A recent Texas Lawyer story by Angela Morris, “Court Lets Houston-Area Lawyer Keep $70,000 Fee, Despite Unethical Contract,” reports that a Houston-area attorney won’t have to pay back more than $70,000 in fees to two clients who argued the lawyer’s fee agreement was unconscionable, after Texas’ 14th Court of Appeals ruled that the clients’ defensive argument wouldn’t support a recovery. But one of the justices on the three-judge panel disagreed, explaining that Bellaire lawyer Joe Alfred Izen Jr. had an unconscionable fee agreement with his clients, which breached the attorney’s ethical duties, and that it was right for the trial court to make him return the money.
“In Texas, attorneys are held to the highest standards of ethical conduct in their dealings with their clients. As a result, attorneys must conduct their business with their clients with inveterate honesty and loyalty, and they must always keep the client’s best interest in mind,” said a concurring and dissenting opinion by Justice Jerry Zimmerer. “The question of Izen’s fees must be viewed through that prism.”
Izen, who represented himself pro se in the appeal, didn’t immediately respond to a call seeking comment. And Ralph Kraft, member in Kraft Lege Anseman in Lafayette, Louisiana, who represented Izen’s past clients Brian and Kimberly Laine, declined to comment.
Izen represented the Laines in a 2002 personal injury settlement agreement over Brian Laine’s injury at work, said the 31-page majority opinion by Justice Kevin Jewell, joined by Justice Bourliot. His employer took care of him after the injury and initiated a settlement for two lump sum payments and a monthly annuity for 30 years, and then the Laines hired Izen to look over the settlement agreement. The Laines also wanted Izen to research if they may have a claim against any third-party entities—but not to sue Brian Laine’s employer.
An attorney-client agreement between Izen and the Laines was for a 35% contingency fee of the settlement with the employer. Izen testified at trial they paid him between $70,000 and $90,000 and eventually he expected nearly $229,000 total. Izen wasn’t licensed to practice in Louisiana and he contracted with an attorney there to represent the Laines in litigation against a third-party entity. However, Brian Laine eventually dismissed that litigation and he did not owe any contingent fee for it.
In 2007, Brian Laine terminated Izen’s representation because he didn’t need it anymore. He also quit paying Izen 35% of his monthly annuity payments from the settlement with his employer. In 2010, Izen sued the Laines alleging they still owed him 35% of the annuity payments. In response, the Laines argued his fee agreement was unconscionable and filed counterclaims seeking the return of the fees they already paid him.
After a jury trial, the judge granted a directed verdict in favor of the Laines, ruling the fee agreement was unconscionable. But Izen also got a favorable ruling dismissing the clients’ counterclaims because they weren’t filed within the four-year statute of limitations. Later, the trial court ordered Izen to disgorge all his fees to the Laines and to pay prejudgment interest spanning back to 2002. In the appeal, Izen attacked the notion that his attorney fee agreement was unconscionable.
The appellate court ruled that Izen’s work reviewing the Laines’ settlement agreement with Brian Laine’s employer, and going to a meeting where the parties signed the agreement, was representation with little risk or expense to Izen. His work on litigation against the third-party entity did have some risk, that there would be no recovery—which did happen in the end.
The 14th Court rejected Izen’s “attempt to combine the two separate jobs he was hired to perform.” He was insisting his 35% fee on the settlement wasn’t unconscionable because the money financed the third-party litigation. “Any fees Izen collected under the guise of financing the litigation against the Louisiana third party defendants were collected under false pretenses in violation of an attorney’s duty of honesty and loyalty to his clients,” said the opinion. “Izen is not entitled to any fee on the Louisiana third-party litigation because there was no recovery.”
The appellate court upheld a trial court ruling that said that the Laines should not have to pay Izen any more money under that agreement. But it also determined that Izen shouldn’t have to pay back the fees the clients had previously paid him.
The clients didn’t file their counterclaims seeking fee forfeiture within the four-year statute of limitations, explained the ruling. It said they couldn’t get back the fees based on an affirmative defense that the agreement was unconscionable. While the Laines’ defense did defeat Izen’s claims, it could not advance their own claims for relief, the ruling said.