Opinion
01-21-00032-CV
12-29-2022
LAURIE ANN MCRAY; INFINITY CAPITAL, LLC; MCRAY MONEY MANAGEMENT, LLC, Appellants v. DOW GOLUB REMELS & GILBREATH PLLC, Appellee
On Appeal from the 333rd District Court Harris County, Texas Trial Court Case No. 2015-47112
Panel consists of Justices Goodman, Hightower, and Guerra.
MEMORANDUM OPINION
AMPARO GUERRA, JUSTICE
This is a suit to recover unpaid attorney's fees. Appellants Laurie Ann McRay, Infinity Capital, LLC, and McRay Money Management, LLC (collectively, McRay) appeal the trial court's final judgment rendered after a bench trial in favor of appellee Dow Golub Remels & Gilbreath PLLC (Dow Golub) on its breach of contract claim. McRay raises two issues on appeal. First, it contends that several of the trial court's pretrial rulings were erroneous and prevented it from developing its defenses and presenting the complete set of facts and legal issues to the trial court and therefore a remand is necessary for a new trial on liability and damages. Second, McRay contends that, if no new trial is granted, this Court should reverse the trial court's award of attorney's fees in the amount of $104,516.50 for the prosecution of Dow Golub's breach of contract claim and render judgment that Dow Golub take only $10,000 in attorney's fees or, alternatively, remand the issue of attorney's fees for reconsideration of the evidence presented at trial.
We affirm.
Background
A. Factual History
In 2012, McRay hired Dow Golub to represent it in two lawsuits: the Munoz suit and the Allport suit. For each matter, the parties signed letters of engagement for legal services which set forth the terms of Dow Golub's engagement and related matters as well as the hourly rates of its attorneys and legal staff assigned to work on the cases.
The Munoz suit is Louis Munoz, Sr. and Yvette Munoz, Individually and as Next Friend of Miranda Munoz, Louis Munoz, Jr. and Juliana Munoz, Minor Children vs. Infinity Capital, LLC, Realty Associates Hub, LLC, Marie Barforough Individually and d/b/a Me'Cohen Enterprises, and George Barforough; Cause No. 2012-29738; In the 151st Judicial District Court of Harris County, Texas. The Allport suit is Melinda Gardner, Susan Jacobus, and Suzanne Carroll, as Co-Trustees of the Maribel Allport Revocable Trust vs. Laurie A. McRay, McRay Money Management, LLC, and Infinity Capital, LLC; Cause No. 2011-30904; In the 281st Judicial District Court of Harris County, Texas.
In the Munoz matter, one of Laurie McRay's companies was sued by tenants of a single-family residence owned by the company for personal injury damages. In the Allport matter, Laurie McRay and her two companies were sued for alleged wrongful conduct that included securities violations, breach of fiduciary duty, and fraud. Following Dow Golub's engagement in the Allport matter, the parties attended a mediation that resulted in a settlement agreement and dismissal of the claims against Laurie McRay, individually, and her companies. The settlement agreement executed by the parties on January 14, 2013 required McRay to wind down the business of Infinity Capital, LLC, and sell all of its assets.
On April 1, 2013, Laurie McRay, as Managing Partner of Infinity Capital, LLC, conveyed a number of Infinity Capital, LLC's properties that were to be sold as part of the Allport settlement to a newly formed entity, Infinity Capital 2, LLC. Litigation ensued over the transferred assets during which Dow Golub continued to represent McRay despite the fact that McRay had ceased paying its legal bills months earlier. On February 13, 2015, McRay terminated Dow Golub's legal services in connection with the Allport case.
Alan F. Levin was appointed as the arbitrator in the Allport suit. On June 23, 2015, Levin entered an arbitration award finding that "the transfer of . . . nine (9) properties from Infinity Capital, LLC to Infinity Capital 2, LLC . . . w[as] fraudulent and [] therefore deemed null, void and of no legal force or effect ...." The arbitration award ordered McRay to pay Strasburger Price, who represented the Allport plaintiffs and was granted an equitable interest in and a lien on the properties, actual damages in the amount of $1,413,164.00, sanctions, and attorney's fees. The trial court entered a final judgment confirming the arbitration award on June 24, 2015.
Judge Sylvia Matthews signed the final judgment.
B. Procedural History
On August 12, 2015, Dow Golub sued McRay asserting claims for breach of contract and quantum meruit based on sums due and owing under the parties' contract and seeking attorney's fees pursuant to the contract and Texas Civil Practice and Remedies Code Section 38.001. On November 13, 2015, McRay answered asserting a general denial.
On November 25, 2015, McRay filed an original counterclaim and third-party petition joining Sanford Dow (Dow), a partner at Dow Golub, and asserting a professional negligence claim against Dow Golub and Dow individually. McRay alleged that Dow Golub and Dow committed negligence by (1) advising Laurie McRay to enter into an invalid, illegal, and unenforceable mediation agreement on behalf of Infinity Capital, LLC, (2) advising Laurie McRay to enter into a mediation agreement with terms requiring that all future disputes between the parties to the mediation be resolved by binding arbitration with mediator Alan F. Levin to act as arbitrator, and (3) failing to raise an objection to arbitration on the basis that the underlying agreement was invalid, illegal, or unenforceable. Dow Golub and Dow filed answers to the counterclaim, each asserting a general denial and various affirmative defenses. They later amended their answer asserting additional affirmative defenses.
On December 9, 2015, the trial court entered a docket control order in the case setting June 27, 2016, as the final deadline for expert designations and August 26, 2016, as the close of discovery. After the expert designation deadline had passed, Dow Golub moved for traditional summary judgment on its breach of contract claim for unpaid fees. McRay subsequently nonsuited its professional negligence counterclaim. On December 4, 2016, McRay amended its answer asserting affirmative defenses of "credit and/or setoff" and "breach of fiduciary duty."
On December 12, 2016, the trial court granted Dow Golub's motion for summary judgment on its breach of contract claim. The final judgment awarded Golub its unpaid fees and the attorney's fees incurred in collecting its contract damages. McRay appealed raising two issues: (1) Dow Golub had failed to conclusively prove the reasonableness and necessity of its fees in the Munoz and Allport matters, and (2) the trial court erred by denying it leave to allow the designation of an expert witness after the deadline.
Then presiding Judge Joseph J. Halbach, Jr. signed the judgment.
With its motion to allow late designation, McRay proffered affidavits from two experts: John P. Venzke, on the reasonableness of fees, and Eugene B. Wilshire, on the standard of care. Dow Golub moved to strike the late-designated experts. The trial court struck the designation of Wilshire, but it allowed the designation of Venzke.
This Court reversed the trial court's order granting summary judgment to Dow Golub concluding that the evidence did not conclusively establish the amounts owed, and it remanded the case to the trial court for further determination. See McRay v. Dow Golub Remels &Beverly, LLP, 554 S.W.3d 702, 708 (Tex. App.-Houston [1st Dist.] 2018, no pet.). This Court further concluded that, given its resolution of this issue, it was unnecessary to address McRay's remaining contention that the trial court erred in denying leave to allow the late designation of an expert witness. See id. This Court issued its mandate on October 19, 2018.
On the same day the mandate issued, Dow Golub filed a letter with the trial court requesting that the matter be set for a one-day bench trial "at the court's earliest convenience" and noting that the parties had engaged in sixteen months of litigation to date and that discovery had been closed since August 2016.
On November 5, 2018, Bradley Kirklin, McRay's newly retained counsel, sent a letter to the trial court requesting that it issue a new docket control order allowing limited discovery to permit McRay to designate expert witnesses and depose Dow Golub's corporate representative, and that it set a trial date six months thereafter. McRay's counsel noted that, due in part to the serious health problems of his client's previous counsel, Anthony Bannwart, McRay "did not depose Dow Golub's corporate representative or timely designate experts to opine on whether the disputed fees were reasonable and necessary and/or whether the work allegedly performed by Dow Golub warranted such fees." McRay's counsel filed a brief in support of the motion to reopen discovery and for a new docket control order. The trial court denied McRay's motion.
Then presiding Judge Daryl Moore signed the order.
On February 25, 2019, Kirklin moved to withdraw as McRay's counsel due to McRay's failure to pay its attorney's fees. The trial court granted the motion. A new attorney, Gene Tausk, took over McRay's defense the same day.
On June 25, 2019, the trial court notified the parties that trial was set for July 30, 2019. Two weeks before trial, Tausk moved to withdraw because McRay's retainer had been exhausted and Tausk did not believe McRay intended to pay him for legal services rendered after exhaustion of the retainer. The trial court held a hearing on the motion to withdraw. After noting that allowing McRay's counsel to withdraw would require resetting the trial date, the trial court stated:
Okay. So this is what I'm going to do. I'm going to draft my order. I'm going to reset it for trial. I'll get a trial date . . . so the trial
setting will be in the order granting the withdrawal. So, counsel, if you will agree to make sure that you send a copy to your clients so they have notice of the trial setting, and I'm going to reiterate that I will not entertain a motion to modify the docket control order or the motion for continuance.
The trial court advised the parties that trial would be held on September 25, 2019.
On September 16, 2019, Mitchell Katine filed a notice of appearance listing him and three other attorneys as McRay's counsel. That same day, Katine filed an emergency motion for continuance requesting additional time to review the case and prepare for trial. Based upon information from his client, Katine stated that the parties were engaged in good faith settlement discussions and needed additional time to attempt to finalize settlement terms. Dow Golub filed a response contesting the alleged grounds for the requested motion, noting that the case had been continued multiple times and stating that, as of the filing of the response, there were no good faith settlement discussions nor "need for additional time to try and finalize settlement terms."
The case proceeded to a bench trial on September 25, 2019-more than four years after suit was filed and three years after the close of discovery. Dow Golub's witnesses-Sanford Dow and Robert Debelak-testified about the reasonableness and necessity of the attorney's fees incurred. Dow Golub sought $160,487.17 in unpaid fees, expenses, and interest based on its work in the Munoz and Allport matters and $197,412.65 in legal fees incurred to collect the unpaid debt. McRay called Laurie McRay and its attorney's fees expert, John Venzke, as witnesses. Venzke testified that the hourly rates of Dow Golub's attorneys were reasonable but that some of the fees charged were inadequately documented or unnecessary.
On October 16, 2020, the trial court entered a final judgment in favor of Dow Golub, awarding it $104,316.66 in damages on its breach of contract claim and $104,516.50 in legal fees. On November 6, 2020, the trial court entered the following findings of fact and conclusions of law:
• This is a fee dispute between a law firm (Plaintiff) and Defendants, arising from two valid and enforceable fee agreements (the Munoz and Allport agreements).
• Plaintiff performed legal services under the agreements, but Defendants failed and refused to pay for those services.
• Defendants' failure to pay constitutes breaches of the agreements.
• As a result of Defendants' breaches, Plaintiff suffered actual damages of $22,904.49 with regard to the Munoz agreement, and $81,412.17 with regard to the Allport agreement.
• Plaintiff incurred $104,516.50 in reasonable and necessary attorney's fees prosecuting its claims in this suit for representation through trial and completion of the proceedings in this Court[.]
• In reaching the actual-damage figures and fee awards, the Court has reviewed all [] the billing records, has segregated recoverable from non-recoverable fees, has partially reduced the amounts sought for block billing, and has awarded only amounts that are both reasonable and necessary.
• Defendant provided neither legally nor factually sufficient evidence of any breach of fiduciary duty.
• Fee forfeiture is not warranted, factually or legally.
• Defendant has provided neither legally nor factually sufficient evidence to support its claim for offset.
The trial court additionally found that, if the case was appealed, Dow Golub would incur in reasonable and necessary attorney's fees as follows: (a) $25,000.00 for representation through judgment in the Court of Appeals; (b) $20,000.00 for representation at the petition-for-review stage in the Texas Supreme Court; (c) $15,000.00 for representation for merits briefing in the Texas Supreme Court; and (d) $10,000.00 for oral argument in the Texas Supreme Court if the case is argued.
On November 16, 2020, McRay filed a motion for new trial contending that it discovered new evidence after the trial that would have affected the outcome of the trial, and the trial court erred by finding no breach of fiduciary duty by Dow Golub in connection with McRay's asserted affirmative defense. Dow Golub responded that all the allegedly newly discovered evidence was irrelevant to the issues presented at trial as it related solely to the 2014 arbitration concerning McRay's fraudulent transfer of assets with which Dow Golub had no involvement. Following a hearing, the trial court denied McRay's motion for new trial, finding that (1) the evidence was not newly discovered and not so material that it would have produced a different result, (2) Laurie McRay's affidavit presented in support of the new trial motion was not credible, and (3) had the trial court considered the alleged newly discovered evidence during trial, it would have found Laurie McRay less credible than it did during her trial testimony. The trial court subsequently denied McRay's request for rehearing of its motion for new trial.
The alleged newly discovered evidence consisted of secretly recorded conversations and an attempt to surreptitiously record the 2014 arbitration.
Judge Brittanye Morris was the presiding judge.
This appeal followed.
Trial Court's Pretrial Rulings
In its first issue, McRay contends that a remand for a new trial is necessary on liability and damages because several of the trial court's post-remand pretrial rulings were erroneous and prevented it from developing its defenses and presenting a complete set of facts and legal issues to the trial court. It complains specifically about the trial court's rulings denying its request for limited discovery, excluding an expert on fiduciary duty, and precluding Sanford Dow's deposition.
With regard to McRay's contention that the trial court erroneously excluded its fiduciary duty expert, Dow Golub responds that (1) McRay never designated a fiduciary duty expert and the trial court never entered an order denying McRay's purported expert, (2) McRay failed to preserve its argument for appellate review, and (3) its argument is without merit. With regard to McRay's contention that the trial court improperly denied its request for additional discovery and Dow's deposition, Dow Golub argues that those arguments are similarly waived, harmless, and without merit.
A. Standard of Review
The scope of discovery rests within the discretion of the trial court. See Flores v. Fourth Ct. of Appeals, 777 S.W.2d 38, 41 (Tex. 1989); In re Morgan, 507 S.W.3d 400, 403 (Tex. App.-Houston [1st Dist.] 2016, orig. proceeding). Trial courts have broad discretion in matters of discovery. See Clanton v. Clark, 639 S.W.2d 929, 931 (Tex. 1982) ("[T]he court is given wide discretion in managing its docket, and we will not interfere with the exercise of that discretion absent a showing of clear abuse."); Macy v. Waste Mgmt., Inc., 294 S.W.3d 638, 651 (Tex. App.-Houston [1st Dist.] 2009, pet. denied). The same standard applies to a trial court's ruling on requests to obtain additional discovery. Wheeler v. Methodist Hosp., 95 S.W.3d 628, 643-44 (Tex. App.-Houston [1st Dist.] 2002, no pet.). A party who claims the trial court abused its discretion in a discovery matter labors under a heavy burden-it must establish that, under the circumstances of the case, "the facts and law permitted the trial court to make but one decision." Shell Oil Co. v. Smith, 814 S.W.2d 237, 241 (Tex. App.-Houston [14th Dist.] 1991, orig. proceeding) (emphasis in original). We also review for an abuse of discretion a trial court's exclusion of expert testimony based on a failure to designate during the discovery period. Fort Brown Villas III Condo. Ass'n v. Gillenwater, 285 S.W.3d 879, 881 (Tex. 2009).
B. Expert Witness Designation
McRay argues that the trial court abused its discretion in denying its request to designate its fiduciary duty expert witness, Eugene B. Wilshire, after the discovery deadline had passed. It argues that the issues underlying its breach of fiduciary duty affirmative defense "are not matters within a lay person's knowledge and, potentially, not within the knowledge of a trial judge, especially when the conduct in question [concerns] proper attorney-client conduct when reviewing commercial litigation-based settlement agreements, binding arbitration, the Texas Business Organization Code, and other issues related to the legal operation of corporate entities."
The trial court's docket control order set June 27, 2016 as the expert designation deadline in the case. After the deadline had passed, Dow Golub moved for traditional summary judgment on its breach of contract claim for unpaid fees. McRay's only counterclaim at that time was for professional negligence which it later nonsuited. On December 4, 2016-nearly six months after expiration of the expert designation deadline-McRay amended its answer asserting breach of fiduciary duty as an affirmative defense.
Dow Golub argues that the record does not show that McRay attempted to designate Wilshire as an expert on fiduciary duty and the trial court did not deny it leave to do so. We agree. In its prior decision, this Court noted that McRay had moved the trial court to allow a late designation of expert witnesses, proffering affidavits from two experts: Venzke on the reasonableness of fees, and Wilshire on the standard of care. See McRay, 554 S.W.3d at 708. McRay's request to late designate Wilshire as an expert on the standard of care correlated to its only claim before the trial court, a professional negligence claim. McRay had not pleaded a breach of fiduciary duty claim. Thus, when the trial court denied McRay's request to designate Wilshire after the deadline, it was denying the designation of Wilshire as an expert on professional negligence and not an expert on fiduciary duties. Because McRay did not request that Wilshire be designated as a fiduciary duty expert, and the trial court therefore did not deny a request to designate him as such, that complaint was not preserved for our review. See TEX. R. APP. P. 33.1(a)(1), (2) (stating as prerequisite to presenting complaint for appellate review, record must show that complaint was made to trial court by timely request, objection, or motion and that trial court ruled on request, objection, or motion, or refused to rule).
Further, under Texas Rule of Civil Procedure 193.6, a party may not offer the testimony of a witness (other than the named party) who was not timely identified. Tex.R.Civ.P. 193.6(a); Fort Brown Villas, 285 S.W.3d at 881. A party who fails to timely designate an expert has the burden of establishing good cause or a lack of unfair surprise or prejudice before the trial court may allow the witness to testify. See TEX. R. CIV. P.193.6(b). “A trial court's exclusion of an expert who has not been properly designated can be overturned only upon a finding of abuse of discretion." Mentis v. Barnard, 870 S.W.2d 14, 16 (Tex. 1994) (citing Morrow v. H.E.B., Inc., 714 S.W.2d 297, 298 (Tex. 1986)). Here, while McRay requested that the trial court certify a 374-page clerk's record and a 687-page supplemental clerk's record, it notably did not include its motion for leave to late designate Wilshire as an expert and/or any evidence associated with the motion. As a result, there is nothing in the record showing whether McRay satisfied its burden under Rule 193.6 to show that Wilshire's late designation was supported by good cause and a lack of prejudice. We therefore presume that the omitted documents support the trial court's order denying leave for McRay to late designate Wilshire. Cf. Enter. Leasing Co. of Hous. v. Barrios, 156 S.W.3d 547, 550 (Tex. 2004) (stating that where pertinent summary judgment evidence considered by trial court was not included in appellate record, appellate court must presume that omitted evidence supported trial court's judgment); Small v. Garcia, 01-20-00640-CV, 2022 WL 3092895, at *4 (Tex. App.-Houston [1st Dist.] Aug. 4, 2022, no pet.) (mem. op.) (same). The trial court did not abuse its discretion in excluding Wilshire as an expert.
We also note that it is the appellant's burden to bring forth a sufficient record demonstrating error by the trial court. Without the motion and evidence, we cannot determine whether McRay met its burden and thus whether the trial court erred. See Christiansen v. Prezelski, 782 S.W.2d 842, 843 (Tex. 1990) (per curiam); Matter of Marriage of Comstock, 639 S.W.3d 118, 130 (Tex. App.-Houston [1st Dist.] 2021, no pet.); Nicholson v. Fifth Third Bank, 226 S.W.3d 581, 583 (Tex. App.-Houston [1st Dist.] 2007, no pet.).
C. Denial of Continuance and Limited Discovery
McRay argues that the trial court abused its discretion in denying McRay's requests for a continuance and that discovery be reopened. It argues that, under Texas Rule of Civil Procedure 190.5, the interest of justice required modification of the discovery plan.
1. McRay's First Request
In a letter dated November 5, 2018, McRay's counsel asked that (1) trial be set "on or after May 1, 2019," (2) McRay be given a chance to depose Dow Golub's corporate representative and designate expert witnesses, and (3) McRay be afforded time to fully brief the circumstances as to why it was unable to designate expert witnesses or depose the plaintiff before the close of discovery. The trial court subsequently notified the parties that trial was set on July 30, 2019, and McRay was permitted the opportunity to brief its request to reopen discovery. The trial court, however, later denied McRay's request to reopen discovery.
We review a trial court's ruling denying a motion for continuance for an abuse of discretion. BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 800 (Tex. 2002) (applying abuse of discretion standard to denial of motion for continuance requesting extension to complete discovery). A trial court abuses its discretion "when it reaches a decision so arbitrary and unreasonable as to amount to a clear and prejudicial error of law." Id.
McRay bore the burden to show that "the interest of justice require[d]" the trial court to allow it additional time to depose Dow Golub's corporate representative and designate experts. See TEX. R. CIV. P. 190.5. To satisfy the burden, McRay had to show that it used due diligence to obtain the discovery sought and specify the nature, materiality, or purpose of the evidence it claimed it was prevented from discovering. See Lagou v. U.S. Bank Nat'l Ass'n, No. 01-13-00311-CV, 2013 WL 6415490, at *3 (Tex. App.-Houston [1st Dist.] Dec. 5, 2013, no pet.) (mem. op.) ("'If a continuance is sought in order to pursue further discovery, the motion must describe the evidence sought, explain its materiality, and show the party requesting the continuance has used due diligence to obtain the evidence.'" (quoting Wal-Mart Stores Tex., LP v. Crosby, 295 S.W.3d 346, 356 (Tex. App.-Dallas 2009, pet. denied)); Estate of Hernandez, No. 04-14-00046-CV, 2014 WL 7439713, at *3 (Tex. App.-San Antonio Dec. 31, 2014, pet. denied) (mem. op.). In its brief in support of its motion to reopen discovery, McRay did not offer any explanation for its failure to depose Dow Golub's corporate representative, identify the testimony it would have obtained at a deposition, or explain its materiality. The trial court did not abuse its discretion in denying McRay's request to reopen discovery.
2. McRay's Second Request
Nine days before the September 25, 2019 trial setting, McRay's new counsel filed an emergency motion for continuance requesting additional time to review the case and prepare for trial. The motion stated that the parties were engaged in good faith settlement discussions and needed additional time to try and finalize settlement terms. Dow Golub filed a response disputing the grounds for a continuance alleged in McRay's motion, noting that the case had been continued multiple times and that, as of the filing of the response, there were no good faith settlement discussions nor "need for additional time to try and finalize settlement terms." The trial court denied the emergency motion.
Other than McRay's assertion that the parties were engaged in settlement negotiations-which Dow Golub disputed-the sole basis for the requested continuance was to allow McRay's four-lawyer defense team additional time to review the case and prepare for a half-day bench trial. "[T]he denial of a motion for continuance based on lack of time to prepare for trial is not an abuse of discretion." Perrotta v. Farmers Ins. Exch., 47 S.W.3d 569, 577 (Tex. App.-Houston [1st Dist.] 2001, no pet.); see also Losoya v. Mission Hous. Auth., No. 13-15-00599-CV, 2016 WL 8607595, at *2 (Tex. App.-Corpus Christi-Edinburg Dec. 8, 2016, pet. denied) (mem. op.); White v. Hansen, No. 05-99-00657-CV, 2000 WL 1137285, *2 (Tex. App.-Dallas Aug. 11, 2000, no pet.); Hatteberg v. Hatteberg, 933 S.W.2d 522, 527 (Tex. App.-Houston [1st Dist.] 1994, no writ). The trial court did not abuse its discretion in denying McRay's requests for continuance and to reopen discovery.
We overrule McRay's first issue.
Attorney's Fees
In its second issue, McRay contends that, if no new trial is granted, this Court should reverse the trial court's award of attorney's fees in the amount of $104,516.50 for the prosecution of Dow Golub's breach of contract claim and render judgment that Dow Golub take only $10,000 in attorney's fees or, alternatively, remand the question for reconsideration of the evidence presented at trial.
A. Standard of Review and Applicable Law
Whether attorney's fees are available for a prevailing party is a question of law that we review de novo. Holland v. Wal-Mart Stores, Inc., 1 S.W.3d 91, 94 (Tex. 1999). It is the burden of the party claiming fees to provide sufficient evidence of both the reasonable hours worked and the reasonable hourly rate. Rohrmoos Venture v. UTSW DVA Healthcare, LLP, 578 S.W.3d 469, 498 (Tex. 2019). "Sufficient evidence includes, at a minimum, evidence of (1) particular services performed, (2) who performed those services, (3) approximately when the services were performed, (4) the reasonable amount of time required to perform the services, and (5) the reasonable hourly rate for each person performing such services." Id.; see also City of Laredo v. Montano, 414 S.W.3d 731, 736 (Tex. 2013).
B. Analysis
McRay argues that Dow Golub was not entitled to recover $104,516.50 in prosecution-based attorney's fees because Dow Golub's insurer, not Dow Golub, was billed and paid for nearly all the attorney's fees and therefore Dow Golub did not "incur" the fees. It also argues that the evidence was insufficient to support the trial court's findings of reasonableness and necessity.
1. Fees "Incurred"
In support of its challenge to the attorney's fees award, McRay points to the trial court's finding that Dow Golub "incurred" $104,516.50 in prosecution-based fees. Noting that a fee is incurred when a party becomes liable for it, McRay argues that there is no evidence in the record that Dow Golub paid or became liable for the fees. Rather, it argues, the evidence shows that third-party firms took over once they were hired by Dow Golub's professional malpractice insurer, North American Risk Services, and that, other than a $10,000 deductible paid by Dow Golub, all remaining third-party law firm fees and costs were billed to and paid for by the insurer. McRay's argument is unavailing.
In Aviles v. Aguirre, the Texas Supreme Court held that a defendant incurred the legal fees expended on his defense despite the fact that the fees were actually paid by the defendant's insurer. 292 S.W.3d 648, 649 (Tex. 2009). Noting that the plaintiffs had sued only the defendant doctor, and not his insurer, the Court stated that the defendant was "personally liable in the first instance for both defense costs and any potential judgment," and "[t]hat he had previously contracted with an insurer to pay some or all of both does not mean he incurred neither." Id. The Court stated that "[w]hen [the defendant's] insurer paid his attorney's fees on his behalf, the insurer was 'stand[ing] in the shoes of its insured.'" Id. (quoting SonatExpl. Co. v. Cudd Pressure Control, Inc., 271 S.W.3d 228, 236 (Tex. 2008)). Thus, under Aviles, whether Dow Golub paid its counsel's invoices directly or its insurer paid them does not alter the fact that Dow Golub incurred the fees. See id.
We further note that McRay's effort to reduce its own liability by the amount of Dow Golub's insurance benefits is barred by the collateral source rule which holds that a wrongdoer cannot offset its liability by insurance benefits independently procured by the injured party. See Mid-Century Ins. Co. of Tex. v. Kidd, 997 S.W.2d 265, 274 (Tex. 1999); Brown v. Am. Transfer & Storage Co., 601 S.W.2d 931, 934 (Tex. 1980). It is undisputed that the parties' contract provided for Dow Golub's recovery of reasonable prosecution-based attorney's fees and costs. Because McRay is liable to Dow Golub for its reasonable attorney's fees and costs expended on collecting McRay's unpaid debt, McRay cannot rely on Dow Golub's separate decision to "purchase[] insurance" as a basis to avoid that liability. See Graco, Inc. v. CRC, Inc. of Tex., 47 S.W.3d 742, 744-46 (Tex. App.-Dallas 2001, pet. denied) (concluding that collateral source rule applied and therefore defendant incurred legal fees and expenses provided by its insurance company, and evidence supported trial court's finding that defendant had incurred $107,859.82 in legal fees and expenses in case). That Dow Golub's legal fees were paid by its insurer does not provide a basis to exclude those fees from Dow Golub's fee award.
The contract states, in relevant part, that "the Firm is entitled to reasonable attorney's fees and costs if collection activities are necessary for the failure of Client to pay any indebtedness to the Firm."
2. Necessity of Fees
McRay contends that the evidence is insufficient to demonstrate that the prosecution-based attorney's fees the trial court awarded to Dow Golub were necessary. It argues that this Court should remand the case to the trial court for reconsideration of the evidence presented at trial in light of governing law.
The record shows that Dow Golub sought $197,412.56 in attorney's fees incurred in the collection of McRay's unpaid debt from the Munoz and Allport matters. At trial, it offered Exhibit 44 which consisted of the invoices reflecting the work performed by Sanford Dow and an associate, Stephanie Hamm-whose hourly rates were $425 and $250, respectively-from August 2015 until August 2016, following McRay's termination of Dow Golub's representation, to prosecute its lawsuit and collect McRay's unpaid debt. Dow testified that, applying the Arthur Anderson factors, the hourly rates and the hours worked to prosecute the case against McRay were reasonable and necessary. Dow Golub also offered Exhibits 45 and 46 which consisted of the invoices from Edison, McDowell & Heatherington LLP, the third-party firm who took over prosecution of the suit, reflecting the work performed by its counsel from January 2016 to June 2019.
To determine the amount of attorney's fees to be awarded, Texas follows the lodestar method, which is a short-hand version of the factors set forth by the Texas Supreme Court in Arthur Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812, 818 (Tex. 1997). See Rohrmoos Venture v. UTSW DVA Healthcare, LLP, 578 S.W.3d 469, 496 (Tex. 2019). The lodestar method requires the fact finder to determine reasonable attorney's fees by first determining the reasonable hours spent by counsel in the case and the reasonable hourly rate for counsel's work. See El Apple I, Ltd. v. Olivas, 370 S.W.3d 757, 760 (Tex. 2012). The fact finder then multiplies the number of hours counsel worked on the case by the applicable rate, the product of which is the base fee or lodestar. Id. It is the fee claimant's burden to provide sufficient evidence of both the reasonable hours worked and the reasonable hourly rate. Rohrmoos Venture, 578 S.W.3d at 498.
Venzke, McRay's fees expert, opined that $46,276.70 of the fees reflected in the invoices presented by Dow Golub were either duplicative or improperly documented due to redactions. Specifically, he testified that $15,137.50 in fees reflected in Exhibit 44 for work performed by Dow Golub after January 26, 2016, the date the third-party firm entered its first appearance in the case, should be excluded as well as $30,139.20 of the fees reflected in the third-party firm's invoices in Exhibits 45 and 46 due to redactions. Venzke also opined that Dow Golub should not recover any fees for work spent to obtain the summary judgment that was reversed on appeal, however, he did not quantify how much of a reduction he believed was warranted.
Based on Venzke's testimony, if the trial court excluded every one of the redacted and duplicative entries from Dow's Golub's evidence-totaling fees of $46,276.70-the evidence would still support an award of $151,135.86. However, as noted above, the trial court awarded only $104,516.50 to Dow Golub for prosecution-based fees, which is less than the amount supported by the unobjected-to evidence. Thus, the evidence upon which McRay relies cannot constitute grounds for reversal of the award.
McRay argues that the defenses of offset and the one-satisfaction rule also bar the trial court's award of $104,537.50 in prosecution-based attorney's fees. In a footnote, McRay asserts that the defense of offset allows defendants, like McRay, to an offset of the amount of damages claimed that were reimbursed or paid by defendants or other parties. It argues that because Dow Golub's insurer paid the fees (except for the $10,000 deductible), rather than Dow Golub, to permit Dow Golub to recover those fees would result in a double recovery and windfall. This argument is unavailing.
The final judgment shows that the trial court did not award the same fees to both Dow Golub and its insurer; rather, the prosecution-based fees were awarded only once, to Dow Golub. And, as Dow Golub points out, to exclude those fees would not prevent a double recovery but instead would preclude even a single recovery for the fees that Dow Golub incurred to collect McRay's unpaid debt. McRay's argument that the one-satisfaction rule bars the award of attorney's fees is also without merit because "the principle forbidding more than one recovery for the same loss is not applicable" when one of the recoveries comes in the form of an insurance payment that falls "within the collateral source rule." Brown, 601 S.W.2d at 936 ("If payment is within the collateral source rule, the principle forbidding more than one recovery for the same loss is not applicable.").
We conclude that the evidence is sufficient to support the trial court's findings related to the reasonableness and necessity of Dow Golub's fees and its award of $104,516.50 in prosecution-based fees to Dow Golub. We overrule McRay's second issue.
Conclusion
We affirm the trial court's judgment.