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Friedman & Feiger, LLP v. Massey

Court of Appeals of Texas, Second District, Fort Worth

July 18, 2019

Friedman & Feiger, LLP, Appellant
v.
Robert E. Massey, Individually and as Independent Executor of the Estate of William Earl Massey, Appellee

          On Appeal from County Court at Law No. 2 Parker County, Texas Trial Court No. CIV-15-0299

          Before Sudderth, C.J.; Gabriel and Wallach, JJ. [1]

          MEMORANDUM OPINION ON REHEARING

          LEE GABRIEL, JUSTICE

         Appellee Robert E. Massey, Individually and as Independent Executor of the Estate of William Earl Massey, filed a motion for rehearing of our original opinion that issued on June 6, 2019. We deny the motion, withdraw our opinion and judgments dated June 6, 2019, and substitute the following.

         In a single issue in these consolidated appeals, appellant Friedman & Feiger, LLP appeals from the trial court's order denying its motion to compel arbitration of counterclaims Massey asserted against it and from the temporary injunction the trial court rendered enjoining it from proceeding with arbitration. We reverse and remand.

         I. BACKGROUND

         Robert Massey is the executor of his late father's estate. On behalf of the estate, he engaged a law firm to file a lawsuit against a company called EECU. After the lawsuit was filed, Massey sought to have Friedman take over representation of the estate's claims against EECU. To that end, in October 2013, Massey entered into a contingency fee agreement with Friedman, signing the agreement in both his capacity as executor and his individual capacity.

         The agreement provided that Massey had retained Friedman to represent the estate in claims against EECU, including the lawsuit, in exchange for Friedman receiving forty percent of any recovery on those claims. The agreement also provided that Massey had not retained Friedman to provide any representation other than for the claims against EECU and that "a separate fee contract [would] be negotiated if [Massey] desire[d] representation in other matters." Additionally, there was an arbitration clause, which provided,

Any dispute concerning any aspect of [Friedman's] representation of [Massey, individually and as executor] relating to the [claims against EECU] and/or under this Contingent Fee Contract, whether sounding in contract or tort, shall be resolved by binding arbitration to be determined by Judicial Arbitration and Mediation Services, Inc. in Dallas, Texas. Any such dispute shall be heard (to the full extent possible) within sixty (60) days of filing a demand for arbitration, and no discovery shall be permitted in connection with such arbitration hearing. In addition, the prevailing party in such arbitration shall be entitled to recover all costs and expenses, including attorney fees, incurred with respect to such proceeding.

         Massey settled the lawsuit in exchange for EECU's payment of $738, 600, and those funds were deposited into Friedman's trust account. Massey entered into another agreement with Friedman whereby Friedman agreed to reduce its contingency fee to thirty-three and one-third percent. This resulted in Friedman collecting $245, 953.80 as its contingency fee, as well as an additional $9, 286.49 for its expenses.

         Three creditors of both Massey and the estate subsequently raised claims against the remaining settlement funds. According to Friedman, Massey asked the firm to represent him and the estate in resolving those third-party claims, but Massey disputes that he made any such request or authorized that representation. Regardless, Friedman undertook representation for the third-party claims and ultimately settled two of them for a cumulative total of $150, 000. The third creditor made a claim for $69, 900. Friedman's attempt to settle that claim was unsuccessful, so it deposited $69, 900 into the registry of the probate court where Massey's father's estate was pending.[2]

         Friedman then sent a bill to Massey for $46, 620.78 for its services related to the third-party claims. However, Massey noted that at least some of the billing entries reflected work Friedman had performed in resolving the claims against EECU rather than the third-party claims. Friedman concedes that $5, 532.50 of the amount it billed Massey was for services it had performed related to the resolution of the EECU claims, which was covered by the October 2013 contingency fee agreement. In its brief, Friedman asserts that its inclusion of that amount in the bill was inadvertent and that it does not seek to recover that $5, 532.50. We note that Friedman amended its pleadings in this case, alleging that certain billing entries in the bill reflected services related to the EECU claims and unrelated to the third-party claims. Friedman further alleged that it sought to recover $41, 088.28, which it alleged represented the total amount due for its services in settling and attempting to settle the third-party claims.

         Massey did not pay the bill, so in January 2015, Friedman filed a claim against the estate seeking to recover the fees. Friedman later sued Massey and the estate, alleging breach of contract, sworn account, and quantum meruit claims arising out of the services it had provided for the third-party claims. Friedman also alleged claims for fraud and negligence related to the October 2013 contingency fee agreement, asserting that Massey had represented to Friedman that the probate court had approved a contingency fee of forty percent for services related to the EECU claims, a representation that Friedman alleged was false, and that Friedman had relied on that representation in entering the agreement.[3] Friedman asserted it suffered unspecified damage as a result of the alleged misrepresentation.

         In response to Friedman's amended claim in the probate court, Massey filed a general denial in June 2015. As an affirmative defense, he also asserted that Friedman was seeking a total fee that exceeded one-third of the amount recovered on the EECU claims and that Friedman had failed to obtain the probate court's approval for a contingency fee that exceeded one-third of the recovery obtained on those claims.

         The record shows little additional pretrial activity occurred with respect to Friedman and Massey until June 4, 2018, when Massey filed a motion for partial summary judgment on Friedman's claims. In the motion, Massey argued that the October 2013 contingency fee agreement was void because section 351.152 of the Texas Estates Code required the probate court to approve any contingency fee that exceeded one-third, and the probate court had never approved the October 2013 contingency fee agreement. However, Massey did not assert any affirmative claims against Friedman until August 7, 2018, when he filed his "Defendants' Original Counterclaim," in which he asserted various affirmative claims, including claims based on the assertion that the October 2013 contingency fee agreement violated section 351.152 and thus was void.

         On September 6, 2018, Friedman filed an answer to Massey's August 7, 2018 counterclaims, as well as a motion to compel arbitration of those counterclaims under the Texas General Arbitration Act because, Friedman alleged, they concerned disputes over its representation of Massey and the estate in resolving the EECU claims and thus fell within the scope of the October 2013 contingency fee agreement's arbitration clause. Massey filed a response, alleging that the arbitration clause was unenforceable because it was unconscionable and because Friedman had waived arbitration.

         On October 16, 2018, Friedman filed a demand for arbitration with JAMS in Dallas. On November 7, 2018, Massey filed in the trial court an application for an injunction enjoining Friedman from proceeding with the arbitration. The trial court conducted a hearing on Friedman's motion to compel arbitration[4] and Massey's application for injunction after which it denied Friedman's motion without stating its reasons for doing so and granted Massey a temporary injunction enjoining Friedman from "proceeding with arbitration in this matter unless, and until such time as, the Court compels arbitration." Friedman has appealed both orders. See Tex. Civ. Prac. & Rem. Code Ann. §§ 51.014(a)(4) (authorizing interlocutory appeal from order granting temporary injunction), 171.098(a)(1) (authorizing interlocutory appeal from order denying motion to compel arbitration made under section 171.021).

         II. ISSUES, APPLICABLE LAW, AND STANDARD OF REVIEW[5]

         In a single issue, Friedman asserts the trial court abused its discretion by denying its motion to compel arbitration and enjoining it from arbitrating Massey's counterclaims. We review a trial court's denial of a motion to compel arbitration for an abuse of discretion See Branch Law Firm, L.L.P. v. Osborn, 447 S.W.3d 390, 395 (Tex. App.-Houston [14th Dist.] 2014, no pet.).

         A party attempting to compel arbitration must first establish that the dispute in question falls within the scope of a valid arbitration agreement. Rachal v. Reitz, 403 S.W.3d 840, 843 (Tex. 2013). If the party seeking arbitration does so, the burden shifts to the party opposing arbitration to establish a valid defense to enforcing arbitration, such as waiver or unconscionability. See J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex. 2003); see also Royston, Rayzor, Vickery & Williams, LLP v. Lopez, 467 S.W.3d 494, 499-500 (Tex. 2015) (noting that unconscionability is a valid defense to arbitration); Holmes, Woods & Diggs v. Gentry, 333 S.W.3d 650, 654 (Tex. App.-Dallas 2009, no pet.) (noting that waiver is a valid defense to arbitration).

         A trial court's determination regarding whether a valid agreement to arbitrate exists is a question of law that we review de novo. J.M. Davidson, 128 S.W.3d at 227. Additionally, whether the party resisting arbitration has established a defense to arbitration is a legal question that is also subject to de novo review. Brand FX, LLC v. Rhine, 458 S.W.3d 195, 205 (Tex. App.-Fort Worth 2015, no pet.).

         III. DISCUSSION

         As noted above, Massey urged the trial court to deny Friedman's motion to compel arbitration for three reasons. First, he argued that no valid arbitration agreement exists because the entire October 2013 contingency fee agreement is void, alleging it violated section 351.152 of the estates code. Second, he argued that Friedman had waived its right to arbitrate. Third, he argued that the arbitration clause was unenforceable because it was unconscionable.[6] Because the trial court did not issue findings of fact or conclusions of law or state a basis for its decision in its order denying Friedman's motion to compel arbitration, we must uphold the trial court's ruling if there is sufficient evidence to support it on any legal theory Massey raised in the trial ...


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