More Pressure on Texas Supreme Court to Enforce Ethical Rules Despite Arbitration Clauses

Dennis wrote about this case involving Jenner & Block and Parallel Networks on the main page, and I was an expert in the underlying case for the client.  Boiled down, Jenner agreed to represent Parallel Networks on a contingent fee.  The firm got upset when the client fell behind on expenses, and the client paid up.  Then the firm lost  on summary judgment, and dumped the client.

The law in Texas is pretty clear that there’s a big distinction between whether you can quit a case — withdrawal — and whether you can quit a case and be paid.  The former is pretty narrowly circumscribed but the latter is severely so:  without “just cause” you lose any right to any money.  Makes sense, otherwise a contingent fee is illusory:  I get in a case, and it’s a loser, I withdraw but still get paid.  Undermines the entire notion of contingent fees.

Although Jenner gave up on its client’s case, the client didn’t.  But the client had to pay another firm hourly fees to handle the appeal and get the case out of the ditch into which Jenner had put it, and left it.

Then that firm (my old firm, Baker Botts), turned the case around on appeal,  resulting in settlement money.

Believe it or not, Jenner then demanded that — even though it had left its own client in the ditch to fend for itself — because of the contingent fee agreement, it was entitled to its fully hourly fees. Yes, full hourly fees because supposedly that’s what the agreement provided.  The arbitrator awarded the firm some money, but not full hourly fees.  The agreement is quite something to read and Jenner pointed out that the client had used it in another case (long story), and so, presumably, was the cause of any unethical provisions in it.  (Think on that.)

The Texas courts have, so far, refused to even examine the merits  of the award because, supposedly, the Federal Arbitration Act precludes review unless the award was fraudulent, etc.

As you can imagine, the prevailing notion in Texas that we’ve outsourced ethics to arbitrators (aka, lawyers), and as a result insulated their decisions from review by the judiciary — supposedly independent and constitutionally charged in many states with enforcing ethics —  has caused some people to wonder about what is wrong in Texas courts.  If anything, the Texas Supreme Court should say, clearly:  “if there’s an arbitration clause it will be enforced even if the conduct is unethical because that’s what the FAA requires,” so the Supreme Court can take corrective action.

The latest amicus brief is here.  Dennis’ post which links to my earlier one, is here.

I don’t mean to be flippant but, the way things stand, suppose you hire a hit man and, being the good lawyer you are, you include an arbitration clause in your written agreement. He then decides it’s not right to murder someone. So you bring an arbitration proceeding for damages. Hooray for you.  That arbitrator is free to ignore public policy saying that contract is no good, and make then hitman pay, and a Texas court will enforce the award.  Yes, a silly example and obviously extreme, but that’s where Texas now is. It’s obviously wrong, seriously misguided, and needs to be corrected by that court or the one above it.

One thought on “More Pressure on Texas Supreme Court to Enforce Ethical Rules Despite Arbitration Clauses

  1. Professor,

    Let me see if I understood one of your comments correctly. Because Jenner entered into a fee agreement previously used by Parallel Networks that contained unethical provisions, it was Parallel Networks fault for any ethical lapses? Gee, I didn’t know that it was the client that owed the attorney ethical obligations. I think Jenner needs go back and review their ethical obligations to their clients.

    Also, the amicus letter your article linked to noted that Jenner claimed that they had billed $10.2 million or 24,000 hours in the 18 months they represented Parallel Networks (which, as the amicus letter points out translates to 44 hours/day seven days/week for 18 months). Wow!

    Remind me to never hire Jenner for a patent case (regardless of whether they’re billing under a contingency fee or an hourly fee, it seems Jenner likes to stick it to their clients).

    B

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