Rohrmoos Venture v. UTSW DVA Healthcare, LLP

• Decision Date: 26 April 2019
• Docket Number: NO. 16-0006,16-0006
• Citation: 578 S.W.3d 469
• Parties: ROHRMOOS VENTURE, Eric Langford, Dan Basso, and Tobin Grove, Petitioners, v. UTSW DVA HEALTHCARE, LLP, Respondent
• Court: Texas Supreme Court

578 S.W.3d 469

ROHRMOOS VENTURE, Eric Langford, Dan Basso, and Tobin Grove, Petitioners,

v.UTSW DVA HEALTHCARE, LLP, Respondent

NO. 16-0006

Supreme Court of Texas.

Argued October 31, 2018

OPINION DELIVERED: April 26, 2019

James A. Pikl, Byron K. Henry, Scheef & Stone, L.L.P., Frisco, for Petitioners.

Wade Thomas Howard, Alma Fern Shields, Houston, for Respondent.

Justice Green delivered the opinion of the Court.

In this case, we must decide whether a tenant can terminate a commercial lease contract for the landlord’s prior material breach. We hold that under Davidow v. Inwood North Professional Group–Phase I , 747 S.W.2d 373 (Tex. 1988), termination is a justified remedy when the landlord breaches the commercial lease. We also must consider whether the evidence offered to prove attorney’s fees is sufficient under our precedent for fee-shifting awards. We hold that it is not. When a fee claimant seeks to recover attorney’s fees from an opposing party, it must put on evidence of reasonable hours worked multiplied by a reasonable hourly rate, yielding a base figure that can be adjusted by considerations not already accounted for in either the hours worked or the rate. Because the record does not contain this evidence, we affirm the court of appeals' judgment in part, reverse as to the award of attorney’s fees, and remand the case to the trial court for further proceedings.

I. Background

Landlord Rohrmoos Venture executed a commercial lease with tenant UT Southwestern DVA Healthcare, LLP (UTSW), for a commercial building in Dallas, Texas.¹ UTSW used the commercial building for a dialysis clinic. At some point UTSW began experiencing water penetration in the building’s concrete foundation and installed ceramic floor tiles because of the moisture problems.

Around September 2007, state health inspectors evaluated UTSW’s dialysis clinic and criticized the facility because some ceramic floor tiles had come loose from the concrete slab and moisture could be seen under the tiles. UTSW notified Rohrmoos of the inspection results and over the following months, the two exchanged extensive communication in an attempt to diagnose and fix the issue. Neither party accepted responsibility. Multiple engineers and contractors were called in, but the issue persisted into 2009 and then began to worsen as the building apparently suffered significant water penetration.

Because UTSW viewed the commercial building as unsuitable for its intended commercial purpose, UTSW terminated its lease early, vacated the premises, and relocated to Irving, Texas, while still allegedly owing approximately $ 250,000 in unpaid rent. UTSW then sued Rohrmoos and the joint-venturers behind it for breach of contract and breach of the implied warranty of suitability. UTSW also sought declaratory judgment that: (1) a casualty occurred in accordance with the lease, (2) Rohrmoos failed to remedy the casualty, and (3) UTSW had the right to terminate the lease. Rohrmoos answered with several affirmative defenses, including waiver and prior material breach. Rohrmoos also counterclaimed for negligence and breach of contract. UTSW asserted its own affirmative defenses to Rohrmoos’s counterclaims.

The case was submitted to a jury. The jury found that UTSW and Rohrmoos both failed to comply with the lease, that Rohrmoos failed to comply first, and that Rohrmoos breached the implied warranty of suitability. Although UTSW initially sought money damages, it did not submit that claim to the jury. Accordingly, no money damages were awarded to UTSW.

Regarding attorney’s fees, the parties' lease agreement provided for a fee-shifting arrangement whereby "the prevailing party shall be entitled to an award for its reasonable attorneys' fees" from the non-prevailing party "[i]n any action to enforce the terms of [the] Lease." In an attempt to prove the reasonableness and necessity of the requested attorney’s fees at trial, UTSW’s attorney, Wade Howard, testified that he had twenty years of litigation experience, the standard rate he charges is $ 430 per hour, he has handled cases similar in nature to this one before, and a reasonable and necessary number of hours to spend on this case would be around 750 to 1,000. Those hours multiplied by his standard hourly rate equals between $ 322,500 and $ 400,000, so he testified that a reasonable and necessary fee would be between $ 300,000 and $ 400,000. But then Howard went on to state, "This case, for whatever reason, has not been worked up in a reasonable fashion.... But because of that, the fees in this case are much closer -- my fees are much closer to 800 -- over $ 800,000." He gave some examples of why the cost of this litigation was so high—searching through "millions" of emails and reviewing "hundreds of thousands" of documents during discovery, over forty depositions taken, and a forty-page motion for summary judgment. Howard did not explain how much time was spent on each of those tasks, however, and it was clear that not all the tasks he performed were included in his testimony. Rather, he stated that the factors relevant to his attorney’s fees were (1) the amount in controversy, (2) the complexity of the case, and (3) his knowledge and experience—three of the eight factors set out in Arthur Andersen & Co. v. Perry Equipment Corp. , 945 S.W.2d 812, 818 (Tex. 1997). The jury determined reasonable attorney’s fees for both UTSW and Rohrmoos at $ 800,000 for representation in the trial court, $ 150,000 in the court of appeals, and $ 75,000 for representation in this Court.

The trial court entered final judgment against Rohrmoos, stating:

1. [Rohrmoos] materially breached the lease agreement first.

2. [Rohrmoos] breached the implied warranty of suitability.

3. Because [Rohrmoos] materially breached the lease agreement first and breached the implied warranty of suitability, UTSW had the right to terminate the lease agreement.

4. Rohrmoos Venture takes nothing on all of its claims against UTSW and Counter-Defendants....

The trial court awarded UTSW attorney’s fees in the amount determined by the jury—totaling $ 1,025,000 with the conditional appellate awards. Rohrmoos moved to reform the judgment or, alternatively, for a new trial. The trial court denied the motion.

Because the trial court’s judgment authorized UTSW to terminate the commercial lease, Rohrmoos, on appeal, attacked the jury’s finding that it breached the implied warranty of suitability established under Davidow . See Davidow , 747 S.W.2d at 377 (holding that "there is an implied warranty of suitability by the landlord in a commercial lease that the premises are suitable for their intended commercial purpose"). Rohrmoos reasoned that unless Davidow is waived under the lease or the lease contains a provision that supersedes Davidow ’s implied warranty of suitability, a tenant can terminate a commercial lease only by proving a breach of the implied warranty of suitability. Otherwise, posited Rohrmoos, why would a commercial tenant go through the rigors of proving a Davidow breach if instead it could obtain the same remedy—termination—by merely convincing a jury that the landlord had materially breached the lease? Rohrmoos therefore devoted most of its briefing to challenging the jury’s finding that it breached Davidow ’s implied warranty of suitability. Rohrmoos did not challenge the jury’s finding that it materially breached the lease.

The court of appeals initially missed Rohrmoos’s primary argument under Davidow , largely because Rohrmoos did not brief the Davidow issue fully. On this point, the court of appeals held:

All of [Rohrmoos’s Davidow arguments] are irrelevant unless Rohrmoos also defeats the answers to questions one through three [of the jury charge], which support [UTSW]’s prior material breach of contract defense to Rohrmoos’s counterclaim. But, as discussed later, Rohrmoos does not properly challenge the sufficiency of the evidence to support the jury’s breach of contract findings. And unchallenged jury findings are binding on this court.

559 S.W.3d 155, 160 (Tex. App.—Dallas 2015, pet. granted) (mem. op.) (footnote omitted) (citation omitted).

Rohrmoos filed a motion for reconsideration, asserting that the court of appeals overlooked Rohrmoos’s primary argument under Davidow that a material breach of contract does not support the termination of a commercial lease. The court of appeals withdrew its opinion, vacated its judgment, and published a new opinion with the following language:

Rohrmoos’s motion for reconsideration improperly now argues that we should ignore the answers to Questions One through Three [of the jury charge] because the right to terminate a commercial lease for failure to make repairs exists only with respect to a breach of the implied warranty of suitability that the Supreme Court established in Davidow v. Inwood North Professional Group–Phase I , 747 S.W.2d 373, 376–77 (Tex. 1988) and does not exist for a prior material breach of an express duty [to] repair contained in the lease. But Rohrmoos did not assert that objection to Questions One through Three in the trial court, or otherwise preserve the point in the trial court. See TEX. R. CIV. P. 274 ("A party objecting to a charge must point out distinctly the matter to which he objects and the grounds of his objection.").

Id. at 163. The court of appeals decided Rohrmoos’s remaining points of error against Rohrmoos and affirmed the trial court’s judgment. See id. at 160–64, 169.

Regarding the $ 1,025,000 in attorney’s fees, Rohrmoos challenged the award in the court of appeals on two grounds: (1) UTSW was not a "prevailing party" under the lease and therefore was not entitled to recover attorney’s fees, and (2) the evidence was insufficient to support the fee award.² Id. at 164–66. The court of appeals disagreed with Rohrmoos on both counts, holding that UTSW was a "prevailing party" under the lease, and that El Apple I, Ltd. v. Olivas , 370 S.W.3d 757 (Tex. 2012), and its progeny, which use the ...