Opinion
Civil Action No. 3:00-CV-0800-BH
June 19, 2003
ORDER
Before the Court is Century Products Company's Emergency Motion for Reconsideration of Order Regarding Attorneys' Fees Application, filed May 8, 2003, Cosco, Inc.'s Response to Century Products Company's Emergency Motion for Reconsideration of Order Regarding Attorneys' Fees Application, filed May 29, 2003, and Century Products Comapany's Reply to Cosco, Inc.'s Response, filed June 13, 2003. Having reviewed the evidence of the parties in connection with the pleadings, the Court is of the opinion that Century Products Company's Emergency Motion for Reconsideration of Order Regarding Attorneys' Fees Application should be GRANTED in part.
I. BACKGROUND
Century filed suit against Cosco, seeking a declaration that Cosco was obligated to indemnify Century for any and all liabilities arising from the a wrongful death claim (the "Todtenbier Claim"), pursuant to the terms of a contract. (Pet. for Decl. J. at 5.) The District Court granted partial summary judgment to Century and awarded it damages in the amount of the settlement of the Todtenbier claim. (Partial J. at 1.) On January 31, 2003, this Court entered final judgment for Century Product's Company ("Century"), and granted its request for its reasonable and necessary attorney's fees incurred in defending the Todtenbier claim. However, the Court ordered Century to resubmit its fee application, show the application of the "lodestar" method and an analysis of the Johnson factors, and submit sufficient supporting documentation. On May 8, 2003, after being granted multiple extensions to resubmit its application, Century filed the instant motion for reconsideration. The bases for the motion for reconsideration are: (1) that the Court erroneously applied federal standards to Century's fee application; and (2) that the Court erroneously applied a statutory fee calculation method to a case involving a contractual fee shifting provision. (M. at 1-2.)
Hensley v. Eckerhart, 461 U.S. 424, 433 (1983).
Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir. 1974).
II. ANALYSIS
A. Standard
Century asserts that the Court erred in applying the lodestar method and the Johnson factors to its fee application because Texas law governs the fee determination in a diversity case. (M., at 2-4.)
"State 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). Accordingly, because Texas law determined the interpretation of the contract at issue in this suit and was used by this Court in awarding Century attorney's fees incurred in defense of the Todtenbier claim, Century is correct in its assertion that Texas law should govern the Court's determination of whether Century's fees are reasonable.
In determining the amount of reasonable attorney's fees to be awarded, Texas courts consider eight factors:
(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill required to perform the legal service properly;
(2) the likelihood . . . that the acceptance of the particular employment will preclude other employment by the lawyer;
(3) the fee customarily charged in the locality for similar legal services;
(4) the amount involved and the results obtained;
(5) the time limitations imposed by the client or by the circumstances;
(6) the nature and length of the professional relationship with the client;
(7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and
(8) whether the fee is fixed or contingent on results obtained or uncertainty of collection before the legal services have been rendered.Arthur Anderson Co. v. Perry Equipment Corp., 945 S.W.2d 812, 818 (Tex. 1997). The burden is on the party seeking attorney's fees to establish an entitlement to the fees. See Stewart Title Guaranty Co. v. Sterling, 822 S.W.2d 1, 10 (Tex. 1991).
Cosco correctly states that the factors considered by Texas courts in determining the reasonableness of attorney's fees are virtually identical to the factors used by federal courts. See Northwinds Abatement, Inc. v. Employers Insurance of Wausau, 258 F.3d 345, 354 n. 9 (5th Cir. 2001); Vela v. City of Houston, 276 F.3d 659, 680 n. 24 (5th Cir. 2001); Kona Technology Corp. v. Southern Pacific Transp. Co., 225 F.3d 595, 614 n. 7 (5th Cir. 2000); Mid-Continent Casualty Co. v. Chevron Pipe Line Co., 205 F.3d 222, 232 (5th Cir. 2000); Robinson v. State Farm Fire Casualty Co., 13 F.3d 160, 164 (5th Cir. 1994).
B. Contractual fee-shifting provision
Century argues that it is entitled to recover all of the billed litigation expenses related to its defense of the Totdenbier claim because the parties' contract requires Cosco to indemnify Century for all of its fees and expenses and because the Court's discretion to reduce contractual fees is limited. (M. at 4-5.) Cosco states that Texas law makes no distinction as to the analysis to be applied to contractual and statutory fee-shifting provisions and that the Court has discretion to determine the reasonableness of Century's fee application. (Resp. at 2-3.)
Pursuant to the parties' contract, Century is entitled to recover from Cosco the costs of its defense of the Todtenbier claim. (Asset Purchase Agreement § 9.4; App. at 35.) As noted by Century, the contract did not limit Century to hiring only bargain-basement counsel. However, the contract also did not contain a blank check requiring Cosco to pay any and all fees submitted without the ability to question whether or not they were reasonable.
Century cites a Tenth Circuit case, which quotes a Fifth Circuit case, in support of its proposition that "[a]lthough the Court may consider the Rule 1.04 Factors to determine whether the [sic] Century's fees are inequitable or unreasonable, it may not use them to independently calculate a reasonable fee." ( Reply at 3.) As the Court reads the cases cited by Century, when a contractual provision provides for attorney's fees, the court's discretion to deny such fees is limited. However, the Court has already granted the fees, not denied them. It is precisely because the Court wishes to apply the appropriate factors to determine whether Century's fees are inequitable or unreasonable, and because the Court has absolutely no desire to independently calculate a reasonable fee for the defense of the Todtenbier claim, that a proper fee application has been requested. See Heritage Resources, Inc. v. Hill, — F.3d —, 2003 WL 304827 (Tex.App.-El Paso, 2003) (noting that the trial court must have sufficient evidence upon which to exercise its discretion in awarding fees); Geodyne Energy Income Production Partnership I-E v. Newton Corp., 97 S.W.3d 779 (Tex.App.-Dallas, 2003) (stating that it is incumbent upon the party seeking fees to prove its fees are reasonable and, when it has pursued a cause of action for which attorney's fees are not permitted by statute or contract, that party has a duty to segregate work performed on that cause of action from that for which attorney's fees can be recovered). The simple fact is that the fee application submitted by Century is insufficient for the Court to determine the reasonableness of the fee.
Contrary to Century's assertion, the fact that the fees were recoverable under a contractual fee-shifting provision does not mean that the Court must rubber-stamp Century's fee application approved without requiring Century to show that the fees incurred were reasonable. In fact, it would be an abuse of discretion for the Court to award fees without reference to any guiding rules and principles. See Sieber Calicutt, Inc. v. La Gloria Oil and Gas Co., 66 S.W.3d 340, 351 (Tex.App.-Tyler, 2001) (affirming the trial court's denial of attorney's fees pursuant to a contractual fee-shifting provision when the attorney failed to provide evidence of the time and labor required, produce billing records, describe the fees customarily charged in the area, testify as to the nature and length of his relationship with the client, or describe whether he was precluded from other employment by taking the case). See also General Electric Credit Corp. v. Oil Screw Triton, 712 F.2d 991 (5th Cir. 1983) (noting that while a court possesses limited discretion to deny fees provided by contract, it may reduce the amount awarded if it finds that the requested amount is inequitable and unreasonable); Cable Marine, Inc. v. M/V Trust Me II, 632 F.2d 1344 (5th Cir. 1980) (holding that it is within a court's equitable discretion to decline to award attorney's fees authorized by contract when such an award would be inequitable and unreasonable); O'Kehie v. Harris Leasing Co., 80 S.W.3d 316 (Tex.App.-Texarkana, 2002) (noting favorably that in proving the reasonableness of the fees awarded under a contractual fee-shifting provision, the attorney presented testimony in compliance with the Arthur Anderson factors).
The Court is not seeking to arbitrarily determine a reasonable fee. However, the Court does have a responsibility to ensure that the fees it awards are reasonable and equitable. Moreover, the initial request for resubmission was in part due to the fact that the initial fee application did not segregate the fees for the Todtenbier claim. Accordingly, regardless of whether the fees are viewed as awarded under the contractual provision or pursuant to state law, it is within the Court's discretion to review Century's fee application to determine whether or not the requested amount is inequitable and unreasonable.
C. Resubmitting the Fee Application
Century is required to resubmit to the Court a fee application, showing an analysis of the Arthur Anderson factors, and containing sufficient supporting documentation. The Court concludes that requiring Century to apply the Arthur Anderson factors, rather than the Johnson factors should not cause any delay in resubmitting the fee application because the factors applied by Texas courts are comparable to the Johnson factors and Century has already been given more than ample time to assemble the requested documentation. See Northwinds Abatement, Inc. v. Employers Insurance of Wausau, 258 F.3d 345, 354 n. 9 (5th Cir. 2001); Vela v. City of Houston, 276 F.3d 659, 680 n. 24 (5th Cir. 2001); Kona Technology Corp. v. Southern Pacific Transp. Co., 225 F.3d 595, 614 n. 7 (5th Cir. 2000); Mid-Continent Casualty Co. v. Chevron Pipe Line Co., 205 F.3d 222, 232 (5th Cir. 2000); Robinson v. State Farm Fire Casualty Co., 13 F.3d 160, 164 (5th Cir. 1994). For the same reasons that the Court found Century's initial fee application insufficient to permit the Court to assess reasonableness according to the Johnson factors, the application is insufficient to permit the Court to assess reasonableness according to the Arthur Anderson factors.
Century was first ordered to resubmit its fee application on January 31, 2003. In the Court's order, Century was given very detailed instructions as to the information needed by the Court in order to determine whether the fees requested were reasonable. To avoid confusion, the same instructions are given with respect to the Arthur Anderson factors:
Factor 1. The time and labor required . . . and the skill required to perform the legal service properly. Century did not summarize the total hours billed by either law firm in defense of the Todtenbier claim, nor the total hours billed by each employee. Century's time entries reflecting only "RESEARCH," "RESEARCH REGARDING," "Telephone call with Ray Guy re," "Legal research re," and "Conferences re"(Pl. App. at 50, 182-183, 211, 246) are wholly insufficient, because it is not apparent that these entries even pertain to the Todtenbier claim. In order to show that the requested fee amount is reasonable under this factor, Century must summarize the total hours billed by either law firm and the total hours billed by each employee, with a breakdown to show the rate at which each hour was billed, including segregation of hours billed for legal work from hours billed for clerical work, travel, and other work. The relevant time entries should be unredacted and include an adequate description of the services performed, the client and/or case, hours expended, and dates on which the work was done. Unproductive, excessive, or redundant hours should be removed. There should be separate totals for each category of recoverable costs with supporting itemized records.
Century's time entries reflecting only "RESEARCH," "RESEARCH REGARDING," "Telephone call with Ray Guy re," "Legal research re," and "Conferences re" (Pl App. at 50, 182-183, 211, 246) are insufficient.
Factor 3. The fee customarily charged in the locality for similar legal services. To show that the requested fee amount is reasonable under this factor, Century should provide evidence of the reasonableness of each billed employee's rates. Factor 7. The experience, reputation, and ability of the lawyer or lawyers performing the services. In order to show that the requested fee amount is reasonable under this factor, Century must provide background information, such as years of legal experience, area of expertise, awards and commendations, for each employee.
As noted above, the Court has no desire to independently calculate a reasonable fee for the defense of the Todtenbier. Therefor, it would behoove Century to provide the Court with sufficient documentation to permit a determination of the reasonableness and equity of its fees.
III. CONCLUSION
For the reasons stated above, it is hereby
ORDERED that Century shall resubmit its fee application in accordance with the above instructions by July 1, 2003 .