Charles Matlock, Individually and D/B/A Matlock Insurance Agency v. Kenneth Fitzgerald, Gayle Fitzgerald, Buford Narramore, and Sharon Narramore

Opinion filed October 26, 2017

In The

Eleventh Court of Appeals
__________

No. 11-15-00211-CV
__________

CHARLES MATLOCK, INDIVIDUALLY AND D/B/A
MATLOCK INSURANCE AGENCY, Appellant
V.
KENNETH FITZGERALD, GAYLE FITZGERALD, BUFORD
NARRAMORE, AND SHARON NARRAMORE, Appellees

On Appeal from the 35th District Court
Brown County, Texas
Trial Court Cause No. CV1207249

MEMORANDUM OPINION
This is an appeal from a bench trial in a suit brought by the former clients of
an insurance agent over failed investment products that he marketed to them. The
investment products involved life settlements sold by a company located in Houston
called “A&O.” As recently explained by the Texas Supreme Court, a life settlement
is a transaction in which someone buys (at a discount from its payout value) an
existing life insurance policy from the insured and then sells interests in the policy
to third parties. Life Partners, Inc. v. Arnold, 464 S.W.3d 660, 663 (Tex. 2015); see
Matlock v. Hill, No. 07-15-00048-CV, 2016 WL 3659988, at *1 n.1 (Tex. App.—
Amarillo June 30, 2016, no pet.) (mem. op.). Through the marketing efforts of
Charles Matlock, Appellees Kenneth and Gayle Fitzgerald invested $100,000 in
A&O life settlements, and Appellees Buford and Sharon Narramore invested
$272,758.39 in A&O life settlements.
A&O filed for bankruptcy in 2009, and many of its principals were convicted
of various federal crimes, including securities fraud. See United States v.
Abdulwahab, 715 F.3d 521, 526–27 (4th Cir. 2013); United States v. Allmendinger,
706 F.3d 330, 344 (4th Cir. 2013); In re Life Fund 5.1 LLC, No. 09 B 32672, 2010
WL 2650024, at *3 (Bankr. N.D. Ill. June 30, 2010). As a result of the bankruptcy
and criminal proceedings, the Fitzgeralds were only able to recover $10,442.07 of
their original investment, and the Narramores were only able to recover $29,431.64.
The trial court entered judgment against Matlock in favor of the Fitzgeralds and the
Narramores for the remaining amounts, $89,557.93 and $243,326.75, respectively.
The trial court also awarded the Fitzgeralds and the Narramores attorney’s fees in
the amount of $252,111.25. Matlock challenges the trial court’s judgment in seven
issues. We affirm.
Background Facts
Kenneth Fitzgerald is a pharmacist in Bangs. He first purchased health
insurance from Matlock. The topic of the A&O product came up during one of their
meetings. Fitzgerald testified that Matlock “was promoting a product that he thought
was extremely -- that I would be interested in because it had potential for tremendous
returns with being virtually impossible to lose on.” Fitzgerald stated that it looked
like a good investment because they would be investing $100,000 and receiving
$140,000 in five years. The Fitzgeralds were also impressed that the investment
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appeared to be backed by a bond issued by “PCI” that guaranteed the timely
repayment of their investment. Fitzgerald executed a “Bonded Life Contract” with
A&O on November 7, 2006, and invested $100,000.
Sharon Narramore is a retired teacher’s aide living in May. Sometime
between Thanksgiving and Christmas of 2006, she saw an advertisement that
Matlock placed in the Brownwood newspaper. The representative advertisements
that she referenced in her testimony provided as follows: “Is your CD or 401k
EARNING 12%? INSURED & COMPOUNDED”; “Is your CD or 401k EARNING
10%? COMPOUNDED”; “Is your CD or 401k EARNING 9 1/2%? INSURED &
COMPOUNDED.” Narramore contacted Matlock in response to the advertisement.
Narramore testified that she had several face-to-face meetings with Matlock
about the A&O product. She received a brochure issued by A&O during these
meetings proclaiming that A&O had “developed a strategy that is revolutionizing
the insurance industry and exceeding client expectations.” On a page depicting a
life preserver, the brochure touted that it could stop a client’s portfolio from
drowning by putting an investor “in a position to achieve substantial returns with
minimal risk.” On a page depicting a baseball umpire’s mask, the brochure stated
that safety is a cornerstone of A&O’s philosophy. The brochure also represented
that A&O backed its life settlement product with a reinsurance guarantee bond that
secured the investor’s time frame for the payout of the investment.
Narramore testified that she told Matlock she was only interested in the
investment if it was “totally safe” and that Matlock assured her that it was. Matlock
told the Narramores that the investment was safe because it was backed by a bond.
Narramore testified that Matlock told them that there was minimal risk associated
with the product. Narramore stated that Matlock seemed very knowledgeable about
the product, and she assumed that he had thoroughly researched it.

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 Matlock set up a conference call between the Narramores and representatives
of A&O so that the Narramores could learn more about the product. During the
conference call, Sharon Narramore took detailed notes and made several notations
on the paperwork that the Narramores had been provided. The A&O representatives
told the Narramores that the “high risk” references in the paperwork did not apply
to their investment. As a result of Matlock’s efforts, the Narramores invested their
life savings of over $272,000 in A&O products in September and October of 2007.
At the time that Matlock marketed the A&O product to Appellees, he held a
“General Lines Life, Accident, Health & HMO” insurance agent license. Matlock
first learned of the A&O product in January 2006 from Adley Wahab1 of A&O.
Matlock subsequently met with Wahab at A&O’s offices in Houston in 2006.
Matlock testified that A&O’s offices were very nice and that A&O appeared to be a
legitimate operation. Matlock testified that the A&O investment seemed to be a
great product because it was backed by a PCI bond. Matlock characterized the PCI
bond as a “game changer.”
Matlock submitted his first application for the sale of an A&O product in July
2006. Matlock believed that he could sell the product because he thought it was a
life insurance policy. However, he was subsequently told by A&O in late 2006 that
the product might be a security. A&O officials asked Matlock in January 2007 about
getting a license to sell securities in order for him to continue selling the A&O
product. Matlock declined their request because he did not want to have to get
another license. Matlock testified that he stopped selling the A&O product from late
2006 until mid-2007. Matlock started selling the A&O product again when Wahab
informed him that he could sell it if A&O made him a “managing member.” Matlock

1
Wahab is also known as Adley Abdulwahab.

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testified that Wahab told him that state securities law would not apply to him if he
was a managing member of A&O.
A&O provided Matlock with business cards that identified him as “Charles
Matlock Managing Member A&O LIFE FUNDS, L.P.” Matlock provided the
Narramores with this business card during his meetings with them. However,
Matlock did not get paid anything for being a “managing member,” and he had no
duties or responsibilities at A&O. Matlock testified that he relied on the information
provided to him by A&O about the managing member designation and that the
arrangement did not set off any “red flags” to him because he was told that A&O’s
lawyers had looked into the matter.
On October 15, 2007, the Texas Department of Insurance sent a letter to
Matlock concerning his efforts to market an A&O investment product underwritten
by PCI to another client. In addition to asking Matlock several questions concerning
his efforts to market A&O products, the letter advised Matlock that PCI was not
authorized to conduct any insurance business in Texas because the Commissioner
had issued a cease and desist order against PCI on November 6, 2006. The letter
also advised Matlock that he was marketing a product that he was not authorized to
sell under his current insurance agent license.
John Courtade testified on behalf of Appellees as an expert in securities law.
Courtade testified that the A&O product marketed by Matlock to Appellees was a
security subject to state and federal securities law. He characterized Matlock’s
newspaper advertisements comparing the product to a CD as “highly deceptive.”
Courtade testified that the A&O brochure was misleading and that the managing
member designation given to Matlock was misleading as well. Courtade stated that
Matlock had an obligation to research the product he was selling irrespective of
whether or not he was registered to sell securities. He compared Matlock’s
obligation to a person driving without a valid driver’s license—that person would
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still have to comply with traffic laws while driving. Courtade described Matlock’s
failure to thoroughly investigate A&O, its principals, and PCI and Matlock’s failure
to disclose negative information to Appellees as constituting a high degree of
recklessness.
Matlock denied knowing any negative information about A&O and PCI at the
time that he marketed the products to Appellees. Matlock testified that, as an
insurance agent, his obligation was to be truthful with his clients. He did not believe
that he had a responsibility to research the credentials of the companies he was
selling. Matlock’s expert, Stephen Carl Burgess, testified that he did not believe that
the A&O investment product constituted a security. He testified that an insurance
agent did not have a duty to investigate or perform due diligence on the products that
he or she sells. Burgess testified that he believed that Matlock had complied with
all applicable duties in his dealings with Appellees.
Appellees asserted causes of action against Matlock for common law fraud
and breach of contract. Additionally, the Narramores asserted a cause of action
under the Texas Securities Act. See TEX. REV. CIV. STAT. ANN. art. 581-33 (West
2010). The trial court found Matlock liable to Appellees on all theories of liability
that they asserted. Specifically, the trial court determined that Matlock was liable to
the Fitzgeralds for common law fraud and breach of contract and that Matlock was
liable to the Narramores for common law fraud, breach of contract, and violations
of the Texas Securities Act. The trial court determined that the losses sustained by
Appellees were the same under each of the theories of liability they asserted.
Accordingly, the multiple theories of liability found by the trial court served as
independent grounds supporting the damages awarded to Appellees.
Analysis
An appellant must attack all independent bases or grounds that support the
judgment that he challenges on appeal. See Britton v. Tex. Dep’t of Criminal Justice,
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95 S.W.3d 676, 681 (Tex. App.—Houston [1st Dist.] 2002, no pet.); Harris v. Gen.
Motors Corp., 924 S.W.2d 187, 188 (Tex. App.—San Antonio 1996, writ denied).
If he does not prevail on his challenge to each independent basis supporting the
judgment, we must affirm the judgment. See Britton, 95 S.W.3d at 681; Harris, 924
S.W.2d at 188.
In his first six issues, Matlock challenges the three independent grounds of
recovery found by the trial court. His first and second issues address the common
law fraud theory. Matlock’s third issue challenges the breach of contract ground.
Matlock’s fourth, fifth, and sixth issues concern the trial court’s determination that
he violated the Texas Securities Act. In his seventh issue, Matlock challenges the
trial court’s award of attorney’s fees.
Prior to addressing Matlock’s issues, we note that the trial in this case occurred
prior to the issuance of two recent opinions concerning life settlements. In Life
Partners, Inc. v. Arnold, the Texas Supreme Court determined that life settlement
agreements are investment contracts that are securities subject to the Texas
Securities Act. 464 S.W.3d at 667–84. The court in Arnold additionally determined
that its decision applied retroactively, rejecting a claim that it should only apply
prospectively. Id. at 684–85.
Matlock v. Hill involved Matlock’s efforts to market A&O products to other
customers. 2016 WL 3659988. The trial in Matlock v. Hill occurred prior to the
trial underlying this appeal. However, the Amarillo Court of Appeals had not issued
its opinion affirming the trial court’s judgment against Matlock until after the trial
underlying this appeal. In addition to involving the same investment product and
the same defendant marketing it, the attorneys in Matlock v. Hill are the same
attorneys as in this case.
We begin our analysis with Matlock’s third issue concerning breach of
contract. He asserts that the trial court’s conclusions of law in support of this theory
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of recovery violate Article I, section 16 of the Texas Constitution pertaining to the
impairment of contracts. This section provides that “[n]o bill of attainder, ex post
facto law, retroactive law, or any law impairing the obligation of contracts, shall be
made.” TEX. CONST. art. I, § 16. Matlock also premises his fourth, fifth, and sixth
issues on this constitutional provision.
The conclusions of law that Matlock challenges simply provide that Matlock
is liable to the Fitzgeralds and the Narramores for breach of contract. Matlock
contends that the retroactive imposition of any statutory restrictions on his sale of
life settlements to the Fitzgeralds and the Narramores constitutes an impermissible
impairment under the Texas Constitution on his contract with his clients. The
constitutionality of a statute or ruling under a statute is a question of law, which we
review de novo. See State v. Hodges, 92 S.W.3d 489, 494 (Tex. 2002).
Matlock presented a similar contention in Matlock v. Hill by asserting that the
court could not retroactively apply the Texas Securities Act’s requirements to his
transaction with his clients. 2016 WL 3659988, at *4. Relying on the Texas
Supreme Court’s decision in Arnold, the Amarillo Court of Appeals rejected
Matlock’s contention. The court in Arnold noted that it was interpreting and
applying a very old law rather than creating a new law. 464 S.W.3d at 685. We
agree with our sister court that the Texas Supreme Court’s decision in Arnold
precludes Matlock’s claim of an improper retroactive application of the Texas
Securities Act.
Moreover, the breach of contract ground of recovery found by the trial court
did not depend on any statutory violations. The trial court simply found that
“Defendant Matlock acted as an agent of the A&O entities involved and breached
the contracts.” Matlock’s claim of an improper retroactive application of the Texas
Securities Act has no bearing on his liability for breach of contract. Accordingly,
we overrule Matlock’s third issue.
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 As noted previously, the breach of contract ground of recovery was an
independent ground supporting the trial court’s award of damages. We do not reach
Matlock’s first, second, fourth, fifth, or sixth issues because our resolution of
Matlock’s third issue is dispositive on the question of his liability for the damages
awarded by the trial court. See TEX. R. APP. P. 47.1.
Matlock’s seventh issue addresses the trial court’s award of attorney’s fees.
The trial court awarded Appellees attorney’s fees of $252,111.25. The trial court
specified that the attorney’s fees awarded to the Fitzgeralds were based on the breach
of contract ground of recovery and that the attorney’s fees awarded to the
Narramores were based on the grounds of recovery of breach of contract and
violations of the Texas Securities Act. Accordingly, the breach of contract ground
of recovery was also an independent ground supporting the award of attorney’s fees
to Appellees.
Matlock initially asserts that any recovery for attorney’s fees for breach of
contract would violate Article 1, section 16. This is essentially the same contention
that he made in his third issue. Our rejection of Matlock’s third issue is dispositive
of this contention. Matlock directs the bulk of his contentions to the manner in which
Appellees’ attorneys calculated their fees. He first asserts that Appellees’ attorneys
failed to adequately reflect the time that was expended in working on the case.
Matlock also asserts that Appellees failed to properly segregate attorney’s fees
between claims that permit attorney’s fees to be recovered and claims that do not
permit a recovery of attorney’s fees. Finally, Matlock contends that Appellees’
attorneys commingled work performed for Matlock v. Hill with the attorney’s fees
sought in this matter.
An award of attorney’s fees generally is within the discretion of the trial court.
El Apple I, Ltd. v. Olivas, 370 S.W.3d 757, 761 (Tex. 2012). Appellees used the
“lodestar” method to prove their claim for reasonable and necessary attorney’s fees.
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Under the lodestar method, a two-step process is required to determine what
constitutes a reasonable attorney’s fee. Id. at 760. First, the court must determine
the reasonable hours spent by the attorneys in the case and a reasonable hourly rate
for such work. Id. The reasonable hours determined are then multiplied by the
applicable rate, the result of which is the lodestar. Id. A party that seeks an award
of attorney’s fees using the lodestar method bears the burden of proof. Id. at 761.
Such proof should include evidence “of the services performed, who performed them
and at what hourly rate, when they were performed, and how much time the work
required.” Id. at 764.
Appellees’ attorneys submitted affidavits detailing their attorney’s fees in this
case, which totaled $282,111.25. The affidavits were broken down into the
following categories: Depositions, Pretrial Hearings, Mediation, Trial, Pleadings,
Discovery, and Correspondence. For many of the categories, the attorneys estimated
the time expended on the related tasks based upon the number of pages they prepared
or reviewed. For example, the attorneys estimated that they spent three minutes per
page to review deposition transcripts and exhibits in preparing for depositions. The
attorneys estimated that they spent thirty minutes per page drafting pleadings, thirty
minutes per page drafting discovery, thirty minutes per page writing correspondence,
five minutes (or one minute—depending on the attorney) per page reviewing
pleadings, five minutes per page reviewing discovery requests and responses, five
minutes (or two minutes—depending on the attorney) per page reviewing evidence,
fifteen minutes (or five minutes—depending upon the attorney) per page reviewing
correspondence, and one minute per e-mail. The attorneys then multiplied the
number of pages prepared or reviewed for various work tasks by these “per page
time estimates” to calculate the amount of time expended.
Matlock opposed Appellees’ attorney’s fees affidavits. He presented the same
argument to the trial court that he is asserting on appeal—that Appellees’ attorneys
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are charging “by the page” rather than upon the time actually expended on
representing Appellees. The trial court conducted a hearing on attorney’s fees.
Appellees’ counsel asserted that the attorneys were “very conservative on [their]
time assessments.” In this regard, the affidavits noted various matters that were not
included in the calculations, such as time preparing for depositions, travel delays,
witness preparation, and early correspondence in the cases. The trial court
subsequently awarded Appellees attorney’s fees of $252,111.25.2
When a party seeks a recovery of attorney’s fees under the lodestar approach,
the requirements of El Apple apply. See Long v. Griffin, 442 S.W.3d 253, 255 (Tex.
2014) (per curiam) (applying El Apple to a request for attorney’s fees under TEX.
CIV. PRAC. & REM. CODE ANN . § 38.001 (West 2015)); see also Arrington v. Aranda
Pools, Inc., No. 11-15-00207-CV, 2017 WL 3923662, at *3 (Tex. App.—Eastland
Aug. 31, 2017, no pet. h.) (same). In El Apple, the court stated that “[t]he starting
point for determining a lodestar fee award is the number of hours ‘reasonably
expended on the litigation.’” El Apple, 370 S.W.3d at 762 (quoting Hensley v.
Eckerhart, 461 U.S. 424, 433 (1983)). However, neither El Apple nor any of the
other Texas Supreme Court cases interpreting it have required that time records
prepared contemporaneously when the work is performed must be admitted into
evidence to support a recovery of attorney’s fees under the lodestar approach. City
of Laredo v. Montano, 414 S.W.3d 731, 736 (Tex. 2013) (“El Apple does not hold
that a lodestar fee can only be established through time records or billing
statements.”).
The court noted in El Apple that the attorneys in that case may not have
contemporaneous billing records available in light of the new approach it adopted

2
The trial court indicated in its letter ruling that it reduced the amount of attorney’s fees awarded
to Appellees by $30,000 based on its determination that this amount was only attributable to the common
law fraud claim.

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for the lodestar method. El Apple, 370 S.W.3d at 764. Accordingly, it remanded
the case so that the attorneys could attempt to reconstruct their work in the case. Id.;
see Long, 442 S.W.3d at 255–56. The court’s opinion in El Apple was only issued
within a month of the filing of the underlying proceedings in this case, and the Texas
Supreme Court’s subsequent opinions in Long and Montano were issued during the
pendency of the case. Furthermore, some of our sister courts took the position that
the requirements of El Apple were restricted to only the claims referenced in El
Apple. See Ferrant v. Graham Assocs., Inc., No. 02-12-00190-CV, 2014 WL
1875825, at *7–8 (Tex. App.—Fort Worth May 8, 2014, no pet.) (mem. op.)
(holding that El Apple did not apply in a breach of contract case).3 Accordingly, the
novelty and uncertain application of El Apple may have also affected the manner in
which Appellees’ attorneys kept track of their time during the pendency of this case.
El Apple stands for the proposition that generalities about tasks performed by
attorneys provide insufficient information for the factfinder to meaningfully review
whether the tasks and hours were reasonable and necessary under the lodestar
method. Long, 442 S.W.3d at 255. Accordingly, the attorney must provide more
evidence other than just the total number of hours worked on a case. Id. Instead,
the attorney must provide evidence of the time devoted to the specific tasks
performed. Montano, 414 S.W.3d at 736–37.
Unlike the evidence in Long, Montano, and El Apple, the affidavits prepared
by the attorneys in this case detail time spent on specific tasks. While the attorneys
did not present contemporaneous time records, they did provide an estimate of the
time they expended on various tasks using the pages prepared or reviewed as a
reference point for their estimations. The court noted in El Apple that appellate
courts generally accord “considerable deference” to a trial court’s findings regarding

3
Appellees cited Ferrant at the hearing on attorney’s fees.

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whether counsel’s claimed hours are excessive, redundant, or unreasonable. 370
S.W.3d at 763–64. This deference is attributable to the trial court’s superior
understanding of the case and the factual matters involved. Id. at 764. We conclude
that the trial court’s acceptance of the time estimates provided by Appellees’
attorneys on the specific tasks they performed is also entitled to deference. The
attorneys’ affidavits in this case provided sufficient information for the trial court to
perform a meaningful review as required by El Apple.
Finally, Matlock complains that the trial court failed to properly segregate the
attorney’s fees between the claims asserted by Appellees. Specifically, Matlock is
asserting that Appellees sought attorney’s fees for their claim of common law fraud.
Matlock also asserts that Appellees failed to segregate work that overlapped the
work performed in Matlock v. Hill. As noted previously, the trial court reduced the
attorney’s fees sought by Appellees by $30,000 for work it determined was
attributable to the common law fraud claim. The trial court also found in its findings
of fact that no attorney’s fees were awarded for the common law fraud claim. The
trial court’s determination of the attorneys’ time spent on compensable claims versus
non-compensable claims is a matter within the trial court’s discretion. See id. The
record does not show that the trial court abused its discretion in making these
determinations. We overrule Matlock’s seventh issue.
This Court’s Ruling
We affirm the judgment of the trial court.

October 26, 2017 JOHN M. BAILEY
Panel consists of: Wright, C.J., JUSTICE
Willson, J., and Bailey, J.

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