Opinion
Civil Action No. 3:00-CV-1801-G.
September 14, 2004
ORDER
Pursuant to the District Court's Order of Reference, entered March 1, 2004, the motion of American Realty Trust, Inc., ("ART"), Basic Capital Management, Inc., ("BCM"), Gene E. Phillilps ("Phillips"), and A. Cal Rossi ("Rossi") for an award of attorney fees and costs, filed February 12, 2004, has been referred to the United States Magistrate Judge for a hearing, if necessary, and for determination. The Court held a hearing on this matter on August 19, 2004. The Court has considered the pleadings and arguments of the parties, as well as the parties' supplemental briefing. The motion for attorney fees and costs is hereby GRANTED in part and DENIED in part. I. Background
On June 26, 2000, ART filed suit in state court against Defendants Matisse Capital Partners, L.L.C. ("Matisse"); Paul Bagley ("Bagley"); and Jack Takacs ("Takacs"). On August 16, 2000, Defendants removed the suit to the Northern District of Texas based upon diversity jurisdiction. Following the removal, ART amended its complaint to assert claims against Defendants for breach of contract, breach of the duties of care and loyalty, breach of fiduciary duty, a declaratory judgment, and attorney fees. BCM then asserted claims against Defendants for breach of contract, unjust enrichment, a declaratory judgment, and attorney fees. Matisse, in turn, asserted counterclaims for breach of contract and attorney fees against ART; fraud against Rossi, ART, and BCM; and tortious interference with a contract against Rossi and Phillips. The jury returned verdicts against all three defendants in favor of both ART and BCM on their respective breach of contract claims, but the jury awarded no damages. The jury also found in favor of ART on its breach of fiduciary duty claims against Matisse and Bagley. Further, the jury found that Matisse did not prove its breach of contract claim against ART.
Matisse, Bagley, and Takacs will be referred to collectively as "Defendants," unless otherwise specified.
Several weeks later, the District Court granted Defendants' motion for judgment as a matter of law and denied Plaintiffs' motion to enter judgment on the verdict. Specifically, the District Court entered: (1) judgment as a matter of law in favor of Defendants on all claims brought by Plaintiffs against Defendants; (2) judgment as a matter of law in favor of Matisse on its counterclaims for breach of contract and attorney fees against ART; and (3) judgment on the verdict in favor of Rossi and Phillips on all counterclaims brought by Matisse against Rossi and Phillips.
Plaintiffs appealed. The Fifth Circuit Court of Appeals held that the District Court was correct to reject the jury's verdict to the extent that it found that Bagley and Takacs individually, as opposed to Matisse, had breached the Consulting Contract. It also affirmed the District Court's judgment to the extent that it rejected the jury's verdict in BCM's favor on its breach of contract claim. However, the Fifth Circuit Court of Appeals reversed the District Court's entry of judgment in Matisse's favor on its breach of contract claim and remanded the case for entry of judgment in favor of ART on ART's breach of contract claim against Matisse and on Art's breach of fiduciary duty claim against Matisse and Bagley. The appellate court noted that no damages were to be awarded to ART on any of its claims. It also reversed the District Court's finding that Matisse was entitled to attorney fees and remanded the case for the trial court to determine whether ART is entitled to attorney fees and what sum of attorney fees, if any, should be awarded.
In the motion before the Court, ART, BCM, Phillips, and Rossi ("Movants") seek to recover $1,416,310.81 in attorney fees and $179,625.12 in costs. (Mot. at 3, 22.) Movants contend that: (1) they are entitled to reasonable attorney fees; (2) they are not required to segregate their attorney fees; (3) the requested attorney fees are reasonable; and (4) their costs are recoverable. (Mot. at 6-22.) Defendants, on the other hand, contend that: (1) BCM, Rossi and Phillips may not recover their fees; (2) ART is not entitled to recover its attorney fees; and (3) even if ART is entitled a recovery, the requested fees and costs are excessive. (Resp. at 2-16.)
The Court turns first to a determination of whether BCM, Rossi, and Phillips may recover their attorney fees and costs.
II. Attorney Fees and Costs of BCM, Rossi, and Phillips A. The Fifth Circuit's Remand
The appellate court remanded this case for the entry of judgment in favor of ART on its breach of contract claim against Matisse and on ART's breach of fiduciary duty claim against Matisse and Bagley "with no damages to ART on any such claims." Am. Realty Trus, Inc. v. Matisse Capital Partners, L.L.C., No. 02-11148, 2003 WL 22965577, at *10 (5th Cir. Dec. 17, 2003). Additionally, the trial court is instructed to determine ART's entitlement to attorney fees. The court of appeals intimated no opinion with respect to whether ART is entitled to fees. Id. The district court must comply with the appellate court's mandate without variance. Daly v. Sprague, 742 F.2d 896, 900-01 (5th Cir. 1984). The narrow and specific issue on remand is whether ART is entitled to attorney fees and costs and, if so, the amount of fees and costs. The Court may not vary from the mandate to consider whether BCM, Phillips or Rossi are entitled to attorney fees and costs. Daly, 742 F.2d at 900-01. The Court sustains Defendants objection to the consideration of whether ART may recover the attorney fees incurred by BCM, Phillips, and Rossi on a theory of indemnity or on any other theory. (See Def.'s Obj. to ART's Newly Presented Arg. and Evid., filed Sept. 3, 2004.)
B. Intertwined Fees
Movants argue that the Court's previous finding that the causes of action are intertwined to the point of being inseparable entitles BCM, Phillips, and Rossi to their attorney fees. Defendants correctly point out that throughout the briefing and argument of this case ART and BCM have delineated which party was responsible for each of the attorney's fees. Defendants cite as an example that Eric Redwine stated in his declaration that he represented BCM at trial and ART after trial. (Redwine Decl. at ¶ 11; ART App. at 105.) Defendants also state that Mitchell Madden segregated his fees in the same manner as Mr. Redwine. (Madden Decl. at ¶¶ 4, 6, 10; ART App. at 388-89.) Accordingly, the Court finds that although the fees may be intertwined with respect to the various causes of action, the fees are separable with respect to which entity an attorney was representing at the time the fees were incurred. ART's own attorney fees are separable from those of BCM, Phillips, and Rossi.
The Court now sets forth the legal standards that will guide its analysis of whether ART is entitled to recover attorney fees and costs. The analysis will follow in Section IV. III. Legal Standards
In diversity cases, an award of attorney fees is governed by state law. Mid-Continent Casualty Co. v. Chevron Pipe Line Co., 205 F.3d 222, 230 (5th Cir. 2000). Under Texas law, attorney fees are not recoverable unless they are provided for by statute or by contract between the parties. New Amsterdam Cas. Co. v. Texas Indus., Inc., 414 S.W.2d 914, 915 (Tex. 1967). In construing a contract, courts give the language its plain grammatical meaning unless it would defeat the intention of the parties. Reilly v. Rangers Management, Inc., 727 S.W.2d 527, 529 (Tex. 1987). Parties may contract for a more liberal standard for the recovery of attorney fees than an attorney fee statute provides, and when they do so, courts are bound by their choice. Wayne v. A.V.A. Vending, Inc., 52 S.W.3d 412, 417-18 (Tex.App.-Corpus Christi 2001, pet. denied); One Call Sys., Inc. v. Houston Lighting Power, 936 S.W.2d 673, 676 (Tex.App.-Houston [14th Dist.] 1996, writ denied).
IV. Analysis
In this case, the parties entered a "Joint Stipulation Regarding Proof and Recovery of Attorney Fees" which provides:
The prevailing party or parties in this action may recover their attorneys' fees and non-taxable costs by post-trial motion in the manner provided by Fed.R.Civ.P. 54(d)(2). Accordingly, pre-trial discovery of experts or other materials relevant only to attorneys' fees and non-taxable costs will not be undertaken.
("Joint Stipulation . . .," filed Nov. 21, 2001.) [Emphasis supplied]. Parties may agree on the truth of specific facts by stipulation, thereby limiting the issues to be tried and binding themselves, the trial court, and the court of appeals. Geo-Western Petroleum Development, Inc. v. Mitchell, 717 S.W.2d 734, 736 (Tex.App.-Waco 1986, no writ). When stipulations comprise the record of the trial court, they will be observed. Amoco Prod. Co. v. Texas Elec. Serv. Co., 614 S.W.2d 194, 196 (Tex.Civ.App.-Houston [14th Dist.] 1981, no writ). A stipulation is an agreement, admission, or concession made in the course of a judicial proceeding by parties or their attorneys and may be used to fix, limit, or modify the issues to be tried. First Nat. Bank in Dallas v. Kinabrew, 589 S.W.2d 137, 142 (Tex.Civ.App.-Tyler 1979, writ ref'd n.r.e.). As such, stipulations enjoy equal dignity with judicial admissions, which eliminate an adversary's necessity of proof and establish the admitted elements as a matter of law. Valdes v. Moore, 476 S.W.2d 936, 940 (Tex.Civ.App.-Houston [14th Dist.] 1972, writ ref'd n.r.e.). Accordingly, the prevailing party in this action is entitled, as a matter of law, to attorney fees pursuant to the Joint Stipulation.
Additionally, the parties stipulated at trial that "on April 13, 2000, ART, BCM, and National Realty, L.P. ("NLRP") executed a Financial Consulting, Management and Marketing Agreement with Matisse ("the Consulting Agreement")." (Jury Instr. at 11.) The Consulting Agreement provides:
If any legal action or arbitration or other proceeding of any kind is brought for the enforcement of this Agreement or because of an alleged breach, default, or misrepresentation or any other dispute in connection with any provision of this Agreement, the successful or prevailing party shall be entitled to recover all reasonable attorneys' fees and other costs incurred in such action or proceedings, in addition to any other relief to which it may be entitled.
(Ps' Ex. 11 ¶ 13h). Defendants do not dispute that they entered the stipulations and that the contract provision is valid. The Court need not consider the requirements of TEX. CIV. PRAC. REM. § 38.001(8) because the stipulations and contract provision control. See, e.g., Twelve Oaks Tower I, Ltd. v. Premier Allergy, Inc., 938 S.W.2d 102, 118 (Tex.App.-Houston [14th Dist.] 1996, no writ) (basing attorney fees on underlying contract rather than statutory requirements); One Call Systems, Inc., 936 S.W.2d at 676 (upholding an award of attorney fees in the absence of other affirmative relief because the parties were free to adopt by contract a more liberal standard for the recovery of attorney fees). The issue is whether ART was the successful or prevailing party in accordance with the plain meaning of prevailing party in the Joint Stipulation and in the contract.
The parties' stipulation and contract for attorney fees and costs is more liberal than the statutory provision of TEX. CIV. PRAC. REM. § 38.001(8). Under § 38.001(8), a party must (1) prevail on a cause of action for which attorney fees are recoverable and (2) recover money damages. Under the Joint Stipulation, all that is required is that the party requesting fees be the prevailing party. Under Texas law, unless required by a statute, damages are not a quid pro quo for prevailing party status. A prevailing party is one who successfully prosecutes the action or successfully defends against it, prevailing on the main issue, even though not to the extent of its original contention. Operation Rescue-Nat'l v. Planned Parenthood of Houston Southeast Tex., Inc., 937 S.W.2d 60, 86 (Tex.App.-Houston [14th Dist.] 1996, no writ) (citing Perez v. Baker Packers, 694 S.W.2d 138, 143 (Tex.App.-Houston [14th Dist.] 1985, writ ref'd n.r.e.)), aff'd as modified, 975 S.W.2d 546 (Tex. 1998); Weng Enters. v. Embassy World Travel, Inc., 837 S.W.2d 217, 222-23 (Tex.App.-Houston [1st Dist.] 1992, no writ). A determination of whether one is a prevailing party must be based upon success on the merits, and not whether damages were awarded. Scholl v. Home Owners Warranty Corp., 810 S.W.2d 464, 468 (Tex.App. — San Antonio 1991, no writ); Perez, 694 S.W.2d at 143. In other words, a prevailing party is one who is vindicated by the trial court's judgment. Dear v. City of Irving, 902 S.W.2d 731, 739 (Tex.App.-Austin 1995, writ denied).
Defendants claim that ART must have recovered "something of value" to be the successful or prevailing party. They rely on the language in the contract which states, "the successful or prevailing party shall be entitled to recover all reasonable attorneys' fees and other costs incurred in such action or proceedings, in addition to any other relief to which it may be entitled." [Emphasis supplied.] A similar provision was considered by a Texas appellate court which held that "the plain grammatical meaning of this language is not that a party is entitled to recover attorney fees only in addition to any other relief which it is actually awarded, but rather, that either party is entitled to recover attorney fees in addition to any other relief to which it may be entitled, i.e., if any." One Call Systems, 936 S.W.2d at 676. [Emphasis in original.] In Weng, the parties agreed that the prevailing party would be entitled to attorney fees. The plaintiff brought a cause of action for enforcement of the termination provision of the contract. The defendant prevailed and obtained a "take-nothing" judgment against the plaintiff. The court held that, by the parties' own agreement, the defendant was entitled to attorney fees as the prevailing party. Weng, 837 S.W.2d at 222-23.
Here, Defendants stipulated that the prevailing party is entitled to attorney fees. No limitation that "something of value" be recovered was expressed in the Joint Stipulation. Moreover, the language of the Consulting Agreement provides no clear indication that the parties meant to preclude attorney fees unless "something of value" was awarded. The attorney-fee provision is applicable to either party in a dispute over the contract. Accordingly, the Court is unable to infer that the recovery of anything other than a favorable decision with respect to the contract dispute is intended in order to activate the Consulting Agreement's attorney-fee provision.
The jury found that ART proved that Matisse, Bagley, and Takacs breached the Consulting Agreement. It further found that Matisse did not prove that ART breached the Consulting Agreement. Although the jury did not award ART the damages it requested, ART received vindication for its goodwill and business interests. Further, ART prevailed on appeal, successfully winning reinstatement of the jury verdict and overturning the damages, attorney fees, and costs awarded to Matisse in the trial court. Additionally, Matisse was ordered to pay the costs on appeal. Even if "something of value" were required, clearly, under these circumstances, ART is entitled to its attorney fees and costs as the prevailing party.
In determining the amount of reasonable attorney fees to be awarded, a finder of fact should consider the eight factors set out in Arthur Andersen Co. v. Perry Equipment Corp., 945 S.W.2d 812, 818 (Tex. 1997). ART brought its motion for attorney fees and costs jointly with BCM, Phillips, and Rossi. ART's attorney fees appear to be severable from those of the other plaintiff and the counter-defendants; therefore, ART's submission of its fees and costs in a separate pleading and supplemental appendix will assist the Court in making the determination of the amount of reasonable attorney fees and costs due to ART. The submission shall contain a summary of the amount of fees requested by each attorney, setting out the rates and clearly identifying the dates and subject matter of the representation. This summary shall be in addition to the affidavits and detailed billing records for each attorney. Accordingly, ART shall have ten days to submit its individual application for attorney fees and costs in a form consistent with this opinion. Defendants shall have ten days thereafter to respond.
V. Conclusion
ART is the prevailing party on the breach of contract claims and, as such, is entitled to its own reasonable attorney fees and costs. ART's request for fees it may have paid for its co-plaintiff or the counter-defendants pursuant to indemnification or other theories is denied. BCM's, Phillips' and Rossi's requests for attorney fees and costs are denied. The Court will determine the amount of ART's reasonable attorney fees and costs after ART submits a separate application and after Defendant responds with specific objections, if any. Accordingly, Movants' motion for attorney fees and costs, filed February 14, 2004, is GRANTED in part and DENIED in part.
SO ORDERED.