A recent Law 360 story, “Texas Justices To Hear National Lloyds Fee Discovery Fight,” reports that the Texas Supreme Court agreed to hear a case brought to it by National Lloyds Insurance Co. in which the insurer argued that a lower court deviated from precedent in compelling discovery of its attorneys’ fee information by property owners who say National underpaid their damage claims.

In its petition for writ of mandamus filed with the high court last August, National argued that a defendant's fees are irrelevant, and that there are other methods in place — including the lodestar method and Arthur Anderson factors — that can be used without compelling a party to turn over rate and fee information that it argues is privileged.

National’s petition said the Thirteenth Court of Appeals decision caused a split among state appellate courts over whether a plaintiff can discover a defendant's attorney's fee information, which it said is reflective of a split in outside state and federal courts as well.  It said that the high court has never adjudicated the issue and the Thirteenth Court erroneously relied on Chief Justice Nathan Hecht's concurring opinion in the 2012 case El Apple I v. Olivas in justifying its holding that the fee information is both relevant and discoverable.

“Using this opinion, any plaintiff can now seek discovery of a defense lawyer’s hourly rates, invoices, payment receipts, and audits any time their claims for fees are contested.  Consequently, every defendant defending a claim for attorneys’ fees will be forced to choose between stipulating to the reasonableness of the plaintiff’s fees, or producing all of their attorney fee information as the price for challenging those fees,” the petition said.

“Certainly Chief Justice Hecht’s opinion in El Apple did not intend, as the Thirteenth Court has pronounced, to open this door to irrelevant and privileged attorneys’ fee information that will implicate almost every civil case in the state,” it said.  “Yet, until this court clarifies this issue, that is exactly what will happen.”

In arguing against high court review, the property owners told the court in a brief filed in November that the trial court was correct in permitting them to ask about the insurer's attorney fees because that information is not privileged from disclosure.

“Because [the insurers] are challenging the reasonableness of the hours, rates, and total charges of the plaintiffs’ attorneys in the underlying litigation, the trial court did not abuse its discretion in ordering the limited discovery it allowed,” the response said.  “As courts around the country have recognized, the discovery ordered by the trial court is not patently irrelevant.”

Dale Wainwright of Bracewell LLP, who represents National Lloyds, told Law360 he was pleased the Supreme Court agreed to review the case.  "National Lloyds does not believe the law allows or that it is rational to order defendants, who are not seeking an attorneys’ fee recovery from plaintiffs, to provide plaintiffs with descriptions of legal services provided or the amount of fees for those services," he said.  "Such information is irrelevant to the dispute and is a tactic to increase defense costs."

The underlying suit concerns four property insurance cases in which the property owners argued they had been underpaid on damage claims following two hailstorms in Hidalgo County, Texas, in March and April 2012.  The property owners were seeking damages and attorney's fees on their breach of contract and Texas Insurance Code claims, according to court documents.

The cases were consolidated with thousands of others in a multidistrict litigation in Texas and special master Roberto Ramirez was appointed to resolve any disputes.  In March 2015, according to the petition, the property owners in this case moved additional discovery on attorney's fee information, including rates, invoices, payments and audits.  The insurers objected.

But in April 2015 the special master permitted the additional discovery, which resulted in requests for the information being served to National Lloyds, Wardlaw Claims Service Inc. and Ideal Adjusting Inc., which objected to the requests.  After a hearing, the special master overruled each objection, according to the petition, and an appeal to the Thirteenth Court of Appeals followed.

The case is In re: National Lloyds Insurance Co. et al., case number 15-0591, in the Supreme Court of the State of Texas.