Barker v. Hurst, No. 01-19-00529-CV, 2021 WL 2428981 (Tex. App.—Houston [1st Dist.] June 15, 2021, no pet.).

Panel consisted of Chief Justice Radack and Justices Goodman and Farris. Majority Opinion by Chief Justice Radack. Dissenting Opinion by Justice Goodman.

This fascinating opinion was rendered in the second appeal arising from a case dealing with the Texas Citizens’ Participation Act (“TCPA”). It concerns the award of attorney’s fees under the lodestar method. An earlier version of the TCPA—which mandated attorney’s fees, court costs, and expenses—applied in this case.  The issues explored in the opinion are important in the wake of the seminal Texas Supreme Court decision of Rohrmoos Venture v. UTSW DVA Healthcare, LLP, 578 S.W.3d 469 (Tex. 2019).

The first appeal dealt with the propriety of the TCPA motion to dismiss. Two individuals brought defamation claims against an anonymous online blog and its author. The defendants unsuccessfully moved to dismiss under the TCPA. On appeal, the First Court ruled that the motion should have been granted and remanded.

On remand, the trial court granted the motion to dismiss. The defendants then sought attorney’s fees under the lodestar method. They presented evidence that the fees incurred in defending against both plaintiffs’ claims that could not be segregated were $50,071, and the fees incurred in defending against each plaintiff’s claims that could be segregated were $10,832.50 and $9,430.43, respectively.

Despite this evidence, the trial court awarded “attorney’s fees, court costs, and expenses” in the amounts of $9,000 and $7,000 against each plaintiff, respectively.

On appeal, the majority opinion analyzed the award under the two-step lodestar method.

First, the majority examined the evidence in support of the lodestar calculation and concluded that it was sufficient to justify the presumption that the calculation reflected reasonable attorney’s fees that could be shifted.

Second, the majority examined any evidence that justified the downward adjustment. The majority concluded that the plaintiffs’ affidavits submitted against the fee request were conclusory and thus constituted no evidence to overcome the presumptive reasonableness of the base lodestar calculation.

The majority acknowledged that even if a fee claimant’s testimony is uncontroverted, a trial court is not obligated to award the requested amount. Here, the plaintiffs had only pled for damages of less than $100,000. But the defendants had requested $73,605.12 in fees. Thus, the trial court could have reasonably applied some reduction.

But the trial court’s reduction was severe and awarded the defendants only 17% of the requested fees. The majority concluded the trial court abused its discretion.

The majority also held that the TCPA calls for the award of court costs and expenses separately.

Of note to appellate practitioners: the trial court rejected the challenge to the conditional appellate attorney’s fee award based on the invited error doctrine. The defendants had requested conditional appellate attorney’s fees only if the plaintiffs appealed. In reality, the defendants themselves appealed after receiving an unsatisfactory fee award. But they had to live with the consequences of their conditional request.

Justice Goodman’s dissenting opinion highlights some important issues.

A trial court need not award the full amount of fees requested even if the evidence is undisputed. In other words, while the lodestar calculation is some evidence of reasonableness, it is not conclusive evidence of reasonableness. According to Justice Goodman, there were several reasons why the trial court could have found a downward adjustment was justified.

Among other things, the plaintiffs had sought less than $100,000 in damages, but the defendants were seeking nearly the same amount as attorney’s fees to defend a simple suit. Moreover, the trial court could have concluded this TCPA case was not as complex as other TCPA cases. Importantly, the defendants’ expert had opined that defense counsel were skilled and had expertise in TCPA cases. Thus, the trial court could have expected skilled experts to “accomplish more in less time.”

Thus, the dissent provides an insightful roadmap to litigants arguing against an attorney’s fees award.

Sunergon Oil, Gas & Mining Group, Inc. v. Arnulfo Montes Cuen, No. 01-19-00998-CV, 2021 WL 3775589 (Tex. App.—Houston [1st Dist.] Aug. 26, 2021, no pet. h.) (mem. op.).

Panel consisted of Justices Kelly, Guerra, and Farris. Memorandum Opinion by Justice Farris.

This opinion deals with the common situation in which a non-signatory seeks to enforce an arbitration agreement.

Sunergon Oil and Arnulfo Montes Cuen met several times to discuss a business opportunity related to water treatment units and equipment. Sunergon ultimately loaned Cuen $3 million, but Cuen failed to deliver the promised goods. As a result, Surgeon sued him for fraud.

Cuen filed a motion to dismiss in favor of arbitration. He pointed to an arbitration agreement found in a contract signed by Sunergon and another company, which created a joint venture related to the water treatment business. The contract referenced Surgeon’s $3 million payment as an initial investment.

Cuen had signed that contract as a legal representative of the other company, but not in his individual capacity. Thus, he was not a party to the contract.

In order to compel arbitration, a party must show that (1) a valid and enforceable arbitration agreement exists and (2) the claims in dispute fall within the scope of the agreement.

The First Court acknowledged that non-signatories may enforce arbitration agreements under various rules of law and equity, including the law of agency. But the court held that Cuen could not establish agency.

The only evidence supporting agency was the contract itself. But the contract was not evidence of either actual or apparent authority because it was not evidence of conduct by the principal, i.e., the other company.

Moreover, there was contrary evidence in the record. A newspaper article quoted Cuen as saying that he was not associated with the other company.

Thus, the First Court concluded that the strong presumption in favor of arbitration never arose because Cuen was unable to establish a valid arbitration agreement between himself and Sunergon.

As a result, the First Court held that the trial court abused its discretion in dismissing the lawsuit in favor of arbitration.