EL Apple I, Ltd. v. Olivas

• Citation: 115 Fair Empl.Prac.Cas. (BNA) 510,370 S.W.3d 757,55 Tex. Sup. Ct. J. 954
• Decision Date: 22 June 2012
• Docket Number: No. 10–0490.,10–0490.
• Parties: EL APPLE I, LTD., Petitioner, v. Myriam OLIVAS, Respondent.
• Court: Supreme Court of Texas

370 S.W.3d 757

115 Fair Empl.Prac.Cas. (BNA) 510

55 Tex. Sup. Ct. J. 954

EL APPLE I, LTD., Petitioner,

v.Myriam OLIVAS, Respondent.

No. 10–0490.

Supreme Court of Texas.

Argued Sept. 15, 2011.

Decided June 22, 2012.

David R. Pierce, The Law Office of David Pierce, Joseph L. Hood Jr., Windle Hood Alley Norton Brittain & Jay LLP, El Paso, TX, for El Apple I, Ltd.

Francisco X. Dominguez, Dominguez & Coyle PLLC, Daniel Salvador Gonzalez, John P. Mobbs, Attorneys at Law, El Paso, TX, for Myriam Olivas.

Clara B. Burns, Kemp Smith LLP, El Paso, TX, for Amicus Curiae Texas Association of Business.

Justice MEDINA delivered the opinion of the Court.

In this appeal, we consider the calculation of an attorney's fee award in an employment discrimination and retaliation suit brought pursuant to the Texas Commission on Human Rights Act (TCHRA). The TCHRA includes a fee-shifting provision that allows a prevailing party to recover reasonable attorney's fees as part of the costs of pursuing the claim. To calculate attorney's fees under the TCHRA, Texas courts utilize the lodestar method, that is, the number of hours worked multiplied by the prevailing hourly rates. If the lodestar does not reflect a reasonable fee, a multiplier may be applied. In this case, the court of appeals affirmed an attorney's fee award, applying a multiplier that doubled the base lodestar amount. 324 S.W.3d 181 (Tex.App.-El Paso 2010).

The employer presents two issues. First, it claims that the affidavits used to support the fee application were not legally sufficient to support the trial court's determination of the hours expended or a reasonable hourly rate. Second, the employer argues that the trial court abused its discretion by enhancing the lodestar with a 2.0 multiplier. Because we agree that the evidence in the trial court was insufficient to make a lodestar calculation, we reverse the court of appeals' judgment and remand to the trial court for further proceedings consistent with this opinion.

I

Myriam Olivas, an Applebee's restaurant manager in El Paso, filed suit against her employer, El Apple I, Ltd., alleging sex discrimination and retaliation under the TCHRA. Tex. Lab. Code §§ 21.001–.55. A jury determined that Olivas was not the target of sex discrimination, but that her decision to file discrimination complaints against her employer was a motivating factor in El Apple's creation of a hostile work environment. Thus, Olivas prevailed on only the retaliation claim. The trial court rendered judgment awarding Olivas compensatory damages of $1,700 for back pay, $75,000 for past compensatory damages, and $28,000 for future compensatory losses.

As the prevailing party, Olivas also submitted an application for attorney's fees. In affidavits, her attorneys estimated that they collectively spent 850 hours on the case. Olivas's lead counsel, Daniel Gonzalez, averred that he spent approximately 700 hours on the case. Her other attorney, Francisco Dominguez, averred that he spent 150 hours in preparing and trying the case. At a hearing on the fee application, Dominguez subsequently testified that he spent 190 hours, but that he was not seeking compensation for some of that time because it was duplicative of work performed by his co-counsel.

Gonzalez testified that both attorneys' time was reasonable and necessary given the nature of the case and the results obtained. Counsel attributed the number of hours on the case to the number of discovery instruments and pleadings, the number of depositions and witness interviews, as well as the quality of representation. Both Dominguez and Gonzalez testified that they refrained from taking additional clients because of the case.

Following the fee-application hearing, the trial court used the lodestar method to calculate attorney's fees. The court determined that Gonzalez should be compensated at a rate of $250 per hour for 700 hours for a total of $175,000, and that his co-counsel Dominguez should be compensated at a rate of $300 per hour for 190 hours for a total of $57,000. The court then enhanced the lodestar by applying a 2.0 multiplier, resulting in $464,000 in attorney's fees for the trial of the case. Legal assistant fees for 100 hours were also added to the award at a rate of $65 per hour for a total of $6,500. The court further awarded $99,000 in conditional attorney's fees for defending post-judgment motions and appeals.

On appeal, El Apple argued that the attorney's fees awarded through trial was an abuse of discretion because the court did not have sufficient evidence on which to make a reasonable assessment. The company also complained that no basis existed for the trial court's enhancement of the lodestar. The court of appeals vacated the award of Olivas's back-pay damages but otherwise affirmed Olivas's compensatory damages and attorney's fees. 324 S.W.3d at 195. The court held that the affidavits were legally sufficient to support the trial court's determination of hours spent and a reasonable hourly rate, and that more detailed billing records were unnecessary. Id. at 193. The court also determined that the trial court had not erred in enhancing the lodestar because it considered separate factors from those it used to determine the lodestar. Id. at 193–94.

II

The remedies provided under the TCHRA mirror those available under Title VII of the Civil Rights Act of 1964, as amended by the Civil Rights Act of 1991. CompareTex. Lab.Code §§ 21.258, 21.2585, 21.259(a)with42 U.S.C. §§ 1981a, 2000e–5(g), 2000e–5(k). One of the TCHRA's purposes is to harmonize state and federal employment discrimination law. Tex. Lab.Code § 21.001(1). Although state procedural rules govern the determination of attorney's fees in a suit brought under state law, Texas courts have looked to federal law in applying our own statute, including section 21.259(a) of the TCHRA, which provides for an award of attorney's fees to the prevailing party as part of the costs. See, e.g., Sw. Bell Mobile Sys., Inc. v. Franco, 971 S.W.2d 52, 55–56 (Tex.1998); Burgmann Seals Am., Inc. v. Cadenhead, 135 S.W.3d 854, 860–61 (Tex.App.-Houston [1st Dist.] 2004, pet. denied); Elgaghil v. Tarrant Cnty. Junior Coll., 45 S.W.3d 133, 144–45 (Tex.App.-Fort Worth 2000, pet. denied). Because federal courts use the lodestar method in awarding attorney's fees in Title VII cases, Texas courts have likewise used lodestar in awarding fees under Section 21.259(a) of the TCHRA. See, e.g., Dillard Dep't Stores, Inc. v. Gonzales, 72 S.W.3d 398, 412 (Tex.App.-El Paso 2002, pet. denied); W. Telemarketing Corp. Outbound v. McClure, 225 S.W.3d 658, 675–76 (Tex.App.-El Paso 2006, pet. granted, judgm't vacated w.r.m.).

The lodestar method of calculating attorney's fees first “achieved dominance” in federal class actions. Gisbrecht v. Barnhart, 535 U.S. 789, 801, 122 S.Ct. 1817, 152 L.Ed.2d 996 (2002). Texas courts similarly adopted lodestar initially for fee setting in class actions, and the Texas Legislature subsequently mandated the method's use in such cases. SeeTex. Civ. Prac. & Rem.Code § 26.003(a) (providing that “the trial court shall use the Lodestar method to calculate the amount of attorney's fees to be awarded class counsel”).

Under the lodestar method, the determination of what constitutes a reasonable attorney's fee involves two steps. First, the court must determine the reasonable hours spent by counsel in the case and a reasonable hourly rate for such work. Gonzales, 72 S.W.3d at 412. The court then multiplies the number of such hours by the applicable rate, the product of which is the base fee or lodestar. La. Power & Light Co. v. Kellstrom, 50 F.3d 319, 323–24 (5th Cir.1995). The court may then adjust the base lodestar up or down (apply a multiplier), if relevant factors indicate an adjustment is necessary to reach a reasonable fee in the case. Gonzales, 72 S.W.3d at 412.

Our class action rule identifies the relevant factors when making a lodestar determination by reference to Rule 1.04(b), Texas Disciplinary Rules of Professional Conduct. SeeTex.R. Civ. P. 42(i)(1) (providing for attorney's fees award in class actions). The disciplinary rule enumerates the following non-exclusive list of factors:

(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;

(2) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer;

(3) the fee customarily charged in the locality for similar legal services;

(4) the amount involved and the results obtained;

(5) the time limitations imposed by the client or by the circumstances;

(6) the nature and length of the professional relationship with the client;

(7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and

(8) whether the fee is fixed or contingent on results obtained or uncertainty of collection before the legal services have been rendered.

Tex. Disciplinary R. Prof'L Conduct 1.04(b); see also Arthur Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812, 818 (Tex.1997) (quoting the eight-factor test for determining attorney's fees).¹ Our class action rule further provides that any adjustment to the base lodestar “must be in the range of 25% to 400% of the lodestar figure.” Tex.R. Civ. P. 42(i)(1).

III

The award of attorney's fees generally rests in the sound discretion of the trial court. Ragsdale v. Progressive Voters League, 801 S.W.2d 880, 881 (Tex.1990) (per curiam). But a party applying for an award of attorney's fees under the lodestar method bears the burden of documenting the hours expended on the litigation and the value of those hours. Hensley v. Eckerhart, 461 U.S. 424, 437, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983). El Apple submits that a court cannot calculate the base fee or lodestar without such information and that the trial court here abused its discretion by not requiring the...