By: Gordon K. Wright
Under Texas law, there are certain circumstances in which a party to the lawsuit may seek recovery of their attorney’s fees. The most prominent statute allowing recovery of attorney fees is Texas Civil Practice & Remedies Code, Ch. 41. Chapter 41 permits recovery for attorney’s fees for breach of contract and other listed claims.
There are two typical situations in which a claim for attorney’s fees arises: 1) breach of contract and 2) attorney’s fees as “damages.” For example, in the insurance context, a refusal to defend an underlying case may give rise to a lawsuit for bad faith. The claimant in the bad faith case may argue that his damages include the attorney’s fees incurred in the underlying case. He may also argue that because he had to bring the bad faith case, which is based on a breach of the contract between him and his insurer, he is entitled to attorney’s fees in the bad faith action.
TEXAS RULE OF EVIDENCE 503 provides that “a client has a privilege to refuse to disclose and to prevent any other person from disclosing confidential communications made for the purpose of facilitating the rendition of professional legal services to the client.” There are a few exceptions provided for in the rule where the privilege does not apply, but the attorney/client privilege is strong and difficult to break.
Frequently, when a party seeks discovery regarding attorney’s fees, the party seeking recovery of fees provides redacted attorney’s fees bills. Those bills are redacted in an effort to preserve the attorney-client privilege and the work-product privileges. Should someone seeking to recover attorney’s fees, however, be allowed to redact the fee statements? If they are redacted, the producing party has a full understanding of what is on the statements and what was done to incur reasonable and necessary fees while the party who is opposing the recovery of attorney’s fees does not. The opposing party may try to depose the lawyers involved and/or the attorney’s fee expert designated by the party seeking fees, but it can expect objections and assertions of the attorney-client and work-product privileges from the producing parties.
A party opposing the recovery of attorney’s fees may try to argue that the attorney-client privilege is being used as a sword rather than a shield and is therefore waived. However, to do so, the party must show three things. See Republic Insurance v. Davis, 856 S.W.2d 158, 163 (Tex. 1993). First, the party asserting the privilege must be seeking affirmative relief. That is the case when a party is seeking attorney’s fees. Second, the privileged information sought must be such that it is outcome determinative of the cause of action. One may try to argue that the information being sought is outcome determinative on the issue of whether the attorney’s fees are reasonable and necessary. That may not be what the Texas Supreme Court had in mind in referring to a requirement of “outcome determinative,” and it may be difficult to persuade the trial court that attorney’s fees are somehow “outcome determinative.” Third, disclosure of the confidential information must be the only means whereby the aggrieved party can obtain the information. This point may also be difficult for the plaintiff to prove. A court could require depositions of parties, discovery from those referred to in the pleadings, discovery from opposing counsel or parties in the underlying case, and other measures to be taken in order to avoid a direct attack on the privilege. A party seeking production of the fee statements may also argue that bills do not, as a general rule, contain attorney client privileged communications as they are not sent for purposes of rendering legal advice. To the extent that the producing party claims that they do contain such attorney-client information, those bills should be submitted to the court for in camera inspection. In short, the attorney-client privilege is difficult to break.
The work product privilege, however, may be more assailable by one opposing the recovery of attorney’s fees. Work product is defined in TEXAS RULES OF CIVIL PROCEDURE 192.5 as material prepared and mental impressions developed in anticipation of litigation or for trial or a communication made in anticipation of litigation or for trial between a party and the party’s representatives. While the attorney/client privilege likely survives the end of a particular matter, the work product privilege arguably relates only to a given matter. Thus, in a situation where you have two cases, an underlying case and the case at bar, once the underlying case is resolved, counsel can argue that work product privilege goes away. The party seeking to discover information regarding attorney’s fees could argue that the bills, while they may have been generated during the pendency of a lawsuit, are discoverable after a matter is concluded. Even if the matter is ongoing, a party may still argue that the fee bills should be discoverable based on equity because it is patently unfair to permit one side to seek a damage about which the other side is not able to do a full and fair investigation.
Additionally, a party opposing recovery of attorney’s fees can seek to depose counsel who is a witness as to the reasonableness and necessity of attorney’s fees. When a party seeks recovery of attorney’s fees, someone must testify as to the reasonableness and necessity of those fees. That someone should be qualified as an expert witness, even if it is the party’s own counsel. There is a specific exception for work product in Texas Rules of Civil Procedure 192.5(c)(1) for material reviewed by an expert witness. Counsel could attempt to persuade the court that, in justice, we cannot be expected to pay for what we cannot even discuss.
As a side note, plaintiff’s lawyers will frequently ask to bifurcate the trial - that is to have the attorney’s fees determined by the judge. Defense counsel should give careful consideration to whether that is in the best interest of the defendant. Most trial judges will better understand why a disproportionate amount of attorney’s fees has been charged given the amount of damage being sought. Juries may be offended by an attorney charging three or four times the amount of actual damage.