Appellate Ruling Saves Dallas Firm From Giving Up IOLTA Funds

The trial court abused its discretion by improperly invading the attorney work-product privilege by ordering production of attorney billing records, the panel found.

IN RE STEVEN K. TOPLETZ AND HARPER BATES & CHAMPION LLP, Relators

A trial court should not have ordered a Dallas law firm and its client to give up Interest on Lawyers Trust Account funds to pay a judgment the client owed in an underlying case, an appellate court ruled Tuesday.

The trial court abused its discretion by improperly enforcing the judgment against Harper Bates & Champion in Dallas and invading the attorney work-product privilege by ordering production of attorney billing records, ruled Dallas’ Fifth Court of Appeals.

“The notion that as a firm, we were being asked not only to hand over privileged and work-product documents, without an opportunity to be heard, but also potentially hand over our client’s money—that we had been duty bound to hold for the client—was very concerning,” said Austin Champion, one of the firm’s founding partners.

In the underlying dispute, the estate of Lynda Carroll Willis, individually and on behalf of Lancaster Bluegrove, won a judgment for $700,000 against Steven Topletz, and $300,000 against his company, said Israel Suster, the estate’s attorney. Suster also claimed Topletz tried to hide assets to avoid paying.

The estate was seeking postjudgment discovery against Topletz and his attorney, Champion. Champion said he didn’t represent Topletz when the judgment was imposed, but came in later to defend Topletz in postjudgment proceedings when he faced a contempt of court hearing for refusing to hand over documents that he claimed were privileged.

In one hearing, Topletz testified he paid a $5,000 retainer to Champion’s firm, and the estate wanted to collect the unearned portion of the retainer to pay the judgment.

In discovery, the estate sought attorney fee agreements, checks or drafts paid to attorneys, attorney bills, and IOLTA account records. Topletz produced some records, but he and Champion objected that other documents were privileged, confidential and protected by the attorney work-product doctrine.

Later, the estate filed an application for an ex parte turnover order against Topletz. The trial court granted it in May, finding unearned funds in the IOLTA account and future attorney fees were “non-exempt property” and should be turned over to the court to satisfy the judgment. The judge also ordered them to give up the billing documents.

The firm and Topletz sought mandamus relief.

Justice Ada Brown, joined by Justices David Schenck and Amanda Reichek, wrote that Texas law authorizes a trial court to order a judgment debtor to turn over nonexempt property to pay off a judgment. However, the law doesn’t apply to nonparties to the judgment, and the trial court abused its discretion by ordering the firm to turn over funds.

“A judgment may be enforced against a non-party to the judgment only by bringing a separate suit alleging a basis for enforcing the judgment against that party,” the opinion said.

Courts generally have discretion over the scope of discovery, but certain records are protected, and this includes billing records, unless a party is making a claim for attorney fees, said the opinion. The Fifth Court ruled that the trial court invaded the work-product privilege when it ordered the firm to produce billing records.

The estate’s attorney, Suster, said he has issues with the ruling.

“The court’s opinion doesn’t seem to reflect or take note that the trial court’s order had allotted for redacting any attorney-client privileged information,” said Suster, managing member of The Suster Law Group in Plano. “We weren’t trying to seek earned funds, but to the extent they had money sitting in a trust account that had not been earned. … Any unearned money ought to be subject to turnover, in our view.”

The divorcing wife’s lawyer wants the judge to issue an order to sell the marital home for cents on the dollar at a foreclosure auction so her legal fees are paid. This is how the judge treats the husband, who’s just out of hospital after his foot was amputated. #WeThePeople pic.twitter.com/k8euxHybAU

— LawsInTexas (@lawsintexasusa) August 30, 2020