NO, YOU DON’T HAVE TO MITIGATE DAMAGES BY FIRING A CLIENT AT THE FIRST MISSED PAYMENT

Wyde v. Francesconi
Dallas Court of Appeals, No. 05-17-01333-CV (December 19, 2018)
Justices Bridges (Opinion linked here), Brown, and Whitehill
A lawyer may withdraw from representing a client when the client does not timely pay the agreed fee. Must the lawyer withdraw at the first missed payment, or risk endangering the right to recover from a non-paying client because continuing that representation amounts to a failure to mitigate damages? “No,” says the Dallas Court of Appeals.

Dan Wyde represented Tatianna Francesconi in her divorce and child-custody lawsuit, with a written fee agreement. Francesconi made sporadic small payments, but never paid any invoice in full. Wyde said he expected the court would require Francesconi’s husband to pay Wyde’s fees, which by the time of judgment totaled over $77,000. The trial court entered a final divorce decree ordering the husband to pay one-half of the incurred fees, but never filled in the blank specifying an amount to be paid. Francesconi and her husband subsequently entered into a Rule 11 agreement under which the husband would pay $40,000 and Francesconi would be responsible for the balance of Wyde’s fees. However, immediately after signing that agreement, Francesconi fired Wyde, and the trial court refused to allow Wyde to participate further in the case or to recover his fees as a third-party beneficiary of the Rule 11 agreement.

Wyde sued Francesconi for breach of contract, seeking to recover $77,779 in unpaid attorney’s fees. At a bench trial, Francesconi successfully argued that Wyde could not recover the full amount of his fees because (1) he failed to mitigate his damages by not withdrawing from representing her after her first failure to pay his fees; and (2) he was estopped from recovering part of his damages because he falsely represented that her husband would be responsible for payment. The trial court found Francesconi had breached the agreement, but awarded Wyde only $7500 in damages. Wyde appealed.

The Dallas Court of Appeals held the trial court erred as a matter of law in holding Wyde had a duty to mitigate his damages by withdrawing from the representation following his client’s breach. The Court described the attorney-client relationship as “different from other relationships such as landlord-tenant that apply the mitigation of damages doctrine.” The Disciplinary Rules do not mandate withdrawal in these circumstances, and indeed encourage lawyers generally to “handle the matter to completion.” Moreover, the Court concluded, “requiring or encouraging attorneys to file a motion to withdraw as soon as a client fails to pay conflicts with the aspirational goals of the Texas Lawyer’s Creed.”

The Court also rejected the trial court’s finding of equitable estoppel, holding there was no evidence Wyde made any false representations to Francesconi. The Court therefore reversed the damages award and remanded to the trial court “for a new trial on damages based on Francesconi’s breach of contract.”

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