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Cypress Engine Accessories, LLC v. HDMS Limited Co.

United States District Court, S.D. Texas, Houston Division

November 8, 2017



          Lee H. Rosenthal Chief United States District Judge.

         The defendant, HDMS, moves for attorneys' fees under the Deceptive Trade Practices Act, Tex. Bus. & Com. Code§ 17.50(c). For the reasons analyzed below, the court finds that HDMS is entitled to recover $75, 949.07 in attorneys' fees for defending against Cypress Engine's groundless DTPA claim.

         I. Background

         On October 6, 2017, the court found Cypress Engine's DTPA claim groundless as a matter of law and that, as a result, HDMS was entitled to recover attorneys' fees for the amount spent defending against this claim. (Docket Entry No. 92 at 18). The court ordered HDMS, which had previously sought recovery of nearly all of its fees, to submit evidence segregating the fees incurred in defending against only the DTPA claim or, in the alternative, evidence that the fees were for claims so interrelated that segregation is not required. (Docket Entry No. 92 at 19).

         HDMS argues that “[h]ad Cypress not filed its groundless claims, HDMS would not have been forced to spend even a single dollar on this lawsuit, ” and asserts that it incurred $450, 887.63 in fees through September 30, 2017. (Docket Entry No. 94 at 2). HDMS argues that it is entitled to recover at least $341, 384.97 for defending against the DTPA claim and other claims “so interrelated to the DTPA claim that segregation is not required.” (Id.).

         II. Analysis

         The DTPA allows a defendant to recover attorneys' fees for claims determined to be groundless or brought in bad faith. Tex. Bus. & Com. Code § 17.50(c). Once the court determines that a DTPA claim was “groundless in fact or law or brought in bad faith, or brought for the purpose of harassment, the court shall award to the defendant reasonable and necessary attorneys' fees and court costs.” Id. (emphasis added).

         “To recover attorney's fees in a case involving multiple claims, parties must segregate the fees among the various claims or present evidence the claims are so interrelated that their prosecution or defense entails proof or denial of essentially the same facts.” Stromberger v. Law Offices of Windle Turley, No. 05-04-00050-CV, 2005 Tex.App. LEXIS 2321, at *7 (Tex. App.-Dallas [5th Dist.] Mar. 28, 2005) (citing Stewart Title Guaranty Co. v. Sterling, 822 S.W.2d 1, 10-11 (Tex. 1991)). “Once a trial judge concludes that a DTPA claim is groundless or brought in bad faith, the only limitation on the award of attorney's fees and costs to defendants is that such fees be ‘reasonable and necessary.'” Id. (citing Tex. Bus. & Com. Code § 17.50(c)).

         HDMS presents insufficient evidence that the claims are so interrelated that segregation would not be possible. HDMS argues that to defend against Cypress Engine's claims, it had to prove “1) that a valid settlement agreement existed between HDMS and Cypress, 2) that the settlement agreement released the claims asserted by Cypress, and 3) that Cypress breached the agreement first.” (Docket Entry No. 94-1 at 3). HDMS argues that the defense that Cypress was not entitled to rescind its release also advanced HDMS's defense against Cypress Engine's other claims. The same logic, however, could equally support the opposite conclusion: if Cypress Engine had not asserted the DTPA claim, HDMS would have incurred the same fees defending against the other claims.

         HDMS also argues that many of the legal services it performed, including investigation and discovery, did “double service” in its defense against the DTPA claim and other claims. (Docket Entry No. 94-1 at 10). While this is undoubtedly true, it does little to prove that the DTPA and other claims were so interrelated that it would be impossible to segregate the fees.

         In Haynesville Shale Rentals, LLC v. Total Equip. & Serv., No. H-12-0860, 2014 U.S. Dist. LEXIS 48478 (S.D. Tex. Apr. 8, 2014) (Werlein, J.), the defendants requested all the attorneys' fees incurred, asserting it was “impossible to segregate.” Id. at *15-16. The court found that “to award to Defendants all attorneys' fees incurred during the course of the entire litigation, which involved numerous other fact intensive issues wholly unrelated to the groundless DTPA claim, would constitute a distorted application of the specific fee shifting proviso set forth in the DTPA.” Id. at *17-18. As a solution, the court determined the reasonable amount of time required to defend against the DTPA claim. The court found that the defense of the DTPA claim was relatively straightforward and that “from start to finish neither Defendant should reasonably have expended more than 60 hours of time on this simple issue so readily disposed of as a matter of law.” Id. at *18. The court found the hourly rate reasonable and multiplied that amount by the number of hours the court determined should have been spent on the DTPA claim to calculate the fee award. Id. at *19. This approach is consistent with the statutory limit on fee awards to “reasonable and necessary” fees. The fee amount HDMS seeks is unreasonable in relationship to the demands of the entire case. To award HDMS the full amount would, as recognized in Haynesville, distort the fee-shifting provision of the DTPA.

         The Texas Supreme Court in Arthur Andersen v. Perry Equipment Corporation listed eight factors to consider in determining the reasonableness of attorneys' fees under the DTPA:

(i) the time and labor required, the novelty and difficulty of the questions involved, and the skill required to perform the legal service properly;
(ii) the likelihood that the acceptance of the particular employment will preclude other ...

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