SCOTX CLARIFIES STANDARD FOR PROVING UP ATTORNEY’S FEES

Rohrmoos Venture v. UTSW DVA Healthcare, LLP
Supreme Court of Texas, No. 16-0006 (April 26, 2019)
Justice Green (opinion available here)

Kelli Hinson

This opinion is a must read for any attorney seeking to recover attorney’s fees from an opposing party. The Court took the opportunity in Rohrmoos to provide a primer on the evidence necessary to prove up reasonable and necessary attorney’s fees, and disapproved of language in recent cases out of the Dallas Court of Appeals suggesting that testimony about the attorney-fee expert’s experience, the total amount of fees, and the reasonableness of the fees charged is sufficient to support an award. It emphasized that, while such conclusory evidence may be sufficient to survive a no-evidence challenge, it is not sufficient to support an actual award of attorney’s fees.

At the outset, the Court noted there is no legal distinction between the phrases “reasonable and necessary attorney’s fees” and “reasonable attorney’s fees.” In either case, “when a claimant wishes to obtain attorney’s fees from the opposing party, the claimant must prove that the requested fees are both reasonable and necessary.” And the amount contracted between attorney and client is relevant, but is not conclusive on the issue of reasonableness.

The Court explained that, although the lodestar method and the Arthur Andersen factors are “two seemingly different methods” for evaluating attorney’s fees, the lodestar method was always meant simply as a short-hand for the Arthur Andersen factors as opposed to a separate test or method of proof. After a review of both federal and state precedent on attorney’s fees, the Court held the “fact finder’s starting point for calculating an attorney’s fee award is determining the reasonable hours worked multiplied by a reasonable hourly rate, and the fee claimant bears the burden of providing sufficient evidence on both counts.” Sufficient evidence 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 required to perform the services, and (5) the reasonable hourly rate for each person performing such services. Charges for duplicative, excessive, or inadequately documented work should be excluded. Although there is no per se requirement to create and introduce contemporaneous billing records, “billing records are strongly encouraged to prove the reasonableness and necessity of requested fees when those elements are contested.” (Emphasis in original).

If properly supported by evidence, this “lodestar” calculation is presumed to reflect the reasonable and necessary attorney’s fees. The lodestar calculation reflects most of the relevant Arthur Andersen factors and, therefore, an enhancement or reduction of the lodestar figure cannot be based on a consideration that is subsumed in the initial calculation (such as time and labor required, and the fee customarily charged for similar services). In order to achieve an enhancement or reduction of the lodestar figure, a litigant must produce specific evidence that would overcome the presumption of reasonableness.

For several years, the pendulum has been swinging toward courts requiring less evidence to support an attorney’s fee award, but this opinion firmly bats the pendulum back in the other direction.

NO, YOU CANNOT USE A TEMPORARY INJUNCTION TO SEQUESTER FUNDS UNRELATED TO YOUR CLAIM JUST SO YOU CAN COLLECT A POTENTIAL FUTURE JUDGMENT.

RWI Construction, Inc. v. Comerica Bank
Dallas Court of Appeals, No. 05-18-00265-CV (April 12, 2019)
Justices Brown, Schenck (Opinion, linked here), and Pedersen, III

Derrick R. Ward

Comerica Bank sued Lone Star, a private equity fund, and several of its portfolio companies after those portfolio companies failed to pay a loan guaranteed by Lone Star. The accounts receivable, inventory, equipment, fixtures, and other personal property of the portfolio companies served as collateral for the loan. Because the portfolio companies were insolvent and did not have assets adequate to cover the balance of the loan, Comerica sought and obtained a temporary injunction preventing Lone Star from dissipating funds received from a recent capital call to prevent those funds from becoming unavailable to satisfy Comerica’s claim on the loan and guarantee. On appeal, Lone Star argued the district court had abused its discretion because Comerica had not established it would suffer irreparable injury for which it had no adequate remedy at law.

The Dallas Court of Appeals held the lower court had abused its discretion by failing to follow established precedent prohibiting trial courts from issuing injunctions to freeze defendants’ assets simply to assure payment of future judgments. The Court echoed concerns expressed by the United States Supreme Court that allowing for such injunctions would create a race to the courthouse among creditors where insolvent or nearly insolvent debtors were concerned—with the fastest creditor “licensing himself, as first hog to the trough, to all of its contents.” Further, the Court said, such a practice would render obsolete statutory remedies like garnishment, attachment, and receivership.

The Court distinguished this general rule, however, from instances in which “there is a logical and justifiable connection between the claims alleged and the acts sought to be enjoined, or where the plaintiff claims a specific contractual or equitable interest in the assets it seeks to freeze.” Of the millions Comerica sought to sequester, $800,000 was an accounts receivable payment received by one of the insolvent portfolio companies, which Lone Star had then transferred to itself and refused to turn over to Comerica. Because that money was collateral for the loan in question, the Court found it was logically and justifiably connected to Comerica’s breach-of-contract claim. It therefore affirmed the trial court’s temporary injunction with respect to that amount.

Finally, the Court rejected Lone Star’s argument that the trial court’s failure to find it insolvent prevented Comerica from demonstrating an inadequate remedy at law. While insolvency can be sufficient to show an inadequate remedy, the Court explained, it is not necessary. Inadequacy might be shown, as in this case, by a defendant’s limited resources and an unwillingness to pay.

LACHES IN THE CYBER AGE: WHEN THE JUDGE SAYS “GRANTED” BY EMAIL, CAN YOU WAIT FOR A SIGNED ORDER BEFORE PURSUING MANDAMUS?

In re Yamaha Golf-Car Co.
Dallas Court of Appeals, No. 05-19-00292-CV (April 8, 2019)
Justices Bridges, Osborne, and Carlyle (Opinion, linked here)

Neil R. Burger

In this mandamus proceeding, the Dallas Court of Appeals held that the relator waived its right to pursue mandamus relief by failing to timely challenge a trial court ruling contained in an email to the parties, even though no signed, written order was issued until months later.

The underlying lawsuit involved injuries to a child caused by a golf-car accident. The defendant, Yamaha, moved to designate emergency medical care providers as responsible third parties under Chapter 33. Plaintiffs filed a motion to strike, asserting that Yamaha had failed to meet the pleading and proof requirements of Chapter 74 concerning medical-care providers in emergency situations.

A month after the court held a hearing on that and other motions, the Judge sent an email to the court administrator stating that she needed “the following orders,” and listing the pending motions with an indication as to the court’s ruling on each, including that the motion to strike was “Granted.”  The court administrator forwarded the Judge’s email to all counsel, and requested orders be submitted.

The court did not sign a formal order denying the motion to strike for another seven months. Yamaha filed its mandamus petition one month after that, only three weeks before trial. Without considering the merits of the order striking the designation, the Court of Appeals determined that Yamaha’s mandamus was barred by laches because it had waited eight months after the Judge’s email announcing her decision before seeking mandamus relief. The Court rejected Yamaha’s argument that the Judge’s email was not sufficiently specific, and found that “signing the order was merely a ministerial act.”

So, the next time a court announces a ruling orally, in an email, or in some other informal fashion, think twice about waiting for a signed, written order before pursuing mandamus.

THUS SAYETH THE TEXAS SUPREME COURT: LIMITATIONS FOR CONSPIRACY GOVERNED BY LIMITATIONS FOR THE UNDERLYING TORT

Agar Corp. v. Electro Circuits International, LLC
Supreme Court of Texas, No. 17-0630 (April 5, 2019)
Opinion by Justice Devine (linked here)

Ken Carroll

Dirty Harry Callahan famously warned, “A man’s got to know his limitations.” Well, thanks to the Supreme Court’s decision in Agar v. Electro Circuits, we now know our limitations with respect to civil conspiracy claims here in Texas. The Supreme Court held that “civil conspiracy is a derivative claim that takes the limitations period of the underlying tort that is the object of the conspiracy.” “Having determined that civil conspiracy is not an independent tort,” the Court said, “it follows that the claim does not have its own statute of limitations.” Instead, “a civil conspiracy claim is connected to the underlying tort and survives or fails alongside it.”

As a corollary, the Court also held a conspiracy claim accrues and limitations begin to run along with the underlying tort; it rejected a separate last-overt-act accrual rule for conspiracy. If the claimant alleges conspiracy to commit multiple torts, the claim accrues and limitations run separately with respect to each such underlying tort.

The ruling brings Texas into line with the majority of other jurisdictions throughout the country. But reaching this conclusion required the Court to disapprove the decisions of all Texas intermediate courts of appeals to have addressed the issue, because they had held conspiracy to be governed by the two-year statute of limitations in TEX. CIV. PRAC. & REM. CODE § 16.003. Invoking that previously unbroken chain of Texas precedent, Electro protested that the Court “should not overturn the court of appeals’ decades-long uniform application of the two-year limitations period to civil conspiracy.” But the Supreme Court demurred, observing that “a long history of mistaken application alone is insufficient to counsel against correcting the error.”

ARBITRATION AGREEMENT IN NDA DID NOT EXTEND TO SEXUAL ASSAULT CLAIM

Alliance Family of Companies v. Nevarez
Dallas Court of Appeals, No. 05-18-00622-CV (April 4, 2019)
Justices Whitehill, Molberg, and Reichek (opinion linked here)

Kelli Hinson

The Alliance Family of Companies and its CEO moved to compel arbitration of an employee’s claims that the CEO sexually assaulted her. In connection with her employment, the employee had signed two non-disclosure agreements, agreeing to keep confidential the information she learned about the company and the CEO. Each NDA included an agreement to arbitrate “[a]ny dispute under this Agreement.” The defendants argued that, because the alleged assault occurred in the course and scope of both the employee’s and the CEO’s employment, the claims were covered under the “broad language” of the arbitration agreements. The trial court denied the defendants’ motion to compel arbitration, and the defendants appealed.

The Dallas Court of Appeals sided with the employee, holding that her claims for sexual assault did not arise “under the [NDA] Agreement,” and so were outside the scope of the agreement to arbitrate. It concluded that “under the Agreement” requires a direct relationship between the agreement and the dispute and limits application to actions that arise as a result of the agreement. The Court distinguished other cases involving “broad provisions,” including an agreement to arbitrate “all disputes related to the employment relationship.” Here, there was no such broad language. And because the NDAs address the non-disclosure of confidential information, and not the type of intentional tort alleged by the employee, the dispute did not arise under the NDAs.

The Court also refused to consider arguably broader language contained in the recitals or “whereas clauses” of the NDAs, noting that contract recitals “are not strictly part of a contract and will not control a contract’s operative clauses unless those clauses are ambiguous.”