Commercial leases and attorneys’ fees are front and center of the Supreme Court of Texas decision in Rohrmoos Venture v. UTSW DVA Healthcare, LLP. The case will interest anyone with a commercial lease dispute or that wants to recover attorneys’ fees. The Court held that termination is a justified remedy when the landlord breaches the commercial lease. The Court also held that the plaintiff who successfully terminated the lease and defended against the landlord’s counterclaim for breach of contract was a “prevailing party” and could recovery attorneys’ fees.
However, although the plaintiff was a “prevailing party,” there was insufficient evidence to support the jury award of attorneys’ fees. The plaintiff got the “W,” and terminated the lease, but losing the million-dollar fee-award had to sting. The case is both a road-map and a cautionary tale for commercial lease disputes and the recovery of attorneys’ fees.
In Rohrmoos Venture, the plaintiff-tenant sued the defendant-landlord to terminate the commercial lease. The plaintiff argued that the property was not suitable for the intended commercial purpose. The Supreme Court of Texas noted that the implied warranty of suitability is alive and well in commercial leases. The failure to maintain the property in a commercially suitable state may constitute a material breach and did in fact constitute a material breach in this case. The material breach justified the plaintiff-tenant’s termination and walkaway from the lease agreement.
The Court then found that the plaintiff-tenant was a “prevailing party” for the purposes of recovering attorneys’ fees. The plaintiff successfully terminated the lease and defend against the landlord’s breach of counterclaim. And although the plaintiff did not recover any damages, it could recover fees. The Court held that attorneys’ fees may be recoverable where the party “did not recover actual damages” but “achieves a material alteration in its legal relationship” with the other party.
But even though the plaintiff was a prevailing party, there was insufficient evidence to support the award of attorneys’ fees award. The attorney proving up the attorneys’ fee amount testified generally about the work he performed and did not introduce any billing records. The Court held that this kind of “general” testimony was insufficient to satisfy Texas standards on proving up reasonable and necessary attorneys’ fees. The Court stated:
We also understand [the attorney’s] position that opposing counsel’s actions drove the cost of litigation, in most instances, and that made [Plaintiff’s] $800,000 in requested attorney’s fees necessary, even reasonable. However true this may be, Howard’s justification for why his fees should be $800,000—searching through “millions” of emails and reviewing “hundreds of thousands” of papers in discovery, more than forty depositions taken, and a forty-page motion for summary judgment—is too general to establish that the requested fees were reasonable and necessary. Without detail about the work done, how much time was spent on the tasks, and how he arrived at the $800,000 sum, Howard’s testimony lacks the substance required to uphold a fee award.
The silver-lining: the Court remanded the case to the trial court for re-determination of the proper amount of attorneys’ fees. You can bet your bottom dollar the attorney will be ready to hammer those specifics next go-round.