David Gillespie and Michael O'Brien v. A.L. Hernden and Frederick R. Zlotucha

Fourth Court of Appeals
San Antonio, Texas
OPINION
No. 04-15-00405-CV

David GILLESPIE and Michael O’Brien,
Appellants

v.

A.L. HERNDEN and Frederick R. Zlotucha,
Appellees

From the 408th Judicial District Court, Bexar County, Texas
Trial Court No. 2013-CI-10278
Honorable Cathleen M. Stryker, Judge Presiding 1

Opinion by: Patricia O. Alvarez, Justice

Sitting: Karen Angelini, Justice
Marialyn Barnard, Justice
Patricia O. Alvarez, Justice

Delivered and Filed: December 14, 2016

AFFIRMED

This appeal involves a dispute between two clients and their two attorneys over a written

contingent fee contract and an oral fee-sharing agreement in an oil and gas case. In that case, the

attorneys obtained a settlement for the clients. Then, the clients sued the attorneys; the clients

argued the contingent fee contract was unconscionable and the attorneys should forfeit their fees.

1
The Honorable Larry Noll is the presiding judge of the 408th Judicial District Court. The Honorable Cathleen M.
Stryker, presiding judge of the 224th Judicial District Court, signed the final judgment.
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The trial court denied the clients’ traditional motion for summary judgment and granted the

attorneys’ no-evidence and traditional motions. The clients appeal.

Because the clients did not meet their traditional motion’s burden or provide any competent

evidence in response to the attorneys’ no-evidence motion, we affirm the trial court’s order.

BACKGROUND

The two clients, David Gillespie and Michael O’Brien, signed a contingent fee contract

(CFC) with attorney A.L. Hernden, but not with attorney Frederick R. Zlotucha, to handle an oil

and gas lease dispute. The written CFC specified that Hernden’s fee would be 50% of any recovery

and the clients would pay all costs from their portion of any recovery. After the oil and gas case

began, Hernden asked Zlotucha to help him with the case, and Hernden informed the clients that

Zlotucha would be working on their case. The clients agreed to Zlotucha’s assistance, and they

met with Zlotucha a number of times including accompanying him as he represented them in court

proceedings.

After some discovery, the oil and gas dispute parties mediated and reached a settlement

agreement. The oil and gas defendant agreed to pay the clients $40,000.00 and give them a 1%

overriding royalty interest (ORRI) in an oil and gas lease. Subsequently, Zlotucha drafted a

settlement disbursement agreement which the clients and the attorneys signed. The agreement

deducted case expenses of $9,538.22 from the $40,000.00 which left a $30,461.78 remainder. The

remainder was divided into four equal amounts, and the two clients and the two attorneys each

received $7,615.44. The agreement also equally divided the 1% ORRI into four shares with

Gillespie, O’Brien, Hernden, and Zlotucha each receiving a 0.25% ORRI.

Thereafter, the clients sued the attorneys for fraud, breach of contract, breach of fiduciary

duty, barratry, and violations of the Deceptive Trade Practices Act. The clients contended that the

attorneys violated rules 1.04 and 1.08 of the Texas Disciplinary Rules of Professional Conduct,
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and those violations made the CFC unconscionable and the oral fee-sharing agreement

unenforceable. See, e.g., TEX. DISCIPLINARY RULES PROF’L CONDUCT R. 1.04(f), reprinted in TEX.

GOV’T CODE ANN., tit. 2, subtit. G, app. A (West 2013) (Tex. State Bar R. art. X, § 9).

After some discovery, the clients moved for partial summary judgment on breach of

fiduciary duty by both Hernden and Zlotucha. The clients argued the CFC is unconscionable and

violates Hernden’s fiduciary duties to the clients by acquiring a proprietary interest in the cause of

action, entering into a business transaction with the clients without complying with Disciplinary

Rule 1.08(a), and charging an unreasonable fee. See id. Rs. 1.04, 1.08. The clients also argued

that Zlotucha breached his fiduciary duties by collecting a contingent fee without a CFC or a

written fee-sharing agreement, charging an unreasonable fee, and receiving benefits under an

unconscionable CFC. See id. R. 1.04(f). The trial court denied the clients’ motion.

Subsequently, the attorneys filed traditional and no-evidence motions for summary

judgment. In their no-evidence motion, the attorneys specifically identified each of the clients’

claims and asserted there was no evidence of one or more of the elements for each claim. In their

traditional motion, the attorneys argued the summary judgment evidence conclusively disproves

at least one essential element of each of the clients’ claims.

In response to the clients’ motion for reconsideration of their motion for partial summary

judgment, the trial court reconsidered the clients’ motion and again denied it. The trial court

granted the attorneys’ traditional and no-evidence motions.

On appeal, the clients raise two issues: (1) the trial court erred by denying the clients’

motion for partial summary judgment and (2) the trial court erred in granting the attorneys’ motions

for summary judgment and rendering a take-nothing judgment against the clients.

We begin by reciting the applicable standards of review.

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STANDARDS OF REVIEW

To prevail on a traditional motion for summary judgment, a plaintiff movant must show

“there is no genuine issue as to any material fact and the [movant] is entitled to judgment as a

matter of law.” See TEX. R. CIV. P. 166a(c); accord Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d

546, 548 (Tex. 1985). We take the evidence favoring the nonmovant as true and make every

reasonable inference and resolve any doubts in the nonmovant’s favor. Nixon, 690 S.W.2d at 548–

49.

A defendant moving for traditional summary judgment must conclusively disprove at least

one essential element of each of the plaintiff’s claims. Elliott-Williams Co. v. Diaz, 9 S.W.3d 801,

803 (Tex. 1999); Doe v. Boys Clubs of Greater Dall., Inc., 907 S.W.2d 472, 476–77 (Tex. 1995).

A defendant’s motion asserting there is no evidence of one or more elements of a plaintiff’s claims

must identify the challenged elements. See TEX. R. CIV. P. 166a(i); N. Tex. Mun. Water Dist. v.

Ball, 466 S.W.3d 314, 320 (Tex. App.—Dallas 2015, no pet.) (quoting Jose Fuentes Co., Inc. v.

Alfaro, 418 S.W.3d 280, 283 (Tex. App.—Dallas 2013, pet. denied) (en banc)).

We review a no-evidence summary judgment using a legal sufficiency standard. King

Ranch, Inc. v. Chapman, 118 S.W.3d 742, 750–51 (Tex. 2003). “We review the evidence

presented by the motion and response in the light most favorable to the party against whom the

summary judgment was rendered, crediting evidence favorable to that party if reasonable jurors

could, and disregarding contrary evidence unless reasonable jurors could not.” Mack Trucks, Inc.

v. Tamez, 206 S.W.3d 572, 582 (Tex. 2006) (citing City of Keller v. Wilson, 168 S.W.3d 802, 827

(Tex. 2005)). If there is no evidence of one or more essential elements of a claim, we need not

examine the summary judgment evidence under the traditional standard. See Ford Motor Co. v.

Ridgway, 135 S.W.3d 598, 600 (Tex. 2004); BP Am. Prod. Co. v. Zaffirini, 419 S.W.3d 485, 509

(Tex. App.—San Antonio 2013, pet. denied).
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“Whether reviewing a traditional or a no-evidence summary judgment, we accept the non-

movant’s evidence as true and ‘indulge every reasonable inference and resolve any doubts in the

non-movant’s favor.’” Strandberg v. Spectrum Office Bldg., 293 S.W.3d 736, 738 (Tex. App.—

San Antonio 2009, no pet.) (quoting Joe v. Two Thirty Nine Joint Venture, 145 S.W.3d 150, 157

(Tex. 2004)).

CIVIL LIABILITY AND THE DISCIPLINARY RULES OF PROFESSIONAL CONDUCT

The clients argue courts may consider Disciplinary Rules violations to determine that a

CFC is unconscionable, and an attorney who enters into an unconscionable CFC breaches his

fiduciary duty to the client. We briefly address the law for civil liability as it is affected by the

Disciplinary Rules.

The preamble to the Disciplinary Rules addresses how the Rules relate to civil liability for

lawyers:

These rules do not undertake to define standards of civil liability of lawyers for
professional conduct. Violation of a rule does not give rise to a private cause of
action nor does it create any presumption that a legal duty to a client has been
breached. . . . Accordingly, nothing in the rules should be deemed to augment any
substantive legal duty of lawyers or the extra-disciplinary consequences of
violating such a duty.

TEX. DISCIPLINARY RULES OF PROF’L CONDUCT pmbl.; accord Royston, Rayzor, Vickery, &

Williams, LLP v. Lopez, 467 S.W.3d 494, 503 (Tex. 2015) (“The Disciplinary Rules are not

binding as to substantive law regarding attorneys, although they inform that law.”); Joe, 145

S.W.3d at 158 n.2 (“[W]e note that the Rules do not define standards of civil liability of lawyers

for professional conduct.”).

Although the Rules “do not define standards of civil liability of lawyers,” the Texas

Supreme Court and our sister courts have looked to the Rules for guidance in determining whether

a specific situation violated the public policies—the client protections—embodied in the Rules.

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See Royston, Rayzor, Vickery, & Williams, LLP, 467 S.W.3d at 503 (“[P]ublic policy . . . may be

informed by the Disciplinary Rules.”).

The Texas Supreme Court considered the client protections incorporated in Rule 1.15 to

determine that a provision in a contingent fee contract was unconscionable as a matter of law. See

Hoover Slovacek LLP v. Walton, 206 S.W.3d 557, 563 (Tex. 2006) (concluding the law firm’s

contingent fee contract’s “termination fee provision violates public policy and is unconscionable

as a matter of law”). It also applied the requirements in Rules 1.04 and 1.08 to determine additional

reasons that a fee agreement provision was unenforceable. Id. at 563–64 (noting in a footnote that

the disciplinary rules “are persuasive authority outside the context of disciplinary proceedings, and

we have applied Rule 1.04 as a rule of decision in disputes concerning attorney’s fees”).

The Austin Court of Appeals has looked to the policies embedded in the Rules when

deciding whether CFCs were enforceable. In Enochs v. Brown and Garza v. Gray & Becker, P.C.,

the Austin court recognized the Government Code and the Rules require a CFC to be written and

signed by the attorney and the client. See Enochs v. Brown, 872 S.W.2d 312, 317–19 (Tex. App.—

Austin 1994, no writ), disapproved of on other grounds by Roberts v. Williamson, 111 S.W.3d 113

(Tex. 2003); Garza v. Gray & Becker, P.C., No. 03-02-00136-CV, 2002 WL 31769034, at *8

(Tex. App.—Austin Dec. 12, 2002, pet. denied) (mem. op.). But the Austin court likened the lack

of a written, signed agreement to a statute of frauds question; it applied a quasi-estoppel theory

and enforced CFCs that did not fully comply with Rule 1.04’s and Texas Government Code section

82.065’s writing requirements. See TEX. GOV’T CODE ANN. § 82.065 (West Supp. 2016); Enochs,

872 S.W.2d at 319; Garza, 2002 WL 31769034, at *8. And in In re Estate of Arizola, this court

relied on Enochs. In re Estate of Arizola, 401 S.W.3d 664, 671–72 (Tex. App.—San Antonio

2013, pet. denied).

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The Houston First and Dallas Courts of Appeals have also recognized that a client may

avoid the enforcement of a CFC if the client instructs the attorney to stop work before the attorney

has fully or substantially performed under the contract. See Cobb v. Stern, Miller & Higdon, 305

S.W.3d 36, 42 (Tex. App.—Houston [1st Dist.] 2009, no pet.) (“A client may void a contingent

fee contract that violates section 82.065 by expressing his intent to do so before the attorney has

fully or substantially performed.” (emphasis added)); Tillery & Tillery v. Zurich Ins. Co., 54

S.W.3d 356, 359 (Tex. App.—Dallas 2001, pet. denied) (same).

In sum, the Rules do not create standards of civil liability for attorneys, but courts may

examine the Rules to discern the policies and protections embodied in them as an aid in deciding

questions of attorney civil liability. See TEX. DISCIPLINARY RULES OF PROF’L CONDUCT pmbl.;

Hoover Slovacek, 206 S.W.3d at 563; Enochs, 872 S.W.2d at 317–19; see also Estate of Arizola,

401 S.W.3d at 671–72.

CONTINGENT FEE CONTRACT

Before we address the questions pertaining to the attorneys’ civil liability, we first present

the contingent fee contracts that lie at the heart of this appeal. It is undisputed that each client

signed a CFC with Hernden. The CFCs, for purposes of this appeal, are identical; in this section,

we will refer to Gillespie’s and O’Brien’s CFCs in the singular: the CFC and the client.

The CFC is a two-page, triple-spaced document. The document consists of two paragraphs:

the first identifies the oil and gas dispute as the claim for which Hernden will represent the client,

and the second contains the complained of terms. The second paragraph is recited in its entirety:

THIS IS THEREFORE TO EVIDENCE: That Client does hereby voluntarily
employ the LAW OFFICE OF A. L. HERNDEN, hereinafter called Attorney, to
represent Client in the prosecution and adjustment of said claim, cause of action,
and in consideration of such services rendered and to be rendered Client hereby
sells, transfers and assigns to the said attorney a FIFTY PER CENT (50%) interest,
in and to this matter, claim, and any property obtained through such demand, and/or
case, and any compromise, settlements, judgment, or recovery of any sort
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whatsoever and howsoever acquired relating thereto, that Client may recover or be
entitled to by reason of said matter, claim, demand, and/or case. No settlement or
compromise to be made without Client’s approval and Client agrees not to make
any settlement or compromise without the written approval and consent of
Attorney. Any expenses incurred by Attorney in this matter shall be deducted from
the client[’]s portion of the entire recovery, only in the event of any recovery.
Expenses which attorney may expend or become liable for in the assertion of this
matter and/or claim, including but not limited to, all costs of Court, depositions,
interrogatories, investigation, photographs, expert and lay witnesses, and case
related expenses. If no recovery is made client will not owe any expenses.

We turn now to the clients’ first issue—whether the trial court erred when it denied the

clients’ traditional motion.

CLIENTS’ TRADITIONAL MOTION

The clients moved for summary judgment on their requested declarations that Hernden

breached his fiduciary duty to the clients by entering into a CFC that was unconscionable. The

clients’ burden was to prove unconscionability as a matter of law. See Nixon, 690 S.W.2d at 548.

If the summary judgment evidence raised a genuine issue of material fact, the clients were not

entitled to judgment. See id.

A. Clients’ Complaints of Unconscionable CFC

The clients complain the CFC is unconscionable because the fee is unreasonable and the

CFC allows Hernden to recover more than the clients.

1. Unreasonable Fee

The clients argue the summary judgment evidence proves as a matter of law that the CFC

is unconscionable as to Hernden because no competent lawyer could believe the fee Hernden

obtained was reasonable and, by entering into that CFC, Hernden violated his fiduciary duties to

the clients.

In a deposition, Hernden acknowledged he had already received approximately $225,000

under the 0.25% ORRI he received as part of his fee, and he had worked approximately 100 hours

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on the case. But the summary judgment evidence also included expert witness affidavits averring

that a 50% contingency fee was reasonable under the circumstances including a common practice

of a 50% fee, a difficult case, an uncertain legal result, and an uncertain value of any settlement.

Taking the attorneys’ expert witness affidavits as true, we conclude they directly contradict

the clients’ assertions that the CFC was unconscionable due to an unreasonable fee, and we

necessarily conclude the affidavits raise genuine issues of material fact. See id. at 548–49.

2. Attorney’s Fee Exceeds Clients’ Recovery

The clients also argue the CFC is unconscionable as a matter of law because the CFC gives

Hernden a greater fee than the clients’ recovery. The CFC allows Hernden to recover a greater

amount than the clients because it deducts expenses from the clients’ portion of any recovery, but

the disbursement statement conclusively proves the expenses were shared equally by the clients

and Hernden. The Disbursement and Settlement Statement, included in the clients’ traditional

motion for partial summary judgment, states the cash recovery was $40,000.00, and expenses were

$9,538.22. The expenses were deducted from the gross cash recovery leaving a balance of

$30,461.78. Hernden’s fee (50% of $30,461.78 = $15,230.89) was deducted from the balance,

and the remaining cash recovery ($15,230.89) was divided essentially equally between Gillespie

and O’Brien. Gillespie received $7,615.45, and O’Brien received one penny less: $7,615.44. The

clients’ summary judgment evidence also conclusively proves the 1.0% ORRI was split equally

among the clients and the attorneys, with each receiving an ORRI of 0.25%.

Because the summary judgment evidence disproves as a matter of law the very facts the

clients had the burden to prove as a matter of law, the clients were not entitled to summary

judgment on the requested declaration that the CFC was unconscionable based on an unreasonable

fee or a recovery greater than the clients’ recovery, or that Hernden breached his fiduciary duty to

the clients on those bases. See TEX. R. CIV. P. 166a(c); Nixon, 690 S.W.2d at 548–49.
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B. Proprietary Interest; Self-Dealing, Improper Benefit; Business Transaction

The clients contend the summary judgment evidence proves as a matter of law that Hernden

violated aspects of Rules 1.04 and 1.08.

1. Proprietary Interest

First, they argue Hernden created an irreconcilable conflict of interest by taking an

impermissible proprietary interest in the cause of action. See TEX. DISCIPLINARY RULES PROF’L

CONDUCT R. 1.08(h) (“A lawyer shall not acquire a proprietary interest in the cause of action or

subject matter of litigation the lawyer is conducting for a client, except that the lawyer may . . .

contract in a civil case with a client for a contingent fee that is permissible under Rule 1.04.”).

A lawyer may not “acquire a proprietary interest in the cause of action or subject matter of

litigation” except in a civil case where the lawyer uses a CFC that complies with Rule 1.04. See

id.; In re Slusser, 136 S.W.3d 245, 249 (Tex. App.—San Antonio 2004, no pet.) (allowing an

attorney “to acquire a lien on the property to secure his contingent fee”).

The summary judgment evidence conclusively proves that Gillespie and O’Brien each

signed a written CFC with Hernden. See TEX. GOV’T CODE ANN. § 82.065 (West Supp. 2016) (“A

contingent fee contract for legal services must be in writing and signed by the attorney and

client.”); In re Polybutylene Plumbing Litig., 23 S.W.3d 428, 436 (Tex. App.—Houston [1st Dist.]

2000, pet. dism’d). The CFC states the fee the client owes Hernden in the event of a recovery:

[I]n consideration of such [legal] services rendered and to be rendered Client hereby
sells, transfers and assigns to [Hernden] a FIFTY PER CENT (50%) interest, in and
to this matter, claim, and any property obtained through such demand, and/or case,
and any compromise, settlements, judgment, or recovery of any sort whatsoever
and howsoever acquired relating thereto, that Client may recover or be entitled to
by reason of said matter, claim, demand, and/or case.

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The summary judgment evidence also conclusively proves the CFC provides for a contingent fee

of 50% in “any property obtained” in a recovery. The remaining question on whether Hernden

took an impermissible proprietary interest is whether the CFC is permissible under Rule 1.04.

2. Self-Dealing, Improper Benefit

Rule 1.04(d) provides guidance for a CFC; it states the following:

A fee may be contingent on the outcome of the matter for which the service is
rendered, except in a matter in which a contingent fee is prohibited by paragraph
(e) or other law. A contingent fee agreement shall be in writing and shall state the
method by which the fee is to be determined. If there is to be a differentiation in
the percentage or percentages that shall accrue to the lawyer in the event of
settlement, trial or appeal, the percentage for each shall be stated. The agreement
shall state the litigation and other expenses to be deducted from the recovery, and
whether such expenses are to be deducted before or after the contingent fee is
calculated. Upon conclusion of a contingent fee matter, the lawyer shall provide
the client with a written statement describing the outcome of the matter and, if there
is a recovery, showing the remittance to the client and the method of its
determination.

TEX. DISCIPLINARY RULES PROF’L CONDUCT R. 1.04(d); see Hoover Slovacek LLP v. Walton, 206

S.W.3d 557, 563 (Tex. 2006). The summary judgment evidence conclusively proves the CFC was

in writing, and the CFC “state[d] the method by which the fee [was] to be determined.” See TEX.

DISCIPLINARY RULES PROF’L CONDUCT R. 1.04(d). Further, the lawyers provided the clients with

a Disbursement and Settlement Statement. The written statement described the outcome of the

matter including the total amount of the cash settlement, the amount of expenses deducted from

the recovery, the adjusted cash amount paid to the clients, and the disposition of the 1.0% ORRI

included in the recovery. See id. The ORRI was allocated as one-half to the lawyers and one-half

to the clients; each client and each lawyer received a 0.25% ORRI.

The clients argue Hernden engaged in self-dealing and obtained an improper benefit

because he did not explain the potential value of the ORRI to the clients, and thus neither client

understood what he was giving up when he signed his CFC. But Rule 1.04(d)’s guidance only

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calls for the CFC to “state the method by which the fee is to be determined.” See id.; Celmer v.

McGarry, 412 S.W.3d 691, 700 (Tex. App.—Dallas 2013, pet. denied). The Rule’s plain language

does not require an attorney to explain the monetary value of a contingent fee, and the clients cite

no case law to support their assertion to the contrary.

Taking the summary judgment evidence favoring the attorneys as true and making every

reasonable inference in the attorneys’ favor, we conclude that the clients failed to prove as a matter

of law that the CFC and resultant disbursement were instances of self-dealing and bestowed an

improper benefit on Hernden. See TEX. R. CIV. P. 166a(c); Nixon, 690 S.W.2d at 548–49.

3. Business Transaction

The clients also argue they are entitled to judgment as a matter of law on their requested

declarations that the CFC is unconscionable and violates the fiduciary duties Hernden owed to the

clients because the CFC’s terms were not “fair and reasonable to the client,” Hernden did not

explain the value of the contingent fee, and Hernden did not advise the clients to seek the advice

of independent counsel before they signed the CFC. They claim the CFC and Hernden’s conduct

violated Rule 1.08(a). Rule 1.08(a) states the following:

A lawyer shall not enter into a business transaction with a client unless:
(1) the transaction and terms on which the lawyer acquires the interest
are fair and reasonable to the client and are fully disclosed in a manner
which can be reasonably understood by the client;
(2) the client is given a reasonable opportunity to seek the advice of
independent counsel in the transaction; and
(3) the client consents in writing thereto.

TEX. DISCIPLINARY RULES PROF’L CONDUCT R. 1.08(a).

By its plain language, Rule 1.08(a) applies when a lawyer “enter[s] into a business

transaction with a client.” See id.; Rosas v. Comm’n for Lawyer Discipline, 335 S.W.3d 311, 316

(Tex. App.—San Antonio 2010, no pet.). But “the establishment of a lawyer-client relationship is

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not a ‘business transaction with a client’ within the meaning of Rule 1.08(a).” TEX. COMM. ON

PROF’L ETHICS, Op. 586, 72 TEX. B.J. 128, 128 (2009). When the clients executed the CFC with

Hernden, they contracted with him to provide legal services, see Rosas, 335 S.W.3d at 316 (“An

attorney-client relationship is a contractual relationship whereby an attorney agrees to render

professional services for a client.”), they did not enter into a business transaction with him, see

TEX. COMM. ON PROF’L ETHICS, Op. 586, 72 TEX. B.J. 128, 128 (2009).

There is no evidence that Hernden entered into any other business transaction with the

clients, and we conclude Rule 1.08(a) does not apply in this case. See id. Thus, the clients’

arguments that Hernden breached his fiduciary duty to them because the CFC’s terms were not

“fair and reasonable to the client,” Hernden did not explain the value of the contingent fee, and

Hernden did not advise the clients to seek the advice of independent counsel before they signed

the CFC are inapt. See TEX. DISCIPLINARY RULES PROF’L CONDUCT R. 1.08(a); Rosas, 335 S.W.3d

at 316.

C. Zlotucha Fee Illegal, Unconscionable

The clients argue neither Hernden nor Zlotucha are entitled to attorney’s fees from the

clients’ settlement because the clients did not consent in writing to a fee-sharing agreement before

Zlotucha joined in the representation, the settlement disbursement agreement did not comply with

Rule 1.08, and Zlotucha had no written CFC with the clients as required by section 82.065 of the

Government Code.

1. No Written CFC with Zlotucha

Section 82.065 requires a contingent fee agreement to be in writing:

(a) A contingent fee contract for legal services must be in writing and signed by
the attorney and client.

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TEX. GOV’T CODE ANN. § 82.065(a); see Celmer, 412 S.W.3d at 700. Although the statute does

not state any consequence or remedy for failure to comply with its requirement, we may look to

case law for guidance.

In Enochs v. Brown and Garza v. Gray & Becker, P.C., the Austin Court of Appeals

recognized that section 82.065 and Rule 1.04(f) require a CFC to be written and signed by the

attorney and the client. See Enochs, 872 S.W.2d at 317–19; Garza, 2002 WL 31769034, at *8.

But the Austin court still enforced the CFCs that did not fully comply with the writing

requirements. It did so by likening the lack of a written, signed agreement to a statute of frauds

question; it applied a quasi-estoppel theory and enforced CFCs that did not fully comply with

section 82.065. See Enochs, 872 S.W.2d at 319; Garza, 2002 WL 31769034, at *8; see also Estate

of Arizola, 401 S.W.3d at 671–72 (relying on Enochs).

Here, the summary judgment evidence establishes the following:

• Gillespie and O’Brien signed CFCs with Hernden;

• Hernden told both clients Zlotucha would assist Hernden in representing the clients;

• both clients knew Zlotucha would share Hernden’s fee;

• Zlotucha met with the clients on numerous occasions, including appearing on their
behalf (with them present) in court proceedings;

• the clients never instructed Zlotucha to stop representing them; and

• the clients accepted the benefits Zlotucha helped obtain on their behalf.

See Enochs, 872 S.W.2d at 319 (refusing to void a contingent fee contract that the client signed

but the attorney did not after the attorney performed on the contract); Garza, 2002 WL 31769034,

at *8 (refusing to allow clients “to challenge the fee agreements only after they have accepted the

benefits of those agreements”).

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We conclude the clients received the protections the legislature intended clients to receive

under section 82.065. See TEX. GOV’T CODE ANN. § 82.065; Enochs, 872 S.W.2d at 319; Garza,

2002 WL 31769034, at *8; see also Estate of Arizola, 401 S.W.3d at 671–72 (relying on Enochs).

We turn now to the clients’ complaint that there was no signed fee-sharing agreement.

2. No Written Fee-Sharing Agreement

Rule 1.04(f) states requirements for how attorneys who are not in the same firm are to

divide a fee.

(f) A division or arrangement for division of a fee between lawyers who are not in
the same firm may be made only if:
(1) the division is:
(i) in proportion to the professional services performed by each lawyer; or
(ii) made between lawyers who assume joint responsibility for the
representation; and
(2) the client consents in writing to the terms of the arrangement prior to the
time of the association or referral proposed, including:
(i) the identity of all lawyers or law firms who will participate in the fee-
sharing agreement, and
(ii) whether fees will be divided based on the proportion of services
performed or by lawyers agreeing to assume joint responsibility for the
representation, and
(iii) the share of the fee that each lawyer or law firm will receive or, if the
division is based on the proportion of services performed, the basis on
which the division will be made; and
(3) the aggregate fee does not violate paragraph (a).

TEX. DISCIPLINARY RULES PROF’L CONDUCT R. 1.04(f).

It is undisputed that the clients did not consent in writing to a fee-sharing agreement

concerning Zlotucha before Zlotucha began representing the clients. Contra id. (requiring the

client’s written consent to a fee sharing agreement); Johnson v. Brewer & Pritchard, P.C., 73

S.W.3d 193, 205 (Tex. 2002) (“A fee sharing agreement between lawyers who are not in the same

firm violates public policy and is unenforceable unless the client is advised of and consents to the

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sharing arrangement.”). But the undisputed evidence, including the clients’ own depositions,

proves the clients knew that Zlotucha would represent them, that Hernden would share his fee with

Zlotucha, and the clients agreed to the fee sharing. At a minimum, the summary judgment

evidence establishes that both attorneys maintained responsibility for the representation, the clients

knew the identity of all the lawyers who participated in the fee-sharing agreement, and the clients

knew, not later than when they signed the settlement disbursement agreement, what share of the

fee each lawyer received. See TEX. DISCIPLINARY RULES PROF’L CONDUCT R. 1.04(f); Johnson,

73 S.W.3d at 205.

Having reviewed the summary judgment evidence, we conclude the clients received the

protections Rule 1.04(f) seeks to provide; we also conclude that the clients failed to prove as a

matter of law that the oral fee-sharing agreement was unconscionable. See Hoover Slovacek, 206

S.W.3d at 561; Enochs, 872 S.W.2d at 319 (enforcing a CFC that did not comply with Rule

1.04(f)’s and section 82.065’s writing requirements); Garza, 2002 WL 31769034, at *8.

D. Barratry

The clients also argue the attorneys engaged in barratry by “entering into the illegal fee-

sharing agreement.” The clients insist that because they did not have a written CFC or fee-sharing

agreement with Zlotucha, his representation of them constitutes barratry. 2 Penal Code section

38.12 proscribes barratry, and it was in effect at the relevant times. The clients argue the attorneys

committed violations under sections 38.12(a)(1), (b)(1), and (b)(2). These subsections read as

follows:

2
The clients argue the attorneys engaged in barratry under section 82.0651. See TEX. GOV’T CODE ANN. § 82.0651
(West Supp. 2016). The clients signed the CFCs in 2009; section 82.0651 became effective on September 1, 2011.
See Act of May 5, 2011, 82d Leg., R.S., ch. 94, § 4, 2011 Tex. Gen. Laws 534, 535 (amended 2013) (current version
at TEX. GOV’T CODE ANN. § 82.0651 (West Supp. 2016)). Section 82.0651 was not yet in effect when the clients
signed the CFCs or when Zlotucha began representing them. See Neese v. Lyon, 479 S.W.3d 368, 385 (Tex. App.—
Dallas 2015, no pet.). Therefore, section 82.0651 does not apply to the CFCs.

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(a) A person commits an offense if, with intent to obtain an economic benefit
the person:
(1) knowingly institutes a suit or claim that the person has not been
authorized to pursue;
...
(b) A person commits an offense if the person:
(1) knowingly finances the commission of an offense under Subsection (a);
(2) invests funds the person knows or believes are intended to further the
commission of an offense under Subsection (a) . . . .

TEX. PENAL CODE ANN. § 38.12 (West Supp. 2015).

It is undisputed and the summary judgment evidence conclusively proves that the clients

signed CFCs with Hernden. Their signatures authorized Hernden to institute a suit or claim on

their behalf. See id. § 38.12(a)(1). Further, with respect to the alleged illegal fee-sharing

agreement, Hernden averred that he asked Zlotucha to assist him with the case, and he told the

clients that Zlotucha would be brought into the case. See Johnson, 73 S.W.3d at 205 (“A fee

sharing agreement between lawyers who are not in the same firm violates public policy and is

unenforceable unless the client is advised of and consents to the sharing arrangement.” (emphasis

added)). In their depositions, the clients acknowledge they knew Zlotucha would assist Hernden

in handling the case, they willingly consented to Zlotucha’s participation in the suit, they attended

court proceedings with Zlotucha in which he represented them, and, until after the settlement

disbursement agreement was signed, they never instructed Zlotucha to stop representing them. See

id.

Taking the evidence favoring the attorneys as true, we conclude the clients failed to prove

as a matter of law that the attorneys “knowingly institute[d] a suit or claim that the [attorneys had]

not been authorized to pursue.” See TEX. PENAL CODE ANN. § 38.12; TEX. R. CIV. P. 166a(c);

Nixon, 690 S.W.2d at 548–49.

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Having reviewed the summary judgment evidence under the appropriate standard and the

law pertaining to each basis in the clients’ traditional motion, we conclude the clients failed to

prove as a matter of law that the CFC was unconscionable or that Hernden or Zlotucha breached

their fiduciary duties to the clients. See TEX. R. CIV. P. 166a(c); Nixon, 690 S.W.2d at 548–49.

Thus, the clients were not entitled to summary judgment on their declarations.

ATTORNEYS’ NO-EVIDENCE AND TRADITIONAL MOTIONS

We turn now to the attorneys’ motions for summary judgment. The attorneys filed no-

evidence and traditional motions against the clients’ claims of breach of fiduciary duty, fraud,

negligence, barratry, and DTPA violations. For each of the clients’ claims, we address the no-

evidence motion first. See Ford Motor Co. v. Ridgway, 135 S.W.3d 598, 600 (Tex. 2004)

(recognizing that a no-evidence review should be conducted first); BP Am. Prod. Co. v. Zaffirini,

419 S.W.3d 485, 509 (Tex. App.—San Antonio 2013, pet. denied) (same).

A. Breach of Fiduciary Duty

The clients claim there is some evidence that the attorneys breached their fiduciary duty to

the clients by charging an unconscionable fee, “by failing to make full disclosure of material facts

to the [clients] regarding the requirements of a written employment contract and the settlement of

the case, by engaging in self-dealing, and by failing to account to the [clients].” The attorneys

allege there is no evidence that they breached their fiduciary duties to the clients. It is undisputed

that the clients signed CFCs with Hernden, and the CFCs were part of the summary judgment

evidence.

1. Unconscionable CFC

The clients argue there is some evidence of the attorneys’ alleged breach of fiduciary duty

because the CFC is unconscionable as a matter of law because the CFC gives Hernden a greater

fee than the clients’ recovery. But the disbursement statement conclusively proves the expenses
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were shared equally by the clients and the attorneys, and under the settlement disbursement

agreement, the attorneys did not and will not receive a fee greater than the clients’ recovery.

Nevertheless, the clients point to their expert witness’s opinion that “a 50% contingency fee was

excessive and unreasonable under the circumstances” as some evidence of an unconscionable

CFC.

Because the clients were the nonmovants for the attorneys’ no-evidence motion, we take

the clients’ evidence as true if it is competent evidence. See Ryland Grp., Inc. v. Hood, 924 S.W.2d

120, 122 (Tex. 1996); Nixon, 690 S.W.2d at 548–49. To be competent evidence, an expert’s

opinion must offer a factual basis that actually supports the opinion. See Hous. Unlimited, Inc.

Metal Processing v. Mel Acres Ranch, 443 S.W.3d 820, 829 (Tex. 2014). If the expert offers “little

more than his credentials and a subjective opinion,” see Merrell Dow Pharms., Inc. v. Havner, 953

S.W.2d 706, 712 (Tex. 1997), his opinion is not competent summary judgment evidence, see

Gammill v. Jack Williams Chevrolet, Inc., 972 S.W.2d 713, 726 (Tex. 1998); see also City of

Keller, 168 S.W.3d at 813 (“[A]n appellate court conducting a no-evidence review cannot consider

only an expert’s bare opinion, but must also consider contrary evidence showing it has no scientific

basis.”).

Here, the clients’ expert opined that “50% contingency fee contracts are seen as the

absolute maximum allowed and are only rarely justified.” To support his opinion, he cited a

personal injury attorney’s article from an advanced personal injury continuing legal education

course. But the clients’ expert did not opine that such a fee was never justified or offer any

supporting evidence to show how a maximum contingent fee in a personal injury suit was

applicable to a CFC for an oil and gas case in general or to the clients’ oil and gas case in particular.

Contra Hous. Unlimited, 443 S.W.3d at 829 (requiring an expert opinion to provide a basis that

actually supports the expert’s conclusion). The expert did not provide a factual basis to show how
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he concluded that “this litigation was a fairly typical case,” or that the “evidence was fairly

straightforward.” Contra id. Instead, he merely stated that the case contained no “arcane

regulatory or public policy issues” or any “complex scientific or medical issues.”

The client’s expert stated what attributes the clients’ oil and gas case did not have, but that

opinion provides no basis to establish that any attributes the case actually has are not complex.

See Gammill, 972 S.W.2d at 726 (analytical gap). Further, the clients’ expert did not explain how

his conclusion—that a fee of greater than 50% was unreasonable—applied to the reasonableness

of the CFC’s 50% fee. See id.

For these reasons, we conclude there was too great an analytical gap between the evidence

and the expert’s opinion; the clients’ expert witness’s opinion on unconscionability of the CFC

and fee was not competent evidence. See id. Thus, there was no competent summary judgment

evidence that the fee was unconscionable. See City of Keller, 168 S.W.3d at 813.

2. Full Disclosure of Material Facts

The clients also claim there is some evidence of breach of fiduciary duty because the

attorneys did not advise the clients that the attorneys were obligated to have a written CFC and a

written fee-sharing agreement. The clients extrapolate from Chappell’s statement that a fiduciary

must “make a full and accurate confession of all his fiduciary activities, transactions, profits, and

mistakes” to require the attorneys to teach the clients about the Disciplinary Rules or law that

applied to the CFC or the fee-sharing agreement. See Jackson Law Office, P.C. v. Chappell, 37

S.W.3d 15, 22 (Tex. App.—Tyler 2000, pet. denied).

But Chappell’s attorney’s fee facts are readily distinguishable. In Chappell, the attorneys

had an hourly fee agreement with the client, but the attorneys “were vague about their fee

arrangement, and did not reduce the fee agreement to writing.” Id. The Chappell attorneys “failed

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to maintain billing records, failed to record services rendered, and failed to provide billing

statements to Chappell.” Id.

Here, unlike Chappell, the CFC was written, signed by the clients, and expressly described

the fee arrangement; further, the disbursement statement clearly described the fee, the recovery,

and the apportioned distribution of the recovery. See id. Chappell requires attorneys to comply

with the applicable laws, but we conclude Chappell did not create any duty for the attorneys to

advise the clients about the Disciplinary Rules or Government Code sections that govern attorney-

client contingent fee contracts or fee-sharing agreements. In this case, the existence of signed,

written CFCs is undisputed, and the CFCs describe the scope of work and how the attorney’s fee

is determined. See TEX. GOV’T CODE ANN. § 82.065 (contingent fee contract requirements); TEX.

DISCIPLINARY RULES PROF’L CONDUCT R. 1.04(d) (same). The written settlement disbursement

agreement described and documented how the recovery was divided, including explaining the

moneys recovered and how they were disbursed. See TEX. DISCIPLINARY RULES PROF’L CONDUCT

R. 1.04(f) (fee-sharing agreement); Johnson, 73 S.W.3d at 205.

We conclude there is no evidence that the attorneys breached any duty to the clients to

disclose material facts. See City of Keller, 168 S.W.3d at 813.

3. Self-Dealing

The clients also argue there is some evidence the attorneys breached their fiduciary duties

to the clients because the lawyers engaged in self-dealing in the settlement of the clients’ oil and

gas case. The clients contend the CFCs were self-dealing because the CFCs allow the attorney to

deduct case expenses from the clients’ share of any recovery. But the settlement disbursement

statement conclusively proves the case expenses were shared equally by the clients and the

attorneys. Further, bare allegations of misconduct without any supporting evidence are merely

conclusory statements and are not competent evidence. See Mar. Overseas Corp. v. Ellis, 971
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S.W.2d 402, 421 (Tex. 1998) (“[B]are conclusions and assertions unsupported by facts of record

. . . are no evidence to support a finding of fact.”); Dolcefino v. Randolph, 19 S.W.3d 906, 918

(Tex. App.—Houston [14th Dist.] 2000, pet. denied) (noting “a conclusory statement is no

evidence”).

We conclude there is no evidence that the attorneys engaged in self-dealing as a result of

the fee specified in the CFC. See City of Keller, 168 S.W.3d at 813.

Given the clients’ asserted bases for their claims of breach of fiduciary duty against the

attorneys, and having reviewed the evidence in the light most favorable to the clients, we

nevertheless conclude there was no evidence that the attorneys breached their fiduciary duties to

the clients. See id.

B. Fraud

In their fraud claims, the clients allege there is some evidence that the attorneys committed

common law fraud by representing that the CFC and settlement disbursement statement were valid

and enforceable agreements.

Two of the essential elements of a common-law fraud claim are “(1) that a material

representation was made [and] (2) that it was false . . . .” T.O. Stanley Boot Co. v. Bank of El Paso,

847 S.W.2d 218, 222 (Tex. 1992); accord Ernst & Young, L.L.P. v. Pac. Mut. Life Ins. Co., 51

S.W.3d 573, 577 (Tex. 2001).

The attorneys argue there is no evidence (1) that they made any materially false

representation to the clients or (2) that either the CFC or settlement disbursement statements were

not valid, enforceable contracts. It is undisputed that Hernden offered the CFCs to the clients and

the clients signed them, both clients signed the Disbursement and Settlement Statement, and both

Gillespie and O’Brien received benefits under the statement.

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We already addressed the clients’ complaints about the agreements’ writing deficiencies

under Rule 1.04(d) and section 82.065, and determined that the agreements were enforceable.

Construing these unambiguous documents as a matter of law, we again conclude the CFCs and the

disbursement agreement were valid, enforceable agreements. Thus, there is no evidence that the

attorneys made any materially false representation to the clients when they offered the CFCs and

the disbursement agreements as valid, enforceable contracts. See City of Keller, 168 S.W.3d at

813.

C. Negligence, Legal Malpractice

In their fifth amended petition, the clients claim the attorneys “negligently advised [clients]

to settle [the clients’] claims for sums far below their worth since they failed in their duty to

appraise and determine the value of [the clients’] claims” in the oil and gas dispute. However, in

their brief the clients state they “withdrew the legal malpractice and negligence claims,” and

neither negligence nor legal malpractice was briefed. See TEX. R. APP. P. 38.1(i) (requiring

adequate briefing); In re Blankenship, 392 S.W.3d 249, 259 (Tex. App.—San Antonio 2012, no

pet.) (same). We conclude the clients waived any appellate review of any claim for legal

malpractice or negligence.

D. Barratry

The clients argue there is some evidence of barratry because Government Code section

82.0651 was in effect when the allegedly illegal fee-sharing agreement was executed, and section

82.0651 allows them to void the fee-sharing agreement and settlement disbursement agreement.

See TEX. GOV’T CODE ANN. § 82.0651. We disagree.

Section 82.0651 allows a client to “bring an action to void a contract for legal services that

was procured as a result of conduct violating Section 38.12(a).” See TEX. GOV’T CODE ANN.

§ 82.0651; Neese v. Lyon, 479 S.W.3d 368, 385 (Tex. App.—Dallas 2015, no pet.). Here, it is
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undisputed that the CFCs were signed before section 82.0651 was in effect and we have already

concluded section 82.0651 does not apply to the CFCs. See TEX. GOV’T CODE ANN. § 82.0651;

Neese, 479 S.W.3d at 385.

The clients also argue that section 82.0651 applies to the settlement disbursement

agreement, but we conclude it does not. The disbursement agreement was not a contract to procure

legal services; it was a statement describing how the recovery proceeds would be distributed and

an agreement to those terms. See Neese, 479 S.W.3d at 386 (concluding a settlement agreement

was not a contract for legal services).

We conclude section 82.0651 does not apply to the fee-sharing agreement or the settlement

disbursement agreement. See id. We further conclude there is no evidence that the attorneys

“knowingly institute[d] a suit or claim that the [attorneys had] not been authorized to pursue.” See

TEX. PENAL CODE ANN. § 38.12 (barratry); TEX. GOV’T CODE ANN. § 82.0651 (civil liability for

barratry).

E. DTPA Violations

The clients also claim there is some evidence that the attorneys violated multiple sections

of the DTPA because the CFC was unconscionable, and the attorneys did not explain to the clients

the value of the interest, did not advise the clients to seek independent legal advice before signing

the CFC, and did not explain the applicable Disciplinary Rules required the clients’ written consent

for a fee-sharing agreement. We have already addressed each of these points and concluded there

was no evidence of at least one essential element of each overlying claim.

F. Traditional Motion

After reviewing all the evidence pertaining to each of the clients’ claims in the light most

favorable to the clients, we have nevertheless determined the clients failed to produce any

competent evidence of at least one essential element of each of their claims. See Mack Trucks,
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Inc. v. Tamez, 206 S.W.3d 572, 582 (Tex. 2006) (citing City of Keller, 168 S.W.3d at 827).

Therefore, we need not examine the summary judgment evidence under the traditional standard.

See Ford Motor Co., 135 S.W.3d at 600; BP Am. Prod. Co., 419 S.W.3d at 509.

CONCLUSION

In reviewing the clients’ motion for partial summary judgment as a matter of law, we

examined the summary judgment evidence in the light most favorable to the attorneys. We

conclude the clients failed to meet their burden to prove as a matter of law that the CFCs or

Disbursement Settlement Statement agreement were unconscionable or that the attorneys breached

their fiduciary duties to the clients. Thus, the trial court did not err when it denied the clients’

motion for summary judgment as a matter of law.

In reviewing the attorneys’ no-evidence motion for summary judgment, we examined the

evidence in the light most favorable to the clients. We conclude the clients failed to produce any

evidence of at least one essential element of each of their claims.

Because the clients did not meet their traditional motion’s burden or provide any competent

evidence on at least one essential element of each of their claims in response to the attorneys’ no-

evidence motion, we affirm the trial court’s order.

Patricia O. Alvarez, Justice

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