Charles Matlock, Individually and D/B/A Matlock Insurance Agency v. Kenneth Fitzgerald, Gayle Fitzgerald, Buford Narramore, and Sharon Narramore
11-15-00211-CV
| Tex. App. | Oct 26, 2017Background
- Plaintiffs (Kenneth & Gayle Fitzgerald; Buford & Sharon Narramore) invested in A&O life-settlement products marketed to them by insurance agent Charles Matlock; Fitzgeralds invested $100,000 and Narramores $272,758.39. A&O later filed bankruptcy and plaintiffs recovered only small fractions of their investments.
- Trial court found Matlock liable and awarded plaintiffs the remaining principal losses ($89,557.93 to Fitzgeralds; $243,326.75 to Narramores) and $252,111.25 in attorney’s fees.
- Plaintiffs asserted common-law fraud and breach of contract; the Narramores also asserted violations of the Texas Securities Act (life settlements characterized as securities).
- Matlock marketed the product using A&O materials and a "managing member" business card; TDI warned him he was marketing an unauthorized product and that the purported bond issuer (PCI) was not authorized to do business in Texas.
- The trial court ruled for plaintiffs on all theories; on appeal Matlock raised seven issues (fraud, breach, securities-act violations, and attorney’s fees). The appellate court affirmed.
Issues and Key Positions
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1. Common-law fraud (Issues 1–2) | Matlock knowingly misrepresented safety/returns and failed to disclose negative info; induced investments | Matlock denied knowing adverse facts and contended no duty to investigate product credentials | Not reached on merits; independent breach-of-contract finding upheld judgment against Matlock |
| 2. Breach of contract / retroactivity of securities rules (Issue 3) | Contracts were breached by Matlock acting as A&O agent; retroactive application of securities law not material to contract liability | Retroactive application of securities-law principles would impair contracts under Tex. Const. art. I, §16 | Held against Matlock: breach-of-contract finding stands; Arnold controls so retroactivity argument fails and contract remedy is valid |
| 3. Texas Securities Act violations (Issues 4–6) | Product constituted a security (life settlement); Matlock sold unregistered securities and used misleading advertising | Matlock argued he was not subject to securities law (claimed managing-member status; thought product was insurance) | Not reached on merits because breach-of-contract independent ground was sufficient to affirm |
| 4. Attorney’s fees award (Issue 7) | Fees were reasonable and supported by lodestar affidavits estimating time by pages; sought $252,111.25 after $30,000 reduction | Matlock argued inadequate time records, improper "by-the-page" estimates, failure to segregate fees and overlap with related Matlock v. Hill work | Held for plaintiffs: trial court did not abuse discretion; lodestar proof met El Apple requirements and court reasonably reduced and segregated fees |
Key Cases Cited
- Life Partners, Inc. v. Arnold, 464 S.W.3d 660 (Tex. 2015) (life-settlement agreements are securities; holding applies retroactively)
- El Apple I, Ltd. v. Olivas, 370 S.W.3d 757 (Tex. 2012) (lodestar method requires proof of reasonable hours and rates; trial court must meaningfully review fee evidence)
- Long v. Griffin, 442 S.W.3d 253 (Tex. 2014) (El Apple principles applied to attorney-fee claims under Section 38.001)
- City of Laredo v. Montano, 414 S.W.3d 731 (Tex. 2013) (El Apple does not require contemporaneous time records; attorneys may reconstruct time with adequate detail)
- Hensley v. Eckerhart, 461 U.S. 424 (U.S. 1983) (lodestar calculation starts with reasonably expended hours times reasonable rate)