Reverse and Render

Non-suit precludes attorney's fees award as prevailing party under agreement

Byron Henry — Mon, 08 Mar 2010 06:00:00 -0600

The Austin Court of Appeals recently held that a plaintiff's notice of non-suit precludes a defendant from recovering attorney's fees as prevailing party under a written agreement. In this case, the plaintiffs bought a house from defendants under a standard-form sales contract promulgated by the Texas Real Estate Commission. Plaintiffs brought suit against defendants for failing to disclose alleged defects to the house and sought attorney's fees. Defendants also requested attorney's fees. Section 17 of the contract provides that the prevailing party is entitled to attorney's fees. Plaintiffs nonsuited their claims prior to trial leaving only the defendant's claim for attorney's fees unresolved. The trial court entered a take nothing judgment against the plaintiffs (despite the nonsuit) and awarded the defendants attorney's fees.

The court of appeals reversed the take-nothing judgment against the plaintiffs because the trial court had no discretion but to dismiss the plaintiffs' claims without prejudice once the notice of nonsuit was filed. More importantly, however, the court reversed the attorney's fees award and held that the defendants were not prevailing parties because they had not prevailed on the merits of any legal proceeding related to the contract. The court of appeals stated:

Because the court did not adjudicate the [plaintiffs'] claims, and because the [defendants] brought no claim for relief on which they could prevail other than their request for attorney's fees, the [defendants] did not prevail on any claims that would entitled them to attorney's fees under the terms of contract.

The court of appeals also rejected defendants' argument that allowing parties to nonsuit at the last minute to avoid liability for attorney's fees was poor public policy. The court distinguished a case in which a party sought statutory attorney's fees after a partial nonsuit. The court's opinion in Fowler v. Epps can be found here.

Trial courts must state the reasons for granting motions for new trial

Mike Northrup — Thu, 04 Mar 2010 20:35:10 -0600

The Dallas Court of Appeals granted a petition for writ of mandamus in In re Hunter, and ordered the trial court to specify the reasons for ordering a new trial.

The court's opinion relies upon the Texas Supreme Court's opinion in In re Columbia Medical Center, 290 S.W.3d 204 (Tex. 2009), to support its holding. Interestingly, the relator (Hunter) apparently argued that the trial court was required to vacate or set aside its order granting the new trial. The court's opinion does not state what reasoning the relator gave to support her argument. However, the court of appeals cites the Texas Supreme Court's opinion in In re United Scaffolding, Inc., for the proposition that vacating or setting aside the order is not required. Without knowing what reason the relator gave to support her argument, it's hard to know how United Scaffolding applies. The opinion in In re United Scaffolding addressed whether the granting of the new trial was improper to the extent it was based upon a lack of sufficient evidence. The supreme court stated that because it did not know the reason the new trial was granted, it could not grant relief other than requiring the trial court to specify the reasons. This language almost implies that other relief could be granted in some circumstance. Here, we don't know if Hunter made the same argument as United Scaffolding, or if some new and different argument was presented and rejected.

The court's opinion in In re Hunter may be found at this link.

Home is where the headquarters are

Byron Henry — Mon, 01 Mar 2010 08:33:11 -0600

The United States Supreme Court recently resolved a split of authority as to the citizenship of corporations for purposes of federal diversity jurisdiction. Corporations are deemed citizens of the state in which they are incorporated and the state in which they have their "principal place of business." In Hertz Corp. v. Friend, the Court adressed the interpretation of the phrase "prinicipal place of business." The Court first discussed the various tests developed and applied by the courts of appeals focusing on the "nerve center" test and "business activities" test. In this case, the Ninth Circuit employed the business activities test and held that because Hertz did more business in California than any other state, it was a citizen of California. The Supreme Court disagreed and held that

“[P]rincipal place of business" is best read as referring to the place where a corporation’s officers direct, control, and coordinate the corporation’s activities. It is the place that Courts of Appeals have called the corporation’s “nerve center.” And in practice it should normally be the place where the corporation maintains its headquarters . . .

The Court concluded by acknowledging that "seeming anomalies" will arise under this test, but the Court was willing to accept them "in an effort to find a single, more uniform, interpretation of the statutory phrase" and "in view of the necessity of having a clearer rule." Thus, a corporation's dual citizenship for diversity purposes consists of the state of incorportation and the state in which the headquarters is located. Accordingly, the Court reversed the Ninth Circuit and remanded for reconsideration in light of this test. The Supreme Court's unaminous opinion can be found here.

Superseding judgments: what damages must be superseded?

Mike Northrup — Wed, 24 Feb 2010 19:42:23 -0600

Supersedeas aficionados will want to take a look at the Austin Court of Appeals' opinion in Shook v. Walden. The opinion gives a very thorough treatment of the parties' arguments and analysis of the law relating to elements of damages that must be superseded. To summarize, the court of appeals makes the following holdings:

Attorney's fees awarded under Civil Practice and Remedies Code Chapter 38 are not compensatory damages that must be superseded under Civil Practice and Remedies Code Section 52.006. The court distinguishes the Houston Fourteenth Court of Appeals decision in Clearview Props., L.P. v. Property Tex. SC One Corp., 228 S.W.3d 262 (Tex. App.--Houston [14th Dist.] 2007, pet. denied)
Prejudgment interest is a form of compensatory damages that must be superseded under Civil Practice and Remedies Code Section 52.006.
The clerk's record for an appeal is not a cost awarded in the judgment and does not have to be superseded under Civil Practice and Remedies Code Section 52.006.
Post-judgment interest, including the post-judgment interest awarded on prejudgment interest, trial and post-judgment attorney's fees, and costs must be superseded under Civil Practice and Remedies Code Section 52.006.
Post-judgment interest for one year's estimated is adequate since the trial court has continuing jurisdiction to revisit the matter after a year has passed.

The court's opinion may be found here. The court's opinion that post-judgment interest on post-judgment attorney's fees must be superseded is interesting in light of the Fourteenth Court's holding that post-judgment interest on post-judgment attorney's fees should not begin to run until the appeals court judgment is final. Protechnics Int'l, Inc. v. True-Tag Sys., Inc., 843 S.W.2d 734, 736 (Tex. App.-- Houston [14th Dist.] 1992, no writ).

Due Process requires an opportunity to be heard

Mike Northrup — Thu, 11 Feb 2010 09:46:52 -0600

The Dallas Court of Appeals has held that "due process requires that a party be given the opportunity to present its arguments to a court before the court makes a ruling." (citing TRAP 52.4).

In In re Victor Enterprises, Inc., the trial court (Dallas County Court at Law No. 1) granted a petition for writ of mandamus without requesting a response from Victor Enterprises. Victor Enterprises sought mandamus relief in the court of appeals. Interestingly, the court of appeals requested a response from the real party in interest. The real party in interest filed no response. The court of appeals concluded that the trial court abused its discretion by granting the petition without requesting a response or allowing Victor Enterprises time to file a response. The writ of mandamus was conditionally granted. The court's opinion may be found here.

Lack of Consideration Revisited

Byron Henry — Tue, 26 Jan 2010 13:15:38 -0600

The Twelfth Court of Appeals recently held that lack of consideration is an affirmative defense that must be plead. In this case involving a will contest, the court reversed an order granting a no-evidence motion for summary judgment on the basis that the agreement at issue lacked consideration. The court ruled that consideration for a written instrument is presumed. The Court also held, however, that lack of consideration is an affirmative defense. Thus, the court concluded, it was improper for a movant to utilize a no-evidence motion regarding a claim on which the movant has the burden of proof. The court's opinion in Burges v. Mosley can be found here.

In my opinion, there is a problem with treating lack of consideration as an affirmative defense.

Here is a list of propositions with which I have no disagreement:

existence of a valid and enforceable agreement is an element of a claim for breach of contract;
consideration is an essential element of a valid and enforceable agreement;
plaintiff has the burden to prove all of the elements of his claim;
in order to allege lack of consideration with respect to a written instrument, a defendant must file a verified denial under TRCP 93(9);
failure of consideration occurs after a contract is formed and is an affirmative defense under TRCP 94;
an affirmative defense is a matter of confession and avoidance, i.e., it does not seek to defend by denying the plaintiff's claims, but seeks to establish an independent reason why the plaintiff cannot recover

Thus, courts err by placing the burden on defendants to prove lack of consideration simply because the agreement is in writing. While consideration is presumed for a written instrument, the presumption should not survive a verified denial. Further, based on the foregoing propositions, lack of consideration should not be considered an affirmative defense. It is true that the Texas Supreme Court said otherwise in Lakeway Co. v. Leon Howard, Inc., 585 S.W.2d 660, 662 (Tex. 1979). But the only authority cited for this proposition is TRCP 94, which lists failure of consideration as an affirmative defense, which is in keeping with the nature of defenses as matters in confession and avoidance. The difference between lack of consideration and failure of consideration is significant and was discussed in a previous post here. While TRCP 93(9) requires a verified denial for lack of consideration and failure of consideration for written instruments, only failure of consideration is an affirmative defense. Suffice it to say that the defendant should not bear the burden of proving lack of consideration so long as a verified denial is filed regarding written agreements. Accordingly, a defendant should be able to use a no-evidence motion for summary judgment to challenge the absence of a valid and enforceable agreement, including the element of consideration. At some point, the Texas Supreme Court should take up this issue, overrule Lakeway Co., and resove this simple, though pervasive, misunderstanding.

Attorney's Fees for Travel Time are Recoverable

Mike Northrup — Tue, 12 Jan 2010 19:34:13 -0600

Attorney's Fees for travel time are recoverable under Chapter 38 of the Texas Civil Practice and Remedies Code, according to the San Antonio Court of Appeals. In Wilkerson v. Atascosa Wildlife Supply, Atascosa sought recovery of attorney's fees inclusive of $5,500 for travel time. Atascosa offered evidence that the travel time was reasonable and necessary considering the distance traveled. The evidence also showed that he billed only one-half of his rate for 36 hours of the travel time in which he was driving and not actively working on the case. After the trial court granted Atascosa's attorney's fees, Wilkerson appealed.

The court of appeals observed that it could find no Texas case precluding an award of attorney's fees that includes travel time. Based upon the evidence presented, the court concluded that there was nothing in the record showing the award of attorney's fee for travel time was unreasonable or arbitrary and the court affirmed the judgment. The court's opinion may be found here. Wilkerson has now been filed in the Texas Supreme Court. The docketing information can be found here.

Pay for Play An Abuse of Discretion

Byron Henry — Sat, 09 Jan 2010 07:00:00 -0600

The Houston (Fourteenth) Court of Appeals recently held that a trial court abuses its discretion if it conditions a trial setting on the payment of sanctions. Here, after a plaintiff and his attorney were sanctioned $45,000 and $5,000, respectively, they challenged the sanctions order by mandamus. In its memorandum opinion, the court of appeals began by holding that because the plaintiff and his attorney did not claim that the sanctions threatened their ability to continue the litigation, they had an adequate remedy by appeal and, thus, were not entitled to mandamus relief with respect to the sanctions.

In addition to awarding sanctions, however, the order set the trial for the "next available trial date following payment of the fees in full as ordered herein." Citing precedent, the court held that "[a] sanctions award that impedes the prosecution of the case warrants extraordinary relief." Accordingly, the court of appeals conditionally granted mandamus and ordered the trial court to delete the language in the sanctions order that conditioned the trial setting on the payment of sanctions. The court's opinion in In re Gawlikowski can be found here.

Voidness, Unenforceability, or Unconscionability of Contract is an Affirmative Defense

Mike Northrup — Fri, 08 Jan 2010 08:56:49 -0600

The Dallas Court of Appeals has held that "an allegation that a provision in a contract is void, unenforceable, or unconscionable is a matter in the nature of an avoidance and must be pleaded."

In Parks v. Developers Surety & Indemnity Co., Developers Surety and Indemnity Company sued Robert Parks, Jo Ann Parks, and Brinkman Construction on a written indemnity agreement, which had been executed in connection with a surety bond Developers issued on a construction project for the City of Fort Worth. Developers filed a motion for summary judgment asserting that it conclusively established that the defendants were jointly and severally liable for $371,245.81. The trial court granted Developers' motion for summary judgment and the defendants appealed.

On appeal, the appellants (formerly defendants) argued for the first time that a provision in the indemnity agreement providing that evidence of an itemized statement of claims or loss paid is prima facie evidence, was unconscionable and void. The court of appeals first holds that the trial court was entitled to rely upon the contract provision because it was part of the summary judgment record and it did not have to be specifically brought to the trial court's attention. The court also holds that the appellants' allegation that the contract provision was void, unenforceable, or unconsctionable is a matter in the nature of avoidance and must be affirmatively pleaded under Civil Procedure Rule 94. Because it was not raised in response to the motion for summary judgment, the court holds that it could not be considered. The court's opinion may be found here.

This result regarding the affirmative defense is probably correct, however, I question the citation to Shoemake v. Fogel, Ltd., which is an old case of mine. I didn't recall the particular ruling referenced by the Dallas Court of Appeals opinion, so I went back to look at it and refresh my memory. Shoemake involved a failure to plead parental immunity as an affirmative defense and the Supreme Court actually holds that a failure to affirmatively plead parental immunity does not waive the defense. In fact, the opinion expressly states "Rule 94's requirement of pleading is not absolute." To the extent the opinion is applicable, it probably supports the opposite conclusion from the one reached in the Parks opinion.

"Overly broad is the way that leadeth to mandamus."

Byron Henry — Mon, 21 Dec 2009 10:01:37 -0600

At least that's how the Texas Supreme Court's version of Matthew 7:13 reads. In a per curiam opinion, the Court recently demonstrated its vigilance in policing overly-broad discovery orders. In this product liability case, the plaintiff sought all documents of consumer complaints regarding "the sidestep on any model backhoe." John Deere objected to the request as overly broad. The trial court narrowed the request to models with step assemblies similar to the allegedly defective model, but did not impose a reasonable time limit. The Court reaffirmed that discovery orders compelling production must set reasonable time limits and that "[a]n order that compels overly broad discovery is an abuse of discretion for which mandamus is the proper remedy." Accordingly, the Court granted the petition and vacated the trial court's discovery order to the extent it failed to set a reasonable time limit. The Court's opinion in In re Deere & Company can be found here.

Appellate CLE Opportunity

Mike Northrup — Tue, 15 Dec 2009 17:19:15 -0600

The Appellate Law Section of the Dallas Bar Association will have its final meeting of the year on Thursday, December 17th, at noon at the Belo Mansion. Kirsten M. Castañeda of Locke Lord Bissell & Liddell will present an United States Supreme Court Update. Also, as this is the annual business meeting, election of officers for 2010 will take place.

New Procedure Adopted for Electronic Submissions

Mike Northrup — Tue, 15 Dec 2009 17:06:16 -0600

The Texas Supreme Court has adopted new procedures relating to the submission of electronic copies of briefs submitted to that court. The procedures address matters such as file names, the manner of submitting electronic copies, and contents of the electronic copies. For complete details, follow this link.

Danger and the Statute of Limitations

David Oliveros — Sat, 05 Dec 2009 17:21:52 -0600

In the recent case, Rodriguez v. Crutchfield, decided by the Dallas Court of Appeals, we learn the importance of clearly evaluating all the parties we think may have liability and the importance of considering the statute of limitations in that evaluation.

In the case, Richard Rodriguez, a temporary worker driving a forklift for Dallas Transfer Warehouse Co. was injured on February 4, 2005, while unloading a trailer owned by P & H Transportation. The accident happened when P & H employee/driver, Milton Crutchfield, pulled the trailer away from the dock causing the forklift which Rodriguez was operating to fall. Rodriguez received workers compensation beneifts from ALEA North American Insurance Co.

ALEA then sued Crutchfield and P & H for subrogation. Rodriguez, on the same date, sued Dallas Transfer and the cases were consolidated. Crutchfield was never served. Dallas Transfer got out on summary judgment (presumably under the exclusive remedy provision of the workers comp statute) and ALEA nonsuited Dallas Transfer and P & H.

On April 22, 2008, Rodriguez attempted to amend his petition and sue Crutchfield and P & H. The trial court granted summary judgment in favor of Crutchfield and P & H based on the statute of limitations. The Dallas Court of Appeals affirmed as to Crutchfield because he was never served within the limitations period and Rodriguez did not comply with the due diligence requirement for service. The Court also granted summary judgment as to P & H because the only claims against it were brought by ALEA and were dismissed with prejudice on January 30, 2008. Texas law holds that when a case has been refiled following dismissal, the statute of limitations is calculated at the date of refiling, which in this case was well after the limiations period passed.

It's surprising that Rodriguez did not sue Crutchfield and P & H when it sued Dallas Transfer. Once a plaintiff collects workers compensation, it's hard for them to avoid the exclusive remedy provision, which bars negligence suits against employers. Moreover, it appears from the case that if Rodriguez had a negligence claim against anyone, it would be P & H and Crutchfield. Only subrogation claims were filed against P & H and Crutchfield. This case demonstrates the need to anticipate suing all parties at the outset of litigation and to be weary of the statute of limitations if you do not.

You can read the opinion HERE.

Judicial Appointments by the Governor

Mike Northrup — Wed, 02 Dec 2009 10:19:13 -0600

Governor Perry has made two recent appointments to our intermediate appellate courts.

Today, he appointed Lana Myers to the Fifth District Court of Appeals at Dallas. Myers has served as an administrative judge for the Dallas County Criminal Criminal courts. Myers will fill the place on the court that opened up when Justice Carolyn Wright was appointed to Chief Justice of the Dallas Court of Appeals. The Governor's press release regarding the appointment may be viewed here.

The Governor also appointed Tracy Christopher to the Fourteenth District Court of Appeals at Houston. Christopher was previously Judge of the 295th District Court of Harris County. Christopher fills the place on that court, which opened up when the Governor appointed Justice Guzman to the Texas Supreme Court. To view the Governor's press release regarding this appointment, see this link.

Both justices will stand for election in 2010.

Fair Market Value of Real Property Did Not Include Revenue Generated From Billboard Sign

David Oliveros — Wed, 25 Nov 2009 11:11:03 -0600

The Texas Supreme Court recently reviewed an eminent domain, State v. Central Expressway Sign Associates, where the trial court excluded the state's expert report on the fair market value of real property because he failed to account for the revenue generated by the use of the property.

Specifically, the State of Texas condemned a 3,950-square foot parcel of land in Dallas owned by Central Expressway Sign Associates (CESA) that was needed to improve a highway interchange. CESA leased the land to Viacom Outdoor, Inc., which in turn managed a billboard on the property. The sign allegedly generated $168,000 a year in advertising revenue.

In a pretrial hearing, the trial court excluded the State's expert witness on the value of the property because it concluded the expert's failure to account for billboard advertising revenues in his appraisal made his report unreliable.

On appeal, the Texas Supreme Court found that the expert did not improperly exclude the revenue generated by the billboard from his estimate. The court noted that too many variables impact revenue in addition to actual location, including proper permits, constructing, lighting, and employing personnel to sell advertising space and to place and remove the advertisements. Moreover, the court concluded that because the testimony was directly related to the central issue in the case, the state suffered harm when the trial court excluded its witness. Thus, the court reversed and remanded for a new trial.

The opinion can be found HERE.

Welcome to Texas: Personal Jurisdiction Over Non-Resident Directors of Texas Corporations

Byron Henry — Mon, 23 Nov 2009 07:54:58 -0600

The Dallas Court of Appeals recently all but held that a non-resident officer and director of a Texas corporation is subejct to personal jurisdiction in Texas. After reviewing the law on personal jurisdiction, the court decided that there was no general jurisdiction over the defendants who were California residents.

Turning to specific jurisdiction, the court addressed whether the defendants' ongoing business relationship between Texas and California and the dispute over control of a Texas corporation constituted doing business in Texas. The court agreed with the reasoning of a Fourth Circuit case:

Excellent reasons exist for alowing a State to assert jurisdiction over non-resident directors of domestic corporations. A chartering state has a strong, even compelling interest in providing a forum for redressing harm done by corporate fiduciaries, harm endured principally by a resident of that State, the corporation. . . . Given the high degree of regulation over corporate fiduciaries, the State's interst in providing a convenient forum for a derivative suit charging malfeasance or nonfeasance of a director cannot be overemphasized.

The court hedged its bet slightly by acknowledging the lack of authority from the Texas Supreme Court or state legislature on the subject. Thus, the court went on to find that the defendants' other contacts were sufficient to support personal jurisdiction. One caveat, the plaintiff in the case, as well as the other shareholders were Texas residents. Would the analysis change if all of the shareholders, officers, and directors were non-residents? The court's opinion in TexVa, Inc. v. Boone can be found at this link.

Readers note: This issue is currently before the Texas Supreme Court in the case of Kelly v. General Interior Constr., Inc. Readers can go to Don Cruse's Texas Supreme Court blog, or its companion site, docketdb.com and find more infornation about that case here and here.

Verifications versus affidavits

Mike Northrup — Sun, 22 Nov 2009 13:02:21 -0600

When is an affidavit necessary rather than a verification?

In Wimmer v. Hanna Prime, Inc., Hanna Prime brought suit against Wimmer on a sworn account. Wimmer answered with a verification in which he asserted that he did not contract for the debt in his personal capacity and was not liable. His verification stated that the facts were true "to the best of [his] knowledge." Hanna Prime moved for summary judgment. Wimmer responded with an affidavit wherein he asserted he did not contract with Hanna Prime in his individual capacity. The trial court rendered summary judgment against Wimmer and Wimmer appealed. On appeal, Wimmer assered that his affidavit raised a material issue of fact.

Citing Texas Rule of Civil Procedure 93(2), the Dallas Court of Appeals observes Wimmer was required to verify by affidavit his defensive plea asserting no liability in the capacity in which he was sued. Because Wimmer's answer did not unqualifiedly state that the facts were true and within his personal knowledge and instead stated that they were true "to the best of his knowledge," the court of appeals holds that the verification was "not legally effective as a verification" and the court affirms the judgment. The court's opinion may be found here.

Practitioners will want to note two things about this case. First, Rule 93 does require verification by affidavit. There is case law that draws a distinction between a mere verification and an affidavit. Affidavits require more than a verification. Second, it appears that even if your verification is defective, you cannot cure the defect at the time of summary judgment by filing an affidavit as part of your response to the motion. You will need to amend your answer to include a proper verification "by affidavit."

Jurisdictional Discovery: Don't Jump the Gun on Depositions!

Mike Northrup — Fri, 20 Nov 2009 14:34:04 -0600

This blog entry comes courtesy of Cowles & Thompson's Melinda Newman:

The Eastland Court of Appeals recently held that a trial court abused its discretion by refusing to hear a special appearance motion filed by a California corporation until after the defendant’s corporate representative appeared for deposition in Texas. In IRN Realty Corporation v. Hernandez, Vicenta Hernandez filed suit against IRN, alleging various causes of action stemming from the purchase of real estate in Nolan County. Prior to hearing its special appearance, Hernandez noticed the deposition of IRN’s corporate representative. IRN filed a motion to quash, urging the court to first rule on its special appearance and contending that it would be unjust for a Texas court without jurisdiction to require its corporate representative to appear for a deposition. The trial court granted the motion to compel, awarded monetary sanctions, and ordered IRN to present its representative for deposition before it would rule on the special hearing. After IRN ignored the court’s order and failed to present its representative for deposition, the trial court struck IRN’s pleadings.

The court observed Rule 120a’s mandate that a hearing on a special appearance be heard and determined before any other plea or pleading. It also noted, however, that the rule also specifically provides for the means of obtaining a continuance of the special appearance hearing so a deposition may be conducted: affidavits of the party opposing the special appearance. Here, Hernandez did not file any such affidavit stating that she could not present facts essential to justify her opposition to the special appearance or that she needed to depose IRN’s corporate representative regarding jurisdiction -- she simply noticed IRN’s corporate deposition. Thus, while the court made clear it did not condone the actions of IRN in refusing to obey a court order, it held that the trial court abused its discretion in abating the hearing on the special appearance and striking IRN’s pleadings. The court’s opinion may be found here. One issue that was not addressed was location: i.e., had Hernandez properly submitted an affidavit and obtained a court order allowing the deposition, could she have forced the IRN representative to come to Texas for his deposition or would she have had to depose him in California?

Supreme Court Limits Entitlement to Attorney's Fees

Byron Henry — Tue, 17 Nov 2009 11:12:35 -0600

The Texas Supreme Court recently narrowed the right to attorney's fees based on uncontroverted evidence. The Court held that compentent, uncontroverted, unchallenged evidence of attorney's fees does not entitle a party to an award of attorney's fees as a matter of law. Distinguishing its opinion in Ragsdale v. Progressive Voters League, the Court held that under the well-known factors set forth in Arthur Anderson & Co. v. Perry Equip. Corp., the factfinder (here a jury) was free to award a lesser amount of fees considering "the amount involved and the results obtained."

In one bright spot for clients and counsel, the Court did note that the jury was not free to award zero attorney's fees stating:

Although it could have rationally concluded that, in light of the amount involved and results obtained, a reasonable fee award was less that the full amount sought, no evidence supported the jury's refusal to award any fees.

The Court remanded the case for a new trial on attorney's fees. No word on how much is reasonable or whether a formula taking into account the amount invovled and amount incurred should be employed. It is also unclear why a defendant found liable should benefit from requiring a plaintiff to incur high fees to recover a small amount. From this opinion, we know that a court may not award attorney's as a matter of law and the jury cannot award zero attorney's fees. Until further notice, it seems anything in between remains in play. The Court's opinion in Smith v. Patrick W.Y. Tam Trust can be found here.

Texas Supreme Court Addresses Attorney's Fees as Damages

Byron Henry — Thu, 12 Nov 2009 12:37:12 -0600

The Texas Supreme Court recently held that a malpractice plaintiff may recover attorney's fees incurred in a prior suit if those fees were proximately caused by counsel's negligence. In this long and complex malpractice case, the plaintiff, NDR, sued Akin Gump for malpractice. The jury rendered a verdict for NDR and awarded damages, including damages for attorney's fees incurred by NDR for its appeal of the underlying judgment.

In its opinion, the Dallas Court of Appeals reversed the attorney's fees award citing the "American Rule" and a line of cases categorically barring recovery of attorney's fees incurred in a prior suit as damages. The Texas Supreme Court disagreed and held that the American Rule did not apply because NDR was not seeking attorney's fees incurred in prosecuting its malpractice claim, a claim for which fees were not provided by contract or statute. Instead, NDR was seeking its fees incurred in a prior suit that it would not have incurred but for Akin Gump's alleged negligence.

After briefly discussing cases in which courts have disallowed recovery of fees as damages, the Court stated: "The better rule, and the rule we adopt today, is that a malpractice plaintiff may recover damages for attorney's fees paid in the underlying case to the extent the fees were proximately caused by the attorney's negligence." The Court did not address whether the new rule alters the general rule outside the context of legal malpractice cases, but the holding does not appear to extend beyond legal malpractice cases. The Court's opinion in Akin Gump. Strauss, Hauer & Feld, L.L.P. v. Nat'l Devel. & Research Corp. can be found at this link.