Opinion
SA-03-CA-189-RF.
April 12, 2005
ORDER GRANTING PLAINTIFF'S REQUEST FOR ATTORNEY'S FEES
BEFORE THE COURT is Plaintiff's Request for Attorney's Fees (Docket No. 253), filed on January 21, 2005, along with numerous responses and replies and significant supplemental evidence. The Court held a hearing on this request on March 10, 2005. Because the Court finds that the request for attorney's fees is meritorious, it will GRANT the request (Docket No. 253).
BACKGROUND
The case, which has been tried to a jury before this Court, involves a contract dispute. Defendants S.A.S.E. and John Vanderburg individually borrowed around $11.5 million from Plaintiff G.E. Capital Business Asset Funding Group ("G.E. Capital") for the acquisition and development of four commercial properties. The indebtedness is evidenced by four promissory notes, each secured by Commercial Deeds of Trust.
Plaintiff G.E. Capital filed suit for breach of contract and fraud, though the fraud claims have been severed from this action. In its fourth amended complaint, G.E. Capital claims breach of contract for loan defaults, failure to maintain the properties, failure to use best efforts to collect unpaid rents, failure to pay rent, and failure to renew leases as required by the parties' settlement agreement.
The jury trial was held from November 1 through December 1, 2004 and on December 3, the jury returned with a verdict for Plaintiff. The jury awarded significant actual damages and prejudgment interest to Plaintiff G.E. Capital. The Court delayed entry of the judgment pending resolution of the instant issue of attorney's fees and a determination over how to proceed in the severed, fraud claims. The Court now rules on Plaintiff's request for attorney's fees and will enter judgment for Plaintiff in a separate Order.
DISCUSSION
I. Request for Attorney's Fees
On January 21, 2005, Plaintiff initiated its request for attorney's fees by filing the instant motion pursuant to Rule 54. (Docket No. 253) Plaintiff seeks attorney's fees as a matter of Texas contract and statutory law, asking that the judgment include their requested fees.
Plaintiff states that, as a matter of agreement between the parties, Defendants agreed to pay Plaintiff's attorney's fees in the event a dispute arose that required litigation to resolve. Generally, attorney's fees are not recoverable unless the same is provided by statute or by a contract between the parties. However, parties to Texas contracts may provide for recovery of attorney's fees in the event a dispute arises. In the Promissory Notes between the parties, Defendants agreed that, in the event litigation was required to enforce or interpret the notes, the prevailing party "shall be entitled to recover all expenses reasonably incurred . . . whether or not taxable as costs . . . including without limitation, attorney's fees, witness fees (expert and otherwise), deposition costs, copying charges and other expenses." Additionally, each Note provides that Plaintiff G.E. Capital would have "full recourse against Borrower and any general partners of Borrower, all of whom shall be liable jointly and severally" for "all attorney's fees or other costs of collection incurred by [Plaintiff] pursuant to any of the Loan Documents."
New Amsterdam Casualty Company v. Texas Industries, Inc., 414 S.W.2d 914 (Tex. 1967); Bray v. Curtis, 544 S.W.2d 816 (Tex.Civ.App.-Corpus Christi 1976, writ ref'd n.r.e.).
Kleiman v. White, 476 S.W.2d 375, 378 (Tex.Civ.App.-Austin 1972, writ ref'd n.r.e.).
P-276 (San Antonio), at 5; P-97 (Port Arthur I), at 5; P-847 (Port Arthur II), at 5; P-102 (Killeen), at 5.
Id. at 2.
The Deeds of Trust signed by the parties also evidence a promise to pay attorney's fees in the event of litigation. In the Deeds, Defendants agreed to pay "all costs and expenses incurred by [G.E. Capital] in taking any actions pursuant to the Loan Documents including attorney's fees and disbursements." Numerous other portions of the Deeds of Trust also provide for an award of attorney's fees and costs in the event of litigation.
Deeds of Trust: P-727 (San Antonio), at 14, para. 23; P-98 (Port Arthur I), at 14, para. 23; P-847 (Port Arthur II), at 14, para. 23; P-103 (Killeen), at 14, para. 23.
Id. at 16, paras. 24; Id. at 18, para. 26; Id. at 24, para. 32.
In addition to its contractual rights to attorney's fees, Plaintiff G.E. Capital also asserts that it is entitled to attorney's fees under Section 38.001(8) of the Texas Civil Practice and Remedies Code. An award of fees under this section for a prevailing party in a breach of contract claim is mandatory, not discretionary. To recover fees under Section 38.001, the claimant must be represented by an attorney, must present the claim to the opponent or its agent, and the latter must fail to tender payment for the just amount owned within thirty days.
TEX. CIV. PRAC. REM. CODE § 38.001(8) (Vernon 1997).
E.g., Bocquet v. Herring, 972 S.W.2d 19, 20 (Tex. 1998).
It is as general rule that Chapter 38 does not provide for attorney's fees for a party merely defending a contract claim. "However, there is an exception to the general rule of law for cases in which the matters encompassed by the claim and counterclaim are indistinguishable, where they arose from the same transactions, where the same facts required to prosecute the claim are required to defend against the counterclaim."
Veale v. Rose, 657 S.W.2d 834, 841 (Tex.App.-Corpus Christi 1983); First Wichita Nat'l Bank v. Wood, 632 S.W.2d 210 (Tex.App.-Fort Worth 1982, no writ); Wilkins v. Bain, 615 S.W.2d 314 (Tex.Civ.App.-Dallas 1981, no writ); Ortiz v. O.J. Beck Sons, Inc., 611 S.W.2d 860 (Tex.Civ.App.-Corpus Christi 1980, no writ).
A. Standard For Awarding Attorney's Fees
Faced with a request for attorney's fees in a diversity case such as this, district courts apply state law to determine whether an award of fees is appropriate. Under Chapter 38, a prevailing party who sues on an oral or written contract may recover reasonable attorneys fees. The reasonableness of a fee award can be determined by considering all relevant circumstances that relate to the amount charged by the attorney, including the following factors:
Atchison, Topeka Santa Fe Ry. Co. v. Sherwin-Williams Co., 963 F.2d 746, 750-51 (5th Cir. 1992); Texas Commerce Bank Nat'l Ass'n v. Capital Bancshares, 907 F.2d 1571, 1575 (5th Cir. 1990).
Sherwin-Williams, 963 F.2d at 751.
(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill required to perform the legal service properly;
(2) the likelihood . . . that the acceptance of the particular employment will preclude other employment by the lawyer;
(3) the fee customarily charged in the area for similar legal services;
(4) the amount involved and the results obtained;
(5) the time limitations imposed by the client or by the circumstances;
(6) the nature and length of the professional relationship with the client;
(7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and
(8) whether the fee is fixed or contingent on results obtained or uncertainty of collection before the legal services have been rendered.
Arthur Andersen Co. v. Perry Equipment Corp., 945 S.W.2d 812, 818 (Tex. 1997). See also TEX. DISCIPLINARYR. PROF. CONDUCT 1.04, reprinted in TEX. GOV'T CODE, tit. 2, subtit. G app. (State Bar Rules, art. X, § 9); Ragsdale v. Progressive Voters League, 801 S.W.2d 880, 881 (Tex. 1990).
The Fifth Circuit in Georgia Highway Express articulated a set of twelve factors for district courts to apply in determining whether a fee request is reasonable, a list which reflects the substance of the Texas factors, adding only the elements of "undesirability" and "awards in similar cases." Thus, under either Fifth Circuit precedent or Texas state law, the factors to be examined are generally the same.
Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 717-19 (5th Cir. 1974).
Texas law presumes that the usual and customary attorney's fee for similar cases is a "reasonable" fee and does not require a showing that the fees were necessary and reasonable. A reasonable attorney's fee award may include compensation for work performed by individuals other than the attorney himself, including work performed by legal assistants, provided certain criteria are met.
TEX. CIV. PRAC. REM. CODE § 38.003.
Prairie Valley Indep. School Dist. v. Sawyer, 665 S.W.2d 606, 611 (Tex.App.-Fort Worth 1984, writ ref'd n.r.e.).
Gill Sav. Ass'n v. International Supply Co., Inc., 759 S.W.2d 697, 702 (Tex.App.-Dallas 1988) ("In order to recover such amounts, the evidence must establish: (1) that the legal assistant is qualified through education, training or work experience to perform substantive legal work; (2) that substantive legal work was performed under the direction and supervision of an attorney; (3) the nature of the legal work which was performed; (4) the hourly rate being charged for the legal assistant; and (5) the number of hours expended by the legal assistant.").
B. Defendants' Opposition to the Attorney's Fee Request
Defendants oppose Plaintiff's request for attorney's fees, asserting a number of different arguments in opposition. Vanderburg initially opposed an award of attorney's fees until it was given time to conduct additional discovery related to the requested fees. Defendants' statements to the Court revealed that they sought un-redacted fee statements describing in detail the work performed and each of the individuals involved. The Court addressed this position at a hearing held March 10, 2005, offering to appoint a special master to oversee discovery related to the appropriateness of the requested fees. The Court allowed Defendants to make the decision whether to move forward and conduct additional discovery under those circumstances or to rest upon their stated opposition to a fee award here. Defendants elected not to seek appointment of a special master to oversee discovery on the fee issue.
Docket No. 259.
The Court notes that Plaintiff submitted hundreds of pages of documentation in the form of billing statements detailing the basis for the requested attorney's fees. While these exhibits were redacted to conceal attorney work product or other confidential information, they provide the Court with a thorough sense of the attorneys involved, the tasks performed, the time spent completing the tasks. In fact, even with the redactions, the Court finds ample basis upon which to make a determination about the reasonableness of the attorney's fees detailed in the billing statements.
See Docket No. 253, at Exs. 2-5.
Defendants also oppose Plaintiff's request for fees, arguing that requests are unreasonable and submitting affidavit testimony from Texas attorney Ted Lee. Mr. Lee opines that the fee request is excessive and involves "outrageous" expenses and too many attorneys who spent too much time prosecuting the case. Mr. Lee also states that the fees charged by counsel for Plaintiff G.E. Capital seem to be "somewhat high for the San Antonio market."
Docket No. 267.
Id. Ex. A.
Id. at 3.
C. Reasonableness Analysis
To properly place the fee request in perspective, a brief summary of the instant litigation is in order. In 2000, the law firm of Jenkens Gilchrist ("Jenkens") was retained to provide services related to Defendants' initial loan defaults and to assist in collection efforts. Another law firm, Looper, Reed McGraw ("Looper, Reed") was retained by G.E. Capital in March 2003 to serve as Substitute Trustee in connection with the foreclosure of the San Antonio property and to represent G.E. in state court litigation related to this building. Looper, Reed attorneys charged Plaintiff $11,000 for work in these roles.
Docket No. 253, Ex. 1, at 2.
Jenkens represented Plaintiff G.E. until August 2003, when the law firm of Davis, Cedillo Mendoza ("Davis, Cedillo") was retained to substitute for Jenkens as trial counsel. Prior to that point, attorneys with Jenkens spent nearly $400,000 worth of billable hours seeking to resolve the matter without a trial. Beginning in August 2003, Davis, Cedillo represented G.E. Capital through the discovery and pre-trial motion phase, prepared the case for litigation, and tried the case to a jury before this Court for four weeks. For these services, Davis, Cedillo earned nearly $1.8 million in attorney's fees. The fees for each of these firms has been paid by Plaintiff G.E.
Id.
Id.
Id.
As set forth above, Defendants oppose the request for fees, arguing that the request is excessive. By considering the factors followed by Texas courts in determining whether fee requests are reasonable, the Court will place the request and objections thereto in perspective.
1. Time and Labor, Novelty/Difficulty of Issues, and Skill Required
The dispute between Plaintiff and Defendants has continued for five long years. Discovery conducted in this matter involved the production and analysis of over 65,000 pages of documents and more than forty depositions. The litigation and eventual trial featured numerous disputes related to protective orders and privilege issues that Plaintiff accurately describes as "pitched battles." In fact, counsel for Plaintiff spent a combined total of over 10,000 hours in collection and litigation. Measured from the standpoint of the parties, the value of the case itself was over $36 million. In light of these facts, the case lends itself to significant expenditures of time and labor.
Docket No. 253, at 6.
Plaintiff G.E. Capital sought $8 million in damages and Defendants sought $28 million.
Further, because of several complicated legal issues which emerged over the course of the litigation, the case is also one in which a court would expect significant attorney's fees. Although at bottom the case involves a dispute over a contract, several facts worked to complicate the litigation and increase the amount of effort expended. These facts include a number of attorney-client privilege waiver questions, alternative dispute resolution confidentiality issues, and the difficulty of determining several factual matters.
These factors also brought about the need for a high level of trial and other advocacy skills, which were displayed throughout the litigation. The complicated, intersecting issues necessitated having lawyers knowledgeable in the legal areas of foreclosures, negotiated settlement agreements, bankruptcy, management of complex discovery, and tracing concealed assets, not to mention having skilled trial lawyers to present the facts in a succinct manner to a jury.
2. Preclusion of Other Employment
This factor involves the dual consideration of otherwise available business which is foreclosed because of conflicts of interest which occur as a result of the representation and the fact that once the employment is undertaken, the attorney is not free to use the time spent on the client's behalf for other purposes. Here, Plaintiff submits evidence that work on this dispute prevented Jenkens and Davis, Cedillo from taking other employment. Further, it is clear to the Court that, once the trial began in earnest, counsel for Plaintiff were engaged in trying the case around the clock. Particularly as the trial was reaching a conclusion in late November 2004, counsel for both sides worked well into the night on numerous occasions.
Georgia Highway Express, 488 F.2d at 718.
Defendants themselves point out that in the month during which the trial took place, Plaintiff's trial counsel expended hundreds of hours each, with one attorney spending over 460 hours that month on this matter alone. Defendants use this to challenge the amount of hours billed to this matter, but the Court finds that it is ample evidence that engaging in this representation effectively precluded Plaintiff's counsel from engaging in any other work.
3. Fee Customarily Charged in the Area for Similar Legal Services
In its request for attorney's fees, Plaintiff sets forth its counsels' fees and argues that these fees are the usual and customary fees for similar cases in the San Antonio, Texas, legal market. Plaintiff asks the Court to take judicial notice of the fees charged by its counsel and to rule that these are usual and customary fees in San Antonio for this type of case.
Docket No. 253, at 8, Ex. 2-6.
Defendants object to the Court taking judicial notice of the fees normally charged in San Antonio and suggests that fees charged by Plaintiff's counsel are "somewhat high" for the area. However, the expert only mentioned specifically the fee charged by Plaintiff's main trial counsel, Ricardo Cedillo, who charged $500 per hour. Defendants' expert stated that he only knew of one other attorney in San Antonio who charged this much. The expert provided no other information related to this analysis and failed to support his opinion that the rates were higher than the normal rates charged for this type of case in the area.
Defendants' expert also stated that Plaintiff's counsel charged rates that "are a little on the high side, but not too much beyond the normal rates being charged."
The Court has reviewed the evidence presented by both sides related to the customary fees for representation of this kind in the San Antonio legal market. Informing its views are years of experience trying cases and following developments in the legal community, particularly as they relate to increasing attorney's fees. Scrutinizing the evidence before it and applying matters of general knowledge in the legal community, the Court finds that it is not unreasonable in San Antonio, Texas in a large, commercial suit involving claims for millions of dollars, years of litigation and hundreds of boxes of documents for partners to charge $250 to $500 per hour and for associate attorneys to charge from $150 to $250 per hour. This conclusion is not truly challenged by Defendants, who merely assert that the rates seemed a little high for the market. However, since the Court finds this conclusion questionable and unsupported by evidence of the market rates in San Antonio, it takes judicial notice of the foregoing facts and finds that the rates charged by Plaintiff's counsel were not excessive.
4. Amount Involved and Results Obtained
As set forth above, the initial suit involved claims for $36 million, while the claims that proceeded to trial here were valued by the parties at around $15 million. Even though the claims presented were breach of contract claims, the amounts involved and the complicated factual setting made the trial of these issues much more complex than it otherwise would have been. This complexity notwithstanding, the amounts involved were significant and necessitated zealous advocacy on both sides.
As to the "results obtained" factor, this clearly weighs in favor of a fee award here. Plaintiff's counsel entered the case during the pendency of the litigation and rapidly readied the matter for trial. During the actual trial, Davis, Cedillo attorneys displayed extremely effective and skillful advocacy that typifies their representation of other clients before the Court and distinguishes them from other local firms with trial lawyers. The jury award supports this analysis. On December 3, 2004, the jury returned a verdict for Plaintiff on all of its claims and against Defendants on all of their claims and defenses. The jury awarded millions of dollars to Plaintiff; indeed, the jury awarded Plaintiff more than it initially sought in damages. Given these circumstances, the Court finds that both the amount involved in the dispute and the eventual jury verdict support granting Plaintiff's request for attorney's fees.
5. Time Limitations Imposed by the Client or Circumstances
Plaintiff's trial counsel, Davis, Cedillo, entered the matter three years into the dispute and after the litigation had gotten underway. As a result of the late entry and the volume of materials involved in discovery, Davis, Cedillo attorneys were required to get themselves up to speed to effectively represent G.E. Capital in this suit. The time limitations imposes by these circumstances affects the analysis over the reasonableness of the fee requested in two ways. First, it provides additional support for Plaintiff's argument that the number of attorneys and amount of time spent on the case and particularly the trial was justified and reasonable under the circumstances. Second, it highlights the skill of Plaintiff's counsel, who were able to enter a case "mid-stream," come to grips with the veritable mountain of documentary evidence related to the parties' claims, and secure a unanimous verdict awarding Plaintiff everything it sought and finding against Defendants on all counts. As a result, the time limitations factor also supports the reasonableness of a fee award here.
6. Nature and Length of the Professional Relationship with the Client
Plaintiff G.E. Capital had retained the firm of Jenkens for some time, with the client relationship dating back to around 1987. However, Davis, Cedillo was new counsel for G.E. Capital and had not represented it before, though it had consulted with G.E. prior to this matter. Case law states that this factor can become relevant when a lawyer in private practice varies his fee for similar work in light of the professional relationship of the client with his office. Since there is no argument or testimony indicating that this has occurred in this case, this factor does not affect the Court's analysis.
Georgia Highway Express, 488 F.2d at 719.
7. Experience, Reputation, and Ability of the Lawyers Performing the Services
Jenkens is a national law firm with a considerable reputation and unquestioned ability. Davis, Cedillo is a San Antonio firm that enjoys a national reputation in the field of commercial litigation and trial practice. Plaintiff submits evidence that its two main trial counsel are both AV-rated by Martindale-Hubbell and have been honored as Texas "Super Lawyers" by the Texas Monthly Magazine.
Docket No. 253, at 9, Ex. 3, at para. 2; Ex. 5, at paras. 2, 3.
The Court finds that the experience, reputation, and ability of the lawyers for Plaintiff are unquestioned and above reproach. The lawyers of Davis, Cedillo are known for trying difficult and complex cases and securing extremely large judgments in close cases. Their ability to do that in this case as well supports a finding under this factor that Plaintiff's fee request is reasonable and appropriate under the circumstances.
8. Uncertainty of Collection before the Legal Services Have Been Rendered
This is a fixed fee case for all of G.E.'s counsel and there was no aspect of a contingent fee on the facts before the Court. While the presence of a contingent fee agreement between a party and counsel can be helpful to a determination of what the attorney's fee expectations were when he accepted the case, the absence of one does not affect the analysis or make an award of attorney's fees more or less reasonable under the circumstances.
Id.
In addition to the factors followed by Texas courts which this Court has just examined, the Fifth Circuit case law on the reasonableness of attorney's fee requests adds the elements of "undesirability" and "awards in similar cases." The case law suggests that the first factor relates to the community's reaction to a particular type of representation, such as civil rights litigators who face a reaction from a community that does not want to see discrimination eradicated. This factor does not really apply here, as the Court has no evidence of — nor reason to suspect — a reaction from the community related to this case. Thus, the "undesirability" factor is neutral and does not weigh for or against a finding of reasonableness of the fee request here.
Id. at 717-19.
Id. at 719.
The other factor asks the Court to compare the award with other awards entered in similar cases. The Court is without evidence of awards in other, similar cases and finds that this factor also fails to impact its analysis on the reasonableness of the fee request.
Weighing all of these factors, the Court finds that Plaintiff has shown that an award of fees is warranted here. Plaintiff's counsel did an admirable job preparing and trying this case to a jury and displayed consummate professionalism throughout the pendency of the litigation. For the purposes of Chapter 38, Plaintiff presented demands to Defendants for payment in September, October, and November 2000. Plaintiff again presented demands for payment to Defendants in March, April, May and September 2003 and March 2004. Defendants did not and have not tendered payment for the just amount owed, satisfying TEX. CIV. PRAC. REM. § 38.002.
Docket No. 253, at 9 (citing numerous documents in the record in support of contention).
Id.
The Court's decision then involves a determination of the reasonableness of the fee request. Considering the factors applied by Texas courts and courts in the Fifth Circuit, the Court finds an award of fees reasonable under the circumstances. The Court is determined that the fee awarded be reasonable in all respects. As the Fifth Circuit itself has noted, the trial court's job in this situation is difficult and often its decision is totally satisfactory to no one.
Georgia Highway Express, 488 F.2d at 720.
Plaintiff requests a total of $2,268,064.50 for services performed by counsel through March 25, 2005. The Court, while finding that Plaintiff has proved its entitlement to an award of fees and that such a request is reasonable under the circumstances, recognizes that the $2.2 million figure is significant. In light of the magnitude of such a substantial award, the Court finds it appropriate to reduce the fee awarded by 15 percent and award Plaintiff $1,900,000.00 in attorney's fees for representation through March 25, 2005. This minor adjustment is being made not because the fee requested or some other component of the calculation was excessive per sé. Rather, the reduction is being made out of an abundance of caution appropriate when the Court is faced with such a substantial award.
Defendants object to the inclusion of a separate award in contemplation of the appeal that is likely to be taken from the verdict in this case. Defendants protest both as to the amount and the award of appellate attorney's fees prior to the appeal itself. Determined to proceed cautiously, the Court will also defer an award of appellate fees and costs until the appeal is concluded and an accurate determination of the fees involved in the appellate representation can be made.
CONCLUSION
For the foregoing reasons, the Court finds that an award of attorney's fees is reasonable and grants Plaintiff's request for attorney's fees.
It is therefore ORDERED that Plaintiff's Request for Attorney's Fees (Docket No. 253) is hereby GRANTED, and that Plaintiff is AWARDED $1,900,000.00 for representation through March 25, 2005.