Opinion ID: 2740135
Heading Depth: 2
Heading Rank: 2

Heading: Segregation of Fees

Text: As noted above, the statute providing for attorney’s fees in breach of contract claims is an exception to Texas’s general adherence to the American Rule. See In re Nalle Plastics Family Ltd. P’ship, 406 S.W.3d at 172. As such, “fee claimants have always been required to segregate fees between claims for which they are recoverable and claims for which they are not.” Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299, 311 (Tex. 2006). Here, S&C Electric claims that the district court erred in failing to require Structural Metals to segregate certain attorney’s fees that were unrecoverable. First, S&C Electric claims that Structural Metals should have had to segregate fees relating to Structural Metals’s claim that S&C Electric warranted an entire AVC “system” rather than the individual AVC units. S&C Electric argues in its brief that “[a]s a result of [Structural Metals’s] intransigent position on the system and services supposedly provided and 11 Case: 13-50332 Document: 00512794420 Page: 12 Date Filed: 10/06/2014 No. 13-50332 c/w No. 13-50666 warranted by S&C [Electric], the parties spent years litigating the scope of a straightforward sales contract.” However, that argument does not identify a separate claim apart from Structural Metals’s breach of warranty claim for which fees were not recoverable. Rather it is an argument that the jury found that S&C Electric warranted less than Structural Metals originally contended. As such, the district court did not abuse its discretion in ruling that Structural Metals was entitled to “fees with regard to legal services that advanced its breach of warranty claim, even if it did not achieve full success on that claim, such that segregation in this regard is not required. S&C [Electric]’s arguments are more properly evaluated under the reasonableness factors, specifically, the degree of success obtained.” Second, S&C Electric argues that Structural Metals should not be able to recover fees relating to the cause of the December 2006 fire. According to S&C Electric, Structural Metals’s continued insistence that the AVC units were the cause of the December 2006 fire in the face overwhelming evidence caused the parties to “unnecessarily litigate[] the cause of the fire for years.” The district court rejected that argument. The court noted that S&C Electric argued at trial that Structural Metals’s faulty installation of the cables caused the December 2006 fire and that the fire caused all of Structural Metals’s claimed damages, not any faults with the AVC units. It followed then, the court continued, that “[h]ad the jury accepted S&C [Electric]’s argument that the fire caused all of [Structural Metals’s] damages and that only [Structural Metals] was responsible for the fire, it would not have awarded any damages for breach of warranty.” As such, the court ruled that Structural Metals “did not lose on the issue of the cause of the fire, and litigation of that issue was necessary for [Structural Metals] to recover damages on its warranty claims.” The district court’s finding that S&C Electric argued that the cause of the fire precluded Structural Metals from recovering damages is a finding of fact 12 Case: 13-50332 Document: 00512794420 Page: 13 Date Filed: 10/06/2014 No. 13-50332 c/w No. 13-50666 underlying its attorney’s fees award, and we review it only for clear error. See Mathis, 302 F.3d at 461–62. S&C Electric cites only one place in the record to dispute the district court’s finding that S&C Electric put the issue of the fire in the foreground. The citation is to an exchange during direct examination in which Henry Camarillo, an engineer with Structural Metals who headed up the AVC project, gives his personal opinion that the fire began in the AVC units. But that sole exchange is insufficient for us to conclude that the district court’s finding was clearly erroneous. Since that finding stands, we hold that the district court did not abuse its discretion in ruling that Structural Metals did not have to segregate fees relating to the cause of the December 2006 fire. Alternatively, we have difficulty seeing how any argument about the cause of the fire is a separate “claim.” Any argument that the AVC units caused the fire would seem to be an argument for consequential damages for the warranty or contract claims under U.C.C. 2-715 and not a separate claim. As such, there was no need to segregate fees regarding the cause of the fire. See Tony Gullo, 212 S.W.3d at 311 (“[F]ee claimants have always been required to segregate fees between claims for which they are recoverable and claims for which they are not.” (emphasis added)); Green Int’l, Inc. v. Solis, 951 S.W.2d 384, 390 (Tex. 1997) (“To recover attorney’s fees under Section 38.001(8), a party must (1) prevail on a cause of action for which attorney’s fees are recoverable, and (2) recover damages.”). Third, S&C Electric asserts that the district court erred in failing to require Structural Metals to segregate attorney’s fees related to the spoliation issue and Structural Metals’s argument that it revoked acceptance of the AVC units. Yet Structural Metals has segregated fees that it found pertained only to the spoliation and revocation issues. Additionally, Structural Metals reduced its overall fee request by 2% in order to account for fees related to revocation of acceptance that may still have been included. S&C Electric cites 13 Case: 13-50332 Document: 00512794420 Page: 14 Date Filed: 10/06/2014 No. 13-50332 c/w No. 13-50666 nothing to support its argument that additional fees should be segregated other than to point us to a spreadsheet prepared by counsel for S&C Electric that purports to show additional amounts of time that Structural Metals spent on these issues that were not segregated. But S&C Electric fails to explain how those time entries identified related to the spoliation issue. Without more than S&C Electric’s bare characterization of the entries, we cannot say that the district court abused its discretion in declining to require segregation of those entries. As to the revocation issue, the district court concluded that two of the time entries related to contract formation and therefore did not need to be segregated as they were related to both the breach of warranty and breach of contract claims. Our review of the entries yields the same conclusion, especially as S&C Electric cites no additional evidence to the contrary. As to the remaining entries cited by S&C Electric, the district court apparently agreed that a portion of the time entries cited in the spreadsheet related to revocation but concluded that Structural Metals’s 2% overall reduction in its fee request was sufficient to account for those entries. S&C Electric presents no arguments as to why the 2% reduction is insufficient. As such, there is no basis for us to conclude that the district court abused its discretion in rejecting S&C Electric’s argument that additional amounts must be segregated. Fourth, S&C Electric argues that Structural Metals should have been forced to segregate fees relating to removal to federal court. S&C Electric claims that Structural Metals fraudulently joined its parent company, CMC (like S&C Electric, a Delaware corporation), as a plaintiff and S&C Electric’s Texas sales agent, Fred Oberlender & Associates (a Texas corporation), as a defendant in order to prevent removal based on diversity of citizenship. Yet the district court found that “[t]here is no indication that [Structural Metals] joined its parent company or Fred Oberlender in bad faith or to preclude removal. After removal, [Structural Metals] did not file a motion to remand, 14 Case: 13-50332 Document: 00512794420 Page: 15 Date Filed: 10/06/2014 No. 13-50332 c/w No. 13-50666 but instead investigated its options and voluntarily amended its complaint to remove the non-diverse parties.” To rebut that finding, S&C Electric argues only “[t]hat statement is wrong. The fact that [Structural Metals] immediately amended its complaint to remove those parties shows that [Structural Metals] knew that it had no reasonable basis for including them in the first place. The only reason they could have been included was to avoid removal.” Yet those bare assertions are insufficient to demonstrate that the district court’s finding was clearly erroneous. S&C Electric further argues that “amending the complaint to remove improperly included parties did not advance the AVC Warranty Claim, even if [Structural Metals] did not have a bad faith motive for including them in the first place.” This contention is meritless. Had Structural Metals contested the motion to remand and lost, it still would not have been precluded from recovering attorney’s fees associated with removal. DP Solutions, Inc. v. Rollins, Inc., 353 F.3d 421, 434 (5th Cir. 2003) (“[A] party may recover for time spent on unsuccessful motions so long as it succeeds in the overall claim.”). To say then that Structural Metals cannot recover its fees because, instead of engaging in a lengthy—and expensive—battle over subject matter jurisdiction for which it could have recovered fees, it amended its pleadings to dismiss non-diverse parties would truly be a case of no good deed going unpunished. The district court did not abuse its discretion in holding that fees relating to removal were recoverable.