Barratry

In 2011 the Texas Legislature amended Tex. Gov’t Code § 82.065 and added § 82.0651. The statutory changes strengthened civil remedies for clients and created a new civil remedy for nonclients who are subjected to solicitation that violates laws or disciplinary rules regarding barratry.

As this area of the law grows, barratry issues can come up in a variety of legal settings, including fees disputes, association of counsel, motions to disqualify, and lawyer discipline cases. Herring & Panzer counsels clients regarding barratry issues in each of these types of matters. The firm can provide advice to clients who have been a victim of barratry, as well as lawyers who may face their own allegations of barratry.

What is Barratry?

Texas has criminalized barratry since 1876. Citing legal dictionary definitions, courts in Texas have stated generally that barratry is the “vexatious incitement to litigation, especially by soliciting potential legal clients,” or “the offense of . . . exciting and stirring up quarrels and suits, either at law or otherwise.” Those vague descriptions say little and could apply to most forms of permissible lawyer advertising, solicitation, and marketing.

In Texas, at least, the better approach to ascertain the meaning of barratry is probably to examine the “functional definitions” in the Texas Penal Code.

Criminal Prohibitions

Two principal Texas Penal Code sections address barratrous conduct: § 38.12 and § 38.18.

Section 38.12 of the Texas Penal Code is the key barratry prohibition. It is entitled “Barratry and the Solicitation of Professional Employment” and defines three categories of criminal offenses, each of which has multiple subcategories.

Penal Code § 38.12: First Category

The first category of offenses has subcategories that focus on (a) unauthorized claims; (b) solicitation; and (c) paying or transferring value to obtain employment. Specifically, the first prohibition provides that a person commits an offense if, with “intent to obtain economic benefit,” the person:

  1. knowingly institutes a suit or claim that the person has not been authorized to pursue;
  2. solicits employment, either in person or by telephone, for himself or for another;
  3. pays, gives, or advances or offers to pay, give, or advance to a prospective client money or anything of value to obtain employment as a professional from the prospective client;
  4. pays or gives or offers to pay or give a person money or anything of value to solicit employment;
  5. pays or gives or offers to pay or give a family member of a prospective client money or anything of value to solicit employment; or
  6. accepts or agrees to accept money or anything of value to solicit employment.

Penal Code § 38.12: Second Category

The second category of offenses focuses on financing the foregoing activities, or knowingly accepting employment based on such prohibited solicitation. Specifically, it creates criminal liability for a person who:

  1. knowingly finances the commission of an offense under Subsection (a);
  2. invests funds the person knows or believes are intended to further the commission of an offense under Subsection (a); or
  3. is a professional who knowingly accepts employment within the scope of the person’s license, registration, or certification that results from the solicitation of employment in violation of Subsection (a).

 

Penal Code § 38.12: Exceptions to the First and Second Categories

An exception to § 38.12(a) or (b) exists if the “conduct is authorized by the Texas Disciplinary Rules of Professional Conduct or any rule of court.” That exception is somewhat ambiguous. Although it says “authorized by,” it presumably also means “not prohibited by,” at least in some instances. At a minimum, the exception must include certain implicitly authorized solicitations.

For example, Penal Code § 38.12(a)(2) prohibits, in very broad terms, a person from “solicit[ing] employment … in person ….” Disciplinary Rule 7.03(a), in turn, prohibits, among other things, “in-person contact” to seek professional employment “concerning a matter arising out of a particular occurrence or event … from a prospective client … with whom the lawyer has no family or past or present attorney-client relationship ….” (Emphasis added) Thus, by negative implication, Rule 7.03 permits such in-person contact if the contact concerns a matter that does not arise from a “particular occurrence or event” or if the lawyer solicits a family member or current or former client.

 

Penal Code § 38.12: Third Category

The third category of offenses addresses several general subcategories:

  • 30-day prohibitions on solicitations relating to (i) personal injuries or deaths from accidents; (ii) arrests, (iii) divorces;
  • Soliciting someone who indicated a desire not to be solicited; and
  • Soliciting by coercion, fraud, overreaching, or false, misleading, or deceptive statements.

This third category also includes a false, fraudulent, misleading, deceptive, or unfair statement or claim. Compare that category with Disciplinary Rule 7.02(a), which prohibits seven categories of “false or misleading” communications—for instance, communications that contain a “material misrepresentation of fact or law” or are likely to create an “unjustified expectation” about the results the lawyer can obtain.

Civil Remedies

Texas Government Code § 82.065 and § 82.0651 create new civil remedies against barratry. For attorney-client contracts, the amended statute applies only to those contracts entered into on or after September 1, 2011.

Remedies for Clients

Section 82.0651 provides that a contract for legal services is voidable by the client if it is “procured as a result of conduct violating the laws of this state or the Texas Disciplinary Rules of Professional Conduct of the State Bar of Texas regarding barratry by attorneys or other persons.”Under the statute, the contract is not automatically void—it is merely voidable by the client. In theory, a client might choose not to void the contract, even if the client learned that the contract had been procured by barratry.

Under the statute, even if a contract is declared void for barratry, an “innocent” lawyer may still obtain a quantum meruit recovery. Section 82.065(c) allows the quantum meruit recovery of fees and expenses paid or owed under the contract when two requirements are met:

  1. The client does not prove the lawyer committed barratry or knew of the barratry “before undertaking the representation.”
  2. The lawyer must have reported the barratrous misconduct to the disciplinary authorities unless (a) someone else already has or (b) the lawyer reasonably believes reporting would “substantially prejudice” the client.

 

However, note the possible conflict between the statute and Disciplinary Rule 7.03(d). That rule provides that “[a] lawyer shall not . . . collect a fee for professional employment obtained in violation of Rule 7.03(a), (b), or (c).” (Rules 7.03(b) and (c) prohibit certain payments to prospective clients or other persons to solicit employment.) Rule 7.03(d) does not expressly draw the culpability distinction in § 82.065. The rule lacks the “innocent lawyer” safe harbor of the statute.

In addition to providing that the contract is voidable by the client, the statute allows a client to recover the following from any person who has committed barratry:

  1. fees and expenses paid to that person under the contract;
  2. the balance of any fees and expenses paid to any other person under the contract, after deducting fees and expenses awarded on a quantum meruit basis;
  3. actual damages;
  4. a $10,000 penalty; and
  5. reasonable and necessary attorney’s fees.

Remedies for Nonclients

Section 82.0651 further provides a civil remedy for “[a] person who was solicited by conduct violating the laws of this state or the Texas Disciplinary Rules of Professional Conduct of the State Bar of Texas regarding barratry by attorneys or other persons, but who did not enter into a contract as a result of that conduct.”

The person solicited may recover a $10,000 penalty, actual damages, and attorney’s fees in addition to any other remedies provided by law

Other Disciplinary Rules

Rule 8.04(a)(9) expressly prohibits “barratry as defined by the law of this state.” While no Texas statute contains an express “definition” of barratry, clearly Penal Code § 38.12 is the central statute setting out a functional definition of barratry.

Rule 7.03, discussed above, directly addresses prohibited solicitations and payments. Specifically, Rule 7.03(b) and (c) can apply directly to the case-runner scenario.

Rule 7.06 generally prohibits accepting or continuing employment in a case procured in violation of Rules 7.01-7.05 and 8.04(a)(9), potentially creating multiple problems for a lawyer who knowingly accepts a case from another lawyer who has used barratrous means to obtain the case.