Burnett v. Sharp
328 S.W.3d 594, 2010 Tex. App. LEXIS 8411, 2010 WL 4132211 (2010)
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Rule of Law:
A lawyer's fiduciary duty to a client regarding client funds persists after the termination of the attorney-client relationship. A lawyer's refusal to return the unearned portion of a retainer to a former client can constitute a breach of this fiduciary duty and support claims for conversion and money had and received.
Facts:
- In June 2006, Charles W. Burnett retained David Sharp, a lawyer, to represent him in a criminal matter.
- Burnett paid Sharp a $3,000 retainer for his legal services.
- Sharp made five court appearances for Burnett, each time having the case reset.
- Burnett terminated Sharp's representation and hired a new attorney.
- Following the termination, Burnett and his family made numerous phone calls to Sharp's office requesting a refund of the unearned portion of the retainer.
- Burnett later served Sharp with a formal written demand for the return of the unearned funds.
- Sharp did not respond to the demand and did not refund any part of the retainer to Burnett.
Procedural Posture:
- Charles W. Burnett, an inmate, filed a lawsuit in a Texas trial court against his former attorney, David Sharp, proceeding in forma pauperis.
- Burnett's petition asserted claims including legal malpractice, breach of fiduciary duty, negligence, and 'deception.'
- Before process was served on Sharp and without holding a hearing, the trial court dismissed the entire case with prejudice.
- The trial court's order stated that the dismissal was because Burnett 'failed to state a cause of action as a matter of law.'
- Burnett, as appellant, appealed the trial court's dismissal to the Texas Court of Appeals, Fourteenth District.
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Issue:
Does a lawyer's refusal to return the unearned portion of a retainer fee to a former client give rise to legally viable claims for breach of fiduciary duty, conversion, and money had and received, thereby precluding dismissal as frivolous under Texas's inmate litigation statute?
Opinions:
Majority - Justice Kem Thompson Frost
Yes, a lawyer's refusal to return an unearned retainer after termination of representation gives rise to claims that have an arguable basis in law. Under a liberal construction of the pleadings, Burnett asserted viable claims for breach of fiduciary duty, money had and received, and conversion. A lawyer's fiduciary duty to promptly deliver funds that a client is entitled to receive does not cease upon termination of the representation; refusing to return an unearned retainer after being discharged constitutes a breach of this ongoing duty. Similarly, the allegations support a claim for money had and received, as Sharp holds money that in equity belongs to Burnett, and a claim for conversion, as Sharp exercised unauthorized control over Burnett's property. However, Burnett's claims for negligence and intentional misrepresentation are based on indisputably meritless legal theories because the alleged conduct—refusing to return money—does not constitute professional negligence or involve the necessary elements of misrepresentation.
Concurring-in-part-and-dissenting-in-part - Justice William J. Boyce
No, the claim for breach of fiduciary duty is not legally viable, and the client did not properly plead claims for conversion or money had and received. The fiduciary relationship between an attorney and client terminates when the representation ends. Citing Stephenson v. LeBoeuf, any claim for breach of fiduciary duty must be based on conduct that occurred during the representation, not entirely after its termination as alleged here. The majority misinterprets precedent like Avila, which involved a breach occurring during the representation. Furthermore, the court should not liberally construe the petition to invent claims for conversion and money had and received that Burnett never explicitly asserted, especially in a pre-service dismissal under Chapter 14 where special exceptions are irrelevant. While the negligence and deception claims were properly dismissed, the entire suit should have been dismissed without prejudice.
Analysis:
This decision reinforces that a lawyer's fiduciary duty concerning client funds is not extinguished upon the termination of the attorney-client relationship. By holding that a refusal to refund an unearned retainer can support tort claims like breach of fiduciary duty and conversion, the court provides former clients with stronger legal recourse than a simple breach of contract claim. This precedent solidifies the principle that lawyers must act with integrity and fidelity regarding client property even after they are discharged, impacting how fee disputes and the winding-down of legal representations are handled.
