United States District Court, D. New Mexico
TERRA PARTNERS; TERRA XXI, LTD.; ROBERT WAYNE VEIGEL; ELLA MARIE WILLIAMS VEIGEL; VEIGEL FARMS, INC.; VEIGEL CATTLE COMPANY; and VEIGEL FARM PARTNERS, Plaintiffs,
AG ACCEPTANCE CORPORATION, Defendant.
ORDER DENYING MOTION FOR ATTORNEYS' FEES
William P. Lynch United States Magistrate Judge.
to the summary judgment that I granted to Ag Acceptance
Corporation on Terra Partners' claims and on its
counterclaim against Terra Partners for breach of contract,
Ag Acceptance filed a motion to recover the attorneys'
fees and costs it has incurred in defending this case. (Doc.
119.) Terra Partners filed a response, arguing that Ag
Acceptance is not entitled to recover the attorneys' fees
it has incurred, and alternatively that the requested
attorneys' fees rates are not reasonable.
parties implicitly agree that Texas law governs whether Ag
Acceptance is entitled to recover its attorneys' fees.
Texas follows the American Rule that attorneys' fees are
not generally recoverable by a prevailing litigant unless
specifically “provided by contract or statute.”
MBM Fin. Corp. v. Woodlands Operating Co., 292
S.W.3d 660, 669 (Tex. 2009). Ag Acceptance contends that a
long line of Texas state and federal court cases recognize
that claims for breach of a settlement agreement are an
exception to the American Rule that parties are responsible
for their own attorneys' fees in litigation, but this
argument does not withstand close analysis. Texas recognizes
two exceptions to the American Rule. The first exception
allows the recovery of attorneys' fees where the
breaching party's tort requires the other party to
protect his interests by bringing or defending an action
against a third party. G.R.A.V.I.T.Y. Enters. v. Reece
Supply, 177 S.W.3d 537, 546-47 (Tex. App. 2005). The
second exception allows recovery of attorneys' fees when
a party “has acted in bad faith, vexatiously, wantonly,
or for oppressive reasons.” Id. at 547
Friemel Agreement, the basis for Ag Acceptance's
counterclaim against Terra Partners, does not provide for the
recovery of attorney's fees in an action brought for
breach of its terms. Further, neither exception to the
American Rule applies in this case. Terra Partners'
actions did not require Ag Acceptance to engage in litigation
with a third party. And Ag Acceptance did not seek to recover
attorneys' fees for tortious or wrongful acts. Instead,
its counterclaim sought recovery for breach of contract, and
it never attempted to prove that Terra Partners acted
38 of the Texas Civil Practices and Remedies Code allows a
party to recover attorneys' fees in a breach of contract
action as follows: “A person may recover reasonable
attorney's fees . . . in addition to the amount of a
valid claim and costs, if the claim is for . . . an oral or
written contract.” Tex. Civ. Prac. & Rem. Code
§ 38.001(8) (West 2017). To recover fees under this
statute, a litigant must both prevail on a breach of contract
claim and recover damages. Ventling v. Johnson, 466
S.W.3d 143, 154 (Tex. 2015). The requirement to recover
damages “is implied from the statute's language:
for a fee recovery to be ‘in addition to the amount of
a valid claim, ' the claimant must recover some amount on
that claim.” MBM Fin., 292 S.W.3d at 666
(quoting § 38.001(8)) (emphasis omitted). If a party
prevails on a contract claim and recovers damages, the trial
court has no discretion under § 38.001 to deny
attorneys' fees. Ventling, 466 S.W.3d at 154.
38.001 is not a model of clarity, which has led to
conflicting cases from the Texas appellate courts on whether
a party may recover attorneys' fees without the recovery
of additional monetary damages when another party has
breached a settlement agreement. In Haubold v. Med.
Carbon Research Inst., LLC, 2014 WL 1018008 (Tex. App.
Mar. 14, 2014) (unpublished), Haubold and his employer,
Medical Carbon Research Institute (MCRI), entered into a
settlement agreement to resolve all claims between them. Six
weeks later Haubold filed suit against MCRI, and MCRI
counterclaimed for breach of the settlement agreement and, as
damages, sought its attorneys' fees. The trial court
granted summary judgment to MCRI, and awarded MCRI the
attorneys' fees it had incurred in handling the case.
Id. at *3. In reversing the award of attorneys'
fees, the appellate court noted the general rule that
attorneys' fees are generally not recoverable as actual
damages, and that attorneys' fees incident to other
actual damages are ordinarily not recoverable unless they are
authorized by contract or statute. Id. at *6. The
settlement agreement did not provide for the recovery of
attorneys' fees in an action brought for breach of its
terms, so MCRI could not recover the attorneys' fees as
the actual damages resulting from the breach of the
settlement agreement. Id. n.5. The court further
held that MCRI could not recover attorneys' fees under
§ 38.001 because there was no award of other damages as
required by the statute. Id. at *6.
also argued that it was entitled to recover its
attorneys' fees as actual damages because they were the
natural, probable and foreseeable result of Haubold's
breach of the settlement agreement. While the appellate court
agreed that, as a general rule, actual damages may be
recovered when the loss is the natural, probable and
foreseeable consequence of the defendant's conduct, it
found no support for MCRI's contention that
attorneys' fees incurred in the same case in which they
are sought are recoverable as actual damages. Id. at
*7. The court distinguished other Texas cases that had
allowed the recovery of attorney's fees incurred in prior
litigation, and reaffirmed that attorneys' fees incurred
in defending or prosecuting a cause of action are not
recoverable. Id. at *7-8.
contrary result was reached in Boyaki v. John M.
O'Quinn & Assocs., LLC, 2014 WL 4855021 (Tex.
App. Sep. 30, 2014) (unpublished), which involved a dispute
between two groups of lawyers as to the method for allocating
attorneys' fees earned in another case. The O'Quinn
group sued the Boyaki group over the fees, and the parties
subsequently reached a settlement agreement. The parties
later had disagreements over some of the terms of the
agreement, and the O'Quinn group filed a motion for
summary judgment to enforce the terms of the settlement
agreement. The trial court granted summary judgment to the
O'Quinn group and awarded the O'Quinn group its
attorneys' fees. Id. at *3. The appellate court
agreed that attorneys' fees can be awarded under §
38.001 when a party prevails on a claim for specific
performance. Id. at *14. The court recognized that
the Texas “courts of appeals are split on the issue of
whether recovery of monetary damages is necessary to support
a claim for attorney's fees under Chapter 38, or whether
prevailing on a breach-of-contract claim and recovering
relief by an order of specific performance of the contract is
sufficient to support such an award.” Id. at
*13. Refusing to follow two other Texas courts of appeals
that had denied the recovery of attorneys' fees absent a
monetary recovery, the court held that relief in the form of
specific performance of the contract constitutes actual
damages to support a claim for attorneys' fees under the
statute if the specific performance prevents actual loss to
the aggrieved party. Id.
recent cases continue the conflicting positions reached by
the courts on this issue. Compare Vianet Grp. PLC v. Tap
Acquisition, Inc., 2016 WL 4368302, at *9 (N.D. Tex.
Aug. 16, 2016) (unpublished) (following Haubold and
requiring plaintiffs to recover damages to be entitled to
attorneys' fees under § 38.001), with Palavan v.
McCulley, 498 S.W.3d 134, 143 (Tex. App. 2016)
(following Boyaki and awarding attorneys' fees
to a party that obtained specific performance of a settlement
believe that Haubold provides the correct analysis
of this issue. Section 38.001 only allows recovery of
attorneys' fees “in addition to” other
damages. Ag Acceptance did not seek damages other than its
attorneys' fees. Further, in granting summary judgment on
the breach of contract counterclaim, I did not order specific
performance of the Friemel Agreement. Specific performance,
an equitable remedy, is a court order compelling a party to
perform his duties under the contract, and is not a favored
remedy. Dan B. Dobbs, The Law of Remedies §§ 12.8,
12.8.1 (2d ed. 1993). It is most often used to enforce
contracts to convey land or to arbitrate a dispute. See
In re Morris, 260 F.3d 654, 667-68 (6th Cir. 2001);
Nemer Jeep-Eagle, Inc. v. Jeep-Eagle Sales Corp.,
992 F.2d 430, 433-34 (2d Cir. 1993). Instead of ordering
specific performance, which could require court supervision
of the performance, I found that Terra Partners had breached
the Friemel Agreement and granted summary judgment for Ag
Acceptance on that basis.
court in Palavan was correct when it stated that
“[o]btaining specific performance of a contract can
also make the party a prevailing party.” 498 S.W.3d at
143. Yet being the prevailing party alone is not sufficient.
“Recovery of damages on a claim has always been an
element of a recovery of attorney's fees under section
38.001.” G.R.A.V.I.T.Y. Enters., 177 S.W.3d at
547. Because Ag Acceptance did not obtain other damages or
specific performance of the Friemel Agreement, it cannot
recover its attorneys' fees under § 38.001.
fallback position, Ag Acceptance seeks monetary sanctions
under Federal Rule of Civil Procedure 11 because they are no
longer duplicative of the damages awarded for breach of
contract. As Ag Acceptance notes, Rule 11(c)(5) explicitly
prohibits an award of monetary sanctions against a
represented party for violations of Rule 11(b)(2), and
requires that sanctions be imposed against the lawyer or law
firm representing the party. The law firm representing Terra
Partners moved to withdraw from this case twice, once while
the case was pending in Texas and again when the case was
transferred back to New Mexico. Ag Acceptance strenuously
opposed the motion to withdraw both times, arguing that
withdrawal of counsel would lead to frivolous pro se filings
by Steve Veigel and would cause unacceptable delay in
resolution of the case. Because Ag Acceptance successfully
opposed the withdrawal of counsel, it would be unfair to
award monetary sanctions against counsel for Terra Partners
for failing to dismiss Terra Partners' case after it
became clear the claims no longer had any merit.
seems inequitable to deny Ag Acceptance its attorneys'
fees, because they are the natural, probable and foreseeable
consequence of Terra Partners' breach of the Friemel
Agreement. But the Friemel Agreement does not provide for the
recovery of attorneys' fees in the event of a breach of
its provisions, and Texas law, which follows the American
Rule on attorneys' fees, does not allow me to award them.
Accordingly, Ag Acceptance's motion for attorneys'
fees is denied. No later than 14 days after the entry of this
order, Ag Acceptance may file a ...