Commercial leases and attorneys’ fees, a road-map and a cautionary tale

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.

 

 

 

 

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Thanks again to Baylor Law for SCOTX oral argument prep

A brief, personal post. Thanks again to Baylor Law students and faculty for helping me prepare for two recent oral arguments in front of the Supreme Court of Texas. I saw this article pop up today and wanted to share. The students were truly exceptional. The sharp, incisive analysis they offered on knotty legal issues was invaluable.

“Baylor Law Students Help Lawyers Prepare for Arguments Before the TX Supreme Court”

WACO, Texas –

Baylor Law students Carson May, Molly Maier, and Tori Coates assisted a lawyer from the Waco firm of Scanes & Routh prepare for an argument before the Texas Supreme Court. The case, Worsdale v. City of Killeen, Texas involved the issue of requirement of ‘notice’ under the Texas Tort Claims Act.

Tyler Talbert, the Waco lawyer who argued the case on behalf of the plaintiff, first sought assistance in preparing for his arguments before the Texas Supreme Court from Baylor Law Professors Jim Underwood and Mike Berry who had Molly Maier participate as she is writing a law review article on the same subject. Another professor who assisted Talbert, Greg White, later included May and Coates in the preparation. The students read and edited the briefs, and participated in practice oral arguments. Rigorous, practical legal training is the hallmark of Baylor Law’s program, and the trio of Molly, Tori, and Carson are just recent examples of how the program prepares future lawyers. Coates and May have been active and successful in Baylor’s Interscholastic Moot Court programs, and are now participating in Interscholastic Mock Trial teams, and Maier is Editor-in-Chief Elect of Baylor Law Review.

Coates and May attended the oral argument on February 21st. During the oral arguments, Court members asked several questions that the Baylor Law students had anticipated and posed during the practice sessions.

“As an aspiring litigator, I could not be more grateful for this experience or my Baylor Law education. As I read the briefs and pleadings to prepare for our moot court round with Mr. Talbert, I was able to identify the issues and provide thoughtful feedback,” stated Tori Coates, who added “Mr. Talbert is certainly one of the best litigators I have ever had an opportunity to witness. His command of the material and the courtroom was inspiring, and I look forward to helping him prepare for his next oral argument. I am thankful for Baylor law school faculty members like Professor White who make unique opportunities like this possible.”

Fellow student Carson May believes that his time at Baylor Law has been preparing him for opportunities like this case, and more. “When I was first approached with the opportunity, it felt quite daunting. However, when I started pouring through the briefs and the relevant case law, I realized that this was precisely the kind of work that Baylor’s Moot Court program trained us for.” Adding, “Our time at the Texas Supreme Courthouse was a surreal experience. The opportunity to witness first-hand our advice and contributions being utilized before the Texas Supreme Court was a truly unique experience reaffirming why Baylor Law’s Appellate Advocacy program deserves the reputation it has.”

The Texas Tort Claims Act is a set of statutes that waives governmental immunity under certain conditions and allows people who claim they have been harmed by wrongful acts, known legally as torts, to sue for damages. These wrongful acts can include acts of negligence by a government agency or their employees. Before the passage of the Texas Tort Claims Act in 1969, governmental agencies were generally immune from being sued without the specific permission of the government.

In the case before the TX Supreme Court that Baylor Law professors Underwood and Berry helped Talbert prepare for, with input from Maier, May, and Coates, a serious car accident occurred because there were no barricades and signs notifying drivers of a huge obstruction at a construction site. There was some question about whether the City or the County owned the road, and the City investigated the accident. The plaintiffs sued the City claiming that the City was responsible for the dangerous road condition that caused the serious car accident. The case before the TX Supreme Court hinged on a specific requirement of the TX Tort Claims Act – that the plaintiff must give ‘notice’ before proceeding with a lawsuit, the plaintiff claimed formal written notice was unnecessary because the City, which investigated the accident, had actual notice of the accident and the alleged cause.

After oral arguments, another recent Baylor Law graduate who works as a Briefing Attorney at the Court, Elin Isenhower (J.D. ‘18), led the students on a tour of the Court’s chambers and shared with them an insiders-perspective on the workings of the Court.

The Court may decide the case before it recesses for the summer in late May, but the schedule for a decision is dependent on the Court. There is no actual deadline for decisions at the Court.

Governor Abbot appoints Brett Busby to Supreme Court of Texas

Governor Abbott appointed Brett Busby to the Supreme Court of Texas. Busby will fill the vacancy left by Justice Phil Johnson who retired in late 2018. The Texas Senate Nominations Committee unanimously voted to recommend the Senate confirm his appointment. It is anticipated that the Senate will vote next week to confirm. Busby is a former U.S. Supreme Court clerk who served on the Houston (14th) Court of Appeals. He is a career appellate attorney and the Chair of the State Bar Appellate Section.

The confirmation vote will take the Supreme Court of Texas up to a full nine as they look to clear their docket by the end of term. His appointment will last through 2020.

For more information check out:

https://www.texastribune.org/2019/02/21/texas-supreme-court-appoint-abbott-brett-busby/

Fraudulent inducement: What we said isn’t what we signed

The Supreme Court of Texas issued its opinion in Mercedes Benz USA, et al v. Carduco, Inc. The case reversed a $115 million jury verdict on a fraudulent inducement claim and rendered for the defendant.

In the case, the parties negotiated a deal for the plaintiff to purchase the assets of a Mercedes Benz car dealer. As part of that purchase, the parties discussed the buyer-plaintiff’s future sales territories.  The car dealer promised several things about the plaintiff’s geographic sales area in the future. But when the parties signed an agreement, the contract contradicted what the parties actually negotiated.  When he realized the discrepancy, the plaintiff sued. As is often the case, the plaintiff alleged both breach of contract (I didn’t get what was bargained forand fraudulent inducement (you tricked me into signing the contract).

The Court held that the terms of the contract defeated the fraud claim and spelled doom for the plaintiff. As the Court explained, one of the essential elements of a fraudulent inducement claim is “justifiable reliance,” – meaning that the plaintiff did in fact rely on what the defendant said and that it was reasonable to do so. The Court found that the contract defeated any justifiable reliance, reasoning:

we conclude that the parties’ written agreement directly contradicts [Plaintiff’s] alleged belief and thereby negates its justifiable reliance as a matter of law.

As others have noted, this case follows a recent trend narrowing fraudulent inducement claims where the fraud claim contradicts the contract.

Easy with that Sharpie: Over-redaction and attorneys’ fees.

An interesting decision came out of the Ft. Worth Court of Appeals on attorneys’ fees and redactions, McGibney v. Rauhauser, 549 S.W.3d 816 (Tex. App.—Fort Worth 2018). Parties that prevail in certain cases (breach of contract, for example) are able to collect their attorneys’ fees from the losing party. In order to collect the fees, the attorneys must show that the fees charged were “reasonable and necessary,” among other things.

As litigators are all too familiar, lawyers should keep contemporaneous records of their work and billing records in order to prove up the fees at trial. These “fee bills” are often redacted in order to preserve potentially privileged information. Prior to this decision, there’s been little guidance on the topic of how much redaction is too much redaction.

The Ft. Worth Court of Appeals ruled that a large fee award was not reasonable due to heavily-redacted entries. The entries must allow the court to conduct a “meaningful review” so that it is able to determine that the amount requested is not “excessive or extreme, but rather moderate or fair.”

¡Ojo, litigators! Next time you’re taking the black marker to that fee bill, remember this cautionary tale.

Tyler Talbert practices law in Waco, McClennan County, Texas, with the firm Scanes & Routh. He focuses on appeals and appellate law and has practiced before numerous courts of appeal, including the Supreme Court of Texas and Fifth Circuit. 

Judge John Neill to fill 10th Court of Appeals vacancy.

Governor Greg Abbot appointed Judge John Neill to fill the 10th Court of Appeals (Waco) vacancy. Justice Scoggins announced he would retire mid-term, leaving an opening on the court. Judge Neill is a long-time trial judge of the 18th District Court in Johnson and Somervell Counties. He is expected to start his new job on the three-judge intermediate appellate court in Waco on Feb. 20, joining Chief Justice Tom Gray and Justice Rex Davis on the court.

Neill will have to run for election in 2020 and again in 2022, when Scoggins’ term expires. One cool tidbit about Neil: he is a founder of the Court-Appointed Special Advocates (CASA) program in Johnson County.

10 cases set for Oral Argument the first week of December – SCOTX.

The Supreme Court of Texas has ten cases set for oral argument December 4, 5, and 6th. The Court puts together very user-friendly summaries of the cases and issues, which I’ve included below. These will obviously be hot topics of conversation at the Thanksgiving dinner table, so settle in and take a look.

Of note, there are three different cases (in red) on breach of contract, fraud, and fraudulent inducement. These issues pop up commonly for litigators. Frequently, breach of contract claims are paired with fraud/fraudulent inducement claims. One party argues that the other breached the contract, or alternatively, lied about the contents of the agreement. Inevitably the parties are left to argue whether extrinsic evidence is admissible to establish breach/fraud or whether the parol evidence rule bars the evidence. These cases cover a range of issues on breach, fraud, and fraudulent inducement; they should be enlightening on a range of topics.

Also the Texas Citizen Participation Act (TCPA) has made its way back to SCOTX (in blue). If you’re not familiar with the TCPA then I envy you. This is not the first time the Court has considered TCPA, and I’m sure it will not be the last.

  1. Mercedes-Benz USA LLC, et al. v. Carduco Inc.
    •  In this case alleging fraud underlying a contract the issues are (1) whether reliance is precluded because the alleged misrepresentations conflict with the contract; (2) whether the contract’s merger clause disclaiming reliance precludes fraud; (3) whether evidence supports that each defendant had a disclosure duty or gave affirmative misrepresentations; (4) whether separate jury instructions should have been presented on each fraud theory; (5) whether the appeals court improperly sustained a spoliation instruction; and (6) whether the appeals court erred by remitting punitive damages, from $100 million to $600,000.
  2. Barrow-Shaver Resources Co. v. Carrizo Oil & Gas Inc.
    • In this challenge to the appeals court’s take-nothing reversal from a contract-breach and fraud verdict, the issues are (1) whether the court erred by considering a deleted provision from negotiations to interpret the contract and (2) whether the court erred by rejecting a fraud claim on reliance grounds based on an oral promise to act when the written contract omitted that.
  3. In the Interest of A.L.M-F., et al.
    •  The issue in this parental-rights termination appeal is whether the trial court erred by denying the mother’s jury-trial request in de novo hearing.
  4. Chambers-Liberty Counties Navigation District, et al. v. State of Texas 
    • Consolidated with case below
  5. In re Sustainable Texas Oyster Resources Management L.L.C.
    • In this contest over a lease by the navigation district to the oyster-production company, to use submerged land to grow and harvest oysters, the issues are (1) whether statute overcomes the district’s governmental immunity claim; (2) whether the district commissioners have authority to lease the land in this case; (3) whether the state properly alleged an ultra-vires claim against the commissioners for restitution; and (4) whether Sustainable Texas Oyster Resources has standing in this appeal.
  6. Baylor Scott and White, Hillcrest Medical Center v. Ruthen James Weems III
    •  The issue is whether a fraudulent-misdiagnosis claim falls under the health-care liability statute and requires a threshold expert-report requirement.
  7. University of Texas M.D. Anderson Cancer Center v. Lance McKenzie and Deborah Diver
    •  The issues are (1) whether M.D. Anderson used tangible personal property during surgery, defeating Anderson’s immunity defense, and, if so, (2) whether that use proximately caused the surgery patient’s death.
  8. The Dallas Morning News Inc. and Kevin Krause v. Lewis Hall and Richard Hall
    •  The principal issues in this challenge under the Texas Citizens Participation Act are (1) whether the Halls’ partner compounding pharmacy showed clearly and specifically that the newspaper’s report the company was under federal investigation was substantially false and (2) whether a reasonable reader would infer the pharmacy’s guilt from the newspaper’s reporting that included allegations in lawsuits, a federal investigation and the context of the broader controversy over compounding industry practices.
  9. International Business Machines Corp. v. Lufkin Industries LLC
    •  In this appeal from a jury finding for Lufkin on its claims for fraud and fraudulent inducement, the issues are (1) whether reliance was clearly disclaimed despite contract language that exchanges between IBM and Lufkin staffs about project goals and objectives “is the basis of our understanding”; (2) whether fraudulent-inducement damages preclude recovery for fraud; and, assuming liability for fraud and fraudulent inducement, (3) whether Lufkin proved its damages by legally sufficient evidence; (4) whether Lufkin suffered damages for contract breach; and (5) whether Lufkin is bound by incorporation of a clause limiting damages the trial court excluded because of a verification issue.
  10. Linda Ferreira v. Douglas W. Butler and Debra L. Butler
    •  The issue is whether a default is imputed to a probate applicant presenting a will that had been filed before but outside the requisite time restriction.

 

For the truly dedicated, the Court offers video and audio recordings of all Oral Arguments!