No corporation? No fees.

The Fifth Court has now joined the line of cases stating that CPRC § 38.001 only allows an award of attorneys fees against certain kinds of business entities (although bypassing the actual application of that statement on the specific, conflicting facts presented about the defendants’ business structure): “Under the plain language of section 38.001, a trial court cannot order limited liability partnerships (L.L.P.), limited liability companies (L.L.C.), or limited partnerships (L.P.) to pay attorneys’ fees.” Varel Int’l Indus., LP v. PetroDrillBits Int’l, Inc., No.  05-14-01556-CV (Aug. 30, 2016) (mem. op.)

A splashy trademark case

splashIn Premier Pools Management Corp. v. Premier Pools Inc., the Fifth Court found that a successful trademark plaintiff had established sufficient evidence of secondary meaning for the phrase “Premier Pools,” noting — in particular — the plaintiff’s proof about its advertising about and long use of the name, as well as the testimony of nine impartial witnesses about the issue of confusion. Similar evidence supported the findings for liability, damages, and disgorgement. The Court reversed the related declaratory judgment (and with it, the attorney’s fees award), finding that the “claim added nothing and provided access to no remedy that was not otherwise available . . . ” No. 05-14-01388-CV (Aug. 12, 2016) (mem. op.)

Winners win and losers lose

In Brinson Benefits v. Hooper (July 7, 2016), the Dallas Court of Appeals considered whether a plaintiff who wins a Texas Theft Liability Act (“TTLA”) claim nonetheless can be ordered to pay prevailing party attorney’s fees to the losing defendant if that defendant defeats at least one theory asserted by the plaintiff.

Brinson sued Hooper, a former employee, after it discovered that Hooper had taken confidential information and diverted a business opportunity to her new employer. During litigation, Brinson discovered that Hooper had developed and served several clients on the side, keeping the commissions for herself. One of Brinson’s clients also moved with Hooper to her new employer, which Brinson alleged was the result of the theft of confidential information . At the close of evidence, the trial court granted a directed verdict in favor of Hooper on a claim related to a specific former client and then the jury found against Hooper on theft claims for her retaining commissions for her work on the side while still employed by Hooper. The trial court then awarded Brinson its attorney’s fees for the theft claim arising from the stolen commissions but awarded Hooper her attorney’s fees for defending against claims arising from the client she took with her to her new employer.

The Dallas Court of Appeals reversed. It held that no, if you have been found liable for theft under the TTLA, you are not a prevailing party, even if you were not liable for all the damages the plaintiff asserted. A prevailing party is “[t]he party to a suit who successfully prosecutes the action or successfully defends against it, even though not necessarily to the extent of his original contention.” Thus, to recover fees, a defendant must prevail on the merits of the claim, which at least one court has held requires the defendant to “establish [she] did not commit theft.” The Court held that the fact that Brinson prevailed in recovering one set of damages, but not another, does not convert Brinson’s suit for theft into two separate claims.

Brinson Benefits v. Hooper (July 7, 2016)

The first thing we do, let’s pay all the lawyers . . .

movie-theaterSchultz, owner of a chain of movie theaters, did not want to pay Banowsky, a licensed Texas attorney, for helping Schultz find a theater location.  Schultz won summary judgment based on the Texas Real Estate Licensing Act,  primarily because Banowsky admitted that his work did not involve legal services.  The Fifth Court reversed: “[Schultz] argues that Banowsky’s construction of the Act is both unreasonable and favors the individual interest of an attorney over the interest in protecting the public from unlicensed, unscrupulous, or unqualified persons.  But the fact remains that the plain language of the statute exempts attorneys from all requirements of the Act.”  Banowsky v. Schultz, No. 05-14-01624-CV (Feb. 10, 2016) (mem. op.)

Yes, You Can Be Required to Pay Fees and Costs for Losing a Motion to Compel

A personal injury case led to an award of $4500 in attorney fees against the defendants’ attorneys after they lost a motion to compel. Among other things, the defendants sought to designate certain documents as “ATTORNEYS EYES ONLY” and objected to 14 of 21 document requests on the basis of trade secret privilege — in a car wreck case. The county court at law overruled the vast majority of the defendants’ objections, and awarded the $4500 to the plaintiff. On appeal, the defendants’ attorneys argued that the award was a sanction that could not be justified by any offensive conduct. The Dallas Court of Appeals disagreed, pointing to the trial court’s order stating that the award of fees and costs was granted for securing orders overruling the defendants’ objections to the plaintiff’s discovery requests. That made it an award of expenses on a motion to compel, which is required (but rarely observed) by TRCP 215.1(d). Reviewing the course of the proceedings in the trial court, the Court of Appeals could not conclude that the trial court had abused its discretion in determining that the defendants’ resistance to the discovery had not been “substantially justified.”

MacDonald Devin, PC v. Rice, No. 05-14-00938-CV

If You Might Be Violating Public Policy, Make Sure to Include an Arbitration Clause

Jenner & Block took on the representation of Parallel Networks in patent infringement litigation. Their contingency fee agreement provided that Parallel was responsible for the payment of expenses, but Parallel ran up a $500,000 deficit before expenses were finally paid out of proceeds from settlement in another lawsuit. Jenner withdrew from the case, citing a termination clause that allowed it to withdraw if continuing was not in its economic interest. After the patent cases settled under successor counsel, Jenner invoked arbitration and sought to recover $10 million in fees. The arbitrator ruled that Jenner’s withdrawal was justified and awarded $3 million as an “appropriate and fair” portion of the contingent fee recovery, as provided in the parties’ contract. The trial court confirmed the award, and the Dallas Court of Appeals affirmed. The Court declined Parallel’s invitation to declare that the fee agreement was against public policy, holding that the statutory grounds for vacating an award under the FAA are exclusive, and that public policy therefore could not serve to vacate the award.

Parallel Networks, LLC v. Jenner & Block LLP, No. 05-13-00748-CV

No Contingency Fee Interest in Restitution Paid for Criminal Case

Glen Stover was assaulted by two judgment-proof college students at a party in 2010, resulting in multiple surgeries, a shattered wrist and face, stitches, and broken teeth. He signed a contingency-fee agreement with John H. Carney & Associates, which provided for a 33% fee if the matter was settled before suit was filed. In the meantime, a criminal case proceeded against at least one of the assailants, Drew McClure, who agreed to accept a plea deal that included $100,000 in restitution to the victim. When that check was tendered to Carney by McClure’s father, Carney retained funds that he claimed as his contingency fee. A Dallas County district court disagreed, and the Dallas Court of Appeals affirmed, holding that the restitution was paid in satisfaction of McClure’s deferred adjudication order, not in settlement of any civil claim. The Court did not reach the question of whether an attorney could ever legally claim a fee from a criminal restitution payment, but noted in dicta that “we strongly discourage attorneys from engaging in such practices.”

John H. Carney & Assocs. v. Office of Attorney General, No. 05-13-01325-CV

On Barratry Remedies

The Court of Appeals has reversed a summary judgment in favor of the attorney defendants in a civil barratry case. The plaintiffs were victims of a pipeline explosion. Their case against the pipeline company eventualy settled, and the lawyers collected their 40% contingency fee. But the plaintiffs learned that they had actually been solicited by a private investigator working for their attorneys, so they sued to rescind the fee agreement and recover their contingency fees. The Court of Appeals agreed that rescission was an available remedy for barratry, and that the attorney defendants had not established their former clients would be unable to make counter-restitution for the benefits they had received from the lawyers.

Neese v. Lyon, No. 05-13-01597-CV

Attorney’s Fee Award on Summary Judgment Reversed

Among other issues in this case, the Court reversed the trial court’s award of $15,000 in attorney’s fees on summary judgment.  The moving party submitted an affidavit that $53,714 was the reasonable amount of fees for the legal services rendered, but the opponent submitted an affidavit in which their expert stated that a reasonable fee would be no more than $15,000.  Because neither party offered uncontroverted evidence of an amount certain, the trial court improperly made a factual finding in awarding $15,000 in fees.

Myers v. HCB Real Holdings, LLC

On Pleading for Recovery of Attorney Fees

The Dallas Court of Appeals has now joined two other Texas appellate courts in holding that “A post-verdict motion requesting attorney’s fees filed before the entry of a final judgment is a sufficient pleading to support an attorney’s fee award.” The Court also disposed of the appellant’s argument that a $50,000 fee award was unreasonable because it far exceeded the $11,000 in damages found by the jury, holding that the issue was waived by failing to request a reporter’s record of the hearing.

Nisby v. Dentsply Int’l, Inc., No. 05-14-00814-CV