law-arbitration-attorney-client-relationship

law-arbitration-attorney-client-relationship | arbitration in employment-context | arbitration clauses and
workers personal injury claims | pre-injury waiver | arbitrability of wrongful death injury claims | Houston
arbitration cases

ARBITRATION OF ATTORNEY-CLIENT DISPUTES

Pham v. Letney (Tex.App.- Houston [1st Dist.] March 4, 2010)(Hedges) (arbitration agreement in legal
services contract between lawyer and client enforced by mandamus, interlocutory appeal of order
denying motion to compel arbitration dismissed, FAA applied, TAA would be preempted)
Letney sued Pham for legal malpractice, and Pham moved to compel arbitration based on an arbitration
clause in a legal services contract. Pham now attacks the trial court's holding that the arbitration clause
was invalid or unenforceable because either (1) the lawsuit sought recovery for personal injuries and
thus was exempted from arbitration; (2) the Federal Arbitration Act ("FAA"), identified in the agreement
as governing any arbitration thereunder, was inapplicable to the facts of this case; (3) the arbitration
agreement was unconscionable; or (4) the arbitration agreement was voidable as being against the
Disciplinary Rules of Professional Conduct. Appellants Smith & Garg, L.L.C. and Sarita Garg filed a
notice of appeal but then moved to have their appeal dismissed, a motion which we granted, and did not
join the petition for writ of mandamus. We dismiss the interlocutory appeal and conditionally grant the
writ of mandamus.
INTERLOCUTORY APPEAL DISMISSED: Opinion by Chief Justice Hedges
Before Chief Justice Hedges, Justices Seymore and Justice Sullivan
14-08-01153-CV Steven Tuan Pham v. Shelly Letney
Appeal from 215th District Court of Harris County
Trial Court Judge: Levi James Benton
Dissenting Opinion by Justice Seymore in Pham v. Letney
(In consideration of the unique relationship between attorney and client, Justice Seymore writes
dissenting opinion to express his concern about mandatory arbitration provisions in attorney-client
agreements)

In re Tuam Pham (pdf) (Tex.App.- Houston [1st Dist.] March 4, 2010)(Hedges)
MOTION OR WRIT GRANTED: Opinion by Chief Justice Adele Hedges
Before Chief Justice Hedges, Justices Seymore and Sullivan
14-09-00387-CV In Re Steven Tuam Pham
Appeal from 215th District Court of Harris County
Dissenting Opinion by Justice Seymore In re Tuam Pham (pdf)

Labidi, MD v. Sydow, 287 S.W.3d 922 (Tex.App.- Houston [14th Dist.] Jun. 25, 2009)(Guzman)
(consolidation of an interlocutory appeal and a petition for writ of mandamus, challenge to district court's
order compelling arbitration and staying proceedings in the trial court fails)(unconscionabiltiy argument
rejected re arbitration of attorney-client disputes)(public policy arguments overruled)
DISMISSED: Opinion by Justice Eva Guzman
Panel members: Justices Guzman, Mirabal and Boyce
14-08-00527-CV Abdel Hakim Labidi, M.D. Ph.D. v. Michael D. Sydow, Et Al
Appeal from 61st District Court of Harris County

In re Labidi, M .D ., 287 S.W.3d 922 (Tex.App.- Houston [14th Dist.] Jun. 25, 2009)(Guzman)
MOTION OR WRIT DENIED: Opinion by Justice Eva Guzman
Panel members: Justices Guzman, Mirabal and Boyce
14-08-00757-CV In Re Abdel Hakim Labidi, M.D., PH.D.
Appeal from 61st District Court of Harris County
Trial Court Judge: Hon. John Donovan

Sydow tried the case and obtained a judgment for Labidi in the amount of $674,871.00.
In 2006, the law firm split into two firms: Sydow & McDonald L.L.P. and Kaiser & Ahmed, L.L.P. Sydow's
firm settled the outstanding judgment against Exegenics for approximately $638,000.00, and the funds
were wired to the firm's trust account. Labidi then stated he would not settle the case for that amount,
and Sydow's firm returned the settlement funds to the judgment debtor. According to Sydow, Labidi
owed over $100,000 in legal fees at that time. After the law firm returned the settlement funds, Labidi
contacted the judgment debtor directly; it is undisputed that he settled the case for $638,000.
Thereafter, he refused to pay allegedly outstanding legal fees.
Sydow initiated arbitration in Harris County in 2007, whereupon Labidi filed suit in Dallas County against
Sydow, all of the law firms, and Sydow's former partner, attorney Mohammed Sameer Ahmed. Labidi
styled his allegations as claims for breach of fiduciary duty, breach of contract, fraud, legal malpractice,
and negligence; he also sought a declaration that he owed no fees under the engagement letter. Labidi
did not deny that he signed an engagement letter, but he asserted that the letter he signed contained
no arbitration clause; according to Labidi, one or more of the defendants switched pages of the
agreement after Labidi signed it.
The defendants moved to compel arbitration and to transfer venue. After the case was transferred to
Harris County, the defendants reurged the motion to compel arbitration, and the trial court conducted an
evidentiary hearing on May 16, 2008. Ahmed testified that he did not see Labidi sign the agreement, but
he saw the agreement shortly after Labidi signed it and to Ahmed's knowledge, the pages of the
agreement had not been changed. Ahmed further testified that in 2005, the Sydow law firm included
arbitration clauses in all its engagement letters with all of its clients, and the engagement letter bearing
Labidi's signature was the firm's standard form contract.
The trial court granted the motion to compel arbitration and stayed further proceedings in the trial court.
Labidi challenges the trial court's ruling through an appeal as well as through a petition for writ of
mandamus, and we have consolidated both proceedings.
II. ISSUES PRESENTED
In three issues, Labidi contends the trial court abused its discretion in granting the motion to compel
arbitration because the arbitration provision is unenforceable due to (a) want or failure of consideration,
(b) unconscionability and fraud in the inducement, and (c) public policy.
B. Failure or Want of Consideration
Labidi first contends that "no independent consideration [was] given for the arbitration provision," but
the law does not require separate identifiable consideration attributable to the arbitration provision.
Emerald Tex., Inc. v. Peel, 920 S.W.2d 398, 402 (Tex.App.-Houston [1st Dist.] 1996, no writ); see also In
re First-Merit Bank, N.A., 52 S.W.3d 749, 757-58 (Tex.2001) ("[A]n arbitration clause does not require
mutuality of obligation, so long as the underlying contract is supported by [927] adequate
consideration."). Here, the provision is supported by reciprocal promises as well as by the underlying
contract. See In re Palm Harbor Homes, Inc., 195 S.W.3d 672, 676-77 (Tex. 2006) (orig.proceeding).
Thus, Labidi's first issue does not support his petition for writ of mandamus.[6]
C. Unconscionability and Fraud in the Inducement
"[A]rbitrators must decide if an entire contract was fraudulently induced, while courts must decide if an
arbitration clause was." Perry Homes, 258 S.W.3d at 589. Although Labidi contends that both pages of
the agreement containing all of the contract's terms were removed and replaced, he has not suggested
that any provision other than the arbitration clause was changed or added. It therefore was appropriate
for the trial court to make the determination of whether Labidi's allegations are true, and to resolve any
doubts about such factual matters in favor of arbitration. See Henry v. Gonzalez, 18 S.W.3d 684, 688-89
(Tex.App.-San Antonio 2000, pet. dism'd).
1. Procedural Unconscionability
Labidi's fraudulent-inducement argument and his assertion of procedural unconscionability are both
based on his allegation that his attorneys substituted different pages to the engagement agreement
after Labidi signed it. The success or failure of this argument "is dependent upon the existence of facts
which allegedly illustrate unconscionability." Besteman v. Pitcock, 272 S.W.3d 777, 788
(Tex.App.-Texarkana 2008, no pet.) (quoting El Paso Natural Gas. Co. v. Minco Oil & Gas Co., 964
S.W.2d 54, 60-61 (Tex.App.-Amarillo 1997), rev'd on other grounds, 8 S.W.3d 309 (Tex.1999)). The
real parties in interest deny the allegation, and the trial court's ruling indicates that it resolved the
conflicting evidence in their favor. Where, as here, the facts impliedly found by the trial court are
supported by the record, we will not disturb them. See id.
2. Substantive Unconscionability
Regarding substantive unconscionability, Labidi argues that he received "no benefit of the bargain" for
the loss of his right to jury trial, discovery, and unspecified civil and evidentiary protections. If such
arguments were sufficient, then arbitration provisions would be unconscionable per se, but this is not the
case: arbitration agreements are not inherently unconscionable. Palm Harbor Homes, 195 S.W.3d at
678; Emerald Tex., 920 S.W.2d at 402. Labidi's arguments are similar to those rejected in Emerald
Texas, in which the evidence of unconscionability was as follows:
The contract clause was drafted by Emerald. I was not represented by a lawyer when I entered into this
contract. During the discussions about this contract no mention was made concerning the arbitration
clause or its alleged relationship [928] to design and building defects. The contract was presented as a
standard earnest money contract. I was not informed of the existence of the arbitration clause nor its
alleged effect on our rights. I do not have any expertise in the area of homebuilding or negotiating real
estate transactions. I did not receive any consideration for allegedly foregoing my legal right to a trial.
Emerald Tex., 920 S.W.2d at 402.
Contrary to Labidi's suggestion, even disputes between a lawyer and client that involve their contract,
the attorney-client relationship, or services rendered or fees charged to the client are properly referable
to arbitration. Henry, 18 S.W.3d at 687-89; Porter & Clements, L.L.P. v. Stone, 935 S.W.2d 217, 219-22
(Tex.App.-Houston [1st Dist.] 1996, no writ). The arbitration agreement is not grossly one-sided, but is
instead a bilateral agreement to arbitrate. See In re Poly-America, 262 S.W.3d at 348-49. It therefore is
not substantively unconscionable.
D. Public Policy
Finally, Labidi argues that the arbitration provision is invalid because it violates Texas public policy. But
Texas public policy favors arbitration. See Forest Oil Corp. v. McAllen, 268 S.W.3d 51, 56 (2008);
FirstMerit Bank, 52 S.W.3d at 753. And "as both the federal and state arbitration acts pointedly exclude
immediate review of orders compelling arbitration, any balancing [of the benefits and detriments of
delaying proceedings] must tilt strongly against mandamus review." (In re Gulf Exploration, LLC, 52 Tex.
Sup.Ct. J. 612, 2009 WL 1028049, at *3 (Tex. Apr. 17, 2009)).
Although Labidi has not explained why he lacks an adequate remedy by appeal, the Texas Supreme
Court has noted that "[t]he `adequacy' of an appeal may be a closer question when the legislature has
weighed in on both sides of the balance." Id. (citing In re Poly-America, 262 S.W.3d at 352). Some of
Labidi's arguments seem to be directed toward bringing his petition for writ of mandamus within this
category.
Ethics Opinion
In his supplemental brief, Labidi cites an October 2008 opinion from the Texas Ethics Commission in
which the Commission opined as follows:
It is permissible under the Texas Disciplinary Rules of Professional Conduct to include in an
engagement agreement with a client a provision, the terms of which would not be unfair to a typical client
willing to agree to arbitration, requiring the binding arbitration of fee disputes and malpractice claims
provided that (1) the client is aware of the significant advantages and disadvantages of arbitration and
has sufficient information to permit the client to make an informed decision about whether to agree to
the arbitration provision, and (2) the arbitration provision does not limit the lawyer's liability for
malpractice.
OP. TEX. ETHICS COMM'N NO. 586 (2008); see also ABA Comm. on Ethics and Prof'l Responsibility,
Formal Op. 02-425 (2002) (reaching a similar conclusion). The Commission stated that its conclusion
was based on Rule 1.03(b) of the Texas Disciplinary Rules of Professional Conduct, which provides, "A
lawyer shall explain a matter to the extent reasonably necessary to permit the client to make informed
decisions regarding the representation." Tex. DISCIPLINARY R. PROF'L CONDUCT 1.03(b), reprinted in
TEX. GOV'T CODE ANN., tit. 2, subtit. G app'x A (Vernon 2005) (TEX. STATE BAR R. art. X, § 9 (Vernon
2005)). As the Commission further explained, "The scope of the explanation will depend on the
sophistication, education and experience of the client."
But opinions of the Texas Ethics Commission are advisory rather than binding. State ex rel. Young v.
Sixth Judicial Dist. Court of Appeals at Texarkana, 236 S.W.3d 207, 212 n. 22 (Tex.Crim. App.2007);
Landers v. State, 229 S.W.3d 532, 535 (Tex.App.-Texarkana 2007), aff'd, 256 S.W.3d 295
(Tex.Crim.App.2008); In re Goodman, 210 S.W.3d 805, 812 (Tex. App.-Texarkana 2006, orig.
proceeding).[8] Moreover, the Commission expressed no opinion regarding the enforcement of
arbitration clauses, stating, "It is beyond the authority of this Committee [sic] to address questions of
substantive law relating to the validity of arbitration clauses in agreements between lawyers and their
clients." Because it is likewise beyond the authority of this court to disregard public policy as articulated
by the state and federal legislatures and high courts,[9] Labidi's arguments do not support his petition.

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