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

SEGREGATION OF ATTORNEY'S FEES

To preserve a complaint for appellate review, a party must present a timely request, motion, or
objection, state with specificity the grounds for the ruling requested, and obtain a ruling from the
trial court. See Tex. R. App. P. 33.1(a). A party that fails to object to an award of attorney's fees
based on testimony of unsegregated fees fails to preserve the issue for appeal. See Green Int'l v.
Solis, 951 S.W.2d 384, 389 (Tex. 1997); Bencon Mgmt. &
Gen. Contracting, Inc v. Boyer, 178 S.W.3d 198, 208 (Tex. App.-Houston [14th Dist.] 2005, no
pet.).

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  


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