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Category: Fees as Sanctions

Article: Five Lessons for Recovering Attorney Fees in Texas

February 13, 2021

A recent article by Amanda G. Taylor, “Recovering Attorney’s Fees in Texas: Five Lessons” in BizLit News Blog reports on recovering attorney fees in Texas.  This article was posted with permission.  The article reads:

Obtaining an award of attorneys’ fees might be the final step in a long-waged litigation battle but to do so successfully requires careful planning and diligence from the outset of a case.  The Texas Supreme Court recently clarified the evidence required to obtain and affirm such an award.  Rohrmoos Venture v. UTSW DVA Healthcare, LLP, 578 S.W.3d 469 (Tex. 2019).  The Texas Supreme Court also recently confirmed that these evidentiary standards apply equally when fees are sought to be recovered as a sanction.  Nath v. Texas Children’s Hosp., 576 S.W.3d 707, 710 (Tex. 2019).  To best serve a client’s interests of recovering attorneys’ fees in Texas, whether as a prevailing party or as a sanction, lawyers should adhere to five lessons from Rohrmoos.

Lesson One:  Confirm a legal entitlement to recover fees.  “In Texas, as in the federal courts, each party must pay its own way in attorney’s fees … unless a statute or contract provides otherwise.”  Rohrmoos Venture, 578 S.W.3d at 484.  Certain claims, such as a breach of contract claim brought under Chapter 38 of the Texas Civil Practices and Remedies Code, entitle a prevailing party to recover attorneys’ fees.  Other claims, such as a common law fraud claim, do not afford such a remedy.  In establishing your initial case strategy, it is important to consider which claims will and will not allow for recovery of fees, and advise your client about the pros and cons of pursuing each claim accordingly.  Also, be aware of fee-shifting procedural tools (such a motion to dismiss under the Texas Citizens Participation Act) and various Texas statutes and rules that allow for recovery of fees as a sanction (such as Civil Practice and Remedies Code Chapters 9-10, and Texas Rule of Civil Procedure 215).

Lesson Two: Keep accurate, contemporaneous billing records.  Although billing records are not absolutely required to prove the amount of reasonable and necessary fees, it is “strongly encouraged” to submit such proof in support of attorneys’ fees.  Rohrmoos Venture, 578 S.W.3d at 502.  It is much easier to review, summarize, and testify about the work performed (often years later) if you have been diligent in your billing practices throughout.  Time should be kept in a manner that demonstrates the “(1) particular services performed, (2) who performed those services, (3) approximately when those services were performed, (4) the reasonable amount of time required to perform the services, and (5) the reasonable hourly rate for each person performing the services.”  Id.  It is also advisable to keep time in a manner that is specific enough to cover the topic but without legalese and without so much detail that heavy redactions become necessary.  Fact finders prefer to read invoices in plain English without the interruption of hidden text.

Lesson Three:  Your fee agreement does not control the amount awarded.  “[A] client’s agreement to a certain fee arrangement or obligation to pay a particular amount does not necessarily establish that fee as reasonable or necessary.”  Id. at 488.  Translation: even if you have agreed to handle the matter for a flat fee or contingency fee, you still must demonstrate that the amount of fees sought for recovery are reasonable and necessary based on the work performed and the time incurred.  Regardless of the fee arrangement with your client, keeping accurate and contemporaneous billing records is important.

Lesson Four: Remember to timely designate fee experts.   “Historically, claimants have proven reasonableness and necessity of attorney’s fees through an expert’s testimony—often the very attorney seeking the award.”  Id. at 490.  “[C]onclusory testimony devoid of any real substance will not support a fee award.”  Id. at 501.  Because expert testimony will be required, the attorney must remember to designate herself and any other attorney who will offer an opinion about the reasonableness and necessity of the fee amount(s) as an expert witness in compliance with the scheduling order or discovery control plan governing the case.

Lesson Five: Understand the “Texas two-step” calculation method.  At step one, calculate the “base” or “lodestar” amount by multiplying the “reasonable hours worked” by a “reasonable hourly rate.”  Id. at 498.  This is an “objective calculation” that yields a “presumptively reasonable” amount.  Id. at 497-98, 502.  The determination of what is a reasonable market rate and what is a reasonable amount of time will typically include consideration of the following factors: (1) the time and labor required, (2) the novelty and difficulty of the questions involved, (3) the skill required to perform the legal service properly, (4) the fee customarily charged in the locality for similar legal services, (5) the amount involved, (6) the experience, reputation, and ability of the lawyer or lawyers performing the services, (7) whether the fee is fixed or contingent and the uncertainty of collection, and (8) the results obtained.  Id. at 500.  At step two, “adjust[] the base calculation up or down based on relevant considerations … [that were not] subsumed in the first step.”  Id.  “If a fee claimant seeks an enhancement, it must produce specific evidence showing that a higher amount is necessary to achieve a reasonable fee award.”  Id. at 501. Remember that only “rare circumstances” justify such an adjustment.  Id. at 502.

Following these five lessons from the outset of a case will be beneficial to the expert testifying about the amount of fees at the end of a case.  More importantly, it will benefit your client’s best interest in obtaining a monetary award and being able to have that award affirmed on appeal.

Amanda G. Taylor serves as Practice Group Leader of Butler Snow LLP’s Appellate Group and practices from the firm’s Austin, TX office. As a Board-Certified Civil Appellate specialist, Amanda helps to shape successful case strategy from the outset of litigation through the end of an appeal.  Amanda is a detail-oriented lawyer who represents her clients with passion, stays current on emerging trends and issues, and brings a practical perspective to problem solving.  She has a broad range of experience handling complex civil disputes regarding contracts, fraud, tax, insurance, products, employment, real property, and trust and estates.  Amanda is also committed to community service through a number of positions in her State and Local Bar Associations.

Billing Record Proves Defense Fees as Sanctions in Bad Faith Litigation

January 23, 2021

A recent Texas Lawyer story by Angela Morris, “$1.8M in Attorney Fees Awarded to Vinson & Elkins, Norton Rose Fulbright Clients,” reports that a plastic surgeon who has litigated a dispute for 14 years with a Houston hospital and medical school must pay over $1.81 million of their lawyers’ fees for sanctions for filing frivolous litigation.  The large fee award will go to lawyers at Vinson & Elkins and Norton Rose Fulbright, who since 2006 have defended Texas Children’s Hospital and Baylor College of Medicine against claims by Dr. Rahul Nath, in seemingly never-ending litigation that has twice landed on the Texas Supreme Court’s doorsteps.

During multiple appeals, the defense lawyers have succeeded in upholding the hefty sanctions, levied because the surgeon filed suit for an improper purpose and in bad faith.  Now, the Fourteenth Court of Appeals again affirmed the sanctions award: $644,500 for Baylor and for Texas Children’s Hospital, $726,000 in trial fees and nearly $439,500 in appellate fees.

The hospital’s attorneys in the trial court were Vinson & Elkins partners Pat Mizell and Stacey Vu and associate Brooke Noble, and the appellate lawyer was counsel Cathy Smith.  The medical school’s trial lawyers were Norton Rose Fulbright partners Shauna Clark and Jamila Mensah, and its appellate lawyer was of counsel Joy Soloway.

The Fourteenth Court opinion explained that Nath used to work for Baylor and he was affiliated with Texas Children’s Hospital.  The working relationship started deteriorating in 2003 because colleagues said Nath billed too much, did unnecessary procedures and was unprofessional.  He sued in 2006 for defamation and tortious interference with business relationships.  In addition to Baylor and Texas Children’s Hospital, another defendant was a plastic surgeon who had been Nath’s supervisor at work.  Later, Nath abandoned those claims and filed a new one for intentional infliction of emotional distress.

But the trial court granted the defendants a summary judgment win.  Later, the judge granted sanctions against Nath for filing the case with an improper purpose and bad faith, without having facts to back the claims.  Nath’s sanctions related to his pleadings against his former supervisor.

The sanctions award has been tied up in appeals ever since it came down.  Two times, his arguments went all the way to the Texas Supreme Court.  First in 2014, the high court found it was correct to sanction Nath for using litigation to uncover damaging personal information about his supervisor and put it into the public domain, just because he wanted for force a favorable settlement.  But the justices still sent the case back to the trial court to determine if the hospital and medical school’s litigation tactics had caused higher fees.  The trial court later ruled the defendants hadn’t done anything to bump up expenses.

Nath appealed again.  In 2019, the Supreme Court determined that even when a party must sanction for frivolous litigation, a trial court needs to have detailed evidence so that it can rule on how much of the fee was reasonable.  The case again went back down so the defendants could prove up their fees with more evidence.  The hospital and medical school filed new fee applications and attached 350 pages of billing records to back up the amounts.

Again appealed by Nath, the 14th Court found the hospital and medical school’s evidence of fees was good enough: the billing records had dates, times, descriptions and amounts for lawyers who who worked on the case.  The appellate court did change one thing.  As for future appellate fees, the hospital had evidence that based on the amount of time that various levels of Vinson & Elkins lawyers would spend, each billing between $420 and $850 per hour, the fees would come to $439,425.  For some reason the trial court awarded $489,800.  The Fourteenth Court determined the additional $50,375 wasn’t backed by evidence, and sent the case back to the trial court with a suggestion to cut that amount.

Federal Circuit Grants Attorney Fees in ‘Demeaning’ Goat IP Case

September 10, 2020

A recent Law 360 story by Tiffany Hu, “Fed. Circ. Grants Atty Fees in ‘Demeaning’ Goat IP Case, reports that the Federal Circuit ordered a New York attorney to pay legal fees after the U.S. Supreme Court refused to take up his challenge to a restaurant's registered trade dress that he personally found "demeaning" to goats.  In a nonprecedential order, a three-judge panel found that Queens-based attorney Todd M. Bank owes $28,523 in attorney fees to Al Johnson's Swedish Restaurant & Butik in his attempt to invalidate the restaurant's trade dress for goats on a grass-covered roof.

The fee order comes after the high court in June denied a certiorari petition filed by Bank, in which he argued that the Federal Circuit incorrectly found that his personal concern that the mark was "demeaning" to goats did not give him standing to challenge the trade dress.  "What can I say when the same judges who wrongly sanctioned me proceed to ignore all of the arguments that I made in response to the defense counsel's fee application, and instead abuse their power by ruling by fiat?"  Bank, who represented himself, told Law360 in an email.

Katrina G. Hull of Markery Law LLC, an attorney for the restaurant, said in an email that she and her client were "pleased with the court's order."  Al Johnson's Swedish Restaurant, which is based in Sister Bay, Wisconsin, was issued a registration in 1996 for a trade dress that "consists of goats on grass roofs," according to filings.

In 2011 and 2012, Bank petitioned to cancel the registration on behalf of a previous client, a photographer named Robert Doyle.  The Trademark Trial and Appeal Board found both times that Doyle failed to establish standing, saying in 2012 that the photographer's alleged interest in "dining and shopping in such other restaurants and gift shops with goats on their roofs" was insufficient.

Bank filed the third and latest petition "as attorney and client" last October, the restaurant said.  In asking to cancel the mark, Bank argued that the mark was offensive for being "demeaning" to goats and that the registration harms the "respect, dignity and worth of animals."

But siding with the TTAB, a Federal Circuit panel in December ruled that Bank's concern for the animals did not give him standing because he had no other interest in the trade dress.  Bank was ordered to pay the restaurant's legal fees for filing a "frivolous" appeal, with the panel noting that the TTAB has thrice dismissed his petitions to cancel the trade dress for the same reason.

Insurer Wins Recovery of $5.5M in Defense Fees

September 7, 2020

A recent Law 360 story by Daphne Zhang, “Insurer Win ‘Incompetent’ Atty Fight to Recoup $5.5M,” reports that a California federal judge axed a claims handler's suit seeking additional coverage of its legal bills from an insurer that it says hired a bad lawyer to fend off underlying litigation involving a car crash, ruling instead in favor of the insurer's counterclaim to recoup over $5.5 million in defense and arbitration costs it paid.  U.S. District Judge Janis L. Sammartino said that American Claims Management Inc.'s coverage claims are barred by Allied World Surplus Lines Insurance Co.'s policy exclusions, and since some of the claim handler's legal bills should not have been covered, the insurer is entitled to recoup its over $5.5 million payment from ACM.

Allied World has sufficiently shown that its policy's claims services and dishonest acts exclusion precludes coverage since ACM acted in bad faith and concealed information in its handling of insurance claims in the underlying case, Judge Sammartino said.  The judge dismissed ACM's allegation that Allied World breached its duty of defense because the claims handler failed to show that attorney Alan Jampol of Jampol Zimet, appointed by Allied World to defend ACM in the underlying suit, was incompetent or inexperienced, according to the order.

ACM processed claims for QBE Insurance Corp. As of October 2010, it retained Allied World to insure its work for up to $5 million and contracted with other insurance companies for an additional $10 million in coverage.  In the underlying case, a driver insured by QBE crashed into a vehicle and injured a family.  When processing the injured family's claim, ACM missed a March 2011 deadline that would have capped QBE's exposure at $30,000.  The family subsequently won a $21 million jury verdict in the underlying case, which QBE later settled for $15 million, according to filings.

QBE then offered to settle with ACM for $15 million, but Allied World allowed the matter to go to arbitration.  In July 2017, an arbitration panel awarded QBE more than $18.5 million, according to court papers.  With the portion of the over $5 million policy that Allied World paid and the $10 million paid by its other insurance carriers, ACM wanted Allied World to pay the remaining $4.9 million of the arbitration award and sued them.

In the order, Judge Sammartino said that Allied World's policy exclusions bars coverage for acts of bad faith and dishonest conduct in handling an insurance contract, and QBE specifically alleged that ACM handled the car accident claim in bad faith.  The judge said the arbitration panel in the underlying case found that ACM "chose to withhold from QBE evidence of its own negligent performance," provided QBE with "inadequate and misleading" information, and that ACM "has repeatedly tried to conceal and misrepresent the fact of timely receipt of the letter demand" from the injured family.

Additionally, the court has found that Jampol was competent at the time of his appointment by Allied World to defend ACM, Judge Sammartino said. ACM has alleged that Jampol was inexperienced with car accident cases and had never handled a "bad-faith" case as complicated as the underlying suit, according to filings.

"Plaintiff gives no reason why an auto accident case such as this would be more complex than other bad-faith insurance claims that Jampol had experience handling.  Nor does plaintiff identify any skills or knowledge necessary to litigate an auto accident case that Jampol lacked," the judge said.

Attorneys Stuck With Slashed Attorney Fees After USAA Trial Win

July 20, 2020

A recent Law 360 story by Daniel Siegal, “Atty Stuck With Slashed Fees After USAA Bad Faith Trial Win” reports that an Oregon federal judge refused to reconsider his ruling awarding only $179,000 of the $715,000 in fees requested by lawyers who helped a woman convince the court that USAA had acted in bad faith when it refused to cover her crash with an uninsured driver.  In a two-page order, U.S. District Judge Michael H. Simon did not go into the details of the arguments made by plaintiff Peggy Foraker's attorneys, but simply stated the legal standard for a motion for reconsideration and said having reviewed the motion and associated briefing, he found "no basis for reconsideration."

Foraker attorney Stephen Hendricks of Hendricks Law Firm told Law360 via email that his client intends to appeal the attorney fee ruling in addition to other matters going to the merits of the suit.  Foraker, who was hurt when a suspect fleeing from police crashed into her, won two bench trials in her suit against her insurer, which had refused to pay out an uninsured motorist policy.  In the first phase, Foraker obtained a ruling that USAA Casualty Insurance Co. owed her the full $1 million limit of that policy, and in the second phase, Judge Simon found USAA acted in bad faith and awarded Foraker $323,000.

Last month, however, Judge Simon ruled that Foraker's lawyers deserved much less in legal fees than the $715,000 lodestar they requested, because their wins in the second phase were limited — unlike the first phase, where they got $1.31 million in fees.  Judge Simon wrote that roughly three-quarters of the attorneys' time went to unsuccessful arguments and that this was "consistent with the results," and thus it made sense to award them one-quarter of their lodestar figure.  Judge Simon also called the attorneys' 340-page sheaf of submitted bills "massive but poorly organized."

In their motion for reconsideration and supporting briefing, Foraker's attorneys said they understood the case had been "exhausting" and that the court is "weary of this case," but pressed their case that the reduced attorney fee award would have a chilling effect on future bad faith insurance cases under Oregon law.  "As the first publicly watched case on the subject, the court's fee award sends a clear message that all such cases should be abandoned, as even the very successful trial outcome of such a case will be compensated at the rate of 25% of hours incurred," Foraker's attorneys wrote.  "This ignores the mandates of Oregon law and strongly disincentivizes similar plaintiffs from pursuing other meritorious claims."

The attorneys also argued that the supposedly poorly organized time records were organized the same way as the ones submitted for the phase one trial, which were accepted by the court.  Finally, in their reply brief filed on July 13, Foraker's lawyers drew a comparison between their bid for attorney fees and the recent protests for racial justice in Portland.