Court Opinion

ID: 4581398
Source: CourtListenerOpinion
Date Created: 2020-10-28 18:00:20.2904+00
Date Added: 2024-06-11T09:28:18.662880
License: Public Domain

Case: 20-20005     Document: 00515618940         Page: 1    Date Filed: 10/28/2020

           United States Court of Appeals
                for the Fifth Circuit                                United States Court of Appeals
                                                                              Fifth Circuit

                                                                            FILED
                                                                     October 28, 2020
                                  No. 20-20005                         Lyle W. Cayce
                                                                            Clerk

   In the Matter of: ABC Dentistry, P.A., et al.,

                                                                         Debtors,

   Dr. Saeed Rohi,

                                                                      Appellant,

                                      versus

   J. Mark Brewer; A. Blaire Hickman; Brewer &
   Pritchard, P.C.,

                                                                       Appellees.

                  Appeal from the United States District Court
                      for the Southern District of Texas
                           USDC No. 4:19-CV-00682

   Before Dennis, Southwick, and Ho, Circuit Judges.
   James C. Ho, Circuit Judge:
          Cause, not self. That is the sworn duty of every member of the legal
   profession—to subordinate their own interests to those of their clients.
          Dr. Saeed Rohi contends that his attorneys violated this cardinal
   principle when they assured him that they were acting in his best interest,
Case: 20-20005      Document: 00515618940          Page: 2    Date Filed: 10/28/2020

                                    No. 20-20005

   when in fact they were maximizing their fees at his expense. Dr. Rohi’s claim
   may or may not ultimately succeed on the merits. But he should have the
   opportunity to make his case.        We reverse and remand for further
   proceedings.
                                         I.
          This suit has its genesis in ABC Dentistry’s 2016 bankruptcy case. See
   Rohifard v. Brewer & Prichard, P.C. (In re ABC Dentistry, P.A.), 2019 WL
   913356, at *1 (Bankr. S.D. Tex. Feb. 21, 2019). (Rohi informs our court that
   he was “improperly identified in the court below as Saeed Rohifard.”)
          During those bankruptcy proceedings, Rohi settled a Texas False
   Claims Act suit on behalf of the State of Texas against ABC Dentistry for
   $4 million. Id. At a hearing on November 7, 2017, the bankruptcy court
   proposed the following allocation of the settlement proceeds: $1,599,000 to
   Texas, $720,000 to Dr. Rohi, and $1,681,000 to his attorneys. The court
   then granted a brief recess to allow the parties to consult with counsel.
          During that recess, Rohi alleges that his attorneys made “material
   representations . . . about how the gross recovery (including any attorney fee
   award) would be split to induce [his] consent to the settlement.” Based on
   those representations, he claims, Rohi agreed not to oppose or appeal the
   bankruptcy court’s proposed allocation.
          The bankruptcy court then concluded the hearing by issuing an oral
   order distributing the funds as proposed: “$1,599,000 to the State of Texas,
   $720,000 to Dr. Rohi, and $1,681,000 to the attorneys representing Dr. Rohi
   to be divided by the attorneys in accordance with their own agreements.” No
   party appealed that order. The bankruptcy subsequently closed.

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                                       No. 20-20005

          Rohi was represented in the proceedings by the law firm of Brewer &
   Pritchard, as well as by Charles Long, an attorney from a different firm. 1 That
   representation was governed by a written agreement that entitles Brewer &
   Pritchard to 40 percent of the “Gross Recovery.” The agreement defines
   “Gross Recovery” as any money “received from any party” as a result of the
   representation.
          Rohi argues that the term “Gross Recovery” consists not only of the
   $720,000 that the bankruptcy court allocated to Rohi, but also the $1,681,000
   that the court awarded to his attorneys. In his view, Brewer & Pritchard is
   entitled to only 40 percent of the sum of those two amounts—and 40 percent
   of that sum ($2,401,000) equals $960,400, which is considerably less than
   the $1,681,000 awarded to the attorneys under the November 2017 order.
          Brewer & Pritchard disagrees. See id. at *2. So Rohi filed suit in Texas
   state court, alleging state law claims against Brewer & Pritchard for breach of
   fiduciary duty, breach of contract, misapplication of fiduciary property, and
   a violation of the Texas Theft Liability Act. He also brought an equitable
   claim for money had and received.
          In response, Brewer & Pritchard moved to reopen the bankruptcy
   proceedings and remove the state case to the bankruptcy court.                   The
   bankruptcy court subsequently held that it had “arising in or under”
   jurisdiction to hear Rohi’s new claims. Id. at *3. It also held that abstention
   was inappropriate. Id. *5.
          Most notably for this appeal, the bankruptcy court also held that res
   judicata precluded Rohi’s suit. Id. at *5–*10. Also relevant to this appeal,

          1
             Rohi also sued two attorneys at Brewer & Pritchard. Because Rohi brings the
   same claims against the attorneys and the firm, for convenience, we refer to all three
   collectively as “Brewer & Pritchard.”

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   the bankruptcy court did not rule on Rohi’s request to amend his pleadings
   to include additional facts and causes of action regarding Defendants’
   “material misrepresentations . . . about how the gross recovery . . . would be
   split to induce [his] consent to the settlement at the November [2017]
   hearing.”
          The district court affirmed the bankruptcy court. It held, inter alia,
   that the bankruptcy court did not err in denying Rohi’s motion to amend his
   complaint. See Rohi v. Brewer & Pritchard (In re ABC Dentistry, P.A.), 2019
   WL 6894775, at *19 (S.D. Tex. Dec. 17, 2019). Rohi subsequently filed this
   appeal.
                                         II.
          In affirming the denial of Rohi’s motion to amend, the district court
   ruled that Rohi’s proposed amendments would have been futile. See, e.g.,
   Varela v. Gonzales, 773 F.3d 704, 707 (5th Cir. 2014) (an amended complaint
   is futile “if the complaint as amended would be subject to dismissal”). As
   the district court saw it, the amendments would not have altered the res
   judicata analysis, and thus would not have “cure[d] the deficiency of the
   original complaint—failure to state a claim upon which relief [can] be
   granted.”     In re ABC, 2019 WL 6894775, at *19.            We review this
   determination de novo. See Flores v. Stephens, 794 F.3d 494, 504 (5th Cir.
   2015) (“[W]hen the denial of leave to amend is based on futility, our standard
   of review is de novo.”).
          “Claim preclusion, or res judicata, bars the litigation of claims that
   either have been litigated or should have been raised in an earlier suit.” Test
   Masters Educ. Servs., Inc. v. Singh, 428 F.3d 559, 571 (5th Cir. 2005)
   (emphasis added). “[W]e must . . . determine whether the previously
   unlitigated claim could or should have been brought in the earlier litigation.”

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   Ries v. Paige (In re Paige), 610 F.3d 865, 870 (5th Cir. 2010) (quotations
   omitted).
          Rohi sought to amend his complaint to include allegations that Brewer
   & Pritchard attorneys assured him during the recess that they would treat the
   bankruptcy court’s proposed fees as part of Rohi’s “Gross Recovery” under
   his written agreement with Brewer & Pritchard. In re ABC, 2019 WL
   6894775, at *18. The court understood Rohi’s theory that these claims could
   “not [be] barred by res judicata as they could not have been brought prior to
   Dr. Rohi justifiably relying on the fraudulent statements and agreeing to the
   November 2017 allocation.” Id. But the district court nonetheless ruled that
   res judicata barred Rohi’s proposed claims because “the conduct about
   which he is complaining occurred before—not after—the settlement
   allocation.” Id. at *19.
          We disagree. The “conduct” that Rohi seeks to challenge is the
   alleged breach of fiduciary duty—the failure to follow through on the new
   representations supposedly made to him during the November 2017 hearing.
   At the time of the hearing, Rohi could not have even known that the
   attorneys’ assurances were misrepresentations, let alone that he should
   challenge them as such. It was not until after the November 2017 hearing that
   Rohi could have discovered that his attorneys lied to him and would allocate
   the fees in accordance with the allocation, rather than the commitment they
   allegedly made during the recess. In short, had Rohi been granted leave to
   amend his complaint, his proposed claims—whatever their merit—would
   not have been subject to dismissal under the doctrine of res judicata. The
   district court thus erred in concluding that Rohi’s proposed amendments
   would have been futile.
          To be sure, Rohi’s original written agreement with Brewer &
   Pritchard was front and center at the November 2017 hearing. We agree that

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   the time for Rohi to object to the November 2017 order as inconsistent with
   the written agreement was at the hearing. But Rohi seeks to argue that there
   was a new commitment that induced him to not contest or appeal the
   November 2017 order. The district court erred in determining that those
   additional claims could and should have been brought at the November 2017
   hearing.
                                        ***
          Defendants contend that the alleged side-agreement never occurred,
   and that Rohi has no evidence to support his allegations. For the sake of the
   reputation of the legal profession (such as it is), we hope that that is so. But
   whether Rohi’s future amended complaint has the evidentiary support to
   proceed or prevail is a matter for the parties and the district court to resolve
   on remand.
          We reverse and remand, with instructions that Rohi’s motion for
   leave to amend be granted.

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