Austin et al v. Life Partners Inc., et al

Filing 83

ORDER Denying 78 Motion for Attorney Fees. Signed by Judge Philip M. Pro on 2/24/2014. (Copies have been distributed pursuant to the NEF - SLR)

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UNITED STATES DISTRICT COURT
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DISTRICT OF NEVADA
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ANGELA AUSTIN, et al.,
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Plaintiffs,
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v.
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LIFE PARTNERS, INC.,
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Defendant.
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2:11-CV-01767-PMP-GWF

ORDER

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Presently before the Court is Defendant Life Partners, Inc.’s Motion for Award of

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Attorney’s Fees (Doc. #78), filed on July 9, 2013. Plaintiffs filed an Opposition (Doc. #80)

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on July 26, 2013. Defendant filed a Reply (Doc. #81) on August 1, 2013.

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I. BACKGROUND
The parties are familiar with the facts of this case and the Court will not repeat

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them here except where necessary.1 In May 2011, Defendant brought suit against Plaintiffs

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in Texas state court for breach of contract and other related claims. In November 2011,

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Plaintiffs brought suit against Defendant in this Court for fraud and contract-based claims

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arising out of the same facts as the Texas action. In October 2012, the Texas state court

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entered judgment in favor of Defendant. Plaintiffs did not move for a new trial or file a

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notice of appeal of the Texas state court’s judgment. Defendant then moved for summary

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judgment in this Court on the basis of claim and issue preclusion. This Court granted

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Defendant’s motion on the basis that Plaintiffs’ claims in this case are barred under claim

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This Order provides a brief summary of the more detailed factual history given in the Court’s
Order (Doc. #75) granting Defendant’s Motion for Summary Judgment.

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preclusion.
Defendant now moves for attorney’s fees, arguing it is the prevailing party and

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therefore is entitled to $82,382.75. Defendant argues the choice of law clause in the

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parties’ contracts requires application of Texas law. Specifically, Defendant argues it is

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entitled to attorney’s fees under Texas Civil Practice and Remedies Code § 38.001(8),

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which allows the recovery of attorney’s fees for contract claims. Although § 38.001(8) only

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applies to contract claims, Defendant argues it is entitled to fees on all claims because the

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parties’ relationship is entirely contractual and Plaintiffs’ Complaint included claims for

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breach of contract. Defendant also seeks attorney’s fees under Nevada Revised Statutes

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§ 18.010(2)(b) because Plaintiffs filed and continued the present action “in an effort to

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harass [Defendant], to avoid the Texas court rulings and to increase the costs of litigation.”

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(Def. Life Partner, Inc.’s Mot. for Attorney’s Fees (Doc. #78) [“Mot. for Fees”] at 6.)

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Plaintiffs respond that Nevada law governs and that an award of attorney’s fees is

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inappropriate because Plaintiffs’ claims were neither frivolous nor intended to harass.

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Plaintiffs further contend that if Texas law governs, Defendant cannot recover attorney’s

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fees because it did not recover damages in this case, and § 38.001(8) requires the recovery

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of damages to be eligible for a fee award. Plaintiffs also argue Defendant’s requested fees

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are unreasonable because Defendant’s counsel filed only two motions, did not engage in

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discovery, was not precluded from working on other cases, and was not required to address

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novel or difficult issues.

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II. DISCUSSION

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While federal law governs the procedure for requesting attorney’s fees, state law

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governs the substantive issue of whether a party is entitled to attorney’s fees. Carnes v.

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Zamani, 488 F.3d 1057, 1059 (9th Cir. 2007). When sitting in diversity, the Court applies

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the forum state’s law to determine whether a party is entitled to attorney’s fees. Id. Here,

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the Court need not determine whether Nevada would apply its own law or Texas law
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exclusively, or if Nevada would apply both, because Defendant is not entitled to attorney’s

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fees under either standard.

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A. Texas Civil Practice & Remedies Code § 38.001(8)

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“[L]itigants in Texas are responsible for their own attorney’s fees and expenses in

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litigation.” Ashford Partners, Ltd. v. ECO Res., Inc., 401 S.W.3d 35, 41 (Tex. 2012).

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Generally, “attorney’s fees are not recoverable either in an action in tort or a suit upon a

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contract unless provided by statute or by contract between the parties.” New Amsterdam

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Cas. Co. v. Texas Indus., Inc., 414 S.W.2d 914, 915 (Tex. 1967). Texas allows a party to

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recover “reasonable attorney’s fees from an individual or corporation, in addition to the

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amount of a valid claim and costs, if the claim is for . . . an oral or written contract.” Tex.

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Civ. Prac. & Rem. Code § 38.001(8). To obtain fees under § 38.001(8), a litigant must:

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“(1) prevail on a breach of contract claim, and (2) recover damages.” MBM Fin. Corp. v.

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Woodlands Operating Co., 292 S.W.3d 660, 666 (Tex. 2009).

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The requirement that a litigant recover damages “is implied from the statute’s

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language: for a fee recovery to be ‘in addition to the amount of a valid claim,’ the claimant

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must recover some amount on that claim.” Id.; see also, Green Int’l, Inc. v. Solis, 951

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S.W.2d 384, 390 (Tex. 1997) (holding the plaintiff could not recover attorney’s fees under

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§ 38.001 even after the jury found the defendant breached the contract because the jury

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awarded zero damages to the plaintiff for the breach). A claim under § 38.001(8) does not

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include a defense to an adverse claim. Rather, to be entitled to fee recovery under

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§ 38.001(8), the claim must be one which could be prosecuted “to a judgment for money or

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value, even if [the] opponent had never filed [a] competing claim.” ITT Commercial Fin.

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Corp. v. Riehn, 796 S.W.2d 248, 256 (Tex. App. 1990).

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Defendant has not satisfied the statutory requirement to recover fees. Defendant

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succeeded in obtaining a dismissal of Plaintiffs’ claims, but it did not present a claim which

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could be prosecuted apart from Plaintiffs’ claims in this case, and Defendant did not recover
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damages in this case. Defendant’s recovery of damages in the Texas action may entitle it to

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fees in that action, but the fact that this Court gives full faith and credit to the judgment in

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Texas state court does not entitle Defendant to a fee award in this case. Had Defendant

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wished to recover attorney’s fees upon the successful defense of a lawsuit without

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recovering damages, it could have included a contractual clause allowing for such a

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recovery. Intercontinental Grp. P’ship v. KB Home Lone Star L.P., 295 S.W.3d 650, 653

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(Tex. 2009) (stating parties can “contract for a fee-recovery standard either looser or stricter

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than Chapter 38’s”). Therefore, the Court will deny Defendant’s request for attorney’s fees

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under Texas law.

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B. Nevada Revised Statutes § 18.010(2)(b)

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Nevada permits an award of attorney’s fees where a claim or defense “was

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brought or maintained without reasonable ground or to harass the prevailing party.” Nev.

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Rev. Stat. § 18.010(2)(b). A claim or defense “is frivolous or groundless if there is no

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credible evidence to support it.” Rodriguez v. Primadonna Co., 216 P.3d 793, 800 (Nev.

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2009). A district court has discretion to award attorney’s fees, but any award must be based

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on evidence supporting “a finding that the claim or defense was unreasonable or brought to

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harass.” Bower v. Harrah’s Laughlin, Inc., 215 P.3d 709, 726 (Nev. 2009).

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The Court finds Plaintiffs did not bring their claims in this Court to harass

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Defendant. This case and the case in Texas state court were brought to resolve the parties’

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disputes regarding their contractual obligations and related tort claims. Defendant has not

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presented any evidence to support a finding that any of Plaintiffs’ claims were brought to

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harass Defendant.

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The Court also finds Plaintiffs had reasonable grounds to bring this case in

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Nevada despite the pending action in Texas. Sixty-eight of the eighty-three Plaintiffs were

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Nevada residents, the contracts were marketed in Nevada, and Plaintiffs’ alleged harms

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were felt in Nevada. (Compl. (Doc. #1) at 3-9; Order on Def.’s Mot. to Dismiss (Doc. #60)
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at 4.) Plaintiffs were not prohibited from bringing suit in this Court because Defendant first

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filed suit in Texas state court. R.R. Street & Co. v. Transp. Ins. Co., 656 F.3d 966, 975 (9th

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Cir. 2011) (emphasis omitted). Plaintiffs’ decision to bring a parallel action therefore was

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not groundless. The Court also finds Plaintiffs did not frivolously maintain this suit.

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Plaintiffs’ Complaint survived a motion to dismiss in this action. (Order on Def.’s Mot. to

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Dismiss (Doc. #60).) Judgment was entered against Plaintiffs in Texas state court because

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Plaintiffs’ counsel was forced to withdraw and Plaintiffs failed to respond to a motion for

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summary judgment. (Order on Def.’s Mot. for Summ. J. (Doc. #75) at 4.) Defendant then

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moved for summary judgment in this Court immediately after the Texas state court’s

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judgment, resulting in the conclusion of this case on claim preclusion. The Court therefore

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declines, in its discretion, to award Defendant attorney’s fees sought under § 18.010(2)(b).

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Because the Court will deny Defendant’s fee request, the Court need not address the

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reasonableness of the requested fees.

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III. CONCLUSION

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IT IS THEREFORE ORDERED that Defendant Life Partners, Inc.’s Motion for
Award of Attorney’s Fees (Doc. #78) is hereby DENIED.

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DATED: February 24, 2014
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PHILIP M. PRO
United States District Judge

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