Royston, Rayzor, Vickery & Williams, L.L.P. v. Lopez, 443 S.W.3d 196

Background

Royston was retained by Francisco López to represent him in a common-law marriage/divorce matter and to pursue claims against López's common-law wife after she won $11 million in the lottery.
The Employment Contract granted Royston a 20% contingency fee of any gross recovery before expenses and made López responsible for all costs regardless of outcome, with Royston retaining the right to withdraw as counsel at any time for any reason.
The contract includes an arbitration clause requiring disputes arising out of the agreement to be arbitrated in Nueces County, Texas, under AAA rules, with an exception for Royston’s fee and expense claims.
López later sued Royston for malpractice, gross negligence, fraud, breach of contract, and negligent misrepresentation, alleging Royston misled him and failed to zealously pursue his potential community-property claims.
Royston moved to compel arbitration under the Texas Arbitration Act and, alternatively, common-law arbitration; López responded with affirmative defenses to arbitration.
The trial court denied Royston’s motion to compel arbitration, and the matter was appealed and consolidated with a mandamus proceeding which challenged the same ruling; the appellate court issued an order affirming the trial court and denying mandamus relief.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the trial court abused its discretion by denying arbitration	Lopez argues the dispute falls within a valid arbitration agreement.	Royston contends there is a valid arbitration agreement that covers the malpractice claims.	No; the court affirmed the trial court’s denial of arbitration, finding the agreement unconscionable and not enforceable at that stage.
Whether a legal malpractice claim is a personal-injury claim under the TAA	Lopez contends malpractice claims are personal-injury claims that must be arbitrated only under § 171.002.	Royston contends the issue should be decided in light of precedent permitting attorney-client arbitration and that the contract covers the dispute.	Affirmed the ruling on this issue in favor of not treating the malpractice claim as a personal-injury claim under § 171.002 for purposes of mandatory arbitration. (Consequently, the arbitration issue remains.)
Whether the decision relied on an ethics opinion to require disclosure before entering arbitration	Lopez asserts that ethics opinions required full disclosure of arbitration implications.	Royston argues ethics opinions are advisory and not controlling law.	The court acknowledged the advisory nature of ethics opinions but considered them as factors; the decision not to compel arbitration based on that basis was not an abuse of discretion.
Whether the arbitration clause is illusory	Lopez claims the clause is illusory because Royston can litigate its fee claims while López must arbitrate.	Royston contends the clause binds both sides and is not illusory.	Not illusory as a matter of law; both parties are bound and the scope cannot be unilaterally altered.
Whether the arbitration clause is unconscionable	Lopez asserts the clause is procedurally and substantively unconscionable, particularly given the attorney-client relationship.	Royston argues that arbitration clauses between attorneys and clients are not inherently unconscionable and should be evaluated under standard unconscionability tests.	The court held the clause to be unconscionable under the circumstances, focusing on the one-sided nature favoring Royston and the lack of mutuality; thus, arbitration was not compelled.

Key Cases Cited

In re Kellogg Brown & Root, Inc., 166 S.W.3d 732 (Tex. 2005) (threshold requirement; arbitration scope and enforceability under Texas law)
J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223 (Tex. 2003) (establishes scope of arbitration and burden-shifting rule to defenses to arbitration)
In re Palm Harbor Homes, Inc., 195 S.W.3d 672 (Tex. 2006) (unconscionability framework and factors; procedural vs substantive unconscionability)
In re Poly-America, L.P., 262 S.W.3d 337 (Tex. 2008) (one-sided arbitration clauses; unconscionability analysis)
In re Halliburton Co., 80 S.W.3d 566 (Tex. 2002) (attorney-client arbitration considerations; fiduciary duties emphasized)
In re FirstMerit Bank, N.A., 52 S.W.3d 749 (Tex. 2001) (unconscionability test applied to arbitration clauses; duties of disclosure in context)
In re Pham, 314 S.W.3d 520 (Tex. App.—Houston [14th Dist.] 2010) (ethics opinions advisory; not controlling law but relevant to counselor duties)
In re Swift Transp. Co., 311 S.W.3d 484 (Tex. App.—El Paso 2009) (standard for reviewing arbitration orders; de novo where facts undisputed)
Labidi v. Sydow, 287 S.W.3d 922 (Tex. App.—Houston [14th Dist.] 2009) (attorney-client arbitration considerations; ethics context discussed)