2021 Amendments to Tex. Civ. Prac. & Rem. Code ch. 38 Answer Some Questions and Raise Others By Paul Curl
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n its most recent session, the Texas Legislature passed two key amendments to Chapter 38 of the Texas Civil Practice and Remedies Code, which governs recovery of attorney’s fees in many cases. These amendments, which took effect September 1, 2021, address recovery of attorney’s fees against non-corporate entities and recovery of attorney’s fees in construction cases. While the amendments resolve certain issues and questions, they raise others.
Revised Section 38.001 Section 38.001 of the Texas Civil Practice and Remedies Code authorizes recovery of attorney’s fees in cases alleging an unpaid debt or a breach of contract. Until September 1, 2021, Section 38.001 read as follows: A person may recover reasonable attorney’s fees from an individual or corporation, in addition to the amount of a valid claim and costs, if the claim is for: 1. rendered services 2. performed labor 3. furnished materials 4. freight or express overcharges 5. lost or damaged freight or express 6. killed or injured stock 7. a sworn account 8. an oral or written contract (emphasis added).
A question had arisen in some recent cases about whether a limited liability company could be liable for attorney’s fees under Section 38.001. The reflexive response to this question is, “Why wouldn’t it be?” The answer is because an LLC is not an “individual or corporation,” the only classifications of defendant mentioned in Section 38.001. The issue of an LLC’s liability for attorney’s fees was not raised in the case authority for many years. In several cases, the courts allowed recovery of attorney’s fees against LLCs, without addressing the fact that an LLC is not an individual or corporation. See Triton 88, LP v. Star Elec, LLC, 411 S.W.3d 42, 63-65 (Tex. App.—Houston [1st Dist.] 2013, no pet.); Howard Indus., Inc. v. Crown Cork & Seal Co., 403 S.W.3d 347, 353 (Tex. App.—Houston [14th Dist.] 2013, no pet.); Lee-Way Prince Enters., LLC v. QAI Assur., Inc., No 01-0701004-CV, 2009 WL 3490982, at *4 (Tex. App.—Houston [1st Dist.] Oct. 29, 2009, no pet.). In these cases, the parties did not raise the issue of whether an LLC could be liable for attorney’s fees under Section 38.001. More recently, though, some Texas courts of appeals have addressed this question and held that an LLC is not liable for attorney’s fees because a limited liability company is not mentioned in Section 38.001. In Alta Mesa Holdings, LP v. Ives, 488 S.W.3d 438
(Tex. App.—Houston [14th Dist.] 2016, pet. denied), the LLC appellants made the argument that they were not liable for attorney’s fees because they were not “an individual or corporation.” The appellate court agreed. The appellate court looked “primarily to the language of the statute itself,” because it is “‘a fair assumption that the Legislature tries to say what it means, and therefore the words it chooses should be the surest guide to legislative intent.’” Id. at 453 (citing Fitzgerald v. Advanced Spine Fixation Sys., Inc., 996 S.W.2d 864, 866 (Tex. 1999)). After some discussion, the appellate court held that an LLC is not an individual and cannot be equated to a corporation, despite the fact that the words “‘company’ and ‘corporation’ are sometimes used synonymously.” Id. Therefore, the appellate court reasoned that attorney’s fees cannot be awarded against an LLC under Section 38.001. Although the appellate court acknowledged that, in some cases, attorney’s fees were awarded against an LLC, the court distinguished those cases on the basis that the parties never raised the issue. The Fourth Court of Appeals quoted extensively from Alta Mesa to reach the same result in 8305 Broadway, Inc. v. J & J Martindale Ventures, LLC, No. 04–16–00447– CV, 2017 WL 2791322 at *5 (Tex. App.— San Antonio June 28, 2017, no pet.). The
January–February 2022
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