A common concern among litigants is whether attorney's fees are recoverable from the other party. While it is reasonable to assume the prevailing party will be awarded attorney's fees, it is not always the case. In most lawsuits, each party assumes their own attorney's fees unless otherwise provided under the law. In this article, we will discuss some of the most common mechanisms under Texas law for recovering attorney's fees.
Chapter 38 of the Texas Civil Practice and Remedies Code
Chapter 38 of the Texas Civil Practice and Remedies Code is the most common statute for recovering attorney's fees in civil litigation. The statute authorizes a person to recover reasonable attorney's fees from an individual or corporation if the claim is for (1) rendered services; (2) performed labor; (3) furnished material; (4) freight or express overcharges; (5) lost or damaged freight or express; (6) killed or injured stock; (7) a sworn account; or (8) an oral or written contract. Tex. Civ. Prac. & Rem. Code § 38.001 (West 2017). To recover attorney's fees, Texas law requires that the claimant be represented by an attorney, present the claim to the opposing party or an agent thereof, and payment of the just amount owed must not have been tendered before 30 days after the claim is presented. Tex. Civ. Prac. & Rem. Code § 38.002 (West 2017).
Recovering attorney's fees in a breach of contract claim is by far the most common application of Chapter 38: A person may recover attorney's fees from an individual or corporation for breach of oral or written contracts. Tex. Civ. Prac. & Rem. Code § 38.001 (West 2017). Interestingly, Chapter 38 of the Texas Civil Practice and Remedies Code only applies to individuals and corporations and does not provide for the recovery of attorney's fees against a limited liability company, partnerships, or other business entities. This exception to the recovery of attorney's fees under Chapter 38, highlights the importance of expressly contracting for the recovery of legal fees by contract. If a contract includes an attorney's fees provision, the parties may become contractually obligated to cover fees apart from Chapter 38.
In declaratory judgment actions, the judge may award attorney's fees if the parties seek to determine their rights with respect to deeds, wills, written contracts or other writings. Tex. Civ. Prac. & Rem. Code §§ 37.004; 37.005 (West 2017). The Declaratory Judgment Act provides that a court may award costs and reasonable and necessary attorney's fees that are equitable and just. Tex. Civ. Prac. & Rem. Code § 37.009 (West 2017). Whether attorney's fees are equitable and just is fact specific and ultimately under the court's discretion.
To deter groundless and bad faith litigation, a prevailing party to a frivolous lawsuit may be awarded reasonable expenses and attorney's fees incurred in presenting or opposing the allegation. Tex. Civ. Prac. & Rem. Code § 10.002 (West 2017).
Fraud in Real Estate and Stock Transactions
A person who makes false representations to another person for the purpose of inducing that person to enter into a contract involving real estate or stock transactions, shall be liable to the defrauded person for reasonable and necessary attorney's fees. Tex. Bus. & Com. Code § 27.01 (West 2017). Causes of action brought under this statute are commonly referred to as statutory fraud claims and are limited to transactions dealing with real estate and securities.
Insurance Code Violations
Reasonable attorney's fees may be recovered in cases where a person engaged in an act or practice that is an unfair method of competition or an unfair deceptive act or practice. Tex. Ins. Code § 541.152 (West 2017). Statutory causes of action under the Texas Insurance Code are typically brought against larger insurers and surround cases involving denial of claims. For example, the failure of an insurer to promptly pay a claim, may cause the insurer to be liable to the policy holder or beneficiary for the total amount of the claim, 18% interest on the claim per year as damages, and reasonable attorney's fees. Tex. Ins. Code §§ 541.152; 542.054. (West 2017).
Texas Deceptive Trade Practices Act
The Texas Deceptive Trade Practices-Consumer Protection Act (DTPA) was enacted to protect consumers from false, misleading, or deceptive acts or practices in the conduct of any trade or commerce. Tex. Bus. & Com. Code §17.46 (West 2017). In a DTPA claim, a consumer who prevails shall be awarded court costs and reasonable and necessary attorneys' fees. Tex. Bus. & Com. Code §17.50(d) (West 2017). Conversely, if a court finds that the claim was groundless or brought in bad faith or for the purpose of harassment, the court shall award the defendant reasonable and necessary attorneys' fees and court costs. Tex. Bus. & Com. Code §17.50(c) (West 2017).
Even when a contract or statute provides for the recovery of attorney's fees, the practical recovery of fees may be difficult. Litigation is expensive, and the results are often uncertain. Even if ultimately successful, most litigants are required to pay their attorneys in advance of any satisfaction of judgments. Litigants need to be mindful that in many claims, Texas courts have discretionary power when awarding attorney's fees. Consult with an attorney to consider your options, especially when attorney's fees may exceed actual damages.
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