Rahul K. Nath, M.D. v. Texas Children's Hospital and Baylor College of Medicine , 576 S.W.3d 707 ( 2019 )

IN THE SUPREME COURT OF TEXAS
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NO. 17-0110
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RAHUL K. NATH, M.D., PETITIONER,
v.
TEXAS CHILDREN’S HOSPITAL AND BAYLOR COLLEGE OF MEDICINE,
RESPONDENTS
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ON PETITION FOR REVIEW FROM THE
COURT OF APPEALS FOR THE FOURTEENTH DISTRICT OF TEXAS
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PER CURIAM
JUSTICE GUZMAN did not participate in this decision.
This is the second appeal of a $1.4 million sanction, levied to compensate the prevailing
parties, Texas Children’s Hospital and Baylor College of Medicine, for their attorney’s fees in
defending against a frivolous suit. In the first appeal, the Hospital and Baylor moved for attorney’s
fees as a compensatory sanction based on Nath’s frivolous claims that the trial court described as
frivolous ab initio. Nath v. Tex. Children’s Hosp. (Nath I), 446 S.W.3d 355, 364–65, 372 (Tex.
2014); see also TEX. CIV. PRAC. & REM. CODE § 10.004(c)(3); TEX. R. CIV. P. 13. We agreed that
Nath’s pleadings were groundless and sanctionable. Nath I, 446 S.W.3d at 371–72. We remanded,
however, because the parties had litigated merits issues for nearly a half-decade before the Hospital
and Baylor moved for summary judgment, noting that “the degree to which the Hospital and Baylor
caused their attorney’s fees is a relevant inquiry.” Id. at 372. While acknowledging that placing the
entire cost of litigation on Nath might be proper, we noted further that a party “cannot arbitrarily
shift the entirety of its costs on its adversary simply because it ultimately prevails on a motion for
sanctions.” Id. We remanded for the trial court to reassess its award of attorney’s fees.
On remand, the prevailing parties’ attorneys submitted affidavits, asserting they did nothing
to prolong the suit or unnecessarily increase their fees. The affidavits stated total amounts billed to
their clients in defending against Nath’s frivolous suit. The trial court found the evidence sufficient
and reassessed the same $1.4 million sanction for attorney’s fees “pursuant to Chapter 10 of the
Texas Civil Practice and Remedies Code and/or Texas Rule of Civil Procedure 13.”
Nath argues that the Hospital and Baylor’s affidavits are insufficient to prove that the $1.4
million sanction is a reasonable and necessary attorney’s fee. See In re Nat’l Lloyds Ins. Co., 532
S.W.3d 794, 809 (Tex. 2017) (observing that the party seeking attorney’s fees “bears the burden of
establishing the fees are reasonable and necessary”). The Hospital and Baylor, however, argue that
a different standard of proof applies for attorney’s fees awarded as sanctions because the purpose
of sanctions is to punish violators and deter misconduct. Because sanctions are intended to punish,
the Hospital and Baylor argue they should not be held to the same evidentiary burden as in other fee-
shifting cases. Cf. Rohrmoos Venture v. UTSW DVA Healthcare, LLP, ___ S.W.3d ___ (Tex. 2019)
(clarifying the evidentiary standards for shifting attorney’s fees). Indeed, some courts of appeal
have not required proof of necessity or reasonableness when assessing attorney’s fees as sanctions.
See, e.g., Quick Change Artist, LLC v. Accessories, No. 05–14–01562–CV, 2017 WL 563340, at *6
(Tex. App.—Dallas Feb. 13, 2017, no pet.) (mem. op.); Pressley v. Casar, 567 S.W.3d 28, 61 (Tex.
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App.—Austin 2016), rev’d per curiam, 567 S.W.3d 327 (Tex. 2019); Prize Energy Res., L.P. v. Cliff
Hoskins, Inc., 345 S.W.3d 537, 575–76 (Tex. App.—San Antonio 2011, no pet.); Scott Bader, Inc.
v. Sandstone Prods., Inc., 248 S.W.3d 802, 816–17 (Tex. App.—Houston [1st Dist.] 2008, pet.
denied); Olibas v. Gomez, 242 S.W.3d 527, 535 (Tex. App.—El Paso 2007, pet. denied); Glass v.
Glass, 826 S.W.2d 683, 688 (Tex. App.—Texarkana 1992, writ denied); Allied Assocs., Inc. v. INA
Cty. Mut. Ins. Cos., 803 S.W.2d 799, 799 (Tex. App.—Houston [14th Dist.] 1991, no writ).
This line of authority is premised on a misunderstanding of a per curiam opinion from this
Court. In Brantley v. Etter, we refused the writ, no reversible error, observing in a brief opinion that
a party complaining about an award of attorney’s fees as a sanction does not have the right to a jury
trial on the amount of the sanction. 677 S.W.2d 503, 504 (Tex. 1984) (per curiam). Rather, we said
the amount awarded by the trial court was solely within the court’s sound discretion, subject only
to its abuse. Id. Several years later, an intermediate appellate court cited Brantley to support its
“belief that proof of attorney’s fees expended or the reasonableness thereof is not required when
such fees are assessed as sanctions.” Allied Assocs., 803 S.W.2d at 799. The line of authority thus
developed from this initial misunderstanding regarding the proof necessary to invoke the trial court’s
discretion.
Before a court may exercise its discretion to shift attorney’s fees as a sanction, there must
be some evidence of reasonableness because without such proof a trial court cannot determine that
the sanction is “no more severe than necessary” to fairly compensate the prevailing party. PR Invs.
& Speciality Retailers, Inc. v. State, 251 S.W.3d 472, 480 (Tex. 2008) (quoting TransAmerican Nat.
Gas Corp. v. Powell, 811 S.W.2d 913, 917 (Tex. 1991)); see also Low v. Henry, 221 S.W.3d 609,
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620 (Tex. 2007) (“[A] sanction cannot be excessive nor should it be assessed without appropriate
guidelines.”). “Consequently, when a party seeks attorney’s fees as sanctions, the burden is on that
party to put forth some affirmative evidence of attorney’s fees incurred and how those fees resulted
from or were caused by the sanctionable conduct.” CHRISTUS Health Gulf Coast v. Carswell, 505
S.W.3d 528, 540 (Tex. 2016).
Chapter 10 of the Civil Practice and Remedies Code authorizes a court to award sanctions
for groundless allegations and other pleadings presented for an improper purpose. TEX. CIV. PRAC.
& REM. CODE §§ 10.001-.006. The sanction may include a “directive” from the court, the payment
of a “penalty into court,” and a payment to the opposing party of “the amount of the reasonable
expenses incurred by the other party . . . including reasonable attorney’s fees.” Id. § 10.004(c)(1)-
(3). We have recently clarified the legal and evidentiary requirements to establish a reasonable
attorney’s fee in a fee-shifting situation. See Rohrmoos, __ S.W.3d at __. Although this case deals
with attorney’s fees awarded through a sanctions order, the distinction is immaterial because all fee-
shifting situations require reasonableness.
On remand, the Hospital and Baylor attempted to prove the reasonableness of the awarded
fees by submitting two additional conclusory affidavits. Although we expressed confidence in Nath
I that the reasonableness of the sanction might be resolved on the existing record or through
additional affidavits, 446 S.W.3d at 372 n.30, the subsequent affidavits here merely reference the
fees without substantiating either the reasonable hours worked or the reasonable hourly rate. See
Rohrmoos S.W.3d at ___ (explaining the applicability of the lodestar analysis for fee-shifting
awards). Rohrmoos explains the necessity of presenting either billing records or other supporting
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evidence when seeking to shift attorney’s fees to the losing party. Id. Conclusory affidavits
containing mere generalities about the fees for working on Nath’s frivolous claims are legally
insufficient to justify the sanction awarded here. See Long v. Griffin, 442 S.W.3d 253, 255 (Tex.
2014) (per curiam) (overturning an attorney’s fee award when the affidavit supporting the fees “only
offer[ed] generalities” and “no evidence accompanied the affidavit”); El Apple I, Ltd. v. Olivas, 370
S.W.3d 757, 763–64 (Tex. 2012) (discussing the insufficiency of attorney’s fee evidence that “based
[its] time estimates on generalities”).
The trial court’s judgment awards the Hospital attorney’s fees of $726,000 and Baylor
attorney’s fees of $644,500.16 for their respective defenses to Nath’s groundless claims and recites
that this amount “fairly compensates [them] with regard to defending against the claims that serve
as the basis for this award.” The court has thus used its authority under Chapter 10 to shift
responsibility for the defendant’s reasonable attorney’s fees to the plaintiff, Nath, as a penalty for
his pursuit of groundless claims. Because the standard for fee-shifting awards in Rohrmoos likewise
applies to fee-shifting sanctions, we reverse the court of appeals’ judgment affirming the sanctions
award and, without hearing oral argument, remand the case to the trial court for further proceedings
in light of Rohrmoos. See TEX. R. APP. P. 59.1.
Opinion Delivered: June 21, 2019
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