The issue of who is a prevailing party and entitled to recovery of attorney fees has been the subject of more than one, to use a wrestling term, death match. Fortunately, the United States Supreme Court and Supreme Court of Texas have provided good guidance on what it means to be a “prevailing party” so as to be entitled to recover attorney fees under a prevailing party contract clause.
In Lefemine v. Wideman, 568 U.S. __ (Nov. 5, 2012), the United States Supreme Court held that a plaintiff who secured an injunction but no monetary damages was in fact a “prevailing party” because the injunction ordered the Greenwood County Sheriff’s Office to change behavior in a way that directly benefited plaintiff. In Wideman, Lefemine and other members of an organization engaged in anti-abortion demonstrations. A Greenwood County officer informed Lefemine that if the graphic protest signs were not discarded, he would ticket Lefemine for breach of peace. Lefemine stopped protesting. Subsequently, Lefemine’s attorney sent a letter to the Sheriff informing the Sheriff that another protest was planned at the same site and if the Sheriff interfered, all available legal remedies would be pursued. The Deputy Sheriff responded saying that if Lefemine took the same action again, the same action would be taken by the Sheriff. Surprising no one, Lefemine filed suit seeking nominal damages, a declaratory judgment, a permanent injunction and attorney’s fees. Both Lefemine and the County filed motions for summary judgment and the District Court ruled that Lefemine’s rights had been infringed on but denied attorney’s fees. The U.S. Court of Appeals for the Fourth Circuit affirmed the denial of attorney’s fees on the ground that Lefemine was not a “prevailing party” under Section 1988 because the relief awarded did not alter the relative position of the parties and only prohibited unlawful, but not legitimate conduct. In reversing the Fourth Circuit, the U.S. Supreme Court restated its prior holdings that “when actual relief on the merits…materially alters the legal relationship between the parties by modifying defendant’s behavior in a way that directly benefits the plaintiff”, the plaintiff is a prevailing party. Lefemine v. Wideman, 568 U.S. __ (Nov. 5, 2012), citing, Farrar v. Hobby, 506 U.S. 103, 111-112 (1992). The U.S. Supreme Court also held that an injunction or declaratory judgment satisfies that test. Lefemine v. Wideman, 568 U.S. __ (Nov. 5, 2012). citing, Rhodes v. Stewart, 488 U.S. 1, 4 (1988). Because Lefemine had removed Greenwood County’s threat of sanctions and enjoined the County from engaging in similar conduct, the U.S. Supreme Court held he was a prevailing party and should recover attorneys’ fees unless special circumstances would make such an award unjust. Lefemine v. Wideman, 568 U.S. __ (Nov. 5, 2012), citing, Hensley v. Eckerhart, 461 U.S. 424, 429 (1983).
Like the U.S. Supreme Court, the Supreme Court of Texas has taken a very broad view of what constitutes a prevailing party and has held that in order to recover attorney fees, a party must gain something. Intercontinental Group P’ship v. KB Home Lone Star L.P., 295 S.W.3d 650, 652 (Tex. 2009). Texas adheres to the American Rule with respect to recovery of attorney’s fees. Under the American Rule, a party can only recover attorney fees if authorized by statute or the parties’ contract, such as with a well-written “prevailing party” clause. In Epps v. Fowler, 351 S.W.3d 862 (Tex. 2011), the Supreme Court of Texas reversed and held that a defendant was a prevailing party with respect to a prevailing party contract clause and may be entitled to attorney’s fees when a plaintiff non-suited a case with prejudice to avoid an unfavorable ruling on the merits when Defendant had a pending motion for sanctions. Epps v. Fowler, 351 S.W.3d 862, 864 (Tex. 2011). The Supreme Court of Texas opinion stressed that the Court’s primary concern is to construe the parties’ written contract to ascertain the parties’ true intentions as expressed in the contract pointing out again, the importance of well drafted contract clauses. The Supreme Court of Texas also stated again that it finds “federal cases focusing on the meaning of prevailing party instructive,” and therefore, the U.S. Supreme Court’s recent opinion in Lefemine v. Wideman may be useful in Texas litigation on this issue. See Epps v. Fowler, 351 S.W.3d 862, 866 (Tex. 2011), citing, Intercontinental Group P’ship v. KB Home Lone Star L.P., 295 S.W.3d 650 (Tex. 2009).
The views and opinions in this blog are the author’s and not those of Bickerstaff Heath Delgado Acosta LLP. Comments, replies and suggestions may be sent to John Jones at email@example.com.