February 22, 2017
A recent Law 360 story by Michelle Casady, “Texas High Court Told to Nix Attys’ Fee Discovery Ruling,” reports that National Lloyd's Insurance Co. urged the Texas Supreme Court to upend a lower court ruling compelling discovery of its attorneys’ fee information in litigation with property owners who allege the insurer underpaid their damage claims, contending that information is privileged.
The justices heard arguments on whether National should be able to keep that fee information under wraps — a fight that stems from four property insurance cases in which the property owners argued they had been shortchanged on claims following two hailstorms in Hidalgo County, Texas, in March and April 2012.
Scot Doyen, arguing on behalf of the insurer, told the court that siding with the property owners would “add layers of complexity to an area of the law that is otherwise clear and workable,” that the information sought is privileged and that the “relational nature” of fee consideration renders its fees irrelevant. Such fees hinge on "the relationship between the party and the lawyer, not the relationship between the party and the other party,” he told the court. “It is relational to that specific lawyer to client relationship," Doyen said.
Arguing on behalf of the insured property owners, Jennifer Bruch Hogan rejected the notion that an opposing counsel's fee information, including hourly rates and total hours billed, is “patently irrelevant,” though she said the tasks themselves may be privileged information subject to redaction.
“The second point I want to make is that the defendants have voluntarily designated their lead trial lawyer as a testifying expert, and not as a testifying expert on their own attorneys' fees, but as a testifying expert who can challenge the plaintiffs' attorneys' fees as unreasonable and unnecessary,” she also told the court, adding that the arrangement had put the case in "an unusual posture."
In its petition for writ of mandamus filed with the state high court in August 2015, National argued that a defendant's fees are irrelevant, and that there are other methods in place — including the lodestar method and Arthur Andersen factors — that can be used without compelling a party to turn over rate and fee information 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 attorneys' fee information, which it said is reflective of a split in other state and federal courts as well. It said that the state 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.
As part of the underlying legal battle, the property owners were seeking damages and attorneys' 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 for additional discovery on attorneys’ fee information, including rates, invoices, payments and audits. The insurers objected.
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.