Here’s an analysis of the case from the Texas Fifth District Court of Appeals: In Re: $133,333.33, decided February 12, 2025. You can read the full text of the opinion by clicking here.
Case Overview
This case was an appeal concerning the disbursement of $133,333.33 in attorney’s fees, held back by a trial court after a settlement in a personal injury case involving a minor. The underlying suit was a traumatic brain injury suffered by a minor, A.G., at a sports club. The case was settled for $2 million, and the parents’ lawyers (the appellants) sought 40% of the settlement ($800,000) as attorney’s fees, as stipulated in their contingency contract.
The trial court, however, only awarded one-third of the settlement ($666,666.67) as attorney’s fees, withheld $133,333.33, and placed it in the registry of the court. The trial court ruled that 40% was excessive for a minor’s case and decided, on its own initiative, to allocate the disputed funds to the minor’s future needs. The lawyers appealed.
Issues Presented
- Main Legal Issue: Can a trial court disregard undisputed evidence and agreements concerning attorney’s fees in a settlement involving a minor, and reduce the contractual attorney’s fee percentage solely because it exceeds one-third, even after approval by the parents and guardian ad litem?
- Sub-Issue: Did the trial court act within its authority by reallocating part of the agreed-upon attorney’s fees to the minor, rather than the attorneys, based on the court’s own assessment of what constituted a reasonable fee?
Court’s Reasoning
The appellate court acknowledged that, in Texas, courts have a special responsibility to ensure settlements involving minors are in the minor’s best interest. This includes reviewing the reasonableness of attorney’s fees, even if everyone agrees to the settlement.
However, the appellate court found that the trial court abused its discretion in two ways:
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Lack of Guiding Principles: The trial court reduced the attorney’s fee to one-third, not because there was evidence that 40% was excessive in this case, but because of a blanket belief that 40% is never reasonable in cases involving minors. The appellate court said this wasn’t enough—reductions must be based on evidence, not arbitrary rules.
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Contradictory Findings: The trial court had already approved the full settlement (including the attorney’s fees) as being in the best interest of the minor. Afterward, it re-allocated part of those fees to the minor, without new evidence or a change in circumstances. That, the appeals court said, was inconsistent.
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Misapplication of Case Law: The trial court relied on cases (Vance and Diaz) that did not actually support its actions. The appellate court clarified that those cases don’t establish a one-third cap for attorney’s fees in minor settlements.
Key Takeaways
- Courts Must Use Evidence and Legal Principles: While judges have authority to protect minors, they can’t arbitrarily change fee agreements without evidence that the fees are unreasonable in the specific case.
- Approval of Settlement is Binding: Once a settlement (and its fee structure) is approved as being in the minor’s best interest, a court should not later reduce fees without new justification.
- No Automatic Cap on Attorney Fees: There is no Texas rule that attorney’s fees in minor settlements must be capped at one-third. Agreements exceeding one-third can be enforced if found reasonable and in the minor’s best interest.
Outcome
The appellate court reversed the trial court’s order and rendered judgment in favor of the attorneys, ordering that the $133,333.33 be paid to them from the registry.
Practical Implications
- For Lawyers: Courts can review and potentially reduce contingent fees in minor settlements, but must do so based on specific facts and evidence, not a fixed rule.
- For Judges: Even with broad discretion to protect minors, procedural fairness and adherence to guiding legal principles are required.
- For Parties in Minor Settlements: Guardian ad litem approval and parental agreement to attorney’s fees carry significant weight, and courts should respect those unless there’s strong evidence to the contrary.
Girards Law Firm specializes in severe injury and wrongful death cases, especially those that involve brain damage, heart damage, spinal cord injuries or severe burns in Texas, Arkansas and Oklahoma. Contact us at www.girardslaw.com by using the chat feature for more information.