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1 REPORTER'S RECORD
2 TRIAL COURT CAUSE NO. 2004-67710
3 APPELLATE CAUSE NO.
4 COMMISSION FOR LAWYER IN THE DISTRICT COURT OF
DISCIPLINE
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HARRIS COUNTY, T E X A S
133RD JUDICIAL DISTRICT
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10 TRIAL ON MERITS
11 EXCERPT
12 TESTIMONY OF ROBERT SCHUWERK
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15 On the 27th day of January, 2006, the


16 following proceedings came on to be heard in the
17 above-entitled and numbered cause before the Honorable
18 Judge Brett Hall, held in Harris County. Texas:
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20 Proceedings reported by machine shorthand


21 method.
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1 A P PEA RAN C E S
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3 FOR THE COMMISSION FOR LAWYER DISCIPLINE:


Ms. Jennifer Hasley
4 Assistant Disciplinary Counsel for the State Bar of Texas
600 Jefferson, Suite 1000
5 Houston, Texas 77002
713-758-8200
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FOR PAUL C. LOONEY:
7 Mr. Michael Lamson
Michael A. Lamson, P.C.
8 11767 Katy Freeway, Suite 740
Houston, Texas 77079
9 713-526-9269
And
10 Mr. Roni Most
The Most Law Firm, P.C.
11 2016 Main Street, Suite 102
Houston, Texas 77002
12 713-283-6678
And
13 Mr. Paul C. Looney
Looney & Conrad, P.C.
14 11767 Katy Freeway, Suite 740
Houston, Texas 77079
15 713-597-8818
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1 MR. LAMSON: Your Honor, we would request
2 that the Rule be invoked at this time, particularly when
3 we are making a bill at this point.
4 THE COURT: All right. The Rule has been
5 invoked. Anyone that's in the courtroom here that will
6 testify in this matter, other than a party, will need to
7 wait outside. Do not discuss the case with anyone while
8 you're out there, other than the attorneys.
9 EXAMINATION
10 BY MS. HASLEY:
11 Q. Could you please state your full name for the
12 record?
13 A. Robert Paul Schuwerk.
14 Q. And what is your current occupation?
15 A. I'm a professor of law at the University of
16 Houston Law Center.
17 Q. Could you please go through your general
18 qualifications?
19 A. Only so far as they are pertinent to this
20 matter. I have been teaching at the University of
21 Houston since January of 1982. I've taught courses in
22 legal ethics that entire time at least once a year,
23 frequently more than once.
24 I have served on the committee that wrote
25 the current Texas Disciplinary Rules of Professional

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1 Conduct back in the '80s. I then joined the Texas
2 Disciplinary Rules of Professional Conduct Committee at
3 the Bar and remain a member of that committee. I joined
4 it in 1991. I chaired it for ten years from 1994 to
5 2004.
6 I served on the Referral Fee Task Force of
7 the State Bar of Texas that overhauled the referral fee
8 and disciplinary rules. I served on the Supreme Court
9 Task Force, which just completed its work deciding what
10 changes should be made in current Texas Rules based on
11 the work of the American Bar Association's Ethics 2000
12 Commission.
13 I have written two books on the Texas
14 Disciplinary Rules, the one that you mentioned back in
15 the Houston Law Review back in 1990 that I co-authored
16 with Professor John F. Sutton and a book for West
17 Publishing Company which is sitting here, Handbook of
18 Texas Lawyer and Judicial Ethics, that is now in its
19 fourth edition, the 2005 Edition.
20 Q. Are you licensed to practice law?
21 A. I am.
22 Q. Where are you licensed in?
23 A. In Illinois and in Texas.
24 Q. Do you currently serve on the Texas
25 Disciplinary Rules of Professional Conduct Committee?

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1 A. Yes, I do.
2 Q. And you also serve in another role as, I
3 believe, the liaison to the Supreme Court's Task Force.
4 A. I'm a member of that task force, not only just
5 the liaison to it; but its work has just wound up.
6 Q. Okay. And what was the task force responsible
7 for doing?
8 A. The task force was reasonable for looking at
9 the changes the American Bar Association made in the ABA
10 model rules through its Ethics 2000 Commission and to see
11 which of those changes, if any, should be incorporated
12 into our current Texas Disciplinary Rules.
13 Q. Are you familiar with Rule 1.15(d) of the
14 Texas Disciplinary Rules of Professional Conduct?
15 A. Yes, I am.
16 Q. And could you just briefly explain that Rule?
17 A. Well, basically, what the Rule is designed to
18 do is it addresses the situation when a lawyer leaves a
19 matter -- either because the matter is over or because
20 the lawyer has withdrawn or because the client has
21 discharged the lawyer -- and it provides certain basic
22 responsibilities the lawyer has to meet in those
23 circumstances.
24 Q. Did you review documents in preparing for your
25 testimony here today?

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1 A. I did.
2 Q. And what documents did you review?
3 A. Well, I reviewed everything that you sent rna,
4 which included Mr. Looney's deposition; and it included a
5 packet of documents of various pleadings in the case. I
6 reviewed what I assumed is this exhibit notebook. I have
7 a copy of the same thing here. And I looked at certain
8 legal authorities including the handbook that I had
9 written.
10 Q. Okay. Do you have an opinion about whether the
11 respondent violated Rule 1.15(d) in this case?
12 A. I do.
13 Q. And what is that opinion?
14 A. He did.
15 Q. And how do you -- or hmv did you formulate that
16 opinion?
17 A. Well, I based it mainly on his deposition
18 testimony and his understanding of the agreement that he
19 entered into.
20 He had agreed to provide Mr. Blalack with
21 representation through any trial or even an appeal as he
22 testified to, if necessary, on both his parole revocation
23 or the DUI that was largely responsible for that
24 revocation for a flat fee of $12,000. He was paid the
25 $12,000. He didn't finish the work. And, therefore,

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1 based on his own agreement, he hadn't earned the entire


2 $12,000.
3 Q. Does it matter to you what portion of the fee
4 he didn't earn in making a determination that he had
5 violated Rule 1.15(d)?
6 A. No, I don't think it matters as a theoretical
7 matter; but as a practical matter, I agree with the
8 position that you stated in discussion that at some point
9 it would be so A huh De minimus, that it probably
10 shouldn't be pursued as a disciplinary violation; but in
11 principle, it doesn't matter.
12 Q. Well, do you believe that a lawyer is faced
13 with a Hobson's choice or how do they deal with a case
14 when a lawyer is paid --
IS MR. LAMSON: Your Honor, I'm going to
16 object. This is going further than what needs to be done
17 to prove up in a bill.
18 THE COURT: She can put on whatever she
19 wants. She's making a bill.
20 Q. (By Ms. Hasley) How does a lawyer make the
21 decision of how much to refund when the lawyer -- the
22 lawyer's faced with a client who says, "I would like a
23 refund" in a flat-fee case like this?
24 A. Well, I mean, one possibility is to give it to
25 them, of course. Another possibility is to initiate some

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1 procedure for resolving what money, if any, you owe them.
2 The declaratory judgment action is what comes to mind.
3 In the meantime, though, under the Ethics
4 Rules, you have an obligation to hold in your trust
5 account the money that's in dispute.
6 Q. Well, if it's a flat fee and the money was not
7 in your trust account initially, how would you get the
8 money into your trust account; or what obligation does
9 the lawyer have once the dispute arises?
10 A. Well, if the lawyer -- I believe it was a -- it
11 would be a disciplinary violation to have not placed the
12 money in the trust account; but if you -- if you didn't
13 do that, I'd put the -- I'd put $10,000 in there from an
14 operating account and earmark it, you know, some sort
15 of -- in the records indicating that that's why it's
16 there and then try to get that fee dispute resolved as
17 quickly as possible.
18 Q. Now, you said one option is that the lawyer
19 could file a declaratory judgment action?
20 A. Right.
21 Q. Does the lawyer have the burden to resolve the
22 dispute, or does someone else have that responsibility?
23 A. Well, the lawyer has the burden to resolve it
24 unless the client has taken some other action like filing
25 their own suit to get the money back or something of that

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1 kind. I don't think the lawyer would have to file a
2 second suit. He would just participate in the one that
3 was on file.
4 But, basically, the lawyer's obligation is
5 to safeguard the money that's in dispute and to cooperate
6 in some expeditious resolution of whether or not the
7 lawyer gets that money or the client gets it back.
8 Q. Now, I think it's come up that, well, what if
9 the lawyer entered into an agreement, an oral agreement
10 with the client for $12,000 to represent the client and
11 the client fires the lawyer, the promise the lawyer made
12 and if he still stands ready to fulfill that promise is
13 enough to keep the $12,000.
14 What is your position on that premise?
15 A. I think that's confusing retainers with fees.
16 It's a rule that sort of would apply to a retainer where
17 I agree to hold myself available to represent you. In
18 that case, assuming I maintain that promise and am, in
19 fact, available, I have probably earned that retainer;
20 but this doesn't look like what we're talking about here.
21 What we're talking about here is I will
22 perform certain services for you, and the client isn't
23 bargaining for the promise to perform the services. The
24 client is bargaining for the services. And so, when all
25 the services that have been bargained and paid for have

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1 not been performed, then the client is due some money
2 back.
3 Q. When can the lawyers safely disburse the funds
4 and not be subject to disciplinary action?
5 A. Well, if they've done everything that they
6 contractually agreed to do, that would be one point in
7 time. If we're talking about a situation where a dispute
8 has already risen when some authoritative body has told
9 them how much is due to the lawyer and how much is due to
10 be refunded, they can act on that, whether that's a
11 client-initiated court proceeding or a lawyer-initiated
12 declaratory judgment proceeding.
13 If they have a written contract, it talks
14 about when money can be disbursed at various phases of
15 the case. They could take money in accordance with that
16 agreement, but those are the only terms -- situations r
17 can think of.
18 Q. What is your position about a flat fee is
19 earned upon receipt?
20 A. I think that's false.
21 Q. Why?
22 A. Because the fee is being paid to you for you to
23 do certain things and you haven't done them; so, you
24 haven't earn it. And that's a whole thing right there.
25 Q. What if you still stand ready to do that?

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1 A. I don't really think that matters with respect
2 to a fee. I mean, a client has a right to discharge you.
3 And if the -- if that right means anything, it's got to
4 mean that -- let me put it this way: That right would be
5 seriously jeopardized and I think unfairly jeopardized if
6 the 1awyer can say, "Well, you may not be happy with what
7 I've done. I mayor may not have done a good job; but
8 since I'm ready to keep working for you, I get to keep
9 all the money." I th; nk that woul d cl earl y be contrary
10 to what the disciplinary rules contemplate.
11 Q. And if an attorney is terminated, can they,
12 then, convert a flat fee to an hourly rate in order to
13 justify their fee?
14 A. No, I don't think so. That was certainly the
15 position of the pri or di rector or-the Bar.
16 Q. Okay. And so, if, in this case, Mr. Looney was
17 retained for $12,000 at a flat fee, he agreed to
18 represent Mr. Blalack on a flat fee of $12,000; when he
19 was terminated, it would not be proper to say, "Well, I
20 did 30 hours of work at this hourly rate; and, therefore,
21 that's how I'm calculating the refund"?
22 A. No, I don't think -- I don't think you can do
23 that. And I said director of the Bar. I meant Chief
24 Disciplinary Counsel, Don Miller, made that clear.
25 How much work you have done, it seems to

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1 me, and how far you've moved the case towards completion
2 is relevant to how much of the fee you've earned. But
3 you can't simply say, Oh, on an hourly basis, it was this
4 much and that number of dollars happens to be more than
5 $12,000 because that wasn't the way the original
6 agreement worked. The original agreement was: I will do
7 the entire job for $12,000.
8 Q. And in a disciplinary case, when you're trying
9 to calculate how much the unearned fee should be
10 refunded, how would you look at the case to determine
11 what percentage should be returned?
12 A. Well, I would look at what was done and what
13 remains to be done and, of course, bearing in mind that
14 what remains to be done is necessarily uncertain. I
15 mean, there are the case may be pled out. It may be
16 pled out the next day. It may be pled out in six months
17 after, you know, bitter evidentiary fights. It may go to
18 trial. It may go on appeal.
19 But I would I would think that you would
20 -- you would look at what the lawyer has managed to
21 accomplish; and, of course, you could look at what a new
22 lawyer actually did do. That would give you some
23 indication of what remained to be done or at least one
24 possible way of looking at what remained to be done.
25 I think you would look at the quality of

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1 the services that had been rendered up to that point in
2 time. Frankly, I would be influenced on whether I
3 thought the client had any basis for their complaints. I
4 think that's sort of an equitable factor rather than a
5 strictly legal factor.
6 I would look at the factors listed in Rule
7 1.04(b) that are pertinent to what constitutes a
8 reasonable fee under the Rules to the extent that some of
9 those might be helpful.
10 Q. Okay.
11 A. But I can't tell you with mathematical
12 certainty what the number would turn out to be.
13 Q. There's been a position raised that for tax
14 purposes, if a lawyer takes a flat fee and doesn't say
15 it's earned upon receipt, that somehow that would be a
16 felony. Do you know any rule that --
17 A. Well, I'm not a tax lawyer; but I read that
18 document. What it seems to me -- first of all. it makes
19 a number of assumptions that I don't think are true about
20 a flat fee, you know; that is to say that once you get
21 one, there's no substantial likelihood that you're going
22 to have to ever give any of it back.
23 That might be true of a nonrefundable
24 retainer assuming the nonrefundable retainer is a
25 reasonable amount that complies with our ethics opinion

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1 431 in Texas, but that's not true of a flat fee. It is


2 simply not true that there are only a narrow group of
3 circumstances in which you may have to refund all or a
4 portion of a flat fee.
5 Until the horse is in the barn and you've
6 done what that fee called for, there's always a risk that
7 you're going to have to give some portion of it back.
8 And the person offering the tax opinion was not, you
9 know, given those facts going in.
10 Q. How do you run a business as a lawyer in a
11 practical standpoint if you can't spend the flat fee?
12 A. Well, once you're established, the cases you
13 finished up last month are paying this month's bills
14 because once they are finished, you can have the money.
15 The only other way I can see to do it ethically is to
16 have provisions in -- you know, to have written contracts
17 with clients and to have those written contracts permit
18 the lawyer to draw down certain amounts of the money as
19 certain benchmarks in the case are reached, which, of
20 course, didn't happen here.
21 Q. And you mentioned the distinction between a
22 nonrefundable retainer and a flat fee. Could you just
23 delineate that distinction for us?
24 A. A nonrefundable retainer is not really for
25 services at all. A nonrefundable retainer is what

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1 Mr. Lamson was talking about, and that is this idea that
2 I will be available when you need me to do that which you
3 want me to do.
4 Now, that's sort of a closely related
5 concept which we sometimes talk about as getting an
6 advanced retainer of fees or expenses. That's not
7 involved in this case either. There's no claim that this
8 money was being paid to be drawn down against. I mean,
9 that's not the claim that's being made.
10 But a pure flat fee says, I will handle, in
11 this case, your criminal case involving this, that or the
12 other or your parole revocation for a fixed amount of
13 money; in this case, $12,000.
14 And as Mr. Looney explained in his
15 deposition, that's sort of your guess as to what those
16 sorts of cases come out to, you know, involving on
17 average. You hope to do reasonably well and they
18 represented discount from an hourly rate as a rule but
19 not always. He claims they did it in this instance.
20 But there, basically, you're promising not
21 that you will be available to do something but that you
22 will actually do something. You will actually handle
23 this case through to the end, whatever it takes, for a
24 fixed amount of money.
25 Q. In your expert opinion, does respondent's

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1 conduct, as you understand it based on his deposition and
2 the pleadings, violate Rule 1.15(d)?
3 A. It does, yes.
4 Q. And that is to the extent that he failed to
5 refund an unearned fee?
6 A. Yes, and to the extent that he took the
7 position that he had absolutely no obligation to refund
8 any portion of the fee. We're not talking about a
9 situation ~~ere people started dickering over was it
10 2,000 or was it 10,000 that I should keep.
11 I mean, his position throughout his
12 deposition has always been, "I don't owe him a thing, and
13 I'm not going to pay him." And that's simply wrong.
14 MS. HASLEY: Thank you very much for your
15 time. I pass the witness.
16 MR. LAMSON: No questions, Your Honor.
17 THE COURT: Thank you, sir.
18 Next witness.
19 MS. HASLEY: I guess, at this time, we're
20 ready to make opening statements.
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1 TRIAL COURT CAUSE NO. 2004-67710.
2

3 COMMISSION FOR LAWYER IN THE DISTRICT COURT OF


DISCIPLINE
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V. HARRIS COUNTY, T E X A S
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PAUL C. LOONEY 133RD JUDICIAL DISTRICT
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7 I, Minnie Cadena-Meche, Deputy Official


Court Reporter in and for the 133rd Judicial District
8 Court of Harris County, State of Texas, do hereby certify
that the above and foregoing contains a true and correct
9 transcription of all portions of evidence and other
proceedings requested in writing by Ms. Jennifer Hasley,
10 Counsel for the Commission for Lawyer Discipline, for the
parties to be included in this volume of the Reporter's
11 Record. the above-styled and numbered cause, all of which
occurred in open court or in chambers and were reported
12 by me.
13 I further certify that this Reporter's
Record of the proceedings truly and correctly reflects
14 the exhibits, if any, offered by the respective parties.
15 I further certify that the total cost for
the preparation of this Reporter's Record is $103.50 and
16 was paid/will be paid by Ms. Jennifer Hasley.
17 WITNESS MY HAND thi s , the 18th day of
February, 2006.

:: '----~~(\_v_.clt~.c'-~\"--lt l,,-,
Minnie Cadena-Meche, CSR, RPR, RMR
20 CSR # 5849
Expiration Date: 12-31-06
21 Deputy Court Reporter
2013 Stapleton Dr.
22 Friendswood, Texas 77546
281-996-5698
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