Texas SC sends attorney fee case back to Jefferson County

After a round trip through Texas' highest courts, a case over a business owner who wants to keep his attorney's hands out of his settlement has landed back in the court where it all began.

Throughout his company's suit against its insurer over damage claims from Hurricane Rita, Waleed Khan - the owner of Wythe II Corp. - was billed directly by his attorney John Stone. When the case settled, Stone obtained an order from the trial judge which granted him a portion of the settlement proceeds.

Not happy with his attorney getting paid twice for the same work, Khan appealed the ruling. On Feb. 12 justices on the Texas Ninth Court of Appeals issued a per curiam decision granting Khan's writ of mandamus.

Wanting more, Khan filed a writ in the Texas Supreme Court, asking justices to do what the appeals court could not and award mandamus relief against Jefferson County District Clerk Lolitia Ramos and trial Judge Bob Wortham.

The case bounced around a bit in the Texas Supreme Court before being stored and kicked back to Wortham's 58th District Court.

On June 26 a summary judgment hearing lasting the better part of the day was held as parties try to end the battle for good.

Wortham has not yet made a ruling.

Case Background

Wythe II Corp. hired Stone to file a lawsuit against XL Lloyds Insurance regarding claims Wythe submitted over Hurricane Rita damages. The suit was filed April 5, 2007, in Jefferson County District Court and was assigned to 60th District Judge Gary Sanderson.

However, court records say Wortham presided over the case.

In November 2008, after the case settled, attorney Stone filed an "Intervenor's Motion to Enforce Settlement Agreement," court papers say.

The trial judge granted the motion on Dec. 12, 2008, leading Khan to file an appeal the same day.

On appeal, Khan filed a petition for writ of mandamus and prohibition to prevent the release of funds on deposit in the registry of the trial court.

He also appealed seven other issues, which were denied.

"This original proceeding concerns the process required when an attorney intervenes in his client's suit for the purpose of recovering attorney's fees out of settlement proceeds," the appeals opinion states.

"In this case, the trial court ordered the funds to be released in an interlocutory order signed 16 days after the attorney filed the intervention. Because due process was not provided in this case and an appellate remedy would be inadequate, we conditionally grant partial relief and direct the trial court to vacate its order.

"We hold the trial court must provide adequate notice and an opportunity to be heard as required by the applicable rules of civil procedure before adjudicating disputed issues between the attorney and the attorney's client. All other relief sought in this proceeding is denied."

The opinion goes on to state that the trial court abused its discretion when it ordered the disputed funds to be disbursed following a preliminary hearing held with only 11 days notice.

"We are confident that the trial court will vacate its order of Dec. 12, 2008, and that all further proceedings will be set in due course in the manner required by the rules of civil procedure. The writ shall issue only if the trial court does not comply."

Khan is represented in part by attorney Mark W. Stevens.

Stone is representing himself.

Jefferson County Trial case No. B179-073
Ninth District Court of Appeals case No. 09-08-00539-CV
Texas Supreme Court case No. 09-0158