WYTHE II CORP. v. Stone
342 S.W.3d 96
| Tex. App. | 2011Background
- Wythe II Corporation appeals a fee dispute with attorney John D. Stone over a contingent-fee contract after a XL Lloyds settlement.
- Stone represented Wythe in an insurance dispute and in mortgage-related bankruptcy litigation; bankruptcy court approved Stone's representation.
- Stone negotiated a $1,975,000 settlement with XL Lloyds; total payments reached $2,775,000 on a $1,625,000 policy; funds were deposited into the trial court registry.
- The trial court denied Wythe's summary judgment, granted partial summary judgment for Stone, and the jury awarded Stone $314,420 for breach of contract with sanctions against Wythe.
- Wythe challenged contract provisions—an optional unilateral contingency and a termination clause—along with fee amount and sanctions, leading to a split judgment remanded for further proceedings.
- The court held the termination provision severable, the bankruptcy-order approval of the contingency valid, and remanded for a reasonable hourly-rate fee determination while affirming the contingent-fee contract relation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Validity of unilateral contingency option | Wythe argues unilateral option is unconscionable. | Stone contends option is permissible if severable from contract. | Unconscionability not fatal; option severable; contingency remains enforceable |
| Effect of termination provision | Wythe claims termination clause burdens client and shifts risk. | Stone argues clause severable and not triggering forfeiture. | Termination provision severable; fee recovery not precluded |
| Reasonableness of fee for breach of contract | Wythe argues evidence insufficient to justify a contingent fee as reasonable. | Stone relies on customary contingency and hours; seeks $314,420 plus appellate fees. | Jury award not supported by sufficient evidence; remand for hourly-rate reasonable fee |
| Sanctions and penalty to Stone; attorney fees for sanctions | Wythe contends sanctions were improper and excessive. | Stone argues sanctions were warranted under multiple rules and powers. | Penalty to Stone improper and deleted; attorney-fee award for sanctions excessive; remand for recalculation |
| Fee forfeiture and fiduciary duty | Wythe seeks forfeiture for alleged fiduciary breaches. | Stone asserts limited equitable remedy; not warranted under facts. | Judge did not err in denying forfeiture; remedy not compelled |
Key Cases Cited
- Hoover Slovacek LLP v. Walton, 206 S.W.3d 557 (Tex.2006) (termination provisions in contingent-fee contracts may be severed per public policy)
- Arthur Andersen & Co. v. Perry Equipment Corp., 945 S.W.2d 812 (Tex.1997) (contingent-fee contracts require reasonable fees and consideration of factors for reasonableness)
- Formosa Plastics Corp. U.S.A. v. Presidio Eng'rs & Contrs., 960 S.W.2d 41 (Tex.1998) (remittitur/remand when no legally sufficient evidence supports full damages but some evidence supports measure)
- Burrow v. Arce, 997 S.W.2d 229 (Tex.1999) (fee forfeiture limits; protects attorney-client relationship where there was clear and serious breach)