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Hell has no fury like a lawyer scorned. When an Austin, Texas, firm sued a former client — who is an attorney — for alleged nonpayment of fees for representing the client in a lengthy arbitration proceeding, the firm may have gotten more than it bargained for. On Jan. 24, Melissa Hamilton sued Richard “Rick” Harrison, Daniel Byrne and Thomas Fritz, partners in Fritz, Byrne, Head & Harrison, which had sued Hamilton to collect a debt that the firm alleges she owes. Also named as a defendant in Hamilton v. Harrison, et al. is John Schwartz, a partner in the Austin office of Locke Liddell & Sapp; he is FBHH’s attorney in the debt collection suit against Hamilton and was one of the defense lawyers in the underlying arbitration proceeding in which Hamilton was a defendant. Hamilton’s suit, filed in a Travis County district court, is the latest action in litigation that began in March 2004, when FBHH sued Hamilton for approximately $60,000 in fees that the firm alleges she owes for the legal services that Harrison provided Hamilton in a securities suit in which she was a defendant. The firm’s debt collection action, Fritz, Byrne, Head & Harrison v. Hamilton, also is pending in a Travis County district court. Hamilton answered FBHH’s suit and filed a counterclaim against the firm in August 2004. In her counterclaim, Hamilton alleges that she already has paid the firm approximately $100,000. Hamilton says in an interview that an insurance policy that covered her and other defendants in the underlying securities case paid FBHH about $225,000 on her behalf. Michael Sean Quinn, Hamilton’s attorney, says Hamilton filed the new suit so that she could name the individual attorneys as defendants. Quinn, principal in the Law Firm of Michael Sean Quinn in Austin, says before filing the suit he offered to settle with the defendants if they would pay $165,000 to Hamilton, but that no one took him up on the offer before the Jan. 25 deadline that he set. University of Texas School of Law professor John Dzienkowski, who teaches legal ethics, says Hamilton’s suit is another example of the risk a lawyer runs when suing a client over legal fees. “Lawyers are told, ‘Never ever sue a client for a fee,’” Dzienkowski says. “That’s what every professor tells his students.” Schwartz says FBHH “bent over backwards” to avoid suing Hamilton. He says the firm filed the suit as a last resort after other efforts to resolve the fee dispute were unsuccessful. Dzienkowski says lawyers who do sue clients when a fee dispute arises are likely to get a series of allegations leveled at them, as has happened in Hamilton v. Harrison. “She’s thrown the kitchen sink at them,” Dzienkowski says of the multiple allegations that Hamilton makes in her suit. Hamilton’s original petition lists as causes of action alleged violations of the Deceptive Trade Practices and Texas Debt Collection acts, breach of fiduciary duty, conversion, fraud and conspiracy. She seeks actual damages, mental anguish damages and exemplary damages. Harrison contends that there is “absolutely no merit” to Hamilton’s allegations. “At the end of the day, we will get a judgment for the fees that we’re owed, and she will get a judgment for nothing,” he says. Hamilton alleges in her petition that FBHH has billed services to her account that were not the services she ordered and failed to provide her copies of the bills until May 2003. In an interview, Hamilton contends that FBHH is denying her access to her files from the securities arbitration unless she provides them copies of documents she previously copied from those files. “I’m appalled that my former attorneys would turn against me. I think it undermines the trust in the attorney-client relationship,” Hamilton says. Harrison notes that 353rd District Judge Margaret Cooper denied Hamilton’s motion seeking possession of the client files. Quinn contends that Cooper was wrong in that Jan. 5 ruling. Byrne says Hamilton has not suffered any damages. “Because we have the audacity to say she should pay those old debts to [Harrison], she’s turned on us,” he contends. Fritz, managing partner at FBHH, did not return two telephone calls seeking comment before presstime on Jan. 27. THE UNDERLYING SUIT Many of Hamilton’s allegations stem from the representation that Byrne and Harrison provided to her in Wilson, et al. v. Hicks, et al., a securities case that was filed in a Travis County district court in the summer of 2001. In that litigation, investors in Interfase Capital Partners sued officers and directors of the venture capital partnership, including Hamilton, who was Interfase’s general counsel. The suit was decided in a six-week arbitration proceeding, which concluded in the fall of 2003. Harrison says the plaintiffs were seeking about $45 million in damages from the Interfase defendants. Mark Mitchell of Austin, a Clark, Thomas & Winters shareholder who represented another defendant in the Interfase litigation, says the arbitration panel found no liability on Hamilton’s part. “It was a complete victory for [Hamilton]; she was vindicated,” Mitchell says. Hamilton says the arbitration panel found no liability against her but denied her request that the plaintiffs pay her attorney fees. Among other things, Hamilton alleges in her petition that a “gross disparity” exists between, on the one hand, what she paid and what was paid on her behalf for Harrison and Byrne’s services and, on the other hand, the value she received. In an interview, Hamilton says a $5 million Travelers Insurance policy paid the legal fees of the Interfase officers and directors until the policy’s limits were reached. Hamilton says she initially retained Byrne to represent her in the Interfase litigation but discharged him, because he was representing another defendant. Hamilton says she disagreed with the other defendant’s strategy for the case. Harrison says Hamilton retained him in December 2001. At the time, Harrison was the principal in Rick Harrison & Associates in Austin, but he joined FBHH as a partner in July 2002. One of Hamilton’s allegations in the petition is that Harrison failed to timely inform her of discussions that he would become a partner in Byrne’s firm and the potential conflict of interest that might result, because Byrne still represented the co-defendant with interests adverse to hers. Hamilton says she did not learn that Harrison was joining FBHH until about a week before he made that move. Harrison says Hamilton attended a deck party that FBHH hosted to announce that he had joined the firm and did not appear concerned at that time. “She came up and congratulated me on joining the firm,” he says. Hamilton says Harrison demanded payment for his services about two weeks before the arbitration proceeding was to begin, and she requested to see the billings, which she says she had not previously seen. After looking through 18 months of bills, Hamilton says, she found charges that she didn’t understand. But Harrison indicated he would not continue representing her unless she paid the balance, she says. Harrison says he sent bills to Hamilton each month and made suggestions that she make arrangements to pay for the ongoing defense. In May 2003, he received e-mail from Hamilton notifying him that she would no longer need his services, Harrison says. Hamilton says Byrne agreed to represent her in the arbitration hearing, but he required her to pay him a $50,000 retainer and two additional payments of $25,000 each. In her petition, Hamilton alleges that Harrison, Byrne and Schwartz conspired to deplete the $5 million policy limits — an allegation that Schwartz calls ridiculous. “It was not in any of our interests to deplete the insurance policy, because then we would have to look to our clients [for the fees], which is hard,” he says. Quinn says Hamilton sued Schwartz, because the defense attorneys in the Interfase litigation had a joint defense arrangement. He says Schwartz was in charge of the securities portion of the litigation and represented virtually all the defendants to one degree or another. “Hence, if that’s true, [Schwartz] was her lawyer, too,” Quinn says. Mitchell says the joint defense arrangement was designed to protect all the participating lawyers’ clients, so that the lawyers could speak freely on matters, such as strategy. “There was never an indication or hint of joint representation throughout the proceeding,” Mitchell says. Schwartz says lawyers in joint defense arrangements probably owe some duties to nonclient defendants, such as the duty not to disclose their confidential information. But Schwartz says a lawyer in such an arrangement doesn’t owe the same duty to other lawyers’ clients as he owes to his own client. In November 2004, then-200th District Judge Paul Davis denied Hamilton’s motion to disqualify Schwartz and Locke Liddell from representing FBHH in the fee dispute. Quinn contends that Davis was wrong and cites the Texas Supreme Court’s 1996 decision in National Medical Enterprises Inc., et al. v. Godbey. “The attorney’s duty to preserve confidences shared under a joint defense agreement is no less because the person to whom they belong was never a client,” Justice Nathan Hecht wrote for high court in its 7-2 decision. The Supreme Court also found in Godbey that the challenged lawyer and his firm’s representation of clients in a new matter would be adverse to a client that the lawyer had previously represented. The dissenters were then-Justices James A. Baker and Craig Enoch. Schwartz says that, by naming him as a defendant in her suit, Hamilton may achieve what she failed to achieve with the motion to disqualify him. “It’s an issue to be careful about,” he says. “Certainly it triggers the conflict of interest rules,” Dzienkowski says of Hamilton’s suit. Under Texas Disciplinary Rule of Professional Conduct 1.06(b)(2), a lawyer is prohibited from representing a person if the representation of that person appears to be or becomes adversely limited by the lawyer’s or his firm’s own interests. Dzienkowski says Schwartz must determine whether the fact that he has been named as a defendant in the suit causes a material effect on how he’s going to represent his client, FBHH. If Schwartz determines there would be no material effect on FBHH, he can ask for the firm’s consent to continue the representation after making full disclosure, Dzienkowski says.

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