No. 2008-07105 SHERBERT & CAMPBELL, P.C. IN THE DISTRICT COURT Plaintiff v. OF HARRIS COUNTY, TEXAS MOSTYN and CONTINENTAL CASUALTY COMPANY Defendants 280 th JUDICIAL DISTRICT A. Discovery Control Plan PLAINTIFF S FIRST AMENDED ORIGINAL PETITION AND REQUEST FOR DISCLOSURE 1. Plaintiff intends to conduct discovery under Level 2 of Texas Rule of Civil Procedure because amount in controversy exceeds $50,000. B. Parties 2. Plaintiff, Sherbert & Campbell, P.C., is a Texas Professional Corporation, with its principal place of business in Harris County, Texas. 3. Defendant, an individual, is a resident of Harris County, Texas and may be served with service of process at his usual place of business,. 4. Defendant Continental Casualty Company is a foreign insurance company with its principal place of business in Chicago, Illinois, and may be served through its registered agent for service of process: CT Corporation System, 350 North St. Paul Street, Dallas, Texas 75201. C. Jurisdiction action. 5. This court has original jurisdiction of the subject matter and all parties in this 1
D. Venue 6. Venue is proper in Harris County, Texas pursuant to 15.002 (a) (1) and (2) of the Texas Civil Practice and Remedies Code. E. Facts DISSOLUTION AND WINDING UP OF PARTNERSHIP 7. Defendant is an attorney practicing law in Texas. was formerly a partner in the Houston, Texas law firm of Sherbert, Campbell & Mostyn, the other two partners of which were B Sherbert and A Sherbert. 8. The partnership was voluntarily dissolved by agreement of the three partners on December 31, 1998. A true and correct copy of the dissolution agreement is attached as Exhibit A. For purposes of winding up, the agreement split up responsibility the cases currently being handled by the partnership between Mostyn and the new law firm of B and A Sherbert, called Sherbert & Campbell, P.C., which succeeded to the rights of both B Sherbert and A Sherbert in the former partnership of Sherbert, Campbell & Mostyn. The agreement divided partnership s contingent fee interests among the parties by classifying the cases into categories in which the parties would share in varying specified percentages the expenses and/or fees recovered as a result of the eventual resolution of the cases. 9. Pursuant to Texas partnership law, the partnership of Sherbert, Campbell & Mostyn was dissolved but not terminated, and continued to be in winding up until all of the outstanding cases were resolved and all monies owed in the dissolution of the partnership had been paid. Both plaintiff and Mostyn were under continuing obligations in the winding up of the partnership until all the money had been paid and all the business of the former partnership had been completely concluded. 2
10. On March 23, 2000, Sherbert filed suit in the 215 th Judicial District Court to obtain an accounting regarding the outstanding cases provided for in the dissolution of agreement. Ms. Sherbert obtained a temporary injunction requiring Mostyn to complete an accounting schedule. A true and correct copy of the incomplete accounting schedule provided by Mostyn is attached hereto as Exhibit B. At that time, most of the matters in which plaintiff retained a continuing interest were as yet unresolved. However, since the date of that accounting, Mostyn has not paid any further monies, has not updated the status of matters subject to the dissolution agreement, or has not notified plaintiff as to settlements or other disposition of any of the outstanding matters. 11. On October 7, 2003, counsel for plaintiff sent a written demand to Mostyn requesting an update on all outstanding cases, a true and correct copy of which is attached hereto as Exhibit C. Mostyn never responded. 12. Again on December 5, 2006, counsel for plaintiff sent written demand requesting an accounting, a copy of which is attached hereto as Exhibit D.. Mostyn never responded. MAYO V. KOKO MOTEL FEE 13. One of the cases subject to dissolution agreement, which all parties believed might result in a significant recovery, was the claim by Mayo against the KoKo Motel, Inc., which was filed in the 237 th Judicial District Court of Lubbock County, Texas. This case was listed in the dissolution agreement under Schedule C as one of the cases for which Mostyn was responsible to handle and for which Mostyn would retain a 60% interest in the contingent fee and plaintiff would retain a 40% interest in the contingent fee. On October 3, 2000, plaintiff filed a notice of lien in the county property records of Lubbock County, Texas, providing all parties with statutory notice of plaintiff's 40% attorney's fee interest in the Mayo case, a 3
true and correct copy of which notice is attached hereto as Exhibit E. The defense lawyer representing KoKo Motel, Inc. and its insurance carrier, Continental Casualty Co., was also provided with a copy of the written notice. 14. Eventually, the Mayo was tried, and according to the appellate opinion eventually rendered in the case, a judgment was entered by the trial court totaling $1,511,000.00. In August 2001, the Mayo judgment was appealed to the Seventh District Court of Appeals. In November 2002, the Court of Appeals affirmed the trial court's judgment. In February 2003, a petition for review was filed with the Texas Supreme Court. 15. In April 2003, plaintiff learned of the victory in the Court of Appeals and the appeal to the Texas Supreme Court. On April 9, 2003, plaintiff served written notice of its fee interest on defense counsel and plaintiff s counsel in the Mayo case, including Mostyn, a true and correct copy of which is attached as Exhibit F. The written notice alerted all parties, including the insurance carrier, and their counsel to plaintiff s fee interest in the case and requested that the parties enter into a Rule 11 agreement. Mostyn never responded to this letter; however, based on the verbal assurance of the defense counsel in the Arthur Mayo case to notify counsel for the plaintiff if the case was settled, plaintiff did not take any further action at that time to intervene. 16. In January 2004, the Texas Supreme Court certified the trial court's judgment in the Mayo case, and in February 2004 mandate issued. Sometime thereafter, either the judgment was paid or a settlement was reached among the parties. No notice, however, was given to plaintiff by any party that the case had been finally resolved and the funds paid. Presumably, Mostyn received the full fee interest, including the portion belonging to plaintiff. 4
Mostyn never paid to plaintiff its attorney s fees interest in the Mayo case and never provided notice or even acknowledgement of the receipt of the funds. 17. In late 2006, plaintiff became concerned that no notice regarding the Mayo have case had ever been received. Plaintiff s counsel contacted the defense counsel in the Mayo case and was told that the judgment had in fact been paid. On December 5, 2006, plaintiff sent written notice to Mostyn demanding payment of plaintiff's attorney s fees interest in the Mayo case and an accounting of the remaining cases set forth in the dissolution agreement. Exhibit D. Mostyn never responded. Plaintiff also sent written notice and demand to the defense lawyers in the Mayo case that the insurance company they had represented that paid the judgment or settlement was responsible for the misdirection of plaintiff s fee interest. Exhibit G The insurance company s lawyers also never responded. 18. Under the terms of the dissolution agreement, the parties to the former partnership of Sherbert, Campbell & Mostyn had continuing obligations until all of the outstanding cases had been resolved and the monies paid. Therefore, pursuant to section 16.004 of the Texas Civil Practice and Remedies Code, limitations on plaintiff's causes of action is tolled until four years after the day that the dealings between the former partners cease. Because the partnership remains in winding up, limitations on an accounting continues to be tolled. Furthermore, all causes of action belonging to plaintiff are subject to limitations four years after that date that plaintiff discovers the accrual of the cause of action. Because Mostyn is under a duty of full disclosure, plaintiff is under no duty to investigate. Mostyn never notified plaintiff that any monies were due, and Mostyn never notified plaintiff of any repudiation of the dissolution agreement. Therefore, plaintiff did not and reasonably should not have learned of its causes of action against Mostyn until December 2006, at the earliest. 5
F. Causes of Action 19. COUNT 1: PARTNERSHIP ACCOUNTING AND EQUITABLE REMEDIES Based on the allegations above, plaintiff is entitled to an equitable accounting of all cases, property, and funds over which Mostyn exercised control in the winding up of the partnership. Mostyn has been unjustly enriched by the retention and use of funds in which plaintiff has an equitable interest. Plaintiff requests this Court enter an order requiring Mostyn to disclose and account for all cases, property, and funds involved in the winding up of the partnership, that this Court imposed a constructive trust on all funds in which plaintiff has an equitable interest, that this Court enter an order requiring Mostyn to disgorge or make restitution for all funds to in which plaintiff has an equitable interest, that this Court enter an order requiring plaintiff to pay restitutionary damages equal to the costs, including reasonable and necessary attorney's fees, of requiring Mostyn to comply with his legal and equitable duties, and that this Court award plaintiffs such other and further equitable relief as may be right and just. 20. COUNT 2: BREACH OF DISSOLUTION AGREEMENT As alleged above, Mostyn's conduct constitutes a material breach of contractual obligations under the dissolution agreement. Mostyn s breach caused injury to plaintiff which proximately resulted in actual damages. Plaintiff seeks unliquidated damages within the jurisdictional limits of this Court. 21. All conditions precedent have been satisfied or have occurred. 22. Plaintiff is further entitled to recover reasonable and necessary attorney's fees under Texas Civil Practice and Remedies Code Chapter 38 because this is a suit for breach of a written contract. Plaintiff retained counsel, who presented plaintiff s claim to Mostyn. Mostyn did not tender the amount owed within 30 days of when this claim was presented. 6
23. COUNT 3: BREACH OF PARTNERSHIP DUTIES IN WINDING UP Under Texas partnership law, partners continue to owe duties during the winding up of a partnership as to matters pertaining to the winding up. From the date of its dissolution until the present moment, the partnership of Sherbert, Campbell & Mostyn continues to be in winding up, and Mostyn continues to owe plaintiff duties with respect to those matters pertaining to the winding up, including the disposition of cases and payment of monies to under the dissolution agreement. These duties include a duty of loyalty, a duty of care, a duty of good faith, a duty of full disclosure, and a duty to account for all monies and property over which Mostyn exercised control pursuant to the dissolution agreement. Under the terms that the parties agreed to in winding up the partnership, Mostyn assumed control over the Mayo case and other cases with the obligation to resolve those cases, make full disclosure to plaintiff, and pay the amounts owed to his former partners. As alleged above, Mostyn violated his partnership duties in winding up. Plaintiff has been injured by Mostyn's breach of his duties, and as a proximate result thereof has suffered actual damages. Plaintiff seeks unliquidated damages within the jurisdictional limits of this Court. 24. COUNT 4: JOINT AND SEVERAL LIABILITY Continental Casulaty Co. was on notice of plaintiff s contingent fee interest in the Mayo case, and intentionally paid funds belonging to plaintiff to Mostyn. Under established principles of Texas law, Continental Casualty Co. knowingly participated in and materially aided and abetted Mostyn s breach of his legal duties and is jointly and severally liable for the amount of plaintiff s contingent fee in that matter. G. Jury Demand 25. Plaintiff demands a jury trial and tenders the appropriate fee with this petition. 7
H. Conditions Precedent 26. All conditions precedent to plaintiff s claim for relief have been performed or have occurred. I. Request for Disclosure 27. Under Texas Rule of Civil Procedure 194, plaintiff requests that defendants disclose, within 50 days of the service of this request, the information or material described in Rule 194.2. J. Prayer 28. For these reasons, plaintiff asks that the court issue citation for defendants to appear and answer, and that plaintiff be awarded a judgment against defendants for the following: a. Actual damages. b. Equitable remedies of accounting, constructive trust, disgorgement, restitution, injunction. c. Prejudgment and postjudgment interest. d. Reasonable and necessary attorney s fees. e. Court costs. f. All other relief to which plaintiff is entitled. 8
Respectfully Submitted, FRYAR LAW FIRM, P.C. F. Eric Fryar Texas Bar No. 07495770 4606 FM 1960 Rd. W., Ste 400 Houston, Texas 77069-4604 Tel. (281) 315-8860 Fax (281) 605-1888 Email: eric@fryarlawfirm.com 9