Structural Metals, Inc. v. S&C Electric Company ( 2014 )

Case: 13-50332 Document: 00512794420 Page: 1 Date Filed: 10/06/2014
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 13-50332 United States Court of Appeals
Fifth Circuit
FILED
Con. w/ 13-50666 October 6, 2014
Lyle W. Cayce
STRUCTURAL METALS, INCORPORATED, Clerk
Plaintiff - Appellee
v.
S&C ELECTRIC COMPANY,
Defendant - Appellant
Appeals from the United States District Court
for the Western District of Texas
USDC No. 5:09-CV-984
Before KING, GRAVES, and HIGGINSON, Circuit Judges.
PER CURIAM:*
Appellant S&C Electric Company appeals the district court’s denial of
its motion for remittitur as well as the district court’s award of attorney’s fees
to Appellee Structural Metals, Inc. For the following reasons, we AFFIRM the
judgment of the district court.
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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I. Factual and Procedural Background
Plaintiff-Appellee Structural Metals, Inc. operates a steel recycling plant
in Seguin, Texas. Steel recycling is, as one might imagine, a process that
demands a significant amount of power. Yet the amount of power required is
not constant. Smaller pieces of scrap require less power, while larger pieces
require more. That fluctuation in the demand for power can cause dips in the
overall flow of electricity throughout the plant. When Structural Metals
acquired a new caster, 1 which was unable to tolerate variances in voltage of
more than 5 per cent, it began looking for a solution that would make the flow
of electricity throughout the plant more reliable.
To that end, Structural Metals began negotiating with Defendant-
Appellant S&C Electric Company. Between 2003 and 2005, Structural Metals
and S&C Electric negotiated various proposals for the purchase of Adaptive
VAR Compensators (“AVC”), which were meant to ensure that the amount of
power flowing throughout the steel recycling plant remained consistent. Some
of the proposals involved the purchase of the AVCs and all of the additional
facilities, products, and installation required to make them work. Other
proposals were simply for the purchase of the AVCs themselves. Structural
Metals ended up accepting the proposal for the AVC units only, electing to
purchase the additional products elsewhere and to have another company
install the AVCs and build the necessary facility. The purchase price for the
AVCs was $306,500.
Nevertheless, Structural Metals has maintained throughout this action
that its contract was for an “AVC System,” by which it presumably meant that
S&C Electric had sold it an overall design to regulate its power flow, not just
the AVC units that were the centerpiece of that design. Structural Metals’s
1 A caster transforms the molten steel into solid steel bars for storage and transport.
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argument was that even though Structural Metals did not purchase all of the
components of that design from S&C Electric, S&C Electric was responsible
for making sure the overall design worked. S&C Electric hotly contested that
interpretation of the contract, alleging that it only promised to sell the two
individual AVC units, and that Structural Metals was responsible for
implementing them after rejecting an offer to have S&C Electric build and
install the entire system.
In January of 2006, S&C Electric commissioned the two AVC units.
From that point forward, Structural Metals began experiencing problems.
Structural Metals contends that the AVC units never regulated the power level
in the plant to the degree that S&C Electric had warranted. It also claims that
the AVC units constantly overheated, causing damage to the capacitors and
other components of the AVC system. S&C Electric responded to these
concerns by promising to stand by its equipment. In November, 2006, it
extended the warranty and promised to bring its equipment “to an acceptable
condition.”
Before it could follow through, however, a fire broke out in the AVC
system on December 2, 2006 and caused extensive damage. Structural Metals
blamed S&C Electric’s AVC units for causing the fire, and demanded its money
back.
When S&C Electric refused, Structural Metals sued for breach of
contract and breach of warranty under Texas law. Under both theories of
recovery, Structural Metals sought not just the value of the AVC units, but the
value of the entire “AVC System,” including components purchased from other
companies.
After the litigation began, the cause of the fire continued to be a major
issue. Structural Metals contended that the AVC units caused the fire,
whereas S&C Electric claimed that the electrical cables running from one of
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the AVC units to one of the transformers—which had not been installed by
S&C Electric—were the cause. S&C Electric claimed that the cables used were
rated for too low a current and were overtaxed by the AVC system, causing
them to overheat and arc, causing the fire.
The electric cables ran through an underground culvert from the
building housing the AVC units to the transformers. After the fire, Structural
Metals retrieved the electric cables from the burned out, melted culvert and
stored them in a locked building on the plant’s premises. Yet, before S&C
Electric was able to investigate the cables in connection with this litigation,
the cables disappeared. 2 As a spoliation remedy, the district court approved
Structural Metals’s proposal that it not be allowed to contest that the fire
started in the cables at trial.
After the fire, Structural Metals filed a claim with its insurance
company, Liberty Mutual. Liberty Mutual investigated the fire damage and
prepared a list of items that needed to be repaired or replaced and proposed a
settlement of the insurance claim. After some negotiation, Liberty Mutual
agreed to settle the claim for $475,650, which, after Structural Metals’s
$200,000 deductible, resulted in a net insurance payment of $275,650.
The case went to trial in November 2009, with Structural Metals
asserting a breach of contract claim that also included theories of breach of an
express warranty, breach of the implied warranty of merchantability, and
breach of the implied warranty of fitness for a particular purpose. On the
breach of warranty claims, the jury was instructed that the measure of
damages is “[t]he difference, if any, at the time and place of acceptance,
2 Structural Metals had suffered a series of copper thefts from its plant. The lock on
the building in which the cables were being stored was found damaged around the time that
Structural Metals discovered the cables were missing. The cables contained copper.
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between the value of the AVC system accepted and the value that the AVC
system would have had if it had been as warranted.”
The jury found S&C Electric liable for breach of an express warranty,
breach of the implied warranty of merchantability, and breach of the implied
warranty of fitness for a particular purpose. 3 The jury awarded Structural
Metals $306,500 in damages.
After the verdict, S&C Electric moved the court to remit the damages
award under Federal Rule of Civil Procedure 59(e). 4 S&C Electric argued that
its damages should be remitted by the amount of the insurance payment that
Structural Metals received from Liberty Mutual. The district court denied that
motion, ruling that, under Texas law, the collateral source rule bars
consideration of insurance payments in contract actions as well as in tort
actions and, alternatively, that S&C Electric failed to show that the insurance
payment compensated Structural Metals for the same loss as the damages
award.
Structural Metals then moved for attorney’s fees under section 38.001 of
the Texas Civil Practice and Remedies Code. The district court awarded
Structural Metals attorney’s fees in the amount of $727,487.32 and costs in the
amount of $11,910.77.
S&C Electric then timely appealed. On appeal, S&C Electric argues that
the district court erred in denying its motion for remittitur and in its award of
attorney’s fees.
3 The jury found S&C Electric not liable on the run-of-the-mill breach of contract
claim, because they found Structural Metals had not revoked acceptance of the AVCs.
4 S&C Electric also moved for judgment as a matter of law, but the district court’s
denial of that motion was not appealed.
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II. The Motion for Remittitur
S&C Electric argues on appeal that the district court erred in refusing to
remit Structural Metals’s damages award in the amount of the insurance
payment from Liberty Mutual to Structural Metals after the fire. We review
the district court’s decision to deny S&C Electric’s motion for remittitur for
abuse of discretion. See Consol. Cos., Inc. v. Lexington Ins. Co., 616 F.3d 422,
435 (5th Cir. 2010) (“The decision to grant or deny a motion for new trial or
remittitur rests in the sound discretion of the trial judge; that exercise of
discretion can be set aside only upon a clear showing of abuse.” (internal
quotation marks omitted)). Remittitur can be ordered in two ways. In the first,
the plaintiff is offered a choice—accept the remittitur or a new trial will be
ordered. See Wright & Miller, 11 Fed. Prac. & Proc. § 2815 (3d ed. 2012);
Consol. Cos., 616 F.3d at 435. In the second, remittitur is ordered without
offering the plaintiffs a new trial. This method is only permissible, without
running afoul of the Seventh Amendment, where “‘it is apparent as a matter
of law that certain identifiable sums included in the verdict should not have
been there.’” Consol. Cos., 616 F.3d at 435 (quoting Foradori v. Harris, 523
F.3d 477, 503 (5th Cir. 2008)). S&C Electric here argues only that the second,
unconditional type of remittitur was appropriate, indicated by its repeated
invocations of the standard for that relief.
As such, in order to prevail, S&C Electric must show that “as a matter
of law . . . certain identifiable sums included in the verdict should not have
been there.” Id. (internal quotation marks omitted). S&C Electric avers that
the damages award should have been reduced by the full amount of the
insurance payment. S&C Electric contends that, under Texas law, the
collateral source rule permitting recoveries from two sources for the same
injury is limited to tort cases, not contract cases like this one.
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We do not reach the issue of whether the collateral source rule applies to
contract cases because the one satisfaction rule—and, it follows, its collateral
source exception—is inapplicable here. “The one satisfaction rule applies to
prevent a plaintiff from obtaining more than one recovery for the same injury.”
Stewart Title Guar. Co. v. Sterling, 822 S.W.2d 1, 7 (Tex. 1991). The collateral
source rule operates as an exception to the one satisfaction rule, permitting
multiple recoveries for the same injury in certain situations where the outside
source of recovery is independent of the wrongdoer. Brown v. Am. Transfer &
Storage Co., 601 S.W.2d 931, 936 (Tex. 1980) (“If payment is within the
collateral source rule, the principle forbidding more than one recovery for the
same loss is not applicable.”); id. at 934. The collateral source rule traditionally
operates in tort law, preventing insurance payments from an injured party’s
policy from being credited against a tortfeasor’s liability. See id. (Tex. 1980)
(“The theory behind the collateral source rule is that a wrongdoer should not
have the benefit of insurance independently procured by the injured party, and
to which the wrongdoer was not privy.”); see also Restatement (Second) of
Contracts § 347 cmt.e. The Second Restatement of Torts sets out the rule as
follows: “Payments made to or benefits conferred on the injured party from
other sources are not credited against the tortfeasor’s liability, although they
cover all or a part of the harm for which the tortfeasor is liable.” Restatement
(Second) of Torts § 920A (emphasis added); see also Haygood v. De Escabedo,
356 S.W.3d 390, 394 n.25 (Tex. 2012) (citing the Second Restatement’s
definition).
The one satisfaction rule applies only where the plaintiff receives more
than one recovery for the same injury. S&C Electric argues that the insurance
payment compensated Structural Metals for the “exact same claimed loss,”
namely the purchase price of the AVC units. Yet the insurance payment
compensated S&C Electric for a different injury than did the jury damage
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award. The jury found S&C Electric liable for breach of warranty. Damages
for breach of warranty in a sale of goods are measured by “the difference at the
time and place of acceptance between the value of the goods accepted and the
value they would have had if they had been as warranted.” Tex. Bus. & Com.
Code § 2.714; see also U.C.C. 2-714. The jury instructions clearly and correctly
set out this standard for damages in a breach of warranty claim. As we
presume that juries follow their instructions, Richardson v. Marsh, 481 U.S.
200, 211 (1987), we must presume that the $306,500 represents that amount—
the difference in the value of the AVC units as delivered and the value of the
AVC units if they had been as warranted. Further, the district court found
that there was sufficient evidence for the jury to “conclude that the value of the
AVC units at the time of acceptance was zero,” Structural Metals, Inc. v. S&C
Elec. Co., No. SA-09-CV-984-XR, 2013 WL 870084, at *4 (W.D. Tex. Mar. 7,
2013), and S&C Electric does not challenge that sufficiency finding on appeal.
In contrast, the insurance payment from Liberty Mutual here
compensated Structural Metals for losses suffered in the fire. The insurance
payment did not compensate Structural Metals for the “harm for which the
tortfeasor is liable,” or, translated into terms more appropriate for contract
law, the damages caused by S&C Electric’s breach of warranty, which existed
at the time of delivery and were not affected by the fire. Since there were two
separate injuries, the one satisfaction rule does not apply, and there is no need
to consider whether the collateral source rule allows multiple recoveries in this
case. See Stewart, 822 S.W.2d at 7 (“The one satisfaction rule applies to
prevent a plaintiff from obtaining more than one recovery for the same injury.”
(emphasis added)).
S&C Electric’s real complaint seems to be that it is inconsistent for the
jury to have valued the AVC units at the time of acceptance at zero, while a
non-zero portion of the insurance payment was earmarked for those same AVC
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units. As persuasive as that argument may be, we cannot say as a matter of
law that the amount paid for goods a year after delivery necessarily represents
their value at the time of acceptance, the crucial point for breach of warranty
damages. Tex. Bus. & Com. Code § 2.714; accord U.C.C. § 2-714. 5 At best, the
insurance payment is evidence—strong evidence—that the goods as delivered
had a value greater than zero. But while the two recoveries appear to value
the AVC units inconsistently, that is not for us to decide. The jury was properly
instructed and, while the fact of and value of the insurance payment might
have caused the jury to rethink its valuation of the AVC units as received, that
information was excluded from evidence. S&C Electric has appealed only the
denial of its motion for remittitur, not the exclusion of the insurance payments
from evidence. As such, no matter the merit that an argument for admissibility
in evidence would have had, the issue is not before us. Therefore, the district
court did not err in denying the motion for remittitur.
III. The Attorney’s Fees
S&C Electric challenges the district court’s award of attorney’s fees on
three grounds. First, it argues that Structural Metals did not satisfy the
presentment requirement, a predicate to the award of attorney’s fees under
Texas law. Second, it argues that the district court erred in failing to require
Structural Metals to segregate fees incurred pursuing its unsuccessful claims
5 For example, if Seller sold Buyer a car that was worth $40,000 as warranted but only
$10,000 as delivered, the fact that Buyer resold the car a year later for $20,000 would have
no bearing on the amount of damages he could recover under the U.C.C. If the AVC units,
for example, were worth $100,000 at the time of delivery, but Structural Metals’s
compensation from the insurance company was only $50,000 a year later, presumably S&C
Electric would be arguing that the proper measure of its damages would be $206,500 only.
The fact that the amount increased in the first example and decreased in the second does not
alter the equation, except as to its plausibility. That is to say, we generally expect goods to
decrease in value over time. Yet while that would be relevant to the credibility of any
argument by Structural Metals that the goods had no value as delivered and yet increased
in value at the time of the insurance payment, it does not allow us to say that, as a matter of
law, the damages award must be remitted.
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from those incurred pursuing its successful claims. Third, it argues that the
district court erred in awarding an amount of attorney’s fees that was
disproportionate to the damages award that Structural Metals obtained.
The award of attorney’s fees in a diversity case is governed by state law.
Mathis v. Exxon Corp., 302 F.3d 448, 461 (5th Cir. 2002). “Texas follows the
American Rule, which provides that there can be no recovery of attorney’s fees
unless authorized by contract or statute.” In re Nalle Plastics Family Ltd.
P’ship, 406 S.W.3d 168, 172 (Tex. 2013). Despite that general rule, Texas law
specifically provides for the recovery of attorney’s fees in breach of contract
cases. Tex. Civ. Prac. & Rem. Code § 38.001(8). Attorney’s fees for a successful
claim for breach of an express warranty are recoverable under section 38.001,
Med. City Dallas, Ltd. v. Carlisle Corp., 251 S.W.3d 55, 63 (Tex. 2008), and, as
the parties have not disputed the matter, we assume without deciding that fees
for implied warranty claims are also recoverable.
We review the district court’s award of attorney’s fees under section
38.001 for abuse of discretion, though we review its factual determinations only
for clear error. Mathis, 302 F.3d at 461–62.
A. Presentment
To recover fees under section 38.001, the plaintiff must have “present[ed]
the claim to the opposing party.” Tex. Civ. Prac. & Rem. Code § 38.002. Both
oral and written demands are sufficient to satisfy the presentment
requirement. Gordon v. Leasman, 365 S.W.3d 109, 116 (Tex. App.—Houston
[1st Dist.] 2011, no pet.); Panizo v. Young Men’s Christian Ass’n, 938 S.W.2d
163, 168 (Tex. App.—Houston [1st Dist.] 1996, no writ); Jones v. Kelley, 614
S.W.2d 95, 100 (Tex. 1981).
The district court held that two distinct acts satisfied the presentment
requirement. First, in January 2008, after the fire, Henry Camarillo, a
Structural Metals employee, informed S&C Electric’s authorized sales agent,
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Fred Oberlender & Associates, that Structural Metals wanted its money back.
Second, Structural Metals sent a written offer to settle for $772,071.27 in
March 2010.
On appeal, S&C Electric argues that the 2010 settlement offer was
excessive and therefore did not satisfy the presentment requirement. See
Panizo, 938 S.W.2d at 169. Yet S&C Electric has failed to argue on appeal that
the district court erred in holding that Structural Metals’s 2008 demand for its
money back was insufficient to meet the presentment requirement. As such,
the argument is waived, see United States v. Reagan, 596 F.3d 251, 254 (5th
Cir. 2010), and we affirm, Bickford v. Int’l Speedway Corp., 654 F.2d 1028, 1031
(5th Cir. 1981) (“[R]eversal is inappropriate if the ruling of the district court
can be affirmed on any grounds, regardless of whether those grounds were used
by the district court.”); Wolcott v. Sebelius, 635 F.3d 757, 763 (5th Cir. 2011).
B. Segregation of Fees
As noted above, the statute providing for attorney’s fees in breach of
contract claims is an exception to Texas’s general adherence to the American
Rule. See In re Nalle Plastics Family Ltd. P’ship, 406 S.W.3d at 172. As such,
“fee claimants have always been required to segregate fees between claims for
which they are recoverable and claims for which they are not.” Tony Gullo
Motors I, L.P. v. Chapa, 212 S.W.3d 299, 311 (Tex. 2006).
Here, S&C Electric claims that the district court erred in failing to
require Structural Metals to segregate certain attorney’s fees that were
unrecoverable.
First, S&C Electric claims that Structural Metals should have had to
segregate fees relating to Structural Metals’s claim that S&C Electric
warranted an entire AVC “system” rather than the individual AVC units. S&C
Electric argues in its brief that “[a]s a result of [Structural Metals’s]
intransigent position on the system and services supposedly provided and
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warranted by S&C [Electric], the parties spent years litigating the scope of a
straightforward sales contract.” However, that argument does not identify a
separate claim apart from Structural Metals’s breach of warranty claim for
which fees were not recoverable. Rather it is an argument that the jury found
that S&C Electric warranted less than Structural Metals originally contended.
As such, the district court did not abuse its discretion in ruling that Structural
Metals was entitled to “fees with regard to legal services that advanced its
breach of warranty claim, even if it did not achieve full success on that claim,
such that segregation in this regard is not required. S&C [Electric]’s
arguments are more properly evaluated under the reasonableness factors,
specifically, the degree of success obtained.”
Second, S&C Electric argues that Structural Metals should not be able
to recover fees relating to the cause of the December 2006 fire. According to
S&C Electric, Structural Metals’s continued insistence that the AVC units
were the cause of the December 2006 fire in the face overwhelming evidence
caused the parties to “unnecessarily litigate[] the cause of the fire for years.”
The district court rejected that argument. The court noted that S&C Electric
argued at trial that Structural Metals’s faulty installation of the cables caused
the December 2006 fire and that the fire caused all of Structural Metals’s
claimed damages, not any faults with the AVC units. It followed then, the
court continued, that “[h]ad the jury accepted S&C [Electric]’s argument that
the fire caused all of [Structural Metals’s] damages and that only [Structural
Metals] was responsible for the fire, it would not have awarded any damages
for breach of warranty.” As such, the court ruled that Structural Metals “did
not lose on the issue of the cause of the fire, and litigation of that issue was
necessary for [Structural Metals] to recover damages on its warranty claims.”
The district court’s finding that S&C Electric argued that the cause of the fire
precluded Structural Metals from recovering damages is a finding of fact
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underlying its attorney’s fees award, and we review it only for clear error. See
Mathis, 302 F.3d at 461–62. S&C Electric cites only one place in the record to
dispute the district court’s finding that S&C Electric put the issue of the fire
in the foreground. The citation is to an exchange during direct examination in
which Henry Camarillo, an engineer with Structural Metals who headed up
the AVC project, gives his personal opinion that the fire began in the AVC
units. But that sole exchange is insufficient for us to conclude that the district
court’s finding was clearly erroneous. Since that finding stands, we hold that
the district court did not abuse its discretion in ruling that Structural Metals
did not have to segregate fees relating to the cause of the December 2006 fire.
Alternatively, we have difficulty seeing how any argument about the
cause of the fire is a separate “claim.” Any argument that the AVC units
caused the fire would seem to be an argument for consequential damages for
the warranty or contract claims under U.C.C. 2-715 and not a separate claim.
As such, there was no need to segregate fees regarding the cause of the fire.
See Tony Gullo, 212 S.W.3d at 311 (“[F]ee claimants have always been required
to segregate fees between claims for which they are recoverable and claims for
which they are not.” (emphasis added)); Green Int’l, Inc. v. Solis, 951 S.W.2d
384, 390 (Tex. 1997) (“To recover attorney’s fees under Section 38.001(8), a
party must (1) prevail on a cause of action for which attorney’s fees are
recoverable, and (2) recover damages.”).
Third, S&C Electric asserts that the district court erred in failing to
require Structural Metals to segregate attorney’s fees related to the spoliation
issue and Structural Metals’s argument that it revoked acceptance of the AVC
units. Yet Structural Metals has segregated fees that it found pertained only
to the spoliation and revocation issues. Additionally, Structural Metals
reduced its overall fee request by 2% in order to account for fees related to
revocation of acceptance that may still have been included. S&C Electric cites
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nothing to support its argument that additional fees should be segregated
other than to point us to a spreadsheet prepared by counsel for S&C Electric
that purports to show additional amounts of time that Structural Metals spent
on these issues that were not segregated. But S&C Electric fails to explain
how those time entries identified related to the spoliation issue. Without more
than S&C Electric’s bare characterization of the entries, we cannot say that
the district court abused its discretion in declining to require segregation of
those entries. As to the revocation issue, the district court concluded that two
of the time entries related to contract formation and therefore did not need to
be segregated as they were related to both the breach of warranty and breach
of contract claims. Our review of the entries yields the same conclusion,
especially as S&C Electric cites no additional evidence to the contrary. As to
the remaining entries cited by S&C Electric, the district court apparently
agreed that a portion of the time entries cited in the spreadsheet related to
revocation but concluded that Structural Metals’s 2% overall reduction in its
fee request was sufficient to account for those entries. S&C Electric presents
no arguments as to why the 2% reduction is insufficient. As such, there is no
basis for us to conclude that the district court abused its discretion in rejecting
S&C Electric’s argument that additional amounts must be segregated.
Fourth, S&C Electric argues that Structural Metals should have been
forced to segregate fees relating to removal to federal court. S&C Electric
claims that Structural Metals fraudulently joined its parent company, CMC
(like S&C Electric, a Delaware corporation), as a plaintiff and S&C Electric’s
Texas sales agent, Fred Oberlender & Associates (a Texas corporation), as a
defendant in order to prevent removal based on diversity of citizenship. Yet
the district court found that “[t]here is no indication that [Structural Metals]
joined its parent company or Fred Oberlender in bad faith or to preclude
removal. After removal, [Structural Metals] did not file a motion to remand,
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but instead investigated its options and voluntarily amended its complaint to
remove the non-diverse parties.” To rebut that finding, S&C Electric argues
only “[t]hat statement is wrong. The fact that [Structural Metals] immediately
amended its complaint to remove those parties shows that [Structural Metals]
knew that it had no reasonable basis for including them in the first place. The
only reason they could have been included was to avoid removal.” Yet those
bare assertions are insufficient to demonstrate that the district court’s finding
was clearly erroneous. S&C Electric further argues that “amending the
complaint to remove improperly included parties did not advance the AVC
Warranty Claim, even if [Structural Metals] did not have a bad faith motive
for including them in the first place.” This contention is meritless. Had
Structural Metals contested the motion to remand and lost, it still would not
have been precluded from recovering attorney’s fees associated with removal.
DP Solutions, Inc. v. Rollins, Inc., 353 F.3d 421, 434 (5th Cir. 2003) (“[A] party
may recover for time spent on unsuccessful motions so long as it succeeds in
the overall claim.”). To say then that Structural Metals cannot recover its fees
because, instead of engaging in a lengthy—and expensive—battle over subject
matter jurisdiction for which it could have recovered fees, it amended its
pleadings to dismiss non-diverse parties would truly be a case of no good deed
going unpunished. The district court did not abuse its discretion in holding
that fees relating to removal were recoverable.
C. Proportionality
Lastly, S&C Electric argues that the attorney’s fees should be reduced
because they are significantly disproportionate to Structural Metals’s recovery
in this case. The district court applied the lodestar method in evaluating the
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attorney’s fees, and the parties have not disputed the use of that method. 6
First, the court determines the “reasonable hours spent by counsel in the case
and a reasonable hourly rate for such work.” El Apple I, Ltd. v. Olivas, 370
S.W.3d 757, 760 (Tex. 2012). Second, the court multiplies the number of hours
by the applicable rate, yielding the lodestar. Id. The court then adjusts the
lodestar up or down based on reasonableness factors laid out in Arthur
Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812, 818 (Tex. 1997). Id.
Here, the district court applied the lodestar method and Arthur Andersen
factors in making its attorney’s fees calculation. S&C Electric’s only true
contention on appeal is that an award of $727,487.32 in attorney’s fees in
unreasonable in light of a $306,500 recovery. But “[u]nder Texas law,
disproportion alone will not render an attorney fee award excessive.” Quanta
Servs. Inc. v. Am. Admin. Grp. Inc., 384 F. App’x 291, 298 (5th Cir. 2008); see
also Metroplex Mailing Servs., LLC v. RR Donnelley & Sons Co., 410 S.W.3d
889, 900 (Tex. App.—Dallas 2013, no pet.) (“[T]he amount awarded for
attorney’s fees can greatly exceed the amount of damages recovered.”). The
district court explicitly considered the Arthur Andersen factor relating to “the
results obtained” and declined to adjust the lodestar downward further.
6 It is unclear whether the lodestar method is the correct method for calculating
attorney’s fees under section 38.001. Compare Toshiba Mach. Co., Am. v. SPM Flow Control,
Inc., 180 S.W.3d 761, 782 (Tex. App.—Fort Worth 2005, no pet.) (“One method of computing
a reasonable fee is the lodestar method, or the product of reasonable hours times a reasonable
rate.” (internal quotation marks omitted)), with Concert Health Plan v. Hous. Nw. Ptrs., Ltd.,
No. 14-12-00457-CV, 2013 WL 2382960, at *9 n.17 (Tex. App.—Houston [14th Dist.] May 30,
2013, no pet.) (“Because the lodestar method is not the method used for calculating the
appropriate attorney’s fees in a breach-of-contract case, this case is not instructive to our
analysis.”). Some Texas cases indicate that use of the lodestar method is permissible but not
mandatory under section 38.001. See Toshiba Mach. Co., 180 S.W.3d at 782; City of Dallas
v. Arnett, 762 S.W.2d 942, 958 (Tex. App.—Dallas 1988, writ denied) (“The jury was not
required to accept the expert’s testimony or to calculate its award on the basis of the lodestar
method.”); Long v. Griffin, --- S.W.3d ---, ---, No. 11-1021, 2014 WL 1643271, at *3 (Tex. 2014)
(reversing an award of attorney’s fees where the supporting affidavit, which used the lodestar
method, provided only generalities).
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Case: 13-50332 Document: 00512794420 Page: 17 Date Filed: 10/06/2014
No. 13-50332 c/w No. 13-50666
Without more than an argument that the fee was disproportionate, we cannot
say that the district court abused its discretion.
IV. Conclusion
For the foregoing reasons, the judgment of the district court is
AFFIRMED.
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