Epps v. Fowler, No. 10-0283 (Tex. Aug. 26, 2011).
Just when you thought you understood the Texas Supreme Court’s position on whether attorney’s fees are available pursuant to a “prevailing party” contract provision when the party asserting the provision does not recover damages, this case throws a curve ball. The Court candidly admits that, “[t]wo years ago, we held that a plaintiff who obtained favorable jury findings but no damages was not entitled to attorney’s fees under contractual language entitling a prevailing party to such fees.” Epps, No. 10-0283, at 1 (citing Intercont’l Group P’ship v. KB Home Lone Star L.P., 295 S.W.3d 650, 652 (Tex. 2009). In Epps, the Court now holds that, “because a nonsuit with prejudice immediately alters the legal relationship between the parties by its res judicata effect, a defendant prevails when the plaintiff nonsuits with prejudice.” Id., at 2. Under this holding, the Court remanded the case to determine whether the nonsuit without prejudice filed by the plaintiff in this case should be treated as a nonsuit with prejudice, and if so, it instructed the trial court that the defendant may recover attorney’s fees under its “prevailing party” contract provision. Id. The case begs the question—when the contract has a “prevailing party” provision, what difference does it make whether a plaintiff wins but recovers no damages, or a defendant wins but recovers no damages? The answer appears to be that a defendant can recover attorney’s fees for defending the breach of contract claim without showing damages, but the plaintiff cannot recover attorney’s fees for pursuing the breach of contract claim unless the plaintiff also recovers damages. The Epps case was also remanded for consideration of the pending claim for sanctions pursuant chapter 10 of the Civil Practice and Remedies Code. It seems more appropriate for the recovery of attorney’s fees to be considered under a statute, such as chapter 10, that permits the award of attorney’s fees rather than making a new common law rule for recovery of attorney’s fees for defendants under a “prevailing party” contract provision for cases dismissed by a nonsuit with prejudice. Can a defendant recover attorney’s fees under a “prevailing party” contract provision if the defendant obtains a favorable jury verdict on a claim of breach of contract without recovering damages? Apparently so, in light of Epps. In the context of a “prevailing party” contract provision, the bar against recovery of attorney’s fees due to the lack of actual damages applies to plaintiffs, but not to defendants.
(Justice Lehrmann delivered the majority opinion, in which Chief Justice Jefferson, Justices Wainwright, Green, Willett, and Guzman joined. Justice Hecht filed a dissenting opinion, in which Justices Medina and Johnson joined.)
