Motion for Rehearing Overruled; Affirmed in Part, Reversed and Remanded in Part; Memorandum Opinion of February 24, 2005 Withdrawn and Memorandum Opinion filed August 18, 2005.

 

In The

 

Fourteenth Court of Appeals

____________

 

NO. 14-03-00538-CV

____________

 

THOMAS A. DARDAS, INDIVIDUALLY AND D/B/A DARDAS & ASSOCIATES AND BILL OGLETREE, P.C. A/K/A OGLETREE LAW FIRM, Appellants

 

V.

 

FLEMING, HOVENKAMP & GRAYSON, P.C., FLEMING LAW FIRM, PLLC, AND FLEMING & ASSOCIATES, L.L.P., Appellees

 

 

On Appeal from the 61st District Court

Harris County, Texas

Trial Court Cause No. 02-19156

 

 

M E M O R A N D U M   O P I N I O N

We overrule appellees= motion for rehearing.  We withdraw the opinion issued in this case on February 24, 2005, and we issue the following opinion in its place.

This appeal arises out of a dispute between two groups of attorneys as to entitlement to attorney=s fees in class-action litigation.  Appellants/plaintiffs Thomas A. Dardas, individually and d/b/a Dardas & Associates and Bill Ogletree, P.C. a/k/a Ogletree Law Firm appeal the trial court=s summary judgment dismissing their claims against appellees/defendants Fleming, Hovenkamp & Grayson, P.C., Fleming Law Firm, PLLC, and Fleming & Associates, L.L.P.  We affirm in part and reverse and remand in part. 

                        I.  Factual and Procedural Background

Thomas A. Dardas, individually and d/b/a Dardas & Associates (hereinafter ADardas@) is a Texas attorney who filed numerous lawsuits against insurance companies on behalf of policyholders who sought to recover diminished-value damages under their auto insurance policies.  The term Adiminished-value damages@ refers to the loss in the market value of a vehicle allegedly caused by market perceptions that a vehicle involved in an accident, though fully repaired, is worth less than the same vehicle that has never been damaged.  See American Mfrs. Mut. Ins. Co. v. Schaefer, 124 S.W.3d 154, 156 (Tex. 2003).  Although it is now clear that insureds cannot recover diminished-value damages under a Texas Standard Personal Auto Policy, this was not clear until October 17, 2003, when the Texas Supreme Court issued its opinion in the Schaefer case.  See id.  

In 1997, several years before the Schaefer case, Dardas decided that he wanted to assemble a legal team to pursue recovery of diminished-value damages on a class-action basis, and so he enlisted the assistance of Michael Sprain, who was then an attorney at Bill Ogletree, P.C., a/k/a Ogletree Law Firm (hereinafter AOgletree@).  In late 1997, Sprain contacted Debra Hayes, who was then an attorney at the Fleming Firm.^[1]  Shortly thereafter, Dardas and Sprain met with Hayes.  Before disclosing to Hayes the idea of pursuing diminished-value damages on a class-action basis, Dardas required Hayes, on behalf of the Fleming Firm, to sign a contract dated December 17, 1997 (the ADecember 1997 contract@), between Dardas and the Fleming Firm.  This handwritten contract reads, in its entirety, as follows:

This agreement is entered into by and between Fleming, Hovenkamp & Grayson and Thomas A. Dardas.  The purpose of this agreement is to define the relationship between Fleming, Hovenkamp & Grayson and Dardas.

Dardas hereby agrees to disclose to Fleming, Hovenkamp & Grayson a cause of action that Dardas believes is suitable for a class action.

Fleming [sic] Hovenkamp & Grayson hereby agrees to evaluate the cause of action for suitability as a class action.

This agreement is executed with the understanding that if the Law Firm of Fleming, Hovenkamp & Grayson decide [sic] not to pursue the cause of action on a class action basis with Dardas, Fleming, Hovenkamp & Grayson agree [sic] not to pursue dimunition [sic] in value cases for a period of two (2) years from the date of termination of this agreement.

After the Fleming Firm signed the December 1997 contract, Dardas and Sprain discussed with Hayes the idea of filing diminished-value claims on a class-action basis.  After evaluating this idea, the Fleming Firm agreed to pursue diminished-value claims on a class-action basis with Dardas and Ogletree.  The Fleming Firm, Dardas, and Ogletree then negotiated a contract among the three of them as to how they would proceed with these claims, and on January 12, 1998, all three parties signed a contract (the AJanuary 1998 contract@).  On February 3, 1998, the same three parties signed a slightly modified contract (the AFebruary 1998 contract@) which states that it supersedes Aany previous agreements.@  It is undisputed that the February 1998 contract superseded the January 1998 contract.  The main dispute in this case is the scope of the February 1998 contract. 

Dardas and Ogletree contend that the February 1998 contract applies to all diminished-value class-action cases in which the Fleming Firm is involved.  The Fleming Firm asserts that this contract applies only to diminished-value class-action cases in which Dardas or Ogletree referred clients or worked on the case.  The provisions of this contract are discussed in more detail below; however, the contract states, among other things, the following:

The Fleming Firm and Ogletree Awill jointly handle this matter as co-lead counsel.@

!                   AOgletree will be responsible for obtaining clients for each case.@

!                   Dardas Awill continue to consult as the case develops.@

!                   Attorney=s fees on the class action will be divided as follows: 70% to the Fleming Firm and 30% to Dardas and Ogletree Ato be divided between them as they agree.@

Dardas and Ogletree agreed between themselves that, as to their 30% share of any such attorney=s fees, 18% would go to Dardas and 12% would go to Ogletree.  Furthermore, Bill Ogletree and Michael Sprain agreed that each of them would receive half of Ogletree=s 12% share.  On March 5, 1999, Fleming, Dardas, and Michael Sprain entered into a contract (the AMarch 1999 contract@) regarding diminished-value litigation involving clients referred by Sprain. 

Dardas and Ogletree referred various clients as proposed class representatives for diminished-value class actions.  Although the attorneys who signed the February 1998 contract pursued class-action claims as to some of these clients, none of these cases resulted in any attorney=s fees. 

In 1999, the Fleming Firm began pursuing diminished-value class-action claims in states other than Texas without including Dardas or Ogletree.  The Fleming Firm reported to Dardas and Ogletree that it believed the February 1998 contract did not cover diminished-value class actions in which the clients were not referred by Dardas or Ogletree and in which Dardas and Ogletree had not performed any legal services.  The Fleming Firm received fees from the settlement of a diminished-value class-action case in Georgia in which Dardas and Ogletree did not refer the client or provide any legal services.  Dardas and Ogletree have not received any attorney=s fees relating to this case.

Dardas and Ogletree asserted that they were entitled to work on and receive fees from all diminished-value class actions in which the Fleming Firm was involved.  Dardas and Ogletree filed the underlying suit against the Fleming Firm, asserting the following claims:

                                                                Contract Claims

The Fleming Firm has breached its oral agreements pertaining to class-action claims concerning diminished-value damages as well as the December 1997 contract, the  January 1998 contract, the February 1998 contract, and March 1999 contract, by taking the following actions:

!       by pursuing diminished-value litigation without involving Dardas and Ogletree,

!         by failing to pay Dardas and Ogletree their fee from a settlement of a diminished-value case in Georgia; and

!         by repudiating the Fleming Firm=s obligations under these contracts.

                                                                    Tort Claims

The Fleming Firm is liable to Dardas and Ogletree based on tort claims of (a) fraud and fraud in the inducement, and (b) breach of an alleged fiduciary duty and an alleged duty of good faith and fair dealing.

                                                    Declaratory Judgment Claims

Under the Texas Declaratory Judgment Act, Dardas and Ogletree seek the following declaratory relief:

(1) that Dardas and Ogletree are entitled to the attorney=s fees specified in the February 1998 contract as to all diminished-value cases in which the Fleming Firm is involved,

(2) that all diminished-value cases that the Fleming Firm pursues are covered by and subject to the terms of the January 1998 contract, February 1998 contract, and March 1999 contract, and

(3) the four written contracts are unambiguous and provided the Fleming Firm with the following options:

(a) the Fleming Firm could have terminated the December 1997 contract and waited two years before pursuing diminished-value cases without Dardas and Ogletree or

(b) the Fleming Firm could have pursued diminished-value cases with Dardas and Ogletree under the January 1998 contract, February 1998 contract, and the March 1999 contract. 

                              Quantum Meruit and Promissory Estoppel

The Fleming Firm is liable to Dardas and Ogletree based on claims of quantum meruit and promissory estoppel. 

Dardas and Ogletree moved for partial summary judgment, seeking judgment as a matter of law only as to their claims for declaratory relief.  The Fleming Firm moved for both a traditional and no-evidence summary judgment, asserting the following grounds, among others:

(1)       The January 1998 contract does not apply to any case because it was superseded by the February 1998 contract.

(2)       Dardas and Ogletree are not entitled to declaratory relief as to the February 1998 contract because their construction of that contract is unreasonable and contrary to its plain meaning.

(3)       The March 1999 contract does not support the declaratory relief sought by Dardas and Ogletree, and furthermore Ogletree has no rights under this contract because he is not a party to it.

(4)       The third requested declaration should be denied, given that the December 1997 contract has been consummated and fully performed by the parties.  Dardas disclosed his idea for class-action litigation based on diminished-value claims.  The Fleming Firm then evaluated this idea and chose to pursue class-action litigation with Dardas based on diminished-value claims.

(5)       To the extent the court determines that the contract between the parties includes a covenant not to compete that precludes the Fleming Firm from pursuing diminished-value cases with any other lawyer, then (a) the covenant-not-to-compete portion of the contract is still unenforceable  because it does not satisfy the requirements of Texas law; and (b) the covenant not to compete is contrary to Texas ethical rules and void as against public policy, including the public policy behind Texas Disciplinary Rule of Professional Conduct 5.06.

(6)       The declaratory relief that Dardas and Ogletree seek would violate  Texas Disciplinary Rule of Professional Conduct 1.04(f) and therefore, if the contract between the parties had the meaning ascribed to it by Dardas and Ogletree, it would be void and unenforceable as against public policy. 

(7)       Under the unambiguous language of the February 1998 contract, Dardas and Ogletree are entitled to attorney=s fees only as to diminished -value cases in which they referred the client or performed legal services.

(8)       Under the unambiguous language of the December 1997 contract, that contract has been consummated and fully performed by the parties.  Dardas disclosed his idea for class-action litigation based on diminished-value claims.  The Fleming Firm then evaluated this idea and chose to pursue class-action litigation with Dardas based on diminished-value claims.

(9)       The beach-of-contract claim as to the December 1997 contract fails as a matter of law because: (a) Ogletree is not a party to it; (b) the Fleming Firm did not breach it because the Fleming Firm evaluated and pursued class-action litigation with Dardas based on diminished-value claims; and (c) as construed by Dardas and Ogletree, the December 1997 contract is an unenforceable non-compete agreement.

(10)     The breach-of-contract claim as to the February 1998 contract fails as a matter of law because the Fleming Firm has not recovered any attorney=s fees in any diminished-value case in which Dardas or Ogletree referred the client or performed legal services.

(11)     Any claim for breach of an oral contract fails as a matter of law.

(12)     Any claim for breach of the March 1999 contract fails as a matter of law because Dardas and Sprain did not refer any cases to the Fleming Firm after that contract was signed and therefore there were no cases subject to that contract.  Furthermore, Ogletree has no right to recover on that contract because he is not a party to it.

(13)     As a matter of law, the Fleming Firm did not owe a fiduciary duty or duty of good faith and fair dealing to Dardas or Ogletree.

(14)     Dardas and Ogletree may not recover for unjust enrichment because there is an express contract covering the subject matter.

(15)     Dardas and Ogletree may not recover for promissory estoppel because there is no evidence of any promise by the Fleming Firm that induced action or forbearance by Dardas and Ogletree and there is no evidence that any such promise must be enforced to avoid any injustice.

(16)     There is no evidence as to each of the essential elements of fraud and fraud in the inducement.

The trial court granted the Fleming Firm=s motion for summary judgment without specifying the grounds and denied the motion for partial summary judgment filed by Dardas and Ogletree.^[2]  On appeal, Dardas and Ogletree assert that the trial court erred in granting the Fleming Firm=s motion for summary judgment and in denying their motion for partial summary judgment. 

                                                   II.  Standards of Review

In reviewing a traditional motion for summary judgment, we take as true all evidence favorable to the non‑movant, and we make all reasonable inferences in the non‑movant=s favor.  Dolcefino v. Randolph, 19 S.W.3d 906, 916 (Tex. App.CHouston [14th Dist.] 2000, pet. denied).  If the movant=s motion and summary‑judgment evidence facially establish its right to judgment as a matter of law, the burden shifts to the non‑movant to raise a genuine, material fact issue sufficient to defeat summary judgment.  Id.

In reviewing a no‑evidence motion for summary judgment, we ascertain whether the non‑movant produced any evidence of probative force to raise a genuine issue of fact as to the essential elements attacked in the no‑evidence motion.  Id.  We take as true all evidence favorable to the non‑movant, and we make all reasonable inferences therefrom in the non‑movant=s favor.  Id.  A no‑evidence motion for summary judgment must be granted if the party opposing the motion does not respond with competent summary‑judgment evidence that raises a genuine issue of material fact.  Id. at 917.  Because the trial court did not specify the grounds for its ruling, we will affirm if any of the grounds advanced in the motion has merit.  See Carr v. Brasher, 776 S.W.2d 567, 569 (Tex. 1989).

                                                                III.  Analysis

A.        Did the trial court err in ruling that the February 1998 contract unambiguously applies only to cases in which the clients were referred by Dardas or Ogletree or in which Dardas and Ogletree performed work?

The main issue in this appeal is the scope of the February 1998 contract.  Dardas and Ogletree assert that the trial court erred by ruling that this contract unambiguously applies only to diminished-value class-action cases in which Dardas or Ogletree referred clients to the Fleming Firm or worked on the case, as argued by the Fleming Firm.  Dardas and Ogletree argue that this contract unambiguously applies to all diminished-value class-action cases in which the Fleming Firm represents a plaintiff, regardless of whether Dardas or Ogletree referred the client or provided legal services.  In the alternative, Dardas and Ogletree argue that this contract is ambiguous and that therefore summary judgment was improper.

If a written instrument is so worded that it can be given a certain or definite legal meaning or interpretation, it is not ambiguous and it can be construed as a matter of law.  Lenape Res. Corp. v. Tenn. Gas Pipeline Co., 925 S.W.2d 565, 574 (Tex. 1996).  If its meaning is uncertain and doubtful or it is reasonably susceptible to more than one meaning, taking into consideration circumstances present when the particular writing was executed, then it is ambiguous and its meaning must be resolved by a finder of fact.  See id.  In construing a written contract, our primary concern is to ascertain the true intentions of the parties as expressed in the written instrument.  See id.  This court need not embrace strained rules of construction that would avoid ambiguity at all costs.  See id.  If the contract is ambiguous, then the trial court erred in granting summary judgment because the interpretation of an ambiguous contract is a question for the finder of fact.  See Coker v. Coker, 650 S.W.2d 391, 394B95 (Tex. 1983). 

The body of the February 1998 contract reads, in its entirety, as follows:

Re:     Diminished Value Litigation

Dear Mike and Tom:

This agreement confirms our arrangement with regard to the handling of the diminished value matter and supercedes [sic] any previous agreements.

(1)     Fleming, Hovenkamp & Grayson, P.C. (AFH&G@) and The [sic] Ogletree Law Firm (AOgletree@) will jointly handle this matter as co-lead counsel.

(2)     FH&G will handle the discovery, depositions and communications with all Plaintiffs and Class Representatives.  FH&G will be responsible for establishing a database and communicating with Clients throughout this litigation.  Ogletree will assist in the preparation of the Class Representatives and in other legal support matters.

(3)     Ogletree will be responsible for obtaining clients for each case.

(4)     Dardas & Associates (ADardas@) was responsible for bringing the idea to the firms and will continue to consult as the case develops.

(5)     The liability/damages and class action issues will be handled by FH&G.

(6)     FH&G and Ogletree will agree on a division of trial responsibility.

(7)     FH&G will finance the expenses associated with the case such as hiring of the experts, depositions, testing, and the like.  All case-related expenses will be taken out of the clients= share at the conclusion of the case or at the time of any settlement pursuant to the terms of the attorney-client contract or order of the Court.

(8)     Attorneys= fee [sic] earned on the class action will be divided on the basis of 70% to FH&G; 30% to Ogletree and Dardas to be divided between them as they agree.  In the event of appeal or retrial, the same percentage split between the parties will apply. It is agreed that the division of fees is fair in relation to the division of work herein.

(9)     The FH&G share as stated above will include all attorneys with or associated with Fleming, Hovenkamp & Grayson, P.C. which have heretofore been referred to as FH&G.

(10)    The Ogletree share as stated above will include all attorneys with or associated with The [sic] Ogletree Law Firm which have heretofore been referred to as Ogletree.

(11)    The Dardas share as stated above will include all attorneys with or associated with Dardas & Associates which have heretofore been referred to as Dardas.

(12)    If it is necessary to hire local counsel or appellate counsel, the fee paid will be paid by all parties proportionately.

As to the issue of scope, the February 1998 contract refers to ADiminished Value Litigation,@ Athe diminished value matter,@ Athis matter,@ Aclients for each case,@ Athe case,@ Aexpenses associated with the case,@ Acase-related expenses,@ Athe conclusion of the case,@ and Aattorneys= fee earned on the class action.@  No client names or potential defendants are mentioned.  The reference to a single case or class action would tend to support an interpretation that the parties intended the February 1998 contract to apply to one class action.  However, even the Fleming Firm agrees that this contract applies to more than one class-action case.  The terms Amatter@ and Aclients for each case@ indicate that the contract may apply to more than one class-action case.  If, as both sides assert, this contract applies to more than one class-action case, the next question is whether it applies to cases in which Dardas and Ogletree did not refer the clients.  In support of its interpretation that the contract does not apply to such cases, the Fleming Firm relies on item (3), which states that Ogletree will be responsible for obtaining clients for each case.  Although this provision indicates that Ogletree is supposed to obtain clients for the prospective diminished-value class actions, it does not state that the February 1998 contract applies only to class actions in which Ogletree obtains the clients.  Item (8) of the contract, which deals with entitlement to attorney=s fees, does not state that Dardas and Ogletree are only entitled to fees in cases in which they obtain the clients or in which they actually provide services; rather, item (8) speaks vaguely of attorney=s fees Aearned on the class action.@  Taking into consideration the circumstances present when the parties executed the February 1998 contract, we conclude the meaning of this contract is uncertain and doubtful.  See Lenape Res. Corp., 925 S.W.2d at 574 (holding contract provision to be ambiguous); Coker, 650 S.W.2d at 393B94 (holding that contract language was unclear and ambiguous); Watkins v. The Krist Law Firm, No. 14-02-00291-CV, 2003 WL 21786173, at *3B5 (Tex. App.CHouston [14th Dist.] Aug. 5, 2003, pet. dism=d) (mem op.) (holding that contract between law firms regarding contingency fees was ambiguous because its meaning was uncertain and doubtful); A.W. Wright & Assocs., P.C. v. Glover, Anderson, Chandler & Uzick, L.L.P., 993 S.W.2d 466, 470 (Tex. App.CHouston [14th Dist.] 1999, pet. denied) (holding that language in referral contracts between attorneys was uncertain and doubtful and therefore ambiguous).  As to the issue at hand, this contract is ambiguous, and its meaning must be resolved by a finder of fact.  See Lenape Res. Corp., 925 S.W.2d at 574.  Therefore, the trial court erred in granting summary judgment as to the interpretation of the February 1998 contract.  See Coker, 650 S.W.2d at 394B95.

B.      Did the trial court err in determining that under Texas Disciplinary Rule of Professional Conduct 1.04(f), the February 1998 contract would be void as against public policy under the interpretation of that contract asserted by Dardas and Ogletree?

Although we conclude that the trial court erred in determining that the February 1998 contract was unambiguous, this error would not be reversible, if, as argued by the Fleming Firm, the interpretation of that contract asserted by Dardas and Ogletree would violate Texas Disciplinary Rule of Professional Conduct 1.04(f) and thereby render the contract unenforceable as against public policy.  See Tex. R. Disciplinary P. 1.04(f).  The Texas Disciplinary Rules of Professional Conduct do not define standards for civil liability and do not give rise to private claims, but these rules may be used to determine whether a contract violates public policy.  See Tex. R. Disciplinary P. Preamble, & 15; Johnson v. Brewer & Pritchard, P.C., 73 S.W.3d 193, 205 (Tex. 2002) (indicating that fee sharing agreements that violate Rule 1.04(f) are unenforceable as against public policy); Bond v. Crill, 906 S.W.2d 103, 106 (Tex. App.CDallas  1995, no writ) (stating that, while disciplinary rules do not create civil liability, they may be used to determine whether a contract violates public policy).           Texas Disciplinary Rule of Professional Conduct 1.04(f) states:

A division or agreement for division of a fee between lawyers who are not in the same firm shall not be made unless:

(1)     the division is:

(i)      in proportion to the professional services performed by each lawyer;

(ii)      made with a forwarding lawyer;  or

(iii)     made, by written agreement with the client, with a lawyer who assumes joint responsibility for the representation;

(2)     the client is advised of, and does not object to, the participation of all the lawyers involved;  and

(3)     the aggregate fee does not violate paragraph (a).

Tex. R. Disciplinary P. 1.04(f).^[3]

Though the Fleming Firm does not assert that the February 1998 contract would violate Rule 1.04(f)(3) under the interpretation urged by Dardas and Ogletree, it does assert that their interpretation would mean that the contract violates Rule 1.04(f)(1) & (2).  As the movant for summary judgment, the Fleming Firm had the burden of proving as a matter of law that the interpretation urged by Dardas and Ogletree would violate Rule 1.04(f)(1) & (2).  See Bond, 906 S.W.2d at 106.  Rule 1.04(f)(1)(i) states that one way to satisfy the rule is for the division of fees to be Ain proportion to the professional services performed by each lawyer.@  In the fee-splitting provision of the February 1998 contract, the parties expressly agreed that the division of fees under that contract is Afair in relation to the division of work herein.@  The February 1998 contract contemplated that, as to any case within its scope, Ogletree would act as