Opinion
MO:18-CV-137-DC
2021-08-18
SMITH WEST TEXAS PROPERTIES, LTD., Plaintiff, v. ALLIED PROPERTY AND CASUALTY INSURANCE COMPANY, Defendant.
Samuel John Stennis, William Everett Berry, Jr., W. Bruce Williams, Terry Wayne Rhoads, Tyler J. Eyrich, Cotton, Bledsoe, Tighe & Dawson, P.C., Midland, TX, for Plaintiff. Andrew Harper Estes, Randall L. Rouse, Lynch, Chappell & Alsup, PC, Midland, TX, Robert Glen Wall, Ethan D. Carlyle, Patrick M. Kemp, Segal McCambridge Singer & Mahoney, Ltd., Austin, TX, for Defendant.
Samuel John Stennis, William Everett Berry, Jr., W. Bruce Williams, Terry Wayne Rhoads, Tyler J. Eyrich, Cotton, Bledsoe, Tighe & Dawson, P.C., Midland, TX, for Plaintiff.
Andrew Harper Estes, Randall L. Rouse, Lynch, Chappell & Alsup, PC, Midland, TX, Robert Glen Wall, Ethan D. Carlyle, Patrick M. Kemp, Segal McCambridge Singer & Mahoney, Ltd., Austin, TX, for Defendant.
ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR AWARD OF ATTORNEY FEES AND COSTS
DAVID COUNTS, UNITED STATES DISTRICT JUDGE
BEFORE THE COURT is the Motion for Award of Attorneys’ Fees and Costs filed by Plaintiff Smith West Texas Properties, Ltd. ("Plaintiff"). [Doc. 226]. Also before the Court are the Response filed by Defendant Allied Property and Casualty Insurance Company ("Defendant") [Doc. 230], and the Reply Plaintiff filed in support of its Motion [Doc 233]. After due consideration of the parties’ arguments and the applicable law, the Court GRANTS IN PART and DENIES IN PART Plaintiff's Motion. [Doc. 226].
I. BACKGROUND
On April 8, 2021, the jury returned a verdict finding Defendant breached the insurance contract and awarding Plaintiff $420,557.11 in damages. [Doc. 224]. On April 22, 2021, Plaintiff filed the instant Motion, seeking an award of attorney fees in the amount of $383,537.58 and costs in the amount of $100,246.19. [Doc. 226]. Specifically, Plaintiff contends that 27 properties are at issue in this action, and it made "27 separate and distinct demands for 27 [ ] separate properties." [Id. at 3]. Plaintiff argues it is entitled to an award of a percentage of its attorney fees because it sent a pre-suit demand letter in accordance with Chapter 542A of the Texas Insurance Code and it recovered more than 80% of its pre-suit demand with respect to three of the properties and recovered between 20% and 80% of its pre-suit demand with respect to seven of the properties. [Id. ]. With respect to the three properties, Plaintiff asserts it is entitled to 3/27 (11.11%) of its reasonable and necessary fees. [Id. ]. With respect to the seven properties, Plaintiff contends "it is entitled to proportional recovery of its reasonable and necessary attorney[ ] fees for each property, multiplied by 1/27 for each respective property." [Id. ]. Accordingly, Plaintiff claims it should recover 12.2874% of its fees for these properties. [Id. at 3–4]. Based on these arguments, Plaintiff concludes it should recover 23.39858326% of its attorney fees—which totaled $1,639,147.75—or $383,537.58. [Id. at 4].
As a prerequisite to filing an action to which Chapter 542A applies, Texas Insurance Code Sec. 542A.003(b)(2) states that the claimant must give written notice to the insurer that provides "the specific amount alleged to be owed by the insurer on the claim for damage to or loss of covered property." Plaintiff's counsel gave written notice by letter dated January 31, 2018. [Doc. 226-1]. Plaintiff's counsel sent a revised letter dated March 8, 2018, with a cover letter dated March 9, 2018. [Doc. 226-2].
The letters refer to the commercial property insurance policy issued by Defendant to Plaintiff, Policy No. ACP CPPP 3036422828, and the claim number assigned to Plaintiff's claim for the June 2017 hailstorms, Claim No. 560511-GF. [Docs. 226-1, 226-2]. The letters assert $2,380,798.40 in property damages and attach an itemized list of repair costs to support that figure. [Id. ]. The sum of $2,380,798.40 was stated as the amount sought on the claim. [Id. ]. Specifically, Plaintiff's counsel's letter states:
To remedy such damages, SWT hereby makes a demand for payment from Allied in the sum of $2,380,798.40. Such sum is comprised of 27 separate and distinct demands for 27 separate SWT properties, plus industry standard overhead and profit.
[Doc. 226-2 at 6].
Defendant argues that Plaintiff's request for fees should be denied pursuant to Tex. Ins. Code Ann. § 542A.007(c) because Plaintiff's recovery of $420,557.11 on its insurance claim is less than 20% of $2,380,798.40—the amount Plaintiff demanded on the insurance claim in a statutory pre-suit notice letter. [Doc. 230 at 1]. Defendant argues that Plaintiff's claim for attorney fees runs counter to the plain language of the statute. [Id. ]. Finally, Defendant requests the Court to exercise its discretion in denying Plaintiff recovery of its costs.
II. LEGAL STANDARD
Texas Insurance Code Sec. 542A.002 applies to an "action on a claim" against an insurer, including an action alleging breach of contract. A "claim" includes "a first-party claim that: (A) is made by an insured under an insurance policy providing coverage for real property or improvements to real property; (B) must be paid by the insurer directly to the insured; and (C) arises from damage to or loss of covered property caused, wholly or partly, by forces of nature, including ... hail[.]"
Section 542A.007 of the Texas Insurance Code entitled "Award of Attorney's Fees" provides the following:
(a) Except as otherwise provided by this section, the amount of attorney's fees that may be awarded to a claimant in an action to which this chapter applies is the lesser of:
(1) the amount of reasonable and necessary attorney's fees supported at trial by sufficient evidence and determined by the trier of fact to have been incurred by the claimant in bringing the action;
(2) the amount of attorney's fees that may be awarded to the claimant under other applicable law; or
(3) the amount calculated by:
(A) dividing the amount to be awarded in the judgment to the claimant for the claimant's claim under the insurance policy for damage to or loss of covered property by the amount alleged to be owed on the claim for that damage or loss in
a notice given under this chapter; and
(B) multiplying the amount calculated under Paragraph (A) by the total amount of reasonable and necessary attorney's fees supported at trial by sufficient evidence and determined by the trier of fact to have been incurred by the claimant in bringing the action.
(b) Except as provided by Subsection (d), the court shall award to the claimant the full amount of reasonable and necessary attorney's fees supported at trial by sufficient evidence and determined by the trier of fact to have been incurred by the claimant in bringing the action if the amount calculated under Subsection (a)(3)(A) is:
(1) greater than or equal to 0.8;
(2) not limited by this section or another law; and
(3) otherwise recoverable under law.
(c) The court may not award attorney's fees to the claimant if the amount calculated under Subsection (a)(3)(A) is less than 0.2.
Tex. Ins. Code. Ann. § 542A.007.
Rule 54(d)(1) states that costs "should be allowed to the prevailing party." That language establishes "a strong presumption that the prevailing party will be awarded costs." Pacheco v. Mineta , 448 F.3d 783, 793 (5th Cir. 2006). However, "the decision whether to award costs ultimately lies within the sound discretion of the district court." Marx v. General Revenue Corp. , 568 U.S. 371, 377, 133 S.Ct. 1166, 185 L.Ed.2d 242 (2013). The court may only tax as costs the expenses expressly listed in 28 U.S.C. § 1920. Faludi v. U.S. Shale Sols., LLC , No. CV H-16-3467, 2020 WL 2042322, at *1 (S.D. Tex. Apr. 28, 2020). The party against whom costs are to be taxed must specifically object to a cost to overcome the presumption that the costs were necessarily incurred for use in the case. Id. at *2. If a specific objection is raised, the party seeking costs "bears the burden of verifying that the costs were necessarily incurred in the case rather than just spent in preparation and litigation of the case." Id.
Allowable costs under § 1920 are: (1) Fees of the clerk and marshal; (2) Fees for printed or electronically recorded transcripts necessarily obtained for use in the case; (3) Fees and disbursements for printing and witnesses; (4) Fees for exemplification and the costs of making copies of any materials where the copies are necessarily obtained for use in the case; (5) Docket fees under section 1923 of this title;(6) Compensation of court appointed experts, compensation of interpreters, and salaries, fees, expenses, and costs of special interpretation services under section 1828 of this title.
III. DISCUSSION
A. Attorney Fees
Pursuant to Tex. Ins. Code § 542A.007(a) – (c), a claimant may recover the full amount of its reasonable and necessary fees if it recovers policy benefits of 80% or more of the amount alleged to be owed on the claim in a pre-suit notice given under the chapter. If the party is awarded at least 20% but less than 80% of the amount alleged to be owed on the claim, the party may recover its reasonable and necessary fees at a rate proportionally discounted. Finally, if the amount to be awarded is less than 20% of the amount alleged to be owed on the claim, the Court may not award any fees to the claimant.
In this case, the amount to be awarded to Plaintiff for policy benefits is less than 20% of the amount alleged to be owed on the claim in the notice letters. The numerator is the amount to be awarded "for the claimant's claim under the insurance policy for damage to or loss of covered property"—i.e., $420,557.11, the amount owed on the claim based on the jury's findings. The denominator is the amount "alleged to be owed on the claim for that damage or loss in a notice given under [Chapter 542A]"—i.e., $2,380,798.40, the specific amount identified by Plaintiff as damage or loss in its pre-suit notice letter. The amount calculated under Section 542A.007(a)(3)(A) is therefore 0.17, which is less than 0.2. Accordingly, as stated in Section 542A.007(c), Plaintiff is not entitled to an award of attorney fees.
The Court has not found, and the parties have not cited, any case law explicitly addressing what constitutes "the amount to be awarded in the judgment to the claimant for the claimant's claim under the insurance policy for damage to or loss of covered property." Under Texas law, a court interpreting statutory language gives words their ordinary, natural meaning. Weaver v. Metro. Life Ins. Co. , 939 F.3d 618, 626 (5th Cir. 2019). Under a plain reading of the statute, the phrase "the amount to be awarded in the judgment" means the total figure that will be included in the judgment. In this case, there was one claim for breach of contract and one judgment will issue. Thus, the "amount to be awarded in the judgment to the claimant for the claimant's claim under the insurance policy for damage to or loss of covered property," is simply the total amount of damages found by the jury on the claim—i.e., $420,557.11.
Plaintiff's assertion that it can recover reasonable and necessary attorney fees on portions of its single breach of contract claim under the policy and not other portions of the same claim is contrary to the plain language of the statute. The statutory language for the calculation to determine the amount of recoverable fees speaks in terms of a singular "amount" to be awarded in a singular "judgment" and says nothing about dividing the total award into multiple subcategories of property damage for the purpose of calculating an award of attorney fees. Tex. Ins. Code Ann. § 542A.007(a)(3)(A). While there are multiple properties at issue, there is only one insurance claim made under one insurance policy. [Doc. 25 at 8] ("SWT filed a claim with Allied Insurance pursuant to the Policy, seeking the replacement cost for its damaged properties."). Accordingly, the Court declines Plaintiff's invitation to treat 27 separate properties as 27 separate claims or 27 separate judgments. The Court denies Plaintiff's request to conduct piecemeal calculations based on each property location for the sole purpose of avoiding the effect of Section 542A.007(c). The Court does not find anything in the statute nor any other legal authority in support Plaintiff's theory of recovery for attorney fees. The case at hand simply involves one claim, one policy, and judgment.
Section 542A.007(c) states that the "court may not award attorney's fees to the claimant if the amount calculated under Subsection (a)(3)(A) is less than 0.2." Tex. Ins. Code Ann. § 542A.007(c). The ordinary, natural meaning of "may not" is a denial of permission. See May, Black's Law Dictionary (11th ed. 2019) (defining "may" as "[t]o be permitted to ... [l]oosely, is required to; shall; must[.]"); Not, Merriam-Webster's Collegiate Dictionary (11th ed. 2014) (defining "not" as "a function word" to make a word negative). Therefore, pursuant to the plain meaning of Section 542A.007(c), Plaintiff's Motion for Award of Attorneys’ Fees is DENIED . [Doc. 226].
B. Costs
Federal courts rarely face agonizing decisions about whether to allow a prevailing party its costs. Rule 54(d)(1) plainly says that costs "should be allowed to the prevailing party." That language, the Fifth Circuit has made clear, establishes "a strong presumption that the prevailing party will be awarded costs"—a presumption displaced only if narrow circumstances happen to apply. Pacheco , 448 F.3d at 793. As a result, costs are rarely denied to prevailing parties. See Baez v. U.S. Dep't of Justice , 684 F.2d 999, 1004 (D.C. Cir. 1982). In the present case, Plaintiff received a verdict in its favor and prevailed on its breach of contract claim against Defendant. Accordingly, the Court finds that Plaintiff is entitled to recover its costs. The Court now turns to the award's precise amount.
Plaintiff seeks costs incurred in this matter totaling $100,246.19. Plaintiff cites Hilton v Executive Self Storage Associates, Inc. , No. H-06-2744, 2009 WL 1750121, at *16 (S.D. Tex. June 18, 2009) (unpublished), for the proposition that recoverable litigation expenses pursuant to Fed. R. Civ P. 54(d) include reimbursement for travel, meals, lodging, photocopying, long-distance telephone calls, computer legal research, postage, courier service, exhibits, and document scanning. Plaintiff's reliance on Hilton is misplaced.
Hilton involved an action under the Fair Labor Standards Act (the "FLSA"), which provides for a statutory attorney fees award. "Reimbursement for travel, meals, lodging, photocopying, long-distance telephone calls, computer legal research, postage, courier service, mediation, exhibits, document scanning, and visual equipment are types of litigation expenses that are recoverable under The FLSA as part of an attorneys’ fee award." Quintanilla v. A & R Demolition Inc. , No. H-04-1965, 2007 WL 5166849, at *9 (S.D. Tex. May 7, 2007) (unpublished) (emphasis added). The instant case does not involve the FLSA. Only "[c]osts such as court-reporter fees, copying fees, and docket fees, are similarly compensable under 28 U.S.C. § 1920." Hilton , 2009 WL 1750121, at *16.
Accordingly, Plaintiff is entitled to some, but not all, of its requested costs. In determining that Plaintiff is entitled to its costs, and considering the extent of the costs to be awarded, the Court individually analyzes the constituent requests objected to by Defendant as explained further below.
1. Miscellaneous Costs
Plaintiff bears the burden of proving the amount and necessity of its costs and cannot meet this burden without adequately describing the costs being sought. Faludi , 2020 WL 2042322, at *1. Therefore, Plaintiff's costs shall be reduced by $8.75.
2. Conference Calls
Telephone expenses are not a taxable cost because they are not enumerated under 28 U.S.C. § 1920. See Embotelladora Agral Regiomontana, S.A. de C.V. v. Sharp Capital, Inc. , 952 F. Supp. 415, 418 (N.D. Tex. 1997). Therefore, Plaintiff's costs shall be reduced by $55.67.
3. Subpoena Expenses and Filing Fees
Plaintiff requests $164.36 for subpoena expenses and $372.46 for filing fees. The Court finds that subpoena expenses and filing fees are generally recoverable under 28 U.S.C. § 1920, and Defendant has failed to overcome this presumption. Therefore, Plaintiff shall recover $164.36 for subpoena expenses and $372.46 for filing fees.
4. Postage / Federal Express
Incidental costs like "shipping" are generally not taxable as these costs are not listed in § 1920. GSDMIdea City, L.L.C. , 807 F.3d 125, 133 (5th Cir. 2015) ; Halliburton Energy Servs., Inc. v. M-1, LLC , 244 F.R.D. 369, 371 (E.D. Tex. June 20, 2007). Because "these types of costs are nowhere enumerated in the statute," "the award of costs must be modified to delete" any award for postage and other such costs. Id. Plaintiff's request for postage and federal express costs will thus be denied. Plaintiff's costs shall therefore be reduced by $403.22.
5. Attorney Travel Expenses
Attorney travel expenses are not listed in section 1920 and are not recoverable. Coats v. Penrod Drilling Corp. , 5 F.3d 877, 891 (5th Cir. 1993). Plaintiff's costs shall therefore be reduced by $7,958.92.
6. Copying
Plaintiff requests $16,039.68 for reimbursement of copying costs. The Court finds that Plaintiff's copying costs are not granular enough to discern whether the copy costs were necessary. Fogleman v. ARAMCO , 920 F.2d 278, 286 (5th Cir. 1991) ("[W]e do require some demonstration that reproduction costs necessarily result from that litigation."). Thus, "[t]he Court will not allow [ ] unexplained costs." Oldham v. Thompson/Center Arms Co., Inc. , No. 4:12-cv-2432, 2014 WL 1794861, at *3 (S.D. Tex. May 5, 2014) (unpublished). The only documents specifically identified by Plaintiff as requiring photocopying for use in litigation include "Michael Stall and Coy White's August 2019 reports," which "were each almost 5,700 pages," and Defendant's "500 trial exhibits." [Doc. 233 at 7]. Plaintiff's costs shall therefore be reduced by $4,000.00. Plaintiff may recover only $12,039.68 in copying costs related to these specifically enumerated items.
7. Computer Research
Plaintiff cites Alonzo-Miranda v. Schlumberger Tech. Corp. , 5:13-CV-1057, 2015 WL 3651830, at *7 (W.D. Tex. June 11, 2015) for the proposition that the Court can tax online research as costs. However, Alonzo-Miranda , like Hilton , involved a case brought under the FLSA, and therefore, additional categories of expenses were recoverable in Alonzo-Miranda as a component of the attorney fee award under the FLSA statutory scheme that are not recoverable in the present case. Alonzo-Miranda , 2015 WL 3651830, at *6 ("In general, federal courts may award only those costs itemized in 28 U.S.C. § 1920, unless there is explicit statutory or contractual authorization to the contrary.... Additionally, the Fifth Circuit has interpreted the ‘attorney's fee’ allowed by 42 U.S.C. § 2000e–5(k) (incorporated into the Americans with Disabilities Act by § 12117(a)) to include reasonable out-of-pocket expenses incurred by the attorney which are normally charged to a fee-paying client in the course of providing legal services.").
"[C]omputer-assisted legal research is not recoverable under 28 U.S.C. § 1920. Legal research, whether conducted on a computer or in a library, is not a cost enumerated under 28 U.S.C. § 1920." United States ex rel. Gudur v. Deloitte Consulting LLP , H-00-1169,2007 WL 9821302, at *2–4, 2007 U.S. Dist. LEXIS 118480 at *20–22 (S.D. Tex. May 14, 2007) (unpublished). Plaintiff's costs shall therefore be reduced by $28,196.34.
8. Deposition Expenses
The Court will award Plaintiff its full request of $46,573.30 for stenographic transcripts and videos of depositions taken in preparation for this case. Section 1920(2) authorizes the Court to award "fees for printed or electronically recorded transcripts necessarily obtained for use in the case." 28 U.S.C. § 1920(2). As the Fifth Circuit has recognized, that language includes both written transcripts and videos of depositions. U.S. ex rel. Long v. GSDMIdea City, L.L.C. , 807 F.3d 125, 130–31 (5th Cir. 2015). Thus, the only remaining questions are, first, whether the transcripts were "necessarily obtained for use in the case" and, second, even if transcripts were necessary, whether obtaining both written transcripts and videos of the depositions was necessary.
Turning to the first question, the Court finds that the relevant transcripts were "necessarily obtained for use in the case." 28 U.S.C. § 1920(2). As the Fifth Circuit has explained, transcripts "need not be introduced into evidence at trial in order to be ‘necessarily obtained for use in the case’ under § 1920 ; rather, the cost of a deposition or copy that is reasonably expected to be used for trial or trial preparation may be taxable." GSDMIdea, L.L.C. , 807 F.3d at 130 (citing Fogleman , 920 F.2d at 285–86 ) (internal quotation marks omitted) (emphasis added). Video depositions fit this description. It is reasonable to think that the Plaintiff might need depositions for testimony or for potential impeachment. Under Fifth Circuit precedent, expenses associated with those depositions may thus be taxed as costs.
Next, the Court considers whether it was also necessary for Plaintiff to obtain both written transcripts and videos of the relevant depositions. Notably, the phrase " ‘printed or electronically recorded transcripts’ does not mean that costs may be taxed for only one of the two recited types of transcripts." Ushijima v. Samsung Elec. Co. , No. A-12-CV-318-LY, 2015 WL 11251558, at *4 (W.D. Tex. July 30, 2015). To the contrary, it "permits costs to be taxed for both printed and electronically recorded transcripts so long as they are necessarily obtained for use in the case." Id. Following that logic, courts have allowed recovery for "deposition costs for a written transcript and video recording when considered appropriate trial preparation under the unique circumstances of the particular case." Edwards v. 4JLJ, LLC , No. 2:15-CV-299, 2019 WL 2344752, at *3 (S.D. Tex. June 3, 2019).
One factor that courts have found persuasive in permitting recovery for both written transcripts and videos of depositions is the case's complexity. Ushijima , 2015 WL 11251558, at *4 ; Baisden v. I'm Ready Prod., Inc. , 793 F. Supp. 2d 970, 977 (S.D. Tex. 2011). While both capture verbal communication, videos also capture nonverbal communication. Id. at 977. The Court finds this rationale persuasive. Plaintiff reasonably needed both written transcripts and videos to prepare its case. Because the case was complex in that it involved 27 different properties, tens of thousands of pages of records, and numerous experts, the Court permits Plaintiff an award of both the written transcripts and videos of the depositions in the amount of $46,573.30.
IV. CONCLUSION
For the reasons described above, Plaintiff's Motion for Award of Attorneys’ Fees and Costs is hereby GRANTED in part and DENIED in part, as follows:
It is ORDERED that Plaintiff's request for award of attorney fees is DENIED .
It is further ORDERED that Defendant shall pay Plaintiff reimbursable expenses in the total amount of $59,623.29 .
It is so ORDERED .