A Texas appellate court has set aside a portion of an arbitration award for attorney's fees incurred while withdrawing from representation, holding that attorneys' attempts to recover such fees are unconscionable as a matter of law.

In Lee v. Daniels & Daniels, No. 04-07-00096-CV, 2008 WL 372455 (Tex. Ct. App. Feb. 13, 2008), client Lee retained law firm Daniels to represent him in divorce proceedings. The parties executed an engagement letter outlining the costs of representation. The letter also included an arbitration agreement.

After some disagreements between the parties, Daniels withdrew from Lee's representation. Daniels later sued Lee for failure to pay fees for the services rendered up to the date of his withdrawal. The dispute was eventually arbitrated, and the arbitrator entered an award for Daniels for fees incurred in rendering services on Lee's behalf, in pursuing withdrawal, in participating in the arbitration proceeding, and for arbitration administration.

The Court affirmed the portions of the award for services rendered on Lee's behalf up to the date of withdrawal and for fees incurred while participating in the arbitration proceedings.

However, the Court set aside the portion of the award for fees incident to Daniel's motion to withdraw. It found that such an award was unconscionable and violated public policy as a matter of law, because the fees expended during withdrawal were for the benefit of Daniels, not Lee. No lawyer, said the Court, could form a reasonable belief that such efforts, adversarial to the client, could be considered "rendering legal services" for the benefit of that client.

The Court also set aside the portion of the award for the full cost of the arbitration administration, noting that the original engagement letter clearly contemplated an even split of such administration fees between the two parties.