ATTORNEY S FEES AND LOSER PAYS STATUTE

ATTORNEY S FEES AND LOSER PAYS STATUTE WENDY S. BURGOWER 3355 W. Alabama, Suite 825 Houston, Texas 77098 (713)529-3982 State Bar of Texas 35 TH ANNUAL MARRIAGE DISSOLUTION INSTITUTE April 26-27, 2012 Dallas CHAPTER 13

WENDY S. BURGOWER Burgower & Rainwater, L.L.P. 3355 W. Alabama, Suite 825 Phone: (713)529-3982 Houston, Texas 77098 Fax: (713)522-5045 Wendy@brfamilylaw.com Born Houston, Texas EDUCATION: University of Texas at Austin (B.A. Plan II 1976) University of Houston, Bates College of Law (J.D. 1979) LICENSURE: Supreme Court of Texas (1979), U.S. Court of Appeals, Fifth and Eleventh Circuits (1979), U.S. District Court, Southern District Court (1979), Board Certified Family Law, Texas Board of Legal Specialization PROFESSIONAL AFFILIATIONS: American Bar Association, Association; American Academy of Matrimonial Lawyers; Association of Women Attorneys (President, 1986-87); Burta Rhoads Raborn Inns of Court; (Secretary 1997-1999, President 1999-2000) Gulf Coast Family Law Specialists (Board Member/Secretary, 1987-88), (President 1989-90); Houston Bar Association (Board Member, Family Law Section (1987-1990), International Academy of Matrimonial Lawyers, State Bar of Texas, Texas Academy of Family Law Specialists; Texas Family Law Council, (1994-1999); 2000-present 2004-5 Secretary, 2005-6 Treasurer, 2006-7 Vice Chair; 2007-2008 Chair Elect; 2008 Chair, 2009-Immediate Past Chair; Texas Trial Lawyers, Texas Family Law Foundation-Member and Director CLE ACTIVITIES AND HONORS: Course Director: Honors: 22 nd Annual Marriage Dissolution (1999) Super Lawyer- Texas Monthly 2004-2011 28 th Advanced Family Law Course (2002) (assistant) H Magazine--2007 New Frontiers in Marital Property (2004) Go To Lawyer- Texas Monthly 2007 Preeminent Woman Lawyers-Martindale-Hubbell Bar Register 2011 AV Preeminent - Martindale-Hubbell Bar Register 2011 ARTICLES AND PRESENTATIONS: Tuition or Neiman s, Stretching Overextending Budgets and Solutions For the Negative Balance Sheet U.T. Family Law on the Front Lines (2011) Sharpening Your Skills Advanced Family Law Course (2010) Theming Your Case; and Using Electronic Media to Make Your Trial Presentation U.T. Family Law on the Front Lines (2010) When It s Right for the Child to Decide Marriage Dissolution (2010) Successful Mediation and Settlement Practice for the Family Law Attorney Lawyers Who Stare At Goats (2010) Organizing and Using the Trial Notebook Ultimate Trial Notebook: Family Law (2010) Evaluating Property Issues Amid Fairness Issues New Frontiers in Marital Property (2009) Effective Presentation: What Good Lawyers Forget When Presenting Your Case on Temporary and Final Advanced Family Law Course (2009) Representing And Defending Against the Impaired Parent U.T. Family Law on The Front Lines (2008) Giving the Kids A Voice In The Courtroom Advanced Family Law Course (2008) Ethics: the Honest Documents Advanced Family Law Drafting Course (2008) Difficult Clients Advanced Family Law Course (2007) Words from The Wise- A Few Pearls in Custody Litigation Family Law on the Frontlines (2007) The Kids Really Need More Judge-Above Guidelines Support And Providing for Special Needs and Disabled Children Advanced Family Law Course (2006) Bridging the Gaps and Filling in The Holes New Frontiers in Martial Property (2006) Advantages of Settling Family Law Disputes 29 TH annual Marriage Dissolution (2006) Preserving and Protecting Separate Property New Frontiers (2005) Valuation 31 ST Annual Advance Family Law (2005) The Facts, Nothing But The Facts Ultimate Trial Notebook (2004) Ethical Traps Marriage Dissolution (2004) Interaction of Family Law and Criminal Law Advance Family Law Course, (2004) Family Law Torts Family Law Conference for General Practitioners and Legal Assistants (2004) Tips For Drafting Like A Pro: From Basic Claims to Exotic Causes of Actions Advanced Family Law Drafting And Advocacy (2003) Dangerously Giving up Rights: To Share or Not To Share Marriage Dissolution (2003)

Attorney s Fees and Loser Pays Statute Chapter 13 TABLE OF CONTENTS I. INTRODUCTION.... 1 II. GENERAL APPLICATION OF ATTORNEY S FEES.... 1 III. INTERIM FEES.... 1 IV. EVIDENTIARY NEEDS... 2 V. H.B. 274-- THE OMNIBUS TORT REFORM BILL-- DOES THE LOSER PAY IN FAMILY LAW?... 3 VI. CONCLUSION... 4 TABLE OF AUTHORITIES... 5 APPENDIX A... 7 APPENDIX B... 28 APPENDIX C... 30 APPENDIX D... 38 i

Attorney s Fees and Loser Pays Statute Chapter 13 ATTORNEY S FEES AND LOSER PAYS STATUTE I. INTRODUCTION. Attorney s fees in a divorce matter and a Suit Affecting the Parent Child-Relationship (hereinafter referred to as SAPCR ) has been a topic of every seminar in the last ten years. Countless papers are written about setting fees and collecting fees. If we did an analysis of attorney s fees in family law during the last twenty years, one would find that the award of attorney s fees during the pendency of the divorce or in a SAPCR, to be one of the most significant developments in family law. Last session, the Texas Legislature passed House Bill 274, which revised the award of attorney s fees in general civil litigation. The bill is reflected in Section 42.004 of the TEXAS CIVIL PRACTICE AND REMEDIES CODE. The bill was referenced by different interest groups as the loser pay bill. The idea was to properly compensate the party faced with litigation who prevailed, and the clear intent of the legislature was to discourage the present state of personal injury law that did not punish a loser of a shaky, if not frivolous lawsuit. The actual pursuit for attorney s fees is quite thoroughly discussed by Jonathan Bates in his paper Attorney Fees, which has been presented in the 2009 Ultimate Trial Notebook: Family Law. There is not a more complete and thoughtful playbook for the practitioner. This paper will review the current status of obtaining attorney s fees and consider the impact of the House Bill that is now Section 42.004 of the TEXAS CIVIL PRACTICE AND REMEDIES CODE. The author intends to stimulate the minds with possible application to our family law cases, and of course to familiarize all readers with its possible impact on our practice. II. GENERAL APPLICATION OF ATTORNEY S FEES. Attorney s fees are authorized by the TEXAS FAMILY CODE in most all areas of our practice. In most instances, attorney s fees are under the Court s discretion, and seldom are fees deemed mandatory. However, in order to obtain fees, it is mandatory that a pleading requesting fees has been filed. Absent a mandatory statute, a trial court s jurisdiction to render a judgment for attorney fees must be invoked by pleadings and a judgment not supported by pleadings requesting an award of attorney s fees in a nullity. State v Estate of Brown, 802 S.W. 2d 898,900 (Tex.App. San Antonio 1991, no writ). 1 In the context of a divorce, a court may tax costs of the dissolution for marriage suit as costs pursuant to Tex. Fam. Code 6.708. Hirczy v. Hirczy, 838 S.W.2d 783, 786 (Tex.App. Corpus Christi 1992, writ denied). However, see also Pletcher v. Geotz out of the Fort Worth Court of Appeals that holds that costs are limited to fees and charges required by law to be paid to the courts or some of their officers and attorney s fees are not to be taxed as costs. Pletcher v. Geotz, 9 S.W.3d 442, 448 (Tex.App. Fort Worth 1999, pet. denied). Separate and aside from whether or not attorney s fees can be assessed as costs in a divorce, the Court may consider attorney s fees when determining a just and right division of the community estate. TEX. FAM. CODE 7.001; Carle v. Carle, 234 S.W.2d 1002, 1005 (Tex. 1950); Grossnickle v. Grossnickle, 935 S.W.2d 830, 846047 (Tex.App. Texarkana 1996, writ denied). Additionally, pursuant to TEX. FAM. CODE 106.002, the court may render judgment for reasonable attorney s fees and expenses and order the judgment and postjudgment interest to be paid directly to an attorney, in a SAPCR. When representing a client in a divorce with children, keep in mind you have all three avenues above by which to seek attorney s fees in that client s case. Our statutory basis for attorney fees lies either in the TEXAS FAMILY CODE or in the TEXAS CIVIL PRACTICE AND REMEDIES CODE, but can also be found in the TEXAS RULES OF CIVIL PROCEDURE. The origins of the attorney fee awards in the TEXAS RULES OF CIVIL PROCEDURE seem to arise more from the authority of a sanction rather than simply rewarding the prevailing party. See the following statutes relating to the abuse of the discovery process and frivolous filings: TEX. R. CIV. P. 215.3, TEX. R. CIV. P. 13, and TEX. CIV. PRAC. & REM CODE ANN. Chapter 10. III. INTERIM FEES. The ability to get some attorney s fees during the case can make or break the practitioner s ability to maintain the case and carry the client to trial. So many times the family law attorney will get a retainer without considering the time involved in getting the case ready for trial. If the estate has little to no liquidity, the award of fees is not realistic. Practice tip: If there is little liquidity in the estate the attorney may want to set up a monthly payment plan with the client at the beginning of the case. A client will want to know that he/she is not going to be dropped simply when the retainer is exhausted. As stated earlier, the ability to get interim fees can allow the disadvantaged party to maintain the lawsuit and not settle out of financial desperation. The term interim fees is considered in most all cases contemplated by the TEXAS FAMILY CODE. The

Attorney s Fees and Loser Pays Statute Chapter 13 lawsuits arising from an original SAPCR allow interim fees pursuant to Section 105.001 (a)(5); those arising from a divorce are allowed pursuant to Section 6.502(a)(4). This author finds that interim fees in a divorce case are a bit easier to achieve as the Court recognizes that both litigants in the divorce action are still married and their income and usual resources are community property. The Court, in its powers under the TEXAS FAMILY CODE, can actually take money from one side and give it to the other. However, when one has been awarded interim attorney fees, the Court usually was presented in evidence, the community source for the award. This is one reason why the disclosure of income and financial accounts prior to or at the time of a temporary orders hearing is so imperative, especially if you represent the nonmoneyed spouse. It is critical that one be very careful when the interim fees are gone and the likelihood of further payment during the case is slim. Although the attorney has the contractual right to terminate representation due to non-payment of fees, the same attorney may not have the ethical backing to leave the case. A recent case (opinion filed on March 13, 2012) from the Fourteenth Court of Appeals in Houston, Harrison v. Harrison, is necessary reading for all family law practitioners. In view of the recent Texas Supreme Court Advisory Committee dealing with pro se litigants and their assault on the family bar, this case should serve as a primer on what can happen when actual non-payment of fees is the sole basis of a request to terminate services. The Harrison facts are not unique to any family law attorney. The litigation began in October 2006, and by February 2008 the case was called to trial. Prior to that time when Mr. Joel Nass represented her, the file shows five attorneys had represented Connie Vasquez Harrison. During the trial, the trial was recessed as the parties represented they wanted to attempt a reconciliation. The next year, in May, 2009, the parties signed an agreement where they reset the trial to March 2010 as the reconciliation was not successful. Approximately two months before trial, Ms. Harrison s attorney filed a Motion to Withdraw, stating that the client represented her inability to satisfy her contractual obligation to pay the firm. Ms. Harrison opposed the motion and also requested interim fees. The Court, on February 10, 2010 (about forty days prior to trial) granted the Motion to Withdraw and denied the request for additional interim fees. Another Motion for Continuance was filed by Ms. Harrison, and that was denied. The trial reconvened on March 22, 2010. The now pro se litigant then filed with the First Court of Appeals to stay the proceedings and simultaneously filed a petition for mandamus arguing that the trial court had abused its discretion in granting Mr. Nass motion to withdraw after trial had 2 commenced, forcing her to mediate without representation and further in denying her continuance and motion for attorney fees. Although the court of appeals granted a stay it later lifted the stay and denied her writ of mandamus. Additionally, Ms. Harrison filed mandamus papers in the Supreme Court of Texas, and this too was denied. A jury was empanelled and the case went to trial. The jury came back with what seemed to be a victory for Ms. Harrison. She was awarded the right to designate her children s primary residence within Harris County and her allegations of two assaults by her husband were upheld as the jury awarded her $30,000 for damages. The Court then divided the property and a final decree was entered June 21, 2010. On Ms. Harrison s five issues on appeal, the Fourteen Court of Appeals sustained her first point of appeal, as they agreed that the trial court abused its discretion by granting her attorney s motion to withdraw and denying her motion for continuance. The Court, in its reversal, focuses on the issue of whether or not Ms. Harrison had substantially failed to fulfill her obligation to pay her attorney. The Court states it was the attorney s burden to show good case for the withdrawal. The Court further states (in its own words) that While we (the Court) are not prepared to say that allowing Nass (the attorney) to withdraw under these circumstances was an abuse of discretion, we note that allowing withdrawal in this instance approaches the outer limits of discretion. The Court seems to say that this fact coupled with the Court s refusal to grant a continuance under these circumstances was an abuse of discretion. The language in the opinion, which is attached hereto as Appendix A, clearly indicates that a failure to pay the attorney in accordance with the contract may not be enough to allow the attorney to withdraw. The family law attorney faced with this dilemma, must take more caution in crafting the motion to withdraw, as had the request for withdraw recited additional grounds other than simply not being paid the Court may have found otherwise. Practice tip: If you and your client are not getting along, make sure you document the areas of disagreement. If you need to get off the case for a reason other than payment of bill, these communications may be helpful. This woman had 5 previous attorneys it is very probable that grounds other than non-payment could have been cited for withdrawal and such would not have had the same result. This case may also concern judges and they may be more reluctant to allow you to withdraw. IV. EVIDENTIARY NEEDS The request for attorney s fees as stated in the pleadings suggest the very degree of proof that is

Attorney s Fees and Loser Pays Statute Chapter 13 needed in order for a judge to award the fees. One must present evidence that the fees were in fact, incurred! The fee contract is only one element of the evidence that is needed. One must also put into evidence redacted invoices as proof that the attorney s fees, costs, and expenses were actually charged. Our fees must be reasonable and necessary. Evidence as to the reasonableness of fees is based upon the following: 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 locality 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 Equip. Corp. 945 S.W.2d 812, 818-819 (Tex. 1997). TEXAS DISCIPLINARY RULES OF PROFESSIONAL CONDUCT 1.04, reprinted in TEX. GOV T CODE, Title 2, Subtitle G, Subchapter 82, Subchapter C. The Lawyer s Creed, a copy of which is attached hereto as Appendix B, also brings in the ethics involved in our attorney s fee context. The Creed mandates that you inform the client of activity that may be found to be frivolous and lead to possible sanctions on the form of attorney fees. The Creed states that the attorney shall advise the client of the contents of this Creed when undertaking representation. V. H.B. 274-- THE OMNIBUS TORT REFORM BILL-- DOES THE LOSER PAY IN FAMILY LAW? In the past ten years, the legislature has been concerned with what is known as Tort Reform. In the 2011 session, Texas passed what was known as an Omnibus Tort Reform Act. The act has a number of revisions that create or amend provisions in various codes, e.g. the TEXAS GOVERNMENT CODE and the TEXAS CIVIL PRACTICE AND REMEDIES CODE. The Act, in its final form, is attached hereto as Appendix C. Significant changes in the TEXAS GOVERNMENT CODE 3 included the addition of power by the Supreme Court to adopt rules to provide for the dismissal of causes of action that have no basis in law or fact on motion and without evidence However, the amendment is not available in cases filed under the TEXAS FAMILY CODE! Likewise, the amendment to the Government Code that allows the Supreme Court to promote the prompt, efficient, and cost-effective resolution of civil actions.rules shall address the need for lowering discovery costs again do not apply to cases that conflict with the TEXAS FAMILY CODE. The relevant part of the loser pay bill for the family law courts, may lie in the revisions to the TEXAS CIVIL PRACTICE AND REMEDIES CODE under Section 42.001 (5) and (6) as well as Section 42.002 (b) (d) and (e). See full text of Chapter 42 of the TEXAS CIVIL PRACTICE AND REMEDIES CODE attached hereto as Appendix D. Section 42.001(5) of the TEXAS CIVIL PRACTICE AND REMEDIES CODE actually defines what is a litigation cost and, with the 2011 revisions, include the following: (a) court costs; (b) reasonable deposition costs (new addition); (c) reasonable fees for not more than two testifying expert witnesses; and (d) attorney fees. The statute provides that if an offer of settlement is made pursuant to Chapter 42 of the TEX. CIV. PRAC. & REM. CODE, and that offer is rejected, then if the jury (or the fact finder) returns a verdict that is significantly less favorable to the rejecting party than was the offer, then the offering party SHALL recover litigation costs from the rejecting party. The statute specifically states, however, that it does not apply to an action brought under the Family Code. One would immediately wonder then, Why is there a discussion of the Loser Pay statute in a Family Law Seminar? The answer is not so clear. after all, we have many papers and discussions on the need for a skilled practitioner to go beyond the family code when considering its options and causes of action. The simple suit that is brought for divorce pursuant to the code may also branch out into the area of breach of fiduciary duty, the setting aside or attack on a premarital or post marital agreement (which is a contract case), an assault, or any other tort for that matter that has been joined in the marital action. The family attorney who has filed an ancillary cause of action must understand the risk involved if the Court finds that the action does fall into the Chapter 42 scenario. The recovery of the attorney s fees to the

Attorney s Fees and Loser Pays Statute Chapter 13 offering party is a MANDATORY statute. The scenario might be as follows: Wife brings action for breach of fiduciary duty during her divorce case facts are enough to withstand summary judgment. Husband files his offer and that offer of settlement is: a) in writing; b) states it is made pursuant to Section 42 of the TEXAS CIVIL PRACTICE AND REMEDIES CODE; c) states the terms by which the claim may be settled (the offer ); d) states a deadline by which the settlement offer must be accepted; and e) served on all parties to whom the settlement offer is made. The statute then tells us what a win would be as it states the judgment is found to be significantly less favorable to the rejecting party is a claimant and the award is less than 80 percent of the rejected offer or if the rejecting party is a defendant and the award is more than 120 percent of the rejected offer. The first impulse may be to simply do the math and it is clear that a jury award may even detail the results far better than a simple ruling by the Court. The end result, however, is clear: if an offer is made pursuant to the statute, then the loser may have to pay the fees. Practice tip: If you are the attorney who is defending a tort or action within a divorce case, you need to keep your time segregated -- the time spent preparing the property trial and the child issues must be segregated from the time you spend in defense to the tort or breach of duty- otherwise, the Court will not be able to ascertain what your fees for the loser pay actually may be. This should also be a jury issue as if the jury has ruled in your favor they will want to award you fees. VI. CONCLUSION The family practice has clearly become one of inclusion where we join defendants and sue for fraud, breach of fiduciary duty and other torts. As we become plaintiff attorneys hoping to broaden our clients recovery and not just divide the property, so may we also become defense attorneys! If we make our offers of settlement in matters pursuant to those outside the family code and use the Chapter 42 provisions, we may actually get the loser to pay! 4

Attorney s Fees and Loser Pays Statute Chapter 13 TABLE OF AUTHORITIES TEXAS CIVIL PRACTICE AND REMEDIES CODE ANNOTATED Section 42.001 (5) 3 Section 42.001 (6) 3 Section 42.002 (b) 3 Section 42.002 (d) 3 Section 42.002 (e) 3 Section 42.004.. 1 Chapter 10 1 TEXAS DISCIPLINARY RULES OF PROFESSIONAL CONDUCT 1.04. 3 TEXAS FAMILY CODE 6.502(a)(4).. 2 6.708... 1 7.001... 1 105.001 (a)(5). 2 106.002... 1 Chapter 42 3 TEXAS GOVERNMENT CODE Title 1, Subtitle G, Subchapter 82, Subchapter C 3 TEXAS RULES OF CIVIL PROCEDURE 215.3... 1 13 1 CASE LAW Arthur Andersen & Co. v. Perry Equip Corp. 945 S.W.2d 812, 818-819 (Tex. 1997)... 3 Carle v. Carle, 234 S.W.2d 1002, 1005 (Tex. 1950)... 1 Grossnickle v. Grossnickle, 935 S.W.2d 830, 846047 (Tex.App. Texarkana 1996, writ denied) 1 Grossnickle v. Grossnickle, 935 S.W.2d 830, 846047 (Tex.App. Texarkana 1996, writ denied) 1 Hirczy v. Hirczy, 838 S.W.2d 783, 786 (Tex.App. Corpus Christi 1992, writ denied)... 1 Pletcher v. Geotz, 9 S.W.3d 442, 448 (Tex.App. Fort Worth 1999, pet. denied). 1 State v Estate of Brown, 802 S.W. 2d 898,900 (Tex.App. San Antonio 1991, no writ).. 1 HOUSE BILLS 274... 1 PAGE 5

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