Abdel Hakim Labidi v. Sydow

Court of Appeals of Texas,

Houston (14th Dist.).

ABDEL HAKIM LABIDI, M.D., PH.D., Appellant

v.

Michael D. SYDOW; Sydow, McDonald, Kaiser & Ahmed, L.L.P.; Sydow & McDonald, L.L.P.; and Mohammed Sameer Ahmed, Appellees.

and

In re Abdel Hakim Labidi, M.D., Ph.D., Relator.

Nos. 14–08–00527–CV, 14–08–00757–CV.

|

June 25, 2009.

Attorneys & Firms

*924 Yusuf K. Abdullah, Dallas, TX, for appellants.

Allison Standish Miller, Houston, TX, for appellees.

Panel consists of Justices MIRABAL.^*

OPINION

EVA M. GUZMAN, Justice.

In this consolidation of an interlocutory appeal and a petition for writ of mandamus, Abdel Hakim Labidi challenges the district court’s order compelling arbitration and staying proceedings in the trial court. We dismiss the appeal and deny the petition.

I. FACTUAL AND PROCEDURAL BACKGROUND

Appellant and relator Abdel Hakim Labidi retained the law firm of Sydow, McDonald, Kaiser & Ahmed, L.L.P. to represent him in a suit he filed against Exegenics, Inc. in federal court. Attorney Michael Sydow, a partner in the law firm, sent Labidi an engagement letter on May 16, 2005, and Labidi signed and returned the letter. The two-page agreement contained ten provisions, the last of which provided as follows:

10. Binding Arbitration: In the event of any disagreement over the terms or application of this agreement, or arising out of the attorney-client relationship *925 established herein, the parties hereto will work together in good faith to resolve the disagreement. If they are not successful, then the parties agree to submit their disagreement to binding, non-appealable arbitration before one attorney knowledgeable in this type of litigation. Each party to this agreement agrees that other than through such arbitration he will not bring any claim or action against any other party to it regarding any such disagreement. Arbitration may be commenced by giving written notice of intent to arbitrate. The arbitrator will be selected by one of the retired judges listed on the attachment.

Sydow tried the case and obtained a judgment for Labidi in the amount of $674,871.00.

In 2006, the law firm split into two firms: Sydow & McDonald L.L.P. and Kaiser & Ahmed, L.L.P. Sydow’s firm settled the outstanding judgment against Exegenics for approximately $638,000.00, and the funds were wired to the firm’s trust account. Labidi then stated he would not settle the case for that amount, and Sydow’s firm returned the settlement funds to the judgment debtor. According to Sydow, Labidi owed over $100,000 in legal fees at that time. After the law firm returned the settlement funds, Labidi contacted the judgment debtor directly; it is undisputed that he settled the case for $638,000. Thereafter, he refused to pay allegedly outstanding legal fees.

Sydow initiated arbitration in Harris County in 2007, whereupon Labidi filed suit in Dallas County against Sydow, all of the law firms, and Sydow’s former partner, attorney Mohammed Sameer Ahmed. Labidi styled his allegations as claims for breach of fiduciary duty, breach of contract, fraud, legal malpractice, and negligence; he also sought a declaration that he owed no fees under the engagement letter. Labidi did not deny that he signed an engagement letter, but he asserted that the letter he signed contained no arbitration clause; according to Labidi, one or more of the defendants switched pages of the agreement after Labidi signed it.

The defendants moved to compel arbitration and to transfer venue. After the case was transferred to Harris County, the defendants reurged the motion to compel arbitration, and the trial court conducted an evidentiary hearing on May 16, 2008. Ahmed testified that he did not see Labidi sign the agreement, but he saw the agreement shortly after Labidi signed it and to Ahmed’s knowledge, the pages of the agreement had not been changed. Ahmed further testified that in 2005, the Sydow law firm included arbitration clauses in all its engagement letters with all of its clients, and the engagement letter bearing Labidi’s signature was the firm’s standard form contract.

The trial court granted the motion to compel arbitration and stayed further proceedings in the trial court. Labidi challenges the trial court’s ruling through an appeal as well as through a petition for writ of mandamus, and we have consolidated both proceedings.

II. ISSUES PRESENTED

In three issues, Labidi contends the trial court abused its discretion in granting the motion to compel arbitration because the arbitration provision is unenforceable due to (a) want or failure of consideration, (b) unconscionability and fraud in the inducement, and (c) public policy.

III. ANALYSIS

Labidi presents the same issues and arguments in both his petition for writ of mandamus and his brief in the interlocutory appeal, but he takes no position regarding *926 whether the Federal Arbitration Act¹ or the Texas General Arbitration Act² applies. No argument or evidence was presented on the issue either in the trial court or in these proceedings. In any event, a trial court’s order compelling arbitration and staying proceedings in the district court is not subject to interlocutory appeal under the federal³ or state arbitration schemes.⁴ See Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 89, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000) (holding that an order compelling arbitration and dismissing remaining claims is appealable as a final judgment).

Because we lack jurisdiction to entertain the appeal, it is hereby dismissed. See N.Y. Underwriters Ins. Co. v. Sanchez, 799 S.W.2d 677, 679 (Tex.1990) (per curiam) (holding that in the absence of express statutory authorization, the assumption of appellate jurisdiction over an interlocutory appeal is fundamental error). We do however, have jurisdiction over Labidi’s petition for writ of mandamus, which raises the same issues.

A. Standard of Review

To be entitled to mandamus relief, the relator must demonstrate that (1) the trial court clearly abused its discretion and (2) an appellate remedy is inadequate. In re Poly–America, L.P., 262 S.W.3d 337, 347 (Tex.2008).

B. Failure or Want of Consideration

Labidi first contends that “no independent consideration [was] given for the arbitration provision,” but the law does not require separate identifiable consideration attributable to the arbitration provision. In re Palm Harbor Homes, Inc., 195 S.W.3d 672, 676–77 (Tex.2006) (orig.proceeding). Thus, Labidi’s first issue does not support his petition for writ of mandamus.⁵

C. Unconscionability and Fraud in the Inducement

“[A]rbitrators must decide if an entire contract was fraudulently induced, while courts must decide if an arbitration clause was.” Henry v. Gonzalez, 18 S.W.3d 684, 688–89 (Tex.App.-San Antonio 2000, pet. dism’d).

1. Procedural Unconscionability

Labidi’s fraudulent-inducement argument and his assertion of procedural unconscionability are both based on his allegation that his attorneys substituted different pages to the engagement agreement after Labidi signed it. The success or failure of this argument “is dependent upon the existence of facts which allegedly illustrate unconscionability.” id.

2. Substantive Unconscionability

Regarding substantive unconscionability, Labidi argues that he received “no benefit of the bargain” for the loss of his right to jury trial, discovery, and unspecified civil and evidentiary protections. If such arguments were sufficient, then arbitration provisions would be unconscionable per se, but this is not the case: arbitration agreements are not inherently unconscionable. Emerald Tex., 920 S.W.2d at 402. Labidi’s arguments are similar to those rejected in Emerald Texas, in which the evidence of unconscionability was as follows:

The contract clause was drafted by Emerald. I was not represented by a lawyer when I entered into this contract. During the discussions about this contract no mention was made concerning the arbitration clause or its alleged relationship *928 to design and building defects. The contract was presented as a standard earnest money contract. I was not informed of the existence of the arbitration clause nor its alleged effect on our rights. I do not have any expertise in the area of homebuilding or negotiating real estate transactions. I did not receive any consideration for allegedly foregoing my legal right to a trial.

Emerald Tex., 920 S.W.2d at 402.

Contrary to Labidi’s suggestion, even disputes between a lawyer and client that involve their contract, the attorney-client relationship, or services rendered or fees charged to the client are properly referable to arbitration. In re Poly–America, 262 S.W.3d at 348–49. It therefore is not substantively unconscionable.

D. Public Policy

Finally, Labidi argues that the arbitration provision is invalid because it violates Texas public policy. But Texas public policy favors arbitration. See In re Gulf Exploration, LLC, 52 Tex. Sup.Ct. J. 612, 2009 WL 1028049, at *3 (Tex. Apr. 17, 2009)).

Although Labidi has not explained why he lacks an adequate remedy by appeal, the Texas Supreme Court has noted that “[t]he ‘adequacy’ of an appeal may be a closer question when the legislature has weighed in on both sides of the balance.” Id. (citing In re Poly–America, 262 S.W.3d at 352). Some of Labidi’s arguments seem to be directed toward bringing his petition for writ of mandamus within this category.

1. Section 171.002 of the Civil Practice and Remedies Code

Relying on section 171.002 provides as follows:

(a) This chapter [i.e., the Texas Arbitration Act] does not apply to:

(1) a collective bargaining agreement between an employer and a labor union;

(2) an agreement for the acquisition by one or more individuals of property, services, money, or credit in which the total consideration to be furnished by the individual is not more than $50,000, except as provided by Subsection (b);

(3) a claim for personal injury, except as provided by Subsection (c);

(4) a claim for workers’ compensation benefits; or

(5) an agreement made before January 1, 1966.

(b) An agreement described by Subsection (a)(2) is subject to this chapter if:

(1) the parties to the agreement agree in writing to arbitrate; and

(2) the agreement is signed by each party and each party’s attorney.

(c) A claim described by Subsection (a)(3) is subject to this chapter if:

*929 (1) each party to the claim, on the advice of counsel, agrees in writing to arbitrate; and

(2) the agreement is signed by each party and each party’s attorney.

In re Nexion Health at Humble, Inc., 173 S.W.3d 67, 69–70 (Tex.2005) (per curiam).

2. Ethics Opinion

In his supplemental brief, Labidi cites an October 2008 opinion from the Texas Ethics Commission in which the Commission opined as follows:

It is permissible under the Texas Disciplinary Rules of Professional Conduct to include in an engagement agreement with a client a provision, the terms of which would not be unfair to a typical client willing to agree to arbitration, requiring the binding arbitration of fee disputes and malpractice claims provided that (1) the client is aware of the significant advantages and disadvantages of arbitration and has sufficient information to permit the client to make an informed decision about whether to agree to the arbitration provision, and (2) the arbitration provision does not limit the lawyer’s liability for malpractice.

OP. TEX. ETHICS COMM’N NO. 586 (2008); see also ABA Comm. on Ethics and Prof’l Responsibility, Formal Op. 02–425 (2002) (reaching a similar conclusion). The Commission stated that its conclusion was based on TEX. DISCIPLINARY R. PROF’L CONDUCT 1.03(b), reprinted in TEX. GOV’T CODE ANN., tit. 2, subtit. G app’x A (Vernon 2005) (TEX. STATE BAR R. art. X, § 9 (Vernon 2005)). As the Commission further explained, “The scope of the explanation will depend on the sophistication, education and experience of the client.”

But opinions of the Texas Ethics Commission are advisory rather than binding. In re Goodman, 210 S.W.3d 805, 812 (Tex.App.-Texarkana 2006, orig. proceeding).⁷ Moreover, the Commission expressed no opinion regarding the enforcement of arbitration clauses, stating, “It is beyond the authority of this Committee [sic] to address questions of substantive law relating to the validity of arbitration clauses in agreements between lawyers and their clients.” Because it is likewise beyond the authority of this court to disregard public policy as articulated by the state and federal legislatures and high courts,⁸ Labidi’s arguments do not support his petition.

*930 V. CONCLUSION

We dismiss Labidi’s interlocutory appeal for want of jurisdiction. Because he has not demonstrated that the trial court clearly abused its discretion and that he lacks an adequate appellate remedy, we deny his petition for writ of mandamus.