HOUSTON - The fight among two law firms and a litigation-funder for tobacco money is not over yet, even after the sides agreed their fee-sharing agreement was unambiguous.
The case involves a now-disbarred Florida lawyer who had stepped in to fund roughly 1,000 lawsuits, including hundreds by flight attendants alleging secondhand smoke caused their injuries.
When the sides contested whether the agreement extended to future cases after payments were made, J.B. Harris surprised those in attendance at a bench trial by declaring that the agreement's terms were unambiguous, leaving a Harris County judge to stop testimony and issue a ruling.
But the First District Court of Appeals on Nov. 26 reversed, saying the agreement actually is ambiguous and the trial judge needs to analyze it again. Judge Ravi Sandall ruled two years ago 60% of future fees belong to Harris and the rest to Howard & Associates, the former firm of Phillip Howard.
Howard was sent to prison last year for 14 years after pleading guilty to defrauding football players in concussion litigation out of millions of dollars. He was part of the original agreement but Sandall ruled the interest in the tobacco fees is actually the firm's.
"In our view, bearing in mind the business activity sought to be served by the (client-services agreement), the trial court gave the CSA an unreasonable and inequitable construction," First District Justice Sarah Beth Landau wrote.
Harris was pursuing the cases when he realized he needed more money, which Howard agreed to provide. Terms had Howard receiving less fees from cases Harris had already spent time on, then receiving more on future cases that were not ready.
The arrangement soured after Harris became a salaried employee at Howard & Associates. Litigation funder Virage stepped in when a settlement had it paying Harris $302,000 over 12 months, with Howard repaying Virage.
In that year, Harris did not advance any of his tobacco claims, then declared the CSA had now expired and Howard had no right to future fees. But at trial he said the CSA was not ambiguous, leading Sandall to read it to say Howard was entitled to 40% of future fees.
But that flat rate contradicts the escalating scales in the agreements, the appeals court said.
"In stark contrast, the trial court interpreted the CSA to grant Howard a 40% interest in future attorneys fee awards in hundreds of inactive cases, in perpetuity, in exchange for repaying Virage's transfer of funds to Harris for one year in an amount that was only slightly more than the annual salary Howard had been paying Harris until funds dried up and Virage's funds were brought into the arrangement," Landau wrote.
"This is not a reasonable interpretation of a vague and ambiguous agreement made without the benefit of extraneous evidence to reveal the parties intentions. Perhaps trial evidence will reveal the parties entered into such a drastically different arrangement on the second go-around but, without the benefit of that evidence, the parties' intentions are unclear in this contract that is ambiguous as a matter of law."
Justice Gordon Goodman dissented, finding that ordering a new trial was a relief no one had requested. He is also says that unless Howard had fulfilled his contractual obligations before his legal troubles, then he is not entitled to future fees.
"(W)hen, as here, the only relief the appellants request is premised on being able to interpret the agreement as a matter of law and they seek rendition alone, but only for the issue of attorneys fees, we have no choice but to reject their appellate issues concerning the proper meaning of the agreement and affirm the trial court's judgment," Goodman wrote.