Opinion
Civil No. SA-05-CA-1127-FB.
November 22, 2006
REPORT AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE
Pursuant to the orders of referral in the above-styled and numbered cause of action to the undersigned United States Magistrate Judge and consistent with the authority vested in United States Magistrate Judges under the provisions of 28 U.S.C. § 636(b) and rule 1 of the Local Rules for the Assignment of Duties to United States Magistrate Judges in the Western District of Texas, the following report is submitted for your review and consideration.
Docket nos. 19, 69, and 96.
I. JURISDICTION
The Court has jurisdiction pursuant to 28 U.S.C. §§ 1332 and 1441.
II. PROCEDURAL HISTORY
This case was initiated by plaintiff Fulbright Jaworski, L.L.P. ("Fulbright") on November 14, 2005, in the 407th Judicial District Court for Bexar County, Texas, when Fulbright filed its original petition and application for temporary and permanent injunction, motion for expedited discovery and substituted service, and jury demand. Fulbright has sued defendants Mariner Health Care, Inc. ("Mariner"), Mariner Health Care Management Company, and Living Centers of Texas, Inc. ("LCT") (collectively the "Mariner Defendants"); and John Does 1-10 for breach of contract, fraudulent conveyance, and fraud.
Docket no. 1, tab 1, "Docket Information."
Id., tab 2, Fulbright's original petition and application for temporary and permanent injunction ("original petition") at 10-12.
In sum, Fulbright's claims address the firm's continued provision of legal services for the Mariner Defendants, its requests for payment of sums owed on account of such legal services, and the Mariner Defendants' failure to pay moneys owed in and after approximately August 2005. Fulbright seeks a temporary and permanent injunction barring defendants from: "(a) render[ing] any Mariner Defendant insolvent, or more insolvent; (b) defraud[ing] creditors of the Mariner Defendants; (c) enhancing the financial position or financial statements of any John Doe or any other party which is not a Mariner Defendant; (d) invest[ing] in any non-Mariner Defendant, company or business; (e) lend[ing] money to any non-Mariner Defendant company or business; and/or (f) encumber[ing] any Mariner Defendant assets." Fulbright also seeks actual damages, exemplary damages, attorney's fees, pre and post judgment interest, and all other relief to which Fulbright might be entitled. On November 18, 2005, the Mariner Defendants removed the case to federal court pursuant to diversity jurisdiction.
Id. at 13.
Id. at 16.
Docket no. 1.
On December 5, 2005, the Mariner Defendants filed their original combined answer, defenses, and counterclaim, alleging the fees and/or expenses Fulbright is seeking to recover in the present legal action are excessive and unreasonable and requesting attorney's fees, costs, and/or expenses. The Mariner Defendants have subsequently filed their first and second amended combined answers, defenses, and counterclaim. Fulbright answered the original counterclaim and the second amended counterclaim.
Docket no. 5.
Docket nos. 87, 88, and 91.
Docket no. 24.
Docket no. 93.
On December 14, 2005, Fulbright filed a motion for partial summary judgment against two of the defendants named in the case, Mariner Health Care, Inc. and Living Centers of Texas, Inc. The Mariner Defendants' response and motion for continuance as well as Fulbright's reply were subsequently filed.
Docket no. 10. As further discussed, Mariner Health Care, Inc. and Living Centers of Texas, Inc. signed the "Letter Agreement," central to Fulbright's motion for partial summary judgment, and are referred, at times, as the "Signatory Defendants," and are included also in the general reference to "the Mariner Defendants." There is some identity of interest among Mariner Health Care, Inc., Living Centers of Texas, Inc., and Mariner Health Care Management Company as reflected by the response to Fulbright's motion filed by the "Mariner Defendants," denominated as such. Accordingly, this report at times refers to the Mariner Defendants' position on Fulbright's partial motion for summary judgment, although the requested relief precisely could be ordered only with respect to the Signatory Defendants.
Docket nos. 13, 14, and 16.
On January 13, 2006, the undersigned also signed an Order granting Mariner Defendants' request for an extension of time in the briefing and disposition of Fulbright's motion for partial summary judgment and to conduct some discovery limited to the issues implicated by the motion for partial summary judgment, ordering that such limited discovery be completed on or before April 3, 2006, and directing Fulbright to file an advisory on or before February 3, 2006, indicating whether it wished to withdraw its motion for partial summary judgment, without prejudice to refiling after the close of limited discovery.
Docket no. 22 at 9-10.
On February 2, 2006, Fulbright filed an advisory to the Court stating it did not wish to withdraw the pending motion for partial summary judgment, but might seek leave to amend the motion at the close of the limited discovery, if necessary. Therefore, on February 26, 2006, the undersigned entered an Order to establish a briefing schedule on the referred motion for partial summary judgment, namely that Fulbright would file any supplement to its motion on or before April 10, 2006, the Mariner Defendants would file their response on or before April 24, 2006, and Fulbright would file any reply on or before May 8, 2006.
Docket no. 33.
Docket no. 37.
On April 17, 2006, the Mariner Defendants filed their response to Fulbright's motion for partial summary judgment. Fulbright filed a reply on May 3, 2006 and, on May 5, 2006, a motion to supplement the reply with excerpts from the May 4, 2006 deposition testimony of Boyd Gentry.
Docket no. 83.
Docket no. 99.
Docket no. 105. Fulbright argues the excerpts it proffers from Mr. Gentry's May 4, 2006 deposition testimony "provide further conclusive evidence supporting" the motion for partial summary judgment. The evidence was not available at the time Fulbright filed its reply on May 3, 2006, and was filed prior to the May 8, 2006 deadline for filing the reply. Fulbright filed the supplement under seal, acknowledging the Mariner Defendants did not have an opportunity prior to the motion to supplement to designate which portions of the deposition testimony might be confidential. Fulbright's motion to supplement is granted and the deposition excerpts have been considered in the preparation of this report.
III. STATEMENT OF FACTS
Unless otherwise noted, the parties do not appear to contest the following facts, which are construed in favor of the Mariner Defendants as nonmovants and opponents of summary judgment. The facts are derived from the "Uncontested Facts" included in Fulbright's motion for partial summary judgment and attached evidence to which the Mariner Defendants have not objected.Before and during the period of approximately January 1, 2003 to July 2005, Fulbright provided legal counsel and representation to Mariner and LCT (the "Signatory Defendants"), as well as "related entities and persons, inter alia, in numerous litigation and other matters pending or focused in Texas." The Signatory Defendants promised to pay Fulbright for legal and consultative services rendered and did pay or obtain payments from third parties for Fulbright's services. During the relevant period, the Signatory Defendants continued to refer new and additional matters to Fulbright. "In 2004, the Signatory Defendants became very `slow pay.'" Initially, various reasons were provided, but the Signatory Defendants eventually explained Fulbright's legal fees were being withheld pending the potential acquisition of the Signatory Defendants and subsidiaries by one or more third parties (the "Acquisition"). Fulbright did not provide legal services for the Acquisition, but continued to provide representation in other matters even though the Mariner Defendants were tendering tardy and partial payments for past work.
Mariner and LCT, through their Vice President and General Counsel Devin Ehrlich, are signatories to the March 28, 2005 Letter Agreement which is discussed below and is central to the motion for partial summary judgment.
Docket no. 10 at 2 and exhibit 1 at ¶ 1 (affidavit of Charles A. Deacon, a Fulbright partner).
Id.
Id. at 3 and exhibit 1 at ¶ 1.
Id. at 3 and exhibit 1 at ¶ 2.
Id.
Id.
Throughout 2004 and early 2005, payments to Fulbright continued to "grow fewer and farther apart, even as the Signatory Defendants continued to increase [Fulbright's] workload." The "Signatory Defendants instituted a procedure whereby [Fulbright] was required to submit its bills, including third party vendor charges, to [Mariner's] authorized agent(s) for review and approval, and only then submit such bills to [Mariner's] third party administrator, ProClaim America, for payment." The Signatory Defendants represented those bills for services that "first were `approved' would be accepted unconditionally and promptly paid through ProClaim America" and payment would be expedited by this process. Fulbright followed the procedure, as requested. In other words, if bills were "approved," under a further procedure not specified, ProClaim was to pay the bill "unconditionally and promptly."
Id. at 3 and exhibit 1 at ¶ 3.
Id.
Id. at 3-4 and exhibit 1 at ¶ 3.
Id. at 4 and exhibit 1 at ¶ 3.
Fulbright continued to provide legal services to the Signatory Defendants and their additional insureds throughout 2004 and much of 2005. Although some Fulbright invoices were paid as submitted, numerous "approved" invoices remained unpaid. Small adjustments were made in some instances, but no invoices were protested or rejected.
Id. at 4 and exhibit 1 at ¶ 4.
Id.
Id.
In March 2005, after the Acquisition and new management, Fulbright and the Signatory Defendants met in Fulbright's offices to discuss the Signatory Defendants' failure to make payments and Fulbright's continued representation. As a result of the meeting, Fulbright and the Signatory Defendants came to an agreement, set out in a March 28, 2005 letter (the "Letter Agreement"), which is central to the motion for partial summary judgment.
Id. at 4 and exhibit 1 at ¶ 5.
Id. at 4-5 and exhibit 1 at ¶¶ 6, 7.
According to the evidence proffered by Fulbright and not opposed by the Mariner Defendants, the "Signatory Defendants, through their authorized agent, General Counsel Devin Ehrlich, actually affirmatively proposed the basic arrangement and new contract memorialized in the Letter Agreement." Mr. Ehrlich signed the Letter Agreement on behalf of the Signatory Defendants. Pursuant to the Letter Agreement, the Signatory Defendants agreed that, "as of March 1, 2005, after all just and lawful offsets and credits," Fulbright was owed $2,247,035.00 for legal services provided prior to that date. The Signatory Defendants agreed to pay the debt in eleven equal installments of $187,252.00 and with a final, twelfth payment of $187,263.00. For fees incurred for services provided after February 28, 2005, the Signatory Defendants "agreed to pay all such amounts in full within 90 days from the date of its receipt of an invoice from Fulbright. . . ." The Signatory Defendants represented the "90 day provision was required" because they, their subsidiaries, or their divisions "were going to sell assets ("Asset Sales") to generate additional cash" to pay the debts owed to Fulbright and others. Fulbright continued to provide legal services and the workload grew.
Id. at 4 and exhibit 1 at ¶ 6.
Id. at 5 and exhibit 1 at ¶ 6.
Id. at 5, exhibit 1 at ¶ 7, and exhibit A.
Id. The first installment was due on or before the last day of March 2005, with subsequent payments also due on the last day of the month until February 27, 2006 when the final installment was due. Id.
Id. For payments made not in accordance with the Letter Agreement, interest at 6% per year would accrue on all past due debt installments or later fees.
Id. at 5 and exhibit 1 at ¶ 8.
Id.
After the Letter Agreement was executed, the Mariner Defendants paid several of the monthly installments. Nevertheless, some time after the closing of one or more Asset Sales, the Signatory Defendants admitted the cash generated from the sales was diverted to other purposes. When the first 90-day payment came due, the Signatory Defendants ceased making all further payments to Fulbright. The Letter Agreement provided that if the Signatory Defendants defaulted in any payment due under the Letter Agreement, Fulbright had the option of demanding payment of all debt "without presentment, notice, protest or demand." Fulbright "made multiple verbal and written requests for payment which remained unaddressed, even as [Fulbright] continued to work as requested[.]" Further negotiations "resulted in [Fulbright's] complete, but agreed, withdrawal from all representation[.]" This lawsuit followed.
Id. at 6 and exhibit 1 at ¶ 9.
Id.
Id.
Id., exhibit A at 2.
Id. at 6 and exhibit 1 at 10.
Id.
The Letter Agreement also provides that if any sum payable pursuant to the Letter Agreement was collected through Probate Court, Bankruptcy Court or any judicial proceeding, or was placed in the hands of an attorney for collection, the Signatory Defendants "will pay Fulbright reasonable attorney's fees incurred in connection with collection of the debt." Id., exhibit A at 2.
IV. ISSUE
Whether Fulbright is entitled to partial summary judgment on its breach of contract claim.V. SUMMARY JUDGMENT STANDARD
The standard to be applied in deciding a motion for summary judgment is set forth in Federal Rule of Civil Procedure 56, which provides in pertinent part as follows:
The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.
FED. R. CIV. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552 (1986).
Mere allegations of a factual dispute between the parties will not defeat an otherwise proper motion for summary judgment. Rule 56 requires that there be no genuine issue of material fact. A fact is material if it might affect the outcome of the lawsuit under the governing law. A dispute about a material fact is genuine if the evidence is such that a reasonable trier of fact could return a verdict for the nonmoving party. Therefore, summary judgment is proper if, under governing laws, there is only one reasonable conclusion as to the verdict; if reasonable finders of fact could resolve a factual issue in favor of either party, summary judgment should not be granted.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 2510 (1986).
Anderson, 477 U.S. at 248, 106 S.Ct. at 2510; Thomas v. LTV Corp., 39 F.3d 611, 616 (5th Cir. 1994).
Anderson, 477 U.S. at 248, 106 S.Ct. at 2510; Wise v. E.I. DuPont De Nemours Co., 58 F.3d 193, 195 (5th Cir. 1995).
Anderson, 477 U.S. at 249, 106 S.Ct. at 2510-11.
The movant on a summary judgment motion bears the initial burden of providing the court with a legal basis for its motion and identifying those portions of the record which it alleges demonstrate the absence of a genuine issue of material fact. The burden then shifts to the party opposing the motion to present affirmative evidence in order to defeat a properly supported motion for summary judgment. All evidence and inferences drawn from that evidence must be viewed in the light favorable to the party resisting the motion for summary judgment. Thus, summary judgment motions permit the Court to resolve lawsuits without the necessity of trials if there is no genuine dispute as to any material facts and the moving party is entitled to judgment as a matter of law.
Celotex Corp., 477 U.S. at 323, 106 S.Ct. at 2553.
Anderson, 477 U.S. at 257, 106 S.Ct. at 2514.
Hibernia Nat'l Bank v. Carner, 997 F.2d 94, 97 (5th Cir. 1993).
See Fields v. City of South Houston, Tex., 922 F.2d 1183, 1187 (5th Cir. 1991).
When plaintiff moves for summary judgment, it must affirmatively demonstrate that there is no genuine issue of material fact as to each element of its causes of action. If defendant as the non-movant cannot provide some evidence to showing a genuine issue of fact, summary judgment is appropriate.
Fontenot v. Upjohn Co., 780 F.2d 1190, 1195 (5th Cir. 1986).
Stahl v. Novartis Pharmaceuticals Corp., 283 F.3d 254, 263 (5th Cir.), cert. denied, 537 U.S. 824, 123 S.Ct. 111 (2002).
VI. ARGUMENTS AND ANALYSIS
A. Summary of ArgumentsFulbright has moved for partial summary judgment, not on each of its claims or to collect "all sums due it under the Letter Agreement," but to collect the remainder of the unpaid principal balance of the Debt described in the Letter Agreement which, according to Fulbright, totals $1,275,836.77. Fulbright argues there is no genuine issue of material fact and it has "conclusively established" the facts of the Signatory Defendants' joint and several "liability for breach of the Letter Agreement" and an award of "partial damages thereunder in the amount of [$1,275,836.77], solely for the remaining and unpaid Debt." Fulbright contends the Signatory Defendants "have no contrary evidence and cannot disprove any facts or claims essential to [Fulbright's] right to recover the unpaid Debt[.]" Fulbright seeks a partial summary judgment conclusively establishing the facts set forth in its "Uncontested Facts" as a matter of law, or specifying those facts for which there is no genuine issue, and establishing the Signatory Defendants' joint and several liability for breach and payment of the $1,275,836.77 Debt owed under the terms of the Letter Agreement. In support of its motion, Fulbright has proffered the affidavit of Charles A. Deacon, a Fulbright partner, with the Letter Agreement attached as exhibit A.
Docket no. 10 at 1.
Id. at 7.
Id. at 10.
Id., exhibit 1 and exhibit A.
In response, the Mariner Defendants concede the Signatory Defendants "executed [the] letter agreement during the existence of the attorney-client relationship between it and Fulbright " but argue Fulbright's "claims for legal fees are excessive and unreasonable." The Mariner Defendants assert the Signatory Defendants "relied on Fulbright's fiduciary duties of loyalty and trusted the law firm to act in [the Signatory Defendants'] best interests." According to the Mariner Defendants' arguments, Fulbright put its interests above those of the Signatory Defendants, failed to disclose the excessive nature of the fees claimed, and insisted "its excessive fees be paid in full by the execution of the letter agreement[.]" Although the Letter Agreement states "it is understood and agreed that, as of March 1, 2005, after all just and lawful offsets and credits, the sum of $2,247,035.00 is due and owing," the Mariner Defendants argue the "recitation was based upon Fulbright's express representations that such amounts were fair, reasonable, just, and owing." The Mariner Defendants assert the Signatory Defendants learned after the Letter Agreement was executed that Fulbright's charges were "inflated, excessive, and unreasonable." The Mariner Defendants argue the Signatory Defendants "did not perform a review of the substantive nature of the work performed; that is, it did not review the invoices on the numerous files to ensure that Fulbright was not engaged in a deceptive pattern of excessive billing practices as is now apparent." Rather, the Mariner Defendants argue, the Signatory Defendants relied on Fulbright to bill fairly for work performed. The Mariner Defendants argue, in sum, that the evidence suggests Fulbright breached its fiduciary duties to the Signatory Defendants and there is a genuine issue of material fact about whether the Letter Agreement is valid. In support of their arguments, the Mariner Defendants have proffered a copy of the Letter Agreement, the declaration of John D. Percaccio, Esquire, Director of Captive Healthcare Services of the Littleton Group, with attached exhibits, including his report on an audit of invoices submitted by Fulbright, and Mr. Ehrlich's declaration.
The Mariner Defendants rely on the language in the Letter Agreement and refer to Mariner Health Care, Inc. and Living Centers of Texas, Inc. collectively as "Mariner." Because this report refers only to Mariner Health Care, Inc. as "Mariner," Mariner Health Care, Inc. and Living Centers of Texas, Inc. are referred to as the "Signatory Defendants."
Docket no. 83 at 1-2.
Id. at 2.
Id.
Id.
Id.
Id. at 5.
Id.
Id. at 5-6.
Id., exhibits A-C.
In reply, Fulbright argues that "faced with the incontestable and plainly unambiguous Letter Agreement and their own undeniable and inexplicable failure to make payments required thereunder, the [Mariner Defendants] simply retreat to an insupportable assertion of fraud in the inducement, characterized as breach of fiduciary duty." Fulbright asserts the Mariner Defendants' response "create[s] no fact issues relevant to the subject [motion for partial summary judgment]." Because the Letter Agreement is uncontested and unambiguous, Fulbright argues the agreement must be "enforced according to its plain meaning." Fulbright describes the Mariner Defendants' response and affidavits as "an attempt torenegotiate the Letter Agreement" and as "inadmissible, extrinsic evidence which cannot contradict or vary the terms of the Letter Agreement." Fulbright argues that because "the Mariner Defendants had access to and knowledge of all Debt-related Invoices and the pertinent facts memorialized therein long before execution of the Letter Agreement," Fulbright cannot have made any misrepresentations of fact that would support the allegations of fraud or breach of fiduciary duty. In addition, Fulbright argues the Mariner Defendants "can prove neither any material non-disclosure of fact nor any justifiable reliance by [Mariner Defendants] on any alleged silence by Fulbright concerning the validity of the Debt." As will be discussed further below, Fulbright has also objected to the declaration testimony of Mr. Percaccio. To supplement the reply, Fulbright has proffered excerpts from the Mr. Gentry's deposition testimony, purportedly "show[ing] that [the Mariner Defendants] approached [their] law firms seeking to work out a payment schedule in the first quarter of 2005" and that the Mariner Defendants admit, at the time the Letter Agreement was executed, there had long been "concerns or issues with Fulbright's alleged improper billing practices." B. Analysis
1. Fulbright's Objections to Mr. Percaccio's Opinions
Docket no. 99 at 1.
Id. (emphasis in original).
Id. at 2 (emphasis in original).
Id. (emphasis in original).
Id. at 3.
Id. (emphasis in original).
Id. at 4-5.
Docket no. 105, attachment "Supplement to Plaintiff's Reply to Defendants' response to plaintiff's Motion for Partial Summary Judgment."
In support of their arguments that there is a genuine issue of material fact regarding the unreasonableness of Fulbright's fees, the Mariner Defendants have filed the declaration of John Percaccio, Esq., and supporting documents regarding his audit of certain of Fulbright's invoices. Mr. Percaccio's declaration reflects he is an attorney and the Director of Captive Healthcare Programs for the Littleton Group who "regularly perform[s] audits of legal bills for reasonableness of charges" and is "familiar with the reasonable charges for legal services in the South Texas region." According to his declaration, Mr. Percaccio was asked by the Mariner Defendants "to review certain invoices submitted by [Fulbright] to [Mariner] for the defense of various nursing home negligence cases." Mr. Percaccio states the invoices he reviewed, in part, form the basis of Fulbright's motion for partial summary judgment. Mr. Percaccio describes his review as "consist[ing] of a comprehensive analysis of a statistical sample of the approximately 80 cases" that are the subject of Fulbright's motion. Based on his analysis and extrapolations, Mr. Percaccio opines the "particular files reviewed contain an inflation factor of approximately 15%; that is, Fulbright inflated the bills by approximately 15% of the gross charges submitted." Mr. Percaccio further opines that given the "persistent and repeated patterns of billing improprieties . . the entire bulk of invoices submitted (the subject of the Motion for Partial Summary Judgment) is infected with the same rate of inflated invoices."
Docket no. 83, exhibit B at 1.
Id.
Id. at 2.
Id.
Id.
Id.
Attached to Mr. Percaccio's declaration are the report of his findings and spreadsheets for five representative cases. The report reflects Mr. Percaccio was retained to audit legal bills for matters handled by Fulbright and to render an opinion on "whether the charges contained in the legal invoices reviewed were reasonable and/or in compliance with the Mariner Defense Counsel Procedures dated 9/21/04 ("Procedures")." After reviewing "well over 100 boxes of file materials," Mr. Percaccio concluded "a portion of the Fulbright charges for legal services were not reasonable and/or were in violation of the Procedures[.]" The charges were reduced according to the findings and Mr. Percaccio recommended a further case-by-case reduction "due to inefficient billing practices and/or inefficient file handling.
Id. and exhibit 2 with exhibits A-E.
Id., exhibit 2 at 1.
Id.
Id.
The report describes the audit method employed as a "line-by-line review of each time entry contained in each invoice." A time entry was allowed in its entirety if reasonable on its face and was disallowed in its entirety if in violation of the Procedures. When a time entry appeared unreasonable on its face, the file material was compared to the amount billed. If the time entry was commensurate with the file material, it was allowed in its entirety. Otherwise, a reasonable charge was allowed. "[A]ny individual timekeeper who billed 10 or more hours on a file [was] deemed to have been involved to such an extent as to require some type of substantive knowledge of the merits (i.e., facts, allegations, defenses, etc.) of the case." Such a timekeeper would need to be "up to speed" on the merits of the case, and "excess time [was] built into the entries for each occasion a new timekeeper beg[an] working on a file."
Id. at 2.
Id.
Id.
Id.
Id.
Id.
Id.
For the five representative cases addressed, the report reflects Fulbright's invoices were audited for the period from April 2003 to September 2005, if available. The summary for each of the five cases includes: (a) information about the number of timekeepers involved in the case and the time they generally billed; (b) the common reasons for invoice audits, including: clerical functions performed by legal support personnel, excessive or duplicate time billed, work product not in the file, one attorney billing for preparation of a deposition witness and another attorney billing for defending the deposition, and Fulbright's failure in one case to timely object and respond to discovery requests; and (c) recommendations for fifteen percent reductions in addition to the audit reductions reflected on the spreadsheets. The spreadsheets for the five cases reflect, among other things, the time billed by timekeeper, the work performed, the time disallowed by the audit, the total dollar valued billed by timekeeper, the amount allowed, the amount disallowed, and the reasons for the disallowance. In addition, the spreadsheets show the total amount of the line item audit reductions in each case, the amount of the recommended general fifteen percent reduction, and the total amount of the recommended reductions for the case. These reductions are as follows:Flores v. Retama Victoria South Rodriguez v. Retama Laredo South M. Hemphill v. Living Centers of Texas B. DeLeon v. Silver Creek Manor Estate of M. Larson, et al., v. Mariner, Edgewater Care CT.
Id. at 3-10.
Id.
Id., exhibits A-E.
Id., exhibit A.
Id., exhibit B.
Id., exhibit C.
Id., exhibit D.
Id., exhibit E.
Fulbright has objected to the opinions rendered by Mr. Percaccio as "insufficient to defeat the Motion for Partial Summary Judgment, or to support any contention of breach of fiduciary duty or fraud." Fulbright argues Mr. Percaccio's declaration and supporting report: do not opine that Fulbright committed fraud or breached a fiduciary duty; "state mere unqualified beliefs or opinions that Fulbright's charges for legal services were not reasonable or were in violation of Mariner's Procedures;" consider billing entries subsequent to the Letter Agreement that are not relevant to the present issues; and express unreliable and improper opinions. Fulbright notes that certain of the alleged billing irregularities address services rendered after the March 1, 2005 cut-off date for the agreed-upon Debt set out in the Letter Agreement and are irrelevant to the motion for partial summary judgment. Fulbright also notes that Mr. Ehrlich has testified that Fulbright's bills were reviewed for compliance with Mariner's procedures. Any procedural irregularities discovered by Mr. Percaccio, then, were ones that were missed, in good faith, by the Mariner Defendants and Fulbright. Finally, Fulbright contends that Mr. Percaccio's assessments that certain actions were not necessary — such as, disallowing any reimbursement for time certain paralegals spent in a meeting — are speculative, subjective, and unreliable, in that Mr. Percaccio relies exclusively on invoice-disclosed services when asserting his personal criticisms, and has not expressed that he is knowledgeable about time exigencies, attorney client privileged matters regarding cases, or any other factors that may have affected staffing and billing decisions.
Docket no. 99 at 4.
Id.
Id. at 4-5.
The Court, cognizant that evidence presented in support of a motion for summary judgment must be admissible under the rules of evidence, overrules Fulbright's objections to the Mr. Percaccio's declaration and supporting report. Mr. Percaccio's opinions have been considered to the extent they were relevant and were not conclusory, speculative, or unsubstantiated assertions.
FED. R. CIV. P. 32(a) and 56(e).
Doe v. Beaumont Indep. Sch. Dist., 173 F.3d 274, 300 (5th Cir. 1999) (en banc); Douglass v. United Servs. Auto. Ass'n, 79 F.3d 1415, 1429 (5th Cir. 1996) (en banc); see Hanchey v. Energas Co., 925 F.2d 96, 97 (5th Cir. 1990) (legal conclusions and general allegations will not support or defeat motion for summary judgment).
2. Fulbright's Breach of Contract Claim Relating to the Letter Agreement
Fulbright's original petition includes a cause of action for breach of contract based on the breach of the provisions of the Letter Agreement requiring the Signatory Defendants to pay "the principal amount of at least $4,337,323.41 (the "Consolidated Debt") which the Mariner Defendants, though they have approved [Fulbright's] invoices in large measure, have steadfastly refused to pay," including the balance due and owing on the "Debt," as referenced in the Letter Agreement, then fixed in the Letter Agreement as approximately $2.247 million, which was to have been paid through twelve periodic payments specified in the Letter Agreement. Fulbright now seeks partial summary judgment on the balance due and owing on the "Debt" referenced in the Letter Agreement, that is, according to Fulbright's arguments and summary judgment evidence, $1,275,836.77.
The letter agreement is dated March 28, 2005; the "Debt" totaled $2,247,035.00 as of March 1, 2005. Docket no. 10, exhibit A at 2.
Docket no. 1, tab 2, original petition, at 10.
Docket no. 10 at 6-7, 11.
To be entitled to partial summary judgment on the breach of contract claim, Fulbright, as movant, must show there is no genuine issue of material fact on each element of its breach of contract cause of action. According to Texas contract law, to demonstrate a breach of contract, Fulbright must show: (1) the existence of a valid contract; (2) Fulbright performed or tendered performance; (3) the Signatory Defendants breached the contract; and (4) Fulbright was damaged as a result of the breach.
Fontenot, 780 F.2d at 1195.
Lewis v. Bank of Am., N.A., 343 F.3d 540, 545 (5th Cir. 2003) (citing Palmer v. Espey Houston Assoc., 84 S.W.3d 345, 353 (Tex.App.-Corpus Christi 2002, pet. denied)), cert denied, 540 U.S. 1213, 124 S.Ct. (2004).
Texas law also provides that a contract, including an attorney fee contract, with terms expressed in plain and unambiguous language must be enforced as written. An attorney fee contract "will be enforced as written if [it has] been fully performed by the attorneys." In addition, Texas law provides that "[i]f an attorney fee contract was valid when made, and it was made by and between mentally competent persons, it is to be enforced without court review of the reasonableness of attorney's fees so fixed."
Lopez v. Munoz, Hockema, Reed, 22 S.W.3d 857, 862 (Tex. 2000); Heritage Resources, Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex. 1996); Reilly v. Rangers Mgmt., Inc., 727 S.W.2d 527, 529 (Tex. 1987); Vincent v. Bank of Am., N.A., 109 S.W.3d 856, 867 (Tex.App.-Dallas 2003, pet. denied); In re Polybutylene Plumbing Litig., 23 S.W.3d 428, 436 (Tex.App. — Houston [1st Dist.] 2000, pet. denied); Stern v. Wonzer, 846 S.W.2d 939, 944 (Tex.App.-Houston [1st Dist.] 1993, no writ).
In re Polybutylene, 23 S.W.3d at 437. Texas law recognizes a few narrow exceptions to the general rule that attorneys' fee contracts between attorneys and clients will be enforced as written if they have been fully performed by the attorneys:
(a) in cases involving fraud or breach of fiduciary duty by the attorney, . . . and
(b) in cases involving minors or incompetents. Id. Because this is not a case involving any allegation of minors or incompetency; the question is
whether the Mariner Defendants have raised a fact issue regarding alleged fraud or breach of fiduciary duty to preclude partial summary judgment.
In re Polybutylene, 23 S.W.3d at 436; Parker v. Boyles, 197 S.W.2d 842, 849 (Tex.Civ.App.-Galveston 1946, writ ref'd n.r.e.).
As a threshold matter, the Letter Agreement, although written in plain and unambiguous terms, is not a typical attorney fee contract. The Letter Agreement does not state, for example, that described legal services will be performed in exchange for a promise to pay costs and fees, as specified. Rather, the Letter Agreement is a note to re-pay debt incurred as a result of the provision of legal services. The Letter Agreement settles the amount of accrued Debt and provides that payment of the Debt may be deferred under the structured payment plan specified. The Mariner Defendants' summary judgment arguments and evidence do not dispute:
Docket no. 10, exhibit A. As relevant to the motion for partial summary judgment, the Letter Agreement states that "as of March 1, 2005, after all just and lawful offsets and credits, the sum of $2,247,035.00 (the "Debt") was due and owing to Fulbright from [the Signatory Defendants] for Fees incurred prior to that date." The Signatory Defendants were to pay the Debt in eleven equal monthly installments of $187,252.00 and one final installment of $187,263.00.
• Fulbright fully performed the legal and consulting services underlying the Letter Agreement;
• the Signatory Defendants did not timely pay each of the twelve periodic payments or otherwise fully satisfy the Debt addressed in the Letter Agreement; and
• Fulbright was damaged by their failure to pay. But, in apparent reliance on their pleaded defense of breach of fiduciary duty, and also, possibly, fraud and misrepresentation, the Mariner Defendants do challenge the validity of the Letter Agreement and, in effect, the amount of Fulbright's damages.validity of the Letter Agreement
The Mariner Defendants' Second Amended Original Answer, Defenses, and Counterclaim, asserts a fourth defense, to the breach of contract claim, consisting of "accord and satisfaction, coercion, duress, failure of consideration, fraud, laches, offset, misrepresentation, payment, breach of fiduciary duty, the Statute of Frauds, any applicable Statutes of Limitation, and waiver." Language added to the second amended fourth defense asserts "express representations that the fees identified in the Letter Agreement were fair, reasonable, just, and owing," but the "time-keepers recorded time and bills for legal services demonstrates that such charges were inflated, excessive and unreasonable." Docket nos. 87/88 at 2. The Mariner Defendants' response to the motion for partial summary judgment repeatedly asserts the invalidity of the Letter Agreement based on a breach of fiduciary duty and, at times, certain failures to disclose, as well as asserted "express representations that such amounts were fair, reasonable, just and owing." Docket no. 83 at 2-6.
The Mariner Defendants challenge the validity of the Letter Agreement and, in effect, the amount of Fulbright's damages, asserting the "Letter Agreement is presumed invalid" because:
• it "was executed at a time when Fulbright and Mariner had an attorney-client relationship;"
• Fulbright breached its fiduciary duty to its then clients to "not overbill or charge unreasonable and excessive fees;"
• Fulbright did not disclose "inflated," "unreasonable and unnecessary time entries;" and
• the Signatory Defendants were "lulled" into signing the Letter Agreement by Fulbright's failure to disclose "that all just and lawful offsets had not been given — and in fact the legal bills were unjustifiably inflated."
Id. at 4.
Id. at 4-5.
Id. at 5.
Id.
The existence of a valid contract is shown by establishing each of the following elements: (1) an offer; (2) acceptance in strict compliance with the terms of the offer; (3) a meeting of the minds; (4) a communication that each party has consented to the terms of the agreement; and (5) execution and delivery of the contract with an intent that it become mutual and binding on both parties. The Mariner Defendants contest the validity of the Letter Agreement, arguing that the Debt the Signatory Defendants agreed to pay in the Letter Agreement is based on excessive and unreasonable fees, evidencing a breach of fiduciary duty. But, the Mariner Defendants have not identified which of the foregoing legal elements are at issue.
Beverick v. Koch Power, Inc., 186 S.W.3d 145, 150 (Tex.App.-Houston [1st Dist.] 2005, pet. for review filed);Hallmark v. Hand, 885 S.W.2d 471, 476 (Tex.App.-El Paso, 1994, writ denied) (citing McCulley Fine Arts Gallery, Inc., v. "X" Partners, 860 S.W.2d 473, 477 (Tex.App.-El Paso 1993, no writ)).
As authority, the Mariner Defendants cite only two state cases and a treatise generally addressing the fiduciary duties owed by an attorney to a client. The Mariner Defendants also have tendered the declaration of Mr. Percaccio, who reviewed certain of Fulbright's invoices that were provided by Fulbright as the services were rendered and is of the opinion that "Fulbright inflated the bills by approximately 15% of the gross charges submitted" and "[t]he fees were therefore unreasonable by at least that proportionate amount of each invoice," demonstrating "billing improprieties." The question for the Court is whether the Mariner Defendants' arguments and summary judgment evidence are sufficient to raise a fact issue about whether Fulbright's alleged fraud, misrepresentation, or breach of fiduciary duty invalidate the Letter Agreement.
Docket no. 83, exhibit B at 1-2, ¶ 2.
The Mariner defendants' summary judgment evidence does not raise a genuine issue of material fact on their defenses of fraud and misrepresentation. Apart from their arguments based on an alleged breach of fiduciary duty discussed further below, the Mariner Defendants present no argument or authority to show that a repayment note in which two parties — each represented by counsel — agree to pay and accept payments of money already owed may be invalidated because the debtor decided to challenge the reasonableness of the underlying fees and computations that gave rise to the debt, using the same invoices they had in their possession at the time they entered into the repayment note. The evidence shows there was full and complete factual disclosure of Fulbright's bills. The Mariner Defendants agree they received periodic invoices for services rendered in the pertinent years and "reviewed" the invoices and legal bills "for compliance with our policies regarding hourly rates and expenses." The Mariner Defendants concede they did not "substantively review the legal bills for the charging of excessive or unnecessary fees" and do not contest that they could have "substantively reviewed" all invoices at any time and ordered a detailed audit of the bills, as now performed by Mr. Percaccio. The Mariner Defendants may now wish they had intervened and worked with Fulbright to lower costs and fees, but Fulbright disclosed all invoices and bills and the information contained in the invoices and bills was all that was required from Fulbright for the Mariner Defendants to perform an audit, as demonstrated by Mr. Percaccio's submission. Neither Mr. Percaccio nor Mr. Ehrlich testify that any bill or charge did not reflect services rendered, or was false or fraudulent. They testify only that fees and bills are excessive and, in Mr. Percaccio's opinion, likely should be reduced across-the-board by fifteen percent. This evidence does not raise a genuine issue of material fact on the Mariner Defendants' defenses of fraud, material misrepresentation of fact or misrepresentation through fraudulent concealment of fact sufficient to preclude the requested partial summary judgment regarding the Letter Agreement.
In Texas, fraud requires: (1) a material misrepresentation of fact; (2) falsity thereof; (3) scienter by the actor concerning the falsity; (4) intent that the misrepresentation be relied on; (5) justifiable reliance by the complainant; and (6) resulting in injury. E.g. Trenholm v. Ratcliff, 646 S.W.2d 927, 930 (Tex. 1983). Fraudulent concealment also requires proof that the actor knew the complainant was ignorant of concealed facts and did not have the same opportunity to discovery the truth. E.g., Moore More Drilling Co. v. White, 345 S.W.2d 550, 555 (Tex.Civ.App.-Dallas 1961, writ ref'd n.r.e.).
Again, Fulbright has moved for partial summary judgment only on the balance due and owing on the Debt identified in the March 28, 2005 Letter Agreement as having been due and owing as of March 1, 2005, not any subsequently accrued debt for services subsequently provided by Fulbright.
Docket no. 83, exhibit C.
Docket no. 83 at 5.
Id., exhibit C at 2. Mr. Percaccio's Declaration and opinions are based on his review of invoices and bills provided by Fulbright to the Mariner Defendants at or about the time the legal services were rendered.
Though a more difficult assessment, the Mariner Defendants' summary judgment evidence does not raise a genuine issue of material fact regarding Fulbright's alleged breach of fiduciary duty with respect to the Letter Agreement. If such a breach of fiduciary duty, typically a fact question, is established, it raises the question of whether an attorney should forfeit some or any fees. Texas cases show that, depending on the seriousness of the violation, in cases where breach of fiduciary duty is established, courts determine if an attorney forfeits some, all, or none of the fees, but a finder of fact typically determines if there has been a breach of fiduciary duty.
Deutsch v. Hoover, Bax Slovacek, L.L.P., 97 S.W.3d 179, 191-92 (Tex.App.-Houston [14th Dist.] 2002, no pet).
Burrow v. Arce, 997 S.W.2d 229, 246 (Tex. 1999);Deutsch, 97 S.W.3d at 191-92, 193; Jackson Law Office, P.C. v. Chappell, 37 S.W.3d 15, 22-23 (Tex. App — Tyler 2000, pet. denied). Whether an attorney has a breached fiduciary duty is typically a question for the fact finder based on considerations such as "whether or when the misconduct occurred, the attorney's mental state at the time, and the existence or extent of any harm to the client." Burrow, 997 S.W.2d at 246 (quoted in Deutsch, 97 S.W.3d at 191-92). "The remedy of a fee forfeiture presupposes that a lawyer's clear and serious violation of a duty to a client destroys or severely impairs the client-lawyer relationship and thereby the justification of the lawyer's claim to compensation."Burrow, 997 S.W.2d at 238 (citation omitted).
The Mariner Defendants do not allege and have not adduced summary judgment evidence to show Fulbright: suffered from a conflict of interest, engaged in self-dealing, was negligent, or committed malpractice. Each of the grounds for the alleged breach of fiduciary concern, in sum, Fulbright's fees and bills — whether they reflected "all just and lawful offsets," were "unjustifiably inflated," included "unreasonable and unnecessary time entries," or were "unreasonable or excessive." As reflected by the signature block on the Letter Agreement, the Signatory Defendants were represented by their own in-house corporate counsel and officer who was not affiliated with Fulbright. As reflected by the testimony of Boyd Gentry, CFO of the Mariner Defendants, a senior vice president of defendants had conversations with Mr. Gentry in the 2003-early 2004 time frame "about Fulbright's billing practices and problems with Fulbright's billing practices." Yet, the Signatory Defendants, after full opportunity to conduct whatever additional investigation they deemed appropriate and even though, according to Mr. Gentry, they had questions about Fulbright's billing practices and had dealings with a dozen other law firms, agreed to pay the specific amount specified in twelve periodic payments.
Thus, the execution of the Letter Agreement is distinguishable on the facts from the three Texas cases cited inIn re Polybutylene, for the fraud and breach of fiduciary duty exceptions to the general rule that attorneys' fee contracts are enforced as written when the attorney has performed the work and the contract is not ambiguous. Further, unlike Archer, in which Ms. Griffith was had no independent legal representation when she conveyed to her lawyer an interest in property and unlikeBraselton, where Mr. Braselton, pro se, agreed to pay $18,000 to the attorney who represented his ex-wife in their divorce,see 557 S.W.2d at 187, the Signatory Defendants were represented by their own in-house attorney when the Letter Agreement was signed and they agreed to pay fees incurred for services already performed on their behalf.
Docket no. 105, attached supplement, exhibit A at 6-7.
Neither Mr. Percaccio nor Mr. Ehrlich testify that Fulbright breached a fiduciary duty, only that Fulbright's fees were excessive. The Mariner Defendants cite no evidence or case authority to show that any disagreement between a law firm and a client regarding the amount of fees necessarily breaches a fiduciary duty or that every dispute about the reasonableness of fees is sufficient to raise a fact question about a breach of fiduciary duty. More specifically, the Mariner Defendants assert Fulbright's bills seem to be inflated fifteen percent across-the-board and Fulbright may not have been as efficient as it could have been in keeping down fees, as evidenced, for example, by billing for two lawyers to attend a single deposition or billing for one lawyer to prepare for a deposition and another lawyer to take the deposition. There is no evidence to show these concerns could not have been explored with Fulbright as the invoices were issued and, as relevant, before the execution of the Letter Agreement.
E.g. Punts v. Wilson, 137 S.W. 3d 889, 891 (Tex.App. — Texarkana 2004) ("Generally, for a party to establish a claim for breach of a fiduciary duty, there must exist a fiduciary relationship between the plaintiff and defendant, the defendant must have breached its fiduciary duty to the plaintiff, and the defendant's breach must result in injury to the plaintiff, or benefit to the defendant.") (citing Burrow and Hawthorne v. Guenther, 917 S.W.2d 924, 934-35 (Tex.App.-Beaumont 1996, pet. denied)); MacFarlane v. Nelson, No. 03-04-00488-CV, 2005 WL 2240949, at *3 (Tex.App.-Austin, Sept. 15, 2005). See also Crim Truck Tractor Co. v. Navistar Int'l Transp. Corp., 823 S.W. 2d 591, 594 (Tex. 1992) ("[A] fiduciary duty encompasses at the very minimum a duty of good faith and fair dealing[.]").
Significantly, the Mariner Defendants have cited no evidence or case law to show a lawyer breaches a fiduciary duty to a client when the lawyer enters into a note with a client in which the lawyer agrees to forbear immediate payment of legal fees — not for any alleged self-benefit or as a result of self-dealing or as a product of a conflict of interest but because the client either cannot or prefers not to pay the bill immediately — and the client agrees to the note through the action of its own in-house corporate counsel and the amount of the debt specified in the note is obtained from legal bills and invoices previously provided over the span of almost two years. Other than insuring that the client had received full disclosure of services rendered and fees charged, the Mariner defendants cite no case authority to show Fulbright had any other fiduciary duty regarding the execution of the Letter Agreement. Again, the Mariner Defendants were represented by their own attorney, not Fulbright, in executing the Letter Agreement. The Mariner Defendants, through their attorney, "agreed . . . after all just and lawful offsets and credits" the $2.247 sum was owed. To conclude Fulbright breached its fiduciary duty when the Mariner Defendants were represented by in-house counsel during the negotiation of the Letter Agreement, Fulbright's invoices for legal services were fully disclosed, and the Mariner Defendants could have sought a conference with Fulbright at any time about the nature of the services provided and the fees charged, could transform every similar fee agreement freely negotiated by the parties into a question of breach of fiduciary duty.
Docket no. 10, exhibit A.
presumption of unfairness or invalidity
The Mariner Defendants assert the Letter Agreement is presumed invalid, but they cite no authority to support the assertion or to show whether the issue of rebuttal is a question of law or fact. Nevertheless, there is Texas law that
Although an attorney is not incapacitated from contracting with his client for compensation during the existence of the relation of attorney and client, and a fair and reasonable settlement of the compensation to be paid is valid and enforceable, if executed freely, voluntarily, and will full understanding by the client, the courts, because of the confidential relationship, scrutinize with jealousy all contracts between them for compensation which are made while the relation exists. There is a presumption of unfairness or invalidity attaching to the contract, and the burden of showing its fairness and reasonableness is on the attorney.
Archer v. Griffith, 390 S.W.2d 735, 739 (Tex. 1965).
Assuming the issue of rebuttal is a question of fact, here, the presumption of unfairness or invalidity of the Letter Agreement is rebutted by the undisputed facts. The evidence shows: the Mariner Defendants were represented by in-house corporate counsel, who supervised at least a dozen law firms handling litigation for the Mariner Defendants; the Mariner Defendants are an experienced corporate client using, for example, the services of ProCare to process legal bills and a corporate officer and in-house lawyer to supervise litigation; Mr. Ehrlich first raised the suggestion of handling past-due payment in what became the Letter Agreement, not Fulbright; the Mariner Defendants knew of and were in possession of the invoices underlying the Letter Agreement; and the parties negotiated the terms of the Letter Agreement before it was executed. There is no argument or evidence Fulbright gained anything through the execution of the Letter Agreement, except the expectation it would be paid the agreed upon sum, not immediately, but in payments spanning one year. There is evidence the Signatory Defendants benefitted from the Letter Agreement by avoiding the need to pay the outstanding balance owed to Fulbright immediately, deferring payment over the span of one year, and insuring that Fulbright would continue to represent them. In sum, no reasonable finder of fact could conclude Fulbright failed to rebut a presumption, if any, that the Letter Agreement was unfair or invalid. These same considerations support the conclusion the presumption of unfairness or invalidity has been rebutted as a matter of law.
ratification
Even assuming there is a dispute on the reasonableness of fees charged in the invoices and services addressed in the Letter Agreement sufficient to raise a fact question on whether there was a breach of fiduciary duty, the disposition of the Mariner Defendants' claim that Fulbright breached its fiduciary duty through its billing practices does not succeed as a matter of law. Any factual dispute about unfair entries or fee rates is not material because the undisputed facts show ratification. By entering into the Letter Agreement — a repayment note in which the Mariner Defendants "agreed . . . after all just and lawful offsets" to the total amount of Debt to be paid pursuant to terms provided — the Mariner Defendants waived their right to contest the reasonableness of the fees underlying the agreed-upon Debt figure, ratified the amount of fees then owing by agreeing to the Debt sum, and are estopped from challenging the amount of the Debt or, in effect, renegotiating the terms of the Letter Agreement. The amount of the Debt to be repaid over the span of a year was settled in the Letter Agreement. The Mariner Defendants cannot now adopt the inconsistent position of asserting they are not required to pay that Debt over the defined twelve month period.
Docket no. 10, exhibit A.
Caldwell v. Callender Lake Property Owners Improvement Assoc., 888 S.W.2d 903, (Tex.App.-Texarkana 1994, pet. denied) ("ratification and waiver invoke the same factual elements: (1) There must be full knowledge of the known right which vitiates a prior act, and (2) there must be an intentional relinquishment of the known right, or intentional recognition of the prior act, depending upon the user's choice of words. While to relinquish is the gist of `waiver' and to approve is the gist of `ratification,' to relinquish a known right is to give validity to the prior act and to approve a prior act is to relinquish a known right. . . . Normally, waiver is considered a question of fact. However, the question becomes one of law if the facts and circumstances are admitted or are clearly established.") (citations omitted). See also Tenneco Inc. v. Enterprise Prods. Co., 925 S.W.2d 640, 643 (Tex. 1996) ("A waivable right may spring from law or, as in this case, from a contract. . . . A party's express renunciation of a known right can establish waiver. . . . Silence or inaction, for so long a period as to show an intention to yield the known right, is also enough to prove waiver.") (citations omitted).
"The elements of ratification are: (1) approval by act, word, or conduct; (2) with full knowledge of the facts of the earlier act; and (3) with the intention of giving validity to the earlier act." Gibson v. Bostick Roofing Sheet Metal Co., 148 S.W.3d 482, 492 (Tex.App.-El Paso, 2004) (citation omitted).
Generally, promissory estoppel is pleaded by a plaintiff when there is not a written contract or is pleaded as a defense to a claim. "The requisites of promissory estoppel are: (1) a promise, (2) foreseeability of reliance thereon by the promisor, and (3) substantial reliance by the promisee to his detriment."English v. Fischer, 660 S.W.2d 521, 524 (Tex. 1983) (citations omitted). As waiver, normally estoppel is a question of fact and prevents a party from adopting an inconsistent position to cause loss or injury to another. Donaldson v. Lake Vista Comm. Improvement Assoc., 718 S.W.2d 815, 818 (Tex.App. — Corpus Christi, 1986, writ refused n.r.e.).
The Mariner Defendants assert Fulbright did not disclose allegedly excessive fees, yet previously admitted they received all relevant invoices for the period at issue before March 1, 2005 and had reviewed the invoices for compliance with policy and procedures. There is no dispute the invoices were available for any audit the Mariner Defendants might have decided to implement before paying any invoice. By ratifying the Debt in the Letter Agreement, the Mariner Defendants are precluded from adopting the inconsistent position of repudiating the invoices, services rendered, or amount to be paid Fulbright for those services specified in the Letter Agreement. Fulbright relied on the Letter Agreement, did not insist on immediate payment of the Debt, and continued to represent the Signatory Defendants. When the Signatory Defendants, through in-house counsel, entered into the Letter Agreement, a new, negotiated agreement in which they "agreed" the sum of $2.247 million was due and owing "after all just and lawful offsets and credits," they ratified a sum certain and waived their right to argue additional offsets and credits should be taken or the fees were unreasonable or the Debt should be a lesser amount or they should be allowed to repay it in 24 months instead of twelve months, or, in essence, renegotiate any other term of the contract. Alternatively, the Mariner Defendants are estopped from arguing the amount of the Debt was based on unreasonable fees.
Docket no. 10, exhibit A.
C. Conclusion
In sum, the Mariner Defendants have failed to raise a genuine issue of material fact about the validity of the Letter Agreement. Given that the Mariner Defendants do not dispute the remaining elements of Fulbright's breach of contract claim regarding the "Debt" and twelve periodic payments addressed in the Letter Agreement, Fulbright's motion for partial summary judgment should be granted. There is no genuine issue of material fact the Signatory Defendants breached the relevant provisions of the Letter Agreement in which they agreed to repay an agreed amount of Debt in twelve periodic payments. The Mariner Defendants's summary judgment arguments do not deny that the Signatory Defendants owe Fulbright money, but contest the amount owed, principally through the declaration and report of Mr. Percaccio which supports their contention Fulbright breached its fiduciary duty by charging unreasonable fees and also presents a challenge akin to a request for mitigation of damages. Because the amount of relevant Debt is fixed in the Letter Agreement and the Letter Agreement is a valid contract, the arguments are not sufficient to raise a genuine issue of material fact on one of the terms of the Letter Agreement, that is, the obligation to pay the agreed amount of Debt in twelve periodic payments. The entry of partial summary judgment is limited to the $1,275,836.77 balance due and owing on the $2.247 million agreed to be paid in twelve periodic payments in the Letter Agreement, not any other fees for any other services rendered after March 1, 2005 not covered by the periodic payments in the Letter Agreement or any other aspect of Fulbright's breach of contract claim. This ruling also does not address any other claim, the Mariner Defendants' counterclaim or any defense to such other claim or counterclaim.
Fulbright has sought partial summary judgment on the balance due and owing on the "Debt" referenced in the Letter Agreement, that is, according to Fulbright's arguments and summary judgment evidence, $1,275,836.77. Docket no. 10 at 6-7, 11. It appears this amount reflects the principal balance of Debt due and owing, without interest, which, according to the Letter Agreement, Fulbright was entitled to collect at the rate specified in the Letter Agreement. Although the Mariner Defendants have challenged the validity of the Letter Agreement as well as the underlying fees, rates, and certain billing entries in the invoices relating to the Debt, they have not presented any summary judgment evidence to show that Fulbright incorrectly calculated the balance due and owing on the unpaid portion of that Debt if the relevant portions of the Letter Agreement are enforced.
VII. ORDER and RECOMMENDATION
Based on the foregoing analysis,
(a) it is Ordered that Fulbright's motion to supplement the reply to the motion for partial summary judgment is GRANTED and the supplement tendered with the motion shall be filed; and
Docket no. 105.
(b) it is recommended that Fulbright's motion for partial summary judgment be GRANTED:
Docket no. 10.
Fulbright is entitled to judgment as a matter of law on its breach of contract claim that the Signatory Defendants, Mariner Health Care, Inc. and Living Centers of Texas, Inc., breached the portion of the Letter Agreement that addresses their obligation to make twelve periodic payments of approximately $2.247 million;
the Signatory Defendants, Mariner Health Care, Inc. and Living Centers of Texas, Inc., jointly and severally, shall pay the sum of $1,275,836.77, representing the past due and unpaid portion of the $2.247 million Debt addressed by the Letter Agreement;
because the Court has not yet addressed the counterclaim of the Mariner Defendants, in particular, the Signatory Defendants should be required to pay the above-noted sum into an escrow account where the sum will remain pending the disposition of the case; if and as appropriate, the time for payment into the escrow account will be fixed by the District Judge in the Order to be entered on this report; within the time for filing objections to this report or included in any objection to this report, the parties may state any preferences as to the escrow account, such as: when the escrow payment should be made, whether the money should be paid into the registry of the Court or a private account under the joint control of the parties, and if the parties agree a private account may earn interest, their agreement on how interest should be handled; and
in any other respect, the motion should be DENIED.
More specifically, Fulbright has requested payment "now" of the balance due on the specified Debt. Id.. at 11. The report does not recommend entry of partial judgment to require payment to Fulbright, but instead recommends payment into an escrow account.