Few issues incite as much debate as an attorney's interest in collecting unpaid fees. Texas case law reveals that attorneys have had successful results on appeal, occasionally. However, after Burrow v. Arce, 997 S.W.2d 229 (Tex. 1999), it seems reversal and remand has become more common to determine breach of fiduciary duty issues for fee forfeiture. With the recent economic downturn, some attorneys may feel a compelling urge to sue for fees. Some recurring fee suit questions are posed regularly - here are our top ten "FAQ's."

1. Couldn't I just file my fee suit, and take a default judgment if the client doesn't answer? Then I could abstract the judgment and wait. After all, I didn't do anything wrong.

Maybe you could, but even without concerns about a simple negligence counterclaim, don't forget the risk of a fee forfeiture or disgorgement claim for a clear and serious breach of fiduciary duty. It is a long-shot to assume the client-defendant won't hire counsel, will fail to file even a pro se answer, the court won't deny or set aside your default judgment in response to a sympathetic plea by the client, and the lien will attach to non-exempt property in the county of filing. More likely, after Burrow v. Arce, supra, a client would claim a breach of fiduciary duty in hopes of a fee forfeiture and/or disgorgement based on your alleged disciplinary violation - never mind negligence or damage issues. Cf., Deutsch v. Hoover, Bax & Slovacek, L.L.P., 2002 WL 31662403, no pub. (Tex. App. - Houston [14th] Nov. 27, 2002, no pet. hist.) ($67,000 fee claim against bankrupt real estate client; eight years after filing a fee suit, the Court of Appeals affirmed the $61,055 jury verdict, but reversed and remanded to determine the breach of fiduciary duty claim for fee forfeiture based on conflict of interest).

2. My deductible is just $10,000, but this business litigation client owes over $100,000. It's worth incurring the deductible, if I can net even half of the unpaid amount.

First, consider several points objectively: 1) how much billable time would discovery require during the malpractice suit; 2) how would a jury react to the amount already paid by the client compared to the amount unpaid; and 3) could you withstand the disgorgement of fees already received, if the jury should find evidence of misconduct sufficient to support the court's ruling on clear and serious breach of fiduciary duty? In Judwin Properties, Inc. v. Griggs and Harrison, P.C., 911 S.W.2d 498 (Tex. App. - Houston [1st] 1995), 981 S.W.2d 868 (Tex. App. - Houston [1st] 1998), pet. denied per curiam, 11 S.W.3d 188 (Tex. 2000), the client paid $928,690.62 out of pocket for litigation defense and owed $56,000; the firm sued, then settled on the fee amount with Judwin's reticent carrier, leaving only the counterclaims by Judwin. One was for $5,000,000 damages for breach of fiduciary duty allegedly occurring from appending the fee bills to the petition. Only Judwin's negligence and gross negligence issues were reversed and remanded; the second appeal affirmed summary judgment for the attorneys without mentioning Burrow v. Arce or any fee forfeiture issue.

3. Isn't it better to get the upper hand on the bat by filing a fee suit? Even if the client answers, maybe there won't be any counterclaim -- besides, I have complete records to prove all my fees, and a good expert witness, too.

You could be right; sometimes a client fails to file a malpractice counterclaim in defense to a fee suit. However, that is probably wishful thinking because Texas case law has interpreted a legal malpractice counterclaim as compulsory under TEX. R. CIV. P. Rule 97(a), and most courts have held that failure to file one would be res judicata. See, e.g., CLS Associates, Ltd. v. A___ B___, 762 S.W.2d 221 (Tex. App. - Dallas 1988, no writ hist.) (res judicata barred a malpractice suit brought after adjudication of fee suit, following which a collection agency obtained the unpaid fees).

In short, reasons why a client would NOT file a counterclaim to a fee suit are few and frail. See, e.g., Upchurch v. Albear, 5 S.W.3d 274 (Tex. App. - Amarillo 1999, pet. denied 2000). There, post-settlement disputes with counsel arose in mass-client toxic tort cases, resulting in take-nothings for both sides. The clients made DTPA demands in 1994 following respective settlements, but the attorneys won the race to the courthouse, seeking a declaratory judgment concerning fees and other issues. Another suit brought by some clients in a different court was consolidated with the original, followed by counterclaims of breach of fiduciary duty, DTPA, and so on. Six years later, the Court of Appeals remanded the breach of fiduciary duty claims for determination in light of Arce, but affirmed the take-nothing on the attorneys' fees.

4. I practice family law: what about filing an intervention in a divorce case to collect my fees as part of the final decree?

Even an award of fees in the final decree provides no certainty of collecting without an appeal. Again, most published opinions in Texas hold that a client's legal malpractice counterclaim is compulsory under TEX. R. CIV. P. 97(a), and res judicata will bar the claim if not asserted in response to the fee claim. Goggin v. Grimes, 969 S.W.2d 135 (Tex. App. - Houston [14th] 1998, no pet. hist.) (the attorney withdrew, intervened, and was awarded $6,738.83 in the final decree, and summary judgment was affirmed for attorney on a malpractice claim brought later). A fee suit filed after the decree may generate a malpractice claim in another court, and a consolidation hassle. See, Hardy v. McCorkle, 765 S.W.2d 910 (Tex. App. - Houston [1st] 1989 no writ hist.).

5. With the amount the client owes, we're talking about the price of a new BMW here! I have to take my chances on a malpractice counterclaim, even one for breach of fiduciary duty. So what, there should still be plenty of time to notify my professional liability carrier.

You might be able to give substantially timely notice of the claim to the carrier and still invoke coverage, and you might not. Even if treated as timely reported, your policy might not apply to claim connected with fee disputes, either under an express exclusion for that type of claim, and/or the fee amount at issue could be excluded from the policy definition of a "payable loss."

6. If I file a fee suit, I could always agree to settle before trial. At least I might collect part of the amount owed, even if we have to mediate.

Chances are good that the client will still decline to pay, and what is the likelihood they will call you and actually pay such a settlement before they call a plaintiff's lawyer to investigate the prospect of a malpractice claim? More often than not, mediated outcomes of fee disputes result in a "walkaway" and rarely turn into appellate opinions - which creates an illusory prospect of payment. Even if the client agreed to pay something, would it really happen, or would post-mediation enforcement of the settlement be necessary?

7. The client signed a contingent fee agreement on this case, and now complains that her share won't be enough after paying the medical providers: can I deposit the settlement check in my trust account and go ahead and pay my fees?

Use extreme caution or wait. Distributing any funds is risky when there is an allocation dispute about part of them. A contingent fee agreement could be voidable if only the client signed it: both client and attorney must sign. TEX. GOVT. CODE, Sec. 82.065 (Vernon's, 1989). Recovery in quantum meruit might be available where the attorney failed to sign the agreement, if the client accepted the benefits of the attorney's services, as in Enochs v. Brown, 872 S.W.2d 312 (Tex. App. - Austin, 1994, no pet. hist.). Also, the client's grousing might become a complaint or grievance about the fees being unreasonable. See TDRPC Rules 1.04 and 1.14: undisputed trust funds can be disbursed but all disputed amounts need to remain in suspense. Query, if the total amount is insufficient to go around, does that in effect mean the whole sum is disputed?

8. How about seeking a declaratory judgment interpreting the written fee agreement: won't that avoid a counterclaim for malpractice or misconduct?

Not necessarily. See, Spera v. Fleming, Hovenkamp & Grayson, P.C., 25 S.W.3d 863 (Tex. App. - Houston [14th] 2000, no pet. hist.), sub nom, 4 S.W.3d 805 (Tex. App. - Houston [14th] 1999). That mass tort settlement involved written contingent fee agreements between 49 law firms and more than 37,000 clients; the trial court (on its own motion) slashed the contingent fee agreement amount. The First Court of Appeals held that the fee agreements were viable under contract law. However, upon partial reversal and remand of the summary judgment, the clients were able to pursue fee forfeiture under breach of fiduciary duty grounds although failure to prove damages negated their other malpractice claims. See also, Upchurch v. Albear, supra.

9. I avoid having to sue for fees by asserting an attorney's lien on the file to encourage payment. If that doesn't work, I wait to file a fee suit until more than two years pass after the last bill or last date of service rendered (whichever is later), so a malpractice counterclaim would be barred - right?

It's a clever theory, but one best not count on it. The discovery rule could extend the limitations deadline on two-year claims (negligence, DTPA) and four-year claims of fraud and breach of fiduciary duty could still be available. In addition, withholding the file from the client can toll the statute on the malpractice issues, under fraud and concealment theories, as in Clark v. Pruett, 820 S.W.2d 903 (Tex. App. - Houston [1st] 1991, no writ hist.), where the attorney made release of the underlying case file conditional on payment of a 50% referral fee.

Fraud and concealment claims are the kind commonly excluded from coverage, as are court-imposed sanctions, such as those imposed for using fee suit discovery tactics to harass the former client. Cf., Gaspard v. Beadle, 36 S.W.3d 229 (Tex. App. - Houston [1st] 2001, pet. denied) (while in a personal relationship with the client, a Houston attorney waited nearly two years to bill the client on unwritten fee agreement for work done before the relationship ended; the $81,300 damages for fraud, intentional infliction of emotional distress, and exemplary damages were reversed on appeal, but the trial court's sanctions of $20,000 were affirmed for reasons stated at 36 S.W.3d at 239-4).

10. At trial, I got a good result for my client, and the jury award was much better than expected (we even got punitive damages). My fee agreement allows for a 5% markup or bonus for outstanding results, so I intend to add that to the final bill. If there is backlash, I'll just tender the disputed amount to the registry of the court, and let the judge decide. Is there a problem with that?

Best to be cautious about any "bumped" fees: the judge could order a remittitur or impose actual damages and divest your interest in the fees claimed. The better choice might be to opt for making less money. Consider Avila v. Havana Painting Company, Inc., 761 S.W.2d 398 (Tex. App. - Houston [14th] 1988, writ denied), where the client sued and the attorney counterclaimed for fees. The client had paid $650 up front but when the attorney collected $8755 for the client, he demanded 45% of the recovery. Soon after tendering the $8755 to the court, the undisputed amount (55%) was released to the client; in a bench trial six years after that, the client won actual and punitive damages and the attorney was divested of the 45% claimed. The client's award was affirmed due to intentional and knowing breach of fiduciary duty and failure to honor DR 9-102(B)(1973) (compare current TDRPC 1.14). Res ipsa loquitur.