Izen v. Laine

• Decision Date: 29 December 2020
• Docket Number: NO. 14-18-00216-CV,14-18-00216-CV
• Citation: 614 S.W.3d 775
• Parties: Joe Alfred IZEN, Jr., Appellant v. Brian LAINE and Kimberly Laine, Appellees
• Court: Texas Court of Appeals

614 S.W.3d 775

Joe Alfred IZEN, Jr., Appellant

v.Brian LAINE and Kimberly Laine, Appellees

NO. 14-18-00216-CV

Court of Appeals of Texas, Houston (14th Dist.).

Opinion filed December 29, 2020

SUBSTITUTE MAJORITY OPINION ON REHEARING

Kevin Jewell, Justice We grant in part appellant's motion for rehearing. We withdraw our memorandum opinion of June 18, 2020 and issue the following substitute opinion in its place. Appellant's motion for reconsideration en banc is denied as moot.

Appellant Joe Alfred Izen, Jr. appeals from a final judgment ordering him to disgorge legal fees appellees Brian and Kimberly Laine paid him pursuant to an unconscionable attorney employment agreement. Izen raises several issues, the first of which challenges the award because the Laines' claims seeking recovery of fee forfeiture regarding fees paid in the past were barred by limitations. For the reasons explained below, we sustain this point. We reverse the portion of the judgment ordering disgorgement from Izen of $70,126.13 in attorneys' fees and all interest based on that award. We overrule Izen's remaining issues and affirm the judgment in all other respects, including the portion of the judgment ordering that Izen forfeit all fees not paid by the Laines.

Background

Izen is an attorney who offices in Houston. Brian Laine worked as a Jones Act seaman for Big Inch Marine Systems, Inc. and Stolt Offshore, Inc. (collectively "Big Inch"). Kimberly Laine is his wife. Brian was seriously injured while working on the job in a Louisiana marine fabrication yard. It is undisputed that Brian liked working for his employer Big Inch and they did everything needed to take care of him after his injury. Brian and Big Inch negotiated a settlement of his Jones Act claims.

The proposed settlement included two lump sum payments. The first was $60,000, the second was $75,000 for Brian's future medical needs. The two lump sum payments were payable once Brian signed the formal settlement agreement. The negotiated settlement agreement also included an annuity. The annuity guaranteed Brian a monthly payment of about $1,100 for a minimum of thirty years. The annuity also included a two percent annual cost of living adjustment.¹ Big Inch reserved the right to subrogation of any amounts Brian recovered against third parties also found to be responsible for his injuries. Big Inch's attorney drafted the proposed settlement agreement and sent it to Brian. Big Inch recommended that Brian consult with an attorney regarding the proposed settlement document.

Izen entered the story at this point when Brian contacted him by email in the middle of July 2002. Brian contacted Izen regarding (1) Izen reviewing the draft settlement agreement to make certain it said what Brian understood it should say, and (2) pursuing any claims Brian might have against third-party entities possibly responsible for his injuries. According to Brian, he did not contact Izen regarding a lawsuit against his employer Big Inch. Izen has not disputed that a written proposed settlement agreement between Big Inch and Brian had been prepared before Brian contacted Izen. Brian faxed the proposed settlement agreement to Izen on July 23, 2002. Izen reviewed the document, made pencil margin notes on certain pages, and faxed the annotated pages back to Brian on August 2. Nothing changed in the final settlement agreement as a result of Izen's notations.

Izen and Brian met in person on August 9. Brian signed an attorney employment agreement with Izen during this meeting.² The attorney employment agreement provided that the Laines retained Izen to "sue for and recover all damages and compensation to which [the Laines] may be entitled as well as to compromise and settle all claims arising out of the causes of action against Triple C Fabricators, Inc. and any other responsible parties...." The fee agreement also provided that Izen would represent "Client, Brian Laine, in his Workmen's Compensation claim against his employer, Big Inch Marine, Inc." Izen did not offer Brian a flat fee option or an hourly rate option in his fee agreement. Izen instead offered Brian only a thirty-five percent contingent-fee payment option. Izen told Brian that he was to be paid thirty-five percent of all settlement payments included in the proposed settlement agreement with Big Inch. This included two lump sum payments, as well as a monthly annuity payment for at least thirty years. Izen explained that the payments were to be used to finance the contingent-fee litigation in Louisiana against the third-party defendants such as Triple C Fabricators.

Izen and Brian attended the settlement meeting with Big Inch the same day that the attorney employment agreement was signed. At the meeting, Brian signed the Big Inch settlement agreement, which was unchanged from the original proposed settlement agreement. Izen signed the settlement agreement as Brian's attorney. It is undisputed that Big Inch made the two lump sum payments called for by the settlement agreement and also set-up the annuity with Hartford Insurance. It is also undisputed that Hartford subsequently made all monthly annuity payments to Brian. Brian testified that he made the initial thirty-five percent payment on each lump sum and timely made most of the monthly annuity payments as well. While Brian missed some monthly payments, he would eventually catch up by making larger payments. During trial, Izen estimated that the Laines paid him between $70,000 and $90,000. Izen also agreed that he would eventually be paid a total of $228,730.80 out of the Laines' Big Inch Settlement proceeds.

The fee agreement authorized Izen, who was not licensed to practice law in Louisiana, to associate other counsel at his cost to pursue the third-party litigation. Izen asked Big Inch's attorney, Ralph Kraft, if he could recommend a Louisiana attorney who could pursue the third-party claims in Louisiana. Kraft recommended Conrad S. P. Williams. Williams met with Brian and agreed to represent Brian in his claims against the third-party defendants. Williams would be compensated out of Izen's contingent fee recovery, if any. Williams and Izen agreed they would split Izen's thirty-five percent of any recovery sixty percent for Williams and forty percent for Izen.

It is undisputed that Izen drafted a proposed pro-se petition against third-party entities Brian believed were responsible for his injuries to be filed in Louisiana within Louisiana's one-year statute of limitations for personal injury claims. Izen explained that the filing of the pro se petition would give him time to find a Louisiana attorney to handle the Laines' lawsuit. The pro se petition was timely filed. According to Brian and Williams, the drafting and filing of the pro se petition was the extent of Izen's involvement in the third-party defendant litigation. Izen disputed that during his trial testimony. According to Izen, he helped with some discovery responses and stood by ready to take over the litigation if that became necessary. Ultimately, the lawsuit was voluntarily dismissed by Brian with no recovery, so there was no contingent fee owed on his claims against the third-party defendants.

Once the third-party litigation was dismissed, Brian terminated Izen's services saying he was no longer needed. Brian also stopped making the monthly annuity payments to Izen because there was no longer third-party litigation to be financed. This was done in a letter sent in August 2007. Brian did not, however, ask for repayment of the amounts he had already paid Izen. Izen sent a letter back to Brian on March 27, 2008 telling Brian that his representation ended when Brian received the annuity contract in October 2002.

Izen sued the Laines in county court on March 26, 2010. For reasons not disclosed in the record, the case was later transferred to district court. Izen alleged several causes of action, including a request for a declaratory judgment that he owned a thirty-five percent interest in the Hartford annuity and in each annuity payment. Izen also alleged causes of action for breach of contract, conversion, unjust enrichment, quantum meruit, and breach of fiduciary duty, and he sought a turnover order and injunctive relief. The Laines answered the lawsuit, initially with a general denial but later adding numerous affirmative defenses to Izen's claims, including an assertion that Izen's attorney employment agreement was unconscionable. The Laines eventually filed a counterclaim against Izen on November 4, 2011, alleging that Izen took advantage of the Laines by violating his fiduciary duty and collecting money he was not due, and they sought to recover all money, totaling $70,126.13, they had paid to Izen.

The case went to trial before a jury. At the close of Izen's case, the trial court granted the Laines' motion for directed verdict on all of Izen's claims based on a determination that the attorney fee agreement was unconscionable. The trial court also granted directed a verdict in Izen's favor, providing that Izen's "motion for directed verdict on all of [the Laines'] claims is also granted, except as set out below. At the latest, all of [the Laines'] causes of action accrued on August 9, 2007, when Izen was terminated as counsel. [The Laines'] claims were not filed within the four year period of limitations." The trial court's directed verdict order also stated that the Laines might "be entitled to disgorgement of the fees Izen has received because the Attorney Employment Agreement is against public policy under these facts." The trial court ordered briefing on that issue.

A month later, the trial court signed an order based principally on Burrow v. Arce , 997 S.W.2d 229 (Tex. 1999), directing Izen to "disgorge all fees collected from [the Laines] in the matters at issue in this case." The trial court then instructed the Laines to file a proposed final judgment setting out the specific amount of fees received by Izen as the judgment amount. The...