Jampole v. Matthews

No Publication

(Cite as: 1997 WL 414637 (Tex.App.-Hous. (1 Dist.)))


Court of Appeals of Texas, Houston (1st Dist.).

STANLEY JAMPOLE, William Jampole, Daniel Joseph Jampole, Debra E. Bodell, and

Laura Sue Vinogradov, Appellants,


W. Douglas MATTHEWS and Schmidt, Matthews & Brannon, P.C., Later Known as

Schmidt & Matthews, P.C., Appellees.

No. 01-96-00028-CV.

July 24, 1997.

On Appeal from the 133rd District Court Harris County, Texas Trial Court Cause No. 89-44008.



*1 This case concerns the propriety of a modification of a contingency fee contract shortly before settlement. Appellants, Stanley Jampole, William Jampole, Daniel Joseph Jampole, Debra E. Bodell, and Laura Sue Vinogradov, (the Jampoles), retained attorney, W. Douglas Matthews, appellee, on a contingency fee basis to represent them in a wrongful death action against General Motors. Three years after the GM suit settled, the Jampoles filed this lawsuit against Matthews alleging breach of fiduciary and contractual obligations arising from a modified contingency fee agreed to during the attorney-client relationship. After a bench trial, the trial court granted a final judgment in favor of appellees, W. Douglas Matthews and Schmidt, Matthews & Brannon, P.C., later known as Schmidt & Matthews (Matthews). The Jampoles attack the trial court’s judgment in 20 points of error. We affirm.

Procedural History

Matthews filed a motion for summary judgment alleging the Jampoles’ causes of action all arose from an alleged tort. He alleged their claims were barred by the statute of limitations because they filed suit more than three years after the alleged tort occurred. The trial court granted Matthews’ summary judgment. This Court reversed the summary judgment, holding: (1) the Jampoles’ causes of action for breach of contract and fraud were governed by a four-year statute of limitations; and (2) a fact issue existed about when the Jampoles discovered or should have discovered their tort-based claims. See Jampole v. Matthews, 857 S.W.2d 57, 59-64 (Tex.App.–Houston [1st Dist.] 1993, writ denied).

After remand, this case proceeded to a bench trial on June 20, 1995. After both parties presented their evidence and arguments, the trial court entered judgment in favor of Matthews. The trial court issued findings of fact and conclusions of law, finding the Jampoles did not satisfy their burden of proof on any of their causes of action, and Matthews satisfied his burden of proof on all his defenses. The trial court found Stanley Jampole (Jampole), the only fact witness for the plaintiff, lacked credibility in regard to portions of his testimony.


In April, 1979, in Texas, a car collided with the Jampoles’ GM car from the rear. The Jampoles’ car exploded killing Mrs. Jampole. Jampole, who lived in Houston, contacted Bernard Helfat, an attorney who had represented Mrs. Jampole’s father in litigation, and had drafted Jampole’s will. Helfat referred Jampole to Arthur Combs, another attorney. Combs agreed to represent Jampole and his children in a wrongful death action against GM and the driver of the other car. Jampole entered into a contingency fee agreement (the Combs agreement) providing for a 33 1/3% attorney’s fee if the case settled before trial, or a 40% fee if the case went to trial. Jampole testified at trial that he did not know for certain, but he assumed Helfat would receive a referral fee.

*2 Before long, Combs contacted Jampole asking him for permission to retain Douglas Matthews to work on the GM case. Jampole agreed, and Combs referred the case to Matthews. Matthews and Combs agreed Matthews would take 60% of the attorney’s fees under the Combs agreement, and Combs would receive 40% and be responsible for paying the referral fee to Helfat. Jampole testified he was unaware of the fee agreement between Combs and Matthews, and he had no idea how Matthews would be paid. Combs died while the GM suit was pending. Jampole testified he always considered Combs his attorney until Combs died. However, the record does not show Combs was involved in the GM case after he referred it to Matthews.

The GM case continued for approximately seven years after Combs referred it to Matthews. Matthews testified he had never been involved in a case where the defense placed so many obstacles in his path. For example, a discovery dispute prompted Matthews to file a writ of mandamus to obtain documents. The Texas Supreme Court granted the mandamus. See Jampole v. Touchy, 673 S.W.2d 569 (Tex.1984). The documents GM then produced showed GM was grossly negligent. Before the mandamus, GM’s highest settlement offer was $500,000. In the fall of 1985, however, GM made a structured settlement offer with a present value of between $1.5 and $2.0 million. The Jampoles wanted a cash settlement and rejected the offer. In May 1986, Bill Kemp, GM General Counsel, invited Matthews to dinner and offered a $2 million cash settlement. The Jampoles rejected the offer.

On June 12, 1986, Matthews sent Jampole a letter explaining in detail the status of the case and making a record of their earlier telephone conversation. In the first sentence of the letter, he wrote, “GM still seems to have serious interest in settlement.” He explained the intense discovery process and complexity of the case. He also explained discovery costs would become much more expensive as the trial neared. His firm had already expended approximately $80,000 on the case. He chronicled Jampole’s position in their last telephone conversation that Jampole and his children were willing to settle the case for $2.75 million in cash, but would prefer the offer to be $3 million in cash. Matthews also reiterated GM’s last offer was $2 million in cash, but that Matthews believed GM was probably prepared to make an offer of $2.5 million in cash. Matthews also clarified that he had explained to Jampole that he did not know whether GM was prepared to go any higher than $2.5 million, or how much it might offer.

Matthews continued by stating he wanted to discuss the amount of attorney’s fees if the case settled at that time. He stated he had forgotten that the Combs agreement provided for only a 33 1/3% attorney’s fee if the case settled before trial and 40% if the case went to trial. Matthews explained that ordinarily his firm requires clients such as Jampole and his children to sign Matthews’ own contingent fee agreement after the case has been referred to them. He enclosed a copies of the two agreements. He explained the agreement his firm had used for many years provided for a 40% contingency fee for settlement after the suit is filed and 45% if collection or settlement is made after notice of appeal has been given and appeal bond has been filed. Matthews stated that, for some reason, which he could not explain, his firm did not submit their standard form to Jampole and his children for their execution at the time the case was referred to the firm.

*3 Matthews went on to explain their standard fees for products liability cases are higher than those in the Combs agreement because they have found these cases involve a great deal of risk, a tremendous amount of attorney work, the investment of large amounts of their own money at no interest, substantial staff, and large amounts of overhead that are not collected back as costs when the case settles. He confirmed these factors had certainly been present in this case. If he and his firm had been operating under their standard fee agreement, their fee would have been 45% because of the appeal to the Texas Supreme Court. Under the Combs agreement, their fee would have been only 33 1/3% if the case settled.

In addition, he explained Combs’ estate was claiming a referral fee of 40%. This claim raised ethical questions because a referring attorney is required to actually contribute substantial legal services in a case to be entitled to a referral fee of 40%. Nevertheless, if Combs’ claim prevailed, then Matthews’ firm’s fee would be reduced to 20% of any settlement. Matthews felt his firm was entitled to their standard fee of 45%. However, under the circumstances, they suggested their fee be 40%. He thoroughly explained the reasons for fee staggering in the event of appeal.

Matthews continued, “I am raising this question now because there is a chance of settling the case before trial.” (emphasis added). He admitted it was entirely possible they may be unable to settle the case before trial, and if the case went to trial, they would be entitled to 40% under the Combs agreement.

Matthews concluded his letter by writing:

If you and your family feel we should follow the Combs power of attorney, then our fee, of course, will be reduced to 20% if the referral fee is valid. Under our proposal, our fee would be 40%, less the referral fee if it is valid, or 24%. I sincerely believe that we have in all fairness earned this fee. I’ve always considered you to be a very reasonable client to work with, Stanley, and I hope you and your family will give serious thought to our position on this matter.

I look forward to hearing from you at your earliest convenience.

On June 17, 1986, Jampole wrote letters to his children telling them he intended to reject Matthews’ proposal and in response to Matthews’ request it was “tough darts,” or “hey, tough luck, Charlie.” Jampole rejected Matthews’ request to substitute his firm’s standard agreement for the Combs agreement.

Jampole knew he could insist on Matthews continuing under the Combs agreement. However, at trial, Jampole testified he felt Matthews’ letter contained a veiled threat to push the case to trial if Jampole refused to agree to Matthews’ standardized fee agreement. Jampole never communicated that concern to Matthews. In addition, the letters to his children did not communicate any concern of a veiled threat, nor did any other evidence in the record. Jampole also testified he knew he could consult an attorney in regard to the proposed modification of the fee agreement as he could with any other matter. The evidence showed that on at least two occasions, Jampole contacted Helfat, his New York attorney, about the GM case.

*4 Around the end of June or beginning of July 1986, Jampole decided to design a counter-proposal to Matthews’ request. Jampole testified his proposal would be a “win-win” situation for both Matthews and himself. It is undisputed Jampole created and suggested the modified fee agreement of which he now complains. Jampole asked Matthews to meet him at LaGuardia airport in New York to discuss Jampole’s proposal. Jampole suggested Matthews receive 33 1/3% of any recovery up to $2.75 million and 50% of any amount of recovery above that amount. Jampole suggested Matthews agree to this fee arrangement partly as an incentive for Matthews to intensify his efforts and work exclusively to settle the case as soon as possible.

Matthews testified he put aside his other cases and worked only on the GM case for the next approximately two to three weeks until the case settled. On cross-examination, Matthews could not list any specific cases or work that he set aside to work on Jampole’s case. Matthews testified he did not know whether the case would settle or go to trial, except he had a feeling GM would settle, as he had communicated to Jampole in his June 12, 1986 letter.

Jampole testified he knew if the case went to trial he would owe 40% attorney’s fees under the Combs agreement. He also realized his modified fee agreement would be effective regardless of whether the case settled before, during, or after trial. Matthews’ attorney’s fees might have been reduced under the modified fee agreement if the case settled after it went to trial. Under the modified fee agreement, Jampole would have to recover more than $4.58 million in order for Matthews to receive 40% attorney’s fees.

The basis of Jampole’s claim is while agreeing to Jampole’s modified fee agreement, Matthews knew the case was going to settle shortly for $3.525 million, and Matthews did not disclose the true state of his settlement negotiations with GM. The record does not show GM had made any settlement offers other than the $2 million cash offer until the final $3.525 million offer, however.

Interestingly, Jampole relies on a June 12, 1986, letter Matthews wrote to GM, stating if GM would offer $4,750,000 in cash, he would recommend that Jampole accept it. He further wrote, “I hope that GM will offer $4,750,000 or come very close to it.” (emphasis added). Jampole’s major contention is Matthews should have told Jampole of this “demand” and that this letter is evidence Matthews knew settlement was imminent. We disagree with both contentions. A reasonable inference is that Matthews was utilizing negotiating tactics to attempt to increase the settlement amount in accordance with the Jampoles’ refusal of the $2 million settlement and their desire to recover closer to $3 million.

A few weeks after Matthews accepted Jampole’s new fee agreement, GM offered $3.525 million cash to settle the case. Matthews’ August 1 letter to Jampole reflects Jampole was somewhat reluctance to accept the offer:

*5 I do not understand why, Stanley, but it appears that you are unhappy with this settlement for some reason. Had it not been for the General Motors documents tending to prove gross negligence which we obtained as a result of the appeal to the Supreme Court of Texas, as well as the extensive depositions of General Motors employees, in my judgment the settlement value of your case would have been $500,000 to $1 million. If you had signed a standard power of attorney at the outset, our fee would now be 45 percent because of the appeal to the Supreme Court. Instead, your case is being settled for the largest figure ever against General Motors for this kind of case, your total attorney’s fees are only about 36 percent and the case costs are relatively low. In spite of these facts, your primary concern seems to be to question the settlement. This, of course, is your right, if you really are this unhappy, I think you should advise Eleanor right away and I will withdraw the settlement with General Motors and cancel the closing for August 9th.

(Emphasis added). Jampole read the letter before he signed the settlement agreement. At trial, he testified he was not questioning the settlement amount or the attorney’s fees because “I had made an agreement, I will do this if you do that.” He said he was never “unhappy”; he was just questioning things, such as the accounting of the costs. Jampole testified, even though it bothered him in the back of his mind that he agreed to potentially pay Matthews more attorney’s fees, he never said anything to Matthews about it because he made a deal, and “if I make a deal and if it turns out to be a bad deal, I’m not going to come hat in hand to you and say, oh, I made a bad deal, give me some relief. That’s not the way business works. A contract is a contract.”

After GM made the final $3.525 million offer, and Jampole orally agreed, GM came back and asked for a confidentiality agreement as to the amount of the settlement. Jampole discussed it with his children, and told Matthews if GM increased the settlement amount by $500,000, he would agree to the confidentiality agreement. GM refused. On August 11, 1986, Jampole and his children went to sign the settlement papers for the $3.525 million. Matthews went over all the settlement documents line by line, including attorney’s fees. No one raised a question about attorney’s fees. Jampole asked Matthews to leave the room at one point so he could talk to his children, but Jampole does not remember what they discussed. At no time before 1989 did Jampole express to Matthews or anyone in Matthews’ firm that he was unhappy with the amount of the attorney’s fees. Matthews deposited the checks in his trust account and distributed the money to the Jampoles. The Jampoles accepted the checks, endorsed and deposited them, without any complaint about the attorney’s fees. They also signed releases. Jampole knew Matthews would be distributing his portion of the sformement proceeds to himself. Jampole understood at the time of signing the settlement papers that this was the end of the case, and this was all the money he would get, except for the possible recovery of some videotape costs.

*6 In 1989, Jampole consulted a lawyer, who told him he may have a cause of action. In October 1989, the Jampoles sued Matthews alleging many causes of action, all arising from the modified fee agreement.

Standard of Review

In a bench trial, the trial court, as the finder of fact, is the sole judge of the credibility of the witnesses. Southwestern Bell Media, Inc. v. Lyles, 825 S.W.2d 488, 490 (Tex.App.–Houston [1st Dist.] 1992, writ denied). The trial court may take into consideration all the facts and surrounding circumstances and accept or reject all or any part of the testimony of each witness. Id. The findings of the trial court are reviewable for legal and factual sufficiency of the evidence by the same standards that are applied in reviewing evidence supporting a jury’s answer. Catalina v. Blasdel, 881 S.W.2d 295, 297 (Tex.1994). Findings of fact in a bench trial are given the same weight as a jury’s answer to jury questions. Anderson v. City of Seven Points, 806 S.W.2d 791, 794 (Tex.1994).

In reviewing legal sufficiency points of error, the Court may consider only the evidence and inferences tending to support challenged findings and should disregard all evidence and inferences to the contrary. Id.; Pizzitola v. Galveston County Cent. Appraisal Dist., 808 S.W.2d 244, 246 (Tex.App.– Houston [1st Dist.] 1991, >Anarit). If there is more than a scintilla of evidence to support the findings, the no evidence challenge must be overruled. Stafford v. Stafford, 726 S.W.2d 14, 16 (Tex.1987).

Factual insufficiency exists when the only evidence supporting a vital fact finding is factually too weak to support it or, when considered with the evidence opposing the fact, the finding is so contrary to the great weight and preponderance of the evidence as to be manifestly unjust. Strickland v. Coleman, 824 S.W.2d 188, 190 (Tex.App.–Houston [1st Dist.] 1991, no writ).

Tort actions

In the Jampoles’ point of error 15, they contend the trial court erred in its conclusion of law stating all of the Jampole’s causes of action except breach of contract and fraud are barred by limitations because that conclusion is legally incorrect, erroneous, and not supported by the evidence as a whole. On appeal of the summary judgment based on the statute of limitations, this Court held: (1) the tort actions in this case are governed by a two-year statute of limitations and the fraud and breach of contract claims are governed by a four-year statute of limitations; and (2) a fact issue exists as to when the Jampoles discovered or should have discovered their tort-based claims. See Jampole v. Matthews, 857 S.W.2d at 59-64. We distinguished Willis v. Maverick, which holds that when a lawyer is sued for claims arising out of professional negligence, tort-based claims are raised regardless of how the plaintiff attempts to couch the cause of action. 760 S.W.2d 642, 644 (Tex.1989). Matthews contends the intervening supreme court decision, Barcelo v. Elliott, 923 S.W.2d 575 (Tex.1996), requires this Court to find a two-year statute of limitations applies to all of the Jampoles’ causes of action.

*7 Barcelo is distinguishable from this case. In Barcelo, the court held a lawyer’s professional duty does not extend to parties he never represented, even where the client who hired an attorney to draft an estate plan intends for the lawyer’s work to benefit the beneficiaries. Id. at 579. Barcelo rests on the proposition that there could be no recovery without negligence; therefore, the beneficiaries could not recover under a third-party breach of contract claim. Id. In this case, the plaintiff could recover on its claims for fraud and breach of fiduciary duty without any attorney negligence. Therefore, the four-year statute of limitations applies to the Jampoles’ fraud and breach of contract claims.

A lawsuit based on the DTPA, negligence, and related claims must be brought within two years of the accrual date. Tex. Civ. Prac. & Rem.Code Ann. § 16.003; Estate of Degley v. Vega, 797 S.W.2d 299, 302 (Tex.App.–Corpus Christi 1990, no writ). The statute of limitations for a breach of fiduciary duty is also two years. Rose v. Baker & Botts, 816 S.W.2d 805, 809 (Tex.App.–Houston [1st Dist.] 1991, writ denied).

The acts giving rise to the negligence, Deceptive Trade Practices Act (DTPA), and related tort claims all occurred in June 1986, when the parties agreed to the modified fee agreement, or in August 1986, when the Jampoles signed the General Motors settlement. Matthews, 857 S.W.2d at 63. The Jampoles filed this lawsuit three years later, on October 17, 1989. The burden was on Jampole at trial to prove the limitations period should be excused or tolled by the discovery rule or fraudulent concealment. Woods v. William Mercer, Inc., 769 S.W.2d 515, 515 (Tex.1988); Matthews, 857 S.W.2d at 63.

A. Discovery Rule

The Jampoles contend the two-year statute of limitations should be tolled by the discovery rule. The Jampoles did not offer any evidence at trial to satisfy their burden. The only evidence somewhat relevant was the date Jampole finally contacted an attorney in /P> . Jampole testified the modification agreement had been bothering him in the back of his mind ever since the case settled. The discovery rule requires that the plaintiff use diligence in discovering its injury. See S.V. v. R.V., 933 S.W.2d 1, 6 (Tex.1996). The evidence at trial showed the Jampoles were aware of the facts giving rise to their claim for more than three years before they sued Matthews. The accrual of a cause of action does not await the plaintiff’s recognition they have grounds for a lawsuit. Arabian Shield Dev. Co., 808 S.W.2d 577, 583 (Tex.App.–Dallas 1991, writ denied).

*8 Texas courts have applied the discovery rule to breaches of fiduciary duty. See S.V., 933 S.W.2d at 23; Matthews, 857 S.W.2d at 64. The Texas Supreme Court has held breaches of fiduciary duties may be inherently undiscoverable. See S.V., 933 S.W.2d at 23. Howevel thhen the fact of misconduct becomes apparent, it can no longer be ignored, regardless of the nature of the relationship. See id., at 8. The Jampoles had a duty to investigate the claim when they became aware of facts giving rise to the cause of action. See id., at 8; Moreno v. Sterling Drug, Inc., 787 S.W.2d 348, 351 (Tex.1990).

In the Jampoles’ eyes, Matthews’ alleged misconduct was apparent no later than at the time of settlement, August 11, 1986. Jampole’s daughter testified by deposition, and the other children adopted her testimony. She stated that at the time they signed the settlement agreement they felt Matthews had cheated them, and had done something “wrong,” “sneaky,” or underhanded by agreeing to the fee modification so close to settlement of the case.

Stanley Jampole testified he “probably” thought about hiring an attorney to do something about the modification of the fee agreement before 1989, and discussed suing Matthews with his children, but they decided it was better not to re-open old wounds. Jampole testified other reasons he did not sue Matthews earlier were because he had angioplasty in 1987, refurbished a home, and was seeking reconciliation with his ex-wife.

However, neither Jampole nor his children sought any legal advice regarding this matter until 1989, three years after the settlement. With due diligence, the Jampoles should have discovered the nature of their alleged injury within two years of the settlement agreement. Therefore, the discovery rule does not toll the running of the statute of limitations on the Jampoles’ claims.

B. Fraudulent Concealment

The Jampoles also claim their lack of diligence was excused by Matthews’ alleged fraudulent concealment. Fraudulent concealment is an equitable doctrine. Casey v. Methodist Hosp., 907 S.W.2d 898, 903 (Tex.App.–Houston [1st Dist.] 1995, no writ). It estops a defendant from relying on the statute of limitations when a defendant is under a duty to disclose, but fraudulently conceals the existence of a cause of action from the plaintiff. Id.

The Jampoles had the burden to show: (1) the existence of an underlying duty; (2) the defendant’s knowaysge of the tort; (3) the defendant’s use of deception to conceal the tort; and (4) the plaintiff’s reasonable reliance on the deception. Arabian Shield Dev. Co., 808 S.W.2d at 584. The Jampoles did not present any evidence to the trial court of the existence of an underlying tort, Matthews’ knowledge of any tort, the use of deception to conceal a tort, or the reasonable reliance on any alleged deception.

*9 To the contrary, the evidence showed Matthews was open with his client, giving him full details and explanations in writing. There is no evidence of any settlement offers that Matthews did not communicate to Jampole. Matthews made it clear Jampole could refuse to change the fee agreement. Jampole did refuse to substitute Matthews’ standard fee agreement and instead suggested his own. Jampole was aware he could contact an attorney at any time. In fact, he did contact Helfat, his New York attorney, at least twice about the GM case. After Matthews accepted Jampole’s modified fee agreement, he gave Jampole at least two chances to withdraw from the settlement agreement. Matthews memorialized one offer to withdraw in a letter to Jampole. Matthews did not know when the case would settle. The Jampoles did not satisfy their burden of proof to show fraudulent concealment.

Even where the plaintiff establishes fraudulent concealment, the estoppel effect is not permanent. Id. Fraudulent concealment merely tolls the statute of limitations until the time the plaintiff learns of facts, conditions, or circumstances that would cause a reasonably prudent person to make inquiry, which if pursued would lead to discovery of the concealed cause of action. Id. at 904. Jampole was aware of all the facts, circumstances, and conditions alleged in this lawsuit as of the date of the settlement. Therefore, as we discussed above in the discovery rule analysis, Jampole had a duty to make inquiry as of the date of settlement. The statute of limitations is not tolled simply because he waited three years to consult an attorney.

The evidence supports the trial court’s determination the Jampoles’ tort claims are barred by limitations. We overrule the Jampoles’ point of error 15. Therefore, points of error four, six, seven, 10, 11, 13 and 14, which argue the evidence was legally and factually insufficient to support the trial court’s judgment for Matthews on the negligence, breach of fiduciary duty, DTPA, and related tort claims, are also overruled.

Breach of Contract

In the Jampoles’ points of error one, two, and 9, they contend the evidence was legally and factually insufficient to support the trial court’s findings of fact and conclusions of law that: (1) the modified fee agreement was supported by adequate legal consideration; (2) there was a binding novation of the attorney’s fee agreement; and (3) Matthews did not breach any contract.

A. Modification of Fee Agreement

The issue in this case is whether a client and his attorney may, under any circumstances, modify a fee agreement during representation. If they may, the new agreement can discharge the old as a novation. If they cannot, the modification might constitute a breach of the original contract. The trial court properly found there was no breach of contract.

Both parties agree Archer v. Griffith and Robinson v. Garcia, control the contract issues in this case. 390 S.W.2d 735, 739 (Tex.1964); 804 S.W.2d 238, 248 (Tex.App.–Corpus Christi 1991), writ denied, 817 S.W.2d 59 (Tex.1991). However, they both interpret the cases differently. Archer involved a divorce proceeding and a modification of a pre-existing attorney’s fee agreement made during the attorney-client relationship. 390 S.W.2d at 739. The Archer court assumed the parties were dealing at arm’s length when the written contingent fee agreement was signed. Id. The court stated, if the agreement was binding on both parties, it might be enforced without regard to the fairness of the transaction, if the client had signed it when she was not under a legal disability. Id. (emphasis added).

*10 In analyzing Archer v. Griffith, the Corpus Christi Court of Appeals in Robinson stated:

There is a presumption of unfairness attaching to a fee contract entered into during the existence of the attorney-client relatio Ap, and the burden of showing the fairness of the contract is on the attorney. Furthermore, effect is generally not given to a contract that obligates the client to pay to the attorney a sum in excesss of that which has been agreed on by them in their original negotiations. Nevertheless, if the original contract has been terminated by mutual agreement of the parties, a new contract providing for the payment of a greater sum than that specified in the former agreement is valid and binding.

Robinson, 804 S.W.2d at 248. (emphasis added).

The facts of both Archer and Robinson are distinguishable from this case. In both cases, the attorney suggested and structured the new fee agreement. In this case although Matthews originally suggested his standard contingency agreement, and Jampole rejected that knowing he could bind Matthews to the original agreement, Jampole suggested a new fee agreement. Also, in this case, the agreement would not have necessarily resulted in obligating Jampole to pay an excess of the sum originally agreed to. See Robinson, 804 S.W.2d at 248. In fact, at the time of the modification, both Jampole and Matthews understood it may actually reduce the amount of attorney’s fees.

However, the general rules of law in Archer and Robinson apply here. An attorney and client may modify the fee agreement during the existence of the attorney-client relationship. However a presumption of unfairness arises, and the attorney has the burden to show the fee modification is fair under the circumstances.

B. Fee was Fair, Just, and Equitable

In the Jampoles’ points of error three and 12, they contend the evidence was factually and legally insufficient to show the fee was fair, just, and equitable. Matthews had the burden to show the agreement was fair and reasonable under the attendant circumstances. See Archer, 390 S.W.2d at 738. The fairness of a transaction must be determined, on a case-by-case basis, by analysis of the relevant circumstances surrounding the modification. See e.g., Texas Bank & Trust Co, 595 S.W.2d at 508; Archer, 390 S.W.2d at 740. Jampole claims the fee agreement was not fair because Jampole was not fully informed of all settlement offers. The record does not support that contention. The record does show Matthews did not know the case would settle at the time of the fee modification. If the case had gone to trial, Jampole would have benefitted from the fee modification instead of Matthews, unless the jury awarded at least $4.58 million.

*11 Jampole also contends Matthews’ failure to inform him of his right to contact an attorney violates the Texas Disciplinary Rules and makes the fee unfair. Jampole has not cited this court to any rule or case law mandating an attorney to inform the client he has the right to independent counsel. Although the rules state an attorney “should” do so or that it is “advisable” in most conflict of interest situations, there is no per se rule. [FN1] See Tex. Disciplinary R. Prof. Conduct 1.08 cmt. 2 (1991), reprinted in _____________________________________________(Vernon Supp.1997) (State Bar Rules art. X, § 9). Jampole’s expert testified Matthews had such a duty, but Matthews’ experts testified they were not aware of any such mandatory duty, and there was no duty under the facts of this case. The evidence conclusively shows Jampole was aware he had the right to contact an attorney about the fee modification and any other matter; and he contacted Helfat, his New York attorney, about the GM case on at least two other occasions.

FN1. The Texas Disciplinary Rules may be considered as guidelines in determining whether a fee is reasonable. However, the Disciplinary Rules of Professional Conduct for Texas lawyers do not create private causes of action. Bond v. Crill, 906 S.W.2d 103, 106 (Tex.App.–Dallas 1995, no writ). Jampole cites EC 5-11, which provides, where a conflict of interest arises, the personal interests of the attorney “should not deter him from suggesting that additional counsel be employed; on the contrary, he should be alert to the desirability of recommending additional counsel when in his judgment, the proper representation of his client requires it.” (emphasis added). STATE BAR RULES, ART. X, § 9, Canon 5 (1984), reprinted in TEX. GOVT.CODE ANN., TIT. 2, SUBTIT. G APP . (Vernon 1988); Tex. Disciplinary R. Prof. Conduct 5-101, et. seq. (1984), reprinted in Tex. Govt.Code Ann., tit. 2, subtit. G app. (Vernon 1988).

Justice Wallace, a former Texas Supreme Court Justice, testified the fee charged to Jampole was reasonable. William Fred Hagans, a noted personal injury lawyer in Texas, testified unequivocally the modified fee agreement was fair. Matthews, himself an experienced personal injury attorney, testified unequivocally the fee was fair. All the experts, except Craig Landin, testified that in Harris County a 40% contingency fee for a products liability case is customary. Jampole’s own expert, Landin, testified the 36% fee actually paid for the work was fair; it was the modification with which he had a problem.

Even Jampole admitted he thought the fee agreement was fair when he proposed it. Jampole saw the modification as a “win-win” agreement, by which he might pay more fees, but might pay less, but with which he hoped to secure Matthews’ exclusive efforts and get the case resolved more quickly for the maximum recovery. It was only a few weeks after the case settled, that Jampole began to have doubts about the agreement he concocted, solely because the agreement worked out to benefit Matthews more than Jampole.

The Jampoles argue Matthews did not establish that the contingency fee was reasonable because he did not provide evidence satisfying the factors under the Texas Disciplinary Code which determine the reasonableness of the fee as required by Arthur Andersen & Co. v. Perry Equipment Corp., 40 Tex. Sup.Ct. J. 222, 226 (Jan. 10, 1997); TEX. DISC. R. PROF. CONDUCT 1.04, reprinted in Tex. Govt Code, tit. 2, subtit. G. app. (STATE BAR RULES, art. X, § 9). Arthur Andersen involves shifting the plaintiff attorney’s contingent fee to the defendant in a DTPA action, and requires asking the jury for attorney’s fees in a dollar amount rather than as a percentage of the judgment. 40 Tex. Sup.Ct. J. at 226; Tex. Bus. & Com.Code Ann. § 17.50. Arthur Anderson does not control this case.

*12 There was sufficient evidence to support the trial court’s findings of fact and conclusions of law that the fee was fair, just, and equitable. Thus, when Matthews received his portion of the settlement, there could not have been a breach of the original agreement under Archer. We overrule points of error three and 12.

C. Novation

The elements of a novation are: (1) a previous, valid obligation; (2) an agreement of the parties to a new contract; (3) the extinguishment of an old contract; and (4) the validity of the new contract. Mandell v. Hamman Oil & Ref. Co., 822 S.W.2d 153, 163 (Tex.App.–Houston [14th Dist.] 1991, writ denied). The first two elements are undisputedly present.

1. Extinguishment of Old Contract

Jampole testified he came up with the new agreement in an effort to get more money and get the case settled faster. It is absurd for Jampole to argue there was no new contract, when he proposed it and admitted unequivocally at trial “a contract is a contract.” Jampole admitted a new contract was formed and later attempted to recant his testimony. There was evidence Jampole and Matthews both understood the attorney’s fees would no longer be 40% if the case went to trial under the new agreement. There is no evidence Jampole or Matthews intended anything but that the new fee agreement replace the Combs agreement.

2. Validity of New Contract

Jampole argued there was no valid consideration to support the modified fee agreement, so it was invalid. Consideration is a present exchange bargained for in return for a promise. Consideration consists of either a benefit to the promisor or a detriment to the promisee. Roark v. Stallworth Oil & Gas, Inc., 813 S.W.2d 492, 496 (Tex.1991). It is fundamental that in any agreement advantages flowing in both directions constitute sufficient legal consideration to compel the enforcement of the agreement. Newitt v. Camden Drilling Co., 552 S.W.2d 928, 931-32 (Tex.App.–Corpus Christi 1977, no writ). In addition, the surrender of any valid contractual right, which the promisee is not obligated to surrender, constitutes valuable consideration for a return promise as a matter of law. Anderson v. Ladd, 131 Tex. 479, 115 S.W.2d 608, 611 (Tex.1938); Crockett v. Bell, 909 S.W.2d 70, 74 (Tex.App.–Houston [14th Dist.] 1995, no writ).

Jampole relies on testimony of his expert, Landin, that an attorney is already obligated to zealously represent his client and therefore a promise to put all other matters on hold in an effort to resolve Jampole’s case was not consideration. He also relies on Matthews’ stipulation that he was not required to do any more work under the novation than under the Combs agreement.

However, Matthews also gave up his contractual right to collect 40% on any amount recovered if the case went to trial when he agreed to Jampoles’ new fee agreement in place of the Combs agreement. Jampole and Matthews understood this at the time they entered into the modification. Jampole viewed the agreement as a “win-win” situation for both of them because he would not have to pay 40% attorney’s fees if the case went to trial as he would under Matthews standard fee agreement; he would only have to pay 33 1/3% unless Matthews recovered over $2.75 million. Jampole had agreed he would settle the case for $3 million if offered. It is irrelevant that Matthews quickly resolved the case, or that the case settled before trial. The consideration was the present exchange bargained for in return for a promise. See Roark, 813 S.W.2d at 496. Therefore, the new contract was supported by valid consideration. See id; Coon v. Ewing, 275 S.W.2d 481, 468 (Tex.Civ.App.–Beaumont 1925, no writ) (upholding modification of attorney fee where representation involved unforeseen difficulties and no undue influence was shown).

3. Public Policy

*13 Jampole argues the contract was void for public policy reasons because it violated the Texas Code of Disciplinary Conduct by promising Jampole to give his case priority over Matthews’ other clients. He relies on the rule stating an attorney may not willfully or intentionally neglect a matter entrusted to him. TEX. DISC. R. PROF. COND. 6-101(3) (1984). Jampole’s new found concern for Matthews’ other clients is unpersuasive because it is possible and not unusual for an attorney to devote exclusive efforts to one case for a short period of time without neglecting other cases.

4. Failure of Consideration

Jampole also argues Matthews did not keep his promises and, therefore, there was a failure of consideration. Jampole had the burden to prove failure of consideration. Gooch v. American Sling Co., Inc., 902 S.W.2d 181, 185 (Tex.App.–Fort Worth 1995, no writ). Jampole did not offer any evidence Jampole did not devote all of his energy and efforts to resolving the Jampole case, or that Matthews would have insisted on a 40% fee if the case had gone to trial. Jampole did not offer any evidence showing Matthews did not keep his promises. Therefore, Matthews was entitled to judgment as a matter of law, because Jampole had the burden of proof to show failure of consideration. See Stewart v. U.S. Leasing Corp., 702 S.W.2d 288, 290 (Tex.App.–Houston [1st Dist.] 1985, no writ).

5. Summary

The case settled for $3.525 million. At the time of the modified fee agreement, General Motors had not offered more than $2 million, which Jampole rejected. The record does not show evidence of any intervening offers. The evidence was legally and factually sufficient to support the trial court’s findings of fact and conclusions of law that: (1) the modified fee agreement was supported by adequate legal consideration; (2) there was a binding novation which extinguished the Combs agreement in favor of the Matthews agreement; and (3) Matthews did not breach any contract. We overrule the Jampoles’ points of error one, two and 9.

Concealment of Material Fact

In the Jampoles’ point of error five, they contend the evidence was legally and factually insufficient to support the trial court’s finding that Matthews did not conceal any material fact from Jampole. There is no evidence in the record showing Matthews kept secret any settlement offers from GM. To the contrary, the evidence before the trial court showed Matthews kept Jampole fully informed of all settlement offers. Jampole does not cite any authority to support his implied position that an attorney must tell his client every statement he makes when negotiating a settlement. Matthews was clearly carrying out Jampole’s wishes in Matthews’ communications with GM. In Matthews’ June 12, 1986 letter to Jampole, he explained in great detail the progress on the case. There is no evidence of any settlement offers from GM that Matthews did not disclose to Jampole. Matthews did not know when or if the case would settle or for what amount.

*14 The record showed that the proposed modification was made by Jampole, after Matthews had fully disclosed that he was willing to work under the existing agreement, and Matthews went to significant lengths to ensure that Jampole was informed of, and satisfied with, the agreement before the Jampoles signed the settlement papers. There is no evidence of a failure to disclose information material to the Jampole modified fee agreement. We overrule the Jampoles’ point of error five.

Actual or Constructive Fraud

In the Jampoles’ point of error eight, they contend the evidence is legally and factually insufficient to support the trial court’s findings Matthews did not commit actual or constructive fraud. A claim of actual fraud requires dishonesty of purpose and an intent to deceive. Archer, 390 S.W.2d at 740. Jampole did not brief or discuss actual fraud. Therefore, this issue is waived. Tex.R.App. P. 50(d), 52(a), and 74(d); Henry S. Miller Mgmt. Corp. v. Houston State Assoc., 792 S.W.2d 128, 133 (Tex.App.–Houston [1st Dist.] 1990, writ denied).

Constructive fraud is the breach of some legal or equitable duty that the law declares fraudulent because it tends to deceive others, violate confidences, or injure public interests. Archer, 390 S.W.2d at 740. Jampole relies on Archer v. Griffith, for the proposition that constructive fraud automatically arises from a change in an at>Anaey’s fee agreement during the attorney-client relationship. Id. We disagree. Archer simply creates a presumption of unfairness and shifts the burden to the attorney to show the change was fair and reasonable under the circumstances. Therefore, to defeat the constructive fraud claim, Matthews had the duty to prove by a preponderance of the evidence that the modification was fair under the circumstances. See Texas Bank & Trust Co. v. Moore, 595 S.W.2d 502, 508 (Tex.1980); Archer, 390 S.W.2d at 740.

Some of the factors to consider in determining whether the modification was fair and reasonable are whether: (a) the client was aware he was under no obligation to agree to the change; (b) there was legal consideration for the modification; and (c) the client had the availability of independent advice regarding the proposal. Miller v. Miller, 700 S.W.2d 941, 941 (Tex.App.– Dallas 1985, writ ref’d n.r.e). Also to be considered are: (d) the age and experience of the client (Texas Bank & Trust, 595 S.W.2d at 508-09); (e) whether undue influence was exercised by the fiduciary over the beneficiary (Cooley v. Buie, 291 S.W.2d 876, 883 (Tex. Comm’n App.1927)); and (f) the reasonableness of the fee modification for the services rendered on the case (Archer, 360 S.W.2d at 740). Stated differently, the test is whether the fiduciary made reasonable use of the confidence placed in him by the beneficiary or took advantage of his position of trust to the detriment of the beneficiary. Gum v. Schafer, 683 S.W.2d 803, 806 (Tex.App.–Corpus Christi 1984, no writ).

*15 The factors apply to this case as follows: (a) Jampole was aware he could insist that Matthews continue under the old agreement; (a) Jampole concocted the modified fee agreement himself and suggested Matthews meet him to discuss it; (b) Jampole proposed the modification under the belief it was a “win-win” proposal, with potential benefit for both contracting parties; (c) Jampole also admitted he had a lawyer, Helfat, in New York, whom he had consulted about this case on at least two occasions; (c) he knew he could contact an attorney about the modification as he could for any other matter, but he declined to do so; (d) Jampole admitted he was an experienced contract negotiator at the time; (e) Jampole readily admitted he was placed under no duress or coercion by Matthews; (f) the evidence in this case has been overwhelming that this modification was in all things fair and reasonable; and (f) Jampole admitted the additional fee was worthwhile to get the matter resolved quickly; (f) Jampole also admitted the modified fee agreement was fair and reasonable; (f) three experts agreed the approximate 36% fee ultimately paid to Matthews was fair and reasonable for a complex products liability case.

Justice Wallace and Hagans testified Matthews acted reasonably in dealing with Jampole, made reasonable use of the confidence placed in him by the Jampole family and did not overreach the relationship. Only one expert, Landin, testified that the modification was perhaps “unfair” because of Jampole’s alleged lack of knowledge of the true state of settlement negotiations and because Matthews did not inform him he could consult an attorney. On cross- examination, Matthews exposed that Landin had never tried a personal injury case and had never handled a million dollar personal injury case of any nature.

The evidence supports the trial court’s finding of no constructive fraud. We overrule the Jampoles’ point of error eight.


It is not necessary for us to address the trial court’s findings and conclusions in favor of Matthews’ remaining affirmative defenses to affirm the judgment. Accordingly, we decline to reach the Jampoles’ remaining points of error 16, 17, 18, 19, and 20. We affirm the trial court’s judgment.


Attorney Tim Riley has a rich history of helping Texans and their families over the last 30 years. He has been successful with cases many lawyers viewed as hopeless or lost causes.