On Friday, the Supreme Court issued its opinion in In re Nalle Plastics Family Limited Partnership, No. 11-0903. (Our previous coverage of this case is here and here.) In a unanimous opinion by Chief Justice Jefferson, the Court held that attorney's fees should not be included in determining the amount of a supersedeas bond. Click here for the opinion.
The Court resolved a split among the intermediate appellate courts about the application of supersedeas standards adopted in House Bill 4 in 2003. Under that statute, appellants are required to post a bond covering compensatory damages, interest, and costs. (There are other limitations in the statute that are not relevant to the issues in Nalle Plastics.) See Tex. Civ. Prac. & Rem. Code § 52.006.
The First, Fourteenth, El Paso, and Corpus Christi courts had all held that attorney's fees had to be included in the amount of the supersedeas bond, but they had relied on differing rationales. The First, El Paso, and Corpus Christi courts had held that attorney's fees are "compensatory damages." The Fourteenth Court had held that attorney's fees are "costs."
On the other hand, the Austin and Dallas courts had held that attorney's fees are not "compensatory damages" or "costs" and that they therefore did not need to be included in the amount of the supersedeas bond.
The Supreme Court first considered whether attorney's fees incurred in prosecuting or defending the suit are "compensatory damages." The Court relied on cases that distinguish attorney's fees from damages and on the "American Rule" that attorney's fees are not recoverable unless authorized by a statute or contract. The Court also noted that while attorney's fees might be "compensatory" they are not "damages." Finally, the Court noted that the definition of "compensatory damages" in Chapter 41 of the Civil Practice & Remedies Code does not include attorney's fees. The Court did not hold that the Chapter 41 definition controls, only that it was consistent with other authority supporting the holding that attorney's fees are not compensatory damages.
The Court was careful to note that sometimes, attorney's fees can be compensatory damages. Citing Akin, Gump, Strauss, Hauer & Feld, L.L.P. v. Nat’l Dev. & Research Corp., 299 S.W.3d 106, 111 (Tex. 2009), the Court noted that attorney's fees recovered as damages for breach of contract (i.e. damages recovered because the other party breached a contract by failing to pay attorney's fees) are compensatory damages.
The Court then rejected the Fourteenth Court's holding that attorney's fees are "costs." The Court held that "costs" in Chapter 52 has its ordinary meaning of recoverable court costs. And Texas law has long been clear that recoverable court costs do not include attorney's fees.
In addition to the holding, the Nalle Plastics opinion is interesting for two other points. First, the opinion's approach to statutory construction of the term "compensatory damages" could be a good guide for statutory construction arguments in other contexts. Second, the opinion tells us where Chief Justice Jefferson comes down in the "attorney's fees" vs. "attorneys' fees" debate. The opinion consistently uses "attorney's fees."
-- Rich Phillips, Thompson & Knight
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