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Attorney’s Fees and Daubert






SO YOU’RE AN EXPERT WITNESS

ON ATTORNEY FEES?

03-16-2007

Walter P. Wolfram

In Texas, the general rule is that each party pays its own attorney feesi but attorney fees can be recovered from an adverse party if they contract to do so or if the right to attorney fees is established by statute.ii

Attorney fees for professional services are recoverable under Texas law on claims related to contracts, DTPA, Insurance Code and other circumstances where the law specifically allows their recovery.iii Absent a contract or statute, trial courts do not have inherent authority to require a losing party to the pay the prevailing party’s attorney fees.iv Statutes allowing the recovery of attorney fees, use various phrases such as: “recovery of reasonable and necessary attorney’s fees;”v “attorney fees reasonably related to the amount of work performed;”vi or simply “reasonable attorney fees.”vii Even though different words are used, it is clear that the proof requirements are the same. Attorney fees are recoverable only when provided for by statute or by parties’ agreement.viii Claims for attorney fees can reach monumental proportions and this commentary is therefore pertinent.

The elements of a claim for a monetary award for attorney fees requires an inquiry into what is reasonable and necessary which, in turn, involves an inquiry into what is usual and customary in the local market which involves what is a reasonable fee in that market and involves what constitutes necessary legal services. To support an award for attorney fees, the claimant must offer competent evidence to support the claim or lose it.ix Because of the broad impact of claims for attorney fees brought under the various statutes and many contracts, what constitutes usual and customary attorney’s fees becomes a part of an analysis concerning “reasonableness.”x The issue of reasonableness of attorney fees and necessity of the services underlying those fees is a matter for expert testimony. The claimant must proffer competent expert testimony to support a claim for attorney fees and that testimony must come from an attorney who is qualified as an expert within Rule 702, Texas and Federal Rules of Evidence.

Rule 702 of the Texas and Federal Rules of Evidence are identical to the extent that they establish when it is appropriate to use an expert witness. However, Federal Rule of Evidence 702 adds that such expert testimony is proper “…if (1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principals and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case.”xi

The same result exists under Texas Rule 702 because of the holdings related to qualifying experts. E.I. Du Pont De Nemours and Co., Inc. v. Robinson,xiiGammil v. Jack Williams Chevrolet, Inc.,xiii, and General Motors Corp v. Sanchez.xiv

The ultimate test of admissibility of an expert’s opinion requiring scientific, technical or specialized knowledge is whether the expert’s opinion will assist the trier of fact, is reliable and is relevant. Rule 702.

Traditionally, one or more attorneys — including the trial attorney — testifies that he/she is acquainted with the usual and customary fee structure in the local legal community and is acquainted with the standards of what constitute reasonable and necessary services and whether the fees associated with that type of legal work involved in the present litigation are reasonable and necessary– concluding with the amount sought to be recovered. Cross examination, if any, is usually limited to questioning the hours assessed or the necessity of a particular motion or hearing.

I have heard of no case where an expert on attorney fees was challenged on whether the witness had “sufficient facts or data” upon which to base their opinion on the reasonableness of fees and where they got the data or was challenged on whether the witness had “considered” the factors list set forth in Arthur Andersen v. Perry Equipment Corp.xv

In challenging an expert on attorney fees in a Texas court room, the following check list should be kept in mind:

(1) Rule 702 permits a witness qualified as an expert by knowledge, skill, experience, training, or education to testify on scientific, technical, or other specialized subjects if the testimony would assist the trier of fact in understanding the evidence or determining a fact issue.

(2) You must have the requisite knowledge, skill, training or education.

(3) Your testimony must assist the trier of fact in understanding the evidence or determining a fact issue.

(4) Rule 702 requires a proponent of expert testimony to demonstrate that such evidence is relevant and reliable before it can be admitted. The evidence or opinion must be (1) relevant and (2) reliable.

(5) To be relevant, the proposed testimony must be “sufficiently tied to the facts of the case that it will aid the jury in resolving a factual dispute.” Evidence that has no relationship to any of the issues in the case is irrelevant and does not satisfy Rule 702’s requirement that the testimony be of assistance to the jury.

(6) Expert testimony which is not grounded “in the methods and procedures of science” is no more than “subjective belief or unsupported speculation.” Unreliable evidence is of no assistance to the trier of fact and is therefore inadmissible under Rule 702.

(7) The testimony must be both (1) relevant and (2) reliable to be useful and admissible.

These standards clearly require that the expert witness must be involved in the same type of practice about which she/he is testifying. For example, an experienced trial attorney cannot testify about whether attorney fees charged in a securities transaction are reasonable or that the services were necessary.

In Arthur Andersen v. Perry Equipment Corp., the Texas Supreme Court established additional factors and data requirements for the testifying expert to consider in order to opine on the ultimate question of reasonable attorney fees. The “factors to be considered” are:

(1) The time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly.

(2) The likelihood, if apparent to the client, 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.

(8) Whether the fee is fixed or contingent.xvi

The PJC suggests that this list of “things to be considered “ is mandatory for the witness to present to the trier of fact; however, in Checker Bag Co., a Div. of CheckerFood Products Co. v. Washington, 27 S.W.3d 625, 640 (Tex. App. — Waco 2000) the court held “there is no requirement that all eight of the factors be supported by evidence.” The better or safer practice is to have the expert witness “consider” each of these listed items and show their relevance or lack of relevance in arriving at the reasonableness of the fees at issue.

What constitutes “sufficient facts or data” or an analysis of “factors to be considered” must come from the expert based on a proper data and factual base, reviewed by the trial judge as required in the Robinson/Daubert cases. If it is the intent of the expert witness to opine that he/she is acquainted with the usual, customary, reasonable and necessary attorney fees charged and collected, the witness must demonstrate the data and factual basis for that opinion. It is difficult to understand why an attorney would know about the fees of a large enough sampling of other attorneys in the area involved if he/she has not obtained some type of survey information. Simply hanging around the legal community, standing alone, will not suffice and that is usually the only data and factual basis most attorneys have to support their opinions about the usual and customary fees charged in the area.

When the expert on attorney fees attempts to establish that he/she is acquainted with the fees usually and customarily charged and collected in the market area where the services were performed, the expert must establish a factual data basis for such a claim. An attorney should either engage in a survey of local attorney fees or have access to the results of such a survey.xvii The survey should involve a sampling that is large enough to give a fair representation of the local attorney fees charged for the type of service involved in the suit and should be of recent vintage to reflect the current charges. Such a requirement involves data and facts gleaned from a local survey of other attorneys as to their fees charged for the type of services rendered in the case before the court. The survey should be sufficiently tied to the type of fees involved in the trial to support the opinion of the expert. Non-attorneys are disqualified to opine as to what is necessary and reasonable.xviii

The nature of what constitutes a “necessary service” is transcendent to all geographic areas of Texas and is dictated by the laws of Texas and is not significantly impacted by local practice. A practicing attorney may opine from his or her own practice on what is a “necessary service” relating to legal service matters of which he/she is familiar without having to do a survey. Of course, the witness’s experience must be in the area about which he/she is testifying. In order for the witness to be qualified to consider the factors list, he/she must demonstrate sufficient expertise and experience in the particular practice area to qualify as an expert in that area of practice.

SEGREGATION REQUIREMENT

In Stewart Title Guar. Co. v. Sterling,xix the Court held that in a case where a party seeks attorney fees for prosecuting claims against multiple defendants, that party must segregate the fees for services rendered as to each defendant. An exception was allowed that if the services in a single case were “inextricably intertwined” as to prevent their segregation no segregation was required. The exception tended to swallow the rule as all that was needed was for the expert to testify that the services were inextricably intertwined and could not be segregated. In Tony Gullo Motors I L.P. et al vs Nury Chapa,xx the Court addressed that problem by requiring segregation of services and fees rendered between several theories alleged in the same case about the same facts, involving claims that allow the recovery of attorney fees and claims that do not. The Court restated the principle that attorney fees can only be sought and recovered in those limited areas that Texas law allows and that there is no general right to seek and recover attorney fees in all litigation and correctly addressed that problem in the following way:

A recognized exception to this duty to segregate [established in the Sterling Case] arises when the attorney’s fees rendered are in connection with claims arising out of the same transaction and are so interrelated that their “prosecution or defense entails proof or denial of essentially the same facts. Flint & Assoc. v. Intercontinental Pipe & Steel, Inc., 739 S.W.2d 622, 624-25 (Tex.App.-Dallas 1987, writ denied). Therefore, when the causes of action involved in the suit are dependent upon the same set of facts or circumstances and thus are “intertwined to the point of being inseparable,” the party suing for attorney’s fees may recover the entire amount covering all claims.

Additionally:

… 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 claims that they are so intertwined that they need not be segregated. We modify Sterling to that extent.” (Page 286)

It is helpful that the court also held:

Requests for standard disclosure, proof of background facts, depositions of the primary actors, discovery motions and hearings, voir dire of the jury, and a host of other services may be necessary whether a claim is filed alone or with others. To the extent such services would have been incurred on a recoverable claim alone, they are not disallowed simply because they do double service.” (Page 286)

Interestingly, the Court did not require a segregation of fees on efforts involving multiple theories in the case where all of the theories allowed recovery of attorney fees if a theory did not result in the entry of judgment on that theory.

SURVEY OF LOCAL BAR

I recently surveyed a representative sample of individual attorneys who are members of the Amarillo Bar, some who are associated with varying sizes of firms and some who are solo practitioners. They furnished information about themselves and spoke about billing practices of other attorneys about whom they are familiar. I obtained fee data on a total of 30 individual attorneys and one firm. The data has been compiled and is available on request. The facts and data were focused on providing legal services involving litigation where the client was essentially a one time client, paying monthly as billed and the law involved in the case was not unique or limited to experts such as patent attorneys, tax regulation or utility regulation specialists.

I found that lawyers with law firms in the Amarillo market providing litigation services for insurance companies on a regular basis and which companies furnish a large amount of continuing litigation business, the usual and customary hourly rate is $125.00/hour1 which is substantially lower than the prevailing rate for the general litigation fees charged and collected. In the Lubbock, Texas, that rate is significantly lower. I have no data survey records on this topic as it applies to the general litigation market in Lubbock.

Armed with the facts and data from my survey of attorneys’ fees charged by attorneys in the Amarillo Area Bar Association, and having considered the Anderson Case factors list, an attorney proffered as an expert witness in an Amarillo trial court (Federal or State) on attorney fees involving litigation (including arbitration services) in the Amarillo market should be able to withstand a Robinson/Daubert challenge and his/her expert testimony should be admitted to the trier of fact. Absent such a fact or data base, it appears that a Robinson/ Daubert challenge might well be sustained.

End Notes

i.Turner v Turner, 385 S.W.2d 230, 233 (Tex. 1964).

ii.Dallas Central Appraisal District v Seven Investment Co. et al, 835 S.W.2d 75, 77 (Tex. 1992); Holland v Wal- Mart Stores, Inc., 1 S.W.3d 91, 94 (Tex. 1999).

iii.Comment: Texas Pattern Jury charges, 2000 ed., PJC 110.43; see also §38.01, Texas Practice and Remedies Code.

iv.Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299 (Tex. 2006).

v.§17.50(d), B. & C.C.; §27.01, B&CC; §541.152, Insurance Code of Texas

vi.§392.403, Finance Code of Texas.

vii.§38.001, Civ. Prac. & Rem Code of Texas.

viii.Strayhorn v. Raytheon E-Systems, Inc., 101 S.W.3d 558 (Tex App — Amarillo, 2003, no writ yet).

ix.Great American Reserve Insurance Company v. Britton, 406 S.W. 2nd 901, 907 (Tex1966).

x.§ 38.003, Tex Civ Prac & Rem Code.

xi.Effective December 1, 2000, adopted following the issuance of the United States Supreme Court’s opinions in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 US 579 (1993), Kumho Tire Company v. Carmichael, 119 Sup.Ct. 1167 (U.S. 1999) and their progeny.

xii.923 S.W.2d 549 (Tex. 1995).

xiii.972 S.W.2d 713 (Tex, 1998).

xiv.997 S.W.2d 584 (Tex, 1999).

xv.945 S.W.2d 812, 817-18 (Tex, 1997).

xvi.Tex. Disciplinary R. Prof. Conduct 1.04, reprinted in Tex. Govt. Code, tit. 2, sub tit. G app. (State Bar Rules, art. X, Sec. 9).

xvii. Rule 703 “. . . the facts or data need not b admissible in evidence in order for the opinion or inference to be admitted.”

xviii.Although, conceivably, a non-attorney could testify as to what is usual and customary if that person had the requisite data. However, in Danache v Danache,296 S.W. 2nd 821, 824 (Tex Civ App.– Waco 1956), the court held that in a divorce case involving child custody, an award of attorney fees without expert testimony was within the sound discretion of the trial court where the record showed the nature and character of the service performed and the results obtained. This is consistent with §38.004, Civ. Prac. & Rem. Code.

xix.822 S.W.2d 1 (Tex. 1991).

xx.212 S.W.3d 299 (Tex. 2006).