by Hunter Hewell, Senior Associate
I. Introduction
Much like in the federal court system, Texas courts require each party in a suit to pay for their own attorney’s fees.[1] Some circumstances, however, allow for fee-shifting, in which the prevailing party may recover its attorney’s fees from the opposing party.[2] This fee-shifting arrangement is subject to certain requirements: (1) it must be authorized by statute or contract and (2) the party seeking its attorney’s fees must prove the reasonableness of the fee.[3] Although these requirements seem straightforward, courts throughout Texas have struggled with what methodology must be used and what facts the party seeking its attorney’s fees must present to determine the reasonableness of attorney’s fees once a fee-shifting authorization statute is invoked.[4] In 2019, the Texas Supreme Court passed down the Rohrmoos ruling, which specifically addressed what methodology courts and attorneys must use to determine how attorneys’ fees should be apportioned under these circumstances.[5]
Typically, Texas courts have used two methods to calculate attorneys’ fees in a fee-shifting situation:[6] the Arthur Andersen method and the lodestar method, the latter of which is the primary method that federal courts use.[7] Although many courts and attorneys previously saw these two methods as completely different approaches to calculating attorneys’ fees, the Supreme Court of Texas used Rohrmoos as an opportunity to reconcile the two methods.[8] The Court determined that the two methods do not create an “either/or” option; they go hand-in-hand.[9] This realignment of the method used to apportion the attorney’s fees for a prevailing party has created much speculation regarding the impact that the Rohrmoos decision will have on litigation strategy.[10] An understanding of the Texas Supreme Court’s methodology in fee-shifting cases can be reached through an analysis of the Arthur Andersen and lodestar methods, coupled with the decision in Rohrmoos. This methodology, however, is not necessarily as simple or efficient as the Texas Supreme Court presents it, and the effects on litigation may be widespread.
II. Arthur Andersen and Lodestar Methods
In Arthur Andersen, the Texas Supreme Court laid out eight factors to guide courts when determining whether a fee is reasonable.[11] The factors to be applied are very similar to the rules outlined in the Model Rules of Professional Conduct:
(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill required to perform the legal service properly;
(2) the likelihood . . . that the acceptance of the particular employment will preclude other employment by the lawyer;
(3) the fee customarily charged in the locality for similar legal services;
(4) the amount involved and the results obtained;
(5) the time limitations imposed by the client or by the circumstances;
(6) the nature and length of the professional relationship with the client;
(7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and
(8) whether the fee is fixed or contingent on results obtained or uncertainty of collection before the legal services have been rendered.[12]
This test forces the parties to only consider the amount of the fees that are reasonable, rather than the amount of fees that the client and attorney agreed upon because the contract may or may not have specified a reasonable fee due to the existence of contingency fees and other arrangements.[13] Although Texas courts have cited this method, courts never named it the official test.[14] For example, in Rohrmoos, the prevailing party relied upon the Arthur Andersen method in calculating its attorney’s fees to reach above $800,000.[15] The attorney for UTSW, the prevailing party, stated that due to the fact that he and his legal team had to go through millions of emails, review hundreds of thousands of documents, take over 40 depositions, and write a 40-page motion for summary judgment, coupled with several of the Arthur Andersen factors, his attorney’s fees fell between $800,000 and $1,000,000. [16] The Supreme Court of Texas, however, ruled that the Arthur Andersen method, although applicable to attorneys’ fees in a fee-shifting scenario, is not the starting point for the analysis.[17]
Rather, the Court held that the lodestar method is the starting point for any fee-shifting scenario.[18] The Court saw the lodestar method as a more objective way to figure out the reasonableness of the attorney’s fees for the prevailing party.[19] In order to determine the reasonable amount for attorneys’ fees under the lodestar method, the fact-finder must first ascertain the number of hours the attorneys spent working on the case, then multiply that by the applicable rate that an attorney would charge for that work within that market.[20] The Court then established that the lodestar method creates a presumption that the fee amount is reasonable.[21] After calculating the lodestar method, the Court reasoned that the Arthur Andersen factors may still be used to adjust the fee if necessary.[22] Thus, under Rohrmoos, the two methods—previously viewed as separate and distinct—actually work in conjunction with one another, but the lodestar method must be used first.
As a result of this clarification, the Court laid out several requirements and suggestions regarding these determinations. For example, although not required, the Court suggested that billing records are strongly encouraged to show the work done and add further proof of reasonableness for the fee.[23] Further, the Court stated that attorneys should not have to take the stand to prove attorneys’ fees but also stated that the evidence provided by UTSW’s attorney[24] was not enough to satisfy the determination.[25] Thus, the Texas Supreme Court has seemingly “upped the ante” in terms of what it requires as proof to show that an attorney’s fee award is reasonable.
III. Effects of Rohrmoos
The effects of Rohrmoos can be widespread throughout the litigation realm. Although the Court stated that billing records are not absolutely necessary, it strongly encouraged them, which could lead to billing records being entered into evidence as standard practice for attorneys.[26] Attorneys who work on a contingency fee basis could feel the effects of Rohrmoos more heavily because their records may not be as thorough, which would require a reworking of their business practices in many cases.[27] Apart from the fact that attorneys or courts could call opposing counsel to the stand to testify about their work, outside experts could also be used in trial to help show the reasonableness of attorneys’ fees, adding another costly and uncommon practice.[28] Despite the impracticality, it would allow attorneys to save themselves from the awkward position of having to cross-examine each other about their work.[29] Also, the Court was not clear as to exactly when or how many of the Arthur Andersen factors should be used, thus seemingly retaining some of the subjectivity that they wished to eliminate.[30] This could create a scenario in which an attorney still relies on the Arthur Andersen factors to inaccurately overcalculate the fee assessment beyond the lodestar method.
IV. Conclusion
As of April 2020 several appellate court opinions already cited the Rohrmoos decision.[31] The Rohrmoos decision left many questions unanswered, and although the Court tried to establish a blanket test, several different scenarios could create complications.[32] For example, potential issues arise with contingency fee arrangements and the extent to which the judge versus the jury should decide attorneys’ fees.[33] Although the Texas Supreme Court used Rohrmoos as a valiant attempt to clarify the reasonableness of attorneys’ fees, this clarification could create problems for litigants and further complicate the job of attorneys, making them alter their strategies to revolve more around convenient post-services fee calculations.
[1] Rohrmoos Venture v. UTSA DVA Healthcare LLP, 578 S.W.3d 469, 483 (Tex. 2019).
[2] Id.at 484.
[3] Id.
[4] How Rohrmoos Ruling Could Change Attorney Fees in Texas, Nat’l Ass’n of Legal Fee Analysis (May 16, 2019), http://www.thenalfa.org/blog/how-rohrmoos-ruling-could-change-attorney-fees-in-texas/ [https://perma.cc/35AM-NHGB].
[5] See generally Rohrmoos Venture, 578 S.W.3d at 483.
[6] How Rohrmoos Ruling Could Change Attorney Fees in Texas, supra note 4.
[7] Wolfgang P. Hirczy de Mino, Texas Attorney Fee Litigation under the Lodestar: Data on Appellate Cases Six Months after SCOTX Decision in Rohrmoos Venture v. UTSW DVA Healthcare, LLP, 578 S.W.3d 469 (Tex. 2019) (November 13, 2019), available at https://ssrn.com/abstract=3478442 [https://perma.cc/QL99-YRTF].
[8] Id.
[9] See generally Rohrmoos Venture, 578 S.W.3d 469.
[10] How Rohrmoos Ruling Could Change Attorney Fees in Texas, supra note 4.
[11] Arthur Andersen & Co. v. Perry Equipment Corp., 945 S.W.2d 812, 818 (Tex. 1997).
[12] Id.
[13] Rohrmoos Venture, 578 S.W.3d at 487–488.
[14] Texas Supreme Court Clarified the Applicable Standard for Proving Attorney’s Fees, Donato, Minx, Brown & Pool, P.C. (July 26, 2019), http://www.donatominxbrown.com/blog-attorneys-fees [https://perma.cc/NAT6-B7WT].
[15] Rohrmoos Venture, 578 S.W.3d at 476.
[16] Id.
[17] Id. at 501.
[18] Id.
[19] Id.
[20] Id.
[21] Id.
[22] Id. at 476.
[23] Id. at 502.
[24] Respondent’s Brief on the Merits, Rohrmoos Venture, No. 16-0006, 2016 WL 4924046 at 71–73 (Tex. Sept. 9, 2016).
[25] Rohrmos Venture, 578 S.W.3d at505.
[26] How Rohrmoos Ruling Could Change Attorney Fees in Texas, supra note 4.
[27] Id.
[28] Id.
[29] Id.
[30] See generally Rohrmoos Venture, 578 S.W.3d 469.
[31] Wolfgang P. Hirczy de Mino, supra note 7.
[32] Id.
[33] Id.