How many times have you said, upon receiving your opponent’s demand for attorneys’ fees, “That’s outrageous! Our fees are a fraction of that amount!”? Until recently, Texas law was unsettled as to whether you could defend the fee claim on that basis. But on June 9 of this year, the Supreme Court of Texas resolved the question. Probably.
In In Re National Lloyds Insurance Co., the plaintiffs in a multidistrict-litigation hailstorm insurance case sought recovery of their attorneys’ fees. The insurer did not seek recovery of its own fees (presumably having no basis to do so), and stipulated that it would not defend the plaintiffs’ fee claim by comparison to its own fees; it did, however, designate one of its counsel as an expert on the plaintiffs’ claim. The plaintiffs sought discovery of the insurer’s fee billing statements, apparently for the purpose of comparing the insurer’s fees to the plaintiffs’ fees. The trial court allowed the discovery (in redacted form), and the court of appeals denied mandamus relief.
The Supreme Court held that the evidence was not discoverable. It first concluded that the fee statements, even in redacted form, contained privileged attorney work-product information, because they revealed the strategic emphasis, sequence, and staffing of the insurer’s attorneys’ defensive efforts. The privilege had not been waived by offensive use of the evidence, nor had the fee statements been placed in issue by counsel’s designation as an expert witness on the plaintiffs’ fees.
Had the opinion stopped there, it would have been interesting but not groundbreaking. But the Court went further, holding that one party’s fees are not relevant to another party’s fee claim. The Court reasoned that the second party’s fees are not necessarily reasonable, are the product of different motivations regarding the litigation, reflect a different set of tasks, and in isolation are not probative of the customary fee. (A three-justice dissent argued that these are matters for the factfinder.) Finally, the Court observed that interjecting the reasonableness of a second set of fees into the litigation would increase the cost of discovery and embroil the factfinder in resolving collateral issues.
Confusingly, however, the Court created an exception to non-discoverability where the second party pursues its own fee request (fair enough) or where it defends its adversary’s fee claim by comparison to its own fees. But how could one do the latter in the face of an opinion that says that “[e]vidence of an opposing party’s fees lacks genuine probative value as a comparator for a requesting party’s fees”? Perhaps the Court was just saying that if a resisting party wrongly attempts the comparison, its fees are discoverable, but the Court’s two-part exception leaves open a weak argument that a party resisting a fee claim can use its own fees for comparison purposes if it is willing to permit discovery of those fees.
Finally, this is likely a two-way street. Although the Court’s relevance holding was, strictly speaking, that a resisting party’s fees lack relevance in opposing a fee claim, its logic presumably applies to reliance on the opponent’s fees to bolster one’s own fee claim (“They can’t complain – they spent twice as much!”).
As always in the law, time will tell.
