Two questions are often at the forefront when a client hires a lawyer: Who is going to do the work? How much is it going to cost? The decision in Haden v. David J. Sacks, P.C. d/b/a Sacks & Associates, No. 01-01-00200-CV, 2006 Tex. App. Lexis 8008 (Tex. App.–Houston [1st Dist.] 2006), illustrates that a client who wants to cap the fees and limit who will work on the case needs to get those terms written into the engagement letter at the outset instead of waiting to raise them when a fee dispute arises.

Factual Background

Haden and his predecessor company had an appeal pending to the United States Court of Appeals for the Fifth Circuit from an adverse judgment rendered in the United States District Court for the Southern District of Texas, Houston Division. That controversy involved a commercial landlord-tenant dispute and resulted in an adverse judgment that not only assessed liability, but also eliminated the company’s counterclaims. Trial counsel who represented the company in the federal case had prepared a preliminary draft of an appellate brief when Sacks and Haden discussed the merits of hiring independent appellate counsel for the appeal instead of relying on trial counsel. As a result of the conversation, the company hired Sacks and his law firm for the appeal.

The parties began their working relationship through a written engagement letter. The letter, in its entirety, states as follows:

I am honored to represent you with regard to the above-referenced matter. At this point, you have requested that I assist with the writing of the Appellant’s Brief and any reply. If oral arguments are granted by the Fifth Circuit, a decision will have to be made on who should argue the case.

My normal rate is $300.00 per hour, but my rate for this particular matter will be $200.00 per hour. The other lawyers in my firm range from $150.00 to $200.00 per hour, and paralegals range from $50.00 to $100.00 per hour. You are responsible for all costs and expenses in the case as incurred. These expenses include, but are not limited to, copies; binding; fax transmissions; travel; lodging; parking; etc.

Please submit a $10,000 retainer to be applied to fees and expenses.

Please sign in the space provided below and return the original to my office as soon as possible.

Thank you for your cooperation and attention.

Sacks’s signature appears at the close of the letter. Below Sacks’s signature is the statement, “Your signature below indicates acceptance of the terms of this fee agreement.”

Sacks prepared and filed the brief. However, the Fifth Circuit affirmed the adverse judgment that had been rendered against Haden and the predecessor company and, in addition, granted them partial favorable relief by vacating dismissal of their promissory-estoppel counterclaim and remanding those claims for trial.

The company didn’t pay the bill sent by Sacks’ law firm. The law firm sued to collect its fees. The company answered the petition and asserted its own counterclaims against the law firm for fraud, DTPA violations, unconscionable course of action, breach of contract, and breach of fiduciary duty.

The law firm sought traditional and no-evidence summary judgment on the company’s counterclaims. The grounds asserted in the law firm’s no-evidence motion for summary judgment on the counterclaims included the law firm’s contention that it was entitled to judgment as a matter of law because Haden and the company had not incurred any damages on any of their counterclaims.

Haden and the Company responded to the motion for summary judgment that was filed by Sacks by asserting that they were damaged in two ways. First, Haden and the Company contend that they were damaged by the charge of excessive fees that exceeded the amount that they had agreed to pay in the contract with Sacks because Sacks allowed his associates to perform the work rather than doing it himself. Second, Haden and the Company contend that they suffered damages because they incurred legal fees to defend against the lawsuit filed by Sacks for the unpaid fee invoices. The summary judgment evidence provided by Haden and the Company includes Haden’s affidavit, the correspondence between Sacks and Haden that formed their written agreement regarding fees, and copies of invoices showing that Sacks worked 28 hours at $5,600, another attorney worked 37 hours at $6,475, and another attorney worked 161.75 hours at $24,262.50.

The trial court rendered a take-nothing summary judgment in favor of the law firm on the company’s counterclaims. The company appealed.

The burden of producing evidence of damages.

In moving for no-evidence summary judgment, the law firm enumerated each of Haden’s and the company’s counterclaims, listed the elements of each counterclaim, and asserted that Haden and the company had not incurred any damages, a required element of each of their counterclaims. This showing by the law firm satisfied the movant’s initial burden, as stated in Texas Rule of Civil Procedure 166a(i). Accordingly, the burden shifted to Haden and the company to provide some evidence, more than a scintilla, that raised a fact issue concerning whether they had incurred damages for the counterclaims they had asserted against the law firm. See Tex. R. Civ. P. 166a(i); Rueda v. Paschal, 178 S.W.3d 107, 109 (Tex. App.–Houston [1st Dist.] 2005, no pet.); Mathis, 189 S.W.3d at 844. The burden having shifted to Haden and the company, the trial court had a mandatory duty, pursuant to Rule 166a(i), to grant the law firm’s no-evidence motion for summary judgment unless Haden and the company responded  to that motion by producing more than a scintilla of evidence that raised a genuine issue of material fact on the challenged damages elements. See Tex. R. Civ. P. 166a(i); Sw. Elec. Power Co. v. Grant, 73 S.W.3d 211, 215 (Tex. 2002); Rueda v. Paschal, 178 S.W.3d at 109.

Discussion

The Court of Appeals concluded that Haden and the company failed to produce more than a scintilla of evidence of damages for any of their counterclaims.

DTPA Violations, Fraud, and Breach of Fiduciary Duty

To establish a claim for violations of the DTPA, a plaintiff must show that he sustained damages. See Tex. Bus. & Com. Code Ann. §  17.50(a) (requiring that defendant’s act constitute producing cause of economic or mental anguish); Latham v. Castillo, 972 S.W.2d 66, 69 (Tex. 1998) (stating elements of claim for unconscionable conduct recovery under DTPA, including damages pursuant to § 17.50(a)(3)). In a DTPA claim, “[w]ithout an actual-damages  recovery, a party is not entitled to an attorney’s fee recovery.” Gulf States Utils. v. Low, 79 S.W.3d 561, 567 (Tex. 2002).

To establish a claim for fraud, the proof must establish “a material misrepresentation, which was false, and which was either known to be false when made or was asserted without knowledge of the truth, which was intended to be acted upon, which was relied upon, and which caused injury.” DeSantis v. Wackenhut Corp., 793 S.W.2d 670, 688, 33 Tex. Sup. Ct. J. 517 (Tex. 1990). “Attorney’s fees are not recoverable as actual damages in fraud cases.” Hennigan v. Harris County, 593 S.W.2d 380, 385 (Tex. App.--Waco 1979, writ ref’d n.r.e.); see Kilgore Fed. Sav. & Loan Ass’n v. Donnelly, 624 S.W.2d 933, 938 (Tex. App.--Tyler 1981, writ ref’d n.r.e.); Kneip v. UnitedBank-Victoria, 774 S.W.2d 757, 759 (Tex. App.--Corpus Christi 1989, no writ); Town East Ford Sales, Inc. v. Gray, 730 S.W.2d 796, 812 (Tex. App.--Dallas 1987, no writ).

To recover for breach of fiduciary duty, the evidence must prove “the existence of a fiduciary duty, breach of the duty, causation, and damages.” Abetter Trucking Co. v. Arizpe, 113 S.W.3d 503, 508  (Tex. App.--Houston [1st Dist.] 2003, no pet.) However, when a client sues his attorney for breach of fiduciary duty, “a client need not prove actual damages in order to obtain forfeiture of an attorney’s fees for the attorney’s breach of fiduciary duty to the client.” Burrow v. Arce, 997 S.W.2d 229, 240 (Tex. 1999). Although a client may seek, as damages for an attorney’s breach of his fiduciary duty, forfeiture of fees paid to the attorney, Haden and the company did not assert this type of damages in their pleadings or in their response to the motion for summary judgment. See id. at 240.

Haden and the company’s counterclaims are premised on the following alleged conduct:

• Sacks  induced Haden to hire the law firm by telling Haden that he must have an experienced, board-certified appellate lawyer like Sacks and represented that he would personally write the appellate brief instead of an associate,
• Sacks turned the file over to inexperienced attorneys, who performed the vast majority of the legal services,
• Sacks misrepresented the cost involved in assisting with the writing of the brief with the intent to charge more than four times the amount originally represented,
• Sacks understood that Haden could not afford to pay more than $ 5,000 and would not pay more than $ 10,000,
• Sacks failed to warn that the fees he was incurring to prepare the appellate brief were exceeding the agreed to amounts,
• Sacks misrepresented the services he would render by agreeing to put “an edge” on the brief when instead he completely rewrote it.

The Court of Appeals reasoned:

It is undisputed that Haden and the company formed an agreement with Sacks for legal services and that Haden agreed to pay and did pay $10,000 for the legal services. Additionally, in their response to the motion for summary judgment, Haden and the company expressly stated that they were not complaining of “legal malpractice” or “the quality of the work.” The dispute here centers on whether Haden and the company were damaged by the law firm’s charging more for legal services than Haden and the company believe they were obligated to pay under the agreement. Haden and the company do not dispute that they agreed to pay $10,000 for the legal services and that they paid $10,000 under that agreement. Even if we assume that Haden and the company were billed more than they agreed to pay, Haden and the company paid only $10,000, and have not asserted a claim for reimbursement of the $10,000 already paid to the law firm. Haden and the company have not shown, therefore, how they were damaged by the mere creation of invoices that charged in excess of the $10,000 that they acknowledge was due to the law firm.

Haden and the company assert that they are damaged because Sacks said that he would perform the legal services himself, but instead had associates perform most of the work. They contend that Sacks’s misrepresentation that he would perform the work himself caused damages because it took the inexperienced associates more time to perform the work than it would have taken Sacks, had he performed the work himself, and the bill was therefore higher than it should have been. In his affidavit, Haden stated, “It was clear to me that the size of the bill was directly related to the inexperience of the attorney doing most of the work.” Haden did not explain his statement, however, and provided no evidence to support his perception.

It is undisputed that the associates’ time was billed at a lower rate than Sacks. Even if we assume that Haden is correct that it took more time for the inexperienced attorney to perform the task that Sacks had taken, Haden and the Company have not shown how they were damaged because no evidence shows how long it would take an experienced attorney to perform the task in comparison to the time that an associate would take. A more experienced attorney could perform the task more quickly, perhaps, but, because the experienced attorney billed at a higher rate, the bill could be higher than a bill from an associate who took more time to complete the task, but charged a lower rate. The evidence therefore fails to show any damages caused by Sacks’s failure to perform the work himself.

The damages claimed by Haden and the company, therefore, are limited to legal fees that they incurred in defending against the lawsuit filed by Sacks for the unpaid fee invoices. As a general rule, attorney’s fees incurred to defend against a lawsuit filed by another are not recoverable. See Tana Oil & Gas Corp. v. McCall, 104 S.W.3d 80, 82 (Tex. 2003) (rejecting damages described solely in terms of “value of time spent” and “costs incurred” in defending lawsuit as nonrecoverable, even if party seeking such damages could have proven all other elements of claim for tortious interference).

We conclude that Haden and the Company are not entitled to attorney’s fees recovery for their claims of DTPA violations and fraud because there is no showing of an actual-damages recovery. See Gulf States Utils., 79 S.W.3d at 567 (DTPA); Hennigan, 593 S.W.2d at 385 (fraud); Town East Ford Sales, Inc., 730 S.W.2d at 812 (fraud). We further conclude that Haden and the company are not entitled to attorney’s fees recovery in their claim for breach of fiduciary duty because they did not seek forfeiture of the attorney’s fees paid to the law firm as damages or establish any other type of compensable damages for that claim. See Burrow, 997 S.W.2d at 240.

We therefore hold that Haden and the Company offered no evidence that they sustained damages and, therefore, that the trial court properly rendered the no-evidence summary judgment in favor of the law firm on the claims for DTPA violations, fraud, and breach of fiduciary duty counterclaims asserted by Haden and the company.

Breach of contract: saved by the parol evidence rule

The parol evidence rule is a rule of substantive law. Hubacek v. Ennis State Bank, 159 Tex. 166, 317 S.W.2d 30, 31 (Tex. 1958); Gonzalez v. United Bd. of Carpenters & Joiners, 93 S.W.3d 208, 211 (Tex. App.--Houston [14th Dist.] 2002, no pet.); Piper, Stiles & Ladd v. Fid. & Dep. Co., 435 S.W.2d 934, 940 (Tex. Civ. App.--Houston [1st Dist.] 1968, writ ref’d n.r.e.). When parties reduce an agreement to writing, the law of parol evidence presumes, in the absence of fraud, accident, or mistake, that any prior or contemporaneous oral or written agreements merged into the written agreement and, therefore, that any provisions not set out in the writing were either abandoned before execution of the agreement or, alternatively, were never made and are thus excluded from consideration in interpreting the written agreement. See Hubacek, 817 S.W.2d at 31; Smith v. Smith, 794 S.W.2d 823, 827 (Tex. App.--Dallas 1990, no writ); Muhm v. Davis, 580 S.W.2d 98, 101 (Tex. Civ. App.--Houston [1st Dist.] 1979, writ ref’d n.r.e.).

Evidence that violates the parol evidence rule has no legal effect and “merely constitutes proof of facts that are immaterial and inoperative.” Piper, Stiles & Ladd, 435 S.W.2d at 940. Because all prior negotiations and agreements are presumed merged into the final agreement, parol evidence is not admissible to vary, alter, or supplement the terms of an otherwise unambiguous contract except to show (1) that the contract was induced by fraud, accident, or mistake, (2) that an agreement was to become effective only upon certain contingencies, or (3) in the case of ambiguity, that the parties’ true intentions differ from those expressed in the agreement. See Messer v. Johnson, 422 S.W.2d 908, 912 (Tex. 1968); Gonzalez, 93 S.W.3d at 211; Litton v. Hanley, 823 S.W.2d 428, 430 (Tex. App.--Houston [1st Dist.] 1993, no writ).

Parol evidence may also be admissible, under an additional exception, to show collateral, contemporaneous agreements that are consistent with the underlying agreement to be construed. See Hubacek, 317 S.W.2d at 31; see also Transit Enter., Inc. v. Addicks Tire & Auto Supply, Inc., 725 S.W.2d 459, 461 (Tex. App.--Houston [1st Dist.] 1987, no writ) (applying exception for collateral, consistent, contemporaneous agreements); Sherrod v. Bailey, 580 S.W.2d 24, 29 (Tex. Civ. App.--Houston [1st Dist.] 1979, writ ref’d n.r.e.) (same). But, this latter exception does not permit parol evidence that varies or contradicts either the express terms or the implied terms of the written agreement. Hubacek, 317 S.W.2d at 31; Loe v. Murphy, 611 S.W.2d 449, 451-52 (Tex. Civ. App.--Dallas 1980, writ ref’d n.r.e.); NHA, Inc. v. Jones, 500 S.W.2d 940, 944-45 (Tex. Civ. App.--Fort Worth 1973, writ ref’d n.r.e.) (both citing Hubacek).

Haden asserted that:

[I]t is undisputed that David Sacks performed some services for HADEN. However, HADEN agreed to hire a board certified, appellate specialist with 12 years[‘] experience to handle his appeal -- not inexperienced associates with fewer than 2 years of experience between them. HADEN would never have hired SACKS to represent him had he known that nearly 90% of the work on this appeal would be done by lawyers whose inexperience would result in their requiring nearly 200 hours to complete the work. HADEN did not agree to pay a fee which would support this many hours of work nor did he agree to provide an opportunity for new appellate lawyers to learn their trade. HADEN believed he was hiring David J. Sacks, Board Certified Appellate Specialist to do most, if not all, of the work on his appeal for a certain fee.

The Court of Appeals rejected this argument based on the parol evidence rule:

The law firm contends that, because the agreement plainly provides that different lawyers in the law firm would provide legal services to Haden and the company, no breach of contract occurred. The law firm further contends that Haden’s affidavit “constitutes no evidence and cannot be considered” because “Haden cannot introduce this parol evidence to vary the terms of the contract between the Law Firm and Haden.” . . . [W]e reject Haden’s affidavit, on the grounds that parol evidence cannot be introduced to vary the terms of the written agreement. This agreement provides that Sacks and his associates would work on the appellate brief for Haden and the company at specifically designated monetary rates. We conclude that Haden and the company have not produced any evidence that they were damaged by the fees charged by the law firm, which comported with the terms of the written agreement.

We hold that the only evidence that Haden and the company offered in response to the law firm’s motion for no-evidence summary judgment negated any recovery for their counterclaims and was, therefore, no evidence that they incurred any damages on their counterclaims. The trial court thus properly granted the law firm’s motion for summary judgment pursuant to Rule 166a(i). Because the trial court properly rendered the no-evidence summary judgment on Haden’s and the company’s counterclaims, we overrule issue three.