Court Opinion

ID: 4433502
Source: CourtListenerOpinion
Date Created: 2019-08-27 10:16:38.32538+00
Date Added: 2024-06-11T14:51:48.759484
License: Public Domain

Affirmed and Opinion Filed August 26, 2019.

                                              In The
                                Court of Appeals
                         Fifth District of Texas at Dallas
                                       No. 05-18-01485-CV

 DANIEL K. HAGOOD, P.C. AND FITZPATRICK HAGOOD SMITH AND UHL, LLP,
                               Appellants
                                  V.
                         KUNAL KAPAI, Appellee

                       On Appeal from the County Court at Law No. 4
                                   Dallas County, Texas
                           Trial Court Cause No. CC-18-04027-D

                              MEMORANDUM OPINION
                           Before Justices Bridges, Brown, and Nowell
                                   Opinion by Justice Nowell

       This is an interlocutory appeal from an order denying a motion to compel arbitration. The

issue in this appeal is the scope of an arbitration provision in an engagement agreement between

an attorney and his client. The trial court determined the fees sought by the attorney were for

services that were not rendered under the engagement agreement and did not fall within the scope

of the arbitration provision. We conclude the trial court did not abuse its discretion and affirm.

                                          BACKGROUND

       Daniel K. Hagood, P.C. and Fitzpatrick Hagood Smith and Uhl, LLP, (collectively

Hagood) sued Kunal Kapai to recover unpaid attorney’s fees and sought to compel arbitration

under the terms of an engagement letter with Kapai. Hagood alleged claims for breach of contract

and quantum meruit. Kapai contends the services for which Hagood is seeking fees are excluded
from the engagement agreement and not within the scope of the arbitration provision in that

agreement.

         In 2014, Kapai was involved in civil litigation with his former employer, GTL. He was

represented by attorneys Lee Cameron and John Coutilish in the civil litigation. It was alleged that

after Kapai was discharged from the company, he took some GTL checks and cashed them for

himself. GTL alleged that Kapai committed theft by deception and forgery. In early May 2014,

Frisco police contacted Kapai for an interview. Hagood’s billing records indicate Cameron

contacted Hagood on May 9, 2014 and Kapai met with Hagood later that day. Kapai and Hagood

signed an engagement letter relating to the potential police questioning.

         The engagement letter (Agreement) is dated May 9, 2014. In relevant part, it provides:

         1.      Scope of the Engagement. The Client hereby retains the Firm to provide
         legal representation with regard to a potential questioning of client by the [Frisco],
         Texas Police Department and related matters.

         ....

         8.       Arbitration of Disputes. Any disputes regarding the Firm’s services will
         be resolved by binding arbitration in Dallas, Texas by an arbitrator mutually agreed
         on. If there is a dispute and no mutual agreement is reached as to an arbitrator, the
         arbitrator will be appointed by a sitting Judge in Dallas County, Texas.

         ....

         11.    Entire Agreement. This Agreement contains the entire agreement between
         the Firm and the Client. No promise, representation, or warranty has been made by
         any of the parties, except as expressly stated in this Agreement. This Agreement
         does not include representation for any other criminal, administrative, civil, or
         appeal matter.

         Kapai stated in his affidavit that during Hagood’s representation, Kapai advised Hagood

that Cameron and Coutilish represented him in what became five civil and bankruptcy cases where

Kapai and GTL were parties.1 Kapai stated he retained Hagood to represent him in connection with

         1
          The record is not clear when these cases were filed. However, at least one civil case was pending at the time
of the engagement letter.
                                                         –2–
the police interview. He did not retain Hagood to represent him on any other criminal,

administrative, civil, or appeal matter. In June 2014, Kapai, Hagood, and Cameron determined that

Kapai would not give an interview to police. Kapai considered Hagood’s representation pursuant

to the Agreement ended at that time. Kapai reviewed Hagood’s billing records and stated they were

consistent with his recollection that all legal services relating to the potential police questioning

ended in June 2014. Kapai stated the legal services rendered after June 2014 related to other

criminal, administrative, civil, or litigation matters. Kapai also stated that only a few of the

documents in the client file he received from Hagood related to the potential police questioning.

The remaining documents related to the other civil, bankruptcy, and litigation matters in which he

was represented by Cameron.

        Hagood testified that all services rendered by his firm were related to the original criminal

investigation for which Kapai retained him. He denied representing Kapai in any other criminal,

administrative, civil, or appeal matter. Hagood testified the civil litigation referenced in his billing

statements “surrounded the criminal matter in large measure.” Hagood worked to make sure the

civil settlement did not include language that could impact the criminal case. He also worked to

prepare Kapai for a civil deposition in order to avoid any criminal issues. His role was to make

sure nothing in the civil cases would cause criminal trouble for Kapai.

        Hagood introduced his billing statements for the work performed for Kapai. Those

statements indicate that in May 2014, Hagood communicated with the Frisco Police Department

and a Detective Corki, conferred with Cameron and Coutilish, reviewed documents, and met with

the client and others. Hagood also reviewed Texas Workforce Commission documents. In June,

Hagood had conferences regarding documents requested from Kapai, advised Kapai of a telephone

call from Detective Corki, and conferred with Coutilish regarding a request for documents. In July,

Hagood reviewed documents and an e-mail from Coutilish. Hagood billed Kapai for over ten hours

                                                  –3–
in May 2014, another two hours in June, and about an hour total for July and August. The billing

records indicate Kapai paid most, if not all, of the fees through June 30, 2014.2

       Hagood’s activity increased in October and November 2014 in connection with preparation

for Kapai’s deposition in the civil litigation. After November 2014, Hagood recorded no billable

time until March 2015, when he reviewed an e-mail from Cameron about GTL filing for

bankruptcy and a possible deposition for Kapai. From March through October 2015, Hagood

recorded time entries regarding a variety of topics including: GTL filing for bankruptcy; R204

motion in bankruptcy court; conferences with Cameron re case status and update; client testifying

at creditors committee hearing; R204 deposition; non-disparagement order of bankruptcy court;

documents in client’s possession; possible threats to client’s family in India; new lawsuit filed

against client in federal bankruptcy court; whistleblower issues; review petition of Lee Cameron;

fake e-mails that libel client; serving GTL India executives on U.S. soil; review third party

counterclaim; murdered GTL student; settlement offer and negotiations; client testifying at

hearing; reviewing and revising settlement documents; e-mails regarding a Frisco Police

Department report; e-mail with Cameron and client regarding payments to him by debtor; client’s

obligations under settlement agreement; reviewing signed settlement documents; Canadian

authorization form; and conferring with Cameron regarding case status and final settlement.

       In 2018, Hagood filed suit to collect the unpaid fees and moved to compel arbitration under

the terms of the Agreement. Kapai filed a response and his affidavit. The trial court initially denied

the motion, but, on Hagood’s motion for rehearing, conducted an evidentiary hearing. Afterwards,

the trial court granted the motion to compel arbitration. Kapai then filed a motion for rehearing,

reasserting his argument that the claim was not within the scope of the arbitration provision in the

Agreement, as well as other defenses to arbitration. After hearing the arguments of counsel, the

       2
           The billing statements indicate Kapai paid $5,000 on May 30, 2014 and $1,392 on October 24, 2014.
                                                       –4–
trial court rendered an order denying the motion to compel arbitration. Hagood appeals this order

and argues the trial court abused its discretion by denying the motion to compel arbitration.

                                     STANDARD OF REVIEW

       We review a trial court’s order denying a motion to compel arbitration for abuse of

discretion. Henry v. Cash Biz, LP, 551 S.W.3d 111, 115 (Tex. 2018), cert. denied, 139 S. Ct. 184

(2018); In re Labatt Food Serv., L.P., 279 S.W.3d 640, 642–43 (Tex. 2009) (orig. proceeding).

We defer to the trial court’s factual determinations if they are supported by evidence but review

its legal determinations de novo. Henry, 551 S.W.3d at 115. Whether the claims in dispute fall

within the scope of a valid arbitration agreement and whether a party waived its right to arbitrate

are questions of law, which are reviewed de novo. Id.; Perry Homes v. Cull, 258 S.W.3d 580, 598

& n.102 (Tex. 2008).

       A party seeking to compel arbitration must establish the existence of a valid arbitration

agreement and that the claims at issue fall within the scope of that agreement. Venture Cotton

Coop. v. Freeman, 435 S.W.3d 222, 227 (Tex. 2014). If the party seeking to compel arbitration

meets this burden, the burden then shifts to the party opposing arbitration to prove an affirmative

defense to the provision’s enforcement, such as waiver. Id. We resolve any doubts about the scope

of an arbitration agreement in favor of arbitration. In re FirstMerit Bank, N.A., 52 S.W.3d 749,

753 (Tex. 2001) (orig. proceeding). To determine whether a party’s claims are within the scope of

an arbitration agreement, we focus on the factual allegations and not on the legal causes of action

asserted. Id. at 754. “[O]nce the party seeking arbitration proves the existence of an enforceable

agreement to arbitrate, Texas and federal law recognize a strong presumption ‘in favor of

arbitration such that myriad doubts—as to waiver, scope, and other issues not relating to

enforceability—must be resolved in favor or arbitration.’” G.T. Leach Builders, LLC v. Sapphire

V.P., LP, 458 S.W.3d 502, 521 (Tex. 2015) (quoting In re Poly–America, L.P., 262 S.W.3d 337,

                                               –5–
348 (Tex. 2008) (orig. proceeding)).

       Although both Texas and federal policy strongly favor arbitration, that policy “cannot serve

to stretch a contractual clause beyond the scope intended by the parties or allow modification of

the plain and unambiguous provisions of an agreement.” Belmont Constructors, Inc. v. Lyondell

Petrochemical Co., 896 S.W.2d 352, 356 (Tex. App.—Houston [1st Dist.] 1995, no writ); see also

Branch Law Firm, L.L.P. v. Osborn, 447 S.W.3d 390, 397 (Tex. App.—Houston [14th Dist.] 2014,

no pet.); Osornia v. AmeriMex Motor & Controls, Inc., 367 S.W.3d 707, 712 (Tex. App.—Houston

[14th Dist.] 2012, no pet.). “Even the exceptionally strong policy favoring arbitration cannot justify

requiring litigants to forego a judicial remedy when they have not agreed to do so.” Carr v. Main

Carr Dev., LLC, 337 S.W.3d 489, 496 (Tex. App.—Dallas 2011, pet. denied).

                                            DISCUSSION

       The parties do not dispute the existence of the arbitration provision in the Agreement. The

issue before us is whether Hagood’s claim falls within the scope of the arbitration provision.

Hagood argues the presumption of arbitrability is strongest when the arbitration provision is broad.

He argues the clause in the Agreement is broad and covers “any disputes” regarding the firm’s

services.

       While the arbitration paragraph in the Agreement uses broad language, we do not look at

the provision in isolation. Arbitration agreements are interpreted under traditional contract

principles. J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex. 2003). When construing an

agreement to arbitrate contained in a written contract, the courts’ primary concern is to ascertain

the true intentions of the parties as expressed in the instrument. Id. at 229; see Coker v. Coker, 650
S.W.2d 391, 393 (Tex. 1983); Ascendant Anesthesia PLLC v. Abazi, 348 S.W.3d 454, 459 (Tex.

App.—Dallas 2011, no pet.). In order to achieve this objective, courts must examine and consider

the entire writing as a whole in an effort to harmonize and give effect to all the provisions of the

                                                 –6–
contract so that none will be rendered meaningless. J.M. Davidson, 128 S.W.3d at 229; Coker, 650
S.W.2d at 393. We cannot give any single provision taken alone controlling effect; rather, we must

consider all the provisions with reference to the whole instrument. J.M. Davidson, 128 S.W.3d at

229; Coker, 650 S.W.2d at 393.

       Here, although the Agreement states that any disputes regarding the Firm’s services will

be resolved by binding arbitration, it also states that the scope of the engagement is for legal

representation regarding potential questioning by Frisco police “and related matters” and that the

Agreement “does not include representation for any other criminal, administrative, civil, or appeal

matter.” Even though the wording of an arbitration clause may be broad, its scope may be limited

by language elsewhere in the agreement in which the parties unambiguously negate or limit the

arbitration clause with respect to a given matter in dispute. Branch Law Firm, 447 S.W.3d at 395;

see J.M. Davidson, 128 S.W.3d at 229. Looking at the Agreement as a whole, the parties agreed

to arbitrate any disputes regarding the services described in the remainder of the Agreement. Those

services include the legal representation regarding the potential questioning of Kapai by the police

and related matters, but do not include other criminal, administrative, civil, or appeal matters.

       We also consider the facts and circumstances surrounding the formation of the contract to

determine the intent of the parties, subject to the parol evidence rule. Houston Expl. Co. v.

Wellington Underwriting Agencies, Ltd., 352 S.W.3d 462, 469 (Tex. 2011) (noting courts may

consider surrounding circumstances that inform, rather than vary from or contradict, contract text).

At the time they entered into the engagement agreement both Kapai and Hagood were aware of

the civil litigation involving Kapai and his former employer and that Kapai was represented by

other lawyers in that litigation. This circumstance informs the meaning of the provision excluding

representation for any other “criminal, administrative, civil, or appeal matter.” Hagood testified he

drafted the agreement and intended to limit the scope of his engagement to represent Kapai to the

                                                –7–
potential questioning by police and related matters. Hagood and Kapai clearly contracted in

reference to the pending civil litigation and excluded it from the representation. We cannot

construe the term limiting representation to the potential police questioning and related matters to

include the pending civil litigation and subsequent bankruptcy proceedings when the terms of the

contract indicate the parties intended to exclude such matters from the representation.

       Hagood next argues the unpaid fees were for “related matters” to the original criminal

investigation and, therefore, subject to arbitration. Although Hagood testified that all the services

he performed were related to the original criminal investigation, the Agreement does not use the

phrase “criminal investigation.” The Agreement defines the scope of the engagement as the

“potential questioning of [the] client” by the Frisco Police Department and related matters. The

parties decided in June 2014 that Kapai would not submit to questioning by the Frisco police and

Kapai considered the Agreement ended at that time. The trial court could reasonably conclude that

the services performed after that decision was made were not related to the potential police

questioning.

       The Agreement does not define the phrase “related matters,” but the context is clear that

those matters must relate to the potential questioning of Kapai by the police. Hagood’s

interpretation of “related matters” is so broad it renders the exclusion term of the Agreement

meaningless. We cannot interpret a contract in a manner that would render portions meaningless.

See J.M. Davidson, 128 S.W.3d at 229 (courts must examine the entire agreement and give effect

to each provision so that none is rendered meaningless). We cannot say on this record that the trial

court abused its discretion by determining that the services rendered by Hagood in connection with

the civil litigation, some of which was ongoing at the time of the engagement agreement, the

subsequent bankruptcy case and adversary proceedings, and the settlement of the civil litigation

were related matters to the potential police questioning. The trial court determined, based on

                                                –8–
Hagood’s testimony and his contemporaneous billing records, that the services he performed were

not “related” to the police questioning. That determination is supported by the record and Hagood

has not shown that the trial court abused its discretion.

       In summary, Hagood testified that all of his services were related to the matter of the

potential police questioning of Kapai. Kapai stated in his affidavit that the services after June 2014

were not related to the potential police questioning. The trial court, based on the billing records,

agreed with Kapai and those billing records support the trial court’s ruling. We conclude Hagood

failed to meet his burden to show that the claim falls with the scope of the arbitration provision in

the engagement agreement. Thus, the trial court did not abuse its discretion by denying the motion

to compel arbitration. We overrule appellants’ issue.

                                           CONCLUSION

       Although the parties entered into an agreement that includes a provision requiring

arbitration of any disputes about the firm’s services, the agreement limited the representation to

potential questioning of the client by the police and related matters. Appellants failed to establish

that their claim for fees in connection with civil and bankruptcy matters falls within the scope of

the arbitration provision. Accordingly, the trial court did not abuse its discretion by denying the

motion to compel arbitration. We affirm the trial court’s order.

                                                    /Erin A. Nowell/
                                                    ERIN A. NOWELL
                                                    JUSTICE

181485F.P05

                                                 –9–
                               Court of Appeals
                        Fifth District of Texas at Dallas
                                       JUDGMENT

 DANIEL K. HAGOOD, P.C. AND                          On Appeal from the County Court at Law
 FITZPATRICK HAGOOD SMITH AND                        No. 4, Dallas County, Texas
 UHL, LLP, Appellants                                Trial Court Cause No. CC-18-04027-D.
                                                     Opinion delivered by Justice Nowell.
 No. 05-18-01485-CV          V.                      Justices Bridges and Brown participating.

 KUNAL KAPAI, Appellee

     In accordance with this Court’s opinion of this date, the judgment of the trial court is
AFFIRMED.

       It is ORDERED that appellee Kunal Kapai recover his costs of this appeal from
appellants Daniel K. Hagood, P.C. and Fitzpatrick Hagood Smith and Uhl, LLP.

Judgment entered this 26th day of August, 2019.

                                              –10–