A recent Law 360 article by Amy Anderson, Tiffany Raush and Joshua Norris, “Rohrmoos Highlights Steps to Securing Atty Fees in Texas,” reports on the recent Texas Supreme Court case, Rohrmoos Venture v. UTSW DVA Healthcare. This article was post with permission. The article reads:
In Rohrmoos Venture v. UTSW DVA Healthcare LLP, the Supreme Court of Texas has finally thrown down the gauntlet for attorney fees claims: Submit your billing records or else!
While the court’s opinion issued April 26, 2019, stopped short of actually mandating submission of billing records in support of an attorney fees request, “billing records are strongly encouraged.” In reality, nothing short of contemporaneous billing records would likely satisfy the stringent evidentiary requirements articulated in Rohrmoos.
In Rohrmoos, the lessee prevailed in a lease dispute against its landlord; however, it supported its attorney fees claim only with the testimony of its attorney. The attorney testified as to the mountain of documents, emails and depositions he reviewed, prepared for and completed in addition to time spent in trial. He also testified regarding his rate, why that rate was reasonable and why the fees in this case (about $800,000) were so high compared to the total amount in dispute (about $300,000).
He did not introduce his billing records, which would have certainly been voluminous, and instead asserted before the court that the billing records would give the jury no additional basis on which to award his client attorney fees. The jury awarded the lessee $800,000 for fees incurred in addition to conditional amounts for appeal. The landlord challenged the fee award and, in particular, the failure to produce billing records in support. The court of appeals affirmed the award concluding that billing records were not required to prove attorney fees in this case.
The Supreme Court of Texas disagreed. The court issued a lengthy, 20-plus page opinion to address the issue of the attorney fees claim, apparently flummoxed that practitioners, parties and lower courts did not understand that Texas exclusively subscribed to the lodestar method following City of Laredo v. Montano.
The lodestar method requires the calculation of reasonable hours multiplied by a reasonable rate, producing the “lodestar.” From there, adjustment up or down is possible depending on particular circumstances not already accounted for in the lodestar calculation. If it was unclear before, it is clear now — the lodestar method applies to every claim for attorney fees in Texas. And, as the Rohrmoos court sees it, there is little to no reason for an award to ever deviate from the lodestar.
Attorney fees claims are valuable to parties because they constitute an entirely separate claim for damages. An award of fees is meant to compensate the winning party and make that party whole. The award is not intended to punish the losing party, nor is it intended to benefit the attorney. The contours of the court’s Rohrmoors opinion provide important clarifications, reminders and cautions on the issue of attorney fees, several of which are highlighted in the following practice pointers.
Get Your Ducks in a Row Ahead of Time — Chapter 38 (Probably) Won’t Save You
Texas follows the “American Rule” regarding attorney fees recovery — each party pays its own way. To “shift” the payment of attorney fees, parties must point to either a contract provision or a statute. In Texas, we have long revered Chapter 38 as the attorney fees saving grace for oral contracts or the occasional contract without an attorney fee provision. But Chapter 38 has fallen from grace over the past decade following several state and federal court opinions holding that it does not apply to limited liability companies or limited partnerships.
Even before that spate of decisions, however, Chapter 38 had its limitations. As discussed in Rohrmoors, to prevail on an attorney fees claim under Chapter 38, parties have to show (1) they prevailed on a claim entitling them to attorney fees, and (2) they recovered damages for that claim. Thus, while a party who successfully pursued a breach of contract claim for damages can recover attorney fees under Chapter 38, a party who successfully defended a breach of contract claim cannot.
It is imperative that attorney fees are properly addressed in a contract. Among other things, the Rohrmoors decision demonstrates that contractual fee-shifting provisions should specify when a party is a “prevailing party.” If the contract is silent, the trial court will likely apply Chapter 38 prevailing party law — meaning that your successful defense of a breach of contract claim will not yield an attorney fee award.
Parties should also consider whether fee recovery should be limited to fees “incurred.” In Rohrmoors, the court explained that use of the word “incurred” limits the amounts of fees to only those fees for which the requesting party is liable. Without using “incurred,” a party may recover attorneys’ fees that are reasonable and necessary to the representation without a showing that they were “incurred.” While broader is better if you are seeking the fees, and limited is better if you are defending against fees, what is best is to predictably know how the fee provision will be interpreted and applied by the court. Therefore, clarity is king.
Litigation Is Nigh — Now What?
When the parties to a contract find themselves staring down inevitable litigation, the focus is naturally on the claims giving rise to the litigation: breach of contract, breach of warranty, fraudulent conduct, etc. Early on, attorney fees may not be foremost in mind, but they should be. Informed consideration of likely avenues for recovery of attorney fees will help the parties evaluate their potential damages and their potential risks in litigating.
In addition, Chapter 38 has “presentment” requirements and other fee-shifting statutes, such as the Deceptive Trade Practices Act, may have similar preconditions. Developing your attorney fees claim, or defending against the opposing party’s fee claim, is often overlooked until trial approaches when the costs have already been incurred and discovery is coming to a close. Understanding the fee claim and developing or defending it alongside the core claims will pay dividends in the long run.
Proving It Up for the Win
Rohrmoors clears up any lingering mystery: Plan to submit your attorneys’ billing records to support your fee claim. “Sufficient evidence [to support a fee claim] includes, at a minimum, evidence of (1) particular services performed, (2) who performed those services, (3) approximately when the services were performed, (4) the reasonable amount of time require to perform the service, and (5) the reasonable hourly rate for each person performing such services.”
From that, the factfinder determines the reasonable hours times the reasonable hourly rate resulting in the lodestar. Only in extremely limited and unusual circumstances may the factfinder apply a multiplier upward or downward to account for factors not otherwise baked-in-the-cake of the lodestar.
Thus, when proving up your attorney fees, it is critical to provide accurate and complete billing records in support of your claim. The Supreme Court of Texas stated this was “strongly encouraged” in Rohrmoos, but the clear implication of that opinion as a whole is that it is indispensable to recovery of fees.
That means the attorneys’ time entries should be detailed enough to provide sufficient information for review and payment, but not so detailed that extensive redacting is going to be required to protect work product or attorney-client privileged information. Such extensive redaction may fall short of the Rohrmoors’ requirement that the evidence show the particular services performed and may also fail to satisfy segregation requirements.
Also consider whether a fee claim will require a separate, retained expert. The attorney in Rohrmoors opted to testify as his own expert, which is fairly common. There are multiple schools of thought on this. The attorney who generated the fees is going to have a better grasp on the facts and nuances of the case, especially in complex litigation where the total hours and requested award might be especially large. Most judges know that a retained expert is no less self-interested than the lawyer in the case. On the other hand, to a jury, a retained expert may appear at least somewhat less self-serving. If the attorney’s rate is particularly high, it may be helpful to have another attorney explain why that rate is reasonable. Finally, if there is a great degree of tension between opposing lawyers related to the litigation, cross examination of the lawyer in the case on the issue of fees could get heated. In that case, it may be better to have one degree of separation with a retained expert.
Amy K. Anderson and Tiffany C. Raush are associates and Joshua A. Norris is a partner at Jones Walker LLP in Houston.