Joel Flores, Individually and in a Representative Capacity and Criselda Flores, Individually and in a Representative Capacity v. Gonzalez & Associates Law Firm, Ltd.

Citation: Not availableDocket: 13-15-00205-CV

Court: Court of Appeals of Texas; October 6, 2016; Texas; State Appellate Court

Original Court Document: View Document

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Joel Flores and Criselda Flores, both individually and in a representative capacity, initiated a lawsuit against Gonzalez and Associates Law Firm, Ltd., claiming breach of fiduciary duty, common law fraud, and fraud by non-disclosure. In response, Gonzalez filed a cross-claim for breach of contract and sought a declaratory judgment. The trial court granted Gonzalez's motion for summary judgment, dismissing the Flores Family's claims, and subsequently ruled in favor of Gonzalez in a bench trial, awarding damages, attorney's fees, and prejudgment interest.

The Flores Family raised three issues on appeal: (1) the existence of genuine material facts regarding their breach of fiduciary duty claim; (2) an alleged abuse of discretion by the trial court in excluding evidence that they had discharged Gonzalez from the legal services contract for cause; and (3) a claim that the award of unsegregated attorney's fees was an abuse of discretion and lacked sufficient legal support. The appellate court affirmed the trial court's decisions.

Background details include the tragic drowning of the Flores Family's son at a swimming pool in a summer camp program, leading to their referral to Gonzalez by attorney Nereida Lopez-Singleterry. After initial discussions, Gonzalez assisted in drafting a letter to the insurance counsel for the McAllen Country Club, seeking confirmation of insurance policies and coverage. The response from counsel, John Griffith, clarified that he had not made any offers or guarantees regarding the insurance payout, countering the Flores Family's interpretations of earlier communications.

She is permitted to hire any attorney of her choice and select any contingency fee arrangement. The investigation is in its early stages, and efforts are being made to provide information to both the insurance company and the client for proper evaluation. On July 29, 2013, Lopez-Singleterry emailed a letter to Criselda. Following a review of Griffith’s response, Gonzalez advised the Flores Family to file a lawsuit against MCC to seek recovery. Subsequently, a legal services contract was established, where Gonzalez agreed to investigate and pursue claims against MCC for a 25% contingent fee if settled within sixty days, or 31% if settled thereafter, with no fee if settled before August 1, 2013. A lawsuit was filed against MCC on August 5, 2013, and it was revealed that MCC had two insurance policies totaling $6 million. The Flores Family accepted Gonzalez’s recommendation to demand $8.5 million in damages from MCC. On December 19, 2013, Gonzalez communicated an offer from MCC to settle for $6 million plus an additional $250,000 for a charity chosen by the Flores Family. Later that day, Gonzalez advised the family to accept the offer, leading to the execution of a Rule 11 settlement agreement on December 26, 2013, which included contributions to a charity, acceptance of the $6 million, pool safety recommendations, a formal apology from MCC, and a forgiveness ceremony.

On May 9, 2014, the Flores Family discharged Gonzalez as their attorney, citing a loss of trust. Gonzalez responded by filing a plea in intervention to enforce the legal services contract. After hiring new counsel, the Flores Family reasserted claims against MCC and added causes of action against Gonzalez for breach of fiduciary duty, fraud, and fraud by non-disclosure, seeking disgorgement of fees and rescission of the Rule 11 settlement agreement. MCC countered with a breach of contract claim against the Flores Family to enforce the settlement. Gonzalez filed a motion for summary judgment to dismiss the Flores Family’s claims, supported by his affidavit, the legal services contract, the settlement agreement, and deposition testimony. His motion argued that the Flores Family could not demonstrate any breach of fiduciary duty or resulting injury.

Gonzalez contended that the summary judgment evidence demonstrated he did not breach his fiduciary duty. The Flores Family countered with a response bolstered by Criselda's affidavit, exhibits, Gonzalez's deposition, and his interrogatory answers. They asserted that this evidence raised a genuine issue of material fact regarding the claims in Gonzalez's motion. Specifically, they alleged that Gonzalez: 1) misrepresented and failed to disclose the full contents of the Griffith letter; 2) did not disclose his wife's membership and shareholding in MCC; 3) failed to reveal his wife's ownership interest in a service-providing company for the litigation; 4) did not recover their son’s belongings from MCC; 5) misrepresented MCC's net worth; and 6) sought a 31% fee despite verbally agreeing to a 25% contingency fee. The Flores Family argued that proving injury was not necessary for their breach of fiduciary duty claim. While Gonzalez's motion was pending, the Flores Family accepted a Rule 11 settlement agreement that resolved all claims against MCC. The trial court subsequently granted Gonzalez's motion for summary judgment, dismissing the Flores Family's claims.

After their claims were dismissed and beyond the pleading deadline, the Flores Family requested leave to file a sixth amended petition to add a breach of contract claim, alleging an oral modification of the legal services contract to a 25% contingent fee, which Gonzalez breached by seeking 31%. The trial court denied this motion. In January 2015, the court issued a second amended docket control order extending the pleading deadline, after which the Flores Family filed a supplemental answer and counterclaim alleging breach of contract and claiming they discharged Gonzalez for cause. A pretrial hearing revealed confusion about the deadline extension, and the court later corrected the order, removing the extension. The Flores Family's subsequent motion for leave to file a supplemental answer and counterclaim was denied. During a pretrial hearing, the Flores Family agreed not to pursue the misrepresentation claims listed in Gonzalez's motion, leading the trial court to determine these issues were resolved and to move forward.

The trial court granted Gonzalez’s motion to exclude evidence related to the Flores Family’s reasons for discharging him, leading to a bench trial on Gonzalez's breach of contract claim. The court ruled in favor of Gonzalez, awarding him $1,951,829.30 in damages, $82,082.59 in prejudgment interest, and $490,260.67 in attorney's fees, along with contingent appellate fees. The Flores Family appealed, arguing that the trial court erred in granting summary judgment as there were genuine issues of material fact regarding Gonzalez's alleged breach of fiduciary duty, which required absolute candor. 

The standard of review for summary judgment is de novo. The moving party must show no genuine issues of material fact exist and is entitled to judgment as a matter of law. If successful, the burden shifts to the non-movant to raise a genuine issue of material fact. A no-evidence summary judgment can be sought by a party without the burden of proof, requiring the trial court to grant the motion unless the non-movant produces evidence to the contrary. 

To establish a breach of fiduciary duty, a plaintiff must demonstrate the existence of a fiduciary relationship and a breach. Attorneys have a fiduciary duty to their clients by law, focusing on whether an attorney improperly benefited from the representation. Common breaches include failing to disclose conflicts of interest, misappropriating client funds, prioritizing personal interests, and misrepresentations.

Gonzalez sought summary judgment on the Flores Family's breach of fiduciary duty claim, arguing they lacked evidence of a breach. The Flores Family countered with evidence they believe indicates a breach, prompting a detailed examination of their allegations. 

1. **Griffith Letter**: The Flores Family claimed Gonzalez did not fully disclose the contents of a July 26, 2013 letter from Griffith, specifically that Griffith anticipated a quick settlement and suggested a 10% fee if settled within six months. However, it was determined that the Flores Family failed to provide evidence of a breach, as Criselda had been informed by Lopez-Singleterry about Griffith's statements, and Lopez-Singleterry had shared the letter with both Gonzalez and Criselda. Furthermore, Gonzalez's characterization of the letter as “rude” and his assertion that litigation was necessary reflected his subjective interpretation rather than misrepresentation.

2. **Membership of MCC**: The Flores Family alleged that Gonzalez did not disclose that his wife was a member of MCC, which could indicate a conflict of interest. However, they failed to show that Gonzalez gained any benefit from this non-disclosure. Contrarily, evidence revealed that Gonzalez did disclose a family membership in MCC. Criselda's testimony acknowledged that she had asked Gonzalez about his membership, to which he responded affirmatively, indicating he had disclosed the potential conflict.

3. **Ownership of APT**: The Flores Family argued that Gonzalez did not disclose his wife's ownership of Advanced Presentation Technologies (APT), which provided litigation support. They claimed this constituted “self-dealing.” However, the expense report provided to the Flores Family indicated that Gonzalez did not charge them for APT's services, demonstrating that neither he nor his wife benefited improperly from APT’s involvement.

In conclusion, the court found that the Flores Family did not present sufficient evidence to establish a genuine issue of material fact regarding Gonzalez's alleged breach of fiduciary duty.

Texas courts maintain that a breach-of-fiduciary-duty claim assesses whether an attorney improperly benefited from representing a client. Evidence presented by the Flores Family did not demonstrate that Gonzalez engaged in self-dealing or breached his fiduciary duty. The Flores Family sought Gonzalez's assistance in recovering their son’s belongings from MCC, but after a representative from Gonzalez's office reported they could not be found, Criselda managed to locate the items herself. This task fell outside the scope of Gonzalez's representation obligations. Attorney duties are confined to the attorney-client relationship's parameters, and while they must inform clients of material matters, this does not extend to issues outside their representation.

Regarding MCC’s net worth, the Flores Family argued that Gonzalez misrepresented it as under $1 million, influencing their settlement decision. However, MCC’s own sworn response indicated a net worth of $922,721, and the Flores Family did not provide evidence suggesting Gonzalez had additional conflicting information. 

On the matter of the contingency fee, the Flores Family claimed Gonzalez misrepresented his fee as 25%, even though the signed contract stipulated a 31% fee. Although Criselda sought to negotiate his fee post-contract, the evidence indicated that the agreed fee was 31%. Discussions about modifying the contract do not constitute a breach of fiduciary duty.

In summary, the Flores Family failed to provide evidence supporting their claims of Gonzalez’s breach of fiduciary duty, leading to the trial court's correct summary judgment in favor of Gonzalez. Additionally, the trial court did not abuse its discretion by excluding evidence regarding the Flores Family's termination of Gonzalez for cause, as it was pertinent to whether they breached the fee agreement.

The admission or exclusion of evidence is at the trial court's discretion, and an abuse of discretion occurs only if the court acts arbitrarily or without guiding principles. To prove such abuse, an appellant must show that (1) the evidence was wrongly excluded, (2) it was critical to a material issue and not cumulative, and (3) the error likely led to an improper judgment. If a legitimate basis for the ruling exists, it must be upheld. 

An affirmative defense must be timely pleaded, or it is waived. The Flores Family failed to plead an affirmative defense regarding firing Gonzalez for cause before the deadline and their subsequent request for leave was denied without challenge on appeal. The issue of good cause is defensive and related to the attorney's rights under the employment contract. The burden of proof for any contingency that would excuse performance lies with the party seeking to avoid the contract. The Flores Family's failure to plead good cause results in a waiver of the defense, leading to the trial court's proper exclusion of related evidence. Even assuming there was an error, it did not likely cause an improper judgment. The evidence presented, including Criselda's and Joel’s depositions, was cumulative and did not introduce new allegations.

Evidence provided by the Flores Family does not challenge any elements of Gonzalez’s breach of contract claim, which requires proof of a valid contract, performance or tender by the plaintiff, breach by the defendant, and damages suffered by the plaintiff. The evidence instead relates to the Flores Family’s claims of breach of fiduciary duty, fraud, and fraud by non-disclosure, which were previously resolved through summary judgment. 

Regarding attorney’s fees, the Flores Family contends that the trial court abused its discretion by awarding unsegregated fees that lack sufficient legal support. The standard of review for such awards is based on whether the trial court acted without following guiding principles. Claimants must segregate attorney’s fees between recoverable and unrecoverable claims, demonstrating fees incurred specifically for claims allowing recovery. Fees related solely to unrecoverable claims must be segregated unless they advance both types of claims with intertwined facts.

The Flores Family acknowledges that attorney's fees can be awarded in breach of contract and declaratory judgment actions but claims that Gonzalez did not properly segregate fees related to his frivolous pleading claim. The trial court found the factual matters too intertwined to segregate, thus awarding reasonable and necessary attorney's fees to Gonzalez.

The trial court upheld Gonzalez's breach of contract claim while asserting that the Flores Family's claims of breach of fiduciary duty, fraud, and fraud by non-disclosure were deemed frivolous. This assertion was necessary for Gonzalez to advance his breach of contract claim, allowing for the recovery of intertwined attorney’s fees. The legal sufficiency standard allows for sustaining a challenge only when evidence is completely absent, legally barred, merely scintilla, or conclusively contradictory to a vital fact. Texas courts evaluate attorney’s fees based on eight factors, including the complexity of the case, customary fees, and the attorney's experience. The trial court is not obligated to consider evidence for each factor.

Gonzalez provided evidence regarding these factors through itemized billing records and testimony from Robert Valdez, an experienced attorney who confirmed the complexity of the litigation, absence of duplicative work, and reasonable fees within the local market. Valdez praised the active engagement of the attorneys and their good reputations, concluding that the results obtained were favorable. Given the evidence presented, the court found sufficient justification for the attorney’s fee award and ruled that the trial court did not abuse its discretion in granting unsegregated attorney’s fees. The judgment was affirmed.