Recently, the Supreme Court of Texas clarified the issue of whether the lodestar method applies in cases where a request for attorney’s fees is not based on a statute that specifically requires it.
The lodestar method or proving attorney’s fees is a “short hand version” of the longstanding Arthur Andersen factors that relate to the reasonableness of an award of attorney’s fees. The lodestar method “was never intended to be a separate test or method.”1 When parties support a lodestar calculation with sufficient evidence, there is a presumption that the calculation reflects the reasonable and necessary attorney’s fees that a party can shift to a non-prevailing party.2
Specifically, the Venture Court held that sufficient evidence to support a base lodestar calculation includes, at a minimum, evidence of (1) particular services performed, (2) who performed these services, (3) approximately when the services were performed, (4) the reasonable amount of time required to perform the services, and (5) the reasonable hourly rate for each person performing such services.3
Pre-Requisites for a Fee-Shifting Award
To recover attorney’s fees under a contractual provision awarding fees to the prevailing party, the prevailing party must provide that: (1) recovery of attorney’s fees is legally authorized, and (2) the requested attorney’s fees are reasonable and necessary for the legal representation, so that such an award will compensate the prevailing party generally for its losses resulting from the litigation process.4 Attorney’s fees are meant to compensate the prevailing party for its reasonable losses resulting from the litigation process.5
The Arthur Andersen Factors Relating to Reasonableness and Necessity
To recover attorney’s fees under a contractual provision awarding reasonable and necessary attorney’s fees to the prevailing party, the party seeking attorney’s fees bears the burden of proof as to whether the attorney’s fees are both reasonable and necessary.6 Questions regarding reasonableness and necessity are questions of fact that must be determined by the factfinder and supported by legally sufficient evidence.7 Texas courts developed the Arthur Andersen factors to guide factfinders in determining whether a party has presented evidence that the requested attorney’s fees are reasonable and necessary.
The Arthur Andersen factors are:
(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.8
The Lodestar Presumption
The Supreme Court of Texas outlined additional guidelines, beyond Arthur Andersen for determining the reasonableness of an attorney’s fee award.9 These additional guidelines are encompassed in the lodestar calculation, which is a two-step process for determining more precisely the amount of attorney’s fees that are reasonable and necessary. Attorney’s fees calculated using the lodestar calculation are presumptively reasonable.10
The first step in the lodestar calculation is to calculate the number of hours reasonably expended on litigation multiplied by a reasonable rate. The simple equation is legally sufficient only if the parties prove up the “basic facts” underlying the base lodestar—the hours reasonably expended on the litigation and reasonableness of the fee. These facts are: (1) the nature of the work, (2) who performed the services and their rate, (3) approximately when the services were performed, and (4) the number of hours worked.11
The second step is to either adjust the base product up or down based on any additional relevant factors the parties present to the court.12 The base loadstar calculation creates a presumption that a request for attorney’s fees is reasonable. But, the presumption may be rebutted in “those rare circumstances in which the lodestar does not adequately take into account a factor that may be properly be considered in determining a reasonable fee.”13 These can be situations in which considerations not accounted for in the first step show that the award is unreasonably low, depriving fair compensation to a party’s attorney or when the fee award creates a windfall for the prevailing party or its attorney.14
Abrogation of Precedent Allowing General Testimony Relating to Reasonableness
The high court specifically abrogated opinions from the Texas Courts of Appeals that have held that testimony about an attorney’s experience, the total amount of fees, and the reasonableness of the fees, is legally sufficient evidence of the reasonableness and necessity of an award of attorney’s fees.15 To the contrary, attorneys may not base time estimates on generalities.16 Specifically, it is insufficient for attorneys to describe their tasks in a particular case, the number of depositions taken, the number of documents reviewed, and the number of motions written.17 Instead, to present legally sufficient evidence of reasonable hours expended on litigation, the record must show each task and the amount of time each task required. To calculate the reasonable fee for those hours, each task must specify the time required and the rate charged by the person performing the work.18
Takeaway: Bill Contemporaneously and Prove Up the Bill
The high court specified that contemporaneous billing records are not required to prove that the requested fees are reasonable and necessary.19 However, they are valuable because in order to testify to the details needed to support the lodestar calculation, “in all but the simplest cases, the attorney would probably have to refer to some type of record or documentation to provide this information.”20 Accordingly, the court recommended contemporaneous billing records or other documentation recorded reasonably close to the time when the work is performed.
The primary takeaway from Venture with respect to proving the reasonableness of attorney’s
fees is simple:
Record your time contemporaneously and present detailed proof of the service performed,
the attorney performing the services, when the services were performed, the reasonable
amount of time required to perform the services, and the reasonable hourly rate for each
person performing the service.
1 See Rohrmoos Venture et al. v. UTSW DVA Healthcare, LLP, No. 16-006, ---S.W.3d---,--- 2019 WL 1873428 at *13 (Tex. Apr. 26, 2019).
2 Id. at *20.
4 Id. at *11. (A typical formulation is that the prevailing party is entitled to reasonable and necessary attorney’s fees. Some clauses require fees to also actually be incurred. When contracts provide for attorney’s fees, courts do not imply terms, but adhere to the parties’ intent as expressed in the language of the contract. See Venture, No. 16-006, 2019 WL 1873428, at *13.)
6 Id. at *12.
7 Id. at *12.
8 Arthur Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812, 818 (Tex. 1997).
9 El Apple I, Ltd. V. Olivas, 370 S.W.3d 757, 760 (Tex. 2012).
10 See Venture, No. 16-006, 2019 WL 1873428, at *20.
11 Id. at *17.
12 Id. at *16–17.
13 Id. at *22.
15 See id. at *19.
16 See id.
17 See id. at *20.
18 See id.
19 See id. at *23.