Nolan v. Foreman
| Decision Date | 14 January 1982 |
| Docket Number | No. 81-1007,81-1007 |
| Citation | 665 F.2d 738 |
| Parties | Richard C. NOLAN II, a/k/a Rick Nolan, and Richard C. Nolan, a/k/a Dick Nolan, Plaintiffs-Appellants, v. Percy FOREMAN, Defendant-Appellee. Summary Calendar. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Allen J. Kincaid & Associates, Allen J. Kincaid, Brush, Colo., for plaintiffs-appellants.
Sam C. Bashara, San Antonio, Tex., for defendant-appellee.
Appeal from the United States District Court for the Western District of Texas.
Before CLARK, Chief Judge, RUBIN, and SAM D. JOHNSON, Circuit Judges.
Richard C. Nolan, Sr. (Dick), and Richard C. Nolan, Jr. (Rick), appeal a judgment entered on a jury verdict in favor of the younger Nolan's former counsel, defendant Percy Foreman. 1 Foreman, a criminal defense attorney, was retained by the Nolans to appeal Rick Nolan's conviction on a three-count marijuana trafficking indictment, and to defend him against a related two-count indictment, both in the United States District Court for the Western District of Texas. The Nolans sought return of a part of the $25,000 fee paid to Foreman by Dick Nolan on behalf of his son. They allege that Foreman's fee was excessive, and that Foreman breached his agreement to provide professional services by, among other things, refusing to return papers and records relating to Rick Nolan's defense until the Nolans agreed to release him from all malpractice liability. 2 Errors in the jury instructions require that this case be reversed and remanded for a new trial.
In dispute on appeal is the law governing two specific aspects of an attorney's relationship with his client. 3 The parties agree, and we concur, that the case is to be decided under the law of Texas. The relationship was entered into in Houston, and Foreman's representation of Rick Nolan was before the federal district court sitting in San Antonio. Budge v. Post, 643 F.2d 372 (5th Cir. 1981).
As Foreman required, the Nolans paid his fee in full, in advance of his inception of professional services on Rick's behalf. The Nolans argued at trial and on appeal that even if Foreman adequately completed all of his obligations under the employment contract, this advance fee may be reviewed for reasonableness and be reduced if found to be unreasonable. The district court, however, charged the jury that "you will be concerned with what constitutes a reasonable fee only if you first determine that the $25,000 was a retainer and not a flat fee." 4 Record, vol. III, at 1104. The next section of the jury instructions adopted Foreman's view that flat fee agreements entered into at the outset of the attorney's representation are to be evaluated as commercial contracts. The district court instructed the jury as follows:
I am instructing you as to the law again about this first question-when the attorney and client are mentally competent, stand at arm's length towards each other, and enter into a valid contract regarding legal representation, the reasonableness or unreasonableness of the attorney's fees fixed under their contract is immaterial.
In the absence of fraud, accident or mistake, the client is unable to relieve himself of the provisions of the contract. The contract alone must be looked to in determining the fee permissible to be charged under the circumstances.
Special interrogatories given to the jury followed this approach to the case. The jury was asked:
Special Interrogatory # 1
Do you find from a preponderance of the evidence that the $25,000.00 paid to Percy Foreman was a retainer for legal services, from which he was to subtract reasonable attorney's fees and expenses?
ANSWER "YES" OR "NO." WE ANSWER: ________
If you have answered Special Interrogatory # 1 "YES," proceed to answer Special Interrogatory # 2. If you have answered Special Interrogatory # 1 "NO," do not answer Special Interrogatory # 2; proceed to answer Special Interrogatory # 3.
Special Interrogatory # 2
What sum of money, if any, do you find from a preponderance of the evidence would be reasonable attorney's fees and expenses due Percy Foreman for his representation of Richard C. Nolan II?
ANSWER IN DOLLARS AND CENTS, IF ANY. WE ANSWER: ____________
The first interrogatory was answered, "No." The second was not answered. Record, vol. I, at 49.
The starting point for our review of this instruction is with the Rule Governing the State Bar of Texas DR2-106, Tex.Civ.Code Ann. tit. 14 App., art. 12 § 8 DR2-106 (Vernon's 1980), which states, "(A) A lawyer shall not enter into a fee agreement for, charge, or collect an illegal or clearly excessive fee." 5 DR2-106 does not condition the attorney's duty to charge only a reasonable fee on the form in which the fee is paid or quantified. To the contrary, DR2-106(B)(8) includes in a list of factors to be considered in determining whether a fee is reasonable "(w)hether a fee is fixed or contingent." The inclusion of the nature of the fee agreement in an evaluation of the reasonableness of the fee appears to refer not to the inapplicability of the legal and ethical constraints articulated by DR2-106 to flat fee arrangements, but to the propriety of considering, when setting a fee, uncertainties regarding ultimate entitlement to a fee. See Archer v. Griffith, 390 S.W.2d 735, 741 (Tex.1964).
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 connection with a divorce and property settlement reviewable for excessiveness under the standard of DR2-106.
A slightly different approach to the issue is evident in a line of Texas decisions holding that an attorney, upon entering into a professional relationship, assumes a commonlaw fiduciary obligation to his client. Cole v. Plummer, 559 S.W.2d 87 (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 such a relationship, it is presumed that negotiations between the attorney and client were not at arm's length, but that the client relied upon his attorney, as an advisor in a position of trust, to consider the client's interests and to refrain from turning these interests to the attorney's advantage. Indeed, Cole, relying on Archer, held not only that the fee was reviewable for reasonableness, but that the fiduciary nature of the relationship between the attorney and his client demanded that the burden of proving the reasonableness of the fee be placed on the attorney. Cole at 89, citing Archer at 739. Examination of these cases indicates that 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. The attorney fee at issue in Cole was set by contract in advance of rendition of services as a one-third interest in real property owned by the client. That fee differed from the fee in this case only in that it was quantified by reference to the ascertainable value of certain real estate. Archer applied the same approach to the evaluation of the reasonableness of a contingent fee.
That the attorney and the client did in fact stand at arm's-length, in a bargaining relationship between parties of roughly equivalent strength, may be considered by 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 the client's capacity to contract, and indicia of the presence or absence of fraud, misrepresentation, or over-reaching. Braselton at 188; Archer at 739. Those considerations, however, like the form in which the fee is to be paid, are not determinative of whether a fee agreement is susceptible to review.
On remand, then, the jury is to consider whether Foreman breached his fiduciary duty to Rick Nolan, and whether, in consideration of DR2-106's nonexclusive list of factors relevant to an evaluation of the reasonableness of a fee, as well as such other factors as may be appropriate and helpful to this evaluation, the $25,000 charged by Foreman to represent Rick Nolan was clearly excessive. 6
The Nolans offered into evidence letters written by Foreman to the Nolans, after he was formally discharged as Rick Nolan's counsel, in which Foreman refused to return Rick Nolan's legal papers and documents until the Nolans agreed to release him from threatened suit. The Nolans charge that Foreman's attempt to secure his exoneration in exchange for documents belonging to Rick Nolan constituted a violation of his duties under State Bar Rules DR6-102 and DR2-110(A)(2), which govern an attorney's ability to limit his malpractice liability, 7 and delineate the attorney's responsibilities to his client upon his withdrawal from representation. 8 Construing these violations as breaches of covenants implied in the employment contract, the Nolans charge that Foreman's breaches of the contract left him entitled only to the reasonable value of his services, rather than the contractual fee.
The district court, however, again adopted Foreman's view of the matter. The jury was instructed:
(W)e are concerned only with whether the Defendant breached his contract by unprofessional conduct before he was discharged by the Plaintiffs.
Under any view of the evidence, the latest date on which Defendant was discharged was April 8, 1976. There is testimony that the Defendant may have violated professional standards by failing to obey a request after April 8, 1976 to give his file to the Plaintiffs.
There is also testimony that the Defendant may have violated professional standards after April 8, 1976 by attempting to secure a release of liability from the Plaintiffs as a condition of giving his file to them. Any testimony regarding alleged professional misconduct after April 8, 1976 is irrelevant to the question of whether the Defendant...
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