On April 26, 2019, the Texas Supreme Court issued its opinion in Rohrmoos Venture v. UTSW DVA Healthcare (available here). The case has importance guidance concerning attorney’s fees under Texas law. Notable points include:
- When seeking attorney’s fees, a claimant must “put on evidence of reasonable hours worked multiplied by a reasonable hourly rate” which “yield[s] a base figure [i.e., the lodestar amount] that can be adjusted by considerations not already accounted for in either the hours worked or the rate.” Prior to the decision, there was confusion as to whether one should use the so-called Arthur Anderson factors [1] to calculate the base amount of attorney’s fees, and what Arthur Anderson factors should be utilized when adjusting the “lodestar” amount upwards or downwards. The “lodestar” method developed as a “short hand version” of the Arthur Anderson factors “and was never intended to be a separate test or method.”
- The lodestar “base calculation” (i.e., time x rate) is the “presumptively reasonable” amount of attorney’s fees. The claimant bears the burden of providing sufficient evidence on both the time and the rate. “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.”
- According to the Court, “the lodestar calculation should produce an objective figure that approximates the fee that the attorney would have received had he or she properly billed a paying client by the hour in a similar case.” Further, “[t]his readily administrable and objectively reasonable calculation is the standard for calculating the reasonableness and necessity of attorney’s fees in a fee-shifting situation.”
- After the “base calculation” is performed, the calculation can either be enhanced or reduced. The following Arthur Anderson considerations cannot be used to adjust the base calculation, as they are usually reflected in the base lodestar calculation: (i) “the time and labor required,” (ii) “the novelty and difficulty of the questions involved,” (iii) “the skill required to perform the legal services properly,” (iv) the fee customarily charged in the locality for similar legal services, (v) the amount involved, (vi) “the experience, reputation, and ability of the lawyer or lawyers performing the services,” (vii) “whether the fee is fixed or contingent on results obtained,” (viii) “the uncertainty of collection before the legal services have been rendered,” and (ix) the “results obtained” up to trial. If a fee claimant or a fee opponent seeks an upward or downward adjustment it must produce specific evidence showing that a higher amount is necessary to achieve a reasonable fee award or to overcome the presumptive reasonableness of the base lodestar figure, respectively.
- The Court also addressed what happens when the attorney is charging under an alternative billing arrangement (e.g., flat fee, fixed fee, etc.):
We recognize that when fee agreements provide for arrangements other than hourly billing, the attorney will not be able to present evidence of a particular hourly rate billed or paid for the services performed. In those instances, the fee claimant, through its expert, has the burden of showing that the rate claimed for purposes of the base lodestar calculation reflects a reasonable market rate given considerations in Arthur Andersen, including the attorney’s experience and expertise, the novelty and complexity of the questions involved, any special skill required for the representation, the attorney’s risk in accepting such representation, which may be reflected in a contingent fee agreement, and any other considerations that would factor into an attorney’s fee negotiations if the attorney were to bill hourly.
- When fee-shifting is authorized (by statute or contract), the party seeking a fee award “must prove the reasonableness and necessity of the requested attorney’s fees.” “[O]nly fees reasonable and necessary for the legal representation will be shifted” and “not necessarily the amount contracted for between the prevailing party and its attorney, as a client’s agreement to a certain fee arrangement or obligation to pay a particular amount does not necessarily establish that fee as reasonable and necessary.” “[F]act finders should be concerned with awarding reasonable and necessary fees, not with any contractual obligations that may remain between the attorney and client.” Accordingly, “a client could ultimately owe its attorney more fees than the amount of the award shifting fees to the non-prevailing party.”
- A party must be represented by an attorney to secure an award of attorney’s fees (the attorney may be in-house counsel).
- The amount of reasonable and necessary attorney’s fees “are questions of fact to be determined by the fact finder[.]”
- Some statutes allow recovery for attorney’s fees that are “incurred.” In those instances, a fee can only be recovered “when one becomes liable for it.” (A pro se attorney cannot recover fees under a statute that mandates that the fees be “incurred” because the pro se attorney did not “incur” attorney’s fees.) When statutes do not contain an explicit requirement that the fees be “incurred” courts will not imply such a term.
- A party need not be awarded monetary damages to recover under an agreement that contains a provision that specifies that the prevailing party shall be entitled to recover its attorney’s fees. (Texas courts have interpreted some statutes (e.g., Chapter 38 of the Texas Civil Practices and Remedies Code) as containing a requirement that, in order to recover fees, the claimant must prove damages).
- A defendant can be a prevailing party by successfully defending against the plaintiff’s claim, because it has achieved a material alteration in its legal relationship with the plaintiff.
- To recover attorney’s fees, it is not enough for the party’s attorney to testify as to (i) his number of years of experience, (ii) his standard rate, (iii) that he has handled similar cases, and (iv) what the reasonable and necessary number of hours to spend on the case would be. In this case, the attorney did not attempt to introduce billing records into evidence, nor did he testify to the details of his work.
- Time estimates based on generalities are not sufficient to support a fee-shifting award. Nor is general testimony about an attorney’s experience, the total amount of fees, and the reasonableness of the fees.
- “General, conclusory testimony devoid of any real substance will not support a fee award. Thus, a claimant seeking an award of attorney’s fees must prove the attorney’s reasonable hours worked and reasonable rate by presenting sufficient evidence to support the fee award sought. 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.”
- Although “[c]ontemporaneous billing records are not required to prove that the requested fees are reasonable and necessary”, “billing records are strongly encouraged to prove the reasonableness and necessity of requested fees when those elements are contested.” (emphasis added). “Creating [the billing records] makes them available for production, provides a basis for testifying as to the reasonableness and necessity of the requested fees, and permits cross-examination.”
- The Court stated that it did not want “satellite litigation” as to fees: “Importantly, however, we are not endorsing satellite litigation as to attorney’s fees. The fact finder will generally not benefit from attorneys cross-examining each other point-by-point on every billable matter. Parties should use discovery and pretrial procedure to evaluate attorney’s fee claims and the evidence supporting them, then present to the fact finder the evidence relevant to determining a reasonable and necessary fee as discussed in this opinion.” (Note: In a run-of-the-mill case, this is all well and good. But there are some cases where the parties’ respective claims for attorney’s fees quickly dwarf the amount of compensatory damages at issue, and one’s opponent has billed an unreasonable amount. In that situation, it makes sense for any competent attorney to devote a substantial amount of his or her trial presentation to the unreasonableness of the other party’s fee request. (For example, in the instant case, one party requested $1.3 million in fees while seeking less than $300,000 in compensatory damages).)
[1] The Arthur Anderson factors are as follows: (i) the time and labor required, the novelty and difficulty of the questions involved, and the skill required to perform the legal service properly; (ii) the likelihood . . . that the acceptance of the particular employment will preclude other employment by the lawyer; (iii) the fee customarily charged in the locality for similar legal services; (iv) the amount involved and the results obtained; (v) the time limitations imposed by the client or by the circumstances; (vi) the nature and length of the professional relationship with the client; (vii) the experience, reputation, and ability of the lawyer or lawyers performing the services; and (viii) whether the fee is fixed or contingent on results obtained or uncertainty of collection before the legal services have been rendered.
p.s. I’m now so old that clients have used abbreviations in e-mails with me that I had to look up (TLDR=Too Long, Didn’t Read). #Cloudflare.