Hands off my fee bills! Texas Supreme Court acknowledges five levels of protection against disclosure of attorney fee bills
“A request for attorney’s fees should not result in a second major litigation.”
This admonishment was given by the United States Supreme Court nearly 35 years ago in Hensley v. Eckerhart, the seminal case that ushered in the requirement of producing detailed fee bill evidence (a requirement now adopted by the Texas Supreme Court). And yet the very situation warned of decades ago is now a certain reality in every case where attorney’s fees are at issue. But this unfortunate reality can now be avoided thanks to a recent Texas Supreme Court holding.
The Texas Supreme Court, in In re Nat’l Lloyds Ins. Co., No. 15-0591, 60 Tex. Sup. Ct. J. 1165, 2017 Tex. LEXIS 522 (June 9, 2017), has acknowledged five applicable levels of protection that can be used to thwart your opponent’s efforts to compel production of your fee bills:
- Work-product privilege (TRCP 192.5)
- Attorney-client privilege (TRE 503)
- Outside the scope of expert discovery (TRCP 192.3 & 195)
- Irrelevant (TRE 401)
- Unduly Prejudicial (TRE 403)
Background of the case
In re Nat’l Lloyds stemmed from a discovery dispute involving allegations of underpaid homeowner insurance claims. Scott Doyen, one of the attorneys for the defense, testified as an attorney-fee expert and admitted on cross-examination that an opposing party’s fees could be considered as “a factor” in determining a reasonable fee recovery. This, of course, led to interrogatories seeking aggregate fee information and a request for production of fee bills.
After two non-evidentiary hearings, a discovery special master recommended that:
(1) an opponent’s attorney-billing information is, as a general proposition, relevant to the reasonableness of an attorney-fee request in the same case;
(2) to the extent the discovery requests in this case seek material from an expert witness on the attorney-fee issue, the information falls within the scope of permissible discovery under Texas Rule of Civil Procedure 192.3(e);
(3) some of the discovery requests should be more narrowly tailored, but the insurer’s objections to the discovery requests as modified should be overruled; and
(4) “[s]pecific records may be redacted for content protected by an appropriate privilege.”
Adopting these recommendations, the MDL pretrial court ordered the insurer to respond to the discovery requests. The insurer filed a petition for a writ of mandamus. The court of appeals denied relief. The court concluded the discovery order was not an abuse of discretion in the underlying cases because:
(1) an opposing party’s attorney fees are germane to at least two factors that inform the “reasonable and necessary” attorney-fee inquiry, as set forth in Arthur Andersen & Co. v. Perry Equipment Corp.;
(2) the Arthur Anderson factors are explicitly nonexclusive;
(3) the insurer’s designated expert witness previously testified he based his opinion on his own personal experience in defending the same case in which he was testifying as an expert;
(4) the requested information is within the permissible scope of expert-witness discovery, as provided by Rule 192.3(e); and
(5) the insurer produced no evidence that redaction would be insufficient to protect its privileges.
In re Nat’l Lloyds Ins. Co., No. 15-0591, 60 Tex. Sup. Ct. J. 1165, 2017 Tex. LEXIS 522, at *7 (June 9, 2017)
Seems reasonable and well-thought out. The Texas Supreme Court could not disagree more. The opinion is lengthy, but the high points (for quick reference) are found below, with page cites following the quotes.
Work-product privilege (TRCP 192.5)
“Analogizing to our analysis in National Union Fire Insurance Co. v. Valdez, we hold that a request to produce all billing records invades a party’s work-product privilege because, cumulatively, billing records constitute a mechanical compilation of information that, at least incidentally, reveals an attorney’s strategy and thought processes.” *13-14.
“[B]illing records reveal when and where attorneys strategically deploy a client’s resources; which issues were addressed by experienced lawyers as compared to less experienced counsel; the subject-matter expertise of an attorney working on a particular aspect of the case; and who was hired as consultants—including consulting experts and jury consultants—and when. This information provides detailed information regarding a party’s litigation decisions and also illuminates the relative significance of or concern about particular matters.” *17-18.
Attorney-client privilege (TRE 503)
“Billing records constitute ‘communication[s] made in anticipation of litigation or for trial between a party and the party’s representatives or among a party’s representatives.’”*16.
Outside the bounds of permissible discovery (TRCP 192.3 & 195)
“Importantly, a party is limited in the tools available to discover information concerning expert witnesses, even though the information may otherwise be within the scope of testifying-expert discovery. Rule 192.3(e) sets forth the scope of information that parties may discover about a testifying expert . . . . Rule 195 addresses the methods for obtaining such information, limiting testifying-expert discovery to that acquired through disclosures, expert reports, and oral depositions [*36] of expert witnesses. To minimize undue expense and curb discovery abuse, Rule 195 does not provide for interrogatories or requests for production like the discovery requests at issue here. Further, because the disputed discovery requests are not permissible methods of obtaining information discoverable under Rule 192.3(e), the exception to the work-product privilege in Rule 192.5(c)(1) does not apply.” *35-36.
“Patently irrelevant” (TRE 401)
“To the extent factual information about hourly rates and aggregate attorney fees is not privileged, that information is generally irrelevant and nondiscoverable because it does not establish or tend to establish the reasonableness or necessity of the attorney fees an opposing party has incurred. A party’s litigation expenditures reflect only the value that party has assigned to litigating the matter, which may be influenced by myriad party-specific interests. Absent a fee-shifting claim, a party’s attorney-fee expenditures need not be reasonable or necessary for the particular case. Barring unusual circumstances, allowing discovery of such information would spawn unnecessary case-within-a-case litigation devoted to determining the reasonableness and necessity of attorney-fee expenditures that are not at issue in the litigation. This is not a proper discovery objective.” *2-3.
“For the reasons explained above, we agree with those cases concluding such information is generally not discoverable and, in the ordinary case, ‘patently irrelevant.’” *32.
Unduly prejudicial (TRE 403)
“In sum, barring unusual circumstances, an opposing party’s attorney-fee information is not relevant because there is no reasonable expectation that the information will aid the dispute’s resolution. Moreover, whatever marginal relevance might theoretically exist would not come close to surpassing competing concerns about undue prejudice, confusion of the issues, and abusive discovery practices, among others. Aside from lacking genuine probative value, discovery of an opposing party’s attorney-billing information should generally not be permitted for these additional reasons.” *34.
Wait, what about redaction?
“We also conclude that redacting privileged information—such as the specific topics researched or the descriptions of the subject of phone calls—would be insufficient as a matter of law to mask the attorney’s thought processes and strategies. The chronological nature of billing records reveals when, how, and what resources were deployed. With this knowledge, a party in the same proceeding could deduce litigation strategy as to specific or global matters.” *19.
Yes, you can lose the protection
“We acknowledge that an opposing party may waive its work-product privilege through offensive use—perhaps by relying on its billing records to contest the reasonableness of opposing counsel’s attorney fees or to recover its own attorney fees.” *20-21.
“Making a claim for attorney fees or using attorney fees as a comparator in challenging an opponent’s fee request puts a party’s attorney fees at issue in the litigation. In addition, designating counsel as an expert opens the door to expert-witness discovery as provided and limited by the Texas Rules of Civil Procedure.” *40
And there you have it. This five-level protection should foreclose any dispute in the vast majority of cases where a party is not seeking fees, or improperly using their own fees as a yardstick to attack an opposing party’s fees. Just be careful when designating experts: be clear your expert is not reviewing or relying on your fee bills in reaching their opinion. If these pitfalls are avoided, you can say, with overwhelming authority, hands off my fee bills!
And a very Happy New Year from TexAppBlog!
Agreed as to Form and Substance: An Appellate Kiss of Death?
The judge grants your opponent’s summary judgment in what you estimate amounts to a gross miscarriage of justice. The judge asks counsel to agree to an order. You are presented with an order that grants the summary judgment, and you sign the line that says, innocuously enough, “agreed as to form and substance.” You then file your notice of appeal, knowing that the world will be made right once the court of appeals reviews your case. A docketing statement is filed, records are requested, briefing begins . . . and then you receive a plea to the jurisdiction. What happens next depends on where you filed your appeal.
Kiss Your Appeal Goodbye: Texarkana, Dallas, El Paso, and San Antonio
Four Texas Courts of Appeal (above) hold that approving a judgment as to form and substance creates a “consent judgment” that cannot be appealed. This view is best summed up by the El Paso Court:
Approval as to form is a matter of professional courtesy not necessary to a valid judgment. Such approval (as to form) does not waive any error in the proceedings or incident to the judgment itself. But approval as to substance is something else. Approval of the substance of a judgment is tantamount to an agreement by the signatory that the judgment meets all of its essential requirements. By Appellant’s approval of the substance of the judgment, we hold that Appellant has waived any error in the judgment . . . .
Cisneros v. Cisneros, 787 S.W.2d 550, 552 (Tex. App.—El Paso 1990).
The Appeal Lives On: Houston 14th, Houston 1st, Corpus Christi, Austin, and Fort Worth
Five Texas Courts of Appeal (above) hold that a counsel’s agreement as to form and substance, standing alone, is insufficient to constitute an unappealable consent judgment. This view is best expressed by the Corpus Christi Court:
We cannot agree that the phrase “approved as to form and substance,” standing alone, shows a “consent judgment” and a voluntary relinquishment of the right to appeal. Nothing in the body of the judgment suggested that the case had been settled or that the judgment was rendered by consent. No other indications of agreement exist in the record. In order to have a consent judgment, a party must explicitly and unmistakably give consent. The notation “approved as to form and substance,” standing alone, is too indefinite to justify declaring as a matter of law that this judgment was a consent judgment.
First Am. Title Ins. Co. v. Adams, 829 S.W.2d 356, 364 (Tex. App.—Corpus Christi 1992).
Resolving the Split
A consent judgment requires explicit and unmistakable consent. Hill v. Bellville Gen. Hosp., 735 S.W.2d 675, 678 (Tex. App.—Houston [1st Dist.] 1987, no writ). An agreement “as to form and substance” seems to leave at least some ambiguity as to whether the agreement to “substance” is the substance of the order (the trial court did in fact grant my opponent’s summary judgment) or the substance of the party’s allegations (I agree they are entitled to the relief sought). That alone lends credence to the view that an agreement to “form and substance” does not amount to a consent judgment.
And besides, counsel in Texas know how to inform the court that the judgment is agreed—we put “AGREED JUDGMENT” right in title. Hopefully the Texas Supreme Court will weigh in and resolve the split and avoid further draconian results founded on ambiguous language. But in the meantime, stop agreeing “as to form and substance”—you don’t want the appeal resolving this dispute to be one you handled!
For further reference
The cases adopting the “consent judgment rule”: Claxton v. (Upper) Lake Fork Water Control and Imp. Dist. No. 1, 220 S.W.3d 537, 544 (Tex. App.—Texarkana 2006, pet. denied); Office of Attorney General of Texas v. Wilson, 24 S.W.3d 902, 906 (Tex. App.—Dallas 2000, no pet.); Cisneros v. Cisneros, 787 S.W.2d 550, 552 (Tex. App.—El Paso 1990, no writ); Bexar County Criminal Dist. Attorney’s Office v. Mayo, 773 S.W.2d 642, 644 (Tex. App.—San Antonio 1989, no writ).
The cases rejecting the “consent judgment rule”: Andrew Shebay & Co., PLLC v. Bishop, 429 S.W.3d 644, 646–47 (Tex. App.—Houston [1st Dist.] 2012, pet. denied); Chang v. Nguyen, 81 S.W.3d 314, 316, 319 n.1 (Tex. App.—Houston [14th Dist.] 2001, no pet.); Bonner v. Texas Children’s Hosp., No. 13-03-228-CV, 2006 WL 349510, at *2 & n.5 (Tex. App.—Corpus Christi Feb. 16, 2006, no pet.); Cash v. Cash, No. 03-04-00563-CV, 2005 WL 1787552, at *3 & n.7 (Tex. App.—Austin July 27, 2005, no pet.); Leeper v. Woodrick, No. 2-04-371-CV, 2005 WL 1475614, at *2 (Tex. App.—Fort Worth June 23, 2005, no pet.).