Firm News – March 2015
Bailey Brauer client JBS USA LLC and Swift Pork Co. won the dismissal of a nuisance lawsuit filed by multiple plaintiffs over the JBS Louisville Pork Plant’s use of a parking lot near the processing plant in the Butchertown area of Louisville, Kentucky.
Attorney Clayton Bailey was a guest speaker at the 2015 Louisiana Poultry Seminar held in Shreveport, Louisiana.
Attorney Alex Brauer was named to the 2015 Texas Rising Stars list, marking the sixth consecutive year that attorney Brauer was selected by the publisher of Rising Stars.
Attorney Ben Stewart was featured in articles published by the Dallas Morning News and The Texas Lawbook addressing shadow banking and a recent decline in Texas business bankruptcy filings.
Texas law may be changing regarding the ability to recover attorney’s fees in breach of contract cases.
In the past, successful plaintiffs in breach of contract cases were able to recover their reasonable attorney’s fees from defendants under Section 38.001 of the Civil Practice and Remedies Code. Recent decisions from the Houston Court of Appeals and a Dallas federal district court may limit this ability if the defendant is a partnership or limited liability company.
Texas law follows the “American Rule” when it comes to recovery of attorney’s fees in a litigation matter. The American Rule provides that each party must pay its own attorney’s fees.
You may have heard that despite the American Rule, parties in Texas can recover their attorney’s fees if they are the prevailing plaintiff in a breach of contract case. This ability generally arises in one of two ways: (1) the contract at issue contains a clause providing that the prevailing party in a dispute can recover its attorney’s fees; or (2) the plaintiff relies on Texas Civil Practice and Remedies Code Section 38.001, which provides “a person may recover reasonable attorney’s fees from an individual or corporation, in addition to the amount of a valid claim and costs, if the claim is for . . . an oral or written contract.”
If the ability to recover attorney’s fees is set forth in the contract, the terms of that provision will generally govern how and to what extent the prevailing party can recover its fees.
But what if your contract does not contain such a provision or your dispute involves an oral contract? You will then need to rely on Section 38.001 to recover your fees.
In the past, the analysis under Section 38.001 has been relatively straightforward. If the plaintiff prevails, it is entitled to recover its reasonable attorney’s fees from the company or individual who breached the contract (although the parties will generally quarrel regarding the “reasonableness” of the plaintiff’s attorney’s fees).
Recently, a plaintiff’s ability to recover its attorney’s fees from certain types of companies under Section 38.001 has come into question. Prior to the decisions discussed below, Texas courts have interpreted the phrase “recover reasonable attorney’s fees from an individual or corporation” to mean “from an individual or company,” regardless of the company’s corporate structure.
However, in its March 6, 2015 decision in Hoffman v. L & M Arts, the United States District Court for the Northern District of Texas (Dallas) held that the term “corporation” in Section 38.001 does not include limited liability companies (LLCs). Consequently, even though the plaintiff prevailed on her breach of contract claim, she could not recover her attorney’s fees because the defendant was a LLC.
The Hoffman court based its reasoning, in part, on the Houston Court of Appeals’ 2014 decision in Fleming & Assocs., L.L.P. v. Barton, which held that the term “corporation” in Section 38.001 does not apply to partnerships.
The Hoffman and Fleming decisions are troubling, particularly given the popularity of the LLC structure in Texas. Only time will tell whether the Texas Supreme Court will settle this issue. In the meantime, be aware that if you assert a breach of contract claim against a partnership or LLC in Texas, you may no longer be able to recover your attorney’s fees unless the contract states otherwise.