Opinion
No. 01-02-01321-CV
Opinion issued March 3, 2005.
On Appeal from the 80th District Court, Harris County, Texas, Trial Court Cause No. 2002-04672.
David W. Smith, Raymond L. Gregory, II and William J. Eggleston, Eggleston Briscoe, Houston, TX, for appellant.
Fields Alexander, Houston, TX, Anne Pike, Russell S. Post and David J. Beck, Beck, Redden Secrest, L.L.P., Houston, TX, and Lara Hudgins Hollingsworth, Hudgins, Hudgins Warrick, P.C., Houston, TX, for appellee.
Panel consists of Justices NUCHIA, JENNINGS, and ALCALA.
MEMORANDUM OPINION
This is a bill of interpleader action resolved by summary judgment. After appellant, Harrold E. (Gene) Wright, and appellee, Verner, Liipfert, Bernhard, McPherson and Hand, Chartered (Verner), claimed rights to $24,073.32 in funds, the stakeholder of the funds deposited them with the registry of the court. The trial court rendered summary judgment awarding the funds, attorney's fees, and costs to Verner. Wright brings two issues on appeal. He contends that, because the settlement agreement on which Verner relied in asserting its right to the funds was procured by duress, fraud, or both, the trial court erred by rendering summary judgment in Verner's favor. Wright also challenges the trial court's refusal to grant Wright's request for a rule 166a(g) continuance. See TEX. R. CIV. P. 166a(g). We affirm.
Wright filed a supersedeas bond to preclude execution on the judgment.
Background and Procedural History
This suit arose after Wright disputed Verner's rights to attorney's fees under an "Intervention Settlement Agreement" (ISA). The ISA pertains to qui tam litigation filed in the Eastern District of Texas, Lufkin Division, the Honorable John Hannah, Jr., presiding, in which Wright, as relator, sued on behalf of the United States to recover allegedly unpaid oil and gas royalties on federal lands. As recited in the ISA, Wright discharged prior counsel and hired Verner and Michael Sydow, a former Verner shareholder, to represent him as lead counsel under a percentage contingency-fee agreement. Eight months later, Wright terminated Verner and Sydow. Wright maintained the termination was for cause, but Verner disagreed and notified Wright that it would pursue its rights under its fee agreement with him. Judge Hannah signed an order permitting Verner to withdraw as Wright's counsel in the qui tam lawsuit and granted Verner's motion to intervene in that suit. In spring 1999, Wright, Verner and others entered into the ISA.
Wright and others brought several qui tam lawsuits pursuant to 31 U.S.C. § 3729 (2000) (the Federal False Claims or "Whistleblower" Act), which permits a private citizen to sue on behalf of the federal government to recover payments due to the government from third parties and retain a part of the government's recovery. The intervention-settlement agreement encompasses several of those lawsuits; this case resolves only claims related to the particular qui tam litigation addressed here, which the parties refer to as "the Consolidated Oil lawsuit."
Sydow is not a party to this appeal.
Judge Hannah had earlier permitted Wright's prior counsel to withdraw and intervene to assert its interests.
The intervention claims by Verner at issue here pertain to what the parties refer to as the "Consolidated Oil" lawsuit. The ISA recites that Verner was entitled to four percent of Wright's net recovery in that lawsuit. The ISA also recites Wright's and Verner's differing contentions, but contains broad, mutual releases by both. With respect to Wright, the ISA states that he released Verner, as follows:
from any and all claims, demands and causes of actions, including but not limited to claims for attorneys' fees and expenses of whatsoever nature or character, including, but not limited to, those in contract, warranty, or tort, of negligence or gross negligence, of quantum meruit, under common law or statute, based on any acts and/or omissions of [Verner, its] shareholders or employees, which have occurred as of the date of execution of [the ISA] whether known to Wright or not.
Despite these recitals in the ISA executed incident to the qui tam lawsuits, Wright and others sued Verner and Sydow in the 129th District Court of Harris County (the malpractice lawsuit) in early January 2002, alleging legal malpractice, fraud, negligent misrepresentation, negligence, breach of contract, breach of fiduciary duty, conversion, negligent supervision, fraudulent inducement, and violations of the Texas Deceptive Trade and Consumer Protection Act, all in connection with the qui tam lawsuits.
Cause No. 02-00063, Harrold E. ("Gene") Wright, Don Kennard, Pat S. Holloway, and Pat S. Hollowary, P.C. v. Michael Sydow and Verner, Liipfert, Bernhard, McPherson Hand, Chartered, in the 129th District Court of Harris County, Texas. The record reflects that the malpractice action and this interpleader progressed simultaneously, that the parties agreed that discovery could be used in either case, and that the respective trial courts conferred about consolidating the cases, but decided against consolidation.
Later in January 2002, the law firm of Nix, Patterson Roach, L.L.P. (the Nix firm), successor counsel for Wright in the Consolidated Oil lawsuit qui tam action, issued a notice to Wright and the parties to the ISA. The Nix Firm's notice reported that Unocal, one of the Consolidated Oil defendants, had agreed to a settlement and outlined each party's percentage and dollar-amount share of that settlement, in accordance with the terms of the ISA. The amount of Verner's four percent share was stated as $24,073.32. When Wright disputed Verner's right to that amount, the Nix firm, as plaintiff and stakeholder, initiated this interpleader action in the 80th District Court of Harris County and tendered the $24,073.32 into the registry of that court.
Verner answered the Nix firm's bill of interpleader and filed counterclaims and crossclaims against Wright for breach of contract, which entitled Verner to attorney's fees. Wright answered and also crossclaimed against Verner and Sydow, claiming that their fraud and duress invalidated the ISA. The essence of these claims was that Verner's intervention in the qui tam lawsuit amounted to fraud and duress that invalidated the ISA executed incident to that litigation.
The record reflects that Sydow disclaimed personal interest in the settlement funds.
Six months after the Nix firm filed this interpleader action, Verner filed a traditional motion for summary judgment. TEX. R. CIV. P. 166a(b)-(c). Verner argued that Wright had released all claims as a matter of law pursuant to the ISA and had no possible recovery for either duress or fraud as a matter of law because, in filing its intervention claim, as authorized by Judge Hannah, Verner was pursuing what it had a legal right to pursue. Verner supported its motion with the affidavit of Sydow, which incorporated authenticated copies of the ISA and the Nix firm's January 2002 notice that Verner was entitled to $24,073.32 from the Unocal portion of the Consolidated Oil qui tam lawsuit. Verner also provided the affidavit of another Verner shareholder. Both Sydow and the other shareholder denied any independent contact with Wright after executing the ISA, beyond notifying him formally that it intended to pursue its intervention interests, in accordance with Judge Hannah's order having authorized Verner's intervention.
Wright's first response was to request a continuance pursuant to rule 166a(g) to conduct additional discovery before replying to Verner's motion. See TEX. R. CIV. P. 166a(g). Thereafter, Wright simultaneously amended his pleadings, to assert crossclaims to the interpleaded funds and to allege extrinsic fraud, and filed his response to Verner's motion and an additional rule 166a(g) motion for continuance. The essence of Wright's response and summary judgment evidence was that the ISA had no binding effect whatsoever because of Wright's allegations of duress and fraud. As well, Wright alluded to contentions and evidence related to his malpractice claims in the 129th District Court lawsuit. After Verner filed its response, the trial court rendered summary judgment awarding the interpleaded funds plus interest to Verner, in addition to a tiered award of attorney's fees.
Verner also prevailed by summary judgment in the malpractice lawsuit in the 129th District Court lawsuit, which Wright challenged that judgment in Cause No. 14-03-00222-CV, Harrold E. ("Gene") Wright, Don Kennard, Pat S. Holloway, and Pat S. Holloway, P.C. v. Michael Sydow and Verner, Liipfert, Bernhard, McPherson Hand, Chartered. In an opinion issued on November 24, 2004, our sister court affirmed the portions of the trial court's summary judgment ruling in favor of Sydow and Verner, on the grounds that the ISA was not procured through either duress or fraud and was, therefore, enforceable. Wright v. Sydow, ___ S.W.3d ___ No. 14-03-00222-CV, slip op. at 7, 12, 14, 2004 WL 3153293, at * 4, 7, 8 (Tex.App.-Houston [14th Dist.] Nov. 24, 2004, pet. denied). The Fourteenth Court further concluded that the trial court properly denied a rule 166a(g) motion for continuance. Id. at 20, 28, 2004 WL 3153293, at *11, 16. We conclude that the Fourteenth Court's analysis of these issues is dispositive of Wright's issues here.
Standard of Review
We follow the well-settled standards that govern review of a traditional motion for summary judgment rendered in favor of a defendant pursuant to rule 166a(b)-(c). See KPMG Peat Marwick v. Harrison County Housing Fin. Corp., 988 S.W.2d 746, 748 (Tex. 1999); Sci. Spectrum, Inc. v. Martinez, 941 S.W.2d 910, 911 (Tex. 1997); Jones v. Legal Copy, Inc., 846 S.W.2d 922, 924 (Tex.App.-Houston [1st Dist.] 1993, no writ).
Enforceability of Intervention-Settlement Agreement
In his first issue, Wright challenges the summary judgment rendered in Verner's favor, on the grounds that Verner "improperly coerced" Wright into executing the ISA by threatening to sue to enforce its claims, and that this conduct constituted duress and fraud that invalidated the ISA. Wright asserted the same issues in Sydow, in an attempt to pursue malpractice claims against Verner and Sydow by circumventing the express release terms in the ISA. Sydow, slip op. at 7, 2004 WL 3153293, at *7. As stated above, in moving for summary judgment in this case on the merits of its claim that it was entitled to the interpleaded funds as a matter of law, Verner relied, in part, on the Nix firm's notice of the Unocal settlement in the qui tam litigation and the express terms of the ISA. In addition to specifying Verner's interest as four percent of any damages recovered in the qui tam litigation encompassed by the ISA, the ISA also contained Wright's broad release of any and all claims against Verner related to that litigation.
A. Wright's Burden
As in Sydow, Wright has not challenged any portion of the ISA, but contends that Verner's fraud and duress rendered the ISA invalid and therefore unenforceable. See id. A release that is valid on its face, however, constitutes a complete bar that precludes any action pertaining to matters addressed in the release. Id. (citing McMahan v. Greenwood, 108 S.W.3d 467, 478 (Tex.App.-Houston [14th Dist.] 2003, pet. denied)). A release becomes ineffective only if it has been set aside. Id. But Wright has not attempted to set aside the release provisions of the ISA and did not attempt to set them aside in Sydow. See id.
When as here and as in Sydow, the summary judgment movant relies on a facially valid release, the burden shifts to the nonmovant, Wright, to produce summary judgment evidence that the release is invalid.
B. Duress and Fraud
As in Sydow, Wright opposed Verner's motion for summary judgment with documentary evidence, in the form of affidavits and other proof, to suggest that Verner knew that Wright had discharged Verner for cause and that Verner therefore knew that it had no right to assert an intervention interest in the qui tam litigation, which, therefore, Verner conducted wrongfully, in bad faith, without legal justification, and to the extent that Verner invalidated the ISA. See id. at 8-9, 2004 WL 3153293, at *4-5.
But duress does not occur as a matter of law when a party who asserts a demand resorts to the courts to enforce the demand, even if the demand is unlawful. Id. at 9, 2004 WL 3153293, at *5 (citing Cont'l Cas. Co. v. Huizar, 740 S.W.2d 429, 430 (Tex. 1987); Dale v. Simon, 267 S.W. 467, 470 (Tex. Comm'n App. 1924, judgm't adopted); Ward v. Scarborough, 236 S.W. 434, 437 (Tex. Comm'n App. 1922, judgm't adopted); see also Dannelly v. Bard, 62 S.W.2d 301, 308 (Tex.Civ.App.-Beaumont 1933, writ ref'd) (dismissing contention that threats to initiate litigation to enforce asserted rights constituted legal duress, based on well-settled principle that threatening to enforce a claimed civil right "cannot constitute duress"); Taylor v. Hall, 9 S.W. 141, 142-43 (Tex. 1888) (applying same principle, even if litigation brought in bad faith). Moreover, as Sydow emphasized, because Wright and Verner executed the ISA in connection with the qui tam litigation, Wright should have asserted his claims in that litigation, in response to Verner's intervention claim, and not in his "satellite" or "subsequent" litigation in Sydow and here. Id., slip op. at 11; 2004 WL 3153293, at *6 (citing Trevino v. Ortega, 969 S.W.2d 950, 953 (Tex. 1998); McMahan, 108 S.W.3d at 483).
Concerning Wright's claim that Verner's fraud invalidated the intervention-settlement agreement, the Sydow opinion emphasized that, because fraud requires a materially false representation, made with the intent that the aggrieved party act on the representation, well-settled principles negate the existence of fraud when the person who claims he was defrauded realizes that the representation was false. See id. at 13, 2004 WL 3153293, at *7 (citing Johnson Higgins, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507, 524 (Tex. 1998) (listing elements of fraud); McMahan, 108 S.W.3d at 479-81 (negating fraud)). Yet, the ISA recites Wright's allegations that he executed the ISA because Verner had lied, misrepresented, and intervened "frivolously" in the qui tam litigation. Id. slip op. at 12-13, 2004 WL 3153293, at *7. By reciting his awareness of Verner's alleged falsehoods, Wright negated Verner's fraud. See id. Moreover, Wright released any and all claims pursuant to the ISA, which also contained a merger clause that invalidated "all promises, negotiations, or representations not expressly set forth" in the agreement. See id. Accordingly, Wright's fraud claim failed as a matter of law. Id. slip op. at 14, 2004 WL 3153293, at *7.
We agree with and adopt our sister's courts analysis in Sydow. Wright chose not to assert, in the qui tam litigation, that Verner's intervention in that litigation amounted to duress. Moreover, Verner pursued a claim to a legal right, as authorized by the qui tam litigation and as recognized by the ISA, when Verner claimed its portion of the funds interpleaded in this action by the Nix firm. Accordingly, Wright's claim that Verner's duress invalidated the ISA agreement fails as a matter of law. In addition, Wright's recitals in the ISA show that he was aware of the acts by Verner that Wright now contends were fraudulent, but nevertheless released those and any other claims. Accordingly, his claim that Verner's fraud invalidates the ISA also fails as a matter of law.
Having concluded that Wright failed to meet his burden to defeat and set aside the facially valid intervention-settlement agreement on which Verner relied in seeking summary judgment as a matter of law, we overrule Wright's first issue.
Denial of Rule 166a(g) Motion for Continuance
In his second issue, Wright assigns error to the trial court's refusal to grant his motion for continuance, filed pursuant to rule 166a(g), to conduct additional discovery before responding to Verner's motion for summary judgment. See TEX. R. CIV. P. 166a(g). Here again, we agree with Sydow, in which our sister court concluded that the trial court in the malpractice action did not abuse its discretion by rejecting the same reasons that Wright advanced here in support of his motion for continuance, the need for additional discovery to support his claims that fraud and duress by Verner invalidated the intervention-settlement agreement. Id. slip op. at 20, 2004 WL 3153293, at *11. Having overruled Wright's first issue on the grounds that he has no claims for duress or fraud as a matter of law, we cannot conclude that the trial court abused its discretion by refusing to permit additional discovery to support nonexistent claims. See id.
We overrule Wright's second issue.
Conclusion
We affirm the judgment of the trial court.