The so-called “American Rule” provides that, in most of the United States—Texas included, each side to a lawsuit, Plaintiff and Defendant, must pay its own attorney’s fees. While we inherited most of our legal system from the British common law, we do not generally follow the “English Rule,” which states that the losing side pays the other side’s attorney’s fees. In Texas, however, there are countless exceptions to the American Rule. For example, attorney’s fees are recoverable from the losing side in breach of contract cases, cases involving a declaratory judgment, Uniform Fraudulent Transfers Act claims, etcetera.
What the general public rarely understands is that reimbursement of your attorney’s fees when you win your case is hardly automatic. Attorneys will rarely (probably never) accept a breach of contract case for a plaintiff and simply bill the defendant for the legal work. The reason is that when the trial ends, together with all of the appeals (if a supersedeas bond has been posted), the winning party does not actually receive payment for the legal fees. Instead, the winning party receives a monetary judgment against the losing party for the attorney’s fees. That monetary judgment can then be enforced using all of the post-judgment collections procedures that are available under Texas law. This generally means recording an abstract of judgment in counties where the judgment debtor owns real estate and filing for a writ of execution against any non-exempt property owned by the judgment debtor, but there are other collections methods as well, like garnishment, receivership, or turnover proceedings. The amount of legal work that is necessary to collect on a monetary judgment can be quite substantial and no one wants to perform all of the legal work necessary to complete a trial, only to create more post-judgment legal work for themselves, unless the prospects for recovery are high. Also, the attorney’s fees incurred in performing the post-judgment collections activities are generally non-recoverable. So, you may get a judgment for your attorney’s fees, and still have to pay your attorney to go collect on that judgment.
To make things more complex, the winning side does not receive a judgment for attorney’s fees actually “incurred.” See Sloan v. Owners Ass’n of Westfield, Inc., 167 S.W.3d 401, 405 (Tex. App. San Antonio 2005) (“The terms of the fee agreement between the [Defendant] and its counsel are irrelevant to the [Defendant’s] right to recover reasonable and necessary attorney’s fees from the [Plaintiff].”) Instead, the winning party generally receives a judgment for “reasonable and necessary” attorney’s fees, which may be completely different from the fees that the party actually incurred. Interestingly enough, the terms of the party’s contract with his or her attorney may be completely irrelevant to the amount of fees that will be awarded at trial. Moreover, an attorney representing himself or his law firm can probably recover attorney’s fees for his or her own time spent on the case. McLeod, Alexander, Powel & Apffel, P.C. v. Quarles, 894 F.2d 1482, 1488 (5th Cir. Tex. 1990).
When an attorney accepts a case based on a contingency fee, the contingency fee may be determined by the Court to be “reasonable and necessary.” Sloan v. Owners Ass’n of Westfield, Inc., 167 S.W.3d 401 (Tex. App. San Antonio 2005). Generally, “the fact that attorney’s fees are based on a contingent fee agreement does not make the fees requested or awarded unreasonable.” Cooper v. Cochran, 288 S.W.3d 522, 537 (Tex. App. Dallas 2009).
Winning on Some Claims and Losing on Other Claims:
If you prevail on some claims for which attorney’s fees are available, yet lose on other claims, then the attorney’s fee award gets very tricky. If your attorney provides detailed, itemized billing sheets and proves those sheets up in Court, then the sheets may be enough evidence for the Judge to break out the recoverable fees from the non-recoverable fees. Even if the bill sheets do not exist because it is a contingency fee case, your attorney should “reconstruct” the work to “provide the trial court with sufficient information to allow the court to perform a meaningful review of the fee.”
Long v. Griffin, 442 S.W.3d 253, 256 (Tex. 2014).
Copyright 2017, Ian Ghrist, All Rights Reserved.
Disclaimer: This blog is for informational purposes only. Do not rely on any part of this blog as legal advice. Instead, seek out the advice of a licensed attorney. Also, this information may be out-of-date.