law-attorneys-fees-segregation | attorneys fees | attorney fee litigation

See Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299, 313–14 (Tex. 2006)(reaffirming rule that if any
attorney’s fees relate solely to claim for which fees are unrecoverable, claimant must
segregate recoverable fees from unrecoverable fees, and holding that remand required when fees
not segregated and at least some of attorney’s fees are attributable only to claims for which fees are not
recoverable).

In Tony Gullo, the supreme court explained that "to prevail on a contract claim a party must overcome any and all
affirmative defenses (such as limitations, res judicata, or prior material breach), and the opposing party who raises
them should not be allowed to suggest to the jury that overcoming those defenses was unnecessary." Id. at 314.
When a defendant asserts a counterclaim that the plaintiff must overcome in order to fully recover on its contract
claim, the attorney's fees necessary to defeat that counterclaim are likewise recoverable. See Varner v. Cardenas,
218 S.W.3d 68, 69 (Tex. 2007) (per curiam). Thus, under certain circumstances, attorney's fees incurred in
defending against a counterclaim in a breach-of-contract case will not need to be segregated. See 7979 Airport
Garage, L.L.C. v. Dollar Rent A Car Sys., Inc., 245 S.W.3d 488, 507 (Tex. App.--Houston [14th Dist.] 2007, pet.
denied) (holding that no segregation was necessary because plaintiff had to defeat defendant's counterclaim
before plaintiff could recover on its own breach-of-contract claim).

However, in this case, Onca did not successfully defend against PPI's counterclaim. PPI received a jury verdict
against Onca, which the district court offset against Onca's partial summary judgment against PPI. As such, Onca
cannot say that its defense of PPI's counterclaims was necessary to fully recover on its contract claim. Because
Onca did not successfully defend against PPI's counterclaims, it should have been required to segregate its
attorney's fees. See Bair Chase Prop. Co., LLC v. S & K Dev. Co., 260 S.W.3d 133, 145 (Tex. App.--Austin 2008,
pet. filed) (holding that segregation of attorney's fees required because plaintiff did not successfully defend
against usury counterclaim; it instead took corrective action to avoid liability for usury). Put simply, Onca cannot
recover attorney's fees incurred in the defense of a counterclaim on which it did not prevail. Onca should have
been required to segregate the attorney's fees that it incurred in prosecuting its breach-of-contract claim from
those that it incurred in unsuccessfully defending PPI's counterclaim.
PPI Technology Services LP v. Onca Petroleum Development, Inc. (Tex.App.- Houston [1st Dist.] Dec. 11, 2008)
(Nuchia) (segregation of attorney's fees, motion for new trial based on newly discovered evidence)
We sustain issue six. In light of this disposition, we do not reach issue seven, in which PPI argues the attorney's
fees award was excessive.

In issue six, PPI argues the district court erred in awarding $74,500 in attorney's fees to Onca for the trial in which
the jury found that Onca was liable to PPI in the amount of $146,870.84 for expenses related to the "Guatemalan
concessions" and $73,645.43 for undisclosed liabilities in a stock purchase agreement. PPI cites the recent
opinion in Tony Gullo Motors I, L.P. v. Chapa, in which the supreme court makes it clear that if any attorney's fees
relate solely to a claim for which fees are unrecoverable, a claimant must segregate recoverable from
unrecoverable fees. Tony Gullo Motors I, L.P., 212 S.W.3d 299, 313-14 (Tex. 2006).

PPI attempted to get Onca's lawyer to segregate the attorney's fees for trial from any issues specifically related to
the breach of the consulting agreement. Onca's lawyer did not segregate, claiming that Onca's position "is that the
issues are interrelated." While PPI did not formally object during the hearing on attorney's fees, PPI did specifically
object in its supplemental motion for new trial to Onca's failure to segregation.

The Fee-Segregation Rule

Under the American Rule, trial courts have no inherent authority to require a losing party to pay the prevailing
party’s attorneys’ fees.  Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep’t of Health & Human Res., 532 U.S. 598,
602 (2001); Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299, 310-11 (Tex. 2006); CA Partners v. Spears, 274
S.W.3d 51, 81 n.20 (Tex. App.-Houston [14th Dist.] 2008, pet. denied).  

As a matter of settled law, attorneys’ fees are not available to the prevailing party in the absence of an authorizing
contract or statute.  Tony Gullo Motors, 212 S.W.3d at 311 & n.65 (citing Travelers Indem. Co. of Conn. v.
Mayfield, 923 S.W.2d 590, 594 (Tex. 1996)); Wm. Cameron & Co. v. Am. Surety Co. of N.Y., 55 S.W.2d 1032,
1035 (Tex. Comm’n App. 1932, holding approved).  

Questions as to whether a particular contract or statute authorizes recovery of attorneys’ fees present issues of
contract or statutory construction, and these generally are questions of law for the court to decide.  See Entergy
Gulf States, Inc. v. Summers, 52 Tex. Sup. Ct. J. 511, 2009 WL 884906, at *2 (Tex. Apr. 3, 2009) (noting that
statutory construction is a question of law) (citing F.F.P. Operating Partners., L.P. v. Duenez, 237 S.W.3d 680,
683 (Tex. 2007)); Coker v. Coker, 650 S.W.2d 391, 394-95 (Tex. 1983) (explaining that courts construe
unambiguous contracts and determine the existence of ambiguity as matters of law); New Amsterdam Cas. Co. v.
Tex. Indus., Inc., 414 S.W.2d 914, 914-15 (Tex. 1967) (construing contract and statute as a matter of law to
determine whether recovery of attorneys’ fees was authorized).  Courts therefore determine, as a matter of law,
whether a party who prevails on a particular cause of action has the opportunity to recover reasonable attorneys’
fees that were necessary for the litigation of that claim.

Although the general rule has remained constant, the exception to the rule has changed.  CA Partners, 274 S.W.
3d at 81 n.20.  From 1991 to 2006, the exception to the fee-segregation rule applied “when the causes of action
involved in the suit are dependent upon the same set of facts or circumstances and thus are ‘intertwined to the
point of being inseparable.’“ Stewart Title Guar. Co. v. Sterling, 822 S.W.2d 1, 11B12 (Tex. 1991) (quoting Gill
Sav. Ass’n v. Chair King, Inc., 783 S.W.2d 674, 680 (Tex. App.-Houston [14th Dist.] 1989), modified, 797 S.W.2d
31 (Tex. 1990) (per curiam)).  With the issuance of Tony Gullo Motors in 2006, the factors that determine whether
the exception to the fee-segregation rule applies shifted.  After Tony Gullo Motors,

the determination focuses on whether the legal work performed pertains solely to claims for which attorneys’ fees
are not recoverable.  Moreover, in making this determination, factfinders do not examine the work product as a
whole, but parse the work into component tasks.  See Tony Gullo, 212 S.W.3d at 313 (“But when Chapa’s
attorneys were drafting her pleadings or the jury charge relating to fraud, there is no question [that] those fees
were not recoverable.”) (emphasis added); id. at 314 (“Chapa’s attorneys did not have to keep separate time
records when they drafted the fraud, contract, or DTPA paragraphs of her petition; an opinion would have sufficed
stating that, for example, 95 percent of their drafting time would have been necessary even if there had been no
fraud claim.”) (emphasis added).  If any of the component tasks relate solely to a cause of action for which legal
fees are not recoverable, the claimant must segregate the fees.

7979 Airport Garage, L.L.C. v. Dollar Rent A Car Sys., 245 S.W.3d 488, 509 (Tex. App.-Houston [14th Dist.] 2007,
pet. denied).  As explained in Tony Gullo Motors, the question of the extent to which the exception applies
presents a mixed question of law and fact for the factfinder’s determination:

[T]he fees necessary to prove particular claims often turn on such facts‑how hard something was to discover and
prove, how strongly it supported particular inferences or conclusions, how much difference it might make to the
verdict, and a host of other details that include judgment and credibility questions about who had to do what and
what it was worth. In Re Lesikar, NO. 14-09-00016-CV (Tex.App.- Houston [14th Dist.] May 7, 2009)(Guzman)
(scope of remand, discovery mandamus denied)(segregation of attorney's fees required, no fees for non-suited
claims) (jury trial improperly denied)

Tony Gullo Motors, 212 S.W.3d at 313 (emphasis added).

NO FEES FOR NONSUITED CLAIMS

Carolyn is not entitled to recover attorneys’ fees incurred solely to advance her nonsuited claims of breach of
fiduciary duty, negligence, conversion, interference with inheritance, and civil conspiracy; however, she failed to
segregate her claims for such nonrecoverable attorneys’ fees from her claims for attorneys’ fees authorized by the
Declaratory Judgments Act or the Property Code.  Lesikar, 237 S.W.3d at 378.  
when, as here, multiple causes of action are asserted, some of which allow fee recovery and some of which do not,
then evidence of time or money necessary only to the litigation of claims for which attorneys’ fees are not
recoverable must be segregated from evidence of the reasonable amount of time or money necessary for the
performance of legal services necessary to litigate claims for which attorneys’ fees are recoverable.  If a particular
legal service was necessary to litigate a cause of action for which attorneys’ fees are recoverable, such fees are
not rendered unrecoverable merely because they also advance a claim for which attorneys’ fees would not be
otherwise available. In Re Lesikar, NO. 14-09-00016-CV (Tex.App.- Houston [14th Dist.] May 7, 2009)(Guzman)
(scope of remand, discovery mandamus denied)(segregation of attorney's fees required, no fees for non-suited
claims) (jury trial improperly denied)

Awoniyi  v. Mcwilliams, MD (Tex.App.- Houston [14th Dist.] June 10, 2008)(Brown) (HCLC, untimely expert report,
attorney's fees award remanded, failure to segregate recoverable an unrecoverable)
AFFIRMED IN PART; REVERSED & REMANDED IN PART: Opinion by Justice Brown  
Before Justices Brock Yates, Guzman and Brown
14-07-00071-CV Oluwakemi Awoniyi & Quadri Ige v. Robert Barton McWilliams., M.D. and the Womans Hospital of
Texas
Appeal from 152nd District Court of Harris County
Trial Court Judge: Kenneth Price Wise