiation and execution of a fee agreement. Hopefully, this type of activity will notimpose the constructive trust presumption on the attorney.

4.4.2 Situations Where There Is Never A Formal Contract: Many attorneys never obtain a written contractwith their clients regarding their representation. This is legally permissible in non contingent feesituations. The attorney may, however, have a duty to at least inform his or her client of the of the basisor rate of the fee at the outset of the matter. See Lavine, supra. If the attorney does not inform theclient of the basis or rate of his or her fee until after the representation has progressed the constructivefraud presumption may apply.

4.4.3 Litigation: Emergency situations (such as the running of the statute of limitations) may cause an attorneyto file pleadings prior to the negotiation and execution of a fee agreement. Once pleadings are filed onbehalf of a client the attorney client relationship is probably established.

4.4.4 Estate Administration: An application for the probate of a will may be filed prior to the negotiation andexecution of a fee agreement. This may establish an attorney client relationship.

4.4.5 Guardianship: An application for temporary or permanent guardianship may be filed prior to thenegotiation and execution of a fee agreement. This may establish an attorney client relationship.

4.4.6 Estate Planning: Attorneys may cause a client to execute “stop gap” estate planning documents (suchas a holographic will or power of attorney) prior to the to the negotiation and execution of a feeagreement. This may establish an attorney client relationship.

The legal distinction between contracts entered into before or after the inception of legal representation, likemany other legal doctrines, may be simple to state in the abstract but is very difficult to apply in the real world.

5THE ATTORNEY/CLIENT RELATIONSHIP

5.1 THE NATURE OF THE ATTORNEY CLIENT RELATIONSHIP:


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5.1.1After an attorney client relationship is established, the attorney becomes a fiduciary and the client becomesthe beneficiary of the fiduciary relationship. The duties imposed on the attorney are similar to those imposed bycommon law on trustees. See Archer, supra in which the Texas Supreme Court held that:

The relation between an attorney and his client is highly fiduciary in nature, and theirdealings with each other are subject to the same scrutiny, intendments and imputationsas a transaction between an ordinary trustee and his cestui que trust.

5.1.1.1 Goffney v. Rabson, 56 S.W.3d 186 (Tex. App. Houston [14th Dist] July 12, 2001):

A fiduciary relationship exists between attorneys and clientsas a matter of law. Arce v. Burrow, 958 S.W.2d 239, 246(Tex. App. - Houston [14th Dist] 1997)(opinion on reh’g),aff’d as modif ied, 997 S.W.2d 229 (Tex. 1999). The term“fiduciary” ‘refers to integrity and fidelity’.” Id. (quotingKinzbach Tool Co. v. Corbett - Wallace Corp., 138 Tex.565, 160 S.W.2d 509, 512 (1942). Therefore, the attorney-client relationship is one of “most abundant good faith,”requiring absolute perfect candor, openness and honesty, andthe absence of any concealment or deception. Perez v. Kirk& Carrigan, 822 S.W.2d 261, 263-66 (Tex. App. - CorpusChristi 1991, writ denied) (citing Hefner v. State, 735 S.W.2d608, 624 (Tex. App. - Dallas 1987, pet. ref’d). Breach offiduciary duty by an attorney most often involves theattorney’s failure to disclose conflicts of interest, failure todeliver funds belonging to the client, placing personal interestsover the client’s interests, improper use of client confidences,taking advantage of the client’s trust engaging in self-dealing,and making misrepresentations.

5.1.1.2 Jackson Law Office v. Chappell, 37 S.W.3d 15 (Tex. App. - Tyler May 31, 2000):

The relationship existing between attorney and client ischaracterized as "highly fiduciary", and requires proof of"perfect fairness" on the part of the attorney. Archer v.Griffith, 390 S.W.2d 735, 739 (Tex.1965). The "fail safe"mechanism of the fiduciary relationship is the duty of fulldisclosure. A fiduciary has much more than the traditionalobligation not to make any material misrepresentations; he hasan affirmative duty to make a full and accurate confession ofall his fiduciary activities, transactions, profits, and mistakes.See Montgomery v. Kennedy, 669 S.W.2d 309, 312-14(Tex.1984); Kinzbach Tool Co., Inc. v. Corbett-WallaceCorp., 138 Tex. 565, 160 S.W.2d 509, 513-14 (1942). Thebreach of the duty of full disclosure by a fiduciary istantamount to fraudulent concealment. Willis v. Maverick,760 S.W.2d 642, 645 (Tex.1988). And where "self-dealing" bythe fiduciary is alleged, a "presumption of unfairness"automatically arises and the burden is placed on the fiduciaryto prove (a) that the questioned transaction was made in goodfaith, (b) for a fair consideration, and (c) after full and














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complete disclosure of all material information to the principal.See Stephens County Museum, Inc. v. Swenson, 517S.W.2d 257, 261 (Tex.1974); Int'l. Bankers Life Ins. Co. v.Holloway, 368 S.W.2d 567, 576 (Tex.1963).

5.1.2 The attorney client relationship, once established, results in a plethora of fiduciary duties being imposedon the attorney. Among the most important of these fiduciary duties are the duties of:

5.1.2.1 Loyalty:

5.1.2.1.1 Lott v. Ayres, 611 S.W.2d 473 (Tex. App. - Dallas, December 22,1980):

An attorney may not represent conflicting interests;and may not divulge a client’s secrets or confidences,or accept employment from others in mattersadversely affecting an interest of the client withrespect to which confidence has been reposed.

5.1.2.1.2 Easley v. Brookline Trust Co., 256 S.W.2d 983 (Tex. Civ. App. –Amarillo 1952, writ ref’d n.r.e.):

The office of attorney incapacitates him fromrepresenting different interests which are adverse inthe sense that they are hostile, antagonistic, or inconflict with each other, and this disqualificationprecludes him from undertaking employment wherebyhis own interests are brought into conflict with thoseof his client.' (Above italics added.) 7 C.J.S.,Attorney and Client, s 47, p. 823; W. C. TurnbowPetroleum Corporation v. Fulton, Tex.Civ.App.,199 S.W.2d 263, syl. 1; Barreda Corporation v.Ballenger, Tex.Civ.App., 116 S.W.2d 442, syl. 8;Traders & General Ins. Co. v. Keith, Tex.Civ.App.,107 S.W.2d 710, Sec. 1. Further, 'Since counsel feesare earned only by fidelity to, and activity for, a clientand his interests, and since, as has been shown supras 47, an attorney cannot serve conflicting interests, hecan claim pay for his services from only one side * **.' 7 C.J.S., Attorney and Client, s 167b, p. 1024. 'Inso far as their interests were conflicting he could notproperly be paid a fee by both even though therepresentation be with the consent of both parties.'Norman v. Wilson, Tex.Civ.App., 41 S.W.2d 331,333, syl. 7-8, error refused; Bryant v. Lewis,Tex.Civ.App., 27 S.W.2d 604.

5.1.2.1.3 Bryant v. Lewis et al., 27 S.W.2d 604 (Tex. Civ. App. – Austin 1930,writ dism’d):

Public policy and the standards of the profession,demand a close scrutiny of any improper conduct by













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attorneys and their relationship to their clients, andhowever honest his intentions may be, an attorneyshould never put himself “in a position where he maybe required to choose between conflicting duties, orbe led to an attempt to reconcile conflicting interests,rather that to enforce to their full extent the rights ofthe interest which he alone should represent”.

5.1.2.2 Disclosure:

5.1.2.2.1 See Bryant, supra:

With the ever-increasing multiplicity of laws, and thegrowing complexity of our economic and civilrelationships, the field of service of the attorneybecomes increasingly important; and the necessity forthe average laymen to depend upon the judgment,fidelity, diligence and skill of his attorney increases indegree. He owes his client the utmost good faith in hisdealings with him and to affirmatively disclose tohim, not only all material facts which would affecttheir relationship but to disclose the legalconsequence of those facts as well. (emphasissupplied)

5.1.2.2.2 Burgin v. Godwin, 167 S.W.2d 614 (Tex. Civ. App. – Amarillo 1942,writ ref’d):

Equity provides another cogent reason why appelleesare not entitled to the protection of the statute offrauds. They were the attorneys of appellants and assuch they were under the duty to act towardappellants with the most scrupulous fidelity and revealto them the exact status brought about by thecontractual relationship. If the oral contract wasentered into, as testified to by Mrs. Burgin, it was theduty of appellees to inform her upon the question ofwhether it was necessary that the contract bereduced to writing and signed by the parties.Laybourne v. Bray & Shifflett, Tex.Civ.App., 190S.W. 1159. We conceive of nothing that wouldexcuse appellees from this duty to their clients.

5.1.2.2.3 Ames v. Putz, 495 S.W.2d 581 (Tex. Civ. App. – Eastland 1973, writref’d):

In Holland v. Brown, 66 S.W.2d 1095 (Tex. Civ.App. - Beaumont 1934, writ ref’d) the court said:“The failure of an attorney dealing with his client todisclose to him the material facts and the legalconsequenc es flowing from the facts constitutes





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actionable fraud” (Tex. Civ. App. – Houston (1st

Dist.) 1970, writ dism’d)

5.1.2.2.4 Willis v. Maverick, 700 S.W.2d 642 (Tex.1988):

The special relationship between an attorney andclient further jus tifies the imposition of the discoveryrule. A fiduciary relationship exists between attorneyand client. McClung, 620 S.W.2d at 647. As afiduciary, an attorney is obligated to render a fulland fair disclosure of facts material to theclient’s representation. Id. The client must feelfree to rely on his attorney’s advice. Facts whichmight ordinarily require investigation likely may notexcite suspicion where a fiduciary relationship isinvolved. Robinson v. Weaver, 550 S.W.2d 18, 23(Tex. 1977) ... Further, breach of the duty to discloseis tantamount to concealment. McClung, 620 S.W.2dat 647. (emphasis supplied)

5.1.2.3 Good Faith and Fair Play:

5.1.2.3.1 Henderson v. Shell Oil Co., 208 S.W.2d 863 (Tex. 1948):

It is a sound public policy which exacts the utmostfidelity of attorneys, and that policy should not beweakened by the whittling down process or theadding of numerous exceptions to the rules calling forits application.

5.1.2.3.2 Smith v. Dean, 240 S.W.2d 789 (Tex. Civ. App. – Waco 1951, nowrit):

The relation of attorney and client is one of uberrimafides ... The integrity of such relationship should becarefully observed and scrupulously upheld at alltimes. As said in 5 T. J. p. 431, Sec: 32: ‘The cardinalprincipal that an attorney owes his client the highestof good faith furnishes a basis for a number of legaldoctrines.

5.1.2.4 Impartiality:

5.1.2.4.1 Arce v. Burrow. , 958 S.W.2d 239 (Tex. App. – Houston [14th Dist.]1998; reversed on other grounds by Burrow v. Arce, 997 S.W.2d 229(Tex. 1999):

An aggregate settlement occurs when an attorney,who represents two or more clients, settles the entirecase on behalf of those clients without individualnegotiations on behalf of any one client...The attorneyowes a duty of loyalty and good faith to each client,







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and it is the ethical responsibility of an attorneyrepresenting multiple clients to obtain individualsettlements, unless those clients are informed andconsent.

5.2 THE TEXAS CONSTRUCTIVE FRAUD DOCTRINE: “Ordinary” fiduciary duties may be self evidentto an estate practitioner. What might not be self evident however, are the rules imposing special fiduciary dutiesand presumptions that relate to a contract or other business transaction between an attorney and his or herclient after the attorney client relationship has been established. These special rules are referred to as the “TexasConstructive Fraud Doctrine” and place a tremendous burden on the attorney to act fairly and in good faith.

The reason for the Texas Constructive Fraud Doctrine has been the subject of numerous cases. In the case ofLangford v. Shamburger, 417 S.W.2d 438 (Tex. Civ. App. – Ft. Worth 1967, writ ref’d n.r.e.) the court reliedon a 1904 Texas Supreme Court case that held that:

The rule forbidding conflict between interest and duty is no respecter of persons. It imputesconstructive fraud, because the temptation to actual fraud, and the facility of concealing it, areso great. And it imputes it to all alike, who come within its scope, however much or howeverlittle open to suspicion of actual fraud. Equity 'does not so much consider the bearing orhardship of its doctrine upon particular cases as it does the importance of preventing a generalpublic mischief, which may be brought about by means secret and inaccessible to judicialscrutiny, from the dangerous influences arising from the confidential relation of the parties.''The principle applies, however innocent the purchaser may be in a given case. Nabours v .McCord, 97 Tex. 526, 80 S.W. 595, 600 (1904).

In Slay v. Burnett Trust, 143 Tex. 621, 187 S.W.2d 377, (1945), the Supreme Court again held that an “intentto defraud” is immaterial to recovery by a beneficiary who enters into a contract with his or her fiduciary:

These matters, intent to defraud and conspiracy and injury or damage to the beneficiary, areimmaterial in the determination of liability in this case. ... It is well settled that in a suit of thiskind recovery may be had by the beneficiary even though he has suffered no damages and eventhough the trustee may have acted in good faith.'

6ENTERING INTO OR MODIFYING A FEE CONTRACT

AFTER AN ATTORNEY CLIENT RELATIONSHIP HAS BEEN ESTABLISHED

6.1 DISTINCTION BETWEEN FEE CONTRACTS ENTERED INTO BEFORE AND AFTER THEESTABLISHMENT OF AN ATTORNEY CLIENT RELATIONSHIP: Prior to the establishment of theattorney client relationship, Texas law purports to treat an attorney and his or her client no differently than anyother contracting parties.

Once the attorney client relationship is established, the attorney becomes a fiduciary and his legal relationshipwith his or her client changes dramatically. After the establishment of the attorney client relationship, the TexasConstructive Fraud Doctrine imputes a presumption of unfairness or invalidity to any contract between theattorney and his or her client and the burden of showing its fairness and reasonableness is on the attorney.

The Texas Constructive Fraud Doctrine has been applied to attorneys for many years:

6.1.1 Barnes v. McCarthy, 132 S.W.2d 85 (Tex. Civ. App. – 1910, no writ):




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In dealings between attorney and client, owing to the confidential and fiduciaryrelation between an attorney and his client and to the influence of the attorneyover his client growing out of that relation, courts of law, and especially ofequity, scrutinize most closely all transactions between an attorney and hisclient. To sustain a transaction of advantage to himself with his client,the attorney has the burden of showing, not only that he used no undueinfluence, but that he gave his client all the information and advicewhich it would have been his duty to give if he himself had not beeninterested, and that the transaction was as beneficial to the client as itwould have been had the client dealt with a stranger. (emphasis supplied)

6.1.2 Johnson et al. v. Stickney, 152 S.W.2d 921 (Tex. Civ. App. – San Antonio 1941, no writ):

The rule in this State is that agreements made between attorney and client inthe course of that relation, whereby the former obtains a valuable right from thelatter, are presumed to be prima facie fraudulent, and the burden toprove them otherwise is on the attorney, by showing that he paid a fulland fair consideration for the right. (emphasis supplied)

6.1.3 Jacobs v. Middaugh, 369 S.W.2d 695 (Tex. Civ. App. – San Antonio 1963, writ ref’d n.r.e.):

Every transaction between an attorney and client is not absolutely void, butwhere the relationship of attorney client exists a suspicion is cast upon anytransaction between attorney and client, and the burden is cast uponthe attorney in suits of this nature to show that the transaction wasopen and above board, and that no advantage was taken of the client byreason of the transaction. Cooper v. Lee, 75 Tex. 114, 12 S.W. 483; Bellv. Ramirez, Tex. Civ. App. 299 S.W. 655. (emphasis supplied)

6.1.4 The lead Texas case dealing with the fiduciary implications of modifying an attorney client fee contractafter the establishment of the attorney client relationship is Archer v. Griffith, 390 S.W.2d 735 (Tex.1964) In Archer the Texas Supreme Court held that:

The relation between an attorney and his client is highlyfiduciary in nature, and their dealings with each other aresubject to the same scrutiny, intendments and imputations as atransaction between an ordinary trustee and his cestui quetrust. The burden of establishing its perfect fairness, adequacy,and equity, is thrown upon the attorney, upon the general rule, thathe who bargains in a matter of advantage with a person, placing aconfidence in him, is bound to show that a reasonable use has beenmade of that confidence; a rule applying equally to all persons standingin confidential relations with each other.' Story, Equity Jurisprudence,7th ed. 1857, s 311. This principle has always been recognized by theTexas courts. Cooper v. Lee, 75 Tex. 114, 12 S.W. 483; Holland v.Brown, Tex.Civ.App., 66 S.W.2d 1095 (writ ref.); Bell v. Ramirez,Tex.Civ.App., 299 S.W. 655 (writ ref.). (emphasis supplied)

In Archer, the court further held that:






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The general rule mentioned above applies to a contract or othertransaction relating to compensation provided the attorney-clientrelationship was in existence at the time. ‘Although the attorney isnot incapacitated from contracting with his client forcompensation during the existence of the relation of attorneyand client, and a fair and reasonable settlement of thecompensation to be paid is valid and enforceable, if executedfreely, voluntarily, and with full understanding by the client, thecourts, because of the confidential relationship, scrutinize withjealousy all contracts between them for compensation which aremade while the relation exists. There is a presumption ofunfairness or invalidity attaching to the contract, and the burdenof showing its fairness and reasonableness is on the attorney.’Pomeroy, Equity Jurisprudence, 5th ed 1941, s 960d. See alsoTippett v. Brooks, 28 Tex. Civ. App. 107, 67 S.W. 512 (writ ref., 95Tex. 335, 67 S.W. 495); Laybourne v. Bray & Shifflett, Tex. Civ.App., 190 S.W. 630 (writ ref.); Annotation, 19 A.L.R. 867. (emphasissupplied)

6.1.5 Plummer v. Bradford, 395 S.W.2d 856 (Tex. Civ. App. – Houston, 1965, no writ):

There is no allegation in appellees' amended answer of fraud or imputation offraud on the part of appellant, nor is there any allegation to the effect that thecontract and conveyance was unfair, inequitable or unjust, or that the allowanceof the one-third interest in the property as fee to appellant was unreasonableor that it would shock the conscience of the court. Appellees have not soughtto have the instrument in question cancelled or rescinded. There is no evidencein the record of any fraud, unfair dealing, duress, undue influence or improperconduct of any kind on the part of appellant. Appellees contend, however, thatwithout pleading fraud or wrongdoing on the part of appellant Plummer inconnection with the execution of the instrument, their pleading of noconsideration and failure of consideration, in view of the confidential relationexisting between appellant and Mrs. Alexander, placed upon appellant theburden of establishing that such instrument was fair, and freely and voluntarilyexecuted by Mrs. Alexander with full understanding of its import, and that thecontingent fee of a one-third interest in the Alexander undivided interest in theproperty was fair and reasonable.

In Archer v. Griffith, Tex.Sup.1964, 390 S.W.2d 735, the plaintiff brought suitto cancel and set aside a deed which she had executed conveying to herattorney as a fee a one-fourth of her undivided interest in certain property. Thecase was tried by the court without a jury, and the court rendered judgment forthe plaintiff. The plaintiff pleaded fraud, but there was no evidence of fraud.The plaintiff, however, specifically pleaded that the fee was so exorbitant andunreasonable as to require that the deed be cancelled and set aside. TheSupreme Court held that the record would support the conclusion that thecontingent contract was so exorbitant and unreasonable as to require that theconveyance be set aside. In the Archer case evidence was adduced as to thevalue of the property, the services rendered by the attorney, and what areasonable attorney's fee would be.

6.1.6 Ames, supra:




1 An attorney should not owe his client any fiduciary duties prior to the inception of the attorney client relationship and thedoctrine of constructive fraud should not apply prior to the inception of the attorney relationship.

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The relation between an attorney and his client is highly fiduciary in nature andthere is a presumption of unfairness or invalidity attaching to a contractbetween an attorney and his client and the burden of showing itsfairness and reasonableness is on the attorney.

6.1.7 Honeycutt v. Billingsley, 992 S.W.2d 970 (Tex.App.-Hous. [1st Dist.] 1999, no writ):

A contract entered into between any attorney and client after theattorney-client relationship is established is presumed unfair, and theattorney has the burden of showing the fairness and reasonableness ofthe agreement. Archer v. Griffith, 390 S.W.2d 735, 739 (Tex.1964);Cole v. McCanlies, 620 S.W.2d 713, 715 (Tex.Civ.App.--Dallas 1981,writ ref'd n.r.e.). In this case, Billingsley and the Honeycutts hadestablished a four-month-long attorney-client relationship before theyentered into a written contract.

Therefore, it was Billingsley's burden to show the fairness andreasonableness of the agreement. See Archer, 390 S.W.2d at 739.

The point here is that once the attorney client relationship isestablished then the attorney becomes a fiduciary and is subjectto all of the fiduciary duties set forth above. If the attorneycontracts with his or her client after the attorney-clientrelationship is established then the Texas Constructive FraudDoctrine is triggered and the contract will be presumed to befraudulent to the client. In such case the attorney will have theburden of proving that the contract is “fair” to his or her client.(emphasis supplied)

7CONSTRUCTION OF ATTORNEY FEE CONTRACTS

7.1 THE GENERAL RULE: Contracts between attorneys and clients, in the absence of breach of fiduciary dutyand/or constructive fraud1, are supposed to be treated by Texas courts the same as any other contracts. Intheory at least, an attorney is not a fiduciary for, and owes no fiduciary duty to, the client in connection with afee agreement that is entered into prior to the establishment of the attorney client relationship. Texas courtsshould therefore recognize this distinction when construing attorney fee contracts. Unfortunately, they do not doso.

7.1.1 The court in Stern v. Wonzer, 846 S.W.2d 939 [Tex. App. Houston (1stDist.) 1993, no writ] held that:

In interpreting an attorney's contingent fee contract, we apply the general rulesof contract law. See Howell v. Kelly, 534 S.W.2d 737, 739 (Tex.App.--Houston [1st Dist.] 1976, no writ). The parties stipulated, and the trialcourt concluded, that the agreements in question are unambiguous. Where theintention of the parties is clearly and unambiguously stated in the contract, acourt gives effect to the intentions of the parties, as expressed in the contract.







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Citizens Nat'l Bank v. Texas & P. Ry., 136 Tex. 333, 150 S.W.2d 1003, 1006(1941); Wadsworth Properties v. ITT Employment & Training Sys., Inc., 816S.W.2d 819, 822 (Tex. App.- Houston [1st Dist.] 1991, writ denied). Theobjective intent, as expressed in the writing, not the subjective intent, controls.Pfeffer v. Southern Tex. Laborers' Pension Trust Fund, 679 S.W.2d 691,695 (Tex. App.--Houston [1st Dist.] 1984, writ ref'd n.r.e.). When thelanguage is plain and unambiguous, it must be enforced as written.Republic Nat'l Life Ins. Co. v. Spillars, 368 S.W.2d 92, 94 (Tex.1963).(emphasis supplied)

7.1.2 THE LEVINE CASE: The Texas Supreme Court, in a recent case interpreting a contingent feecontract (that was apparently executed prior to the inception of the attorney client relationship), held inLevine v. Bayne, Snell & Karause, Ltd., 40 S.W.3d 92 (Tex. 2001) that:

Such an interpretation rests on the premise that "lawyers are more able thanmost clients to detect and clarify omissions in client-lawyer contracts" because"lawyers almost always write such contracts" and are more familiar with theintricacies of legal representation and with the law and drafting of feeagreements and other contracts. For example, the Indiana Supreme Court hasstated, "[l]awyers almost always possess the more sophisticated understandingof fee arrangements. It is therefore appropriate to place the balance of theburden of fair dealing and the allotment of risk in the hands of the lawyer inregard to fee arrangements with clients." Similarly, the California SupremeCourt has added that attorneys are "presumably familiar with legal terms andproceedings and accustomed to the use of language appropriate to the framingof contracts...." Motivated by some of these concerns, courts in otherjurisdictions have already applied this rule in construing contracts inlawyer-client fee disputes. Because the lawyer is better able than theclient to predict and provide for fee arrangements based on recoveriesdiverging from the traditional payment actually received, the burdenshould fall on the lawyer to express in a contract with the client whetherthe contingent fee will be calculated on non-cash benefits as well asmoney damages.

To place this burden upon attorneys is justifie d not only by theattorney's sophistication, but also by the relationship of trust betweenattorney and client. As the Minnesota Supreme Court has concluded,to impose the obligation of clarifying attorney-client contracts upon theattorney "is entirely reasonable, both because of [the attorney's]greater knowledge and experience with respect to fee arrangementsand because of the trust [the] client has placed in [the attorney]."(Emphasis supplied)

7.1.3 EFFECT OF LEVINE: Does Levine do away with the distinction (recognized in Johnson v. Cofer,supra) between contracts executed prior to the establishment of the attorney client relationship andthose executed after the establishment of the relationship? While the Lavine court seems to hold thatall matters of construction of fee contracts will be resolved against the attorney, it does not apply theTexas Constructive Fraud Doctrine and presume that any attorney fee contract is fraudulent. There maytherefore still be some hope for the Johnson v. Cofer distinction. In Johnson the court recognized thedifference between attorney client contracts executed before and after the existence of the attorneyclient relationship. Although eroded by the Texas Supreme Court in Levine this distinction probably stillexists.








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8TYPES OF ATTORNEY CLIENT FEE ARRANGEMENTS

8.1 DISCLAIMER: The fee agreements attached to this paper are those sometimes used by one or more membersof our law firm. While we feel that these forms have served us well, our firm makes no representation orwarranty of any kind regarding the legality or validity of any of these forms or any of their provisions.

8.2 THE ENGAGEMENT LETTER (USED PRIMARILY FOR NON-CONTINGENT FEEREPRESENTATION):

8.2.1 A non contingent contract for legal services is not required to be in writing. It is, however, usuallyadvisable to have a written contract.

8.2.2 See Appendix A for the form of our firm’s litigation engagement letter.

8.2.3 See Appendix B for the form of our firm’s estate planning engagement letter.

8.3 THE CONTINGENT FEE CONTRACT:

8.3.1 Tex. Gov. Code Ann. §82.065 provides as follows:

(a) A contingent fee contract for legal services must be in writing and signed by theattorney and the client.

(b) A contingent fee contract for legal services is voidable by the client if it is procuredas a result of conduct violating the laws of this state or the Disciplinary Rules of theState Bar of Texas regarding barratry by attorneys or other persons.

8.3.1.1 Enochs v. Brown, 872 S.W.2d 312 (Tex. App. – Austin 1994, no writ):

Even if Enochs were not estopped from challenging thevalidity of the contingent fee contract, we would not hold thecontract void under Government Code section 82.065(a).Section 82.065(a) requires that a contingent fee contract be inwriting and signed by the attorney and client. GovernmentCode § 82.065(a). While Brown, the client, signed the writtenfee contract, Galow, the attorney responsible for the case,failed to sign the agreement. However, the trial courtconcluded as a matter of law that the failure of the attorney tosign the contract "did not render it void or voidable, in light ofthe circumstances surrounding its execution." Were he notestopped, Enochs would challenge this conclusion of law.

We must look to the entire act to effectively determine thepurpose behind a specific provision. Wilburn, 824 S.W.2d at760. The legislature addressed contingent fee contracts in theact that amended the barratry statute. See Act of June 14,1989, 71st Leg., R.S., ch. 866, § 2, 1989 Tex.Gen.Laws 3855,3856 (Tex.Penal Code § 38.12, since amended). The purposeof the barratry statute is to protect vulnerable and unknowingindividuals from overreaching or improper behavior on the part



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of lawyers. Lopez v. State, 846 S.W.2d 90, 95(Tex.App.--Corpus Christi 1992, pet. ref'd). The requirementin section 82.065(a) of having a signed, written contingent feecontract furthers this purpose. If a contingent fee contractmust be written and signed, the client has a better opportunityto fully comprehend that the fee arrangement is a contingentone.

However, we do not believe that clients are afforded anyprotection by voiding a written contract that has been signedby the client, and fully performed by the attorney to the benefitof the client, simply because the attorney did not sign thecontract. Here, no one is claiming that Brown, who enteredinto the contract on Justin's behalf, did not understand or agreeto the contingent fee arrangement that Whitehurst attempts toenforce. We presume that the legislature intended a just andreasonable result in enacting a statute. Tex.Gov't Code Ann.§ 311.021(3) (West 1988). Moreover, we may consider theconsequences of a particular construction. Tex.Gov't CodeAnn. § 311.023(5) (West 1988). In this case, to consider thecontingent fee contract void would lead to an unreasonableand unjust result and would not serve the purpose of protectingvulnerable clients. Brown knowingly signed the writtenc ontract and continues to consent to its enforceability;Whitehurst performed the legal services and procured thesettlement funds; and Justin accepted the benefits. To void thecontract under these circumstances simply because theattorney failed to sign the contract would unjustly enrichJustin.

8.3.1.2 In re Godt, 28 S.W.3d 732 (Tex. App. – Corpus Christi, 2000, no writ):

Although Godt's challenge to the agreement relied on theinapplicability of the TAA and public policy grounds, we notethat the agreement is indisputably a contingent fee agreementfor legal services. Section 82.065(a) of the Government Codeprovides, "[a] contingent fee contract for legal services mustbe in writing and signed by the attorney and client." Tex. Gov'tCode Ann. § 82.065(a) (emphasis added). It is undisputed thatthe agreement was signed only by Godt; neither Henry noranyone from his office signed the agreement. We hold,therefore, that Henry may not enforce the arbitrationagreement because it fails to comply with the requirements setforth in the Government Code. We do not address the issue ofwhether Godt may enforce the agreement.

8.3.1.3 Tillery & Tillery v. Zurick Insurance Company, 54 S.W.3d 356 (Tex. App. – Dallas,2001, writ den’d):

A contingent fee agreement that does not meet therequirements of section 82.065 is voidable by the client. SeeSanes v. Clark, 25 S.W.3d 800, 804 (Tex.App.--Waco 2000,






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pet. denied). One way a client may void the agreement is byexpressing its intent to do so before the attorney has fully orsubstantially performed. See id. at 805. This is exactly whatZurich did. After Tillery filed the intervention claim, but beforehe had done any substantial work on the case, Zurich informedhim he was to take no further action on the intervention.Tillery then spoke with Zurich's in-house counsel and agreedto transfer the pretrial discovery responsibilities to him.Pursuant to Zurich's instructions, Tillery never performed anylegal work on the intervention claim after that time. By tellingTillery to stop work on the case and then transferring the legalwork to its in-house counsel, Zurich clearly demonstrated itsintent to void any agreement with Tillery with respect to theintervention action.

Tillery argues his contingent fee agreement with Zurich isenforceable under the reasoning of Enochs v. Brown, 872S.W.2d 312 (Tex.App.--Austin 1994, no writ). In Enochs, thecourt held a contingent fee agreement may be enforceableeven though it does not meet the requirements of section82.065. See id. at 319. But there are two significantdifferences between Enochs and this case. First, the feeagreement in Enochs was signed by the client, but not by theattorney. The court applied a statute of frauds analysis to holdthat a contract may be enforced under certain circumstanceswhen it is signed by the party to be charged. See id. at 318.Because Zurich did not sign the fee agreement at issue here,the statute of frauds analysis employed in Enochs does notapply.

Second, the attorney in Enochs had completed all of the workin the underlying litigation before he sought to enforce his feeagreement. The court applied a quasi-estoppel theory ofrecovery to conclude it would be unconscionable to allow theclient to challenge an agreement he signed after accepting allthe benefits of the contract. See id. at 317. In this case, theonly benefit of Tillery's services Zurich arguably accepted inthe intervention case before refusing to honor the agreementwas the preparation and filing of the intervention pleadings. Infact, Zurich specifically told Tillery to cease work on theintervention claim and then transferred responsibility for thecase to its in-house counsel. Based on the facts in this case,there is nothing unconscionable about refusing to pay Tillerya contingent fee for a case in which he only filed the originalpleadings. Accordingly, we decline to extend Enochs to thefacts presented in this case.

8.3.2 In Re Polybutylene Plumbing Litigation, 23 S.W.3d 428 (Tex. App. - Houston [1st Dist.] 2001, nowrit):

As a general rule, a court has no authority to determine what fee a litigantshould pay his or her own attorney, that being a matter of contract between





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attorney and client. Thomas v. Anderson, 861 S.W.2d 58, 62 (Tex.App.--ElPaso 1993, no writ). When the language in an attorney fee contract is plain andunambiguous, it must be enforced as written. Stern v. Wonzer, 846 S.W.2d939, 944 (Tex.App.--Houston [1st Dist.] 1993, no writ). If an attorney feecontract was valid when made, and it was made by and between mentallycompetent persons, it is to be enforced without court review of thereasonableness of attorneys' fees so fixed. Parker v. Boyles, 197 S.W.2d 842,849 (Tex.Civ.App.--Galveston 1946, writ ref'd n.r.e.)....

We have found in Texas state court case law the following exceptions to thegeneral rule that attorneys' fee contracts between attorneys and clients will beenforced as written if they have been fully performed by the attorneys: (a) incases involving fraud or breach of a fiduciary duty by the attorney, see Burrowv. Arce, 997 S.W.2d 229, 232 (Tex.1999); Archer v. Griffith, 390 S.W.2d 735,740 (Tex.1964); Braselton v. Nicolas & Morris, 557 S.W.2d 187, 188(Tex.Civ.App.--Corpus Christi 1977, no writ), and (b) in cases involving minorsor incompetents. See Tex. Prob.Code Ann. § 233(b) (Vernon Supp.2000);Tex.R. Civ. P. 44; Stern, 846 S.W.2d at 947. These exceptions do not applyto the case at bar...

Appellees have not cited one Texas state court case holding that a trial judgehas the power, inherent or otherwise, to void or rewrite a fully-performedattorney fee contract in the absence of pleading and proof of barratry, fraud,breach of fiduciary duty, incapacity, illegality, class action, or the applicabilityof the "common fund doctrine."

We hold that, unless the parties agreed otherwise, the general rule in Texashonoring the sanctity of contracts applies in this case.

8.3.3 See Appendix C for the form of our firm’s Contingent Fee Contract.

8.3.4 Special Problems Relating To Contingent Fee Contracts:

8.3.4.1 Right of attorneys under contingent fee contract to prosecute cause of actionindependently of client: Dow Chemical Company v. Benton, 357 S.W.2d 565 (Tex.1962):

The basic fallacy of respondents' position, in our opinion, isthat it ignores the fact that the lawyer's rights, based on thecontingent fee contract, are wholly derivative from those of hisclient. The attorney-client relationship is one of principal andagent. Texas Employers Ins. Ass'n v. Wermske, Tex., 349S.W.2d 90 (1961). Therefore, the rights of each in a cause ofaction during the existence of that relationship are necessarilydependent upon and inseparably interwoven with the other.Neither lawyer nor client should be permitted to select thegood features of his contract and reject the bad. There is butone cause of action. Our decisions uphold an agreement toassign a part of the recovery on the cause of action to theattorney. But we have never held that the cause of action isdivisible and may be tried for only a percentage of the causeof action. To illustrate, let us take a closer look at Rule 215a.













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In addition to giving the trial court the power to dismiss acause of action for failure of a party to give a deposition, thisrule provides alternative sanctions including any orders 'asmay be just.' One of the sanctions specifically permitted is thestriking of any part of the pleadings of the defaulting party.Suppose that the trial court had invoked the latter sanction inthis case, rather than dismissing the cause entirely. Could it besaid that these pleadings would be stricken only as to theplaintiff, but that they could still be used in the same lawsuit tosupport the introduction of evidence and submission of issueson behalf of the plaintiff's lawyer? Conversely, most of theactual details of any lawsuit are necessarily handled by thelawyer on behalf of his client. Suppose that in a particularlawsuit the lawyer fails to make proper objections, draftsdefective special issues, or is late in filing a particulardocument. Could we allow the client to argue on appeal thatall these defects related only to the attorney's case and not tohis? Rule 215a is based on Rule 37(d) of the Federal Rules ofCivil Procedure, 28 U.S.C.A. The case of HammondPacking Co. v. Arkansas, 212 U.S. 322, 29 S.Ct. 370, 53L.Ed. 530, indicates that the legal justification for rules such asthese is that failure to produce requested documents or toappear for a deposition creates a presumption of want of meritin the defaulting party's claim. Suppose that in this caseChampion had appeared for his deposition but then proceededto testify that there was no merit in his cause of action. Couldwe hold that this testimony would not also conclude hislawyer's case?

In our opinion, all of these suggested situations are analogousto the present case, and all of the questions posed above mustbe answered in the negative. The reason is that as long as theattorney-client relationship endures, with its correspondinglegal effect of principal and agent, the acts of one mustnecessarily bind the other as a general rule.

For legal authority in this case, respondents rely primarily uponthose decisions holding that when a client purports to settle acase with the opposite party the settlement will not bind hisattorney who had no notice of the negotiations. One of theattorney's remedies in such a situation is to continue thelitigation on his own account to realize his contingent fee. See,e. g., Texas & P. Ry. Co. v. Vaughan, 16 Tex.Civ.App., 403,40 S.W. 1065 (Err. ref. 1897); Powell v. Galveston, H. & S.A. Ry. Co., Tex.Civ.App., 78 S.W. 975 (no writ 1904);Gibson v. Texas Pac. Coal Co., Tex.Com.App., 266 S.W.137 (1924); Davidson v. Gray, Tex.Civ.App., 97 S.W.2d 488(no writ 1936). We have no quarrel with the result in thesecases. They involve essentially a situation where a client hasconspired with a third party to circumvent the attorney-clientrelationship with the intention of terminating it unilaterally. Ineach case, the client has attempted to satisfy financially his

http://www.TexasBarCLE.com/CLE/PMCasemaker.asp?table=US_supremeopinions&volume=212&edition=U.S.&page=322&id=46061_01

http://www.TexasBarCLE.com/CLE/PMCasemaker.asp?table=US_supremeopinions&volume=29&edition=S.Ct.&page=370&id=46061_01



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legal claim without compensating the attorney for his effortsin the case, despite the fact that the attorney's previous effortsprobably had much influence on the opposite party's desire tosettle. We believe that it is the severing of the attorney-clientrelationship through the inducements of the opposite partywhich distinguishes the settlement cases from the casepresently before us.

We do not reject the rationale that a properly wordedcontingent fee contract may effect an assignment of part ofthe recovery and a part of a cause of action to the attorney.However, the attorney who has received such an assignmentinvariably elects to litigate his interest simultaneously with hisclient's interest, in his client's name, and elects implicitly to bebound by any judgment properly rendered in the case. We holdthat so long as the existing agency relationship is notterminated, as by the opposite party's buying out the client'sinterest, the attorney must be bound by that election.

Since the case of Winston v. Masterson, 87 Tex. 200, 27S.W. 768, it has been the law in Texas that an attorney witha contingent fee contract is not so directly interested in thesubject matter of a lawsuit as to make him a 'party' within themeaning of the statute disqualifying a judge who is related toa party in a case tried before him. Art. 15, Vernon'sAnn.Civ.St. An exception to this rule is in cases where thejudge must approve the attorney's fee. Indemnity Ins. Co. ofNorth America v. McGee, Tex., 356 S.W.2d 666. Thisexception was defined in Postal Mutual Indemnity Co. v.Ellis, 140 Tex. 570, 169 S.W.2d 482, but the Court thereexpressly reaffirmed the general rule of the Winston case. Ifwe were to adopt respondents' position in the present case, theeffect would be that an attorney is no longer merely the legalrepresentative of his client. Instead, in every case where theattorney has a contingent fee contract, he would be more akinto a coplaintiff, which would seem to necessitate ouroverturning he long-standing principle of Winston v.Masterson, supra. We are not inclined to do so; but thisrepresents just another difficulty encountered if weoverindulge in the notion that the attorney with a contingentfee is litigating two distinct, independent interests at the sametime.

Our holding in this case, of course, does not necessarily applyto the case where a plaintiff has assigned a portion of hiscause of action to an independent third party. Nor do we havethe case where an insurance company is litigating itssubrogation rights in the name of the insured. Suffice to saythat in neither of these situations does there exist the crucialattorney-client, principal-agent relationship between assignorand assignee as that present here.




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8.3.4.2 Contingent Fee Conflict of Interest in Representing Multiple Parties: Mandel & Wrightv. Thomas, 441 S.W.2d 841(Tex. 1969):

At the time Mrs. Thomas signed the contract in question,Mandell & Wright already represented another claimant bythe name of James Hiott. The Court of Civil Appealsoverruled the contention of Mrs. Thomas that a conflict ofinterest existed by reason of Mandell & Wright'srepresentation of another claimant. We likewise overrule thatcontention and hold that as a matter of law, there was noconflict of interest at the time Mrs. Thomas signed thecontract on October 27, 1966. While neither party has briefedthe question of what effect such a conflict might have on thecontractual rights and obligations of Mrs. Thomas, we thinkthe question is immaterial in view of our holding under therecord of this case that no conflict of interest existed betweenMrs. Thomas and the other claimant. This is not to say that aconflict of interest could never arise in the representation ofseveral claimants by a single attorney in a proceeding whereliability is limited as provided in 46 U.S.C.A. §183 et seq. Therights and obligations of the attorney in that situation will beconsidered when the question is presented for decision.

Both of the claimants represented by Mandell & Wright wereasserting claims against the owners of the Gulfstag, a commondefendant. But that fact, standing alone, could not possiblylead to the inference that their respective interests wereadverse and hostile, and that is what is required before theinterests can be said to conflict. 7 C.J.S. Attorney and Clients 47. Mrs. Thomas' attorneys contend, however, that at thetime she signed the contract there existed the probability thatthe shipowners would file a petition for limitation of liability asauthorized by 46 U.S.C.A. s 183 et seq., and that the limitationfund established in that proceeding would in all probability beinadequate to satisfy all the claims against the fund. Mrs.Thomas urges that the claimant's respective interestsnecessarily conflicted due to the possibility, if not probability,that they would be seeking satisfaction out of a limited fund.

A petition to limit liability has actually been filed by the ownersof the Gulfstag in the United States District Court for theEastern District of Texas. Wright knew, when Mrs. Thomassigned the contract, that such a petition would probably befiled and that the limitation fund might well be inadequate tosatisfy the many claims which would be asserted against thefund. We nevertheless hold that in representing James Hiottand Mrs. Thomas, Mandell & Wright did not representconflicting interests within the meaning of Texas Canon ofEthics Number Six.

8.3.4.3 Calculation of Contingent Fee Amount: Allison v. National Union Fire InsuranceCompany of Pittsburgh Pennsylvania, 734 S.W.2d 645 (Tex 1987):




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In April 1981, a grain elevator exploded in Corpus Christi,causing property damage as well as a number of injuries anddeaths. Multiple party lawsuits ensued. Through its insurerNational Union Fire Insurance, defendant CEA Carter-DayCompany entered into Mary Carter agreements with thevarious plaintiffs. The settlements made in personal injury anddeath cases contained pay-back provisions whereby the fundsadvanced by Carter-Day would be fully reimbursed out of apercentage of the recovery plaintiffs received from the otherdefendants. Carter-Day's settlement of the property damageclaim, known as the Ireland claim, did not contain anypay-back provision.

The present declaratory judgment suit arose when theplaintiffs' attorneys contended that their contingent fees shouldbe calculated based on gross settlement amounts rather thanon the settlement amounts reduced by their clients' MaryCarter payments to National Union. Both sides filed motionsfor summary judgment.

It is undisputed that the Ireland claim is not subject to anypay-back agreement. Because no genuine issue of materialfact exists as to that claim, the court of appeals erred inreversing that part of the trial court judgment disposing of theIreland claim. TEX.R.CIV.P. 166-A. We reverse that part ofthe court of appeals' judgment relating to the Ireland claim andrender judgment that petitioners are entitled to calculate theirattorney's fees on the gross settlement amounts for that claim.

The Mary Carter agreements entered into by the personalinjury plaintiffs typically contain pay-back provisions as in thiscase: It is further agreed and understood by the parties that itis the parties' intent that National Union be reimbursed to theextent of moneys expended on behalf of the undersignedplaintiff, as set forth below. In accordance with such intention,it is agreed and understood that to the extent that plaintiff isentitled to the proceeds of any further judgment or settlementin any capacity, that 50 cents of each dollar of such moneysactually recovered and paid to plaintiff shall be simultaneouslypaid over directly to National Union up to the maximum of [theamount paid by Carter-Day in settlement to the plaintiff]. Theparties agree that the Mary Carter agreements areunambiguous. Accordingly, the intent of the parties must bedetermined from the plain language of the agreements. IdealLease Service, Inc. v. Amoco Production Co., 662 S.W.2d951, 953 (Tex.1983). The Mary Carter agreements expressthe intention of the plaintiff to fully reimburse Carter-Day. Ifattorney's fees are calculated on the gross settlement amount,Carter-Day will not be fully reimbursed as provided for in theagreements. Accordingly, the intent of the parties appears tobe that the attorney's fees are to be paid only out of the actual




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recovery of the client. Consequently, we hold the court ofappeals correctly reversed the summary judgments as to thepersonal injury and death claims.

8.3.5 Can The Client Transfer the Contingent Interest? Whenever an attorney enters into a contingent feecontract with a trust beneficiary regarding trust litigation, he or she should review the trust to determineif the trust is a spendthrift trust and consequently, whether the beneficiary has the ability to assign anyinterest in the trust.

9COLLECTING LEGAL FEES WITHOUT A CONTRACT

9.1 QUANTUM MERUIT:

9.1.1 Enochs v. Brown, 872 S.W.2d 312 (Tex. App. – Austin 1994, no writ):

To recover under quantum meruit, a claimant must prove that: (1) valuableservices were rendered; (2) for the person sought to be charged; (3) theservices were accepted, used, and enjoyed by the person sought to be charged;and (4) the acceptance, use, and enjoyment was under such circumstances asreasonably notified the person sought to be charged that the claimant, inperforming such services, was expecting to be paid by the person sought to becharged. Vortt Exploration Co. v. Chevron U.S.A., 787 S.W.2d 942, 944(Tex. 1990)

9.2 QUASI-ESTOPPEL:

9.2.1 In Enochs, supra the client signed a contingent fee contract and, after the attorney had fully performedunder the contract and had obtained a recovery, claimed that the contract was void under GovernmentCode §82.065(a) because it was not signed by the attorney. The Enochs court held that:

These findings support the theory of quasi-estoppel. The principle of quasi-estoppel precludes a party from asserting, to another’s disadvantage, a rightinconsistent with a position he has previously taken. Steubner Realty 19, Ltd.v. Cravens Rd. 88, Ltd, 817 S.W.2d 160, 164 (Tex. App. – Houston [14th

Dist.] 1991, no writ) (citation omitted) The doctrine applies when it would beunconscionable to allow a person to maintain a position inconsistent with onein which he accepted a benefit. Id. Misrepresentation by one party, andreliance by the other are not necessary elements of quasi-estoppel.

9.3 COMMON FUND DOCTRINE:

9.3.1 Knebel v. Capital National Bank In Austin, 518 S.W.2d 795 (Tex. 1974):

Based on their successful litigation in nullifying the stock redemption sale andthe claimed benefit to the estate and its beneficiaries therefrom, HerbertKnebel, et al., invoked the rule of the “common fund” doctrine. They soughtreimbursement from the Knebel estate for the fees they were contractuallybound to pay their attorneys under their contingent fee contrats, and anadditional recovery for the use and benefit of their attorneys.






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The rule thus invoked rests in equity and not contract in charging acommon fund with expenses, including attorney’s fees. The equitableobjective is that of distributing the burden of such expenses amongthose who share in an accomplished benefit. (emphasis supplied)

10SUING TO COLLECT LEGAL FEES

10.1 SUING YOUR CLIENT: It is my opinion that it is seldom, if ever, wise to sue a client or former client in orderto collect legal fees. Cases of this type invariably bring cross actions for legal malpractice and are seldomresolved in favor of the attorney.

10.2 SUING THIRD PARTIES :

10.2.1In the case of New Amsterdam Casualty Company v. Texas Industries, Inc., 414 S.W.2d 914 (Tex.1967) the Texas Supreme Court held that:

In Mundy v. Knutson Construction Co., 156 Tex. 211, 294 S.W.2d 371(1956) we reaffirmed the rule previously recognized as settled law in Wm.Cameron & Co. v. American Surety Co., 55 S.W.2d 1032 (Tex. Com. App.1932) that attorney’s fees are not recoverable either in an action in tortor a suit upon a contract unless provided by statute or by contractbetween the parties . See also Van Zandt v. Fort Worth Press, 359 S.W.2d893 (Tex. Sup. 1962), and cases there cited, stating the rule that statutoryprovisions for the recovery of attorney’s fees are in derogation of the commonlaw, are penal in nature and must be strictly construed. (emphasis supplied)

10.2.2Hartman v. Solbrig, 12 S.W.3d 587 (Tex. App. – San Antonio, 2000, writ den’d):

As a general rule, the party seeking to recover attorney’s fees carries theburden of proof...

11STATUTORY GROUNDS FOR

RECOVERY OF ATTORNEY’S FEES IN FIDUCIARY LITIGATION

11.1 ESTATES:

11.1.1Tex. Prob. Code Ann. §113(a) provides that:

If the court determines on review of an application filed under Section 108 ofthis code [relating to eligible applicants for emergency intervention to obtainfunds for the funeral and burial of a decedent] that emergency intervention isnecessary to obtain funds needed for a decedent’s funeral and burial expenses,the court may order funds of the decedent held by an employer, individual, orfinancial institution to be paid directly to a funeral home only for reasonableand necessary attorney’s fees for the attorney who obtained the ordergranted under this section, for court costs for obtaining the order, and forfuneral and burial expenses not to exceed $5,000 as ordered by the court toprovide the decedent with a reasonable, dignified, and appropriate funeral andburial. (emphasis supplied)








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11.1.2Tex. Prob. Code Ann. §149(C) provides that:

(c) An independent executor who defends an action for his removal in goodfaith, whether successful or not, shall be allowed out of the estate his necessaryexpenses ands disbursements including reasonable attorney’s fees, in theremoval proceedings. (emphasis supplied)

(d) Costs and expenses incurred by the party seeking removal incident toremoval of an independent executor appointed without bond, includingreasonable attorney’s fees and expenses, may be paid out of the estate.

11.1.3Tex. Prob. Code Ann. §243 provides that:

When any person designated as executor in a will or an alleged will, or asadministrator with the will or alleged will annexed, defends it or prosecutes anyproceeding in good faith, and with just cause, for the purpose of having the willor alleged will admitted to probate, whether successful or not, he shall beallowed out of the estate his necessary expenses and disbursements, includingreasonable attorney’s fees, in such proceedings. When any persondesignated as a devisee, legatee, or beneficiary in a will or an alleged will, oras administrator with the will or alleged will annexed, defends it or prosecutesany proceeding in good faith, and with just cause, for the purpose of having thewill or alleged will admitted to probate, whether successful or not, he may beallowed out of the estate his necessary expenses and disbursements, includingreasonable attorney’s fees in such proceedings. (emphasis supplied)

11.1.4Tex. Prob. Code Ann. §245 provides that:

When the personal representative of an estate neglects the performance of anyduty required of him, and any costs are incurred thereby, or if he is removedfor cause, he and the sureties on his bond shall be liable for costs of removaland other additional costs incurred that are not authorized expenditures, asdefined by this code and for reasonable attorney’s fees incurred inremoving him and in obtaining his compliance regarding any statutoryduty he has neglected. (emphasis supplied)

11.1.5Tex. Prob. Code Ann. §322A provides in part that:

(y) The prevailing party in an action initiated by a person for the collection ofestate taxes from a person interested in the estate to whom estate taxes wereapportioned and charged under Subsection (b) of this section shall be awardednecessary expenses including reasonable attorney’s fees. (emphasissupplied)

11.2 GUARDIANSHIPS:

11.2.1Tex. Prob. Code Ann. §665B provides that:

(a) A court that creates a guardianship for a ward under this chapter, onrequest of a person who filed an application to be appointed guardian of theproposed ward, may authorize compensation of an attorney who


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represents the person at the application hearing , regardless of whetherthe person is appointed the ward’s guardian, from:

(1) available funds of the ward’s estate; or

(2) the county treasury if:

(A) the ward’s estate is insufficient to pay for the servicesprovided by the attorney; and

(B) funds in the county treasury are budgeted for thatpurpose.

(b) The court may not authorize compensation under this section unlessthe court finds that the applicant acted in good faith and for just causein the filing and prosecution of the application. (emphasis supplied)

11.2.2Tex. Prob. Code Ann. §665C provides that:

(a) Except as provided by Subsection (b) of this section, a guardian of anestate may enter into a contract to convey, or may convey, a contingentinterest in any property sought to be recovered, not exceeding one-third thereof for services of attorneys, subject only to the approval ofthe court in which the estate is being administered.(emphasis supplied)

(b) A guardian of an estate may convey or contract to convey forservices of attorneys a contingent interest that exceeds one-third of theproperty sought to be recovered under this section only on theapproval of the court in which the estate is being administered. The courtmust approve a contract entered into or conveyance made under this sectionbefore an attorney performs any legal services. A contract entered into orconveyance made in violation of this section is void, unless the court ratifies orreforms the contract or documents relating to the conveyance to the extentnecessary to cause the contract or conveyance to meet the requirements of thissection.

(c) In approving a contract or conveyance under Subsection (a) or (b) of thissection for services of an attorney, the court shall consider:

1) the time and labor that will be required, the novelty and difficulty ofthe questions to be involved, and the skill that will be required toperform the legal services properly;

2) the fee customarily charged in the locality for similar legal services;

3) the value of the property recovered or sought to be recovered bythe personal representative under this section;

4) the benefits to the estate that the attorney will be responsible forsecuring; and


37

5) the experience and ability of the attorney who will be performing theservices.

(d) On satisfactory proof to the court, a guardian of an estate is entitled to allnecessary and reasonable expenses incurred by the guardian in collecting orattempting to collect a claim or debt owed to the estate or in recovering orattempting to recover property to which the estate has a title or claim.

11.2.3 Tex. Prob. Code Ann. §666 provides that:

A guardian is entitled to be reimbursed from the guardianship estate for allnecessary and reasonable expenses incurred in performing any duty as aguardian, including reimbursement for the payment of reasonableattorney’s fees necessarily incurred by the guardian in connection withthe management of the estate or any other guardianship matter.(emphasis supplied)

11.2.4 Tex. Prob. Code Ann. §668 provides that:

When costs are incurred because a guardian neglects to perform arequired duty or if a guardian is removed for cause, the guardian andthe sureties on the guardian’s bond are liable for:

(1) costs of removal and other additional costs incurred that are notauthorized expenditures under this chapter; and

(2) reasonable attorney’s fees incurred in removing theguardian or in obtaining compliance regarding any statutory dutythe guardian has neglected.(emphasis supplied)

11.2.5Tex. Prob. Code Ann. §883 (c) provides that:

(a) A court, on its own motion or on the motion of an interested person andafter the community administrator has been cited by personal service to answerat a time and place specified in the notice, may remove a communityadministrator if:

(1) the community administrator fails to comply with a court order foran inventory and appraisement, accounting, or subsequent accountingunder Section 883B of this code;

(2) sufficient grounds appear to support belief that the communityadministrator has misapplied or embezzled or that the communityadministrator is about to misapply or embezzle, all or any part of theproperty committed to the care of the community administrator;

(3) the community administrator is proved to have been guilty of grossmisconduct or gross mismanagement in the performance of duties ascommunity administrator; or

(4) the community administrator becomes an incapacitated person, issentenced to the penitentiary, or for any other reason becomes legally


38

incapacitated from properly performing the community administrator’sfiduciary duties.

(b) The order of removal must state the cause of removal and shall direct byorder the disposition of the assets remaining in the name or under the controlof the removed community administrator.

(c) A community administrator who defends an action for the removalof the community administrator in good faith, regardless of whethersuccessful, is entitled to recover from the incapacitated spouse’s partof the community estate the community administrator’s necessaryexpenses and disbursements in the removal proceedings, includingreasonable attorney’s fees. (emphasis supplied)

11.3 TRUSTS:

11.3.1Tex. Trust Code §114.064 provides that:

In any proceeding under this code the court may make such award of costsand reasonable and necessary attorney’s fee s as may seem equitable andjust. (emphasis supplied)

11.4 DECLARATORY JUDGMENTS:

11.4.1Tex. Civ. Practice & Rem. Code §37.009 provides that:

In any proceeding under this chapter, the court may award costs andreasonable and necessary attorney’s fees as are equitable and just.(emphasis supplied)

11.5 CIVIL PRACTICE & REMEDIES CODE:

11.5.1Tex. Civ. Practice & Rem. Code, Section 38.001 provides that:

A person may recover reasonable attorney’s fees from an individual orcorporation in addition to the amount of a valid claim and costs, if the claim isfor:

(1) rendered services;

(2) performed labor;

(3) furnished material;

(4) freight or express charges;

(5) lost or damaged freight or express;

(6) killed or injured stock;

(8) an oral or written contract. (emphasis supplied)


39


To recover attorney’s fees under this chapter:

(1) the claimant must be represented by an attorney;

(2) the claimant must present the claim to the opposing party or to aduly authorized agent of the opposing party; and

(3) payment for the just amount owed must not have been tenderedbefore the expiration of the 30th day after the claim is presented.supplied)


It is presumed that the usual and customary attorney’s fees for a claim of thetype described in Section 38.001 are reasonable. The presumption may berebutted. (emphasis supplied)


The court may take judicial notice of the usual and customary attorney’s feesand of the contents of the case file without receiving further evidenced in:

(1) a proceeding before the court;

(2) a jury case in which the amount of attorney’s fees is submitted tothe court by agreement. (emphasis supplied)


This chapter shall be liberally construed to promote its underlying purposes.(emphasis supplied)


This chapter does not apply to a contract issued by an insurer that is subject tothe provisions of:

(1) Article 3.62 Insurance Code;

(2) Section 1, Chapter 387, Acts of the 55th Legislature, RegularSession 1957 (Article 3.62-1 Vernons Texas Insurance Code);

(3) Chapter 9, Insurance Code;

(4) Article 21.21 Insurance Code, or

(5) the Unfair Claim Settlement Practices Act (Article 21.21-2Insurance Code).


40

12CONCLUSION

The law relating to attorney fee contracts is far from clear. An attorney should probably attempt to negotiate a feecontract with his or her client at the very inception of their relationship. If the contract is either entered into or modifiedafter an “attorney client relationship” has been established then the attorney should be aware that the contract will bepresumed to be fraudulent under the Texas Constructive Fraud Doctrine. In any dispute regarding the contract theattorney should assume that he or she will never be on a level playing field with the client. The client will always havethe advantage.

41

APPENDIX ALITIGATION ENGAGEMENT LETTER

(Date)

(Name of Client)(Address of Client)

RE: Legal Representation Engagement Letter (the "Engagement Letter")

Dear (Name of Client):

Thank you very much for allowing Our Firm, P.C. (the "Law Firm") the opportunity to represent you. As used inthis Engagement Letter the term "Client" refers to you. The term "Parties" refers to both you and the Law Firm.

1 THIS ENGAGEMENT LETTER IS A LEGAL CONTRACT BETWEEN YOU AND THE LAW FIRM.YOU ARE ADVISED TO HAVE INDEPENDENT LEGAL COUNSEL REVIEW THIS CONTRACT ONYOUR BEHALF. THE LAW FIRM HAS A CONFLICT OF INTEREST THAT PREVENTS IT FROMREPRESENTING YOU IN CONNECTION WITH THE NEGOTIATION, PREPARATION, OREXECUTION OF THIS ENGAGEMENT LETTER.

Commentary: This provision is not required by law. I use it to emphasize to the client that our firm isnot and can not represent them in connection with the negotiation, preparation or execution of thiscontract. Hopefully, this would discourage a client from contending to the contrary.

2 THE ESTABLISHMENT OF AN ATTORNEY CLIENT RELATIONSHIP BETWEEN THE LAW FIRMAND THE CLIENT IS CONTINGENT ON THE CLIENT SIGNING THIS ENGAGEMENT LETTERAND RETURNING SAME TO THE LAW FIRM. IF THE CLIENT FAILS OR REFUSES TO SIGNTHIS ENGAGEMENT LETTER AND/OR TO RETURN SAME TO THE LAW FIRM, THEN THELAW FIRM SHALL NOT HAVE ANY OBLIGATION WHATSOEVER TO PROVIDE ANY LEGALSERVICES TO THE CLIENT.

Commentary: This is a provision to discourage the contention that our firm had an attorney clientrelationship at the time that this contract was executed. See Tanox, Inc. v. Akin, Gump, Strauss, Hauer& Feld, L.L.P., 2002 WL 1988153 (Tex. App. - Houston [14 th Dist], August 29, 2002) (An attorney'sagreement to represent a client may be conditioned on the negotiation of a fee Arrangement. Restatement(Third) Law Governing Lawyers § 14 Cmt. E (2000).) But also see Nolan v. Foreman, 665 F.2d 738, 739n. 3 (5th Cir.1982) (the attorney's common law fiduciary duty to his client, like his duty under DR2-106,exists without regard to the nature of the fee agreement)

3 THE CLIENT AND LAW FIRM AGREE THAT ANY DISPUTES ARISING OUT OF ORCONNECTED WITH THIS AGREEMENT (INCLUDING BUT NOT LIMITED TO THESERVICES PERFORMED BY ANY ATTORNEY UNDER THIS AGREEMENT) SHALL BESUBMITTED TO CONFIDENTIAL BINDING ARBITRATION IN TRAVIS COUNTY, TEXAS INACCORDANCE WITH CHAPTER 171 OF THE TEXAS CIVIL PRACTICE & REMEDIES CODE.

Commentary: Arbitration is recommended because of the difficulty an attorney has obtaining a fair trialin a fee dispute.



42

4 ALL LAWYERS IN TEXAS HAVE AN OBLIGATION TO MAINTAIN A HIGH STANDARD OFETHICAL CONDUCT TOWARD THEIR CLIENTS AND OTHERS. TO ENFORCE THISSTANDARD, THE STATE BAR OF TEXAS INVESTIGATES AND PROSECUTES COMPLAINTSOF PROFESSIONAL MISCONDUCT AGAINST ATTORNEYS LICENSED IN TEXAS. IF YOUFEEL THAT MISCONDUCT MAY HAVE OCCURRED OR IF YOU HAVE QUESTIONSREGARDING THE DISCIPLINARY PROCESS, YOU MAY CALL OR WRITE THE STATE BAR OFTEXAS, P.O. BOX 12487, AUSTIN, TEXAS 78711, (512) 463-1381 OR 1-800-932-1900 (TOLLFREE).

Commentary: This provision is not required by law. It is included to inform the client of his rights.

5 WE ARE REQUIRED BY FEDERAL LAW TO DISCLOSE TO YOU OUR PRIVACY POLICY.BECAUSE OF THE STRICT ETHICAL STANDARDS GOVERNING THE CONDUCT OFATTORNEYS, ANY INFORMATION WE LEARN FROM YOU THAT RELATES TO OURREPRESENTATION WILL BE HELD IN STRICTEST CONFIDENCE EXCEPT TO THE EXTENTTHAT IT IS NECESSARY TO REVEAL SAME TO THIRD PARTIES IN ORDER TO CARRY OUTOUR REPRESENTATION. FURTHER, ANYTHING YOU DISCLOSE TO US RELATING TO OURREPRESENTATION, OTHER THAN CERTAIN CRIMINAL MATTERS, IS PRIVILEGED. WE WILLONLY REVEAL SUCH INFORMATION PURSUANT TO A VALID ORDER OF A COURT OFCOMPETENT JURISDICTION.

Commentary: This provision may be required by the Gramm, Leach, Biley Act of 1999.

6 As a part of the Law Firm's regular procedure in establishing a new client relationship, we would like totake this opportunity to set out the specific terms of our relationship. We request that you acknowledgeyour receipt and understanding of this letter by signing and returning the original to us at your earliestconvenience. A signed, duplicate original is enclosed for your files.

7 By signing this engagement letter you are agreeing to pay the Law Firm a retainer in the amount of ___thousand and no/100 dollars ($___,000). The retainer should be returned to the Law Firm with yoursigned copy of this Engagement Letter. This retainer will be retained in the Law Firm's trust account andapplied against your final bill. If the amount of your final bill is less than the amount of your retainer, thenthe balance will be refunded to you without interest (You will not receive interest on your retainer. Theinterest goes to a State Bar fund which provides legal services to the indigent; it is not paid to the LawFirm). It is important to realize that even if you have a retainer on deposit with the Law Firm, you will stillbe expected to pay each bill sent to you upon receipt of the bill. If you do not pay our bill within thirtydays of receipt, then the Law Firm reserves the right to offset the amount due against the retainer andapply any future payment of such bill to our retainer.

8 The Law Firm's fees in this case are set on the basis of a baseline computation of billable hours multipliedby the attorney's hourly billing rate and then adjusted as provided below. At the present time my hourlybilling rate and Name Other Attorney’s Who Are Anticipated To Work On the File hourly billing rate areeach $000.00 per hour. We anticipate that our normal hourly billing rates will probably increase on somefuture date.

9 The Law Firm’s fees are set on the basis of what we consider to be a fair charge for the servicesrendered. We do not, however, bill on an hourly rate basis. We do use for guidance a baselinecomputation of our billable hours times our hourly billable rate as set forth above. We then compute areasonable fee that takes into account such things as: (1) the time and labor required; (2) the novelty anddifficulty of the questions involved in the legal representation; (3) the skill requisite to perform the legalservice properly; (4) the likelihood, if apparent to the Client, that the acceptance of the particularemployment will preclude other employment by the Law Firm; (5) the fee customarily charged in thelocality for similar legal services; (6) the amount involved and the results obtained; (7) the time limitations


43

imposed by the Client or by the circumstances; and (8) the nature and length of the professionalrelationship with the Client.

Commentary: This paragraph may be amended to provide for a pure hourly billing rate. Most of myadjustments to a bill reduce the amount of the bill from a pure hourly rate amount. I use this languagebecause my billing practices are not precise. I frequently estimate my time records from memory afterthe time has transpired. I don’t want my clients to think that my time posting is an exact science.

10 In addition to all fees describe above, any out-of-pocket expenses incurred by the Law Firm in connectionwith the Legal Representation will be billed to the Client as a separate item on the Client's monthlystatement. Additional details on expenses can be provided on request. Invoices for firm expenses(including, but limited to, out of pocket expenses, travel expenses, deposition transcripts, expert fees,court filing fees, court costs, printing charges, long distance telephone charges, and title company fees)may be sent to you from time to time for immediate payment direct to our suppliers. When reasonablypossible we agree to allow you to arrange for any extraordinary duplication of documents.

11 We will normally submit a bill to you on a monthly basis, and it is due and payable upon receipt. Theremay be occasions involving unforeseen circumstances when a bill will go unpaid. In such instances, wewill attempt to work with you, if you communicate the nature of the delay to us.

12 Occasionally, when a bill for a specific project is rendered near the conclusion of the matter, posting ofsome time and charges (such as telephone, copying, court costs, or similar items) may be delayed, orthere may be an invoice which is not delivered to the Law Firm until after the affair has been finalized.In such cases, these "after closing" expenses will also be billed to you, even though you may havepreviously received a "final" bill.

13 Occasionally we will request reasonable attorney’s fees from another party in a legal proceeding.Regardless of how any court rules with respect to the award of attorney’s fees (or the reasonablenessof legal fees requested in any pleading), the Client agrees to pay the Law Firm the fees set forth in thisEngagement Letter. If the Law Firm receives any compensation as the result of an award of attorneysfees then the Law Firm will, in its discretion, either: (1) credit such receipt to the Client’s unpaid bill or (2)reimburse the Client for the amount of the receipt (if, and only, if the Client does not owe the Law Firmany fees or expenses at the time that the receipt is received).

14 By signing this agreement, you are authorizing the Law Firm to do whatever is reasonably necessary andappropriate, in our professional judgment, to represent you properly, and to incur the costs and expensesreasonably necessary to handle your matter. This includes the authorization and power to associate oremploy such other persons or entities as we may deem necessary to assist us, such as support services,technical experts, or other attorneys who are not members of Our Firm, P.C. (either "local counsel" ina distant forum or contract legal services with attorneys in other firms in Austin).

15 Should you have any questions regarding any bill, please contact us at your earliest convenience so thatwe may resolve any problems as quickly as possible. Your satisfaction with our legal services is veryimportant to us.

16 The scope of our initial engagement (the "Legal Representation") shall be limited to representation inconnection with the following matters:

16.1 (Describe The Matters To Which This Engagement Letter Relates.)

17 The Law Firm is not undertaking responsibility for matters outside this scope at this time; however, shouldyou expressly request, and should we accept additional matters and responsibilities in the future, theprovisions in this letter agreement will govern our continuing relationship, as well as our relationship withany of your related entities.


44

18 You have requested our advice and counsel as a part of our services to you. In the event that you fail to followour advice, otherwise fail to cooperate reasonably with us, or fail to pay any bill from us that is due and payablewithin thirty days of receipt, then we reserve the right to notify you in writing of our withdrawal fromrepresentation and to collect all fees and expenses accrued to the date of our withdrawal. Of course, at any timethat you wish, you may cease to use our services by notifying us in writing.

19 As you know, we cannot make representations to you regarding the probability of ultimate success in theLegal Representation. Similarly, we cannot guarantee any particular result; however, we do agree toexert in good faith our best reasonable, ethical and professional efforts on your behalf.

20 Although historically we have attempted to retain copies of most documents generated by our law firm,we cannot be held responsible in any way for failing to do so, and we consequently request that youretain all originals and copies you desire among your own files for future reference.

21 It is anticipated that, insofar as the Law Firm is concerned, I will be in charge of your representation.However, I always reserve the right to assign other lawyers in our firm to assist me if, in my professionaljudgment, that becomes necessary or desirable. As previously indicated, I may from time to time contractwith other local attorneys to assist me in representing you if, in my opinion, this will result in a costeffective benefit to you. If I do this I will bill these legal services through my firm directly to you.

22 We truly appreciate the opportunity to represent you, and we look forward to continuing a mutually beneficialrelationship. We are very much aware that we are in a service business and that you, as a client, are thelifeblood of our practice. If you do not feel that you understand any part of this agreement, please call me. Ifany part of this agreement is not acceptable to you, please discuss it with me. We are sending this letter to youso that you may know our policies and billing practices at the beginning of our relationship.

Cordially yours,

Our Law Firm, P.C., byLawyer In Charge Of The Representation

Agreed:

__________________________(Name Of Client)

45

APPENDIX BESTATE PLANNING ENGAGEMENT LETTER

(Date)

(Name of Client)(Address of Client)

RE: Legal Representation Engagement Letter (the "Engagement Letter")

Thank you very much for allowing Our Firm, P.C. (the "Law Firm") the opportunity to represent you. As used inthis Engagement Letter the term "Client" refers to you. The term "Parties" refers to both you and the Law Firm.

1 THIS ENGAGEMENT LETTER IS A LEGAL CONTRACT BETWEEN YOU AND THE LAW FIRM.YOU ARE ADVISED TO HAVE INDEPENDENT LEGAL COUNSEL REVIEW THIS CONTRACT ONYOUR BEHALF. THE LAW FIRM HAS A CONFLICT OF INTEREST THAT PREVENTS IT FROMREPRESENTING YOU IN CONNECTION WITH THE NEGOTIATION, PREPARATION, OREXECUTION OF THIS ENGAGEMENT LETTER.

Commentary: This provision is not required by law. I use it to emphasize to the client that our firm isnot and can not represent them in connection with the negotiation, preparation or execution of thiscontract. Hopefully, this would discourage a client from contending to the contrary.

2 THE ESTABLISHMENT OF AN ATTORNEY CLIENT RELATIONSHIP BETWEEN THE LAW FIRMAND THE CLIENT IS CONTINGENT ON THE CLIENT SIGNING THIS ENGAGEMENT LETTERAND RETURNING SAME TO THE LAW FIRM. IF THE CLIENT FAILS OR REFUSES TO SIGNTHIS ENGAGEMENT LETTER AND/OR TO RETURN SAME TO THE LAW FIRM, THEN THELAW FIRM SHALL NOT HAVE ANY OBLIGATION WHATSOEVER TO PROVIDE ANY LEGALSERVICES TO THE CLIENT.

Commentary: This is a provision to discourage the contention that our firm had an attorney clientrelationship at the time that this contract was executed. See Tanox, Inc. v. Akin, Gump, Strauss,Hauer & Feld, L.L.P., 2002 WL 1988153 (Tex. App. - Houston [14th Dist], August 29, 2002) (Anattorney's agreement to represent a client may be conditioned on the negotiation of a fee Arrangement.Restatement (Third) Law Governing Lawyers § 14 Cmt. E (2000).) But also see Nolan v. Foreman, 665F.2d 738, 739 n. 3 (5th Cir.1982) (the attorney's common law fiduciary duty to his client, like his dutyunder DR2-106, exists without regard to the nature of the fee agreement)

3 THE CLIENT AND LAW FIRM AGREE THAT ANY DISPUTES ARISING OUT OF ORCONNECTED WITH THIS AGREEMENT (INCLUDING BUT NOT LIMITED TO THE SERVICESPERFORMED BY ANY ATTORNEY UNDER THIS AGREEMENT) SHALL BE SUBMITTED TOCONFIDENTIAL BINDING ARBITRATION IN TRAVIS COUNTY, TEXAS IN ACCORDANCE WITHCHAPTER 171 OF THE TEXAS CIVIL PRACTICE & REMEDIES CODE.

Commentary: Arbitration is recommended because of the difficulty an attorney has obtaining a fair trialin a fee dispute.

4 ALL LAWYERS IN TEXAS HAVE AN OBLIGATION TO MAINTAIN A HIGH STANDARD OF

ETHICAL CONDUCT TOWARD THEIR CLIENTS AND OTHERS. TO ENFORCE THISSTANDARD, THE STATE BAR OF TEXAS INVESTIGATES AND PROSECUTES COMPLAINTS




46

OF PROFESSIONAL MISCONDUCT AGAINST ATTORNEYS LICENSED IN TEXAS. IF YOUFEEL THAT MISCONDUCT MAY HAVE OCCURRED OR IF YOU HAVE QUESTIONSREGARDING THE DISCIPLINARY PROCESS, YOU MAY CALL OR WRITE THE STATE BAR OFTEXAS, P.O. BOX 12487, AUSTIN, TEXAS 78711, (512) 463-1381 OR 1-800-932-1900 (TOLLFREE).

Commentary: This provision is not required by law. It is included to inform the client of his rights.

5 WE ARE REQUIRED BY FEDERAL LAW TO DISCLOSE TO YOU OUR PRIVACY POLICY.BECAUSE OF THE STRICT ETHICAL STANDARDS GOVERNING THE CONDUCT OFATTORNEYS, ANY INFORMATION WE LEARN FROM YOU THAT RELATES TO OURREPRESENTATION WILL BE HELD IN STRICTEST CONFIDENCE EXCEPT TO THE EXTENTTHAT IT IS NECESSARY TO REVEAL SAME TO THIRD PARTIES IN ORDER TO CARRY OUTOUR REPRESENTATION. FURTHER, ANYTHING YOU DISCLOSE TO US RELATING TO OURREPRESENTATION, OTHER THAN CERTAIN CRIMINAL MATTERS, IS PRIVILEGED. WE WILLONLY REVEAL SUCH INFORMATION PURSUANT TO A VALID ORDER OF A COURT OFCOMPETENT JURISDICTION.

Commentary: This provision may be required by the Gramm, Leach, Biley Act of 1999.

We are delighted to have the opportunity to do this work and will bill for our services no more often than monthlyas work is performed. Our fee will be based upon a fair value for the service rendered plus reasonableexpenses for copying, long distance, etc. Time expended will be the primary, but not exclusive factor in arrivingat a reasonable fee. Name Of Lawyer Providing The Representation’s current hourly rate is $_00.00per hour. Other lawyer and paralegal rates range from $60.00 to $300.00 per hour. These rates,however, are subject to occasional changes without notice and tend to drift upward with inflation and theincreasing years of experience of our lawyers. If we are asked to perform tasks not described in this letter,an additional engagement letter may be required for that work.

We anticipate that your planning will involve ________ and the drafting of wills and/or trusts and related disabilitydocuments. Without knowing what kind of structures we will eventually develop, it is impossible to set a fee atthis time. I would estimate that the fee before all is said and done will be in excess of $__,000, and will probablynot be less than that.

In light of the amount of work involved, we request a $__,000 retainer to be returned with this letter. We will placesuch funds in our trust account. (You will not receive interest on your retainer. The interest goes to a State Barfund which provides legal services to the indigent; it is not paid to the Law Firm). You agree that you will pay mystatements in full within fifteen days of receipt. At the conclusion of the engagement, we will apply the retainerto the final bill, and return the balance, if any, to you. If the final billing exceeds the statement, you will beexpected to remit any difference. If any statement is not paid when due, then we are authorized to draw on theretainer for such statement, and you will replace the amount withdrawn, plus pay any amount due over theretainer, within five days of demand.

We would appreciate your sending a financial statement in written form, so that I may be sure that the datatranscribed is accurate. We will also need the following additional financial information _______________.

It is common for a husband and wife to employ the same law firm to assist them in planning their estates. Weassume that you intend for us to represent you both in your planning. Since we will be representing both of you,it is important that you understand you, collectively, are considered our client. Accordingly, matters that one ofyou might discuss with us may be disclosed to the other of you. Ethical considerations prohibit us from agreeingwith either of you to withhold information from the other. In this representation, we will not give legal advice to


47

either of you or make any changes in any of your estate planning documents without your mutual knowledge andconsent. Of course, anything either of you discusses with us is privileged from disclosure to third parties.

If a conflict of interest arises between you during the course of your planning or if the two of you have adifference of opinion, we can point out the pros and cons of your respective positions or differing opinions.However, ethical considerations prohibit us, as the law firm for both of you, from advocating one of your positionsover the other. Furthermore, we would not be able to advocate one of your positions versus the other if thereis a dispute, at any time, as to your respective property rights or interests or as to other legal issues between you.If actual conflicts of interest do arise between you of such a nature that in our judgement it is impossible for usto perform our ethical obligations to both of you, it would become necessary for us to withdraw as your joint lawfirm. Once documentation is executed to put into place the planning that you have hired us to implement, ourengagement will be concluded. Of course, we will be delighted to renew our relationship should you ever needany future services in the estate planning or estate administration area. Until you request otherwise, we will takeno further action with reference to your affairs. You should consider your estate plan a short term type planning,and therefore it should be reviewed every three to five years, even though it may be determined that no changesare required at that time. We will be delighted to assist you in such review if you request us to do so.

After considering the foregoing, if you consent to our representing both of you jointly, I request that you sign andreturn the enclosed copy of this letter. If you have any questions about anything discussed in this letter, pleaselet us know. In addition, you should feel free to consult with another lawyer about the effect of signing this letter.

Historically, we have attempted to retain, for a reasonable time, copies of most documents generatedby this law firm. However, we cannot be held responsible in any way for failing to do so, and we herebyexpressly disclaim any such responsibility or liability. You must ultimately retain all originals and copiesyou desire among your own files for future reference. Further, it is not possible, from a practicalstandpoint, for us to keep all my clients advised as to changes in the law which may affect their estateplan, and we will not undertake responsibility to do so.

Should you have any questions regarding any statement, please contact us at your earliest convenienceso that we can resolve any problems as quickly as possible. We truly appreciate the opportunity to beof service to you, and we look forward to assisting you in the accomplishment of your estate planninggoals.

Please return a signed copy of this letter along with a check for the retainer.

Very truly yours,

Our Firm, P.C.

By:__________________________Name of Attorney Providing

the Representation


48

CONSENT

We have read the foregoing letter and understand its contents. We have chosen to have you represent both of us on theterms and conditions set forth. We agree that you may, in your discretion, share with both of us any information regardingthe representation the you receive from either of us or any other source.

Dated: _______________________ __________________________________ Name of Client

Dated: _______________________ __________________________________Name of Client


49

APPENDIX CCONTINGENT FEE CONTRACT

STATE OF TEXAS §§

COUNTY OF _________ §

CONTINGENT FEE CONTRACT AND POWER OF ATTORNEY

AGREEMENT made by and between the law firm of Our Firm, P.C., (Address of Law Firm) (the“Law Firm”), and _(Name and Address of Client or Clients), (the “Client”). The Client is entering intothis agreement in _____(Capacity)______. The Law Firm and the Client are sometimes collectivelyhereinafter referred to as the “Parties.” Any one of the Parties may be sometimes hereinafter referredto as a “Party.”

1

SPECIAL DISCLOSURES

1.1 CLIENT ACKNOWLEDGES THAT THE CLIENT WAS ADVISED TO RETAININDEPENDENT LEGAL COUNSEL TO REPRESENT THE CLIENT IN CONNECTIONWITH THE NEGOTIATION AND EXECUTION OF THIS AGREEMENT. THE CLIENTFURTHER ACKNOWLEDGES THAT CLIENT WAS ADVISED THAT THE LAW FIRM HASA CONFLICT OF INTEREST THAT PREVENTS IT FROM REPRESENTING THE CLIENTIN ANY WAY WITH RESPECT TO THE NEGOTIATION AND/OR EXECUTION OF THISAGREEMENT AND THAT THE LAW FIRM HAS NOT DONE SO.

Commentary: This provision is not required by law. I use it to emphasize to the client that ourfirm is not and can not represent them in connection with the negotiation, preparation orexecution of this contract. Hopefully, this would discourage a client from contending to thecontrary.

2 THE ESTABLISHMENT OF AN ATTORNEY CLIENT RELATIONSHIP BETWEEN THELAW FIRM AND THE CLIENT IS CONTINGENT ON THE CLIENT SIGNING THISAGREEMENT AND RETURNING SAME TO THE LAW FIRM. IF THE CLIENT FAILS ORREFUSES TO SIGN THIS AGREEMENT AND/OR TO RETURN SAME TO THE LAW FIRM,THEN THE LAW FIRM SHALL NOT HAVE ANY OBLIGATION WHATSOEVER TOPROVIDE ANY LEGAL SERVICES TO THE CLIENT.

Commentary: This is a provision to discourage the contention that our firm had an attorney clientrelationship at the time that this contract was executed. See Tanox, Inc. v. Akin, Gump, Strauss, Hauer& Feld, L.L.P., 2002 WL 1988153 (Tex. App. - Houston [14th Dist], August 29, 2002) (An attorney'sagreement to represent a client may be conditioned on the negotiation of a fee Arrangement.


50

Restatement (Third) Law Governing Lawyers § 14 Cmt. E (2000).) But also see Nolan v. Foreman, 665F.2d 738, 739 n. 3 (5th Cir.1982) (the attorney's common law fiduciary duty to his client, like his dutyunder DR2-106, exists without regard to the nature of the fee agreement)

2.1 THE CLIENT AND LAW FIRM AGREE THAT ANY DISPUTES ARISING OUT OF ORCONNECTED WITH THIS AGREEMENT (INCLUDING BUT NOT LIMITED TO THESERVICES PERFORMED BY ANY ATTORNEY UNDER THIS AGREEMENT) SHALL BESUBMITTED TO CONFIDENTIAL BINDING ARBITRATION IN TRAVIS COUNTY, TEXASIN ACCORDANCE WITH CHAPTER 171 OF THE TEXAS CIVIL PRACTICE & REMEDIESCODE.

Commentary: Arbitration is recommended because of the difficulty an attorney has obtaininga fair trial in a fee dispute.

2.2 ALL LAWYERS IN TEXAS HAVE AN OBLIGATION TO MAINTAIN A HIGH STANDARD OFETHICAL CONDUCT TOWARD THEIR CLIENTS AND OTHERS. TO ENFORCE THISSTANDARD, THE STATE BAR OF TEXAS INVESTIGATES AND PROSECUTESCOMPLAINTS OF PROFESSIONAL MISCONDUCT AGAINST ATTORNEYS LICENSEDIN TEXAS. IF YOU FEEL THAT MISCONDUCT MAY HAVE OCCURRED OR IF YOU HAVEQUESTIONS REGARDING THE DISCIPLINARY PROCESS, YOU MAY CALL OR WRITETHE STATE BAR OF TEXAS, P.O. BOX 12487, AUSTIN, TEXAS 78711, (512) 463-1381 OR1-800-932-1900 (TOOL FREE).

Commentary: This provision is not required by law. It is included to inform the client of hisrights.

3 WE ARE REQUIRED BY FEDERAL LAW TO DISCLOSE TO YOU OUR PRIVACY POLICY.BECAUSE OF THE STRICT ETHICAL STANDARDS GOVERNING THE CONDUCT OFATTORNEYS, ANY INFORMATION WE LEARN FROM YOU THAT RELATES TO OURREPRESENTATION WILL BE HELD IN STRICTEST CONFIDENCE EXCEPT TO THEEXTENT THAT IT IS NECESSARY TO REVEAL SAME TO THIRD PARTIES IN ORDER TOCARRY OUT OUR REPRESENTATION. FURTHER, ANYTHING YOU DISCLOSE TO USRELATING TO OUR REPRESENTATION, OTHER THAN CERTAIN CRIMINAL MATTERS,IS PRIVILEGED. WE WILL ONLY REVEAL SUCH INFORMATION PURSUANT TO AVALID ORDER OF A COURT OF COMPETENT JURISDICTION.

Commentary: This provision is required by the Gramm, Leach, Biley Act of 1999

3.1 THE CLIENT ACKNOWLEDGES THAT PRIOR TO SIGNING THIS AGREEMENT THECLIENT WAS GIVEN THE OPTION OF RETAINING THE LAW FIRM TO PROSECUTE THELAWSUIT ON A NORMAL HOURLY RATE (PLUS COSTS AND EXPENSES INCURRED)BASIS BUT ELECTED INSTEAD TO RETAIN THE LAW FIRM TO PROSECUTE THELAWSUIT PURSUANT TO THE TERMS AND CONDITIONS OF THIS CONTRACT.

Commentary: Our firm, unlike many other firms, always offer our potential clients (who we arewilling to represent on a contingent fee basis) the choice of either hiring us on an hourly ratebasis or on a contingent fee basis. This provision reminds the client of this choice and




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memorializes the fact that the client chose a contingent fee contract. We have found thatoffering to represent clients on a hourly rate basis causes fewer complaints about theunreasonableness of the contingent fee if the case settles.

4

RECITALS

The Client is executing this Agreement for the purpose of retaining the Law Firm to represent her inconnection with: 4.1 the recovery for _______________________.

The causes of action described in paragraph [s 2.1 through _ above] is/are sometimes hereinaftercollectively referred to as the “Lawsuit.”

Commentary: The description of the legal representation is very important and should be veryprecise. A great deal of thought should be given to this insertion.

5

THE AGREEMENT

NOW, THEREFORE, for and in consideration of the mutual covenants set forth in this agreement,and for other good and valuable consideration, the receipt and sufficiency of which are herebyacknowledged and confessed by each Party, the Parties agree as follows:

5.1 The Client hereby assigns, sells, conveys, and agrees to pay and deliver to the Law Firm thefollowing contingent interest in the Lawsuit measured by the amount of recovery to be enjoyed,realized out of or collected from Lawsuit (whether in money, other property, non cash benefits,future relief, or other consideration), either through settlement, compromise or judgment (suchamount of recovery is hereinafter referred to as the "Litigation Proceeds" and is more specificallydefined below):

5.1.1If, after the effective date of this Agreement, the Lawsuit is settled, thirty-three and one-thirdper cent (33 1/3%) of the Litigation Proceeds;

5.1.2If the Lawsuit is tried in the initial trial court, thirty-five per cent (35%) of the LitigationProceeds (for the purpose of this Agreement, the Lawsuit will be deemed to be “tried” if the Law Firmannounces ready at a trial on the merits of the case or if any hearing approving a settlement agreementis contested);

5.1.3If the judgment of the initial trial court is appealed to a Court of Civil Appeals, thirty-sevenand one-half per cent (37½%) of the Litigation Proceeds;


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5.1.4If the judgment of the Court of Civil Appeals is appealed to the Texas Supreme Court, fortyper cent (40%) of the Litigation Proceeds.

Commentary: The percentages can and do vary.

5.2 The Law Firm shall advance all expenses reasonably incurred for reports, travel expenses, longdistance calls, investigation fees, expert and witness fees, medical examination fees, charts,photographs, deposition fees and costs, xerox and other document reproduction costs, postagecharges, and other expenses reasonably incurred by them in the prosecution of the Lawsuit(“Litigation Expenses”).

5.2.1As a consequence of the Law Firm’s payment of the Litigation Expenses, the Law Firm shallbe entitled to reimbursement of all such Litigation Expenses from any Litigation Proceeds received priorto the application of any percentage fee described in this Agreement;

5.2.2The Law Firm is expressly authorized, as a separate alternative fee (the “Alternative Fee”),to apply to any court, prior to trial on the merits, at its own cost, for the maximum amount ofcompensation, costs and Litigation Expenses allowed to Client (or to the client’s attorneys) by law andto receive any such amounts awarded as compensation for their services hereunder from any personreferred to in the RECITAL paragraph above or from any trust purportedly created by the Client. AnyAlternative Fee recovered under this paragraph shall be offset against any contingent fee payable to theLaw Firm under this Agreement; provided however, that, if the Alternative Fee exceeds any contingentfee, the Law Firm shall be entitled to retain the entire Alternative Fee as compensation for its services(and shall receive no contingent fee);

5.2.3The term “Litigation Proceeds” shall refer to non cash benefits and a sum of money equalin amount to the fair market value of all property, relief, and consideration of every kind and in every formenjoyed, realized out of, or received (or to be enjoyed, realized out of, or received) by the Client as aproximate result of the Lawsuit including, but not limited to, compensatory damages, exemplarydamages, attorney’s fees (other than any Alternative Fee), prejudgment interest, and post judgmentinterest (whether through trial or settlement of the Lawsuit). The amount of Litigation Proceeds shall notbe reduced by any income, gift or estate taxes incident to the recovered amount.

Commentary: Paragraph 5.22 is important in fiduciary litigation where there are statutory rightsof recovery of fees. In some instances it is possible to recover an interim fee from the court.

5.3 The Parties agree that the Law Firm has been induced to enter into this Agreement byrepresentations made by the Client (or her agents) regarding the facts of the case.

5.4 Notwithstanding any other provision in this Agreement (including, but not limited to paragraph 5.5 below, theLaw Firm may withdraw as counsel (in which case this Agreement shall be null, void and of no effect) if afterthoroughly investigating the facts incident to the Lawsuit it concludes that the Lawsuit either is without meritor the defendant or defendants do not have sufficient net worth to warrant prosecution of the Lawsuit. If theLaw Firm were to withdraw pursuant to this paragraph the Client would owe no legal fees or litigationexpenses to the Law Firm.

5.5 The Client agrees that the Law Firm may withdraw from its representation of the Client in connection with theLawsuit if:


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5.5.1the Client insists upon presenting a claim or defense that is not warranted under existing law and cannotbe supported by good faith argument of an extension, modification, or reversal of existing law;

5.5.2the Client insists that the Law Firm pursue a course of conduct that is illegal or that is prohibited underthe State Bar Rules;

5.5.3the Client by other conduct renders it unreasonably difficult for Law Firm to carry out their employment;

5.5.4the Client insists that Law Firm engage in conduct that is contrary to their judgement and advice, evenif such conduct is not contrary to the State Bar Rules;

5.5.5the Client deliberately disregards an agreement with Law Firm as to fees for services rendered or as toLitigation Expenses; or

5.5.6the Law Firm determines, in its sole discretion, after further investigation of the facts of the case, electsto withdraw from representation.

5.6 In the event that the Law Firm withdraws from representation pursuant to the applicableprovisions of this Agreement, the Client agrees to sign all necessary documents to facilitate thewithdrawal of the Law Firm from such representation immediately after written notification to theClient by the Law Firm of their intention to withdraw.

5.7 If the Law Firm withdraws from representation pursuant to the applicable provisions of thisAgreement (except for subparagraph 5.5.6 in the preceding paragraph of this Agreement, inwhich case the Law Firm shall be entitled to no contingent interest) such withdrawal shall not inany way eliminate Law Firm's ownership of a contingent interest in the outcome of the Lawsuit(including but not limited to Law Firm' right to participate in and consent to any settlement ofLawsuit).

5.8 The Client may at any time and for any reasonable cause terminate the Law Firm'srepresentation of Client with respect to Lawsuit; provided, however, that such termination shallnot in any way eliminate Law Firm's ownership of a contingent interest in the outcome or theLawsuit (including but not limited to Law Firm's right to participate in and consent to anysettlement of Lawsuit).

5.9 If the Law Firm ceases to represent the Client pursuant to any provision of this Agreement, thenthe Law Firm shall no longer be liable to Client or to any third party for any costs or expensesincurred after the date of the termination of the Law Firm's representation. If any third partymakes any claim against the Law Firm for any costs and expenses incurred by the Client afterthe date the Law Firm has ceased to represent the Client, then the Client agrees to indemnifyand hold the Law Firm harmless from any such cost and expenses and all expenses incurred,including, but not limited to all attorneys' fees and litigation expenses and costs incurred by theLaw Firm in seeking to enforce this Agreement.

5.10 The Law Firm agrees to faithfully perform the duties imposed upon the Law Firm as attorneys forClient in the prosecution of the Lawsuit. The Law Firm further agrees to use its best efforts toresolve the Lawsuit as soon as is reasonably possible.


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5.11 The Law Firm may, at the discretion and expense of the Law Firm, associate any other attorneyor Law Firm in the prosecution of the Lawsuit and may assign all or any part of their contingentinterest in this Lawsuit to any other such firm. Notwithstanding anything to the contrary in thisparagraph, the Parties agree, however, that the Law Firm shall always be primarily responsiblefor the representation of the Client in connection with the Lawsuit.

5.12 The Client authorizes the Law Firm to try, compromise, settle and receive for and in Client’names, all damages or property to which Client may become entitled by reason of Lawsuit.Client agrees not to settle Lawsuit without the written consent of Law Firm, and Law Firm agreesnot to settle Lawsuit without the written consent of the Client.

5.13 The provisions of this Agreement constitute a Power of Attorney coupled with aninterest and shall survive and shall not be affected by the subsequent disability orincapacity of the Client.

5.14 The Client agrees to keep Law Firm advised of her location at all times, agrees to appear onreasonable notice at any and all depositions and court appearances and agrees to comply withall reasonable requests of Law Firm in connection with the preparation and presentation of theLawsuit.

5.15 The Client specifically recognizes that the Law Firm has made no representation or warrantywhatsoever regarding the probable outcome or the Lawsuit and has in no way guaranteed anyrecovery from the settlement or trial of the Lawsuit.

5.16 It is expressly understood and agreed that the mutual promises contained herein are the soleconsideration for this Agreement, and that said considerations are contractual and not mererecitals, and that all agreements and understandings between the Parties are embodied andexpressed herein.

5.17 The Parties agree to execute such other documents as might be reasonably necessary orappropriate to consummate and implement the terms of this Agreement.

5.18 This Agreement is executed in multiple counterparts, each one of which will be considered to bean original.

5.19 It is expressly understood and agreed that this Agreement shall be governed by, construed,interpreted, and enforced in accordance with laws of the State of Texas and shall be performablein Travis County, Texas.

5.20 This Agreement may not be modified or amended except by a subsequent Agreement in writingsigned by the Parties. The Parties may waive any of the conditions contained herein or any ofthe obligations of any other party. Any such waiver shall be effective only if in writing and signedby the party waiving such condition or obligation.

5.21 In the event that any of the Parties become involved in litigation in connection with any right,obligation, or duty set forth in this Agreement then, and in that event, the party prevailing in suchlitigation shall receive from the other party all expenses, costs and attorney's fees suffered orincurred by such party as a result of such litigation.


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5.22 In the event that any of the Parties hereto shall breach any of the obligations imposed by thisAgreement, then any other party shall be entitled to monetary damages as a result of suchbreach. It is understood by the Parties, however, that monetary damages shall not alone beadequate recompense for any breach of this Agreement, and each of the Parties shall, inaddition to monetary damages, be entitled to equitable relief.

5.23 This agreement is and shall be binding and inure to the benefit of the Parties and their respectiveheirs, executors, administrators, legal representatives, successors and assigns.

5.24 The effective date of this Agreement shall be the __th day of ________, 200_.

Our Firm, P.C.

By:________________________[Name Of Attorney In Charge Of The File]State Bar No. 00000000[Address of Law Firm]

State of TexasCounty of ___________This document was acknowledged before mon on the ____ day of ___________, 2000 by____________________, President of Our Firm, P.C.

(Seal, if any, of notary)

___________________________(printed name)

My commission expires:__________________________

______________________________[Name of Client][Address of Client]

State of TexasCounty of ____________This document was acknowledged before me on on the ____ day of ___________, 2000 by________________.


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(Seal, if any, of notary)

___________________________(printed name)

My commission expires:__________________________


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APPENDIX DSELECTED AUTHORITIES DEALING WITH LEGAL REPRESENTATION

1 THE RULES:

1.1 State Bar Rules, Article X, Rule 1.04 - FEES, provides as follows:

(a) A lawyer shall not enter into an arrangement for, charge, or collect an illegalfee or unconscionable fee. A fee is unconscionable if a competent lawyer couldnot form a reasonable belief that the fee is reasonable. (emphasis supplied)

(b) Factors that may be considered in determining the reasonableness of a fee include,but not to the exclusion of other relevant factors, the following:

(1) the time and labor required, the novelty and difficulty of thequestions involved, and the skill requisite to perform the legal servicepromptly;

(2) the likelihood, if apparent to the client, that the acceptance of theparticular employment will preclude other employment by the lawyer;

(3) the fee customarily charged in the locality for similar legalservices;

(4) the amount involved and the results obtained;

(5) the time limitations imposed by the client or by the circumstances;

(6) the nature and length of the professional relationship;

(7) the experience, reputation, and ability of the lawyer or lawyersperforming the services; and

(8) whether the fee is fixed or contingent on results obtained or uncertain ofcollection before the legal services have been rendered.

(c) When the lawyer has not regularly represented the client, the basis or rateof the fee shall be communicated to the client, preferably in writing, before orwithin a reasonable time after commencing the representation. (emphasissupplied)

(d) A fee may be contingent on the outcome of the matter for which the service isrendered, except in a matter which a contingent fee is prohibited by paragraph (e) or


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other law. A contingent fee agreement shall be in writing and shall state themethod by which the fee is to be determined. If there is to be a difference inthe percentage or precentages that shall accrue to the lawyer in the event ofsettlement, trial or appeal, the percentage for each shall be stated. Theagreement shall state the litigation and other expenses to be deducted fromthe recovery, and whether such expenses are deducted before or after thecontingent fee is calculated. Upon conclusion of a contingent fee matter, thelawyer shall provide the client with a written statement describing the outcomeof the matter and, if there is a recovery, showing the remittance to the clientand the method of its determination. (emphasis supplied)

(e) A lawyer shall not enter into an arrangement for, charge, or collect a contingentfee for representing the client in a criminal case.

(f) A division or agreement for division of a fee between lawyers who are not in thesame firm shall not be made unless:

(1) the division is:

(i) in proportion to the professional services performed byeach lawyer;

(ii) made with a forwarding lawyer; or

(iii) made, by written agreement with the client, with a lawyerwho assumes joint responsibility for the representation;

(2) the client is advised of, and does not object to, the participation of all thelawyers involved; and

(3) the aggregate fee does not violate paragraph (a).

(g) Paragraph (f) of this Rule does not prohibit payment to a former partner orassociate pursuant to a separation or retirement agreement.

1.2 State Bar Rules, Article X, Rule 1.06 - CONFLICT OF INTEREST GENERAL RULE, providesas follows:

(a) A lawyer shall not represent opposing parties to the same litigation.

(b) In other situations and except to the extent permitted by paragraph (c), a lawyershall not represent a person if representation of that person:

(1) involves a substantially related matter in which the person’sinterests are materially and directly adverse to the interests ofanother client of the lawyer or the lawyer’s firm; or


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(2) reasonably appears to be or become adversely limited by thelawyer’s or law firm’s responsibilities to another client or to a thirdperson or by the lawyer’s or law firm’s own interests. (emphasissupplied)

(c) A lawyer may represent a client in the circumstances described in (b) if:

(1) the lawyer reasonably believes the representation of each client will notbe materially affected; and

(2) each affected or potentially affected client consents to such representationafter full disclosure of the existence, nature, implications, and possible adverseconsequences of the common representation and the advantages involved, ifany.

(d) A lawyer who has represented multiple parties in a matter shall not thereafterrepresent any of such parties in a dispute among the parties arising out of the matter,unless prior consent is obtained from all such parties to the dispute.

(e) If a lawyer who has accepted representation in violation of this Rule, or if multiplerepresentation properly accepted becomes improper under this Rule, the lawyer shallpromptly withdraw from one or more representations to the extent necessary for anyremaining representation not to be in violation of these Rules.

(f) If a lawyer would be prohibited by this Rule from engaging in particular conduct,no other lawyer while a member or associated with that lawyer’s firm may engage inthat conduct.

1.3 State Bar Rules, Article X, Rule 1.07 - CONFLICT OF INTEREST INTERMEDIARY,provides as follows:

(a) a lawyer shall not act as intermediary between clients unless:

(1) the lawyer consults with each client concerning theimplications of the common representation, including theadvantages and risks involved, and the effect on theattorney-client privileges, and obtains each client’s writtenconsent to the common representation;

(2) the lawyer reasonably believes that the matter can be resolvedwithout the necessity of contested litigation on terms compatiblewith the clients’ best interests, that each client will be able to makeadequately informed decisions in the matter and that there is littlerisk of material prejudice to the interests of any of the clients if thecontemplated resolution is unsuccessful; and


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(3) the lawyer reasonably believes that the common representationcan be undertaken impartially and without improper effect on otherresponsibilities the lawyer has to any of the clients.

(b) While acting as intermediary, the lawyer shall consult with each clientconcerning the decision to be made and the considerations relevant inmaking them, so that each client can make adequately informed decisions.

(c) A lawyer shall withdraw as intermediary if any of the clients so requests,or if any of the conditions stated in paragraph (a) is no longer satisfied.Upon withdrawal, the lawyer shall not continue to represent any of theclients in the matter that was the subject of the intermediation.

(d) Within the meaning of this Rule, a lawyer acts as intermediary if thelawyer represents two or more parties with potentially conflicting interests.

(e) If a lawyer would be prohibited by this Rule from engaging in particularconduct, no other lawyer while a member of or associated with that lawyer’sfirm may engage in that conduct.

2.4 State Bar Rules, Article X, Rule 1.08 - CONFLICT OF INTEREST: PROHIBITEDTRANSACTIONS, provides as follows:

(a) A lawyer shall not enter into a business transaction with a client unless:

(1) the transaction and terms on which the lawyer acquires theinterest are fair and reasonable to the client and are fully disclosedin a manner which can be reasonably understood by the client;

(2) the client is given a reasonable opportunity to seek the adviceof independent counsel in the transaction; and

(3) the client consents in writing thereto.

(b) A lawyer shall not prepare an instrument giving the lawyer or a personrelated to the lawyer as a parent, child, sibling, or spouse any substantialgift from a client, including a testamentary gift, except where the client isrelated to the donee.

(c) Prior to the conclusion of all aspects of the matter giving rise to thelawyer’s employment, a lawyer shall not make or negotiate an agreementwith a client, prospective client, or former client giving the lawyer literary ormedia rights to a portrayal or account based in substantial part oninformation relating to the representation.

(d) A lawyer shall not provide financial assistance to a client in connectionwith pending or contemplated litigation or administrative proceedings,except that:


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(1) a lawyer may advance or guarantee court costs, expenses oflitigation or administrative proceedings, and reasonably necessarymedical and living expenses, the repayment of which may becontingent on the outcome of the matter; and

(2) a lawyer representing an indigent client may pay court costs andexpenses of litigation on behalf of the client.

(e) A lawyer shall not accept compensation for representing a client fromone other than the client unless:

(1) the client consents;

(2) there is no interference with the lawyer’s independence ofprofessional judgment or with the client-lawyer relationship; and

(3) information relating to representation of a client is protected asrequired by Rule 1.05.

(f) A lawyer who represents two or more clients shall not participate inmaking an aggregate settlement of the claims of or against the clients, orin a criminal case an aggregated agreement to guilty or nolo contenderepleas, unless each client has consented after consultation, includingdisclosure of the existence and nature of all the claims or pleas involvedand of the nature and extent of the participation of each person in thesettlement.

(g) A lawyer shall not make an agreement prospectively limiting thelawyer’s liability to a client for malpractice unless permitted by law and theclient is independently represented in making the agreement, or settle aclaim for such liability with an unrepresented client or former client with outfirst advising that person in writing that independent representation isappropriate in connection therewith.

(h) A lawyer shall not acquire a proprietary interest in the cause of actionor subject matter of litigation the lawyer is conducting for a client, exceptthat the lawyer may:

(1) acquire a lien granted by law to secure the lawyer’s fee orexpenses; and

(2) contract in a civil case with a client for a contingent fee that ispermissible under Rule 1.04.

(i) If a lawyer would be prohibited by this Rule from engaging in particularconduct, no other lawyer while a member of or associated with that lawyer’sfirm may engage in that conduct.


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(j) As used in this Rule, “business transactions” does not include standardcommercial transactions between the lawyer and the client for products orservices that the client generally markets to others.

2.5 State Bar Rules, Article X, Rule 1.09 - CONFLICT OF INTEREST: FORMER CLIENTprovides as follows:

(a) Without prior consent, a lawyer who personally has formerlyrepresented a client in a matter shall not thereafter represent anotherperson in a matter adverse to the former client:

(1) in which such other person questions the validity of the lawyer’sservices or work product for the former client;

(2) if the representation in reasonable probability will involve aviolation of Rule 1.05; or

(3) if it is the same or a substantially related matter.

(b) Except to the extent authorized by Rule 1.10, when lawyers are or havebecome members of or associated with a firm, none of them shallknowingly represent a client if any one of them practicing alone would beprohibited from doing so by paragraph (a).

(c) When the association of a lawyer with a firm has terminated, thelawyers who were then associated with that lawyer shall not knowinglyrepresent a client if the lawyer whose association with that firm hasterminated would be prohibited from doing so by paragraph (a)(1) or if therepresentation in reasonable probability will involve a violation of Rule 1.05.

2.6 State Bar Rules, Article X, Rule 1.10 - SUCCESSIVE GOVERNMENT & PRIVATEEMPLOYMENT, provides as follows:

(a) Except as law may otherwise expressly permit, a lawyer shall notrepresent a private client in connection with a matter in which the lawyerparticipated personally and substantially as a public officer or employee,unless the appropriate government agency consents after consultation.

(b) No lawyer in a firm with which a lawyer subject to paragraph (a) isassociated may knowingly undertake or continue representation in such amatter unless:

(1) The lawyer subject to paragraph (a) is screened from anyparticipation in the matter and is apportioned no part of the feetherefrom; and

(2) written notice is given with reasonable promptness to theappropriate government agency.


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(c) Except as law may otherwise expressly permit, a lawyer havinginformation that the lawyer knows or should know is confidentialgovernment information about a person or other legal entity acquired whenthe lawyer was a public officer or employee may not represent a privateclient whose interests are adverse to that person or legal entity.

(d) After learning that a lawyer in the firm is subject to paragraph (c) withrespect to a particular matter, a firm may undertake or continuerepresentation in that matter only if that disqualified lawyer is screened fromany participation in the matter and is apportioned no part of the feetherefrom.

(e) Except as law may otherwise expressly permit, a lawyer serving as apublic officer or employee shall not:

(1) Participate in a matter involving a private client when the lawyerhad represented that client in the same matter while in privatepractice or nongovernmental employment, unless under applicablelaw no one is, or by lawful delegation may be, authorized to act inthe lawyer’s stead in the matter; or

(2) Negotiate for private employment with any person who isinvolved as a party or as attorney for a party in a matter in which thelawyer is participating personally and substantially.

(f) As used in this rule, the term “matter” does not include regulation-making or rule-making proceedings or assignments, but includes:

(1) Any adjudicatory proceeding, application, request for a ruling orother determination, contract, claim, controversy, investigation,charge accusation, arrest or other similar, particular transactioninvolving a specific party or parties; and

(2) any other action or transaction covered by the conflict of interestrules of the appropriate government agency.

(g) As used in this rule, the term “confidential government information”means information which has been obtained under governmental authorityand which, at the time this rule is applied, the government is prohibited bylaw from disclosing to the public or has a legal privilege not to disclose, andwhich is not otherwise available to the public.

(h) As used in this Rule, “Private Client” includes not only a private party butalso a governmental agency if the lawyer is not a public officer or employeeof that agency.

(i) A lawyer who serves as a public officer or employee of one body politicafter having served as a public officer of another body politic shall comply


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with paragraphs (a) and (c) as if the second body politic were a privateclient and with paragraph (e) as if the first body politic were a private client.

2.7 State Bar Rules, Article X, Rule 1.11 - ADJUDICATORY OFFICIAL OR LAW CLERK,provides as follows:

(a) A lawyer shall not represent anyone in connection with a matter whichthe lawyer has passed upon the merits or otherwise participated personallyand substantially as an adjudicatory official or law clerk to an adjudicatoryofficial, unless all parties to the proceeding consent after disclosure.

(b) A lawyer who is an adjudicatory official shall not negotiate foremployment with any person who is involved as a party or as attorney fora party in a pending matter in which that official is participating personallyand substantially. A lawyer serving as a law clerk to an adjudicatory officialmay negotiate for employment with a party or attorney involved in a matterin which the clerk is participating personally and substantially, but only afterthe clerk has notified the adjudicatory official.

(c) If paragraph (a) is applicable to a lawyer, no other lawyer in a firm withwhich that lawyer is associated may knowingly undertake or continuerepresentation in the matter unless:

(1) the lawyer who is subject to paragraph (a) is screened fromparticipation in the matter and is apportioned no part of the feetherefrom; and

(2) written notice is promptly given to the other parties to theproceeding.

2.8 State Bar Rules, Article X, Rule 1.12 - ORGANIZATION AS A CLIENT, provides asfollows:

(a) A lawyer employed or retained by an organization represents the entity.While the lawyer in the ordinary course of working relationships may reportto, and accept direction from, an entity’s duly authorized constituents, in thesituations described in paragraph (b) the lawyer shall proceed asreasonably necessary in the best interest of the organization withoutinvolving unreasonable risks of disrupting the organization and of revealinginformation relating to the representation to persons outside theorganization.

(b) A lawyer representing an organization must take reasonable remedialactions whenever the lawyer learns or knows that:

(1) an officer, employee, or other person associated with theorganization has committed or intends to commit a violation of alegal obligation to the organization or a violation of law whichreasonably might be imputed to the organization;


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(2) the violation is likely to result in substantial injury to theorganization; and

(3) the violation is related to a matter within the scope of thelawyer’s representation of the organization.

(c) Except where prior disclosure to persons outside the organization isrequired by law or other Rules, a lawyer shall first attempt to resolve aviolation by taking measures within the organization. In determining theinternal procedures, actions or measures that are reasonably necessary inorder to comply with paragraphs (a) and (b), a lawyer shall give dueconsideration to the seriousness of the violation and its consequences, thescope and nature of the lawyer’s representation, the responsibility in theorganization and the apparent motivation of the person involved, thepolicies of the organization concerning such matters, and any other relevantconsiderations. Such procedures, actions and measures may include, butare not limited to, the following:

(1) asking reconsideration of the matter; advising that a separatelegal opinion on the matter be sought for presentation toappropriate authority in the organization; and

(2) referring the matter to higher authority in the organization,including, if warranted by the seriousness of the matter, referral tothe highest authority that can act in behalf of the organization asdetermined by applicable law.

(d) Upon a lawyer’s resignation or termination of the relationship incompliance with Rule 1.15, a lawyer is excused from further proceeding asrequired by paragraphs (a), (b) and (c), and any further obligations of thelawyer are determined by Rule 1.05.

(e) In dealing with an organization’s directors, officers, employees,members, shareholders or other constituents, a lawyer shall explain theidentity of the client when it is apparent that the organization’s interests areadverse to those of the constituents with whom the lawyer is dealing orwhen explanation appears reasonably necessary to avoidmisunderstanding on their part.

2.9 State Bar Rules, Article X, Rule 1.13 - CONFLICTS: PUBLIC INTERESTS ACTIVITIES,provides as follows:

A lawyer serving as a director, officer or member of a legal services, civic,charitable or law reform organization, apart from the law firm in which thelawyer practices, shall not knowingly participate in a decision or action ofthe organization:

(a) if participating in the decision would violate the lawyer’sobligations to a client under Rule 1.06; or


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(b) where the decision could have a material adverse effect on therepresentation of any client of the organization whose interests areadverse to a client of the lawyer.

2.10 State Bar Rules, Article X, Rule 1.15 - DECLINING OR TERMINATINGREPRESENTATION, provides as follows:

(a) A lawyer shall decline to represent a client or, where representation hascommenced, shall withdraw, except as stated in paragraph (c), from therepresentation of a client, if:

(1) the representation will result in violation of Rule 3.08, otherapplicable rules of professional conduct or other law;

(2) the lawyer’s physical, mental or psychological conditionmaterially impairs the lawyer’s fitness to represent the client; or

(3) the lawyer is discharged, with or without good cause.

(b) Except as required by paragraph (a), a lawyer shall not withdraw fromrepresenting a client unless:

(1) withdrawal can be accomplished without material adverse effecton the interests of the client;

(2) the client persists in a course of action involving the lawyer’sservices that the lawyer reasonably believes may be criminal orfraudulent;

(3) the client has used the lawyer’s services to perpetrate a crimeor fraud;

(4) a client insists upon pursuing an objective that the lawyerconsiders repugnant or imprudent or with which the lawyer hasfundamental disagreement; the client fails substantially to fulfill anobligation to the lawyer regarding the lawyer’s services, including anobligation to pay the lawyer’s fee as agreed, and has been givenreasonable warning that the lawyer will withdraw unless theobligation is fulfilled;

(5) the client fails substantially to fulfill an obligation to the lawyerregarding the lawyer’s services, including an obligation to pay thelawyer’s fee as agreed, and has been given reasonable warningthat the lawyer will withdraw unless the obligation is fulfilled;

(6) the representation will result in an unreasonable financial burdenon the lawyer or has been rendered unreasonably difficult by theclient; or


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(7) other good cause for withdrawal exists.

(c) When ordered to do so by a tribunal, a lawyer shall continuerepresentation notwithstanding good cause for terminating therepresentation.

(d) Upon termination of representation, a lawyer shall take steps to theextent reasonably practicable to protect a client’s interests, such as givingreasonable notice to the client, allowing time for employment of othercounsel, surrendering papers and property to which the client is entitle andrefunding any advance payments of fee that has not been earned. Thelawyer may retain papers relating to the client to the extent permitted byother law only if such retention will not prejudice the client in the subjectmatter of the representation.

2.11 State Bar Rules, Article X, Rule 7.03 -PROHIBITED SOLICITATIONS & PAYMENTS, providesas follows:

(a) A lawyer shall not by in-person or telephone contact seek professionalemployment concerning a matter arising out of a particular occurrence orevent, or series of occurrences or events, from a prospective client ornonclient who has not sought the lawyer’s advice regarding employment orwith whom the lawyer has no family or past or present attorney-clientrelationship when a significant motive for the lawyer’s doing so is thelawyer’s pecuniary gain. Notwithstanding the provisions of this paragraph,a lawyer for a qualified nonprofit organization may communicate with theorganization’s members for the purpose of educating the members tounderstand the law, the recognize legal problems, to make intelligentselection of counsel, or to use legal services. In those situations where in-person or telephone contact is permitted by this paragraph, a lawyer shallnot have such a contact with a prospective client if:

(1) the communication involves coercion, duress, fraud,overreaching, intimidation, undue influence, or harassment;

(2) The communication contains information prohibited by Rule7.02(a); or

(3) The communication contains a false, fraudulent, misleading,deceptive, or unfair statement or claim.

(b) A lawyer shall not pay, give, or offer to pay or give anything of value toa person not licensed to practice law for soliciting prospective clients for,or referring clients or prospective client to, any lawyer or firm, except thata lawyer may pay reasonable fees for advertising and public relationsservices rendered in accordance with this Rule and may pay the usualcharges of a lawyer referral service that meets the requirements of Article320d, Revised Statutes.


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(c) A lawyer, in or to solicit professional employment, shall not pay, give,advance, or offer to pay, give, or advance anything of value, other thanactual litigation expenses and other financial assistance as permitted byRule 1.08(d), to a prospective client or any other person, provided however,this provision does not prohibit the payment of legitimate referral fees aspermitted by paragraph (b) of this Rule.

(d) A lawyer shall not enter into an agreement for, charge for, or collect afee for professional employment obtained in violation of Rule 7.03(a), (b),or (c).

(e) A lawyer shall not participate with or accept referrals from a lawyerreferral service unless the lawyer knows or reasonably believes that thelawyer referral service meets the requirements of Article 320d, RevisedStatutes.

2.12 State Bar Rules, Article X, Rule 7.04 - ADVERTISEMENTS IN THE PUBLIC MEDIA, providesas follows:

(a) A lawyer shall not advertise in the public media that the lawyer is a specialist,except as permitted under Rule 7.04(b) or as follows:

(1) A lawyer admitted to practice before the United States Patent Office mayuse the designation “Patents,” “Patent Attorney,” or “Patent Lawyer,” or anycombination of those terms. A lawyer engaged in the trademark practice mayuse the designation “Trademark,” “Trademark Attorney,” or “TrademarkLawyer,” or any combination of those terms. A lawyer engaged in patent andtrademark practice may hold himself or herself out as specializing in“intellectual Property Law,” “Patent, Trademark, Copyright Law and UnfairCompetition,” or any of those terms.

(2) A lawyer may permit his or her name to be listed in lawyer referralservice offices that meet the requirements of Article 320d, Revised Statutes,according to the areas of law in which the lawyer will accept referrals.

(3) A lawyer available to practice in a particular area of law or legal servicemay distribute to other lawyers and publish in legal directories and legalnewspapers a listing or an announcement of such availability. The listing shallnot contain a false or misleading representation of special competence orexperience, but may contain the kind of information that traditionally has beenincluded in such publications.

(b) A lawyer who advertises in the public media:

(1) shall publish or broadcast the name of at least one lawyer who isresponsible for the content of such advertisement;


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(2) shall not include a statement that the lawyer has been certified ordesignated by an organization as possessing special competence or astatement that the lawyer is a member of an organization the name of whichimplies that its members possess special competence, except that:

(i) a lawyer who has been awarded a Certificate of SpecialCompetence by the Texas Board of Legal Specialization inthe area so advertised, may state with respect to each sucharea, “Board Certified. [area of specialization] - TexasBoard of Legal Specialization;” and

(ii) a lawyer who is a member of an organization the nameof which implies that its members possess specialcompetence, or who has been certified or designated by anorganization as possessing special competence, may includea factually accurate statement of such membership or mayinclude a factually accurate statement, “Certified [area ofspecialization] [name of certifying organization], “ but suchstatements may be made only if that organization has beenaccredited by the Texas Board of Legal Specialization as abona fide organization that admits to membership or grantscertification only on the basis of objective, exacting, publiclyavailable standards (including high standards of individualcharacter, conduct, and reputation) that are reasonablyrelevant to the special training or special competence that isimplied and that are in excess of the level of training andcompetence generally required for admission to the Bar; and

(3) shall state with respect to each area advertised in which the lawyer hasnot been awarded a Certificate of Special Competence by the Texas Boardof Legal Specialization, “Not Certified by the Texas Board of LegalSpecialization,” however, if an area of law so advertised has not beendesignated as an area in which a lawyer may be awarded a Certificate ofSpecial Competence by the Texas Board of Legal Specialization, the lawyermay also state, “No designation has been made by the Texas Board of LegalSpecialization for a Certificate of Special Competence in this area.”

(c) Separate and apart from any other statements, the statements referred to inparagraph (b) shall be displayed conspicuously with no abbreviations, changes, oradditions in the quoted language set forth in paragraph (b) so as to be easily seen orunderstood by an ordinary consumer.

(d) Subject to the requirements of Rule 7.02 and of paragraphs (a), (b), and (c) ofthis Rule, a lawyer may, either directly or through a public relations or advertisingrepresentative, advertise services in the public media, such as (but not limited to) atelephone directory, legal directory, newspaper or other periodical, outdoor display,radio, or television.


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(e) All advertisements in the public media for a lawyer or firm must be reviewed andapproved in writing by the lawyer or a lawyer in the firm.

(f) A copy or recording of each advertisement in the public media and relevantapproval referred to in paragraph (e), and a record of when and where theadvertisement was used, shall be kept by the lawyer or firm for four years after its lastdissemination.

(g) In advertisements utilizing video or comparable visual images, any person whoportrays a lawyer whose services or whose firm’s services are being advertised, orwho narrates an advertisement as if he or she were such a lawyer, shall be one ormore of the lawyers whose services are being advertised. In advertisements utilizingaudio recordings, any person who narrates an advertisement as if he or she were alawyer whose services or show firm’s services are being advertised, shall be one ormore of the lawyers whose services are being advertised.

(h) If an advertisement in the public media by a lawyer or firm discloses thewillingness or potential willingness of the lawyer or firm to render services on acontingent fee basis, the advertisement must state whether the client will be obligatedto pay all or any portion of the court costs and, if a client may be liable for otherexpenses, this fact must be disclosed. If specific percentage fees or fee ranges ofcontingent fee work are disclosed in such advertisement, it must also disclose whetherthe percentage is computed before or after expenses are deducted from the recovery.

(i) A lawyer who advertises in the public media a specific fee or range of fees for aparticular service shall conform to the advertised fee or range of fees for the periodduring which the advertisement is reasonably expected to be in circulation orotherwise expected to be effective in attracting clients, unless the advertisementspecifies a shorter period; but in no instance is the lawyer bound to conform to beadvertised fee or range of fees for a period of more than one year after the date ofpublication.

(j) A lawyer or firm who advertises in the public media must disclose the geographiclocation, by city or town, of the lawyer’s or firm’s principal office. A lawyer or firmshall not advertise the existence of any office other than the principal office unless:

(1) that other office is staffed by a lawyer at least three days a week; or

(2) the advertisement states:

(i) the days and times during which a lawyer will be presentat that office, or


2 Subsection (j) was held unconstitutional as applied to a particular lawyer. Texans Against Censorship, Inc.v. State Bar of Texas, 888 F.Supp. 1328, 1359 (E.D.Tex.1995).

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(ii) that meetings with lawyers will be by appointment only.2

(k) A lawyer may not, directly or indirectly, pay all or a part of the cost of anadvertisement in the public media for a lawyer not in the same firm unless suchadvertisement discloses the name and address of the financing lawyer, the relationshipbetween the advertising lawyer and the financing lawyer, and whether the advertisinglawyer is likely to refer cases received through the advertisement to the financinglawyer.

(l) If an advertising lawyer knows or should know at the time of an advertisement inthe public media that a case or matter will likely be referred to another lawyer or firm,a statement of such fact shall be conspicuously included in such advertisement.

(m) No motto, slogan, or jingle that is false or misleading may be used in anyadvertisement in the public media.

(n) A lawyer shall not include in any advertisement in the public media the lawyer’sassociation with a lawyer referral service unless the lawyer referral service meets therequirements of Article 320d, Revised Statutes.

(o) A lawyer may not advertise in the public media as part of an advertisingcooperative or venture of two or more lawyers not in the same firm unless each suchadvertisement:

(1) states that the advertisement is paid for by the cooperating lawyers;

(2) names each of the cooperating lawyers;

(3) sets forth conspicuously the special competency requirements required byRule 7.04(b) of lawyers who advertise in the public media;

(4) does not state or imply that the lawyers participating in the advertisingcooperative or venture possess professional superiority, are able to performservices in a superior manner, or possess special competence in any area oflaw advertised, except that the advertisement may contain the informationpermitted by Rule 7.04(b)(2); and

(5) does not otherwise violate the Texas Disciplinary Rule of ProfessionalConduct.

(p) Each lawyer who advertises in public media as part of an advertising cooperativeor venture shall be individually responsible for:

http://www.TexasBarCLE.com/CLE/PMCasemaker.asp?table=US_distctopinions&volume=888&edition=F.Supp.&page=1328&id=46061_01


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(1) ensuring that each advertisement does not violate this Rule; and

(2) complying with the filing requirements of Rule 7.07.

2.13 State Bar Rules, Article X, Rule 7.05 - PROHIBITED WRITTEN SOLICITATIONS, provides asfollows:

(a) A lawyer shall not send or deliver, or knowingly permit or cause another personto send or deliver on the lawyer’s behalf, a written communication to a prospectiveclient for the purpose of obtaining professional employment if:

(1) the communication involves coercion, duress, fraud, overreaching,intimidation, undue influence, or harassment;

(2) the communication contains information prohibited by Rule 7.02 or failsto satisfy each of the requirements of Rule 7.04(a) through (c), and (h)through (o) that would be applicable to the communication if it were anadvertisement in the public media; or

(3) the communication contains a false, fraudulent, misleading, deceptive, orunfair statement or claim.

(b) Except as provided in paragraph (e) of this Rule, a written solicitationcommunication to perspective clients for the purpose of obtaining professionalemployment:

(1) shall conform to the provisions of Rule 7.04(a) through (c);

(2) shall be plainly marked “ADVERTISEMENT” on the first page of thewritten communication, and the face of the envelope also shall be plainlymarked “ADVERTISEMENT,” however, if the written communication is inthe form of a self-mailing brochure or pamphlet, the word“ADVERTISEMENT” shall be: (i) in a color that contrasts sharply with thebackground color; and (ii) in a size of at least 3/8" vertically or three times thevertical height of the letters used in the body of such communication,whichever is larger.

(3) shall not be made to resemble legal pleadings or other legal documents;

(4) [Deleted by the Supreme Court of Texas July 1, 1998]

(5) [Deleted by the Supreme Court of Texas July 1, 1998]

(6) shall not reveal on the envelope used for the communication, or on theoutside of a self-mailing brochure or pamphlet, the nature of the legal problemof the prospective client or nonclient; and


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(7) shall disclose how the lawyer obtained the information prompting suchwritten communication to solicit professional employment if such contact wasprompted by a specific occurrence involving the recipient of thecommunication or a family member of such person(s).

(c) All written communications to a prospective client for the purpose of obtainingprofessional employment must be reviewed and either signed by or approved inwriting by the lawyer or a lawyer in the firm.

(d) A copy of each written solicitation communication, the relevant approval thereof,and a record of the date of each such communication; the name and address to whicheach such communication was sent; and the means by each such communication wassent shall be kept by the lawyer or firm for four years after its dissemination.

(e) The provisions of paragraph (b) of this Rule do not apply to a written solicitationcommunication:

(1) directed to a family member or a person with whom the lawyer had orhas an attorney-client relationship;

(2) that is not motivated by or concerned with a particular past occurrenceor event or a particular series of past occurrences or events, and also is notmotivated by or concerned with the prospective client’s specific existing legalproblem of which the lawyer is aware;

(3) if the lawyer’s use of the communication to secure professionalemployment was not significantly motivated by a desire for, or by thepossibility of obtaining, pecuniary gain; or

(4) that is requested by the prospective client.

2.14 State Bar Rules, Article X, Rule 7.06 - PROHIBITED EMPLOYMENT provides as follows:

A lawyer shall not accept or continue employment when the lawyer knows orreasonably should know that the person who seeks the lawyer’s services does so asa result of conduct prohibited by these rules.

2.15 Admissibility of the Disciplinary Rules in Civil Litigation:

2.15.1 Stern v. Wonzer, 846 S.W.2d 939 [Tex. App. Houston (1stDist.) 1993, no writ]:

A trial court may use the disciplinary rules that govern attorneyconduct to determine whether a contract is contrary to public policy.Polland v. Lehmann, 832 S.W.2d 729, 736 (Tex.App.--Houston[1st Dist.] 1992, writ denied). Once evidence has been properlyadmitted, an attorney may argue reasonable inferences drawn fromsuch evidence. See Standard Fire Ins. Co. v. Reese, 584 S.W.2d




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835, 837 (Tex.1979); TEX.R.CIV.P. 269(e). We hold the trialcourt did not err in admitting evidence and considering argumentabout Intervenors' violations of the disciplinary rules.

2.15.2 State v. Baker, 539 S.W.2d 367 (Tex. App. – Austin 1976, writ ref’d n.r.e.)

Although the canons of ethics and their ethical considerations set outin the Rules are not binding on this Court, those canons are highlypersuasive and are due our utmost consideration.

2.16 Tex. Gov. Code Ann. §82.065 provides as follows:

(a) A contingent fee contract for legal services must be in writing and signed by theattorney and the client.

(b) A contingent fee contract for legal services is voidable by the client if it is procuredas a result of conduct violating the laws of this state or the Disciplinary Rules of theState Bar of Texas regarding barratry by attorneys or other persons.


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