Is it about to get harder to collect attorneys' fee for breach of contract and other claims under Texas Civil Practice & Remedies Code § 38.001? It sure looks that way. Last February, in Fleming & Assocs., L.L.P. v. Barton, 425 S.W.3d 560, 576 (Tex. App.—Houston [14th Dist.] 2014, pet. denied), the Fourteenth Court of Appeals held that Section 38.001 did not permit recovery of attorneys' fees against anyone other than an "individual or a corporation." Reading the plain language of Section 38.001 against the definitions in the Civil Practice & Remedies Code and previous versions, the court held that "individual" meant an "individual person" and did not have the broad meaning of "persons" found elsewhere in the Code (which includes business entities and governmental entities). The court likewise held that "corporation" meant only an incorporated entity and did not include other forms of business entities, in this case a partnership.
A couple of federal districts courts have interpreted Texas law to provide the same restriction: Ganz v. Lyons P'ship, L.P., 173 F.R.D. 173, 176 (N.D. Tex. 1997) held that Section 38.001(8)did not allow for an award of fees against a limited partnership; and Hoffman v. L&M Arts, No. 3:10-CV-0953-D, 2015 U.S. Dist. LEXIS 27784 (N.D. Tex. Mar. 6, 2015), noted that the "Supreme Court of Texas has not yet addressed whetherSection 38.001permits the recovery of attorney's fees from an LLC" and took an Erie-guess that "the plain meaning of the term 'individual' does not include business entities such as LLCs."
What does the Texas Supreme Court have to say about this? Nothing yet. Fleming made it up to supreme court this year, where the court requested full briefing on the merits. But on May 1, the court denied the petition for review. (Motions for rehearing have been filed and are still pending.)
A bill (H.B. No. 230) was introduced in the last legislative session to expand the scope of 38.001 to include other business entities. (Section 38.001 was last amended to read "individual or corporation" to avoid including governmental entities in the definition of "persons" under the Code Construction Act). But the bill died in committee.
With the supreme court ducking the issue and legislature doing the same, the scope of fee recovery under Section 38.001 appears for now to be limited to individuals and corporations. So take a look at the nature of the party against whom fees are being sought under Section 38.001. If it's not an individual or corporation, Section 38.001 arguably does not allow fee recovery.
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