Generally, in Texas the right to be awarded attorney’s fees is limited to whether a contract or statute provides for the recovery of such fees.  Without a right by contract or statute each party is responsible for their own attorney’s fees and there is no right to shift those fees to the losing party.  Assuming there is a statute or contract which allows a party to recover fees, how do you determine which party has the right to recover its fees? In other words, what makes a party a “prevailing party”?

On April 8, 2022 the Texas Supreme Court issued its opinion in Sunchase IV Homeowners Ass’n. v. Atkinson, and held that sometimes a party can be a “prevailing party” by defeating the other party’s claims.   Recovery of damages is not necessary to be a prevailing party.  In Sunchase, Atkinson sued the Sunchase Homeowners Association (HOA) for various claims related to alleged violations of the condominium association by-laws  and deed restrictions related to the failure to properly repair many of the units, including Atkinson’s unit, damaged by Hurricane Dolly.  In response, the HOA filed a counter-claim and requested attorney’s fees under Section 82.161 of the Texas Property Code, which allows an HOA to seek a declaration of its rights on various issues under the by-laws and deed restrictions.

The trial court granted several of the HOA’s declarative rights, including a the right to attorney’s fees if the HOA prevailed in the lawsuit.   The case proceeded to trial and the jury found against Atkinson and in favor of the HOA and awarded the HOA attorney’s fees of $135,029.94.  The jury did not award the HOA any other monetary damages.  The Court of Appeals affirmed the trial court’s judgment, but reversed the claim for the HOA’s attorney’s fees because it found that the HOA was not awarded any affirmative relief–it “simply” defeated the claims being asserted by Atkinson.

The Texas Supreme Court , however reversed the Court of Appeals and found that the HOA was a prevailing party under Chapter 82.161 of the Texas Property Code.   Chapter 82.161(b) states, “(b) The prevailing party in an action to enforce the declaration, bylaws or rules is entitled to reasonable attorney’s fees and costs of litigation from the non-prevailing party.” The Court interpreted the statute as allowing recovery of attorney’s fees even if the party seeing those fees would not ”have suffered damages or obtained affirmative relief to qualify as a prevailing party”.  Simply put, a party may prevail simply by defeating another party’s claims.

The Sunchase case should not be read to mean that in all cases a party is a prevailing party simply by defeating the other party’s claims.  However, the Court’s opinion places newfound importance on reviewing the language of statutes allowing recovery of attorney’s fees and the definition of “prevailing party” that may be contained in the contract between the parties when determining whether you may recover fees for “simply” defeating a claim.

The attorneys is our Austin and Dallas are available to answer any questions you may have regarding recovery of attorney’s fees under statute or contract.  Please contact us at info@gstexlaw.com.

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