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Category: Fee Issues on Appeal

Texas Energy Companies Can’t Block Rival’s Attorney Fee Win

October 6, 2017

A recent Law 360 story by Jess Krochtengel, “Texas Energy Cos. Can’t Block Rival’s Atty Fee Win,” reports that a Texas appeals court affirmed a $280,000 attorneys’ fee award to Crawford Hughes Operating Co., rejecting arguments from a group of energy companies that formerly worked with Crawford that a trial court wrongly granted a new trial on the fee issue.

A panel of the Fourteenth Court of Appeals held Crawford’s pleadings support a recovery of defensive attorneys’ fees.  The court also determined it lacked jurisdiction to consider arguments from Anglo-Dutch Energy LLC, Explorer Investments LLC and Saxton River Corp. that a trial court had wrongly allowed Crawford a new trial on attorneys’ fees.

The trial court had initially ruled Crawford could not recover any fees despite winning a jury trial in a dispute between the energy companies over bills for operating expenses incurred under multiple joint operating agreements.  But it granted Crawford a partial new trial limited to the fee issue and ultimately awarded the company a total of about $280,000 in fees.

The Anglo-Dutch group had argued the new trial was improperly granted because there was no good cause to allow Crawford an opportunity to fix a “strategic mistake” in how it had initially requested attorneys’ fees.  But the appellate panel said its authority to review new trial orders is limited, and that the circumstances in the Crawford trial don’t merit appellate review.

“The working interest appellants’ arguments on appeal do not invoke any of the scenarios in which appellate review is permitted,” the court said.  “Because this challenge does not fall within one of the narrow exceptions identified by the Supreme Court of Texas, we lack appellate jurisdiction to entertain the working interest appellants’ challenge to the new trial orders.”

The dispute over operating expenses was tried in Harris County District Court in November and December 2014 and a jury awarded the Crawford entities about $44,000 in damages and $233,000 in legal fees.  The trial judge initially struck Crawford’s fee award, finding the group did not properly attribute the fees to reflect the different entities, claims and counterclaims involved in the case.  But Crawford asked the court to modify the judgment and requested a partial new trial limited to the amount of fees it could recover.  The trial court agreed, prompting an earlier appeal from the Anglo-Dutch parties.

In December 2015, the Anglo-Dutch group asked the Texas Supreme Court to block Crawford from getting a new trial on the attorneys’ fee issue.  They argued Crawford was trying to get a “mulligan” after making a strategic mistake in how it marshalled and presented its evidence.

When the case returned to the trial court, the parties stipulated the amount of fees Crawford Hughes Operating had incurred.  A modified final judgment issued in May 2016 awarded Crawford Hughes Operating about $42,000 in damages against Anglo-Dutch and $2,600 in damages against Explorer Investments and Saxton River.

The modified judgment awards Crawford Hughes Operating about $240,000 against Anglo-Dutch and $7,400 against Explorer and Saxton River for attorneys’ fees incurred in defending the case and another $31,000 in fees against Anglo-Dutch and $2,000 in fees against Explorer and Saxton River for what it incurred litigating its counterclaim.

The case is Anglo-Dutch Energy LLC et al. v. Crawford Hughes Operating Co. et al., case number 14-16-00635-CV, in the Texas Court of Appeals for the Fourteenth District.

SCOTUS to Address False Claims Act Fee Awards

October 2, 2017

A recent Texas Lawyer story by Marcia Coyle, “False Claims Act Cases Are Piled Up at SCOTUS: What to Watch,” reports that the U.S. Supreme Court terms opens with several issues to be addressed by the nation’s highest court.  Among the issues is attorney fee awards in False Claim Act litigation.  The case under SCOTUS review:

U.S. ex rel. Grynberg v. Agave Energy Co. arrives at the high court after two decades of litigation.  The issue before the justices is whether the lower court had authority to award $17 million in legal fees to the defendant after deciding that the whistleblower’s claims were barred by a certain provision that can block a suit from someone who was not the first to bring the claims.  Ronald Barkley of Denver’s Anderson Barkley represents Jack Grynberg.  Michael Beatty of Denver’s Beatty & Wozniak is counsel to Agave.

How to Determine When Litigation Costs Include Attorney Fees

September 7, 2017

A recent Texas Lawyer article by Trey Cox and Jason Dennis, “How to Determine When Litigation Costs Include Attorney Fees,” covers attorney fee recovery in Texas.  This article was posted with permission.  The article reads:

Under the American Rule, a party may only recover attorney fees on certain narrow claims.  When a party has some claims that support the award of attorney fees and some claims that do not, then the party must segregate the recoverable attorney fees from the nonrecoverable attorney fees, as in Tony Gullo Motors I v. Chapa, 212 S.W.3d 299, 311 (Tex. 2006).  The need to segregate fees is a question of law, and the courts of appeals apply a de novo standard of review.

Similarly, when a plaintiff has multiple related claims against multiple defendants, the plaintiff is required to segregate the fees owed by one defendant from any fees incurred while prosecuting the claim against any settling defendants, according to Stewart Title Guaranty v. Sterling, 822 S.W.2d 1, 11 (Tex. 1991).

Generally, where a party has failed to properly segregate their claims, and an award of attorney fees has been erroneously awarded, the case requires remand in order to determine what attorney fees are recoverable.  However, it is important to note that the subsequent decision in Green International v. Solis, 951 S.W.2d 384, 389 (Tex. 1997), did state that a failure to segregate fees "can result in the recovery of zero attorneys' fees."  The court did not explain the circumstances under which an award of zero attorney fees would result from a failure to segregate.  The evidence of unsegregated fees requiring a remand on the issue of attorney fees is more than a scintilla of evidence.

The party seeking fees may only present evidence relating to services that were necessarily rendered in connection with the claims for which attorney fees are recoverable, as in Flint & Associates v. Intercontinental Pipe & Steel, 739 S.W.2d 622, 624 (Tex. App.—Dallas 1987).  If a party tries to present evidence relating to services that were rendered in connection with claims that attorney fees are not recoverable, a party must object.  Failure to object to nonrecoverable attorney fees constitutes waiver (see Green International, at 389).  The issue of failing to segregate is generally preserved "by objecting during testimony offered in support of attorneys' fees or an objection to the jury question on attorneys' fees," as in McCalla v. Ski River Development, 239 S.W.3d 374, 383 (Tex. App.—Waco 2007).

Inexorably Intertwined Damages

In Texas, an exception to segregating evidence of attorney fees developed over the years.  Where the attorney fees rendered were in connection with claims arising out of the same transaction, and were so interrelated that their "prosecution or defense entails proof or denial of essentially the same facts," it was held that the segregation requirement could be avoided (see Stewart Title at 11).  The initial exception was phrased such that if an attorney could claim that the "causes of action in the suit are dependent on the same set of facts or circumstances, and thus are 'intertwined to the point of being inseparable,' the parties suing for attorney fees may recover the entire amount covering all claims."

After the holding in Stewart, which first acknowledged an exception to the requirement of segregating fees for claims that are intertwined, the courts of appeals were flooded with claims that recoverable and unrecoverable attorney fees are so intertwined that they could not be segregated. (See, e.g., Tony Gullo at 312.)  For many years after the recognition of the exception to segregation, parties tried to escape the segregation requirement by generically claiming that they could not segregate the claims.  They relied on the recognized exception to the duty to segregate when the attorney fees rendered were in connection with claims arising out of the same transaction and were so interrelated that their prosecution or defense entailed "proof or denial of essentially the same facts."

The Texas Supreme Court has now reined in this exception, providing that if attorney fees relate solely to a claim for which such fees are not recoverable, a claimant must segregate recoverable from unrecoverable fees, but when discrete legal services advance both a recoverable and unrecoverable claim that they are so intertwined, they need not be segregated.

For example, the court explained that certain legal services such as: "requests for standard disclosures, proof of background facts, depositions of the primary actors, discovery motions and hearings, [and] voir dire of the jury" wouldn't be barred from recovering attorney fees just because they served multiple purposes.  However, the court was careful to point out that the mere presence of intertwined facts will not make tort fees recoverable. The new exception to the necessity of segregating fees is that "only when discrete legal services advance both a recoverable and unrecoverable claim" then they can be considered as being so intertwined as to not need segregation.  The segregation requirement can be met by offering expert opinion as to how much time was spent in relation to the recoverable claims versus the unrecoverable claims.

Defending Against Segregation

Whether supporting or attacking an award of attorney fees, the expert must deal specifically with segregation of fees.  The party must segregate fees incurred in connection with nonrecoverable claims, claims against other parties, or other lawsuits.

Trey Cox is a partner at Lynn Pinker Cox & Hurst.  He has spent nearly 20 years helping clients, from Fortune 500 corporations to entrepreneurs, resolve large, complicated and often high-profile business disputes.  Jason Dennis is a partner at the firm.  He has trial and appellate experience representing a diverse group of clients from Fortune 500 companies, to bankruptcy trustees, to individuals both as plaintiffs and defendants.

Tenth Circuit Affirms In Camera Only Review Rule of Billing Records

August 29, 2017

A recent Law 360 story by Christine Powell, “Tribal Co. Can Keep Atty Fees in $3M Gov’t Contract Row,” reports that the Tenth Circuit cemented an attorneys’ fee award given to one of the Fort Sill Apache Tribe's businesses and its leadership after escaping Team Systems International LLC’s lawsuit alleging that they breached an agreement for developing government contracts by failing to pay it nearly $3 million.

In a brief, unanimous ruling, a panel of three of the circuit court’s judges affirmed an Oklahoma district court’s award of $29,234 in attorneys’ fees to Fort Sill Apache Industries, its president and CEO Jeff Haozous and its board of directors as the prevailing party on TSI’s claims.

The attorneys’ fee award came after the Tenth Circuit last year separately affirmed the dismissal of TSI’s allegations that FSAI breached an agreement under which TSI supported FSAI’s work on government construction contracts by failing to fully pay it, concluding that TSI had failed to state a claim upon which relief could be granted.

When appealing the attorneys’ fee award, TSI had argued that the lower court abused its discretion by conducting an in camera review of certain unredacted billing and time records because TSI could not meaningfully challenge the reasonableness of the fee bid, but the panel rejected that contention.

“This court has held that a court reviewing a fee request did not abuse its discretion in denying the responding party access to the itemized time records and conducting in camera review of those records,” the panel said.  “Here, TSI did not pursue other avenues of discovery or contend on appeal that alternative discovery would have been inadequate.  Moreover, TSI has not shown that the district court’s reasons for its ruling were inadequate.”

The case is Team Sys. International v. Haozous et al, case number 16-6277, in the U.S. Court of Appeals for the Tenth Circuit.

Smoker Fights to Keep Fee Award Against Philip Morris

August 24, 2017

A recent Law 360 story by Carolina Bolado, “Smoker Fights to Keep Fee Award in $35M Case,” reports that a smoker who won an award of attorneys' fees and costs on top of a $35 million jury award asked the Florida Supreme Court to reject an appeal of the fee award by Philip Morris and Liggett, arguing that there is no divide in the lower courts on whether or not email service is required to comply with the offer of judgment statute.
 
Richard Boatright and his wife urged the Florida Supreme Court to deny the petition by Philip Morris USA Inc. and Liggett Group LLC and leave in place a Second District ruling that said the trial court erred in denying a motion for attorneys' fees and costs because the Boatrights had served the defendants' attorneys by mail and not email.

The Boatrights had sent four settlement proposals to the tobacco companies before trial.  Under the offer of judgment law, they would be entitled to attorneys' fees and costs after their win at trial, but the judge ruled that they had not strictly complied with the law because they did not send the proposals via email.  The Second District reversed the decision, ruling that mandatory email service requirement does not apply to pretrial proposals for settlement.

The tobacco companies argue that the decision directly conflicts with a February 2017 ruling from the Third District and conflicts with a Fourth District ruling in an analogous case from 2014.

But in their brief, the Boatrights said the Third District's decision was limited to specific requirements of the email service rule and does not directly conflict with the Second District's decision in their case.  The couple added that the Fourth District's decision does not concern proposals for settlement.

Instead of taking up this case, the Boatrights urged the court to ask the Florida Bar’s Rules of Judicial Administration and Civil Rules Committees to propose amendments to clarify the rules regarding email service.  “Amendments to the rules will afford greater certainty to litigants and ensure statewide uniformity in the rules' interpretation and application,” they said in the brief.

The case is Philip Morris USA Inc. et al. v. Boatright et al., case number SC17-897, in the Supreme Court of Florida.

Seventh Circuit Cuts Fee Award in Half

August 18, 2017

A recent NLJ story by Amanda Bronstad, “Fees in Class Action Over Moldy Washing Machines Nearly Halved,” reports that a federal appeals court has slashed plaintiffs' attorney fees by nearly half...

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