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ATTORNEY’S FEES

MICHAEL GARY ORLANDO Sullins, Johnston, Rohrbach & Magers, P.C. 3200 Southwest Freeway, Suite 2200 Houston, Texas 77027

Contributions Made by: Jason A. Hill Sullins, Johnston, Rohrbach & Magers, P.c. 3200 Southwest Freeway, Suite 2200 Houston, Texas 77027

State of Texas COLLECTIONS PRACTICE 2003 May 15-16, 2003 - Houston May 29-30, 2003 - Dallas

CHAPTER 7

Michael Gary Orlando

Personal

Date and Place of Birth: September 4, 1951; Houston, Texas Marital Status: Single, two children

Education

Thurgood Marshall School of - J.D., May 1989 University of Houston - B.B.A., 1975

Memberships American Bar Association Texas Bar Association Houston Bar Association State Bar of Texas Federal Bar Association Michael Gary Orlando has U.S. Tax and Federal District Court for the Southern, Eastern, Northern and extensive experience as a Western Districts of Texas business advisor and counselor in the areas of business law, Professional Experience business formation and Sullins Johnston Rohrbach & Magers - Houston, Texas (Nov. 1996 to present). management, and business and Attorney - Business, business litigation, corporate, partnership, tax, planning commercial litigation. Mr. and . Orlando is rated “AV” by Nash & Orlando, L.L.P. - Houston, Texas (July 1991 - Oct. 1996). Business, business Martindale-Hubbell. litigation, corporate, partnership, tax, estate planning and probate. Orlando & Weinheimer, P.C./Law Offices of M. Gary Orlando (June 1989 - June 1991) . Williamson, Gardner, Hall & Wiesenthal (April 1985 - June 1987). Law Clerk. Law Offices of Ralph Freedson (January 1971 - December 1975). Firm Accountant/ Legal Assistant. Business Experience Business Advisor - Acted as a consultant until May 5, 1989 to Western Business Systems, Inc.; Baker Communications; McFaddin Ventures; McFaddin Affiliates, Inc.; Lance McFaddin; The Outlook Corporation.

McFaddin Ventures/McFaddin Kendrick, Inc. (March 1979-March 1985). Sr. Vice President-Administration/Controller. Responsibilities included development of accounting, financial and reporting principles, policies and practices for use throughout the company. This consisted of the development of systems for the clubs, hotels and real estate companies within the company and its subsidiaries.

B.L. Solomon & Associates, C.P.A. (January 1978 - December 1979). Partner.

Harris Kerr Forster/Pannell Kerr Forster, C.P.A. (January 1975-December 1977). Senior Accountant.

Attorney’s Fees Chapter 7

TABLE OF CONTENTS

I. INTRODUCTION ...... 1

II. THE “AMERICAN RULE” ...... 1

III. EXCEPTIONS TO THE “AMERICAN RULE” IN TEXAS ...... 1

IV. FEDERAL V. STATE ...... 2

V. ATTORNEY’S FEES IN STATE COURT ...... 2

VI. PREREQUISITES FOR THE RECOVERY OF ATTORNEY’S FEES IN THE STATE OF TEXAS ...... 3 A. Pleadings ...... 3 B. Conditions ...... 3 C. Prerequisite Elements for Award of Attorney’s Fees ...... 3

VII. v. v. ...... 3 A. Statute ...... 3 B. Contract ...... 4 C. Attorney’s Fees under the Theory of Equity ...... 5 1. Common Fund Doctrine ...... 5 2. Attorney’s Fees as Damages ...... 5

VIII. TECHNICAL AND PROCEDURAL REQUIREMENTS FOR RECOVERY OF ATTORNEY’S FEES ...... 5 A. Technical Requirements ...... 6 B. Procedure to Establish Reasonableness of the Attorney’s Fees ...... 7 1. Summary Judgments ...... 7 2. ...... 7

IX. SEGREGATION OF MULTIPLE CLAIMS ...... 8

X. CONTINGENT FEE AWARDS ...... 8

XI. ETHICS FOR ATTORNEY’S FEES ...... 9

XII. CONCLUSION ...... 9

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ATTORNEY’S FEES of action that permits or does not permit the plea for attorney’s fees. This article provides a general discussion on This article will also review when you have a case attorney’s fees. You will find that attorney’s fees are where the facts involve both causes of action that do governed within a framework of , rules or and some causes of action which do not permit the procedures, and which govern the ability to claim for attorney’s fees. What happens in such a prevail in the award of attorney’s fees. It is this case? What are you required to do at trial or on framework and how you must operate within it that summary in terms of proof of your fees (i.e. dictates whether or not you will be granted an award a claim for attorney’s fees on a sworn account, which of attorney’s fees in your . Most collection allows for attorney’s fees, and a claim of negligence fall within a statute or are governed by which does not allow for attorney’s fees). contract. II. THE “AMERICAN RULE” To understand why the courts and the I. INTRODUCTION Many attorneys take for granted that, when permit certain causes of action to claim attorney’s fees retained by a client to either file or defend a lawsuit, and other causes of action for which you cannot plead there is always a potential to collect attorney’s fees. for attorney’s fees, you must look at the history of Clients also believe attorney’s fees are part of the attorney’s fees. lawsuit and that the other side will automatically pay As noted above, attorney’s fees are a penalty your fees if you win. Prevailing in a lawsuit is only one against the non prevailing party. Since the fees are a element required to obtain an award of attorney’s fees. penalty, many courts are reluctant to grant an award Below are each of the elements and procedural even when the statute or contract provides for it. requirements necessary to obtain a find of an award of Below are listed various requirements necessary to attorney’s fees. sustain an award of fees. Attorney’s fees are a penalty accessed against The history of attorney’s fees goes back to the the non-prevailing party. Many courts are reluctant to very establishment of American . In grant attorney’s fees unless they are allowed by a American Jurisprudence, the award of attorney’s fees statute or contract. In some cases, courts will look to was viewed differently compared to our forefathers, in equity as a means to establish a basis for granting England, the original basis of our law in America. attorney’s fees to the prevailing party. In the American legal system of jurisprudence, the This article explores who may make a claim for rule that has evolved regarding attorney’s fees is attorney’s fees, the requirements which must be referred to as the “American Rule.” The American followed, and what you as an attorney must do in order Rule stands for the general assumption that “each to prevail on the recovery of attorney’s fees. Further, litigant bears the costs of hiring their own attorney.” this article discusses the law under which attorney’s Texas follows the American Rule. See Turner v. fees are allowed. Also, this article provides the Turner, 385 S.W.2d 230, 233 (Tex. 1964). However, technical aspects which must be followed in order to you will find that there are numerous exceptions to this assure the recovery of “reasonable attorney’s fees.” general rule. Finally, this article discusses what happens when an As an ironical fact, the English established the rule attorney fails to properly present required to that allows the prevailing party to recover its establish the right to recover attorney’s fees during attorney’s fees automatically; the “British Rule.” See litigation. O’Connor’s Federal Rules, “Attorney Fees,” p. 43 Many statutes or make an award of (2002). In many cases, the British Rule follows as the attorney’s fees mandatory. However, you will find exception within Texas law and is the basis of that courts have the discretion to deny fees for awarding fees under certain causes of action. insufficiency of the evidence, or deny fees since the amount is diminutive, or the fees are unreasonable. III. EXCEPTIONS TO THE “AMERICAN You should be aware that there are many causes RULE” IN TEXAS of action which do not permit the award of attorney’s Texas professes to apply the general rule that fees. Therefore, in evaluating a case, you need to each litigant must pay his own attorney. See Turner v. address whether or not the facts will fall within a cause Turner, 385 S.W.2d 230, 233 (Tex. 1964). However, Texas qualifies the application of the general rule or

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American Rule by imposing exceptions to the recovery and (3) costs under FRCP 54(d)(2)(see O’Connor of attorney’s fees. Courts in Texas have held that “a Federal Rules, § 3.8(1) Attorney’s Fees). prevailing party cannot recover attorney's fees from an Procedurally, the request for attorney’s fees in opposing party unless permitted by statute or by Federal Court is different than in state court. In contract between the parties.” See Holland v. Wal- Federal Court, the request for attorney’s fees may be Mart Stores, Inc., 1 S.W.3d 91, 95 (Tex. 1999) and made by motion. “Claims for attorney’s fees and Travelers Indem. Co. of Conn. v. Mayfield, 923 related non-taxable expenses shall be made by motion S.W.2d 590, 593 (Tex. 1996); Dallas Cent. Appraisal unless the substantive law governing the action Dist. v. Seven Inv. Co., 835 S.W.2d 75, 77 (Tex. provides for the recovery of such fees as an element 1992); First City Bank-Farmers Branch v. Guex, 677 of damages to be proved at trial. In state court, S.W.2d 25, 30 (Tex. 1984); New Amsterdam Cas. Co. specific elements must be proven by evidence or a v. Texas Indus., Inc., 414 S.W.2d 914, 915 (Tex. request to take judicial notice of the right to the 1967). attorney’s fees must be made. In Holland, the court also discussed the recovery Further, in Federal Court you are required to of attorney’s fees under a theory of equity. Under the procedurally file for attorney’s fees by filing a motion theory of equity, the court allowed a prevailing party to for attorney’s fees 14 days after entry of judgment, recover attorney’s fees for cases where the court unless the fees are recoverable as an element of applied the common fund doctrine or attorney fee-as- damages, or for violations of the Federal Rules of Civil damages theory. The common fund and attorney fee Procedure or under 28 U.S.C.§ 1927. for damages theories are set forth in detail later in this One final difference between Federal Courts and article. Texas state courts involve how matters of equity and attorney’s fees as damages are dealt with. Federal IV. FEDERAL V. STATE COURTS Courts are vague as to these matters and must be Texas and Federal Courts deal with the issue of looked at on a case by case matter. attorney’s fees similarly under the principle of the American Rule. In Federal Courts, the number of V. ATTORNEY’S FEES IN STATE COURT exceptions to the general rule are similar to that of In state courts, attorney’s fees must be pled for in Texas state courts. However, in Federal courts, the the plaintiff’s original petition or in a counterclaim. proof of attorney’s fees, the evidence presented at Also, you may request attorney’s fees under certain time of trial, and the “reasonableness” standard varies motions (i.e. motion for sanctions, a motion to compel from that of the Texas State courts. discovery, or a motion to strike pleadings) which these Federal Courts provide that a “prevailing party motions permit the award of attorney’s fees. may be entitled to attorney’s fees if the fees are However, since the attorney’s fees are not mandatory, specifically provided for in a contract, or by a statute, the award and amount are discretionary by the courts. or if the case involves a common fund or common Causes of action pled under the guise of a statute or benefit.” See Summit Valley Indus. v. Local 112, contract require the mandatory award of attorney’s United Bhd. Of Carpenters, 456 U.S. 717, 721, 102 fees. However, the does have discretion as to S.Ct. 2112, 2114 (1982). the amount of the award under the reasonableness test. A significant difference between Federal and As mention above, in order to be awarded Texas State Courts are the technical requirements in attorney’s fees, a plaintiff’s causes of action must fall pleading for attorney’s fees. Both Federal and state within a statute, be controlled by contract, or in equity. courts require substantially the same proof to acquire Addressed below are examples of the various federal attorney’s fees, but the technical aspect of how to and state statutes which provide for the prevailing plead attorney’s fees is much different. (Note: This party to be awarded attorney’s fees. These are as article will touch briefly on both . follows: However, a practitioner must look to the Rules of , the local rules, and the various statutes in 1. Federal– e.g. Copyright Act, Civil Rights order to determine proper pleading practices). Act, Fair Labor Standards Act, Employee In Federal Court, an attorney may request Retirement Income Security Act (“ERISA”) attorney’s fees as: (1) damages under substantive law for the causes of action or , (2) sanctions 2. State-. e.g. Business and Commerce Code, under FRCP 56(g) for an affidavit made in bad faith, Business Corporation Act, Civil Practice and

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Remedies Code, Code of Criminal Failure to comply with Rule 54 or the provisions of a Procedure, Education Code, Election Code, contract, will provide a defendant the ability to file Family Code, Finance Code, Government special exceptions or specifically deny that the Code, Health and Safety Code, Human conditions precedent have occurred. At this point, the Resource Code, Insurance Code, Labor burden shifts from a defendant to a plaintiff to prove Code, Local Government Code, Probate that the performance of all conditions precedent have Code, Property Code, Tax Code, Texas been met. See Grimm v. Grimm, 864 S.W.2d 160, 162 Revised Civil Statutes, Transportation Code, (Tex App—Houston [14th Dist.] 1993, no writ). The Utilities Code, and Water Code. notice requirement may also delay your lawsuit. Further, the fees resulting from the delay may be These examples are by no means a complete and denied as unreasonable since it was you or your accurate list of every statute of under client’s error in not complying with all of the conditions which attorney’s fees are permitted. Therefore, you precedent. should review the area of law which your causes of action accrue to determine if you have a right to plead C. Prerequisite Elements for Award of for attorney’s fees (Note: See O’Connor’s Cause of Attorney’s Fees Action, Attorney’s Fees Statutory, Chapter 39, 855 Another prerequisite for obtaining an award of to 868, for an Extensive List of Statutes). attorney’s fees requires that a party must “(1) prevail You should also be aware that under the Texas on a cause of action for which attorney’s fees are Rules of Civil Procedure and Texas Rules of Appellate recoverable, and (2) recover damages...” Green Int’l Procedure, attorney’s fees are awarded in certain v. Solis, 951 S.W. 2d. 384, 390 (Tex.1997). circumstances (i.e. see T.R.C.P. 215.2 (b)(8) The qualifications under Green, supra, are (attorney’s fees as a sanction)). noteworthy for lawsuits with multiple causes of action. Some causes of action do not fall under a statute, VI. PREREQUISITES FOR THE RECOVERY contract, or equity. This does not allow for a plaintiff OF ATTORNEY’S FEES IN THE STATE to plead for the recovery of attorney’s fees. OF TEXAS For lawsuits with multiple causes of action, you A. Pleadings are required to segregate each cause of action, A prerequisite to recovering attorney’s fees is that classifying each cause of action that qualifies for a plaintiff must plead for the recovery of attorney’s attorney’s fees and those causes of action which do fees. Courts have held that “to be entitled to an award not fall within a statute, contract, or equity. of attorney’s fees, a party must file an affirmative Discussed below are some recommended pleading requesting them. See Sharon Menix, v. procedures for segregating between causes of action. Allstate Indemnity Company, 83 S. W.3d 877 (Tex App.--Eastland [11th Dist] 2002, no pet.); Swate v.. VII. STATUTE v. CONTRACT v. EQUITY Medina Comm. Hosp., 966 S.W.2d 693, 701 (Tex A. Statute App.–San Antonio 1998, pet denied). As mentioned above, the general rule for In addition to pleading for attorney’s fees, a party attorney’s fees is that “each litigant must compensate must assure that he has completed all of the his own attorney; see Base Seal, Inc. v. Jefferson requirements of the statute or contract. Also, during Count, 901 S.W.2d 783 (Tex App.–Beaumont [9th the preparation of your case, you must develop Dist.] 1995, writ denied). Courts have expanded the evidence sufficient to support your fees. definition of the general rule by stating that, “it can be presumed that attorney’s fees are not recoverable B. Conditions Precedent from the defendant unless provided for by statute or by A key element in any lawsuit, which must be contract between the parties, attorney’s fees incurred performed prior to filing the pleading, is complying with by a party to litigation are not recoverable against his all conditions precedent. See Tex. Rules of Civil adversary either in an action in or a suit upon a Procedure 54. Complying with the condition contract; fees incurred in prosecuting a suit or precedent means that a plaintiff must comply with the for defending the lawsuit against him...” See Buck vs. statute’s requirements of notice and demand; for Johnson, 495 S.W.2d 291 (Tex. Civ. App.–Waco contract, a plaintiff must comply with the requirements 1973, writ ref’d n.r.e) of notice of the claim or notice of the intent to sue.

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Buck, supra, clarified that suits brought in tort or or corporation, in addition to the amount of a valid a person defending a suit brought against him, cannot claim and costs, if the claim is for: recovery attorney’s fees, even if he prevails. However, there are exceptions to the Buck, 1. rendered services; supra case. A defendant can acquire attorney’s fees 2. performed labor; if: (1) he prevails in a lawsuit where a provision in the 3. furnished material; contract provides that the prevailing party shall be paid 4. freight or express overcharges; attorney’s fees (2) where a defendant has filed a 5. lost or damaged freight or express; counterclaim and successfully prosecutes the claim; 6. killed or injured stock; and (3) under certain forms of sanctions: (i.e. Tex. R. 7. a sworn account; or Civ. P. 13 and 215(b)(2)). 8. an oral or written contract. The Texas legislature has, over the years, attempted to more narrowly define when a person can Chapter 38 is significant since courts apply the or cannot recover attorney’s fees. Statutes, such as “reasonableness standard”to attorney’s fees. Below is Chapter 38 of the Civil Practice and Remedies Code, a discussion on the significance of reasonableness and as an example, defines not only the specific types of how it affects the amount of attorney’s fees you are causes of action under which a plaintiff can plead for awarded. attorney’s fees, but the evidentiary proof which must be established by the prevailing party. B. Contract Chapter 38 of the Texas Civil Practice and Under Chapter 38 of the Civil Practice and Remedies Code was a re-codification of Vernon’s Remedies Code, §38.002 (8) provided attorney’s fees Civil Statute Article 2226. Both Article 2226 and for oral or written contract, but what happens if the Chapter 38 deal with limitations on who can plead for contract has a provision within the contract, which attorney’s fees and the amounts assessed against a permits the collection of attorney’s fees by the non-prevailing party. “prevailing party” or if it provides for a certain amount Vernon’s Ann. Civ. St. art. 2226, (repealed) of recovery? Courts will look to the contract provision, provided that a claimant having a valid claim against a unless it is unclear or ambiguous. person or corporation, or upon sworn account or Courts have stated that “the term prevailing party accounts, or suits founded in oral or written contract for the purposes of awarding attorney’s fees, refers to could recover a reasonable amount of attorney’s a party who successfully prosecutes an action or fees.... Id. successfully defends against an action on the main Since Vernon’s Ann. Civ. St. Art 2226, lent itself issue”. See Emery Air Freight Corp. v. General to a broad interpretation of who and what types of Transp. Sys., Inc. 933 S.W.2d 312, 316 (Tex. case attorney’s fees could be recovered the courts App.–Houston [14th Dist.] 1996, no writ); Weng struggled to interpret the law and what classifies as the Enter., Inc. 837 S.W.2d 217 at 222-223 (Tex. types of causes of action which came under the App.–Houston [1st Dist.] 1992; Goins Contrt. Co S.B. statute. Mclaughin., 930 S.W.2d 124 at 130 (Tex. App.–Tyler The legislature in 1985 codified this part of the 1992, writ ref’d n.r.e.) statute, under V.T.C.A., Civil Practice and Remedies Here is where there is an exception to the Code. The purpose was in part to “...eliminate exception. Above, the article sets forth how a repealed, duplicative, unconstitutional, expired, defendant can only obtain attorney’s fees in a lawsuit executed, and other ineffective provisions and to under a very narrow set of circumstances. The restate the law in modern American English to the circumstances in which a defendant may be awarded greatest extent possible.” See V.T.C.A. Civil Practice attorney’s fees are when the defendant is the and Remedies Code § 1.01. The recodification of prevailing party and the contract states that “each Article 2226 defined more specific causes of action party shall pay his own attorney’s fees in case of a that; “a person may recover ‘reasonable’ attorney’s dispute,” or “the prevailing party shall receive fees from an individual or corporation, in addition to the attorney’s fees”. amount of a valid claim and costs....” See Tex. Civ Courts have addressed this issue by stating that Prac. Rem Code § 38.001. “as a general rule, a prevailing party is not entitled to Chapter 38 provides that if “A person may recover his attorney’s fees from his adversary. recover reasonable attorney’s fees from an individual However, parties to a contract may, provide for by

4 Attorney’s Fees Chapter 7 agreement that the prevailing party is entitled to 2. Attorney’s Fees as Damages recover his attorney’s fees.” See Norrell V. Aransas The second cause of action allowing attorney’s County Navigation District, 1 S.W.3d 296 (Tex. fees under equity is Attorney’s Fees as Damages. App.–Corpus Christi [13th Dist.] 1999, pet. denied), G. Under the theory of Attorney’s Fees as Damages, Richard Goins Constr. Co. v. S.B. Mclaughlin a party, who incurred attorney’s fees in a previous Associs, Inc., 930 S.W.2d 124, 130 (Tex. App.–Tyler lawsuit, in which he was sued, and sues to recover in a 1996, writ denied). second lawsuit for the recovery of the attorney’s fees Therefore, if you are defending a lawsuit, upon wherein he was the prevailing party in the first lawsuit, filing your pleading, you should be careful to point out will be allowed to recover those fees as damages. to the court that attorney’s fees are granted to the Cases where a party may recover his attorney’s prevailing party as defined in the contract whether it is fees as damages are as follows: the plaintiff or defendant. This will be siginficant when preparing your charge or submitting your a) There is a breach of contract by a defendant statement of facts and conclusions of law to the court. which forced a plaintiff to defend against a suit for trespass and conversion by a third party. See C. Attorney’s Fees under the Theory of Equity Baja Energy , Inc. v. Ball, 669 S.W.2d 836, 839 What if there is not a statute or a written contract (Tex. App.–Eastland 1984, no writ); which provides for attorney’s fees? As mention above, there are only two situations in b) Negligence of attorneys in drafting Wills and which attorney’s fees can be brought against a party Trust documents for jointly representing parties for the collection of attorney’s fees (by contract or by which led to protracted probate litigation. (See statute). However, courts have permitted two Estate of Arlitt v Paterson, 995 S.W.2d 713, 717 situations where an attorney can plead for and receive (Tex. App.–San Antonio1999, pet. denied). attorney’s fees where no statute or contract exists. These two areas are found in the following: c) Insurer’s wrong acts in delaying payment of claims or in refusing to settle a lawsuit. See 1. Common Fund Doctrine and Nationwide Mutual Ins. Co. v. Holmes, 842 2. Attorney’s Fees as Damages S.W.2d 335,341-342 (Tex. App.—San Antonio 1992, writ denied). 1. Common Fund Doctrine Courts state that; “under Common Fund Doctrine, VIII. TECHNICAL AND PROCEDURAL the court may allow reasonable attorney’s fees to a REQUIREMENTS FOR RECOVERY OF litigant who, at his own expense, has maintained a suit ATTORNEY’S FEES which creates funds benefitting other parties as well as This article has addressed the issues regarding himself. The court went on to say that “the Common what causes of action qualify for the award of Fund Doctrine is based on principle that those receiving attorney’s fees for the prevailing party. What must a benefits of suit should bear their fair share of plaintiff do to prove his claim for attorney’s fees? expenses”. Id. One of the prerequisites discussed was for a Courts have expanded the criteria regarding plaintiff to file a claim for attorney’s fees against an Common Fund Doctrine in providing that; “... the adverse party and a plaintiff must properly plead for plaintiff’s attorney can recover in his or her own right attorney’s fees. However, in addition to a properly the reasonable value of legal services to the benefitted pled pleading a plaintiff must do the following: parties. The attorney’s fees are allowed as a charge against the fund. And attorney’s compensation from 1. plead for attorney’s fees; non-contracting plaintiff’s under the Common Fund Doctrine is limited to the reasonable value of the 2. show that plaintiff was entitled to attorney’s attorney’s service benefitting them”. See in re fees from the adverse party on its claim by: Polybutylene Plumbing Litigation et. al vs. Hoechst Celanese Corporation, 23 S.W.3rd 428; (Tex. (a) statute; App–Houston [1st Dist.] 2000, pet. filed). (b) a contract between a plaintiff and the Defendant; or (c) under principles of equity;

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3. A plaintiff was represented by an attorney; 51 S.W.3d 787 (Tex App–Houston [1st Dist.] 2001, rehearing overruled). 4. A plaintiff complied with the conditions Courts have affirmed Butler by emphasizing that precedent to recovery; “To be entitled to recovery of a statutory award of attorney’s fees, the prevailing party must: (1) prevail on 5. A plaintiff prevailed on its claim; a cause of action for which attorney’s fees are recoverable, and (2) recover damages. See Academy 6. A plaintiff incurred attorney’s fees; and Corp v. Interior Buildout & Turnkey Const., Inc. 21 S.W.3d 732 (Tex. App.–Houston, [14 Dist] 2000, no 7. The attorney’s fees were reasonable and pet.). necessary. Courts have further stated that “when a prevailing party in a breach of contract suit seeks attorney’s fees, See O’Connor’s Causes of Action, Chpt.39-A, an award of reasonable fees is mandatory if there is § 1.1, Prerequisites for recovery. proof of the reasonableness of the fees. The trial court has discretion to fix the amount of attorney’s fees, but This article previously discussed 1, 2 ,3, & 4 of it doe not have the discretion to completely deny O’Connor’s list set forth above. This article will now attorney’s fees if they are proper.” See World Help v. discuss 5, 6 & 7 which are (5) Plaintiff must prevail on Leisure Lifestyles, Inc., 977 S.W.2d 662, ( Tex. App. the claim, (6) incur attorney’s fees, and (7) the Forth Worth [2nd Dist]1998; pet. denied). attorney’s fees are reasonable. Throughout these cases the courts are in For us to understand what a plaintiff must do in agreement that in order for a plaintiff to be awarded order to complies with 5, 6 & 7, you need to review attorney’s fees a plaintiff must win his lawsuit. what the courts require. In addition to a plaintiff trying However, in his lawsuit, a plaintiff must establish that his lawsuit and winning, a plaintiff must establish the fees which a plaintiff’s request are “reasonable” substantial proof of the amount of attorney’s fees he Just prevailing on the lawsuit is not enough. incurred in the litigation. For a plaintiff to determine whether or not In order to establish proof of attorney’s fees, a attorney’s fees are reasonable, the courts establish that plaintiff must provide admissible evidence to the trier of an “...award of attorney’s fees is a question of fact, the facts, and the value of the services rendered by the and the fee award must be supported by competent attorney. The evidence must also establish that the evidence”. See In re Polybutlene Plumbing, Inc.v. charges by the attorney are reasonable. Hoestch, 23 S.W.3d 48 (Tex. App–Houston [1st The procedure and technical requirements which Dist].–2000, pet. granted.) must follow to provide sufficient evidence to the jury The evidence presented by a plaintiff to support are set forth below. an award of attorney’s fees should encompass several rather broad areas including (1) the attorney’s A. Technical Requirements background, training and experience, (2) the factors The right to attorney’s fees under a statute or delineated in Arthur Anderson, supra, and Johnson, contract is mandatory. See Kona Technology Corp. supra, (3) the conduct of opposing counsel, and (4) the v. Southern Pacific Transp.Co., 225 F3d 595, (5th actual efforts expended in the representation of the Cir. 2000). However, even though the attorney’s fees particular plaintiff in question. are mandatory, a court has the discretion as to the The Texas Supreme Court, in Arthur Anderson, amount of the fees awarded. You may win the supra, outlined a more detailed list of elements which lawsuit, but lose as to the amount of attorney’s fees must be provided in order for the finder of fact to which a plaintiff is awarded. determine whether the attorney’s fees are reasonable. Courts through dicta provide a two prong test to The follow criteria must be established by introduction determine if a claim for attorney’s fees is valid. of evidence during the trial. Therefore a plaintiff must First, Courts look at “whether the prevailing show: party’s claim for attorney’s fees are valid. Second, whether or not there has been a recovery of money, or (1) the time and labor required, the at least something of value the attorney’s fees award novelty and difficulty of the questions cannot be described as an “addition to” the claimant involved, and the skill required to perform the relief.” See Butler v. Arrow Mirror & Glass, Inc., legal service properly;

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(2) the likelihood that the acceptance of the forth the amount of work involved and other bases for particular employment will preclude other substantiating the fee. See Stafford vs. Brennan, 498 employment by the ; S.W.2d 703 (Tex Civ. App.–Corpus Christi,1973). Court in Silverberg. v. Texas Commerce Bank, (3) the fee customarily charged in the locality or N.A. NO. 01-95-00564-CV (Tex. App—Houston [1st by the circumstances; Dist.] 1996); reaffirmed Stafford, supra,. however, the court stated in Silverberg, that; “Factors to be (4) the amount involved and the results obtained; considered can include: (1) the time and labor involved; (2) the nature and complexities of the case; (3) the (5) the time limitations imposed by the client or amount of money or the value of the property or by the circumstances; interest involved; (4) the extent of the responsibilities assumed by the attorney; (5) whether other (6) the nature and length of the professional employment is lost by the attorney because of the relationship with the client; undertaking; (6) the benefits resulting to he client from the service; (7) the contingent or certainty of (7) the experience, reputation, and ability compensation; and (8) whether the employment is of the lawyer or performing casual or for and established or constant client. the services; and Nguyent Ngoc Giao v. Smith & Lamm, P.C., 714 S.W.2d 144, 148-149 (Tex. App. –Houston (1st (8) whether the fee is fixed or contingent on District) 1986, no writ). results obtained or uncertainty of collection Basically, the court requires the same level of before the legal services have been rendered. proof be attached to the Summary Judgment, which would be presented at trial. (See Arthur Anderson & Co. v. Perry Equipment Corp., 945 S.W.2d 812 (Tex. 2. Trial 1997), At trial, what must the attorney do in order to substantiate evidence regarding the reasonableness of In Federal court a plaintiff is required to provide attorney’s fees? The procedure the attorney must evidence of two additional elements of proof. The follow in order to support an award for attorney’s fees Fifth Circuit Court of Appeals set forth similar criteria is as follows: as set for in Arthur Anderson, supra, but added for consideration; (9) “the undesirability of the case” and 1) The attorney should testify as to the (10) “awards in similar cases.”Johnson vs. Georgia attorney’s fees incorporating each of the Highway Express, Inc., 488 F.2d 714 (5th Cir 1974) elements 1 through 8. On each element, the attorney should describe in detail factors to B. Procedure to Establish Reasonableness of support each element of Arthur Anderson; the Attorney’s Fees i.e; testify as to years of experience, The procedure which must be followed to prove experience in a case of this type, what the sufficient evidence is done by testimony at trial or usual and customary fee are for a case of through a summary judgment. this nature, etc.).

1. Summary Judgments 2) Discuss the “reasonableness” of the amounts For summary judgments, the courts have stated involved to obtain the necessary results by that; “proof necessary to sustain an award of showing the time spent and the unusual attorney’s fees in a summary judgment case must meet nature of the case or that cases of like or the same standards of proof as in similar causes of similar nature have had similar awards of action; even though sworn to, are insufficient to attorney’s fees. constitute summary judgment evidence; rather, there must be proof, such as a deposition, interrogatories, 3) Review the appeals process. The attorney admissions, or affidavits, establishing a basis for the fee should review the elements in (1) above then and whether the contract of the attorney is for non explain to the jury what is involved in contingent or contingent and, if non contingent, setting representing a client on appeal. The attorney

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should explain his efforts , should he become Sec. Life Ins. Co. v. Finck, 496 S.W.2d 544, 546-547 involved in preparing a brief, which includes (Tex 1973); Stewart Title Guar. Co. v. Sterling 822 legal research necessary and the formalities S.W.2d 1, 10 (Tex 1991); Harmes vs. Arklatex Corp. of preparing for an appellate court hearing. 615 S.W.2d 177, 180 (Tex. 1981). There is one Also, the attorney the necessity of post trial exception in which segregation is not required. The motions, i.e. motion for rehearing or motion court has held that; “...segregation is not required if for new trial). services are rendered in connection with claims arising out of the same transaction and are so interrelated that 4) An attorney may want to use an expert their prosecution of defense entails proof or denial of witness, another attorney who is familiar with essentially the same facts.” See Hill v. Heritage the case who can testify as to the Resources, Inc., 964 S.W.2d 89 (Tex. App.—El Paso reasonableness of the attorney’s fees. Be 1997, pet. denied); Stewart Title Guar. Co. v. Sterling careful when having an expert testify as to 822 S.W.2d 1, 10 (Tex 1991). attorney’s fees. Your opposing counsel can If your lawsuit contains multiple claims, you must cross exam your expert’s on the sufficiency segregate your time between those which allow of your expert knowledge about the case. attorney’s fees and those which do not. At trial you will be required to testify as to attorney’s fees and how 5) As a matter of law, the attorney can establish you delineated or calculated the amount charged to that attorney’s fees are recoverable as a each cause of action. matter of law if the evidence from an A method which has been recognized by the interested witness is not contradicted by any courts to determine attorney’s fees in multiple claim other witness or attendant circumstances and case is called the “Lodestar” method. The courts the same must be clear, direct, positive, and stated that “under this method, the court must first free from contradiction, inaccuracies, and determine the number of hours reasonably spent by circumstances tending to cause suspicion counsel on the matter, then multiply those hours by an thereon. If the evidence is uncontroverted hourly rate the court deems reasonable for similarly then “the court, as a , may award complex, non-contingent work. The lode star figure attorney’s fees as a matter of law in such may then be adjusted upward or downward for certain circumstances, especially when the opposing factors know as multipliers, such as the complexity of party has the means and opportunity of the case, skill or the attorney, and the contingent nature disproving the testimony or evidence and fails of the fee”.See Dillards Depart.Stores, Inc. v. David to do so.” See Ragsdale v. Progressive Gonzalez, 72 S.W. 3d 398, 412,413 (Tex.App--Elpaso Voters League, 801 S.W.2d 880, 882, (Tex. [8th Dist], 2002, pet. granted); Borg-Warner 1990) See Ed Walton’s, Proving Attorney’s Protective Services Corp. a/k/a Borg Warner Fees, Art and Practice of Collections) Physical Security Corp. d/b/a Well Fargo Guard Services v. Amelia Flores, 955 S.W.2d 861, (Tex. IX. SEGREGATION OF MULTIPLE CLAIMS App.–Corpus Christi [13th Dist] 1997, pet. granted) This article discussed the possibilities of a lawsuit which has multiple causes of action in which several X. CONTINGENT FEE AWARDS of the causes of action do not qualify for the recovery What if your attorney’s fees are based upon a of attorney’s fees; (ie. they do not qualify under a contingent fee contract? statute ,contract, or in equity). What procedure must A contingent fee agreement is not different from the attorney follow in the attorney’s demand for that of an hourly fee contract At trial, you will be attorney’s fees? required to testify and prove up your claim of Courts have held that “...if a case involves more attorney’s fees by applying the eight (8) elements set than one claim, then only those fees attributable to the forth in Arthur Anderson, supra, and Texas Rule claim falling within the scope of such statute or 1.04, Fees, of the Texas Disciplinary Rules of contract are recoverable. Further, the Plaintiff is Professional Conduct. required to show that the fees were incurred while If you are in Federal court additional factors to suing...on a claim which allows recovery of such fee.” those forth in Arthur Anderson, supra, must be See Hill v. Heritage Resources, Inc., 964 S.W.2d 89 incorporated within your proof; (1) the undesirability of (Tex.App.—El Paso 1997, pet. denied); International the case, and (2) awards in similar cases. See Johnson

8 Attorney’s Fees Chapter 7 v. Georgia Highway, Inc., 488 F.2d 714 (5th of the matter and, if there is a recovery, showing the Cir.1974,). Even though these two factors have not remittance to the client and the method of its been adopted by the Texas Supreme Court, it is determination. Tex. Rule of Disp. Pro. Rule 1.04(d). recommended that in your state court case, consider testing these two elements out of an abundance of XII. CONCLUSION caution. Throughout this article discussion took place You should also point out to the court or jury when concerning the general rule and the exceptions testifying that contingent fee contracts “...offer the regarding attorney’s fees and the method by which a potential of a greater fee than might be earned under prevailing party may be awarded them. Further, as an hourly billing method, to compensate the attorney attorneys you are charged with a fiduciary for the risk that the attorney will receive no fee responsibility to your clients to charge a reasonable fee whatsoever if the case is lost.” Arthur Anderson, and assure you do our best to get the greatest result for supra, at 818. This will help to assure that when the your client at trial on an award of attorney’s fees. jury or judge see the amount of the award, they will not Even the State Bar of Texas and the Supreme Court view it as unreasonable. have formulated rules which attorney’s are governed by in the determination of attorney’s fees charged to XI. ETHICS FOR ATTORNEY’S FEES our clients and the criteria upon which you may seek “Prevailing parties in a breach of contract case them from others. were entitled to have attorney’s fees awarded to them You must remember that the award of attorney’s personally, rather than to their attorney’s” See Streeter fees is a penalty taxed against the non prevailing party v. Thompson, 751 S.W.2d 329 (Tex Civ.App—Fort in an effort to make the prevailing party whole and that Worth 1988). As an attorneys, you must remember the prevailing party not bear the cost of the litigation. that your responsibilities are to our clients. When It is not a recovery of damages. seeking attorney’s fees, you have a duty to assure that There are a number of areas which have not been the fees charged are reasonable. You must also covered in this article dealing with attorney’s fees. remember that the attorney’s fees awarded to your Upon being retained by your client you will need to clients in an award is their attorney’s fees award. It is review the area of law and, if permitted by that area, part of the damages a plaintiff is awarded. your ability to plead for attorney’s fees. Be careful in Texas Disciplinary Rules of Professional Conduct telling your client you can go after a defendant for Rule 1.04(a) states that “a lawyer shall not enter into recovery of his attorney’s fees False impression or an arrangement for, charge, or collect an illegal fee or false hope of recovery of your fees can cause you and unconscionable fee. A fee is unconscionable if the your client problems when you find out that you cannot competent lawyer could not form a reasonable belief recover attorney’s fees or you recover only part of that the fee is reasonable.” Rule 1.04(b) goes on to your fees when the court rules that they are outline the factors to determine reasonableness, which “unreasonable”. are the same factors set forth in Arthur Anderson. Under 1.04(d), the rules dictate how a contingent fee is assessed to your clients. More specifically it states in part “a fee may be contingent on the outcome of the matter for which the service is rendered, except in a matter in which a contingent fee is prohibited by paragraph (e) or other law. A contingent fee agreement shall be in writing and shall state the method by which the fee is to be determined. If there is to be a differentiation in the percentage or percentages that shall accrue to the lawyer in the event of settlement, trial or appeal, the percentages for each shall be stated. The agreement shall state the litigation and other expenses to be deducted for the recovery and whether such expenses are to be calculated. Upon conclusion of a contingent fee matter, the lawyer shall provide the client with a written statement describing the outcome

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