Collard v. Schechter
| Decision Date | 12 May 2011 |
| Docket Number | NO. 01-08-00969-CV,01-08-00969-CV |
| Court | Texas Court of Appeals |
| Parties | PITTS & COLLARD, L.L.P. AND GARY PITTS, Appellants v. ARTHUR L. SCHECHTER, ARTHUR L. SCHECHTER, P.C. D/B/A SCHECHTER & ASSOCIATES, SCHECHTER & MARSHALL, L.L.P., AND SCHECHTER, MCELWEE & SHAFFER, L.L.P., Appellees AND ARTHUR L. SCHECHTER, ARTHUR L. SCHECHTER, P.C. D/B/A SCHECHTER & ASSOCIATES, SCHECHTER & MARSHALL, L.L.P., AND SCHECHTER, MCELWEE & SHAFFER, L.L.P., Appellants v. PITTS & COLLARD, L.L.P. AND GARY PITTS, Appellees |
Gary Pitts and Pitts & Collard, LLP sued Arthur L. Schechter, Arthur L. Schechter, P.C. d/b/a Schechter & Associates, Schechter & Marshall, L.L.P., and Schechter, McElwee & Shaffer, L.L.P. for breach of contract. The contract claim was based upon an allegation that the Schechter parties failed to pay referral fees from nearly a thousand lawsuits that Pitts referred by way of nine letter agreements.1 Pitts also sued the Schechter parties for breach of a subsequent 1995 agreement, which also pertained to fees and expenses from certain referred cases.
Schechter raised several affirmative defenses, countersued for breach of contract based on the nine letter agreements, and sued for defamation and abuse of process. He alleged that as retribution for the dispute over referral fees, Pitts made slanderous statements to the Houston City Council before approval of hisnomination to serve as the Chairman of the Metropolitan Transit Authority of Harris County. Schechter also alleged that Pitts slandered him to professional colleagues, interfered with his client relationships by sending letters informing the clients they were being charged interest on their litigation expenses and informing them how to file a grievance, and abused the litigation process by failing to file certain exhibits under seal as the trial court had ordered. Both parties raised various affirmative defenses, and the case was tried to a jury.
After considering the jury's verdict, numerous post-trial motions, and the applicable law as provided by the parties, the trial court entered judgment as follows:
Both Pitts and Schechter filed notices of appeal addressing both the contract and tort parts of the underlying case. We affirm the trial court's judgment pertaining to the contract claims, and we reverse and render a take-nothing judgment on Schechter's abuse of process and professional colleague defamation causes of action.
In the early 1990s, attorney Gary Pitts and his law partner, Ed Collard, advertised about the product liabilities associated with silicone breast implants. As a result of their advertising campaign, over a thousand women retained Pitts & Collard to pursue possible claims. The major manufacturers of silicone breast implants announced a global settlement in September 1993, after negotiations with a plaintiffs' steering committee in a federal lawsuit filed in Alabama. Any woman with silicone breast implants could opt into this settlement. One feature of this settlement was that an opt-in claimant's attorney's contingency fee would be reduced to 25%. The settlement was approved by the federal district court in early 1994.
From late 1993 through 1994, in a series of nine letter agreements, Pitts & Collard referred approximately 1,000 clients to the law firm of attorney Arthur L.Schechter. Each such agreement referred to the lawyers' prior agreements and course of dealing, which included a 60/40 split of attorney's fees on a fees-recovered basis, with the larger amount going to Schechter's firm and the balance to Pitts & Collard. After the second such letter agreement was signed, the lawyers jointly sent a letter to their clients stating that they would share the work and share the fee received from their cases. The client letter indicated that Richard Melancon, an attorney associated at that time with Schechter, would have day-today responsibility for their cases.
Initially, the lawyers thought this would be a lucrative arrangement because of the global settlement. But in the summer of 1995, one of the largest manufacturers of silicone breast implants, Dow Corning, sought bankruptcy protection. The global settlement was revised to apply only to claims against the other major implant manufacturers. The lawyers continued to advocate actively for the clients in cases that did not involve Dow Corning.
A dispute arose in 1995, and Pitts sued Schechter, alleging that the cases were being mismanaged. That lawsuit settled after mediation. As part of the settlement, the parties referred almost 400 of the breast-implant cases to attorney Richard Laminack. However, Laminack refused to take any cases against Dow Corning.
Schechter argues that Pitts stopped working on the cases in 1996, although Schechter continued to represent the clients and pay Pitts referral fees until late 1997. The revised global settlement ended in 1999. At that time, only the Dow Corning cases remained from the cases referred by Pitts to Schechter. But the Dow Corning bankruptcy court had dramatically reduced the fees recoverable by claimants' attorneys, and in some types of cases, the federal court had disallowed attorney's fees entirely. This resulted in a financial loss to the attorneys, particularly Schechter, who had fronted expenses in the cases. In 2001, Pitts sought arbitration under the 1995 settlement agreement, alleging that Schechter was not properly sharing fees. In March 2002, the parties arbitrated the dispute, which was resolved in Schechter's favor.
Meanwhile, by April 2002, Schechter had been appointed to the board of directors of the Metropolitan Transit Authority of Harris County, and he was under consideration to become the chairman. On April 2, 2002, approximately two weeks after the arbitration, Pitts spoke at a public meeting of the Houston City Council, insinuating that Schechter was difficult, dishonest, and unethical in the conduct of his business and political affairs. These comments were recorded and broadcast through local-access cable television. Pitts implored the city council to investigate Schechter and to begin by speaking to his former colleagues and law partners. Pitts also spoke to some of Schechter's former associates and partnersabout his appointment to the METRO board and the consideration of him for its chairmanship. He told Melancon and other former colleagues of Schechter that someone from city council might contact them to discuss their private opinions about Schechter.
Pitts became aware in 2004 that Schechter had begun charging the clients interest on the expenses paid on the contingent-fee cases. Pitts informed the clients that this practice was not part of their contingent-fee arrangement. He also told them how to file a grievance with the State Bar. Subsequently, Schechter stopped charging the clients interest.
Pitts sued Schechter in 2005 for breach of contract and other claims, alleging that Schechter owed him attorney's fees from the nine letter agreements. Pitts generally contended that he was entitled to share in the attorney's fees recovered, and that Schechter was not entitled to an offset for losses in those cases resulting only in a loss. Schechter took the opposite position, arguing that the losses in some cases should be offset against the attorney's fees collected in other cases. Schechter also countersued for breach of contract, alleging that Pitts did not share the litigation work and that Schechter had to hire other people to do the work. Finally, Schechter sued for defamation related to the comments that Pitts made before city council in 2002 and repeated to Schechter's professional colleagues. During the course of litigation, Pitts repeatedly filed a recording of the statementshe made before city council, but he did not file them under seal as required by a protective order entered by the trial court at the agreement and request of the parties. As a result, Schechter added a claim for abuse of process.
Both parties appeal from various aspects of the judgment relating to disputes over their joint representation of the breast-implant clients. Pitts challenges the judgment against him for breach of contract. Schechter challenges the rejection of some of his contract claims on limitations grounds as well as the rejection of his claim that the parties had a joint venture which gave rise to a duty of good faith and fair dealing that was allegedly breached by Pitts. Both parties raise issues relating to attorney's fees.
The jury found that Pitts was first to breach the nine letter agreements and that Schechter's breach was excused by Pitts's repudiation and by commercial impracticability. The trial court entered judgment on the jury's verdict in Schechter's favor. Pitts raises numerous appellate issues...
To continue reading
Request your trial