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Plaintiffs lawyers are eagerly watching a Waco, Tex., court — and it has nothing to do with a smoldering compound or government reports. On July 26, Texas’ 10th Court of Appeals issued a ruling that could render contingent-fee contracts across the state voidable. “If this holds up on appeal, it is huge,” says Randall O. Sorrels, a partner in Houston’s Abraham, Watkins, Nichols, Sorrels, Matthews & Friend and president of the Houston Trial Lawyers Association. “It is a case of first impression under the government code, and plaintiffs’ lawyers need to stop and look at what’s going on.” The case arose from a 1995 industrial accident that left a worker a quadriplegic. Five days later, while the worker lay in a hospital in a semi-conscious state, the worker’s wife signed contingent-fee contracts with lawyer J.W. Stringer, according to the opinion. Stringer then enlisted lawyer Scott W. Sanes to help with the case. The following week, they filed suit against five insurance carriers on behalf of the worker and his wife. But a week after the filing, Sanes and Stringer received letters from the worker’s wife informing the lawyers that the couple had retained other counsel — Clayton Clark and Ernest Cannon, the opinion said. In February 1997, Clark settled the case for nearly $7 million; Sanes and Stringer received only $3,881 as reimbursement for out-of-pocket expenses, according to the opinion. In March, Sanes sent letters to all parties requesting payment of their 40 percent contingent fee. In the ensuing litigation, the 278th District Court in Madison County, Tex., granted summary judgment on the contingent-fee contract issues, denying Sanes and Stringer a percentage of the settlement. MAKING THE DECISION In Sanes, et al. v. Clark, et al., the 10th Court upheld this ruling. The most controversial part of the opinion, authored by Chief Justice Rex D. Davis and joined by Justices Bill Vance and Tom Gray, centered around Stringer’s contact with the worker and his wife. The court first established that the letter sent by the worker’s wife “clearly and unequivocally informed Sanes and Stringer that she was terminating the attorney-client relationship created by the contracts she signed with Stringer and arguably by Stringer’s retention of Sanes.” The court quickly dispensed with Sanes’ argument, saying that because he had no written contract with the couple, his relationship with them was voidable under the Texas Government Code and was, in fact, voided by the letter. The court moved on to Stringer’s claim next. The court relied on the language of Stringer’s contract with the worker and his wife in denying his claim to a contingent fee. “One of the grounds on which appellees challenge Stringer’s contracts with [the couple] is that the contract authorizes Stringer to settle the case without the consent of his clients,” wrote the court. That provision, it ruled, “clearly violates” Texas Disciplinary Rule of Professional Conduct 1.02 (a) (2), as reprinted in the Texas Government Code. This rule, said the court, mandates that a lawyer abide by the client’s decision as to whether to accept a settlement offer. Accordingly, the court held that because the contract contained a provision contrary to the disciplinary rules, it was voidable — and had been voided by the letter. But Houston sole practitioner Timothy A. Hootman, who co-represented Sanes and Stringer, disagrees with disposing of the case on summary judgment. He says that a question of fact exists as to whether the worker and his wife wanted out of the contract for the reasons cited by the court. “This case squarely holds that if an attorney contingent-fee agreement is obtained and it includes a provision that violates the Bar rules, that the contract is voidable, even if [the clients] don’t know the provision is there,” Hootman says. “They can improperly breach the contract and later, during litigation, discover there is a reason they could have legally breached it and say, ‘I want to use that.’ “ Hootman has already filed a motion for rehearing. If that is denied, he says the next step would be the Texas Supreme Court. “I don’t think the supreme court is going to look at it,” posits Thomas R. McDade, of Houston’s McDade, Fogler, Maines. McDade was among the cadre of lawyers from Dallas, Houston, and Chicago that represented appellees Cannon, Clark, and the five insurance companies in the case. “I’ve had more than my share of experiences with ethics, and I am very familiar with them — I believe they ought to be honored and respected and followed,” McDade says. “I think it’s a victory for what’s right and for the way it ought to be.” In the meantime, Sorrels says he will bring the case to the attention of members of the HTLA at its next meeting, and he advises all plaintiffs’ lawyers to take action. They should, he says, “review all contingent-fee contracts in their entirety to make sure they do not violate a single disciplinary rule.”

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