Full Opinion

In the Court of Appeals Sixth Appellate District of Texas at Texarkana No. 06-26-00048-CV DANIEL, WILLIAMS & ASSOC., PLLC, Appellant V. REAUD, MORGAN & QUINN, LLP, Appellee On Appeal from the 172nd District Court Jefferson County, Texas Trial Court No. E-0203382 Before Stevens, C.J., van Cleef and Rambin, JJ. Memorandum Opinion by Justice van Cleef MEMORANDUM OPINION This lawsuit involves an entitlement to disputed attorney fees deposited into a court’s registry as part of a settlement. The facts show that Edward Jerome West hired Reaud, Morgan & Quinn, LLP (Reaud Firm), to represent him in a lawsuit against his former employer. West entered into a contingent-fee agreement with the Reaud Firm, which “performed substantial legal work” for West over the course of a few years. Shortly before trial, West rejected a suggested $65,000.00 settlement offer, terminated the Reaud Firm allegedly without good cause, and decided to retain Daniel, Williams & Associates, PLLC (Williams Firm) instead. When the Williams Firm settled West’s claims a few months later for $80,000.00 and the disputed attorney fees were deposited into the registry of that court in accordance with a settlement agreement, the Reaud Firm sued the Williams Firm for declaratory judgment that the disputed attorney fees should be released to it. During a jury trial, the trial court granted a directed verdict in favor of the Reaud Firm and entered a judgment declaring that the fees deposited in the court’s registry belonged to the Reaud Firm and not to the Williams Firm. On appeal, the Williams Firm argues1 that the Reaud Firm could not recover based solely on its declaratory-judgment action and that the trial court erred by granting the directed verdict because there was a fact question on the issue of whether West had good cause to discharge the Reaud Firm. We find that, in this unique circumstance where the disputed fees were deposited into a court registry as a part of a settlement, recovery on declaratory judgment was proper since 1 Originally appealed to the Ninth Court of Appeals, this case was transferred to this Court by the Texas Supreme Court pursuant to its docket equalization efforts. See TEX. GOV’T CODE ANN. § 73.001 (Supp.). We follow the precedent of the Ninth Court of Appeals in deciding the issues presented. See TEX. R. APP. P. 41.3. 2 the only issue was which law firm was entitled to the funds. Even so, we find that the issue of good cause was a fact question for the jury to decide. As a result, we reverse the trial court’s judgment based on directed verdict and remand the matter for further proceedings. I. Factual and Procedural Background This case involved a jury trial before the 172nd Judicial District Court of Jefferson County, Texas (trial court). John Werner, an attorney for the Reaud Firm, testified about West’s fee agreement, which was admitted into evidence. West’s contract with the Reaud Firm “Fee Agreement) provided an assignment from West to a contingent fee of “[forty percent] if collection of settlement [was] made after suit [was] filed.” Werner testified that the Reaud Firm filed suit in the 260th Judicial District Court of Orange County, Texas (260th JDC), for West after pre-suit settlement efforts were unfruitful. Werner testified that the parties in West’s lawsuit engaged in written discovery, participated in eight depositions, and worked the case in preparation for a February 2018 trial date. Werner testified, and the evidence shows, that the Reaud Firm completed discovery and filed all pretrial disclosures and motions in preparation for trial but, because the parties were ordered to mediate the case, the 260th JDC postponed the trial until after mediation. According to Werner, West wanted to open mediation by requesting ten million dollars, which Werner advised against. At the end of the mediation, the mediator proposed a settlement of $65,000.00, which West rejected. Then, West indicated that he wished to fire the Reaud Firm, who also represented West’s allegedly wrongfully terminated co-workers. 3 In a February 9, 2018, letter to West, Werner urged West not to seek a new lawyer so close to trial since his former employer could interpret a last-minute change of counsel as a signal that West had some weakness in his case. Werner’s letter also reminded West that he had a signed Fee Agreement under which he “agreed to pay [forty percent] of the recovery as an attorney’s fee and also to repay expenses out of any settlement.” Werner’s letter to West continued: While you have the right to hire new attorneys and discharge your original attorneys, even in a situation like this where you are doing so without good cause, that does not mean that you no longer have to honor your contract with the first lawyer. Reaud, Morgan & Quinn will assert its right to get paid under your contract and as such you will ultimately be responsible for paying not only [the Reaud Firm’s] fee and expenses but also whatever it is that the second attorneys might charge. Even so, West testified that he fired the Reaud Firm because he “felt disrespected” and “belittled” by Werner, who served as the lead attorney for West and West’s co-worker plaintiffs. West gave numerous examples that, if found true, a fact-finder could reasonably consider offensive, denigrating, and undermining of confidence in the representation. West sent a letter of termination on February 10, 2018, to the Reaud Firm, which requested that it forward to him “a final accounting of fees” along with his file. On February 13, the Reaud Firm sent a letter to West enclosing a motion to withdraw to be filed in the 260th JDC, along with a notice of an oral hearing to be held on the motion to withdraw. It also requested that West forward the contact information for his new attorneys so that it could transfer his file to West’s new counsel. 4 On February 16, the Reaud Firm filed a letter placing the parties on notice of its intent to collect attorney fees under the Fee Agreement. On March 5, the Reaud Firm sent a letter to the Williams Firm advising that West’s case file was being copied and would soon be forwarded. The letter stated, [A]s we have advised Mr. West and as we have discussed, [the Reaud Firm] asserts its fee interest in this case. While I am not asking you to agree with our position, I would appreciate your professional courtesies and judgment in advising that you will not disburse any settlement proceeds until this matter is resolved. On April 10, the Reaud Firm sent a letter to the Williams Firm to inform it that “[the Reaud Firm] intend[ed] to stand by and assert its contractual assigned fee interest of [forty percent], up to the $65,000[.00] figure that [they] were on track to obtain at mediation while [they] were still representing [West].” West testified that the Williams Firm settled his case for $80,000.00. West signed a settlement agreement that specifically required that the disputed attorney fees be deposited into the 260th JDC’s registry. As a result, West received $48,000.00 from the settlement. While the Reaud Firm asserted its interest under the Fee Agreement, no party in the 260th JDC disputed the existence of the Fee Agreement or the fact that West discharged the Reaud Firm. After the settlement, West’s employer filed a “Consent Motion” to deposit the disputed attorney fees into the 260th JDC’s registry in an effort to “simply. . . conclude the litigation.” The Williams Firm agreed to deposit the funds into the 260th JDC’s registry, which led West’s former employer to file a “Consent Motion to Deposit Disputed Attorneys’ Fees into [the] Court Registry.” Accordingly, the 260th JDC granted West’s employer’s motion and ordered the disputed 5 attorney fees in the amount of $26,939.17 to be deposited into its registry, which constituted forty percent of $65,000.00 plus costs incurred by the Reaud Firm on West’s case. To secure its entitlement to the funds in the 260th JDC’s registry, the Reaud Firm filed a declaratory-judgment action. At trial, West testified that his only complaint was with Werner, the original lead counsel in his case, and said that he had no issue with any other attorney or staff at the Reaud Firm. West clarified that he terminated the Reaud Firm because of Werner’s insults. He said that he appreciated the Williams Firm because he was always given an answer and updates, it “never was brushing [him] off,” his attorney told him what she thought his case was worth, and everyone was professional. Werner, who is not a partner at the Reaud Firm, stated that he was good at returning phone calls. Werner testified that West did not have good cause to terminate the Reaud Firm because they worked hard and “treated [West] properly.” Werner also said that he made it clear that the Reaud Firm was prepared to go to trial if West did not accept the suggested settlement offer. While Werner admitted to making the comment that if he were defense counsel, West “[would not] get shit,” he testified that was in response to West’s suggestion that mediation open with his request for ten million dollars. Mark Frasher, an attorney with the Reaud Firm, testified that West never told him why he terminated the Reaud Firm. Frasher testified that the Reaud Firm was not terminated for good cause. Kathryn Williams, counsel for West and an attorney with the Williams Firm, testified that neither she nor the Williams Firm was bound by West’s Fee Agreement with the Reaud Firm. 6 According to Williams, West’s former employer did not offer the $65,000.00 during mediation and that figure was just the mediator’s suggestion. Williams argued that the Reaud Firm was not entitled to the funds in the 260th JDC’s registry. After that evidence was presented to the jury and the Williams Firm rested, both parties moved for directed verdict. The trial court denied the Williams Firm’s motion but granted the Reaud Firm’s motion, which argued that West did not have good cause to fire it as a matter of law. Ultimately, the trial court ruled that “there [was] no credible evidence that Reaud, Morgan & Quinn [had] been fired for cause.” II. Declaratory Judgment Was an Appropriate Method of Recovery in this Case “In Texas, when the client, without good cause, discharges an attorney before he has completed his work, the attorney may recover on the contract for the amount of his compensation.” Mandell & Wright v. Thomas, 441 S.W.2d 841, 847 (Tex. 1969). Accordingly, “[i]f an attorney hired on a contingent-fee basis is discharged without cause before the representation is completed, the attorney may seek compensation in quantum meruit or in a suit to enforce the contract by collecting the fee from any damages the client subsequently recovers.” Hoover Slovacek LLP v. Walton, 206 S.W.3d 557, 561 (Tex. 2006) (citing Mandell & Wright, 441 S.W.2d at 847); see Rocha v. Ahmad, 676 S.W.2d 149, 156 (Tex. App.—San Antonio 1984, writ dism’d) (when “an attorney having a contingent fee contract with his client . . . has been damaged by a breach of contract by his client, [the attorney] may, inter alia, treat the contract as rescinded and recover under quantum meruit or he may sue for what he would have received 7 under the contract”). “Once the attorney has proved the contract and the fact of discharge, he has made a prima facie case and is entitled to recover.” Rocha, 676 S.W.2d at 156. The declaratory-judgment statute provides, in relevant part, that A person interested under a . . . written contract, or other writings constituting a contract or whose rights, status, or other legal relations are affected by a . . . contract . . . may have determined any question of construction or validity arising under the instrument . . . [or] contract, . . . and obtain a declaration of rights, status, or other legal relations thereunder. TEX. CIV. PRAC. & REM. CODE ANN. § 37.004(a). Because declaratory judgments are “remedial,” and “its purpose is to settle and to afford relief from uncertainty and insecurity with respect to rights, status, and other legal relations[,]” the declaratory-judgment statutes are “to be liberally construed and administered.” TEX. CIV. PRAC. & REM. CODE ANN. § 37.002(b). Thus, “[a] court of record within its jurisdiction has power to declare rights, status, and other legal relations whether or not further relief is or could be claimed,” and “[a]n action or proceeding is not open to objection on the ground that a declaratory judgment or decree is prayed for.” TEX. CIV. PRAC. & REM. CODE ANN. § 37.003(a). Further, “the general powers conferred” by Article 37.003 of the Texas Civil Practice and Remedies Code apply “in any proceeding in which declaratory relief is sought and a judgment or decree will terminate the controversy or remove an uncertainty.” TEX. CIV. PRAC. & REM. CODE ANN. § 37.003(c). In its first point of error, the Williams Firm argues that the Reaud Firm should not be allowed to recover based solely on its declaratory-judgment action because the Reaud Firm did not file a breach of contract action against West. This question is decided by this Court de novo. See City of Dallas v. Sanchez, 494 S.W.3d 722, 724 (Tex. 2016) (per curiam). The Williams 8 Firm’s argument is based on the principle that “a lawyer’s rights based on a contingent fee contract are ‘wholly derivative from those of his client.’” Iron Tigga, LLC v. Law Offs. of David W. Showalter, LLP, No. 13-21-00459-CV, 2022 WL 11467825, at *9 (Tex. App.— Corpus Christi–Edinburg Oct. 20, 2022, pet. denied) (mem. op.) (quoting Dow Chem. Co. v. Benton, 357 S.W.2d 565, 567 (Tex. 1962)). As a result, the Williams Firm cites to cases showing that the attorney cannot sue the opposing party to recover client fees, but those cases do not apply since the Reaud Firm did not seek recovery from West’s employer. See id. (“[T]he party against whom the attorney may sue for this breach is his former client, not the opposing party in the underlying litigation” (citing Mandell & Wright, 441 S.W.2d at 847)); Sewell v. Guillory, Nos. 09-16-00078-CV & 09-16-00079-CV, 2017 WL 6521067, at *6 (Tex. App.— Beaumont Dec. 21, 2017, pet. denied) (mem. op.) (“As a general rule, a discharged or terminated attorney cannot recover under either theory against the opposing party or its insurance company.” (citing Dow Chem. Co., 357 S.W.2d at 568)). The Williams Firm also argues that the Reaud Firm could not solely maintain an action for declaratory judgment because it is “merely a procedural device for deciding cases already within a court’s jurisdiction rather than a legislative enlargement of a court’s power, permitting the rendition of advisory opinions.” Tex. Ass’n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440, 444 (Tex. 1993). However, the unique procedural posture presented by this case shows the applicability of the declaratory-judgment statute because (1) it demonstrates a live controversy rendering a judgment non-advisory and (2) shows that the declaratory judgment was tied to an interpleader in the 260th JDC. 9 Here, the Reaud Firm asserted its interest in the disputed attorney fees in the 260th JDC based on the Fee Agreement. It showed that it had a contract with West and proved the fact of discharge in that case. These facts were undisputed in the 260th JDC. The settlement agreement, signed by West, expressly acknowledges that the Reaud Firm and Williams Firm had an active dispute over attorney fees. Certainly, the Reaud Firm could have sued West in the 260th JDC to recover those fees, but by agreement, and in order to settle the case and terminate the litigation, the Williams Firm agreed to allow West’s former employer to interplead the disputed funds into the registry of the 260th JDC instead of turning those funds over to West. As a result, the 260th JDC entered an order recognizing the attorney-fee dispute and ordered West’s former employer to deposit the disputed fees into its registry, which it did. The 260th JDC’s written order also expressly recognized that the Reaud Firm had a forty-percent contingency-fee contract with West and that West terminated the Reaud Firm. Consequently, the procedural history shows that the Reaud Firm’s declaratory-judgment action was tied to West’s employer’s interplead funds and that the 260th JDC found that the Reaud Firm had made a prima facie case permitting it to recover on its Fee Agreement. Thus, the only issue remaining was which firm was entitled to the disputed fees.2 “A declaratory judgment is proper when it will serve to settle the controversy between the parties.” Fleming v. Ahumada, 193 S.W.3d 704, 717 (Tex. App.—Corpus Christi–Edinburg 2006, no pet.) (citing Cal. Prod., Inc. v. Puretex Lemon Juice, Inc., 334 S.W.2d 780, 783 2 The Williams Firm argues that the Reaud Firm should have named West as a party to this suit because “[w]hen declaratory relief is sought, all persons who have or claim any interest that would be affected by the declaration must be made parties.” TEX. CIV. PRAC. & REM. CODE ANN. § 37.006(a). However, the procedural posture in the 260th JDC shows that West would not be affected by a determination of which law firm was entitled to the disputed funds since he was not in possession of them and agreed to their deposit into the court’s registry. 10 (1960)). As a result, where funds have been pled into a court’s registry, a declaratory-judgment action is appropriate to determine who is entitled to the funds. Wirt v. LaBelleCo Fab, LLC, No. 09-22-00099-CV, 2024 WL 1451166, at *3, *16 (Tex. App.—Beaumont Apr. 4, 2024, no pet.) (mem. op.); Hanzel v. Herring, 80 S.W.3d 167, 173 (Tex. App.—Fort Worth 2002, no pet.) (“[T]he parties’ actions for declaratory judgment were necessary to determine who was entitled to the proceeds in the registry of the court.”); see Siluria, LLC v. Lummus Tech. LLC, No. 09-23- 00127-CV, 2025 WL 865226, at *3 (Tex. App.—Beaumont Mar. 20, 2025, no pet.) (mem. op.); Riley v. Vess Oil Corp., No. 10-23-00348-CV, 2024 WL 5242672, at *1 (Tex. App.—Waco Dec. 30, 2024, pet. denied) (mem. op.). As a result, we overrule the Reaud Firm’s first point of error. III. Fact Issues on Good Cause Precluded Directed Verdict Next, the Williams Firm argues that the trial court erred by directing verdict on the issue of good cause. “We review a trial court’s grant of a directed verdict de novo, using the legal sufficiency standard appellate courts apply to no-evidence summary judgments.” McGhee v. Novoterra Chase, LLC, No. 09-22-00167-CV, 2024 WL 2758702, at *9 (Tex. App.—Beaumont May 30, 2024, pet. denied) (mem. op.) (quoting City of Baytown v. Schrock, 645 S.W.3d 174, 178 (Tex. 2022) (footnote omitted) (citations omitted)). “When no evidence supports a vital fact or the evidence fails to state a claim as a matter of law, a trial court properly grants a directed verdict.” Id. (citing City of Baytown, 645 S.W.3d at 178). “We consider all the evidence in the light most favorable to the nonmovant and resolve all reasonable inferences arising from the evidence admitted at the trial in the nonmovant’s favor, disregarding evidence and inferences to the contrary.” Id. (citing City of Baytown, 645 S.W.3d at 178). “In reviewing a trial court’s 11 granting of a directed verdict, we must determine whether there is more than a scintilla of evidence to raise a fact issue on each element of the plaintiff’s claim.” Id. (quoting Rohrs v. Hartz, No. 09-19-00196-CV, 2021 WL 2677422, at *9 (Tex. App.—Beaumont June 29, 2021, no pet.) (mem. op.) (citing Coastal Transp. Co. v. Crown Cent. Petroleum Corp., 136 S.W.3d 227, 233 (Tex. 2004))). The 260th JDC entered an order acknowledging the fact of the Reaud Firm’s Fee Agreement and the fact of West’s discharge. These facts are undisputed and make the Reaud Firm’s prima facie case under common law for recovery of the disputed fees. In Texas, good cause to discharge legal counsel is a defensive issue, typically raised by the client. Johns L. Firm, LLC v. Pawlik, No. 4:22-CV-01441, 2024 WL 466811, at *6 (S.D. Tex. Jan. 12, 2024) (citing Flores v. Gonzalez & Assocs. L. Firm, Ltd., No. 13-15-00205-CV, 2016 WL 5845922, at *8 (Tex. App.—Corpus Christi–Edinburg Oct. 6, 2016, no pet.) (mem. op.) (“classifying good cause for terminating an attorney as ‘defensive in nature’”); Whiteside v. Hartung, No. 14-97- 00111-CV, 1999 WL 548211, at *6 (Tex. App.—Houston [14th Dist.] July 29, 1999, pet. denied) (“same”); Howell v. Kelly, 534 S.W.2d 737, 740 (Tex. App.—Houston [1st Dist.] 1976, no writ) (“client must ‘establish[] just cause for the termination’” (alteration in original))), report and recommendation adopted, No. 4:22-CV-01877, 2024 WL 943461, *1 (S.D. Tex. Mar. 5, 2024), aff’d, No. 24-20147, 2024 WL 4835239 (5th Cir. Nov. 20, 2024). “Texas courts have not explicitly defined what constitutes good cause in this context.” Id. As a result, “[w]hether a client had good cause for discharging an attorney with whom he contracted to provide legal services is a fact issue for the jury to decide.” Law Offs. of Windle Turley, P.C. v. French, 140 12 S.W.3d 407, 413 (Tex. App.—Fort Worth 2004, no pet.). There is no “bright-line rule for what qualifies as good cause.” Pawlik, 2024 WL 466811, at *6. Here, viewed in the light most favorable to the Williams Firm, the evidence shows that West discharged the Reaud Firm for several reasons, including, among other things, not providing West with an idea of the value of his case; lack of communication from an attorney; comments from Werner that West believed were disrespectful; Werner’s statement that if he were defense counsel he would not give West any recovery; Werner’s behavior during mediation, including working on another case; making fun of West’s clothing; and Werner’s statement that West should consider the settlement offer since he could be litigating an employment discrimination case as an African American man in front of a Caucasian jury. West testified that he did not believe Werner could adequately represent him. Even though Texas law is clear that the issue of good cause is a fact issue and that there is no “bright-line rule” setting forth what constitutes good cause, the trial court granted a directed verdict. The trial court’s comments further show that it made factual findings on the issue. Here, we find that there was sufficient evidence to submit the issue of good cause to the fact-finder, which in this case was the jury. As a result, the trial court’s directed verdict cannot stand. 13 IV. Conclusion We reverse the trial court’s judgment and remand the case for further proceedings in light of this opinion. Charles van Cleef Justice Date Submitted: October 23, 2026 Date Decided: November 10, 2026 14