Photo: Brasil Creativo/Shutterstock.com

Two Dallas law firms lost an effort to force a client's fee dispute into arbitration because their legal services exceeded the scope of representation listed in their engagement agreement.

Monday's ruling from Dallas' Fifth Court of Appeals should serve as a cautionary tale for attorneys to review their contracts to ensure they really outline the scope of work intended, according to legal malpractice attorney Tim Soefje, who represented the client in the case.

"I see a lot of poorly drafted engagement agreements in my practice. All attorneys and law firms should reexamine their engagement agreements and where appropriate, they might consider outside review of those agreements," said Soefje, a managing member at Seltzer Chadwick Soefje & Ladik in Frisco.

The opinion, written by Justice Erin Nowell, explained that law firms Daniel K. Hagood PC and Fitzpatrick Hagood Smith & Uhl, which has changed names to Fitzpatrick Jacks Smith & Uhl, sued client Kunal Kapai in 2018 to recover unpaid attorney fees and compel arbitration under the engagement agreement. State Bar of Texas records show that attorney Daniel Hagood now works at Sorrels Hagood in Dallas. Hagood didn't immediately return a call or email seeking comment.

"He was billed for a lot of things he did not expect to be billed for," Soefje said about Kapai, noting the fee was more than $35,000.

In underlying litigation, Kapai had other attorneys representing him in a civil lawsuit brought by his former employer, who accused him of taking checks and cashing them for himself. The employer sued Kapai for theft by deception and forgery in that separate litigation.

The Frisco Police Department wanted to interview Kapai, and he hired Hagood "with regard to a potential questioning of client by the Frisco Texas Police Department and related matters," said the engagement agreement, according to the opinion. The agreement said the parties would arbitrate any disputes.

In the fee dispute, Kapai said Hagood's representation ended in June 2014 once Kapai decided not to do an interview. Hagood countered that the services also covered Kapai's criminal investigation.

Hagood stated that the work ensured in the lawsuit between the employer and Kapai, that Kapai's deposition would avoid criminal issues, and that the settlement of that case didn't include language that could impact a criminal case.

"His role was to make sure nothing in the civil cases would cause criminal trouble for Kapai," said the opinion, which was joined by Justices David Bridges and Ada Brown.

However, the trial court found the services weren't covered by the agreement's specific language, and denied Hagood's request for arbitration.

On appeal, Hagood argued the retainer's arbitration provision was broad and covered any disputes over the firm's services. But the Fifth Court determined it had to consider the entire contract, which had limited the scope of representation.

"The trial court determined, based on 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," the opinion said.

Hagood's attorney, Beau Powell, an associate with the Law Offices of Van Shaw in Dallas, didn't respond to a request for comment.

Houston solo practitioner Diane Dillard wrote in a State Bar of Texas continuing legal education paper that it's key for an engagement agreement to prevent misunderstandings by explaining what a lawyer was hired to do. If a lawyer handles multiple matters for the same client, they should document the engagement for each matter.

Dillard also wrote that whenever a lawyer and client agree to broaden the scope of representation, they should document the change in writing.

Read the opinion: