United States District Court, E.D. Texas, Sherman Division
MEMORANDUM OPINION AND ORDER
L. MAZZANT UNITED STATES DISTRICT JUDGE.
before the Court is Tech Pharmacy Services, LLC's
(“Tech Pharmacy”) Motion for Attorneys' Fees
(Dkt. #386). The Court, having considered the motion and
relevant pleadings, finds that the motion should be granted.
Pharmacy filed suit against Defendants Alixa Rx LLC, Golden
Gate National Senior Care LLC d/b/a Golden LivingCenters,
Fillmore Capital Partners, LLC, Fillmore Strategic Investors,
LLC, and Fillmore Strategic Management, LLC (collectively,
“Defendants”) asserting claims for patent
infringement, breach of contract, fraud, equitable estoppel,
and misappropriation of trade secrets (Dkt. #83). Throughout
the litigation, Tech Pharmacy was represented by Hogan
Lovells and Potter Minton. In September 2017, the parties
proceeded to trial on these issues and the jury found that
Defendants breached the 2009 Confidentiality Agreement
(“2009 Agreement”) and awarded Tech Pharmacy
fifteen million dollars in damages.
Tech Pharmacy prevailed on its breach of contract claim, the
issue of attorneys' fees was submitted to the
jury. The jury found that Tech Pharmacy's
reasonable attorneys' fees and expenses for their
necessary services was two million dollars (Dkt. #378).
Subsequently, on October 31, 2017, Tech Pharmacy submitted
this motion for attorneys' fees arguing that the request
for attorneys' fees needs to be made through a motion
rather than submitted to the jury (Dkt. #386). Defendants
filed a response to the motion on November 14, 2017 (Dkt.
#389). Tech Pharmacy filed its reply on November 21, 2017
(Dkt. #390), and Defendants filed their sur-reply on November
30, 2017 (Dkt. #393).
law controls both the award of and the reasonableness of fees
awarded where state law supplies the rule of decision.”
Mathis v. Exxon Corp., 302 F.3d 448, 461 (5th Cir.
2002). Under Texas law, it is the movant that bears the
burden of proof to show the reasonable fees they are owed.
El Apple I, Ltd. v. Olivas, 370 S.W.3d 757, 760
(Tex. 2012) (citing Hensley v. Eckerhart, 461 U.S.
424, 437 (1983)) (applying substantive federal law because it
is a federal cause of action but also discussing Texas's
adoption of the lodestar method in other cases). The movant
may calculate their reasonable and necessary attorneys'
fees using either the lodestar method or the market value
method. Id.; AMX Enters. v. Master Realty
Corp., 283 S.W.3d 506, 515 (Tex. App.- Fort Worth 2009,
no pet.). There are certain causes of action, which require
the use of the lodestar calculation. City of Laredo v.
Montano, 414 S.W.3d 731, 736 (Tex. 2013). However, even
if it is not required, if the movant produces evidence of the
lodestar calculation, courts typically apply the lodestar
calculation. City of Laredo v. Montano, 414 S.W.3d
731, 736 (Tex. 2013).
the lodestar analysis, the computation of a reasonable
attorneys' fee award is a two-step process. El
Apple, 370 S.W.3d at 760 (citing Dillard Dep't
Stores, Inc. v. Gonzales, 72 S.W.3d 398, 412 (Tex.
App.-El Paso 2002, pet. denied)). First, courts determine the
reasonable hours spent by counsel and a reasonable hourly
rate, and then multiplies the two together to get the base
fee or lodestar. Id. (citing Gonzales, 72
S.W.3d at 412). Second, courts adjust the lodestar up or down
based on relevant factors, found in Johnson v. Georgia
Highway Express, Inc., 488 F.2d 714 (5th Cir.
Johnson factors are:
(1) time and labor required; (2) novelty and difficulty of
issues; (3) skill required; (4) loss of other employment in
taking the case; (5) customary fee; (6) whether the fee is
fixed or contingent; (7) time limitations imposed by client
or circumstances; (8) amount involved and results obtained;
(9) counsel's experience, reputation, and ability; (10)
case undesirability; (11) nature and length of relationship
with the client; and (12) awards in similar cases.
Gonzales, 72 S.W.3d at 412 (citing Johnson,
488 F.2d at 717-19). “If some of these factors are
accounted for in the lodestar amount, they should not be
considered when making adjustments.” Id.
(citing Guity v. C.C.I. Enter., Co., 54 S.W.3d 526,
529 (Tex. App.-Houston [1st Dist.] 2001, no pet.)). The
lodestar is presumptively reasonable, and should be modified
only in exceptional cases. El Apple, 370 S.W.3d at
Pharmacy argues that a request for attorneys' fees in
this case needs to be made by a Rule 54 motion. Accordingly,
Tech Pharmacy asks the Court to award $7, 304,
454.15 in attorneys' fees, although their
total lodestar calculation comes out to $9, 137, 151.30.
Defendants argue that the attorneys' fees were properly
in front of the jury, but even if not, Tech Pharmacy is not
entitled to more than the $2, 000, 000.00 that the jury
awarded. The Court will address whether Tech Pharmacy is
entitled to attorneys' fees, if attorneys' fees were
appropriately before the jury or if it is appropriate for the
Court, and then will address the amount of fees sought.
Entitlement to Attorneys' Fees
Pharmacy argues that the terms of the contract and
additionally the Texas Civil Practice and Remedies Code
Section 38.001 entitle it to attorneys' fees. Defendants
contend that Tech Pharmacy is not entitled to attorneys'
fees under Texas Civil Practice and Remedies Code Section
38.001 because Tech Pharmacy did not plead it and did not
present the claim to Defendants. However, Defendants admit
that Tech Pharmacy is entitled to attorneys' fees under
the terms of the contract (Dkt. # 389 at p. 18
(“Finally, although Tech Pharmacy may recover
attorneys' fees under the 2009 [Agreement], Tech
Pharmacy has failed to satisfy multiple procedural
requirements to recover attorneys' fees under Section
38.001 of the Texas Civil Practice and Remedies Code.”)
Texas law, attorney's fees are recoverable as a cost of
collection only if authorized by statute or contract.”
Richardson v. Wells Fargo Bank, N.A., 740 F.3d 1035,
1037 (5th Cir. 2014) (citing In re Nalle Plastics Family
Ltd. P'ship, 406 S.W.3d 168, 172 (Tex. 2013)). Here,
both a statute and the contract entitle Tech Pharmacy to
attorneys' fees; however, Tech Pharmacy does not need to
use both. The terms of the 2009 Agreement, on their own, are
enough to recover attorneys' fees. See Mundy v.
Knutson Const. Co., 294 S.W.2d 371, 373 (Tex. 1956)
(“Since the wording of our bond provides for payment of
‘all costs and expenses' incurred in the
prosecution of a suit or suits on a breach of the
construction contract, or on that very bond, we feel
attorneys' fees so incurred was a proper measure of
recovery.”). As such, because Tech Pharmacy is entitled
to attorneys' fees under the terms of the contract, the
Court need not address whether Tech Pharmacy waived its
ability to recover attorneys' fees under Texas Civil
Practice and Remedies Code Section 38.001.
Application of Rule 54
Pharmacy argues that under Federal Rule of Civil Procedure
54, its claim for attorneys' fees under the terms of the
2009 Agreement must be made by a motion. Defendants claim
that the terms of the contract contemplate a jury deciding
attorneys' fees. Under Federal Rule of Civil Procedure
54(d), “[a] claim for attorney's fees and related
nontaxable expenses must be made by motion unless the
substantive law requires those fees to be proved at trial as
an element of damages.” Accordingly, it is crucial to
determine whether attorneys' fees are an element of
damages under the 2009 Agreement.
Court will first look to Tech Pharmacy's claim for
damages according to the terms of the contract. As an example
of types of claims that are typically proved at trial as an
element of damages, the Advisory Committee Notes lists fees
that are “sought under the terms of a contract.”
Fed.R.Civ.P. 54(d), Advisory Committee Notes. However, the
Advisory Committee Notes do not state that when a party is
seeking damages under the terms of a contract, the party must
always prove the attorneys' fees at trial as an element
of damages. Id. As such, when a party is
seeking attorneys' fees under a contract, it is
“[t]he language of the contract and the nature of the
claim [that] are the dispositive factors concerning whether
the fees are an element of damages or collateral litigation
costs.” Richardson, 740 F.3d at 1039.
Court looks to the language of the contract to determine
whether the attorneys' fees in this case are an element
of damages or if they are collateral litigation costs.
See Id. The contract states:
If any action at law or in equity, including an action for
declaratory relief, is brought to enforce or interpret the
provisions of this Agreement, the prevailing party shall be
entitled to recover costs of court and reasonable
attorneys' fees from the other party, which fees shall be
in addition to any other relief that may be awarded, and
which fees may be set by the court in the trial of such
action or may be enforced in a separate action for that
(Dkt. #386 at p. 3; Dkt. #389 at p. 3 (citing PX115 at §
10)). Tech Pharmacy argues that the language of the 2009
Agreement makes clear that the parties contemplated the Court
would determine attorneys' fees and were collateral to
damages for breach of the contract. On the other hand,
Defendants contend that the language shows the parties
considered the possibility that the jury would determine
attorneys' fees because of the permissive language in the
contractual language is important to determine whether the
claim is an element of damages, not whether the parties
contemplated the possibility of a jury determining
fees. See Fed.R.Civ.P. 54(d);
Richardson, 740 F.3d at 1039. In the 2009 Agreement,
the parties identified that attorneys' fees “shall
be in addition to any other relief that may be awarded,
” and additionally contemplated that the award may be
sought “in a separate action.” (Dkt. #386 at p.
3; Dkt. #389 at p. 3 (citing PX115 at § 10)). This
language indicates that the attorneys' fees under this
contract are “expressly distinguished from the damages
that [Tech Pharmacy] incur[red]” from enforcing or
interpreting the provisions of the contract.
Richardson, 740 F.3d at 1038. As such, “[t]he
fees are not an ‘independent ground of recovery.'
[Instead, t]hey are costs of collection or costs incurred
to” enforce or interpret the contract. Id.
Because the attorneys' fees are not compensation for the
underlying harm, but are fees awarded for counsels'
services according to the terms of the 2009 Agreement, the
attorneys' fees are not an element of damages. Therefore,
the language of the 2009 Agreement supports Tech
Pharmacy's contention that the request for attorneys'
fees must be made by motion according to the terms of Rule
the nature of the claim supports the proposition that
attorneys' fees in this case are collateral litigation
costs as opposed to an element of damages. Tech Pharmacy was
successful on its claim for breach of contract and the
damages it was awarded were based on the harm proximately
caused by Defendants' breach. Tech Pharmacy's
attorneys' fees are not part of the harm it incurred.
See Richardson, 740 F.3d at 1037 (quoting In re
Nalle, 406 S.W.3d at 172). Attorneys' fees, in this
case, are a separate right owed based on the terms of the
contract. Because the attorneys' fees are not an element
of the claim, based on the language of the 2009 Agreement and
the nature of the claim, the request for attorneys' fees
must be made by a motion pursuant to Rule 54, and is an issue
that is proper for the Court to decide.
Amount of Attorneys' Fees
Pharmacy claims that “the total fees for professional
services that Tech Pharmacy incurred is $14, 608,
908.29.” (Dkt. #386 at p. 11 (citing Dkt. #387, Exhibit
1 at p. 34)). However, Tech Pharmacy “requests an award
of [fifty percent] of this amount, or a total of $7, 304,
454.15. . . . This discount reflects Tech Pharmacy's
reasonable segregation of its state-law claims from its
federal patent infringement cause of action.” (Dkt.
#386 at p. 11). Defendants claim the amount of attorneys'
fees should not exceed $2, 000.000.00. The Court will analyze
Tech Pharmacy's request using the lodestar analysis
because this is the calculation Tech Pharmacy chose to prove
its fees. See City of Laredo, 414 S.W.3d at 736.
Hours Reasonably Expended.
Pharmacy asserts that “[t]he total attorney hours
expended on this case over a period of almost 2 years is 29,
103.7.” (Dkt. #386 at pp. 11-12). Because Tech Pharmacy
only prevailed on its breach of contract claim, Tech Pharmacy
represents that this total should be reduced by half, leaving
“14, 551.85 of these hours . . . [that] are
compensable.” (Dkt. #386 at p. 12). Tech Pharmacy
presents that the hours expended are divided as follows: