Texas Court Clarifies the Standard for Recovering Attorneys’ Fees in Contingency Fee Cases

Plaintiffs in Texas are frequently presented with the opportunity to recover their attorneys’ fees as a measure of damages, most commonly in the breach of contract context. Until recently, the Texas Supreme Court had not set forth the specific proof needed to support such a request by a plaintiff. However, in the recent case of El Apple I, Ltd. v. Olivas, the Texas Supreme Court explained the standard of proof needed for an award while cautioning against overreaching on the fees sought.

 

In Olivas, the Texas Supreme Court overturned a $464,000 attorneys’ fee award because the plaintiff’s attorneys failed to provide sufficient details of the work they actually performed.  Specifically, the attorneys presented testimony that they spent 890 hours prosecuting the case.  Unfortunately, they based their fee request on generalities (i.e. that discovery was performed, that they filed numerous pleadings, etc.), but did not present time records, contemporaneous billing statements, invoices, or even detail which attorney performed which task on the case.  As a result, the Texas Supreme Court held that there was insufficient information for the trial court to provide a meaningful review of their fee application and reversed the award. Because the Court was cognizant that it had never explained the proof necessary for an award of attorneys’ fees, it remanded the case so that the attorneys would have another opportunity to present evidence of their fees.

 

This decision is instructive for a plaintiff considering a breach of contract case.  Often, breach of contract cases are handled on a contingency fee basis, meaning the attorneys do not bill the client on an hourly basis, but instead take a percentage of the recovery as their fee.  Before this opinion, because attorneys are not directly billing the client on an hourly basis, there was no real need to keep detailed records of the work performed.  However, this case makes clear that contemporaneous billing records is the strongest evidence that an attorney can present to support the award.  Properly kept records would alleviate the court’s concern that there was no evidence of the hours the attorneys actually worked, the tasks they performed, and when the work was done. Thus, if you want to increase your chances of a recovery of attorneys’ fees,  is critical for a client to ensure that his attorneys are keeping accurate and timely records of the work they performed.

 

Further, even though the attorneys should keep accurate records, it is equally important not to “over-work” the case and only seek reasonable attorneys fees.  In his concurrence, Justice Hecht specifically found that the attorneys’ fees sought in Olivas were “patently unreasonable” on their face.  He noted that:

  1. The award was for more than 7 times the amount the defendant paid its attorneys.
  2. Greatly exceeded the actual recovery in the case.  Justice Hecht specifically stated that attorneys’ fees awards “should take into account what the market should,” and the Olivas attorneys’ request did not do so.  Thus, because “feeshifting is not a bonanza,” in order to maximize the likelihood of obtaining an attorneys’ fee award, it is important to only seek a reasonable fee for their work performed.

 

If you follow the Texas Supreme Court’s guidance in Olivas, you will greatly enhance your ability to recover your attorneys’ fees and increase your recovery.


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