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Category: Fee Jurisprudence

Article: Rohrmoos Highlights Steps to Securing Attorney Fees in Texas

July 8, 2019

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.

IP Group: USPTO’s ‘Peculiar’ Attorney Fee Rule Hurts Inventors

June 27, 2019

A recent Law 360 story by Bill Donahue, “USPTO’s ‘Peculiar Fee Rule Hurts Inventors, IP Attys Say,” reports that a prominent group of intellectual property attorneys is urging the U.S. Supreme Court to strike down the U.S. Patent and Trademark Office's controversial policy of seeking attorney fees regardless of the outcome of a case, warning it will “penalize emerging inventors.”  The amicus brief, filed by the New York Intellectual Property Law Association, came three months after the justices granted certiorari in Iancu v. NantKwest, a case that will decide whether the policy runs afoul of the so-called American Rule that litigants must typically pay their own legal fees.

In the brief, the NYIPLA sharply criticized the USPTO’s fee rule as “a rather peculiar circumstance where the government is seeking to recoup the salaries of its staff attorneys and paralegals from an adversary.”  And the new rule, the group warned the justices, will have a “chilling effect” on patent applicants.

“Allowing the [USPTO]’s interpretation … to stand would penalize parties for merely commencing a lawsuit to such a degree that many parties of limited means simply could not have their statutorily granted day in court,” the group wrote.  “This would particularly penalize emerging inventors and entrepreneurs seeking to file innovative patents.”

The NYIPLA is the latest outside group to criticize the USPTO’s policy.  The American Bar Association and other IP-focused bar associations have also urged courts to overturn the rule.

The controversy is rooted in language in both the Patent Act and the Lanham Act that says unsuccessful applicants who file a so-called de novo appeal to a district court — as opposed to a more streamlined record appeal directly to the Federal Circuit — must pay "all expenses of the proceeding."  But for decades, the USPTO interpreted that language to mean relatively minor expenses, like travel costs and expert fees.  That changed in 2013, when the agency started seeking the substantially larger attorney fees.

The USPTO says the change was justified to pay for a more expensive type of case, but critics say the policy violates the American Rule, a doctrine that says litigants must pay their own expenses unless Congress expressly says otherwise.  Critics say the "all expenses” language is not that kind of explicit authorization.

The NYIPLA echoed that argument — pointing to the USPTO’s own longstanding approach.  “The [USPTO] itself has for over one hundred and seventy years taken the position that “expenses” do not include attorneys’ fees,” the group wrote.  “PTO did not even attempt to obtain reimbursement for attorneys’ fees under this definition until 2013.”

The case before the justices is being litigated by a drugmaker called NantKwest, which filed a de novo appeal to a district court after the USPTO denied the company a patent for a cancer drug.  The company was later forced to reimburse the USPTO’s attorney fees.  NantKwest won a ruling at the Federal Circuit striking down the policy, prompting the USPTO to take the case to the Supreme Court.  The justices agreed to hear the case in March, and the agency filed its opening brief in May.

Texas High Court: Detailed Evidence Needed to Prove Attorney Fees

June 24, 2019

A recent Texas Lawyer story by Angela Morris, “Detailed Evidence Needed to Prove Attorney Fee Award as Sanction High Court Rules,” reports that even when a litigant is sanctioned for filing a frivolous lawsuit and ordered to pay the opposing parties’ attorney fees, trial courts still need detailed evidence to rule on how much of the fee was reasonable, according to a recent Texas Supreme Court ruling.  The June 21 opinion in Nath v. Texas Children’s Hospital follows a chain of cases in recent years that blasted lawyers’ fee awards when the only thing to back them up was testimony and affidavits.  The justices have strongly urged attorneys to provide courts with detailed billing records when they’re proving attorney fee awards.

What’s new about Nath is that the state Supreme Court made it clear that the same evidence is required when fees are awarded as sanctions.  “All fee-shifting situations require reasonableness,” the opinion said.  “Before a court may exercise its discretion to shift attorney’s fees as a sanction, there must be some evidence of reasonableness because without such proof a trial court cannot determine that the sanction is ‘no more severe than necessary’ to fairly compensate the prevailing party.”

The ruling means that Texas Children’s Hospital and Baylor College of Medicine must return to the trial court to provide better evidence to back up a $1.4 million attorney fee award that they won as sanctions after petitioner Rahul Nath filed a frivolous lawsuit against them. 

The Supreme Court’s docket shows that Texas Children’s attorneys were Vinson & Elkins partner Pat Mizell, counsel Stacy Vu and Cathy Smith, and Copeland & Rice partner Russell Gips.  The opinion noted their fees totaled $726,000.  Meanwhile, Baylor’s fees were $644,500.  Its attorneys were Norton Rose Fulbright partners Joy Soloway and Shauna Clark, senior associate Jamila Mensah and senior counsel Jaclyn Caugherty, and Edward “Teddy” Adams Jr., vice president of litigation for Crown Castle International.

CA Judge Failed to Employ Lodestar Method to Calculate Fees

June 20, 2019

A recent Metropolitan News Enterprise story, “Judge Meiers Misread Retainer Agreement, Failed to Employ Lodestar Method,” reports that an attorney fee award in a case brought under the state’s “lemon law” has been reversed by the Court of Appeal for this district because the trial court judge misread the plaintiff’s retainer agreement with her lawyers and failed to utilize the lodestar method of calculation.  The opinion was authored by Dennis Perluss of Div. Seven.  It reverses an order by Los Angeles Superior Court Judge Barbara A. Meiers.

The plaintiff, Mary Hanna, sued Mercedes-Benz USA, LLC under the Song-Beverly Consumer Warranty Act—Civil Code §1790 et seq.—popularly referred to as the “lemon law.”  Represented by specialists in that area of law, O’Connor & Mikhov, she obtained a settlement on Jan. 27, 2017, for $60,000 plus costs—including attorney fees—and expenses.  She had paid the all-inclusive amount of $52,948.54 in 2007 for a new Mercedes-Benz, and had received $14,998.02 from her insurance company after the vehicle was damaged beyond repair in a May 2015 accident.  The settlement amount was, therefore, in excess of actual damages.

Although the law firm took the case on a contingency-fee basis, the retainer agreement spelled out hourly rates. It also provided: “In some instances we are able to recover additional damages above and beyond Client’s actual damages.  In only those instances where we are able to recover additional damages, 40% of those additional damages shall be due the Law Firm as additional attorney’s fees.”  Hanna and Mercedes were unable to agree on the amount of attorney fees—she wanted to use the lodestar amount of $172,712.50 and a multiplier of 1.5, with the product being $259,068.75—and, pursuant to the settlement agreement, the setting of fees was left to the court.

Using the lodestar method, Meiers awarded $45,869 for the period up to Jan. 21, 2016, the date of upon which Hanna apparently received a Jan. 20 settlement offer from Mercedes, with terms less favorable than those she ultimately accepted a year later.  For the period after Jan. 21, 2016, up to Jan. 27, 2017 when the settlement was reached, the judge awarded $15,000 which she reckoned to be 40 percent of the pay-out in excess of actual damages.  The total attorney-fee award was $60,869.

Perluss quoted the language in the retainer agreement relating to “additional fees” and said:  “Contrary to the trial court’s reading, this language clearly specified that O’Connor & Mikhov would receive its hourly rate for all time expended on the litigation, whether directed to the recovery of actual or additional damages, but it would also be entitled to a bonus equal to 40 percent of all additional damages recovered.  By misreading this language as providing for a percentage recovery of additional damages ‘in lieu of an hourly rate’ for those legal services, and then using its faulty interpretation of the retainer agreement as the sole basis for awarding only $15,000 of the fees incurred after January 21, 2016, the trial court committed plain error.”

He added: “Even if the trial court’s interpretation of the retainer agreement were correct, however, it would still have been error to award fees for legal work performed by O’Connor & Mikhov after January 21, 2016 based entirely on the law firm’s percentage share of civil penalties or other ‘excess’ monetary recovery, rather than using the lodestar figure—time spent multiplied by reasonable hourly compensation for each attorney…—as specified in the parties’ settlement agreement and mandated by Civil Code section 1794, subdivision (d), as the starting point for its analysis.”

That paragraph, part of the Song-Beverly Act, reads: “If the buyer prevails in an action under this section, the buyer shall be allowed by the court to recover as part of the judgment a sum equal to the aggregate amount of costs and expenses, including attorney’s fees based on actual time expended, determined by the court to have been reasonably incurred by the buyer in connection with the commencement and prosecution of such action.”  Perluss said the “trial court has broad discretion to increase or reduce the proposed lodestar amount based on the various factors identified in case law,” but that the initial inquiry must always be what number of hours were reasonably expended by counsel.

Wells Fargo Must Face Claim It Inflated Attorney Fee Request

June 19, 2019

A recent Law 360 story by Nathan Hale, “Wells Fargo Must Face Claim it Inflated Atty Fee Request,” reports that a Florida trial court erred in finding that borrowers could not sue Wells Fargo for expenses they allegedly incurred as a direct result of the bank "grossly" inflating its attorney fees claim after suing them for a loan default, a state appeals court said.  In its opinion, the Third District said the lower court's dismissal appeared to be the result of confusion over the issues and that Florida law clearly allows borrower 345 Carnegie Avenue LLC and loan backers Vladimir Galkin and Yakov Baraz to seek damages if the bank made an inaccurate fees claim.

"The hearing transcript reveals that the trial court conflated the issue of whether Wells Fargo was entitled to attorney's fees based on appellants' stipulated default on the loan documents, with the different issue of whether Wells Fargo's estoppel letter was inaccurate causing consequential damages to appellants," the appeals panel said. "It is clear to us that this confusion resulted in the dismissal of a cognizable claim."  The Third District said it was not weighing in on whether the borrowers could prove that Wells Fargo Bank NA breached their loan documents and Florida's covenant of good faith and fair dealing, but it said that at this stage in the litigation, the court must accept their allegations as true.

The dispute stems from a 2007 loan issued to 345 Carnegie by Wells Fargo's predecessor, Wachovia Bank.  The borrowers did not contest Wells Fargo's March 2014 claim that they committed several nonmonetary defaults, but they disputed the bank's claim that they also owed it more than $100,000 in attorney fees in connection with its enforcement and collection of the note, according to the opinion.  The borrowers claimed that amount was grossly inflated and inaccurate, but the bank refused to provide further proof justifying it, citing attorney-client privilege, the opinion said.

The borrowers attempted to pay the roughly $1.2 million amount the bank had demanded aside from the $100,000 in legal fees, but Wells Fargo refused to accept it.  As a result, the borrowers filed suit in May 2014 to try to prevent the bank from collecting on the note and foreclosing on a mortgage on commercial property owned by 345 Carnegie that partially secured the loan.  Wells Fargo filed a counterclaim, the borrowers stipulated to their liability on the loan default, and the trial court entered a partial final judgment in Wells Fargo's favor and released funds it was holding to the bank to cover those claims.  The court said it would rule separately on the reasonableness of the attorney fees claim, the opinion said.

In a second amended complaint, filed in October 2017, 345 Carnegie, Galkin and Baraz claimed that the fees dispute had caused them monetary damages because they were unable to refinance or sell the mortgaged property securing the loan, according to the opinion.  The trial court subsequently granted Wells Fargo's motion to dismiss that claim for failure to state a claim.

But the appeals court said the damages the borrowers claim they suffered as a result of Wells Fargo's deliberately inflating its fees request were separate and distinct from the question of their being required to pay attorney fees to the bank, and there is "little doubt" that Florida law recognizes such a claim.

State law requires a mortgage lender to provide the borrower with a written estoppel letter detailing not only the unpaid balance of the loans secured by the mortgage but also "any other charges properly due under or secured by the mortgage," the court pointed out.  And the legislature "expressly contemplated" a cause of action rising out of that obligation, including a line in the relevant statute that a prevailing party in a civil action arising from that section of law is entitled to attorney fees and cost, the opinion said.