IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
__________________________
No. 00-10745
__________________________
MARK RAPPAPORT and TRACEY RAPPAPORT,
Plaintiffs-Appellants,
versus
STATE FARM LLOYDS,
Defendant-Appellee.
___________________________________________________
Appeal from the United States District Court
For the Northern District of Texas
(No. 3:97-CV-2747-L)
___________________________________________________
October 26, 2001
Before GARWOOD and WIENER, Circuit Judges, and VANCE,* District
Judge.
PER CURIAM**:
Plaintiffs-Appellants Mark and Tracey Rappaport appeal from
the district court’s award of attorney’s fees in their suit against
State Farm Lloyds for payment of an insurance claim. We conclude
that the district court neither abused its discretion nor clearly
erred in awarding fees, and we therefore affirm.
*
District Judge of the Eastern District of Louisiana, sitting
by designation.
**
Pursuant to 5TH CIR. R. 47.5, the Court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
I. FACTS AND PROCEEDINGS
In October 1997, the Rappaports, residents of Dallas County,
Texas, sued their insurer, State Farm Lloyds, in Dallas County
District Court; they alleged contractual claims, including breach
of contract and violations of Article 21.55 of the Texas Insurance
Code, and a series of extracontractual claims, including fraud,
civil conspiracy, and breach of the duty of good faith and fair
dealing. The suit arose out of State Farm’s refusal to pay the
Rappaports’ claim under their homeowner’s policy contract for hail
damage to the roof of their house. Relying on the Rappaports’
demand for damages totaling $200,000 (including mental anguish and
treble damages for the insurance proceeds) and on diversity of the
parties, State Farm removed to the United States District Court for
the Northern District of Texas.
Discovery proceeded under the supervision of District Judge
Solis until August 1998, when the case was reassigned to District
Judge Lindsay. In 1999 the court granted State Farm’s motion for
summary judgment dismissing the Rappaports’ extracontractual
claims, and the Rappaports have not appealed this ruling. The
breach-of-contract and Article 21.55 claims went to trial before a
jury.
The sole question put to the jury was: “Did the hail damage
that led to the need to replace the Rappaports’ roof occur during
[the insurance coverage period]?” The jury checked the box,
“Plaintiffs did so prove.” The district court entered final
2
judgment in September 1999, ordering that the Rappaports recover
$8,900 in actual damages to their roof, plus interest and costs.
This litigation then entered its second phase, which focused
solely on attorney’s fees. After the jury verdict, the district
court cautioned the Rappaports that:
Plaintiffs are further directed to submit fees
only for time spent pursuing the claim [sic]
upon which they ultimately prevailed at trial.
No fees will be awarded for time spent on
claims and other matters upon which Plaintiffs
were unsuccessful.
In issuing this caution, the trial court required the Rappaports ——
actually, their counsel —— to segregate the legal expenses
involving the Rappaports’ successful claims from those involving
their extracontractual claims, which had been dismissed on summary
judgment. Nevertheless, the Rappaports’ first application for fees
failed to segregate the fees as directed, contested the legality of
the segregation requirement, and asserted a claim for $71,430 in
attorney’s fees for the entire case.
The court responded by stating that in its view, applicable
law permitted the fee claims to be segregated, and again
unequivocally ordered the Rappaports to do so:
Plaintiffs are hereby ordered to file an
amended fee application that segregates fees
incurred in prosecuting their successful
claims for breach of contract and under Texas
Insurance code article 21.55. If Plaintiffs
fail to segregate their fees as ordered by the
court, the court will segregate the fees and
further will take any action it deems
appropriate for failure to comply with a
lawful court order. Plaintiffs’ counsel is
3
warned not to play games with the court or
fail to comply with its lawful orders.
Despite this express order and warning to counsel, the Rappaports’
first amended application for fees continued to contest the
segregation requirement; however, it did segregate the time spent
drafting the summary-judgment pleadings and did reduce all other
expenses prior to summary judgment by 20 percent, describing this
as a “good faith generous estimate of the time that might be
reasonably allocated to the unsuccessful claims.” No other
segregation was attempted. The overall claim for fees dropped to
$63,786 —— a reduction of about 11 percent.
The court thereupon attempted its own segregation analysis,
but was frustrated in this effort because it found the records of
the Rappaports’ lawyer, Mark Ticer, to be “sketchy and vague in
many instances and...[lacking] sufficient explanatory detail for
the court to determine which hours were expended on the contracts
and Art. 21.55 claims.” Describing the allocation of time among
the claims as “totally inadequate,” the court stated that it was
“impossible [emphasis original] for the court to determine the
amount of time that was reasonably expended on Plaintiffs’
successful contract claim” before the summary-judgment dismissal of
the extracontractual claims. Consequently, the district court
denied all fees for time expended before its summary-judgment
ruling, finding the Rappaports’ failure to segregate “really
unexplainable and inexcusable.” The court also denied as
4
unreasonable some fees related to the successful contract claims,
including $8,050 billed by co-counsel, terming that legal service
“not necessary for the prosecution of this action.” In the end,
the court awarded the Rappaports $18,460 in attorney’s fees.
The Rappaports moved to amend or reconsider this judgment and
submitted a brief that, while preserving the segregation issue for
appeal, did segregate some of the contractual-claim and
extracontractual-claim fees from the generality of the case. This
segregation reduced the total attorney’s fees request to $57,744
—— an additional reduction of $6,042, or approximately 10 percent
of the revised request. On reconsideration, the district court
allowed fifty more hours of Ticer’s time that the court now
understood to be related to the contractual claims, resulting in an
increase of $10,940 in fees awarded, for a total of $29,400. The
court viewed this award as reasonable both for the contract claims
taken as a whole and in light of the actual damages found in the
case; therefore, it stated, “this court will not further expend
scarce judicial resources on the attorney’s fees dispute.” This
timely appeal followed.
II. ANALYSIS
5
We review a district court’s award or denial of attorney’s
fees for abuse of discretion.1 We review the court’s findings of
fact supporting the award, such as its determination of reasonable
hours, for clear error.2
As this is a diversity case, the district court looked to
state law, which governs the fee award.3 Texas statutes provide
that the party prevailing on a breach-of-contract claim “may
recover reasonable attorney’s fees”4 and that if an insured sues
under Article 21.55, “reasonable attorney fees...shall be taxed.”5
More generally, the Texas Supreme Court has stated that a trial
court may award those fees that are “reasonable and necessary for
the prosecution of the suit.”6 To calculate the total fee award,
the district court must determine the reasonable number of hours
1
See Strong v. Bellsouth Telecommunications, Inc., 137 F.3d
844, 850 (5th Cir. 1998) (citing Forbush v. J.C. Penney Co., 98
F.3d 817, 821 (5th Cir. 1996)); Texas Commerce Bank Nat’l Ass’n v.
Capital Bancshares, Inc., 907 F.2d 1571, 1575 (5th Cir. 1990) (“An
award of attorney’s fees is entrusted to the sound discretion of
the trial court.”).
2
Strong, 137 F.3d at 850 (citing Longden v. Sunderman, 979
F.2d 1095, 1100 (5th Cir. 1992)); Louisiana Power & Light Co. v.
Kellstrom, 50 F.3d 319, 324 (5th Cir. 1995), cert. denied, 516 U.S.
862 (1995).
3
Atchison, Topeka and Santa Fe Ry. Co. v. Sherwin-Williams
Co., 963 F.2d 746, 751 (5th Cir. 1992).
4
TEX. CIV. PRAC. & REM. CODE ANN. § 38.001 (Vernon 1997).
5
TEX. INS. CODE ANN. art. 21.55 § 6 (Vernon 2001 Supp.).
6
Stewart Title Guaranty Co. v. Sterling, 822 S.W.2d 1, 10
(Tex. 1991).
6
expended and the reasonable hourly rate for each participating
attorney.7 The product of these is frequently labeled the
“lodestar” amount.8 The fee applicant bears the burden of proof in
showing the reasonableness of the hours applied for: It must
provide documentation that will enable the district court to verify
this showing, and a district court may reduce the number of hours
awarded if the documentation is vague or incomplete.9
With these standards in mind, we turn to the three issues
raised by this appeal.
A. Segregating the Claims
Much of the second stage to-and-fro in the district court
centered on whether it was proper for the court to order
segregation of claims in this case. Generally, as part of its
reasonableness-and-necessity burden, the prevailing party must show
that it incurred the subject fees while suing the losing party “on
7
Hensley v. Eckerhart, 461 U.S. 424, 433 (1983) (terming this
calculation the “most useful starting point for determining the
amount of a reasonable fee”).
8
Id. The lodestar amount may then be adjusted according to
the twelve factors set forth in Johnson v. Georgia Hwy. Express,
Inc., 488 F.2d 714, 717 (5th Cir. 1974) (including among these
factors the “amount involved and the results obtained”). The
instant case centers on the calculation of the lodestar itself,
rather than an adjustment to it under Johnson.
9
Louisiana Power & Light Co. v. Kellstrom, 50 F.3d 319, 324
(5th Cir. 1995), cert. denied, 516 U.S. 862 (1995); see also Riley
v. City of Jackson, Mississippi, 99 F.3d 757, 760 (5th Cir. 1996)
(“The fee applicant bears the burden of proving that the number of
hours and the hourly rate for which compensation is requested is
[sic] reasonable.”).
7
a claim which allows recovery of such fees.”10 The fee applicant
thus must distinguish successful from unsuccessful claims, carve
out the fees incurred to prosecute the successful claims, and limit
its application to those fees only.11 Under Texas law, however,
A recognized exception to this duty to
segregate arises when the attorney’s fees
rendered are in connection with claims arising
out of the same transaction and are so
interrelated that their “prosecution or
defense entails proof or denial of essentially
the same facts.” Therefore, when the causes
of action involved in the suit are dependent
upon the same set of facts or circumstances
and thus are “intertwined to the point of
being inseparable,” the party suing for
attorney’s fees may recover the entire amount
covering all claims.12
The Rappaports contend that their case falls under this exception.
Because whether facts are “essentially the same” depends on
each case’s circumstances, the Texas cases on segregation of fees
in fraud and contract claims are either somewhat inconsistent13 or,
10
Stewart Title, 822 S.W.2d at 10 (citations omitted).
11
United States v. Reid & Gary Strickland Co., 161 F.3d 915,
919 (5th Cir. 1998) (“A party requesting attorneys’ fees carries
the burden of proof and the duty to segregate fees.”) (applying
Texas law); Smith v. United National Bank–Denton (Matter of Smith),
966 F.2d 973, 978 (5th Cir. 1992) (“This burden [of the fee
applicant] includes the duty to segregate recoverable fees from
those that are not recoverable.”) (applying Texas law).
12
Stewart Title, 822 S.W.2d at 11.
13
Compare Panizo v. Young Men’s Christian Ass’n of Greater
Houston Area, 938 S.W.2d 163, 171 (Tex. App. 1996) (“Proof of this
scienter requirement [for fraud] would require significant
additional pretrial discovery and trial preparation. We hold the
fraud and contract claims in this case do not involve proof or
denial of essentially the same facts.”) with Mid-Century Ins. Co.
8
at the least, highly fact-dependent.14 Either way, none of these
cases supports the proposition that a court clearly errs in
requiring segregation of extracontractual claims that did not
survive summary judgment. As State Farm correctly argues, the
extracontractual claims certainly would have required proof of
facts in addition to those required to establish the contractual
claims.15 We therefore hold that the district court did not abuse
of Texas v. Boyte, 49 S.W.3d 408, 416 (Tex. App. 2001) (holding
that a bad-faith claim was not required to be segregated from
claims under the insurance code and deceptive trade practices
statute); Pegasus Energy Group v. Cheyenne Petroleum, 3 S.W.3d 112,
131 (Tex. App. 1999) (finding that claims alleging fraud and breach
of oil well operating agreement were so intertwined as to be
inseparable); Triland Inv. Group v. Warren, 742 S.W.2d 18, 25 (Tex.
App. 1987), rev’d on other grounds, 779 S.W.2d 808 (Tex. 1989)
(holding that segregation of breach-of-contract and fraud claims
was not necessary, because the facts proving each claim were
“closely aligned,” even though the jury’s verdict of fraud
reflected an error of law).
14
See Briercroft Service Corp. v. Perez, 820 S.W.2d 813, 817
(Tex. App. 1990), rev’d on other grounds, 809 S.W.2d 216 (Tex.
1991) (stating that trial court properly submitted a jury question
on attorney’s fees because breach-of-warranty, breach-of-contract,
misrepresentation, and deceptive-trade-practices claims were
inseparable for purposes of the jury’s calculation of attorney’s
fees); Paramount Nat’l Life Ins. Co. v. Williams, 772 S.W.2d 255,
(Tex. App. 1989), writ denied (finding that segregation of
successful tort claim from three contractual claims was not
necessary because “[i]n this case the causes of action require
proof of the same facts beginning with the policy application
interview and continuing through the ultimate denial of the claims
based on what occurred in that interview”).
15
The contract claim required proof of performance, breach, and
damages, see Panizo, 938 S.W.2d at 170, and the Article 21.55 claim
required proof of untimely payment, see TEX. INS. CODE ANN. § 21.55.
For the Rappaports to have succeeded on the fraud claim, however,
would have required different proof of “a material
misrepresentation, which was false, and which was either known to
be false when made or was asserted without knowledge of its truth,
9
its discretion in requiring that the Rappaports segregate their
successful claims in contract from their meritless claims in tort
for purposes of recovering attorney’s fees.
B. Fees for Time Incurred before Summary Judgment
The Rappaports also appeal from the district court’s denial of
any attorney’s fees for legal services rendered before summary
judgment. In briefing this issue to us, the Rappaports have at
last done what they had three opportunities to do in the district
court: segregate time that was reasonable for and necessary to the
contractual claims that actually went to trial. They urge us to
increase the fee award to reflect 17.5 hours spent by their counsel
on matters such as removal, scheduling, and disclosure that did not
depend on the claim made; 31.6 hours incurred in preparation for
and taking depositions of witnesses who testified at trial; and
27.3 hours devoted to State Farm’s expert and his report.
That the Rappaports can so segregate their lawyer’s time now
strongly suggests that they could have done so all along, despite
which was intended to be acted upon, which was relied upon, and
which caused injury.” Formosa Plastics v. Presidio Engineers, 960
S.W.2d 41, 47 (Tex. 1998) (citations omitted). The bad-faith claim
would have required proof that State Farm “knew or should have
known that it was reasonably clear that the claim was covered.”
State Farm Lloyds v. Nicolau, 951 S.W.2d 444, 448 (Tex. 1997)
(citing Universe Life Ins. Co. v. Giles, 950 S.W.2d 48, 54 (Tex.
1997)). The civil-conspiracy claim would have required that the
Rappaports prove (1) a combination of two or more persons (2) who
agreed (3) on a common purpose, (4) in furtherance of which one of
them committed an overt and unlawful act. Operation
Rescue—National v. Planned Parenthood of Houston and Southeast
Texas, Inc., 975 S.W.2d 546, 553 (Tex. 1998).
10
their protestations to the contrary, without imperiling appellate
review of the segregation question. Furthermore, as an appellate
court sitting in review of a district court’s award of attorney’s
fees —— an issue that should not become a second litigation with a
life of its own if it can be avoided —— we are loath to disturb the
district court’s order. “Litigants clearly take their chances that
the district court will reject or reduce fee awards if they submit
vague or incomplete applications.”16 That the Rappaports may have
finally met their burden of pleading before us does not demonstrate
that the district court clearly erred in reviewing their inadequate
and non-complying responses to its pellucid directions; on the
contrary, it indicates a weakness in their proffered reasons for
thrice failing to comply with the court’s instruction to segregate.
By denying fees based on time incurred before summary
judgment, the district court did not run afoul of the Texas rule
that “if a party does not properly segregate attorney’s fees, it
would be error to completely deny attorney’s fees on contract
claims, as evidence of unsegregated attorney’s fees is more than a
scintilla of evidence of segregated fees.”17 Indeed, the Rappaports
will receive $29,400 in attorney’s fees, more than three times the
16
Wegner v. Standard Ins. Co., 129 F.3d 814, 822 (5th Cir.
1997) (citing Louisiana Power & Light Co. v. Kellstrom, 50 F.3d
319, 324 (5th Cir. 1995), cert. denied, 516 U.S. 862 (1995)
(internal quotation marks omitted)).
17
Jackson Law Office, P.C. v. Chappell, 37 S.W.3d 15, 23 (Tex.
App. 2000) (citing Panizo, 938 S.W.2d at 171).
11
quantum received on their insurance claim. Given the damages they
recovered and the simplicity of their triable claims, we do not
view this as an inadequate or unreasonably low award.
C. Co-counsel’s Fees
Lastly, the Rappaports appeal from the district court’s denial
of their application for $8,050 in fees for co-counsel Jack Thomas
Jamison, whom Ticer enlisted to assist in trying the case. To
repeat, the only claims then remaining were the ones based on the
contract and the insurance code, and the sole issue put to the jury
was whether the hailstorm occurred during the term of the policy.
The district court denied fees for Jamison because it “did not
understand why an additional lawyer with essentially the same
skill, experience, and knowledge as that of Mr. Ticer was needed at
this stage of the litigation....[C]ertain lawsuits need multiple
lawyers, but this lawsuit was not such a case.”
Whether a fee application’s reported hours are repetitive or
duplicative is a question of fact, and we will not disturb the
district court’s finding absent clear error.18 Here, the judge who
conducted trial was in the best position to determine whether
Jamison supplied any ingredient necessary to the Rappaports’
presentation of their case that Ticer himself could not have
provided. In particular, and contrary to the Rappaports’
18
Riley v. City of Jackson, Mississippi, 99 F.3d 757, 760 (5th
Cir. 1996) (citing Cooper v. Pentecost, 77 F.3d 829 (5th Cir.
1996)).
12
suggestion to us, Ticer’s billing affidavit does indeed reflect
time spent preparing jury questions; his records do not clearly
establish that the time Jamison spent on the same project was
necessary and nonduplicative, at least not to the level of making
the district court’s finding clearly erroneous. We perceive no
reversible error in the denial of fees for Jamison.
III. CONCLUSION
In summary, the district court did not abuse its discretion or
clearly err in ordering that the claims be segregated, denying fees
for unsegregated time prior to summary judgment, and denying fees
for co-counsel. We therefore
AFFIRM.
13