A TORTURED TALE OF CONTINGENT FEE AGREEMENTS

Celmer v. McGarry
Dallas Court of Appeals, No. 05-10-01133-CV (August 8, 2013)
Justices O’Neill, Lang-Miers (Opinion), and FitzGerald (Dissent)
Ken Carroll 
Charles McGarry represented Elizabeth Celmer in trial and two appeals in her divorce proceedings. When the divorce hostilities ended, a disagreement arose between Celmer and McGarry regarding their contingent fee arrangement. McGarry contended their original arrangement, under which McGarry would be paid only based on any award to Celmer from one specific asset at issue in the divorce, had been replaced by a new agreement, tying his contingent fee to all assets recovered by Celmer in the divorce. Celmer disagreed, and that disagreement led to judgment for McGarry based on a jury’s finding there was a new or second contingent fee contract, as McGarry claimed, and that Celmer had breached it. The Dallas Court of Appeals reversed, however, finding the evidence legally insufficient to support the jury’s verdict. Justice FitzGerald dissented, and would have affirmed based on the jury’s verdict.

Disappointed by the results of her divorce trial, Celmer engaged McGarry to pursue an appeal. They entered into a written fee agreement that provided for McGarry to receive a percentage of Celmer’s recovery, if any, for her asserted interest in certain shares of stock, if he were successful on the appeal; the agreement further provided that McGarry would not participate in future trial court proceedings. McGarry’s appeal secured a new trial for Celmer. At the second trial, in which McGarry did participate notwithstanding the original agreement to the contrary, Celmer was awarded nothing for her purported interest in the stock, but received a substantial award of other assets. Celmer’s ex-spouse appealed that award, and McGarry continued to represent Celmer in that appeal, which resulted in an affirmance of the award, except for prejudgment interest.

McGarry contended that after the case was remanded for a new trial following the first appeal, and in connection with his agreement to participate in the second trial, he and Celmer had entered into a new fee arrangement pursuant to which he would receive 50% of Celmer’s total recovery (not restricted to the stock interest), plus $200 per hour and expenses. McGarry produced no new signed, written agreement, but relied instead on a series of emails with Celmer that he contended constituted a contract, and, in the alternative, on oral testimony and emails from both parties regarding the existence of a written, signed second fee agreement which neither side could produce at trial. This evidence was sufficient to convince the jury, but not the majority of the appeals panel.

The appeals court dealt with a variety of issues in its opinion, but the formation, existence, and enforceability of the alleged second fee agreement took center stage. First, the court noted that TEX. GOV’T CODE § 82.065(a) mandates that a contingent fee contract for legal services “must be in writing and signed by the attorney and client.” Nevertheless, the court observed, under TEX. BUS. & COM. CODE §§ 322.001-.021, an electronic record can satisfy that requirement “if the parties have agreed to conduct [the] transaction by electronic means.” The jury apparently found those requirements to have been met, but the appeals court found the evidence legally insufficient to support that determination. Because the emails seemed to anticipate a formal, written agreement, there was not sufficient evidence that the parties had agreed to conduct their transaction by electronic means. Similarly, the court found no sufficient evidence to support a finding that a second written and signed agreement existed and was perhaps lost. Accordingly, because the evidence was legally insufficient to prove a second contract, the court reversed judgment for McGarry on his breach-of-contract claim. It did, however, render judgment for him in a reduced amount based on the jury’s alternative finding in quantum meruit.

Justice FitzGerald dissented and would have affirmed the trial court’s judgment. He found the evidence legally and factually sufficient to support the verdict and lamented the majority’s disposition, saying, “This case is about money, pure and simple, and Celmer’s refusal to pay McGarry, the one lawyer who won her case on appeal, then persisted in representing Celmer through a retrial and the subsequent appeals.

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