Bill Creates New Civil Remedies for Barratry
by Suzanne Raggio Westerheim
The Texas Legislature has amended Section 82.065 of the Texas Government Code, which previously applied only to contingent fee agreements, and added new Section 82.0651. See SB 1716. These changes allow clients to void all fee agreements procured as the result of barratry and create new causes of action and civil liability for prohibited barratry.
The new law applies when a fee agreement has been “procured as a result of conduct violating the laws of this state or the Texas Disciplinary Rules of Professional Conduct of the State Bar of Texas regarding barratry by attorneys or other persons.”Tex. Gov’t Code § 82.065 (b); Tex. Gov’t Code § 82.0651(a). The law does not make any substantive change to the law of barratry. It simply adds new remedies.
So, what is barratry? “Barratry is the solicitation of employment to prosecute or defend a claim with intent to obtain a personal benefit.” State Bar of Texas v. Kilpatrick, 874 S.W.2d 656, 659 (Tex. 1994). Barratry includes both prohibited payments and prohibited solicitations.
A voided fee contract or a civil judgment is not the worst thing that could happen to a lawyer who commits barratry. Barratry is, first and foremost, a crime. Texas Penal Code § 38.12 sets forth the conduct that constitutes the crime of barratry and solicitation of professional employment.
Barratry can also cost a lawyer his or her law license. Texas Disciplinary Rule of Professional Conduct 7.03, regarding prohibited solicitations and payments, sets forth the conduct that constitutes barratry under the Disciplinary Rules.
The provisions of the criminal statute and the disciplinary rule are very similar. Both are designed to prevent clients from being unduly influenced in their choice of counsel by the circumstances under which the prospective client is approached and to prevent lawyers from using financial inducements to generate new clients.
Rule 7.03 prohibits payments or giving anything of value to clients (except for the litigation and other expenses authorized by Rule 1.08) or non-lawyers who are in a position to refer clients. The Penal Code, however, prohibits payments or giving anything of value to any “person” to solicit employment. This would include other lawyers.
The Penal Code exempts conduct authorized by the disciplinary rules from the prohibition against giving “anything of value to solicit employment.” Payments or giving anything of value to other lawyers for referring cases is governed by Rule 1.04(f). See Tex. Discip. R. Prof. Conduct 7.03 cmt. 4. With the elimination of the forwarding fee as a basis for sharing fees, giving another lawyer anything of value for referring a case—even a fruit basket—without meeting the requirements of Rule 1.04(f) could be considered a disciplinary rule violation.
Texas Government Code Section 82.065(a), which requires that contingent fee agreements be in writing and signed by the lawyer and the client, has not been changed. Section 82.065(b) previously made contingent fee agreements procured as the result of barratry voidable. This provision has been amended to apply to all fee agreements, and a new .
Section 82.0651(a) now allows a client to bring an action to void a fee agreement that has been procured as a result of barratry.
Section 82.065(c) allows a lawyer whose fee agreement has been voided under Section 82.0651(a) to nevertheless recover fees and expenses in quantum meruit if the client does not prove that the lawyer committed barratry or knew that the contract was the result of barratry by another person. In order to be entitled to quantum meruit, the innocent lawyer must have reported the misconduct as required by Texas Disciplinary Rule of Professional Conduct 8.03. The statute includes two exceptions to this requirement: 1) the misconduct has already been reported; or 2) the report would substantially prejudice the client’s interests. If the person committing the misconduct was a non-lawyer, then the requirement to report the misconduct does not apply.
A client who prevails under Section 82.0651(a) can recover: 1) all fees paid to the person who committed barratry; 2) any excess fees and expenses paid to a lawyer entitled to a quantum meruit award; 3) actual damages; and 4) attorney’s fees.
Section 82.0651(c) allows a person who was solicited by conduct in violation of the barratry laws but who did not enter into a fee agreement as a result of that conduct, to bring a civil action against any person who committed barratry. A person who prevails under this section can recover: 1) a $10,000 penalty (interestingly, a remedy not available to clients who entered into fee agreements); 2) actual damages; and 3) attorney’s fees.
These provisions go into effect September 1, 2011, and apply to conduct occurring after that date.
Suzanne Raggio Westerheim represents and advises lawyers and law firms on professional responsibility issues. Ms. Westerheim is the former Chair of the DBA Legal Ethics Committee. She can be reached at firstname.lastname@example.org.