After ruling that a paralegal’s alleged deal to split fees with a Houston lawyer for clients he brought in connection with the 2010 BP Deepwater Horizon oil spill was illegal, a Texas Court of Appeals nevertheless allowed the paralegal to move forward with a suit seeking at least some portion of the $503,080 he claims to be owed.
Houston’s First Court of Appeals decision in Luong v. McAllister focuses on Truyen Luong, who alleges he entered into an oral contract with lawyer Robert A. McAllister and his law firm in 2010 for a fee-sharing agreement in which Luong would be paid a percentage for bringing in clients and working on their files.
Although Luong is not a licensed Texas attorney, he described his work as that “of a professional lawyer” and claimed he would get the client and work the file from “A to Z,” alleging McAllister did not do any work except signing claims that were submitted to BP in order to get paid, according to the court.
According to the court, Luong said he did not know the exact number of hours he worked but noted it was “a lot,” and claimed that he often worked 14 hours per day, and that McAllister still owes him “not less than $503,080.”
McAllister, for his part, denies entering into such an agreement or allowing Luong to do all the work on client files.
Luong filed a breach-of-contract claim asserting he performed his obligations to McAllister, but McAllister refused to pay. Luong also lodged claims for quantum meruit and unjust enrichment to recover the reasonable value of services he provided to the lawyer and his firm.
McAllister filed a motion for traditional summary judgment, arguing that he was entitled to a judgment as a matter of law because the alleged agreement Luong relies on is illegal, because it is against the law in Texas for lawyers to split fees with nonlawyers. And the alleged solicitation of clients for a lawyer by a nonlawyer for fees is also illegal under the state’s barratry statute.
The trial court granted McAllister’s summary judgment motion, which Luong appealed to the First Court.
In their Aug. 2 decision, the First Court ruled that the trial court was correct to dismiss Luong’s breach-of-contract claim because it was void due to illegality.
But the appeals court refused to dismiss Luong’s claims for quantum meruit and unjust enrichment, reasoning he could be paid for work that did not run afoul of the law.
“In this case, the only basis McAllister presented to the trial court for granting summary judgment to dismiss Luong’s claims for quantum meruit and unjust enrichment was that illegal void contracts cannot be enforced in equity because of a lack of clean hands,” wrote Justice Terry Jennings.
Jennings note that, while Luong couldn’t pinpoint the hours he worked, McAllister’s traditional summary judgment motion and supporting evidence did not conclusively establish that Luong had been reasonably compensated for legitimate work.
“Simply because Luong may not have been entitled to compensation based on the fee-sharing agreement does not mean that he is not entitled to reasonable compensation for the work he performed for McAllister,” Jennings wrote. “The evidence in the record raises a genuine issue of material fact as to whether Luong can prove his claims for quantum meruit and unjust enrichment without relying on the void contract or any allegedly illegal acts on his part. Accordingly, we hold that the trial court erred in granting summary judgment.”
In a footnote to the opinion, Jennings noted that while McAllister asserts that Luong had presented no evidence of the work he performed for which he was not compensated, McAllister did not file a no-evidence summary judgment motion in the case.
Scott Rothenberg, a Houston solo practitioner who represents Luong on appeal, is pleased that his client will be allowed to pursue his quantum meruit claim and unjust enrichment claims against McAllister.
“There is still a cause of action that allows to him to recover all of the work he did that was legal,” Rothenberg said. “That’s been the law in the State of Texas for decades. Those are well plowed fields. I don’t think there is anything novel here. Obviously a party cannot recover for services provided that may be illegal.’’
Wayne Paris, a Houston attorney who represents McAllister, said he has not decided whether to appeal the First Court’s decision or return to the trial court, where he expects to file a no-evidence motion for summary judgment to dismiss Luong’s remaining claims.
“My client has always denied any allegation of fee-splitting,” said Paris, adding that McAllister denies Luong’s claim that the non-lawyer did all the work on the cases.
“We moved for traditional summary judgment because the plaintiff testified to that and he was barred from bringing it. We moved for traditional summary judgment based on the fact that was the plaintiff’s position. My client has never given any testimony that he agreed to any of that. We just said ‘Plaintiff, if that is your position, you’re not entitled to recovery,’’ Paris said.
“The whole heart of this is whether the illegal act, if you believe it, precludes his contract claim. But whether or not you believe that illegal act is different from the quantum meruit claim,” Paris said. “Our position is that there could have been no work on the quantum meruit unless they show how the plaintiff got those cases.’’