ATTORNEY'S FEE CONTRACT | PAROL EVIDENCE RULE PRECLUDES CONSIDERATION OF EVIDENCE IN SUPPORT
OF DEFENSE THAT WRITTEN FEE AGREEMENT WAS VERBALLY MODIFIED TO ADD CAP ON FEES WHERE
WRITTEN CONTRACT DID NOT CONTAIN SUCH A CAP AND LETTER AGREEMENT ON FEES WAS NOT AMBIGUOUS

David J. Sacks, PC v. Charles McIntre Haden (Tex. 2008) (superseded per curiam
opinion),
See subsequent Substituted Opinion in David J. Sacks PC v. Haden (Tex. Sep. 26, 2008)
No. 07-0472 (Tex. July 11, 2008)(per curiam) ("The contract was explicit as to the services to be rendered and the manner
that would be used in determining the price, and was therefore sufficiently clear to demonstrate a meeting of the minds
between the parties as to all essential terms of the contract.")

OPEN-ENDED FEE AGREEMENT ENFORCEABLE WHERE HOURLY FEE WAS STATED

Texas Supreme Court says that Houston court of appeals erred in holding that there was no
meeting of the minds necessary to form a binding contract governing appellate attorney's fees,
and further erred in holding that the parol evidence rule did not bar the client’s evidence of an
oral agreement with the law firm to cap fees. The evidence offered by Haden would alter the
written fee agreement, and is therefore not admissible under the collateral and consistent
exception to the parol evidence rule. The high court, in a per curiam opinion, grants the
defendant law firm's petition for review, reverses the First Court of Appeals, and reinstates the
trial court’s judgment.

DAVID J. SACKS, P.C. D/B/A SACKS & ASSOCIATES v. CHARLES MCINTYRE HADEN, JR., INDIVIDUALLY, AND
CHARLES MCINTYRE HADEN, JR. & COMPANY D/B/A HADEN & COMPANY; from Harris County; 1st district
(01-01-00200-CV, 222 SW3d 580, 03-08-07)         
Pursuant to Texas Rule of Appellate Procedure 59.1, after granting the petition for review and without hearing oral
argument, the Court reverses the court of appeals' judgment and reinstates the trial court's judgment.
(Retrieve Per Curiam Opinion in pdf)

OPINION BELOW
Haden v. Sacks, No. 01-03-00025-CV (Tex.App.- Houston [1st Dist.] Mar 8, 2007, pet. granted)(Opinion by Justice Sherry
Radack) (breach of contract, attorney fees agreement dispute, ambiguous or unambiguous contract) (parol evidence rule
does not bar evidence of agreement to cap fees) Justice Elsa Alcala dissented in Haden v. Sacks
Trial Court: County Civil Court at Law No 2  Trial Court Judge: Hon. Gary Michael Block  

TERMS: attorney's fee collection suit)(hourly fee contract, meeting of the minds element in contract formation, essential
terms of a contract, alleged amendment of terms of contract, parol [not parole] evidence rule, exceptions to parole
evidence rule, ambiguous vs. unambiguous written contract, parol evidence of collateral and contemporaneous agreement

CASE NOTES, COMMENTARY AND NEWS COVERAGE OF THIS CASE:
Hourly Rate Engagement Letter Held Not Ambiguous by Hon. Craig Estlinbaum, Guest Blogger on Adjunct Law Prof Blog
The Seven-Year War: Former Clients to Continue Fighting Firm Over Legal Fees  by Mary Alice Robbins Texas Lawyer
September 19, 2006

ALSO SEE Companion Case to Sacks v. Hade (involving appeal from turnover order)
Texas Supreme Court Decisions involving attorney's fees issues | Attorney fee cases from the Houston Courts of Appeals
Other Texas Supreme Court Opinions Released 2008 | Per Curiam Opinions | Texas Opinions Homepage

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Sacks v. Haden No. 07-0472 (Tex. 2008)

════════════════════════════════════════════════════

The question in this case is whether a written attorney’s fee agreement that specifies only hourly fee rates may be
modified by evidence of an oral capping agreement. We hold that it may not because parol evidence cannot modify a
written agreement absent ambiguity. Accordingly, we reverse the court of appeals’ judgment and reinstate the trial court’s
judgment.

Haden & Company and its owner, Charles Haden, were involved in a lawsuit that was appealed to the federal circuit court
of appeals. Haden hired David Sacks as his appellate counsel. The parties signed a written engagement letter prepared
by Sacks.

The letter stated the following:

I am honored to represent you with regard to the above-referenced matter. At this point, you have requested that I assist
with the writing of the Appellants’ Brief and any reply. If oral arguments are granted by the Fifth Circuit, a decision will have
to be made on who should argue the case.

My normal rate is $300.00 per hour, but my rate for this particular matter will be $200.00 per hour. The other lawyers in my
firm range from $150.00 to $200.00 per hour, and paralegals range from $50.00 to $100.00 per hour. You are responsible
for all costs and expenses in the case as incurred. These expenses include, but are not limited to, copies; binding; fax
transmissions; travel; lodging; parking; etc.

Please submit a $10,000 retainer to be applied to fees and expenses.

Sacks’s signature appears at the close of the letter. Below Sacks’s signature is the statement, “Your signature below
indicates acceptance of the terms of this fee agreement.” The parties later agreed to change the amount of the retainer,
and the face of the engagement letter shows that Haden signed the agreement, making that change by striking through
the original $10,000 amount and superscripting the amount of $5,000 above the original typewritten numerals in
handwriting, adding his initials beside that change. Haden forwarded a check for the $5,000 retainer with a letter, which
stated:

Pursuant to our telephone conversation, enclosed herewith is a check in the amount of five thousand dollars ($5,000) to
be applied to fees and expenses in assisting with the writing of the Appellants’ Brief and reply. Also enclosed is an
executed copy of your August 4, 1997 letter indicating that I have acknowledged acceptance of the terms of your fee
agreement on behalf of Haden & Company and myself, except that the initial retainer amount has been reduced to $5,000
per our agreement.

Sacks then filed a brief on behalf of Haden and his company seeking relief from the trial court’s judgment. Sacks sent
Haden an invoice for his legal services in the amount of $37,259.71, along with a letter stating that, “given the state of the
record as we were eventually able to retrieve from the Court, putting together winning arguments took considerabl[y] more
time than I anticipated after giving the cursory review of the initial documents.” The letter also said, “We are committed to
excellence and will generally spend whatever time is necessary to develop a winning brief given the state of the record.
Sometimes that gets a little more expensive than anticipated.”

After Haden’s opponent’s responsive brief was received, Sacks prepared and filed Haden’s reply brief. Sacks later sent
Haden another invoice showing $40,304.71 in total charges for both the appellant’s brief and the reply brief, crediting
Haden $5,000 for the retainer, and requesting payment of the outstanding balance of $35,304.71. Haden paid Sacks only
an additional $5,000.

Over the next two years, Sacks continued to request payment of the remaining amount but Haden contested the fees
owed, stating that Sacks was only to review the brief already drafted by his trial counsel and maintaining that Haden had
“made it clear” that $5,000 was all he could afford to spend.

Sacks disputed Haden’s assertions and filed this lawsuit.

The trial court rendered a partial summary judgment in favor of Sacks on his breach of contract claims, awarding Sacks
the fees accrued preparing the briefs for Haden plus interest. The trial court also ruled that Sacks was entitled to attorney’
s fees incurred in pursuing the contract claim, but reserved ruling on the amount of reasonable attorney’s fees. In addition,
the trial court rendered a preliminary take-nothing summary judgment in favor of Sacks on Haden’s counterclaims for
unconscionable action, fraud, violations of the Deceptive Trade Practices Act, breach of fiduciary duty, and breach of
contract.

Sacks next sought summary judgment on the reasonableness of the attorney’s fees he incurred in seeking summary
judgment on his breach of contract claim. The trial court then rendered a final judgment, which incorporated the earlier
ruling on the contract claim, and awarded Sacks an additional $75,887.50 for attorney’s fees incurred in pursuing his claim
on the original fee agreement, with contingent fees totaling $45,000 for appeals to an intermediate appellate court and for
filing a petition for review in this Court.

Reviewing the trial court’s grant of summary judgment, the court of appeals initially unanimously affirmed. On rehearing,
the court reversed the trial court in a 2-1 decision, holding that a fact question existed with respect to whether there was a
meeting of the minds between the parties when they entered into the fee agreement.
[Haden v. Sacks] 222 S.W.3d 580, 590–91 (Tex. App.—Houston [1st Dist.] 2007). Because the agreement did not explicitly
state whether the parties had agreed to an open account or a flat, maximum fee, the court of appeals concluded that
Haden’s evidence of an oral agreement to cap the attorney’s fees at $10,000 was admissible as a defense to Sacks’s
claim under the collateral and consistent exception to the parol evidence rule. Id. at 592–93.

The court of appeals raised meeting of the minds sua sponte, concluding that in the absence of a clear statement
identifying the fee agreement as an open account, a question of fact was raised as to whether “the minds of the parties
‘met’ on the crucial obligation.” Id. at 591. A meeting of the minds is necessary to form a binding contract. E.g., Hathaway
v. General Mills, Inc., 711 S.W.2d 227, 228 (Tex. 1986). However, the absence of a fixed total price for services does not
indicate a failure of the parties to reach a meeting of the minds with regard to the essential terms of the contract. See
Haws & Garrett Gen. Contractors, Inc. v. Gorbett Bros. Welding Co., 480 S.W.2d 607, 609 (Tex. 1972); Buxani v.
Nussbaum, 940 S.W.2d 350, 352–53 (Tex. App.—San Antonio 1997, no pet.). “Where the parties have done everything
else necessary to make a binding agreement for the sale of goods or services, their failure to specify the price does not
leave the contract so incomplete that it cannot be enforced. In such a case it will be presumed that a reasonable price was
intended.” Bendalin v. Delgado, 406 S.W.2d 897, 900 (Tex. 1966); see also Burnside Air Conditioning & Heating, Inc. v. T.
S. Young Corp., 113 S.W.3d 889, 894–95 (Tex. App.—Dallas 2003, no pet.); Buxani, 940 S.W.2d at 353; Pennington v.
Gurkoff, 899 S.W.2d 767, 770 (Tex. App.—Fort Worth 1995, writ denied). Though Sacks did not specify an exact total
price for his services, the specified hourly rates confirm that the parties agreed that Sacks would charge and Haden would
pay a reasonable price. The contract was explicit as to the services to be rendered and the manner that would be used in
determining the price, and was therefore sufficiently clear to demonstrate a meeting of the minds between the parties as to
all essential terms of the contract.

An unambiguous contract will be enforced as written, and parol evidence will not be received for the purpose of creating
an ambiguity or to give the contract a meaning different from that which its language imports. Universal C.I.T. Credit Corp.
v. Daniel, 243 S.W.2d 154, 157 (Tex. 1951). Only where a contract is ambiguous may a court consider the parties’
interpretation and “admit extraneous evidence to determine the true meaning of the instrument.” Nat’l Union Fire Ins. Co.
of Pittsburgh, Penn. v. CBI Indus., Inc., 907 S.W.2d 517, 520 (Tex. 1995) (per curiam). “Whether a contract is ambiguous
is a question of law that must be decided by examining the contract as a whole in light of the circumstances present when
the contract was entered.” Columbia Gas Transmission Corp. v. New Ulm Gas, Ltd., 940 S.W.2d 587, 589 (Tex. 1996).

The plain language of the engagement letter demonstrates that Haden agreed to pay Sacks an hourly fee, and that no
cap on fees was set. Haden argues that a fee agreement must specifically state that hourly fees will accrue without limit in
order for the agreement to be unambiguous and enforceable. But the lack of such explicit language is irrelevant if the
agreement can be reasonably interpreted only one way. See id. at 591. We have never held that an open-ended hourly
fee agreement will be enforced only if it expressly states there is no cap on fees, and we decline to do so now. If a contract
is unambiguous, the parol evidence rule precludes consideration of evidence of prior or contemporaneous agreements
unless an exception to the parol evidence rule applies. See Hubacek v. Ennis State Bank, 317 S.W.2d 30, 31 (Tex. 1958).

Haden argues that the collateral and consistent exception applies. Under the exception, parol evidence can be used to
demonstrate a prior or contemporaneous agreement that is both collateral to and consistent with a binding agreement,
and that does not vary or contradict the agreement’s express or implied terms or obligations. Id. But “[a] previous or
simultaneous agreement to alter the fee agreed upon in a written contract is in conflict with the written contract and not
merely collateral to it.” Lakeway Co. v. Leon Howard, Inc., 585 S.W.2d 660, 662 (Tex. 1979) (per curiam); see also
Rincones v. Windberg, 705 S.W.2d 846, 849 (Tex. App.—Austin 1986, no writ) (“It is a fair conclusion, we think, that the
parol evidence rule prohibits the admission of oral evidence which alters the payment terms of a written contract.”). The
evidence offered by Haden would alter the written fee agreement, and is therefore not admissible under the collateral and
consistent exception to the parol evidence rule.

The court of appeals erred in holding that there was no meeting of the minds necessary to form a binding contract, and
erred in holding that the parol evidence rule did not bar Haden’s evidence of an oral agreement to cap fees. Accordingly,
we grant Sacks petition for review and, without hearing oral argument, reverse the court of appeals and reinstate the trial
court’s judgment. See Tex. R. App. P. 59.1.


OPINION DELIVERED: July 11, 2008


═════════════════════════════════════════════════════════════

DAVID J. SACKS, P.C.  v. HADEN, No. 07-0487 (Tex. July 11, 2008)
(companion case) (turnover order appeal)

═════════════════════════════════════════════════════════════

PER CURIAM

This is an appeal of a trial court’s turnover order awarding fees a law firm incurred in its efforts to recover damages
awarded for a client’s breach of their fee agreement. David J. Sacks, P.C. obtained partial summary judgment on its
breach of contract claim against former client Charles Haden and his company, and the trial court awarded Sacks
$30,314.38 plus interest. When Haden did not supersede that judgment pending his appeal of the case, Sacks undertook
considerable expense under section 31.002 of the Texas Civil Practice and Remedies Code to secure a turnover order,
have a receiver appointed, prevent postjudgment transfer of assets, and seek dismissal of Haden’s eventual bankruptcy
filings. The trial court ruled that Section 31.002(e) entitled Sacks to attorney’s fees incurred in collection of the judgment,
and awarded Sacks $90,000 as reasonable costs and attorney’s fees.

Haden appealed the underlying breach of contract judgment as well as the turnover order. Initially, the court of appeals
unanimously affirmed both the trial court’s judgment and the turnover order. On rehearing, the court of appeals reversed
the trial court’s judgment on Sacks’s underlying breach of contract claim, holding that the issue of whether there was a
meeting of the minds between the parties was a question of fact that a jury must decide. 222 S.W.3d 580, 590–91 (Tex.
App.—Houston [1st Dist.] 2007). Because the court of appeals reversed the underlying judgment, it also reversed the
subsequent turnover order. Id. at 598.

We reversed the court of appeals’ judgment with respect to the breach of contract claim, holding that the fee agreement
was unambiguous and that the parol evidence rule bars consideration of evidence of an oral agreement to cap the fees.
Sacks v. Haden, ___ S.W.3d ___, ___ (Tex. 2008) (per curiam). Accordingly, without hearing oral argument, we reverse
the court of appeals’ judgment as to the turnover order and remand this case to the court of appeals for consideration of
whether the turnover order was proper under Section 31.002(e). See Tex. R. App. P. 59.1.

OPINION DELIVERED: July 11, 2008