Texas Supreme Court keeps whittling away Whistleblower protections - Comment on OAG v Weatherspoon (Tex 2015)

Supreme Court Justices continue to dismantle the Texas Whistleblower Act 

Comment on Office of the Attorney General v Ginger Weatherspoon, No. 14-0582 (Tex. Sep. 18, 2015) 

Here we go again. In an opinion handed down last Friday, the Texas Supreme Court reverses the lower courts and throws out a whistleblower claim on a technicality, noting that the court below -- to be fair - couldn't have known how the Supremes would rule on a critical procedural issue, -- whether the whistleblower must report the alleged violation to outside law enforcement even though agency rules prohibit such action, and require internal reporting instead. 
      
But the whistle-blower in the case apparently was supposed to know, and since she complained to the wrong officials (as retroactively determined by the Supreme Court contrary to the Dallas Court of Appeals' conclusion), her claim cannot be heard. 

Case dismissed. -- So much for fairness to the whistle-blower. 

Office of Attorney General v Ginger Weatherspoon  

It's yet another instance of the high court's game of gotcha. A game that involves making up new rules, or changing existing ones, after the fact to justify reaching the favored outcome: in a case of this nature, a ruling in favor of the governmental defendant. Specifically - here - the Office of Attorney General. The litigant in question couldn't have anticipated the new rule, and does not get a chance to satisfy the requirements of the new rule because the court dismisses her case -- based on the new rule.  

As the Court has shown us time and again in its immunity jurisprudence, the government can do no wrong, because the government -- like the King -- is sovereign. And that's a matter of jurisdiction. Because the Court says so. 

The merits of a claim brought against a governmental entity, or the State itself, do not matter. The truth of falsity of the allegations by the whistleblower - here involving a junior attorney's refusal to prepare a false affidavit at the OAG -- is irrelevant because the case will never go to trial. It gets snuffed out with the cloak of immunity. Never mind the open-courts provision of the Texas Constitution. To all appearances, the judge-made doctrine of sovereign immunity trumps the constitution. Why? Because a majority of the Texas Supreme Court has the last word on the matter every time the issue comes up.

In some areas, a previous Texas Legislature has created waivers of sovereign immunity -- such as through the Whistleblower Act and the Texas Tort Claims Act, thereby allowing injured and aggrieved persons to sue the State, but the Texas Supreme Court has done its "best" to dismantle these statutes and render them impotent. As the latest example illustrates, the high court remains committed to doing so.  

Tellingly, last Friday's opinion makes no  mention of the Legislature's intent in passing the Whistleblower Act, and the public policy purposes that the waiver of sovereign immunity effected by the Whistleblower Act was meant to serve. 
 

OPINION OF THE DALLAS COURT OF APPEALS

 IN OAG Vs WEATHERSPOON

WHICH RECOUNTS THE DETAILS OF THE WHISTLEBLOWER'S ALLEGATIONS

AND HELD THAT THE CASE MAY GO FORWARD  

OFFICE OF THE ATTORNEY GENERAL, Appellant,
v.
GINGER WEATHERSPOON, Appellee.

No. 05-13-00632-CV.

Court of Appeals of Texas, Fifth District, Dallas.

Opinion Filed June 16, 2014.

Before Justices O'Neill, Lang-Miers, and Evans.

OPINION

Opinion by Justice DAVID EVANS.

The Office of the Attorney General appeals the denial of its plea to the jurisdiction in this suit under the Whistleblower Act. The OAG contends the trial court erred in concluding Ginger Weatherspoon made a good faith report of a violation of law to an appropriate law enforcement authority and in determining that it had subject matter jurisdiction over Weatherspoon's claims. Because we conclude Weatherspoon sufficiently alleged a claim under the Act to invoke subject matter jurisdiction, we affirm the trial court's order.

FACTUAL BACKGROUND

As the basis for her whistleblower suit, Ginger Weatherspoon alleged the following facts. Weatherspoon began working for the OAG as an assistant attorney general in the Child Support Division in July 2006. According to Weatherspoon, on February 1, 2008, two senior regional attorneys with the OAG, James Jones and Harry Monck, ordered her to report her recent interactions with a district judge. In response, Weatherspoon sent them an e-mail containing facts about a conversation with the judge. Four days later, Weatherspoon received an e-mail with an attached affidavit for her to sign concerning her conversation. A managing attorney with the OAG, Paula Crockett, told her they intended to use the affidavit as evidence to have the judge recused from hearing cases involving the OAG. The affidavit was also going to be used to support a judicial misconduct complaint against the judge. Weatherspoon refused to sign the affidavit stating that she believed it misrepresented various facts regarding her conversation with the judge and mischaracterized the tone and nature of the conversation.

According to Weatherspoon, on February 11, Jones sent Weatherspoon an e-mail ordering her to sign the affidavit. Weatherspoon responded that the affidavit was false as written and asked if she could revise it. Jones rejected Weatherspoon's request and Weatherspoon again refused to sign the affidavit. When Jones continued to insist that Weatherspoon sign the affidavit, Weatherspoon reported the matter to Crockett.

Weatherspoon alleged that the next day, Jones ordered her to appear at the OAG administrative office to sign the affidavit. When Weatherspoon continued to refuse to sign, Jones began to yell and slammed his fist on the desk. Weatherspoon was then ordered into a separate room and was told she could not leave until she had prepared a written statement against the judge. Weatherspoon attempted to make a report about Jones's conduct to his direct supervisor, but Jones prevented her from doing so. Weatherspoon was finally allowed to leave after she prepared a written statement concerning her conversation with the judge. According to Weatherspoon, the report she created was accurate.

Weatherspoon stated that, immediately after being allowed to leave, she contacted Crockett to report Jones's attempts to force her to sign the allegedly false affidavit. Weatherspoon asserted that Jones was exerting pressure in his official capacity in violation of the Texas Penal Code provisions concerning abuse of official capacity and official oppression. Weatherspoon further asserted that Jones's insistence that she sign a false affidavit constituted subordination of perjury in violation of federal law. Weatherspoon reported the same violations to her managing attorney, an attorney trainer, an attorney in the open records department, and to Alicia Key, the Child Support Director for the OAG, and Charles Smith, the Deputy Director of Child Support. Key told Weatherspoon that the Attorney General wanted Key to personally apologize for what happened and that "they would look into it and there would be a full investigation." Key also told Weatherspoon not to discuss the matter with anyone.

The OAG has mandatory procedures for reporting violations of law occurring within its office. The OAG Policies and Procedures Manual states that,

[i]t is the policy of the Office of the Attorney General that all potential criminal violations be referred to the appropriate division of the Office of Special Investigations. Employees shall notify their division chief upon learning of a potential criminal violation. This includes violations discovered in the performance of their regular duties or assignments and/or requests for assistance from outside agencies. It is the responsibility of each division chief, or their designee, to collect the basic information regarding the nature of the criminal violation, and then refer that information to the Office of Special Investigations utilizing the appropriate form. . . . Under no circumstances shall an employee not assigned to OSI refer a criminal violation encountered in the course of their official duties to an outside law enforcement agency unless exigent circumstances exist that threaten the immediate loss of life, and then only with the knowledge and approval of Executive Administration.

Weatherspoon claimed that, after she reported the alleged violations in compliance with the OAG's policy, she was retaliated against and eventually terminated from her position. Weatherspoon exhausted the OAG's grievance procedures and filed this suit asserting that her termination was done in violation of the Whistleblower Act.

The OAG filed a plea to the jurisdiction contending that Weatherspoon failed to allege sufficient facts to establish a whistleblower violation and a consequent waiver of the OAG's sovereign immunity. The OAG also filed a no-evidence motion for summary judgment on the same grounds. Weatherspoon responded and submitted an affidavit setting forth the facts she contended formed the basis of her claims. The trial court denied the OAG's plea and motion for summary judgment. The OAG then brought this interlocutory appeal from the trial court's denial of its plea to the jurisdiction.

ANALYSIS

Whether a trial court has subject matter jurisdiction is a question of law. See Tex. Natural Res. Conservation Comm'n v. IT-Davy, 74 S.W.3d 849, 855 (Tex. 2002). We review de novo whether a plaintiff has set forth facts that affirmatively demonstrate a trial court's subject matter jurisdiction. See Tex. Dep't. of Parks and Wildlife v. Miranda, 133 S.W.3d 217, 226 (Tex. 2004). Where a plea to the jurisdiction challenges the existence of jurisdictional facts, as is the case here, the court considers the relevant evidence submitted by the parties to resolve the jurisdictional issues. Id. at 227. If the evidence does not negate jurisdiction as a matter of law or if it creates a fact issue, the trial court should deny the plea. See Office of Attorney Gen. of Tex. v. Rodriguez, 420 S.W.3d 99, 102 (Tex. App.-El Paso 2012, no pet.).

Section 554.0035 of the Texas Government Code expressly waives sovereign immunity for claims brought under the Texas Whistleblower Act. See TEX. GOV'T CODE ANN. § 554.0035 (West 2012). For immunity to be waived, however, the plaintiff must be a public employee and properly allege a violation of the Act. See State v. Lueck, 290 S.W.3d 876, 881 (Tex. 2009). We determine whether the jurisdictional prerequisite of alleging a violation has been met by examining the elements of a whistleblower claim as set forth in section 554.002 of the government code. See Mullins v. Dallas Indep. Sch. Dist., 357 S.W.3d 182, 186 (Tex. App.-Dallas 2012, pet. denied).

Under section 554.002, "a state or local governmental entity may not suspend or terminate the employment of, or take other adverse personnel action against, a public employee who in good faith reports a violation of law by the employing governmental entity or another public employee to an appropriate law enforcement authority." SeeTEX. GOV'T CODE ANN. § 554.002(a). A report is made to an appropriate law enforcement authority if "the authority is a part of a state or local governmental entity or of the federal government that the employee in good faith believes is authorized to: (1) regulate under or enforce the law alleged to be violated in the report; or (2) investigate or prosecute a violation of criminal law." Id. § 554.002(b).

In this case, Weatherspoon alleged that she made a report concerning a fellow public employee who had allegedly committed violations of criminal law, including abuse of official capacity, official oppression, and suborning perjury, and that her employment was terminated as a result. Weatherspoon further alleged that she made her reports to numerous people including the head of her division at the OAG as required by the OAG's policies and procedures manual. On appeal, the OAG presents a single issue contending these allegations fail to show that Weatherspoon made her report to an "appropriate law enforcement authority" as required by the Act. In making this argument, the OAG relies heavily on cases holding that reports made internally to one's own employer are generally insufficient to invoke the Act's protections. See e.g. Univ. of Tex. Sw. Med. Ctr. at Dallas v. Gentilello, 398 S.W.3d 680, 685-86 (Tex. 2013). This is because an employer's ability to require internal compliance with a law does not equate with the power to regulate or enforce the law, or investigate or prosecute violations of the law as required by the Act's definition of "appropriate law enforcement authority." See id.As noted by the Texas Supreme Court, however, reports made internally may satisfy the requirements of the Act if the employer has not only internal authority to require compliance, but also the power to enforce, investigate, or prosecute violations against third parties outside the entity itself. Id. at 686. For example, a police officer may report a criminal act committed by her partner to the appropriate supervisor or division of the police department and come under the protections of the Act. Id.

The OAG argues that Weatherspoon did not make her report to an appropriate law enforcement authority because she reported the alleged criminal violations only to her division head and others in the Child Support Division. It is undisputed that the Child Support Division does not address allegations against third parties of criminal fraud and abuse of office. It is also undisputed, however, that the Child Support Division is part of the OAG. The evidence presented by Weatherspoon shows that the OAG, through its Office of Special Investigations, has the authority to investigate complaints not only of internal fraud and corruption, but also fraud and corruption by third parties. Furthermore, the OAG has concurrent jurisdiction with the consent of the local prosecutor to prosecute abuses of official capacity and official oppression by third parties.^[1] See TEX. PENAL CODE ANN. § 39.015 (West 2011).

Pursuant to the OAG's own policies and procedures, Weatherspoon's division head at the OAG was required to refer Weatherspoon's report to the OAG's Office of Special Investigations. As stated above, section 554.002(b) of the government code provides that a report is made to an appropriate law enforcement authority if the authority to whom the report is made is "part of" a governmental entity that the employee believes in good faith is authorized to investigate or prosecute a violation of criminal law. Because the Child Support Division and, consequently, its division head are "part of" the OAG, and the OAG, through its Office of Special Investigations, is authorized to investigate or prosecute violations of criminal law such as those alleged by Weatherspoon, Weatherspoon's report to her division head constitutes a report made to an appropriate law enforcement authority.

The facts presented here are similar to those presented in Office of Atty. Gen. of Tex. v. Rodriguez. See Rodriguez, 420 S.W.3d at 100-01. In Rodriguez, the plaintiff, like Weatherspoon, was an employee in the OAG's Child Support Division. Id. at 100. The plaintiff suspected that her assistant was committing insurance fraud and tampering with governmental records. Id. According to the OAG policy in place at the time, employees were required to report unethical, fraudulent, or illegal conduct to both an immediate supervisor and the ethics advisor. Id. at 103. The plaintiff first made her report to her supervisor and, after her supervisor told her to do so, made a second report to the ethics advisor. Id. at 100. The ethics advisor then requested an investigation be conducted by the Criminal Investigation Division. Id. Following the investigation, the ethics advisor released a report concluding that the assistant had not committed fraud, but had misstated information. Id. at 101. The plaintiff was later terminated and she brought suit against the OAG under the Whistleblower Act. Id.

The OAG filed a plea to the jurisdiction and argued, as it does here, that the plaintiff failed to show she made her report to an appropriate law enforcement authority because none of the persons to whom she made her report had the authority to prosecute violations of criminal law. Id. The court rejected this argument noting that the plaintiff made her report to those persons she was required to make her report to pursuant to the OAG's policies. Id. at 103. The court further stated that the plaintiff's allegations did not involve matters of "mere internal discipline," but rather allegations of violations of criminal law that the ethics advisor along with the OAG's Criminal Investigation Division had the authority to investigate. Id. Based on these jurisdictional facts, the court concluded the trial court correctly denied the OAG's plea to the jurisdiction. Id. at 104.

The OAG contends Rodriguez is distinguishable on the basis that the plaintiff made her report directly to the ethics advisor who had the power to conduct an investigation, and not just to her supervisor in the Child Support Division as was done by Weatherspoon. We do not find this distinction persuasive. The OAG policy in effect in Rodriguezrequired the plaintiff to report illegal conduct to both her supervisor and the ethics advisor. See Rodriguez, 420 S.W.3d at 103. In contrast, the policy under which Weatherspoon was operating required her to report suspected criminal violations to onlyher division head. The division head receiving the report was then required to collect information regarding the allegation and forward it to the Office of Special Investigations. Under these mandatory policies, a report made to a division head is, in effect, a report made to the Office of Special Investigations, both of which are "part of" the OAG, consistent with section 554.002(b) of the government code. See Tex. Gov't Code Ann. § 554.002(b). As discussed above, the OAG is an appropriate law enforcement authority.

The OAG argues that compliance with an internal procedure for reporting criminal violations and the belief that the report will be forwarded to those with an ability to conduct an investigation or enforce the law is insufficient to meet the requirements of the Act. While this may be true under some circumstances, the facts of this case lead to a different result.

In University of Houston v. Barth, the Texas Supreme Court held that compliance with the university's policy for reporting suspected criminal activity to a school official combined with the possibility that the report would be forwarded to the university police did not constitute a report to an appropriate law enforcement authority. See Univ. of Houston v. Barth, 403 S.W.3d 851, 858 (Tex. 2013). The plaintiff in Barth made his report of suspected criminal activity to various university officials including the chief financial officer, general counsel, dean, internal auditor, and associate provost. Id. at 853. He argued, among other things, that each of those people was "obligated" to report the alleged violations to the university police. Id. at 857-58. The Barth opinion does not indicate that there was any showing either that the policy at issue required the person receiving the report of suspected criminal activity to forward it on specifically to the university police or that the university police had authority to investigate or prosecute persons not affiliated with the university, i.e. third parties. See Univ. of Houston v. Barth,365 S.W.3d 438, 441 (Tex. App.-Houston [1st Dist.] 2011), rev'd, 403 S.W.3d 851 (Tex. 2013) (policy obligated employees to report suspected criminal activity to one of several listed officials including chief financial officer, general counsel, and university police). Because the policy did not require anything other than an internal report to persons without the power to either investigate or prosecute alleged violations of law, compliance with the policy was insufficient under the Act. See Barth, 403 S.W.3d at 858.

Similarly, in Texas Department of Transportation v. Needham, the plaintiff reported a co-worker's alleged criminal conduct to his supervisors at the Department of Transportation.See Tex. Dept. of Transp. v. Needham, 82 S.W.3d 314, 318 (Tex. 2002). The plaintiff argued that he reasonably believed either that his employer was an appropriate law enforcement authority or that his employer could forward his report on to another entity to prosecute the alleged violations. See id. at 318-19. The supreme court concluded that the Department of Transportation was not an appropriate law enforcement authority and the plaintiff's subjective belief that his report could be forwarded to another entity was not sufficient to meet the Act's requirements. Id. at 321. Belief in the possibility that a report will be sent to an appropriate law enforcement authority does not equate with knowledge that the person to whom one reports works for an appropriate law enforcement authority and is required to forward the report to the appropriate persons within that same entity for investigation or prosecution. It is the latter circumstance that is presented here.

In this case, Weatherspoon was specifically directed to report suspected criminal violations by her co-workers to her division head at the OAG. The division head at the OAG was then required to forward Weatherspoon's report to the OAG's Office of Special Investigations. The OAG itself and, more specifically, the Office of Special Investigations, is an appropriate law enforcement authority with respect to the criminal violations Weatherspoon alleged. Accordingly, there was more than a mere possibility that Weatherspoon's report would reach persons with specific authority to investigate or prosecute the alleged criminal violations. Weatherspoon made her report to persons employed by an appropriate law enforcement entity who were required to ensure that her allegations were reported to the proper persons and she was assured that this had been done. Under these facts, we conclude Weatherspoon has sufficiently alleged that she made good faith report of a violation of law by another public employee to an appropriate law enforcement authority. We resolve the OAG's sole issue against it.

We affirm the trial court's order denying the OAG's plea to the jurisdiction.

JUDGMENT

In accordance with this Court's opinion of this date, the order of the trial court denying appellant OFFICE OF THE ATTORNEY GENERAL's plea to the jurisdiction is AFFIRMED.

It is ORDERED that appellee GINGER WEATHERSPOON recover her costs of this appeal from appellant OFFICE OF THE ATTORNEY GENERAL.

[1] The OAG suggests that because its authority to prosecute cases of abuse of official capacity and official oppression requires the consent of the local county or district attorney, its power is not "free-standing" as required by the Texas Supreme Court's opinion in Gentilello. See Gentilello, 398 S.W.3d at 682. The term "free-standing" was used by the court to distinguish entities that must refer suspected violations elsewhere for investigation or prosecution. Id. The requirement that an entity receive consent to prosecute a criminal violation is fundamentally different than the entity having no authority to prosecute the violation at all. Furthermore, the OAG needs no consent to investigate allegations of abuse of office even if prosecution in court of such matters by the OAG requires consent of local prosecutors. The power to investigate such allegations is, standing alone, sufficient to make it an appropriate law enforcement authority. See TEX. GOV'T CODE ANN. § 554.002.

TEXAS SUPREME COURT REVERSES COURT OF APPEALS AND DISMISSES WHISTLE-BLOWER CASE ALLEGING SUBORNATION OF PERJURY AND OFFICIAL OPPRESSION IN THE ATTORNEY GENERAL'S OFFICE  

IN THE SUPREME COURT OF TEXAS

444444444444

NO. 14-0582

444444444444

OFFICE OF THE ATTORNEY GENERAL, PETITIONER,

v.

GINGER WEATHERSPOON, RESPONDENT

4444444444444444444444444444444444444444444444444444

ON PETITION FOR REVIEW FROM THE

COURT OF APPEALS FOR THE FIFTH DISTRICT OF TEXAS

4444444444444444444444444444444444444444444444444444

PER CURIAM

This Whistleblower Act case raises a question we recently addressed in Texas Department
of Human Services v. Okoli: whether reports of alleged violations of law are protected if made to
supervisors with power only to oversee internal compliance within an entity, even if the supervisors
must forward the complaints to another department with outward-looking authorityto regulate under
or enforce the law alleged to be violated or investigate or prosecute criminal violations against third
parties. See 440 S.W.3d 611, 615–16 (Tex. 2014). We held in Okoli that the Act does not protect
such reports. Id. The court of appeals held otherwise (though, to be fair, it did so before we decided
Okoli). 435 S.W.3d 844, 851 (Tex. App.—Dallas 2014). Accordingly, we reverse the court of
appeals’ judgment and dismiss the case.
Ginger Weatherspoon was an assistant attorney general in the Child Support Division. She
alleges that two senior attorneys in the Office of the Attorney General (OAG) tried to coerce her to
sign a false affidavit regarding her interactions with a judge. She refused, and claimed the attorneys’
conduct amounted to subornation of perjury (see 18 U.S.C. section 1622), as well as abuse of official
capacity and official oppression (see Texas Penal Code sections 39.02 and 39.03).
OAG policyrequires employeesto report a potential criminal violation to their division chief,
who must then refer it to the OAG’s Office of Special Investigations for further action. Employees
such asWeatherspoon maynot launch their own investigation or, absent exigent circumstances, refer
a criminal violation to outside law enforcement. Employees may be disciplined for doing otherwise.
Weatherspoon asserts she adhered to this policy, reporting the wrongful conduct to her
managing attorney, the Child Support Director, the Deputy Director of Child Support, and an
attorney in the Open Records Department, among others. According to Weatherspoon, the Child
Support Director apologized to her on behalf of the Attorney General, promised her there would be
an investigation, and instructed her not to discuss the matter. Nonetheless, Weatherspoon alleges
she was eventually retaliated against for making the reports, leading to her termination.
After being fired, Weatherspoon sued the OAG under the Whistleblower Act, which under
certain circumstances waives a state entity’s immunity from suit for retaliatory discharge. TEX.
GOV’T CODE § 554.0035. The OAG filed a plea to the jurisdiction, arguing that Weatherspoon’s
allegations were not sufficient to invoke the Act and waive immunity. The trial court denied the
OAG’s plea, and following the OAG’s interlocutory appeal, the court of appeals affirmed. 435
S.W.3d at 846–47.
The Whistleblower Act protects “a public employee who in good faith reports a violation of
law by the employing governmental entity or another public employee to an appropriate law
2

enforcement authority.” TEX.GOV’TCODE § 554.002(a). The reported-to authority is an appropriate
law-enforcement authority if it is
a part of a state or local governmental entity or of the federal government that the
employee in good faith believes is authorized to:
(1) regulate under or enforce the law alleged to be violated in the report;
or
(2) investigate or prosecute a violation of criminal law.
Id. § 554.002(b).
To be in “good faith,” an employee’s belief about the reported-to authority’s powers must
be “reasonable in light of the employee’s training and experience.” Tex. Dep’t of Transp. v.
Needham, 82 S.W.3d 314, 321 (Tex. 2002). An authority’s powerto discipline its own or investigate
internally does not support a good-faith belief that it is an appropriate law-enforcement authority.
Univ. of Tex. Sw. Med. Ctr. v. Gentilello, 398 S.W.3d 680, 686 (Tex. 2013). Instead, the authority
must have outward-looking powers. “[I]t must have authority to enforce, investigate, or prosecute
violations of law against third parties outside of the entity itself, or it must have authority to
promulgate regulations governing the conduct of such third parties.” Id.
Similarly, a policy requiring employees to report violations to their supervisors, who must
then send the complaints to an appropriate law-enforcement authority, is not enough for a good-faith
belief that the supervisors are an appropriate authority. Okoli, 440 S.W.3d at 616. “When an
employee reports wrongdoing internallywith the knowledge that the report will have to be forwarded
elsewhere for regulation, enforcement, investigation, or prosecution, then the employee is not
reporting ‘to an appropriate law[-]enforcement authority.’” Id. at 615 (alteration in original) (quoting
3

TEX. GOV’T CODE § 554.002). Although such a policy permits employees to reasonably believe
reports will be sent to an appropriate law-enforcement authority, it provides no reason to believe the
reported-to supervisors are appropriate authorities.
Accordingly, Weatherspoon’s reports were insufficient. She has provided no evidence that
the reported-to attorneys or their departments had outward-looking enforcement authority. Her
division chief’s duty to forward complaints to the Office of Special Investigations did not vest the
division chief with authority to “regulate under or enforce the law alleged to be violated” or to
“investigate or prosecute a violation of criminal law.” See TEX.GOV’T CODE § 554.002(b). Neither
did it make the division chief the equivalent of a “police-intake clerk” for the Office of Special
Investigations, given that the division chief works for a separate arm of the OAG. See Okoli, 440
S.W.3d at 617. Similarly, the Child Support Director’s promise of an investigation gave
Weatherspoon no reason to believe the Director had power to investigate crime as crime rather than
as a breach of OAG policy.
Weatherspoon urges that if following OAG policy and reporting to her division chief did not
invoke the Act’s protection, then OAG employees have no safe way to report criminal violations.
According toWeatherspoon, should employees directlycontact an actual law-enforcement authority,
they risk discipline for violating OAG policy. We disagree. The Act prohibits adverse personnel
action against “a public employee who in good faith reports a violation of law . . . to an appropriate
law enforcement authority.” TEX. GOV’T CODE § 554.002(a). An agency may not rely on internal
policy to do what the Act prohibits: disciplining an employee for making a protected report.
4

Finally, Weatherspoon argues the OAG is an appropriate law-enforcement authority because
it may handle some criminal-law matters. The Texas Penal Code grants the Attorney General
“concurrent jurisdiction with [a] consenting local prosecutor to prosecute an offense” such as official
oppression or abuse of official capacity. See TEX. PENAL CODE § 39.015. Additionally, the OAG
has an Ethics Advisor, and one court of appeals held the Ethics Advisor was an appropriate lawenforcement
authority. Office of Att’y Gen. v. Rodriguez, 420 S.W.3d 99, 103 (Tex. App.—El Paso
2012, no pet.). Pointing to the OAG’s Criminal Investigation Division, see id. at 101, its Office of
Special Investigations, and its statutory authority to prosecute certain crimes, Weatherspoon asserts
the OAG has the requisite outward-looking authority.
These arguments fail because the authority of some OAG divisions to investigate or
prosecute crime does not transform the entire OAG into an appropriate law-enforcement authority.
As we held in Okoli, a policy requiring that reports be forwarded from one division lacking the
required authority to another division in the same agency having the required authority does not
mean the initial reports were protected. Okoli, 440 S.W.3d at 616. An entire agency does not
become an appropriate law-enforcement authoritymerely because some divisions have such power.
Because Weatherspoon cannot show that her reports met the Act’s requirements, the OAG
remains immune from suit. Without hearing oral argument, we grant the petition for review, reverse
the court of appeals’ judgment, and dismiss the case. See TEX. R. APP. P. 59.1.

Opinion Delivered: September 18, 2015
5

Neese v Lyon: Civil Barratry: Dallas Court of Appeals addresses multiple complex legal issues in clients' suit against attorneys seeking to void attorney fee agreement based on illegal solicitation after pipeline explosion

     
UPDATE ON NEESE VS. LYON: On September 4, 2015, the lawfirm defendants filed motions for rehearing and for reconsideration en banc. Both focus on the issue of estoppel, pointing out that barratrous contingency-fee agreements are voidable, rather than void, and that the clients are estopped from disavowing the contract after the other party has fully performed. The lawfirm defendants argue that the Dallas Court of Appeal's decision conflicts with decisions of other courts of appeals, with its own precedent, and with a Texas Supreme Court case that stands for the proposition that the estoppel doctrine applies to all voidable contracts.

The motions can be accessed through the hotlinks on the docket sheet. No response is on file as of 9/24/2015.

   

 Fifth Court of Appeals addresses complex issues in appeal from summary judgment in suit by tort clients who sued their lawyers for barratry  

      
CARL "STACEY" NEESE, INDIVIDUALLY AND AS NEXT FRIEND OF L.N., C.N., L.N., AND C.N., JAMES NEESE, DAVID NEESE, JENNIFER HUGHES, MITZI RENFROE, AND IRL HOOPER, Appellants, v. TED B. LYON, JR., MARQUETTE W. WOLF, TED B. LYON & ASSOCIATES, P.C., AND WILLIAM HEIDELBERG, Appellees. No. 05-13-01597-CV(Tex.App. - Dallas, July 31, 2015, no pet. h.)
  
In one of the first appellate opinions involving issues surrounding the statutory cause of action for barratry, the Dallas Court of Appeals recently reversed a final summary judgment in favor of a lawfirm, its attorneys, and an "investigator" who had procured a high-stakes and high-dollar pipeline explosion tort case for the firm. 
   

The plaintiffs/clients were unaware of the barratry at the time they obtained legal representation, but later -- after settlement and disbursal of proceeds -- filed suit seeking to take away the lawfirm's substantial attorney's fees, which were based on a contingency fee agreement, as is common in tort cases. The nonattorney "investigator" had been paid $50,000 for soliciting the victims's family members as clients, and was also named as a defendant in the subsequent lawsuit over fees. 

The clients brought their complaints under a variety of different legal theories, including the civil barratry statute (before it was amended to also authorize an award of statutory damages). Under the older version, which applied at the time, the clients sought fee forfeiture because the legal services contract had resulted from conduct that violated the law. But they brought other causes of action also. 

The issues in the appeal were complicated and included questions regarding the time of accrual of the barratry claim and a disagreement over the applicable limitations period, the distinction between void and voidable contract, the interplay of the attorney disciplinary system with the civil justice system, and the ramifications of the rescission remedy for the litigant seeking it. 

The clients raised a total of thirteen issues on appeal. 

The panel opinion, which was issued in the name of only two justices (Lang and Brown) because the third one on the panel (FitzGerald) had resigned before it was handed down on July 31, 2015. It is best read in its entirety to appreciate the multiplicity of issues, and the procedural posture of the case in which they were raised. 

STATUTE OF LIMITATIONS FOR CIVIL BARRATRY CLAIM TO VOID FEE AGREEMENT 

Among other holdings, the two-member appellate panel concluded that the barratry cause of action was governed by the residual statute of limitations (4 years) because the statute itself did not contain a limitations period. Therefore, the defendants, who had argued that the limitations period was only two years, were not entitled to summary judgment based on limitations under the facts of the case. The clients also argued that the discovery rule applied because they did not learn of the improper "barratrous" conduct until some time after the fee agreement was made, but the justices did not find it necessary to reach that issue. 

NOT THE LAST WORD ON THE MATTER 

Because the appeal resulted in the reversal of a summary judgment in favor of the lawfirm defendants, the case will go back to the trial court for further litigation in light of the appellate court's resolution of the legal issues raised at the summary judgment stage. 

Most significantly, the clients' causes of action for barratry under the original version of Texas Government Code § 82.065 may proceed in the trial court, as the court of appeals held that none of the multiple bases that the defendants had urged in their summary judgment motion merited dismissal. 
  
Several alternative causes of action, but not all, were also reinstated, including breach of fiduciary duty, DTPA, and civil conspiracy. The ultimate outcome thus remains uncertain. Short of a trial on the merits, there could be additional motions for summary judgment, but there might also be a settlement.

POSSIBLE SUPREME COURT REVIEW 

Barring a prompt resolution of the dispute by settlement, however, there is a good chance that the case will first be taken to the Texas Supreme Court, and if the high court agrees to hear it, it is likely that one or more of the legal issues might get decided differently by the court that has the last word on matters of Texas state law. 
  
Grant of review is more likely in cases that present an unsettled legal issues, not to mention one that affects the practice of law in the State of Texas, which the Texas Supreme Court also oversees in its regulatory and administrative capacity. The high court has recently addressed other issues affecting the practice of law, including the enforceability of attorney-client arbitration agreements and attorney immunity to civil suits by opponents in prior litigation. 

Even if this case gets resolved without supreme court involvement, it will hardly be the last one to reach the courts of appeals. Nor will future cases alleging barratry be limited to the original version of the barratry statute. Indeed, the more recent amendments, which authorized $10,000 in statutory damages, created an additional incentive for clients to turn on their attorneys, not to mention a profit motive for other attorneys -- those who do not shy away from suing a fellow member of the bar -- to take cases of alleged unlawful solicitation on a contingency basis. 
  
Some observers even perceive the emergence of a new niche in the legal biz, though the firms jumping at this opportunity may not yet have branded themselves as "barratry boutiques".  
    
Case style: Neese v. Lyon, No. 05-13-01597 (Tex.App. - Dallas July 2015) (summary judgment for defendants in civil suit by clients over illegal barratry under the original version of Texas Government Code § 82.065 reversed) 

CARL "STACEY" NEESE, INDIVIDUALLY AND AS NEXT FRIEND OF L.N., C.N., L.N., AND C.N., JAMES NEESE, DAVID NEESE, JENNIFER HUGHES, MITZI RENFROE, AND IRL HOOPER, Appellants,
v.
TED B. LYON, JR., MARQUETTE W. WOLF, TED B. LYON & ASSOCIATES, P.C., AND WILLIAM HEIDELBERG, Appellees.

No. 05-13-01597-CV.

Court of Appeals of Texas, Fifth District, Dallas.

Opinion Filed July 31, 2015.

Before Justices Lang and Brown^[1].

OPINION

ADA BROWN, Justice. 

Appellants sued appellees on several theories of liability including barratry. The trial court granted a take-nothing summary judgment in favor of appellees. Appellants raise thirteen issues on appeal. We affirm the trial court's judgment in part, reverse it in part, and remand for further proceedings consistent with this opinion.

I. BACKGROUND

A. Factual allegations

Appellants alleged the following facts, which appellees assumed to be true solely for purposes of their summary-judgment motion. A natural-gas pipeline exploded in Johnson County, Texas, on June 7, 2010. The explosion seriously injured appellants Carl "Stacey" Neese^[2] and Irl Hooper. It also killed Neese's brother James Robert Neese. Appellant Mitzi Renfroe is James Robert Neese's mother, and the remaining appellants are James Robert Neese's children. We sometimes collectively refer to appellants as the "Clients."

Appellees Ted B. Lyon Jr. and Marquette W. Wolf are Texas lawyers. Lyon is the president and director of appellee Ted B. Lyon & Associates, P.C., and Wolf works for that law firm. Appellee William Heidelberg is a private investigator.

Although Lyon, Wolf, and the Lyon law firm had no prior relationship with the Neeses, they hired Heidelberg to solicit the Neese family to hire Lyon and his firm as their attorneys. Heidelberg traveled to Oklahoma and contacted Neese. He falsely told Neese that he was investigating the pipeline explosion for an organization called the Danielle Smalley Foundation and that he was not associated with any law firm. Heidelberg also told Neese that he should consider hiring Lyon, who had previously obtained a verdict of several hundred million dollars for a victim of a different pipeline explosion. On June 25, 2010, Lyon and Wolf flew to Tulsa and met with Neese and other Neese family members. The Neeses hired the Lyon firm to represent them in any pipeline-explosion litigation for a 40% contingency fee.

Heidelberg asked Neese if he knew anyone else who was injured in the explosion, and Neese referred him to Hooper. Heidelberg met with Hooper in the hospital and was introduced to Hooper as an investigator for the Danielle Smalley Foundation. According to Hooper's summary-judgment affidavit, Neese told Hooper that Heidelberg was not associated with any law firm. Heidelberg did not deny these statements, and he told Hooper that he should consider hiring Lyon, again because of Lyon's prior success. Another lawyer with the Lyon law firm later flew to Oklahoma and got Hooper to hire the Lyon law firm on a 40% contingency-fee basis. Hooper's affidavit indicates this meeting took place on or after July 5, 2010. Heidelberg was paid a $50,000 bonus by the other appellees for successfully soliciting the Neeses and Hooper.

Lyon, Wolf, and the Lyon law firm filed a lawsuit for the Neeses and Hooper. That lawsuit eventually settled. The Clients paid attorneys' fees and expenses to the Lyon appellees. The Clients later learned of Heidelberg's relationship with the Lyon appellees.

B. Procedural history

The Clients sued appellees, asserting the following claims and requesting the following remedies in their fifth amended petition: (1) barratry and fee forfeiture, (2) breach of fiduciary duty, (3) fraud by nondisclosure, omission, or concealment, (4) rescission, (5) unjust enrichment, (6) legal malpractice, (7) conspiracy, (8) violations of the Texas Deceptive Trade Practices Act, (9) suspension from the practice of law and revocation of license, and (10) an accounting. Appellees then filed a second amended summary-judgment motion, which was expressly a "traditional" motion under Rule 166a(c). The Clients timely responded and also timely filed a sixth amended petition in which they added a claim for "money had and received and/or quantum valebant." Appellees addressed the new claim in a "supplement" to their second amended motion for summary judgment, and the Clients filed a special exception and response to the supplement.

After a hearing, the trial judge signed a take-nothing summary judgment in favor of appellees. The Clients timely perfected this appeal.

II. STANDARD OF REVIEW

We review a traditional summary judgment under a de novo standard of review.Smith v. Deneve, 285 S.W.3d 904, 909 (Tex. App.-Dallas 2009, no pet.). When we review a traditional summary judgment for a defendant, we determine whether the defendant conclusively disproved an element of the plaintiff's claim or conclusively proved every element of an affirmative defense. Am. Tobacco Co. v. Grinnell, 951 S.W.2d 420, 425 (Tex. 1997). We must take evidence favorable to the nonmovant as true, and we must indulge every reasonable inference and resolve every doubt in the nonmovant's favor. Sysco Food Servs., Inc. v. Trapnell, 890 S.W.2d 796, 800 (Tex. 1994). A matter is conclusively established if ordinary minds could not differ as to the conclusion to be drawn from the evidence. In re Estate of Hendler, 316 S.W.3d 703, 707 (Tex. App.-Dallas 2010, no pet.).

Although appellees attached some evidence to their summary-judgment motion, such as the fee agreements and some evidence regarding the course of the underlying pipeline-explosion litigation, they relied principally on the averments in appellants' live petition, the truth of which appellees accepted solely for purposes of summary judgment. Although pleadings generally do not constitute summary-judgment evidence, a summary-judgment movant may rely on judicial admissions in the nonmovant's live pleading. See Commercial Structures & Interiors, Inc. v. Liberty Educ. Ministries, Inc., 192 S.W.3d 827, 835 (Tex. App.-Fort Worth 2006, no pet.) ("[I]f a plaintiff's pleadings contain judicial admissions negating a cause of action, summary judgment may properly be granted on the basis of the pleadings."); see also Tex. Dep't of Corr. v. Herring, 513 S.W.2d 6, 9 (Tex. 1974) ("It is recognized that a party may plead himself out of court; e.g., the plaintiff may plead facts which affirmatively negate his cause of action."). When we review a summary judgment against a plaintiff based on the pleadings, we view the facts in the pleadings in the light most favorable to the plaintiff. Murphy v. Gruber, 241 S.W.3d 689, 691 n.2 (Tex. App.-Dallas 2007, pet. denied).

The Clients attached evidence to their summary-judgment response, principally affidavits by Neese, Hooper, and an attorney who worked for the Lyon law firm from 2007 until 2012. These affidavits largely repeat and elaborate on the facts pleaded in the Clients' sixth amended petition.

III. ANALYSIS

The Clients raise thirteen issues on appeal. The first issue is a general averrment, without substantive argument, that the trial court erroneously granted summary judgment. Issues two and three concern their barratry claims. Issues four through thirteen concern their other liability theories and requested remedies. We proceed directly to their second and third issues.

A. Barratry

1. Summary-judgment grounds and the Clients' arguments on appeal

Under the heading "Barratrous Conduct and fee forfeiture," the Clients alleged that appellees committed barratry in violation of the Texas Penal Code and the Texas Disciplinary Rules of Professional Conduct. They further asserted that appellees' barratry entitled the Clients to avoid their contingency-fee agreements and to recover all fees and expenses paid to appellees under the agreements.

Appellees raised several summary-judgment grounds regarding the Clients' barratry claims. They argued that Texas law did not recognize a private civil cause of action for barratry until the Texas Legislature statutorily recognized that cause of action effective September 1, 2011. They further argued that, under the civil barratry statute in effect in 2010, clients could invoke barratry only defensively as a basis for avoiding an obligation to pay as-yet-unpaid legal fees. Applying the law to the facts, appellees argued that the Clients had no viable barratry claim because the Clients alleged barratrous acts occurring only in 2010 and all legal fees due under the allegedly barratrous agreements had already been paid. Appellees also argued that the Clients' barratry claims were barred by a two-year statute of limitations and by ratification.

On appeal, the Clients argue that the civil barratry statute in effect before September 1, 2011, created a private cause of action for barratry and that they successfully pleaded a claim under that statute. They also argue that they alleged facts stating a claim for barratry under the version of the statute in effect from September 1, 2011, through August 31, 2013. The Clients also argue that limitations does not bar their barratry claims because the discovery rule delayed accrual of their claims and because the applicable statute of limitations is four years rather than two. Finally, they argue that they did not ratify the alleged barratry because they were not aware of it until after the underlying case had settled.

2. Applicable law

The ordinary meaning of barratry is vexatious incitement to litigation, especially by soliciting potential legal clients. See Barratry, BLACK'S LAW DICTIONARY (10th ed. 2014). It has long been a crime in Texas. See Ackerman v. State, 61 S.W.2d 116 (Tex. Crim. App. 1933) (affirming barratry conviction). The criminal prohibition of barratry is now found in Chapter 38 of the Texas Penal Code. See TEX. PENAL CODE ANN. § 38.12 (West Supp. 2014) (entitled "Barratry and Solicitation of Professional Employment"). The rules of professional conduct also address barratry.See TEX. DISCIPLINARY RULES PROF'L CONDUCT R. 7.03 (entitled "Prohibited Solicitations and Payments"), reprinted in TEX. GOV'T CODE ANN., tit. 2, subtit. G, app. A (West 2013).

In 1989, the legislature enacted a new statute, § 82.065 of the Texas Government Code, addressing contingent-fee contracts and barratry:

(a) A contingent fee contract for legal services must be in writing and signed by the attorney and client.

(b) A contingent fee contract for legal services is voidable by the client if it is procured as a result of conduct violating the laws of this state or the Disciplinary Rules of the State Bar of Texas regarding barratry by attorneys or other persons.

Act of May 27, 1989, 71st Leg., R.S., ch. 866, § 3, 1989 Tex. Gen. Laws 3855, 3857 (amended 2011 and 2013) (current version at TEX. GOV'T CODE ANN. § 82.065 (West Supp. 2014)).

In 2011, the legislature amended § 82.065 and enacted § 82.0651. The 2011 amendments to § 82.065 are not relevant to this appeal. New § 82.0651 contained the following provisions:

(a) A client may bring an action to void a contract for legal services that was 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.

(b) A client who prevails in an action under Subsection (a) shall recover from any person who committed barratry:

(1) all fees and expenses paid to that person under the contract;

(2) the balance of any fees and expenses paid to any other person under the contract, after deducting fees and expenses awarded based on a quantum meruit theory as provided by Section 82.065(c);

(3) actual damages caused by the prohibited conduct; and

(4) reasonable and necessary attorney's fees.

. . . .

(e) This section shall be liberally construed and applied to promote its underlying purposes, which are to protect those in need of legal services against unethical, unlawful solicitation and to provide efficient and economical procedures to secure that protection.

(f) The provisions of this subchapter are not exclusive. The remedies provided in this subchapter are in addition to any other procedures or remedies provided by any other law, except that a person may not recover damages and penalties under both this subchapter and another law for the same act or practice.

Act of May 5, 2011, 82d Leg., R.S., ch. 94, § 2, 2011 Tex. Sess. Law Serv. 535, 535-36 (amended 2013) (current version at TEX. GOV'T CODE ANN. § 82.0651 (West Supp. 2014)).^[3]

Section 82.0651, as adopted in 2011, and the 2011 amendments to § 82.065 do not apply to events occurring before September 1, 2011. Act of May 5, 2011, 82d Leg., R.S., ch. 94, § 3, 2011 Tex. Sess. Law Serv. 535, 536.

3. Application of original § 82.065(b) to the facts

a. Background

In their second issue, the Clients argue that original § 82.065(b) allows them to avoid their fee agreements and recover the consideration appellees received under them. Appellees respond that original § 82.065(b) does not create a cause of action allowing barratry victims to sue for legal fees and expenses paid after the legal services have been fully or substantially performed. The proper interpretation of original § 82.065(b) appears to be a question of first impression for this Court.

Our objective in construing a statute is to effectuate the legislature's intent. We look first to the statutory words' plain and common meaning. City of San Antonio v. City of Boerne, 111 S.W.3d 22, 25 (Tex. 2003). If the statute is unambiguous, we enforce it according to its plain meaning, unless doing so would produce an absurd result. In re Curry, 407 S.W.3d 376, 379 (Tex. App.-Dallas 2013, orig. proceeding). We read the statute as a whole and interpret it to give effect to every part. City of San Antonio,111 S.W.3d at 25.

We may also consider, among other things, the circumstances under which the statute was enacted, the common law, former statutory provisions, and laws on the same or similar subjects. TEX. GOV'T CODE ANN. § 311.023(2), (4) (West 2013). We may thus consider that barratry has long been a crime in Texas and that barratry is also proscribed by the ethical rules applicable to attorneys. See TEX. DISCIPLINARY RULES PROF'L CONDUCT R. 7.03. We have found no authority that Texas recognized a private cause of action for barratry in favor of an improperly solicited client before the adoption of original § 82.065 in 1989. See Moiel v. Sandlin,571 S.W.2d 567, 571 (Tex. Civ. App.-Corpus Christi 1978, no writ) ("The offense of barratry as defined in the penal code is a public remedy and not a private one."); cf.Pelton v. McClaren Rubber Co., 120 S.W.2d 516, 517 (Tex. Civ. App.-Waco 1938, writ ref'd) (allowing assertion of barratry as a defense and holding that claim-collector's contract secured by illegal solicitation was "void and unenforceable"). See generally Metro. Reg'l Info. Sys., Inc. v. Am. Home Realty Network, Inc., 948 F. Supp. 2d 538, 568-69 (D. Md. 2013) ("[M]ost courts that have examined that issue . . . have concluded that a private cause of action for barratry cannot be implied from a criminal statute.").

Original § 82.065(b) states only one civil consequence for barratry—a contingent-fee contract procured by barratry "is voidable by the client." With respect to contracts, "voidable" means that a contract is valid and effective unless and until the party entitled to avoid it takes steps to disaffirm it. See Cole v. McWillie, No. 11-12-00265-CV, 2015 WL 3485269, at *2 (Tex. App.-Eastland May 29, 2015, no pet. h.) ("[A] voidable contract continues in effect until active steps are taken to disaffirm the contract. . . ."); Mason v. Abel, 215 S.W.2d 377, 381-82 (Tex. Civ. App.-Dallas 1948, writ ref'd n.r.e.) (contract voidable under statute of frauds is valid unless avoided by a party); see also RESTATEMENT (SECOND) OF CONTRACTS § 7 (AM. LAW INST. 1981) ("A voidable contract is one where one or more parties have the power, by a manifestation of election to do so, to avoid the legal relations created by the contract, or by ratification of the contract to extinguish the power of avoidance.").

Grounds that can make a contract voidable include fraudulent inducement, mistake, duress, and breach by the other party. Lee v. Rosen, Newey & Von Blon, P.C., No. 14-00-00759-CV, 2002 WL 1953791, at *3 (Tex. App.-Houston [14th Dist.] Aug. 22, 2002, pet. denied) (mem. op., not designated for publication); see also Wilhite v. Davis, 298 S.W.2d 928, 932 (Tex. Civ. App.-Dallas 1957, no writ) (deed by insane person is voidable). By enacting original § 82.065(b), the legislature added barratry as a reason that makes a contract voidable.

b. Original § 82.065(b) is not purely defensive

We agree with the Clients that original § 82.065(b) is not purely defensive but also entitles a client to sue to avoid a barratrous contingency-fee agreement. By saying that the contract is voidable "by the client," the legislature plainly meant that the client may act to have the contract voided. That is, the client may sue to have a court declare the contract voided and canceled. Nothing in the statute restricts this plain meaning. Cf. In re Myers, No. 07-06-0050-CV, 2006 WL 305033, at *2 (Tex. App.-Amarillo Feb. 9, 2006, orig. proceeding) (noting that rescission can be asserted either defensively or offensively).

By providing that barratrous contracts are voidable by the client, the legislature plainly intended that an affected client can act to cancel the agreement if necessary. We conclude that in cases brought under original § 82.065(b), the client may sue to avoid a barratrous contingency-fee agreement.

c. Original § 82.065(b) also authorizes the remedy of rescission and restitution.

The next question is whether the Clients are entitled to a monetary remedy under original § 82.065(b). Weighing against the Clients is the fact that the legislature did not expressly mention such a remedy in the statute. That fact contrasts with the legislature's approach in other contexts. For example, the Texas Deceptive Trade Practices Act (DTPA) expressly allows a prevailing consumer to obtain orders restoring consideration acquired in violation of the DTPA. See TEX. BUS. & COM. CODE ANN. § 17.50(b)(3) (West 2011). Likewise, the Texas Property Code permits certain purchasers "to cancel and rescind" executory contracts and recover a "full refund" of amounts paid under certain circumstances. E.g., TEX. PROP. CODE ANN. §§ 5.069(d)(2), 5.070(b)(2) (West 2014).

Moreover, the San Antonio Court of Appeals has opined that § 82.065(b) does not allow a plaintiff to avoid a barratrous contingency-fee agreement after the attorney has performed his legal services. See In re Estate of Arizola, 401 S.W.3d 664 (Tex. App.-San Antonio 2013, pet. denied).^[4] After a traffic accident left three people dead and one person severely injured, a probate court approved the employment of certain attorneys by the administrator for the estate of one of the decedents. Id. at 667. That decedent's father, who was not the administrator, later moved to set aside the contingent-fee agreement based on barratry. Id. at 668-69. The probate court denied that motion, and the movant appealed. The court of appeals rejected the father's argument for three reasons: (1) it was inadequately briefed, (2) the father was not the client, and (3) the attorneys had fully performed the contingent-fee agreement before the movant filed his motion to set aside. Id. at 671-72. On the last point, the court of appeals explained as follows:

The client may void a contingent fee contract that violates section 82.065 by expressing his intent to do so before the attorney has fully or substantially performed. . . . After the attorney has fully performed the contract, however, the client is estopped from voiding the contract.

Id. Although the Estate of Arizola case supports appellees' position, it does so without analyzing § 82.065(b)'s language. Moreover, that court's discussion of § 82.065(b) follows its holding that the father waived the issue by failing to brief it. Id. at 671. Accordingly, Arizola's persuasive value is limited.^[5]

On the other hand, rescission and restitution is a well-established remedy when a party sets aside a voidable contract.^[6] See Gentry v. Squires Constr., Inc., 188 S.W.3d 396, 410 (Tex. App.-Dallas 2006, no pet.) ("Rescission is an equitable remedy that operates to extinguish a contract that is legally valid but must be set aside due to fraud, mistake, or for some other reason to avoid unjust enrichment.");Lowrey v. Univ. of Tex. Med. Branch at Galveston, 837 S.W.2d 171, 174 (Tex. App.-El Paso 1992, writ denied) (same); see also Holt v. Robertson, No. 07-06-0220-CV, 2008 WL 2130420, at *5 (Tex. App.-Amarillo May 21, 2008, pet. denied) (mem. op.) ("After performance of the contract, the transaction remains voidable, and rescission remains a viable option, so long as the status quo of the parties prior to entry of the contract can be restored."); Neill v. Pure Oil Co., 101 S.W.2d 402, 404 (Tex. Civ. App.-Dallas 1937, writ ref'd) (voidable deed is effective "until set aside in a suit for rescission or cancellation"). That is, a suit to set aside a contract is one for rescission and cancellation of the contract. See Lowrey, 837 S.W.2d at 174 (citingBullock v. Tex. Emp'rs Ins. Ass'n, 254 S.W.2d 554, 556 (Tex. Civ. App.-Dallas 1952, writ ref'd); Tex. Emp'rs Ins. Ass'n v. Kennedy, 143 S.W.2d 583, 585-86 (Tex. 1940)).

"[W]e presume that the Legislature acted with knowledge of the common law and court decisions." Phillips v. Beaber, 995 S.W.2d 655, 658 (Tex. 1999). Moreover, we interpret a statute to abrogate common-law principles only when the statute's express terms or necessary implications clearly indicate such an intent by the legislature. Bruce v. Jim Walters Homes, Inc., 943 S.W.2d 121, 122-23 (Tex. App.-San Antonio 1997, writ denied). Because rescission and restitution is an established common-law remedy for a voidable contract, we conclude that the legislature intended for that remedy to be available when it made barratrous contingency-fee contracts voidable under original § 82.065(b).

The next question is whether appellees' full performance of the fee agreements bars the Clients' claims for rescission under original § 82.065(b), as the court held inEstate of Arizola. In answering this question, we find guidance in two recent Texas Supreme Court cases, Cruz v. Andrews Restoration, Inc., 364 S.W.3d 817 (Tex. 2012), and Morton v. Nguyen, 412 S.W.3d 506 (Tex. 2013). In both cases, the supreme court interpreted statutes that make rescission-like remedies available, and the court relied heavily on common-law rescission and restitution as explained in theRestatement (Third) of Restitution and Unjust Enrichment. These cases help us conclude that appellees' full performance of the fee agreements does not bar the Clients' claims for rescission under original § 82.065(b).

In Cruz, a contractor sued a homeowner, Cruz, for breach of contract, and Cruz counterclaimed under the DTPA. 364 S.W.3d at 821. Although Cruz obtained a partial summary judgment on DTPA liability, the jury returned a zero damages finding. Id. The court of appeals and supreme court affirmed the resulting judgment awarding Cruz nothing on his DTPA claim. A principal question on appeal was whether Cruz was entitled to the DTPA remedy of restoration of the consideration that had been paid to the contractor. Id. at 824-27. To answer this question, the supreme court turned to the common law of rescission and restitution. See id. The supreme court observed that under the common law, a rescission claimant generally must return the parties to the status quo ante by returning whatever the claimant has received from the defendant—what the court called "counter-restitution." Id. at 825-26. However, a defendant's wrongdoing may excuse the claimant from this obligation when counter-restitution is not feasible. Id. at 826. The supreme court concluded these principles apply to the DTPA remedy of restoration of consideration, but the claimant need not make or tender counter-restitution as a prerequisite to relief as long as the award to the claimant can be reduced accordingly. Id. at 826-27. Because Cruz had not deducted the value he received from the contractor, or proved how much he rather than his insurer had paid the contractor, the court held that Cruz had failed to prove conclusively that he was entitled to the sum he claimed as restoration of consideration under the DTPA. Id. at 827.

Morton involved a property code provision giving certain real estate buyers the right to cancel the contract and receive a full refund of payments made. 412 S.W.3d at 507-08. The question presented was whether the buyer seeking such a remedy is obliged to make counter-restitution for the value of his occupation of the property.See id. at 510. Relying on Cruz and the Restatement, the supreme court held that a prevailing buyer must make such counter-restitution. Id. at 510-12.

To summarize, then, rescission is generally limited to cases in which counter-restitution by the claimant—that is, the return to the defendant of whatever the claimant received in the transaction—will restore the defendant to the status quo ante. See Cruz, 364 S.W.3d at 825-26 (relying on RESTATEMENT (THIRD) OF RESTITUTION AND UNJUST ENRICHMENT § 54 (AM. LAW INST. 2011)). However, as stated in Cruz, "rescission is not a one-way street. It requires a mutual restoration and accounting, in which each party restores property received from the other." Id. at 825.

Cases show that counter-restitution can be effectuated in various ways, even after full performance of a contract. This is exemplified by Sudderth v. Howard, 560 S.W.2d 511 (Tex. Civ. App.-Amarillo 1977, writ ref'd n.r.e.). The Sudderths executed documents purporting to sell land to the Howards for $17,400, and they then successfully sued to rescind the deed on the ground that the transaction was in substance a forbidden home-equity loan. Id. at 513-14. The trial court's judgment rescinded the deed, but it also awarded the Howards a recovery of $17,400 plus interest. Id. at 514. The Sudderths complained on appeal that this recovery was not supported by the pleadings, but the court of civil appeals rejected the argument because the duty to return benefits was inherent in the Sudderths' claim for rescission. Id. at 516. The court wrote, "[O]ne seeking cancellation of an instrument cannot repudiate it and retain the benefits received therefrom; he should offer or tender a restoration and the court can accomplish that result by its judgment. . . . By its judgment rendered here, the court did so." Id. (citation omitted).

Thus, having reviewed the common law of rescission, we find no absolute rule that a defendant's full performance of a contract, without more, is a defense to an otherwise proper claim for avoidance and rescission of a contract. See Holt, 2008 WL 2130420, at *5; see also City of Corpus Christi v. S.S. Smith & Sons Masonry, Inc., 736 S.W.2d 247, 251 (Tex. App.-Corpus Christi 1987, writ denied) ("[Rescission] is also not a remedy for a completed contract in the absence of fraud." (emphasis added)).

Finally, nothing in § 54 of the new Restatement, relied on heavily by the supreme court in Cruz, indicates that a defendant's full performance of a voidable contract, without more, defeats a claim for rescission and restitution. See generallyRESTATEMENT (THIRD) OF RESTITUTION AND UNJUST ENRICHMENT § 54 (AM. LAW INST. 2011). Rather, the relevant considerations are whether the claimant can make counter-restitution of benefits received and, if not, whether the defendant's conduct is such that it is appropriate for it to bear an uncompensated loss. See generally Cruz, 364 S.W.3d at 826. Here, appellees did not undertake to prove conclusively that it is impossible for the Clients to make acceptable counter-restitution.

For the foregoing reasons, we conclude that original § 82.065(b) authorizes the Clients to sue to avoid contingency-fee agreements procured by barratry and seek the remedy of rescission and restitution. By reaching this conclusion, we disagree with the Clients to the extent they contend that original § 82.065(b) entitles them to total fee forfeiture—that is, the automatic recovery of all fees paid to appellees, with no counter-restitution at all—rather than traditional rescission and restitution. As we discuss more fully in Part III.D of this opinion, rescission is not forfeiture. We further conclude that the bare fact that the parties have fully performed an agreement that is voidable under original § 82.065(b) is not a bar to a claim for rescission and restitution.^[7] To the extent it concludes to the contrary, we disagree with In re Estate of Arizola, 401 S.W.3d 664 (Tex. App.-San Antonio 2013, pet. denied).

(1) Harmonizing original § 82.065(b) with subsequent enactments

We disagree with appellees' suggestion that construing original § 82.065(b) to authorize rescission renders the legislature's 2011 adoption of § 82.0651(a) a superfluous act. Unlike original § 82.065(b), § 82.0651(a) expressly authorizes clients to recover not only fees and expenses paid under a barratrous contract to any person who committed barratry, but also actual damages caused by the barratry and reasonable and necessary attorneys' fees incurred in prosecuting the barratry action. Act of May 5, 2011, 82d Leg., R.S., ch. 94, § 2, 2011 Tex. Sess. Law Serv. 535, 535-36 (amended 2013) (current version at TEX. GOV'T CODE ANN. § 82.0651 (West Supp. 2014)). Moreover, § 82.0651(b)(1) and amended § 82.065(b) together clarify quantum-meruit protection for innocent lawyers working on the case.

By adding new remedies such as actual damages and attorneys' fees, the legislature changed existing law when it adopted § 82.0651. Accordingly, our interpretation of original § 82.065(b) does not make the adoption of § 82.0651 a meaningless act.

(2) Legislative history

We also reject appellees' reliance on certain legislative history regarding the 2011 amendments. A bill analysis of those amendments contained the following statements under the heading "Author's/Sponsor's Statement of Intent":

Under Section 38.12, Penal Code, "barratry" is generally defined as the illegal solicitation of professional employment. The Texas Disciplinary Rules of Professional Conduct of the State Bar of Texas prohibit these solicitations as well. Adding a civil enforcement option would help curtail this practice.

S.B. 1716 adds a cause of action for a client who has been unlawfully solicited to void the contract and recover any actual damages and any fees and expenses paid.

Sen. Comm. on State Affairs, Bill Analysis, Tex. S.B. 1716, 82d Leg., R.S. (2011). This statement does not reflect any analysis of original § 82.065, which the legislature had adopted over twenty years earlier. One session of the legislature does not have the power to construe the acts or declare the intent of a past session.Rowan Oil Co. v. Tex. Emp't Comm'n, 263 S.W.2d 140, 143 (Tex. 1953).

Moreover, the bill analysis speaks conjunctively when it says that the statute "adds a cause of action for a client who has been unlawfully solicited to void the contract and recover any actual damages and any fees and expenses paid." (Emphases added.) That is, § 82.0651 provides a cause of action with additional remedies not available under the prior law. The client's ability to void the barratrous contingent-fee contract was not new, but the remedies of actual damages and attorneys' fees were added to the already-existing cancellation action.

For these reasons, the legislative history relied on by appellees does not support construing original § 82.065(b) to exclude the remedy of rescission and restitution.

We conclude that the Clients pleaded a viable claim under original § 82.065(b) to void the fee agreements and obtain rescission and restitution.

4. Affirmative defenses

a. Limitations

Appellees argued that any barratry claim the Clients possessed accrued in the summer of 2010 and was barred by the two-year statute of limitations when the Clients sued in 2013. See TEX. CIV. PRAC. & REM. CODE ANN. § 16.003(a) (West Supp. 2014). The Clients, on the other hand, argue that a four-year statute of limitations and the discovery rule apply. We conclude that the four-year statute applies and thus do not reach the discovery-rule issue.

With some exceptions not relevant here, a two-year limitations period applies to suits "for trespass for injury to the estate or to the property of another, conversion of personal property, taking or detaining the personal property of another, personal injury, forcible entry and detainer, and forcible detainer." Id. Under the residual statute of limitations, a four-year period applies to "[e]very action for which there is no express limitations period." Id. § 16.051 (West 2015).

A statutory claim to avoid and rescind an agreement for barratry does not fall into any of the categories of claims governed by the two-year statute of limitations found in § 16.003(a). Nor is such a claim identified in another statute of limitations. We thus conclude that a claim under original Government Code § 82.065(b) is a claim not covered by another express limitations period, and thus the four-year residual statute of limitations applies to the Clients' claims under original § 82.065(b). Cf. Lowrey, 837 S.W.2d at 174 (holding that four-year residual statute of limitations applied to claim for common-law rescission).

Because the applicable limitations period is four years, we conclude that appellees did not conclusively prove that limitations bars the Clients' claims under original § 82.065(b).

b. Ratification

Appellees also argued that ratification barred any barratry claim because the Clients approved the underlying settlement. The Clients contend that ratification does not apply because they did not know of the alleged barratry when they authorized the settlement and fee payment. We agree with the Clients that appellees did not conclusively prove ratification.

Ratification is an affirmative defense. Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323, 344 (Tex. 2011). Its elements are (1) approval by act, word, or conduct, (2) with full knowledge of the facts of the earlier act, and (3) with the intent to validate the earlier act. White v. Harrison, 390 S.W.3d 666, 672 (Tex. App.-Dallas 2012, no pet.). "A party ratifies an agreement when—after learning all of the material facts—he confirms or adopts an earlier act that did not then legally bind him and that he could have repudiated." Id.

The Clients argue there is no evidence that they had full knowledge of appellees' allegedly wrongful conduct before appellees finished their work on the underlying case, and appellees thus failed to conclusively prove the essential full-knowledge element of their ratification defense. Appellees counter that even if the Clients did not know that Heidelberg was secretly working for the other appellees when he solicited them, the Clients were still "aware of the facts they allege to constitute barratry by the Lawyers." But appellees do not explain what these "facts" were, nor do they provide any record citations showing that the Clients knew appellees had committed barratry even if they did not know about Heidelberg's deceit. At oral argument, appellees explained that the Clients knew that Heidelberg had solicited them on the other appellees' behalf and that this was sufficient knowledge. We disagree.

Ratification requires full knowledge of the facts of the earlier act allegedly ratified.See id. Although the Clients obviously knew that Heidelberg had recommended appellees, there is no conclusive proof that they knew any of the additional facts that would make his recommendation a barratrous solicitation, such as Heidelberg's financial interest in soliciting the Clients for the other appellees. Furthermore, for summary-judgment purposes appellees accepted as true the allegations in the Clients' live petition, which state that the Clients "were not aware that the Lyon Defendants had solicited their representation and paid Heidelberg to solicit their representation for the Lyon Defendants . . . until shortly before the filing of this lawsuit."

Moreover, there is no evidence that the Clients committed any conduct manifesting approval of the alleged barratry after they learned all the pertinent facts. They instead sued appellees shortly after learning of the alleged barratry.

In sum, appellees did not conclusively prove ratification's "full knowledge" element. We thus conclude that ratification does not support appellees' summary judgment.

5. Application of original § 82.0651 to the facts

In their third issue, the Clients argue that original § 82.0651 also supports their barratry claims. Appellees contend that § 82.0651 was enacted after the alleged barratry occurred and thus as a matter of law does not apply. We agree with appellees.

As stated above, § 82.0651(a) was enacted in 2011 and provided as follows from September 1, 2011, through August 31, 2013:

A client may bring an action to void a contract for legal services that was 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.

Act of May 5, 2011, 82d Leg., R.S., ch. 94, § 2, 2011 Tex. Sess. Law Serv. 535, 535-36 (amended 2013) (current version at TEX. GOV'T CODE ANN. § 82.0651 (West Supp. 2014)). Original § 82.0651(b) expressly authorizes a client who prevails in an action under subsection (a) to recover all fees and expenses paid under the barratrous contract to the person who committed barratry, plus other remedies such as actual damages and attorney's fees. Id.

Original § 82.0651 does not apply to conduct that occurred before September 1, 2011. Id. §§ 3-4, 2011 Tex. Sess. Law Serv. at 536. The Clients nonetheless argue that they have a claim under original § 82.0651 because (1) appellees committed conduct after August 31, 2011 that allegedly violated Texas's barratry laws, or (2) the November 2011 settlement agreements in the underlying pipeline-explosion case constituted "contracts for legal services" within the meaning of the original version of § 82.0651(a). We reject both arguments.

First, the Clients argue that they have a viable § 82.0651 claim because they alleged that appellees violated several rules of professional conduct regarding barratry after August 31, 2011:

• appellees continued their employment by the Clients, procured through barratry, in violation of Rule 7.06;

• appellees committed criminal barratry, in violation of Rule 8.04(a)(2);

• appellees committed barratry, in violation of Rule 8.04(a)(9); and

• appellees charged for and collected a fee for professional employment obtained in violation of the barratry rules, in violation of Rule 7.03(d).

But the cause of action created by original § 82.0651 requires a client to prove more than that the defendant violated the laws or disciplinary rules regarding barratry after August 31, 2011. The client must also prove that the lawyer "procured" a legal-services contract due to such conduct. Here, the Clients do not support any of the four alleged rule violations listed above with factual allegations showing that appellees procured a contract for legal services by barratry committed after August 31, 2011. Thus, the Clients' first argument fails.

The Clients argue alternatively that the November 2011 settlement agreements in the underlying case were "contracts for legal services" procured by barratry within the meaning of original § 82.0651(a). The settlement agreements themselves are not in the record. Rather, the Clients filed affidavits by Neese and Hooper stating the following facts:

• the pipeline-explosion case settled at mediation on or about September 20, 2011; and

• on or about November 1, 2011, Neese and Hooper were required to sign documents whereby Lyon, Wolf, and the law firm charged them attorneys' fees and expenses and required them to state that they were satisfied with the results of the distribution of the settlement proceeds, including the payment of attorneys' fees.

This is the only evidence the Clients provided regarding the settlement agreements.

The question is whether those documents constitute contracts for legal services "procured" by barratry as required by original § 82.0651(a). We conclude they do not. The plain meaning of the statutory term "contract for legal services" is a contract whereby an attorney agrees to provide legal services to a client for a fee or other consideration. Cf. Contract for services, BLACK'S LAW DICTIONARY (10th ed. 2014) (defining "contract for services" as "[a] contract for a job undertaken by an independent contractor, as opposed to an employee"). The November 2011 documents, as described by Neese and Hooper, involved no promises by appellees to provide legal services. Rather, they addressed the division of settlement proceeds and the payment of fees and expenses for legal services already performed. As such, the November 2011 documents were not contracts for legal services within the meaning of original § 82.0651(a).

The trial court properly granted summary judgment against the Clients on their barratry claims based on the 2011 version of § 82.0651. We thus reject the Clients' third appellate issue.

We conclude that the trial court erred by granting summary judgment on the Clients' barratry claims based on the original version of Government Code § 82.065. The trial court did not err by granting summary judgment on the Clients' barratry claims based on the original version of § 82.0651.

B. Breach of fiduciary duty