Exemplary Damages and Attorneys’ Fees in Texas: Glen Wilkerson Commentary

On December 22, 2006, the Supreme Court came down with the opinion quoted below. The opinion is significant in two important respects:

1. The opinion demonstrates the Supreme Court holding exemplary damages “constitutionally excessive” even though the exemplary damages are within the Chapter 41 limit of $200,000.00. Therefore, this is a case where the constitutionally excessive defensive pleadings came into play. The court holds that it has the power to decide whether the exemplary damages are “constitutionally excessive”. If the court holds that the exemplary damages are excessive (here for fraud in the inducement), then the remedy is a remand to the court of appeals to set a remittitur amount.

2. Even more importantly, this case makes a large change in the law with broad impact. The court changes the burden on a party seeking to recover attorney’s fees. In the past, if P sued on theory A that allowed fees, and on theory B that did not allow fees, P’s most often claimed that the fees were “intertwined” and thus they could recover all. Blister’s opinion here changes the burden of recovery for attorney’s fees. Much more attention must be paid by the Plaintiff to the recovery of attorney’s fees. This is a significant (but subtle) change in current law.

Blister’s Opinion says:

Accordingly, we reaffirm the rule that if any attorney’s fees relate solely to a claim for which such fees are unrecoverable, a claimant must segregate recoverable from unrecoverable fees. Intertwined facts do not make tort fees recoverable; it is only when discrete legal services advance both a recoverable and unrecoverable claim that they are so intertwined that they need not be segregated. We modify Sterling to that extent.

Tony Gullo Motors v. Chapa, ___ S.W.3d ___ (Tex. 2006) (Cause No. 04-0961)

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