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Texas Attorney Fee Dispute Heads to Arbitration

July 29, 2019 | Posted in : Fee Agreements, Fee Allocation / Splitting, Fee Dispute, Fee Dispute Litigation / ADR, Fee Issues on Appeal

A recent Law 360 story by Sarah Jarvis, “Texas Attys Must Arbitrate Dispute Over Referral Fees,” reports that a dispute between two Texas attorneys over fees stemming from a referral agreement for asbestos lawsuits will head to arbitration after a state appellate court ruled that the lower court erred when it denied an arbitration motion.  Judge Peter Kelly said Dennis Weitzel’s motion to compel arbitration with Brent Coon’s law firm was allowed under an agreement the two signed in 2010 after Weitzel left Coon’s firm.  The panel remanded the case to trial court with the direction that the court order Weitzel and Brent Coon & Associates to arbitrate.

The case arose from a dispute about a fee agreement between Brent Coon & Associates and a nonparty law firm that Coon alleges was supposed to receive portions of payments for referrals of certain asbestos, mesothelioma and lung cancer clients.  Michael T. Gallagher and The Gallagher Law Firm PLLC sued Coon and his firm in 2018 alleging breach of the referral agreement, and Coon filed a third-party claim against Weitzel, arguing he did not forward portions of payments to Gallagher that he received from Coon’s firm.

Weitzel moved to compel arbitration on the matter, under the 2010 separation agreement, but the trial court denied Weitzel’s motion in December 2018, according to the opinion.  The arbitration clause in that agreement stipulates that Weitzel and Brent Coon & Associates would resolve any disputes that arose under the agreement by arbitration, Judge Kelly said.

The law firm argued that the dispute was not covered by the scope of the 2010 agreement, but by another agreement from 2002 which outlined the percentage of fees Weitzel and Gallagher would receive upon a case’s favorable resolution if they referred certain clients.  The panel sided with Weitzel’s argument that the 2010 agreement applies, and that the 2002 agreement was incorporated into the 2010 agreement by reference.

“Because BCA and Weitzel agreed that the arbitrator would decide these questions, the trial court should have granted this aspect of Weitzel’s motion so that the dispute, including the extent to which the 2002 agreement was incorporated into the 2010 agreement, could be resolved in arbitration,” Judge Kelly said.  “The parties incorporated the AAA Rules into the 2010 agreement and thus agreed that the arbitrator, not the trial court, would decide gateway issues, including whether their dispute falls under the arbitration clause of the 2010 agreement.”

But the panel said Weitzel did not meet his burden to show the trial court abused its discretion by denying his motion to compel arbitration against Coon, because the signatory to the 2002 and 2010 agreements was Coon’s firm and not Coon himself.