The Texas Supreme Court, No. 16-0006, Rohmoos Venture v. UTSW DVA Healthcare, ___S.W.3d___, 2019 WL 1873428 (Tex. 2019), decided an important must-read case that is very instructive on who is the prevailing party and evidence needed to prove up attorney’s fees. Justice Green delivered the opinion of the Court on April 26, 2019. FACTS: UTSW DVA Healthcare signed a commercial lease with the landlord, Rohrmoos Venture, Eric Langford, Dan Basso, and Tobin Grove to use the building for a dialysis clinic. State health inspectors evaluated UTSW’s dialysis clinic in 2007 and criticized the facility because some ceramic floor tiles had come loose from the concrete slab due water penetration. UTSW gave notice to Rohrmoos. Engineers and contractors were called in, but the issue persisted into 2009 and then began to worsen as the building suffered significant water penetration. UTSW viewed the building as unsuitable for its intended purpose, terminated the lease early, and vacated the premises, while still allegedly owing about $250,000 in unpaid rent. UTSW sued Rohrmoos for breach of warranty of suitability. Rohrmoos counter claimed for negligence and breach of contract. The case was submitted to a jury. The jury found that UTSW and Rohrmoos both failed to comply with the lease, that Rohrmoos failed to comply first, and that Rohrmoos breached the implied warranty of suitability. Although UTSW initially sought money damages, it did not submit that claim to the jury. Accordingly, no money damages were awarded to UTSW. Regarding attorney’s fees, the parties’ lease agreement provided for a fee-shifting arrangement whereby “the prevailing party shall be entitled to an award for its reasonable attorneys’ fees from the non-prevailing party in any action to enforce the terms of the Lease.” In an attempt to prove the reasonableness and necessity of the requested attorney’s fees at trial, UTSW’s attorney, Wade Howard, testified that he had twenty years of litigation experience, that the standard rate he charges is $430 per hour, he has handled similar cases before, and a reasonable and necessary number of hours to spend on these case would be around 750 to 1000. Those hours multiplied by his standard hourly rate equals between $322,500 and $400,000 and that a reasonable and necessary fee would be between $300,000 and $400,000. But then Howard went on to state, “This case, whatever reason, has not been worked up in a reasonable fashion…But because of that, the fees in this case are much closer-my fees are much…over $800,000.” Howard did not explain how much time was spent of each of the following tasks: searching through “millions” of emails, reviewing “hundreds of thousands” of documents during discovery, over forty depositions taken, and a forty-page motion for summary judgement. He stated the factors relevant to his attorney’s fees were (1) the amount in controversy, (2) the complexity of the case, and (3) his knowledge and experience. The jury determined reasonable fees for both UTSW and Rohrmoos $800,000 for representation in the trial court. $150,000 in the court of appeals and $75,000 in the Texas Supreme Court. The trial court awarded UTSW attorney’s fees of $1,024,000 with conditional appellate awards. Rohrmoos appealed the $1,025,000 award in the court of appeals on 2 grounds: (1) UTSW was not the prevailing party under the lease and thus not entitled to attorney’s fees, and (2) the evidence was insufficient to support the fee award. The court of appeals affirmed the trial court and Rohrmoos appealed to the Texas Supreme Court. ISSUES: Who is the prevailing party and what is sufficient evidence to prove-up attorney’s fees? HOLDING:PREVAILING PARTY: The Supreme Court ruled that to prevail requires a claimant obtain actual and meaningful relief, something that materially alters the legal relationship of the parties. To prevail requires a claimant to prove a compensable injury and secure an enforceable judgment in the form of damages or equitable relief. The commercial lease plainly states that “in any action to enforce the terms of this Lease, the prevailing party shall be intitled to an award for its reasonable attorneys’ fees.” “Nothing in that contract provision requires that a party receive any damages, as we have held under Chapter 38” of the Texas Civil Practice and Remedies Code. The prevailing party was UTSW and is entitled to reasonable and necessary attorney’s fees. Although UTSW was the original plaintiff, it successfully defended-as defendant against Rohrmoos’ s breach of contract counterclaim. Rohrmoos breached the lease first. The trial court entered a judgment that Rohrmoos take nothing on its counterclaim for about $250,000 in back rent. UTSW obtained actual and meaningful relief, materially altering the parties’ legal relationship, by successfully defending against a claim and securing a take-nothing judgment on the main issue or issues in the case. LEGAL SUFFICIENCY OF ATTORNEY’S FEES: The Texas Supreme Court held that legal authorization begins with the American Rule, which provides that a prevailing party has no inherent right to recover attorney’s fees from the non-prevailing party unless there is specific statutory or contractual authority allowing it. In this case the terms of the lease contract allowed the prevailing party to get attorney’s fees. First, the idea behind awarding attorney’s fees in fee-shifting situations is to compensate the prevailing party generally for its reasonable losses resulting the litigation process. Second, because such fee awards are compensatory in nature, fee-shifting is not a mechanism for greatly enhancing an attorney’s economic situation. Thus, only fees reasonable and necessary for legal representation will be shifted to the non-prevailing party, and not necessarily the amount contracted for between the prevailing party and its attorney. The amount incurred or contracted for is not conclusive evidence of reasonableness or necessity. The fee claimant still has the burden to establish the reasonableness and necessity of the fees. Third, a party must be represented by an attorney to secure an award of attorney’s fees. Courts have held that a law firm can be awarded fees for representation by its own attorney. Attorneys have been awarded fees for their own pro se representation. 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. The reasonableness and necessity of particular fees presents a fact question that the fact finder must decide. The Court concludes that the starting point for calculating is the lodestar method, which provides a base calculation that can be adjusted upward or downward based on the Arthur Anderson factors, ( see Arthur Anderson, 945 S,W.2d 812, 818 (Tex. 1997)) which are the same as Rule 1.04 of the Texas Disciplinary Rules of Professional Conduct. Those factors are:
- the time and labor required, the novelty and difficulty of the questions involved, and the skill required to perform the legal services properly;
- the likelihood…. that acceptance of the particular employment will preclude other employment by the lawyer;
- the fee customarily charged in the locality for similar legal services;
- the amount involved and the results obtained;
- the time limitations imposed by the client or by the circumstances;
- the nature and length of the professional relationship with the client;
- the experience, reputation, and ability of the lawyer or lawyers performing the services; and,
- whether the fee is fixed or contingent on results obtained or uncertainty of collection before the legal services have been rendered.
Sufficient evidence under lodestar 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 the reasonable hourly rate for each person performing the services. Also, counsel for the prevailing party should make a good-faith effort to exclude from a fee request, hours that are excessive, redundant, or otherwise unnecessary, just a lawyer is ethically obligated to do with the lawyer’s client. The lodestar calculation of hours times hourly rate is presumptively reasonable. The base lodestar calculation may be adjusted by the fact finder up or down, if relevant factors indicate an adjustment is necessary and reasonable fee in a case. Contemporaneous records are not required, but are encouraged, to prove that the requested fees are reasonable and necessary. The Court held that UTSW’s attorney, Wade Howard’s testimony did not meet the sufficient evidence standard and requisite detail as to time spent of the various tasks performed. The Court affirmed the judgment as breach of implied warranty. The Court reversed the court of appeals’ judgment as to attorney’s fee award and remanded the case to the trial court for a redetermination of fees consistent with its opinion. This opinion is applicable to federal cases also as the Texas Supreme Court followed and cited the United States Supreme Court and the Fifth Circuit Court of Appeals.