McGuire, Craddock, Strother & Hale, P.C. v. Transcontinental Realty Investors, Inc., 251 S.W.3d 890 (Tex.App. 2008)
Brief Summary
Law firm did not breach its fiduciary duty by raising hourly rates without first informing its client.
Complete Summary
Law firm McGuire, Craddock, Strother & Hale, P.C. (“McGuire”) sued several former clients (“TRI”) for unpaid legal fees. TRI had stopped paying fees and terminated McGuire because the cost of litigation in the underlying matter had ballooned far past what McGuire had estimated in a litigation budget. TRI also filed a fiduciary duty counterclaim based on McGuire’s allegedly unreasonable fee agreement and billing practices. At trial the jury found in favor of McGuire, but the judge granted TRI’s motion for JNOV, ordering McGuire to forfeit its fees based on its breach of fiduciary duty.
The appellate court reversed, holding that there was more than a scintilla of evidence from which the jury could have found that McGuire complied with its fiduciary duty to TRI. The court cited evidence that McGuire’s billing in the underlying matter was consistent with McGuire’s billing in a previous matter involving TRI, and TRI had never complained about billing in the previous matter. The court accepted expert testimony that McGuire’s practice of billing in 15-minute increments was not a breach of fiduciary duty.
Perhaps most significantly, McGuire had raised its rates without informing TRI in advance—an apparent violation of Texas Rule of Professional Conduct, Rule 1.04—but the court held Rule 1.04 was not a basis for civil liability. Finally, the court noted that McGuire’s allegedly “lowball” proposed litigation budget was not presented to the client as a guarantee or a limit and that following the proposal, the litigation took an unexpected turn and became much more complex.
Significance of Opinion
If nothing else, the court’s holding serves as a reminder that the Rules of Professional Conduct are not a basis for civil liability.
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