Stewart Automotive Research, LLC v. Erik Nolte, Brian Kirk, Simon Ogier and John Tolle

Reversed and Rendered and Opinion filed April 23, 2015.

In The

Fourteenth Court of Appeals

NO. 14-14-00199-CV

STEWART AUTOMOTIVE RESEARCH, LLC, Appellant
V.

ERIK NOLTE, BRIAN KIRK, SIMON OGIER AND JOHN TOLLE,
Appellees

On Appeal from the 295th District Court
Harris County, Texas
Trial Court Cause No. 2012-73571

OPINION

Appellant Stewart Automotive Research, LLC sued appellees Erik Nolte,
Simon Ogier, Brian Kirk, and John Tolle for misappropriation of trade secrets and
conversion. In addition, Stewart sought judicial review of the Texas Workforce
Commission’s determination that Stewart owed Nolte unpaid wages. Stewart
subsequently non-suited its claims without prejudice. Appellees then filed a
motion for recovery of attorney fees. The trial court granted the motion and
awarded appellees $42,010 in attorneys’ fees.

Stewart argues on appeal, among other things, that the trial court’s fee award
must be reversed because there is no contractual, equitable, or statutory basis for
appellees to recover their attorneys’ fees in this case. We agree and therefore
reverse the award, rendering judgment that appellees take nothing.

BACKGROUND

Appellant Stewart Automotive Research, LLC sued its former employees,
appellees Erik Nolte, Simon Ogier, Brian Kirk, and John Tolle, alleging
misappropriation of trade secrets and conversion. Stewart also named the Texas
Workforce Commission (“TWC”) as a defendant because Stewart sought judicial
review of the TWC’s determination that Stewart owed Nolte $27,701.97 in unpaid
wages.1

Appellees filed an answer with a general denial. 2 Almost one year later,
appellees filed a traditional and no-evidence summary judgment motion. Stewart
then non-suited its claims against all defendants, including appellees, without
prejudice.

1
Stewart contends it was only seeking judicial review of Nolte’s wage claim and points
to the prayer for relief section of its original petition. That section asks for a review and reversal
of Nolte’s wage claim. It does not mention any wage claims made by the other appellees.
Appellees claim that Stewart’s petition nonetheless contained facts and argument relating to
Kirk’s and Ogier’s claims, and that this had the effect of tying up those claims in litigation.
Appellees argue that if Stewart was not seeking review of Kirk’s and Ogier’s claims, it should
have paid the claims when they became final. We agree with Stewart, however, that its petition
only sought review of Nolte’s claim. Stewart’s failure, if any, to timely pay the wage claims of
any appellee is not before us in this case.
2
The TWC filed its own answer and stated appellees were not represented by the Office
of the Attorney General. The TWC is not a party to this appeal.

2
 Subsequently, appellees filed a motion for recovery of attorneys’ fees.
Appellees claimed that Stewart non-suited its claims to avoid an unfavorable ruling
and that they were thus entitled to attorneys’ fees under Epps v. Fowler, 351
S.W.3d 862 (Tex. 2011), and section 61.066(f) of the Texas Labor Code.
Alternatively, appellees argued that they were entitled to attorneys’ fees on
equitable grounds. Stewart filed a response to appellees’ motion, and appellees
filed a reply to Stewart’s response. In the reply, appellees renewed their previous
arguments and advanced a new basis for the award of attorneys’ fees. They
asserted that trial courts may award attorneys’ fees as sanctions when those fees
have been incurred for bad-faith abuse of the judicial process.

Following a hearing, the trial court granted appellees’ motion. The court
found that Stewart “took a nonsuit in this case in order to avoid an unfavorable
judgment” and therefore awarded appellees $42,010 in attorneys’ fees. This appeal
followed.

ANALYSIS

Stewart challenges the trial court’s award of attorneys’ fees on three
grounds. In its first issue, Stewart argues that Rule 162 of the Texas Rules of Civil
Procedure mandates reversal of the trial court’s award because appellees had no
pending claim for affirmative relief seeking attorneys’ fees at the time Stewart
non-suited its claims. In its second issue, Stewart asserts there is no contractual,
equitable, or statutory basis entitling appellees’ to recover attorneys’ fees in this
case. In its third issue, Stewart asserts it did not non-suit its claims to avoid an
unfavorable result. Because we agree that there is no basis for the court’s award,
we do not address Stewart’s first and third issues.

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I. Standard of review and applicable law

Under the American Rule, trial courts have no inherent authority to require a
losing party to pay the prevailing party’s attorneys’ fees. In re Lesikar, 285
S.W.3d 577, 582 (Tex. App.—Houston [14th Dist.] 2009, no pet.) (citing
Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep’t of Health & Human Res., 532
U.S. 598, 602 (2001)). Attorneys’ fees are not available to the prevailing party in
the absence of an authorizing contract or statute. Tony Gullo Motors I, L.P. v.
Chapa, 212 S.W.3d 299, 310 (Tex. 2006).

Appellees have not asserted that there is a contract entitling them to recover
attorneys’ fees in this case. Instead, they have argued both in the trial court and on
appeal that that they are entitled to attorneys’ fees under section 61.066(f) of the
Texas Labor Code. The availability of attorneys’ fees under a particular statute is a
question of law. Holland v. Wal–Mart Stores, Inc., 1 S.W.3d 91, 94 (Tex. 1999).
We therefore review this issue de novo. Headington Oil Co. v. White, 287 S.W.3d
204, 215 (Tex. App.—Houston [14th Dist.] 2009, no pet.). We construe statutory
provisions to ascertain and effectuate legislative intent, and we ascertain that intent
by first looking to the plain and common meaning of the statute’s words. Tex.
Mut. Ins. Co. v. Sonic Sys. Int’l, Inc., 214 S.W.3d 469, 476 (Tex. App.—Houston
[14th Dist.] 2006, pet. denied). We must also view a statute’s terms in context and
give them full effect. Id.

II. Appellees are not entitled to attorneys’ fees under section 61.066(f) of
the Labor Code.
Section 61.066(f) of the Labor Code provides: “Unless the adverse party
prevails in the civil action or the notice of assessment is reversed by a reviewing
court, the adverse party shall pay all costs of either action, including attorney’s
fees, investigation costs, service costs, court costs, and other applicable costs.”

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Tex. Labor Code Ann. § 61.066(f) (West 2006). 3 Notwithstanding Stewart’s non-
suit without prejudice, appellees contend they are the prevailing parties under this
section, citing Epps v. Fowler, 351 S.W.3d 862 (Tex. 2011). In that case, the
Supreme Court of Texas held that a defendant may be a prevailing party when a
plaintiff nonsuits without prejudice if the trial court determines—as it did here—
that the nonsuit was taken to avoid an unfavorable ruling on the merits. Id. at 870.

Stewart responds that even if appellees prevailed, they cannot recover fees
under subsection (f) because they are not parties to a civil action brought under
section 61.066. To evaluate this argument, we examine the language and structure
of the section as a whole. Section 61.066 is entitled “Commission Action;
Enforcement Order.” Tex. Labor Code Ann. § 61.066 (West 2006). Subsection
(a) provides that

The commission, in the name of the state and the attorney general, may: (1)
bring a suit in a district court in Travis County to enforce a final order from
which an appeal under this chapter has not been taken; or (2) serve on the
defaulting party a notice of assessment stating the amount due.
Tex. Labor Code Ann. § 61.066(a) (West 2006). The next four subsections
concern the “notice of assessment” referenced in subsection (a)(2). Subsection (c)
mandates that the notice be served in the manner provided by law for service of
process on a defendant in a civil action in district court. Tex. Labor Code Ann.
§ 61.066(c) (West 2006). Subsection (d) authorizes a person aggrieved by the
TWC determination reflected in the notice to seek judicial review in Travis
County. Tex. Labor Code Ann. § 61.066(d) (West 2006). Subsection (e) states
that the notice of assessment becomes final if the person does not seek judicial

3
Appellees concede that they are not entitled to attorneys’ fees under section 38.001 of
the Texas Civil Practice and Remedies Code. See Abatement Inc. v. Williams, 324 S.W.3d 858,
864 (Tex. App.—Houston [14th Dist.] 2010, pet. denied) (“Common law claims and TWC
claims are distinct remedial schemes, and a litigant must choose which one to pursue.”).

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Tex. Labor Code Ann. § 61.066(f) (West 2006). 3 Notwithstanding Stewart’s non-
suit without prejudice, appellees contend they are the prevailing parties under this
section, citing Epps v. Fowler, 351 S.W.3d 862 (Tex. 2011). In that case, the
Supreme Court of Texas held that a defendant may be a prevailing party when a
plaintiff nonsuits without prejudice if the trial court determines—as it did here—
that the nonsuit was taken to avoid an unfavorable ruling on the merits. Id. at 870.

Stewart responds that even if appellees prevailed, they cannot recover fees
under subsection (f) because they are not parties to a civil action brought under
section 61.066. To evaluate this argument, we examine the language and structure
of the section as a whole. Section 61.066 is entitled “Commission Action;
Enforcement Order.” Tex. Labor Code Ann. § 61.066 (West 2006). Subsection
(a) provides that

The commission, in the name of the state and the attorney general, may: (1)
bring a suit in a district court in Travis County to enforce a final order from
which an appeal under this chapter has not been taken; or (2) serve on the
defaulting party a notice of assessment stating the amount due.
Tex. Labor Code Ann. § 61.066(a) (West 2006). The next four subsections
concern the “notice of assessment” referenced in subsection (a)(2). Subsection (c)
mandates that the notice be served in the manner provided by law for service of
process on a defendant in a civil action in district court. Tex. Labor Code Ann.
§ 61.066(c) (West 2006). Subsection (d) authorizes a person aggrieved by the
TWC determination reflected in the notice to seek judicial review in Travis
County. Tex. Labor Code Ann. § 61.066(d) (West 2006). Subsection (e) states
that the notice of assessment becomes final if the person does not seek judicial

3
Appellees concede that they are not entitled to attorneys’ fees under section 38.001 of
the Texas Civil Practice and Remedies Code. See Abatement Inc. v. Williams, 324 S.W.3d 858,
864 (Tex. App.—Houston [14th Dist.] 2010, pet. denied) (“Common law claims and TWC
claims are distinct remedial schemes, and a litigant must choose which one to pursue.”).

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successfully recover unpaid wages under the Payday Act should be allowed to
recover attorney’s fees they incur, especially in court, because section 61.062 “has
heretofore not included a fee-shifting mechanism within or alongside the ‘wages’
for which it authorizes recovery, and whether it should provide one is the sole
prerogative of the Legislature”); see also Abatement Inc., 324 S.W.3d at 864
(“[A]ttorney’s fees can be recovered in connection with a breach of contract claim
but not in a TWC claim” for denied wages.).

Appellees argue that Pruneda merely addresses bad faith filings under
section 61.053. We disagree. In Pruneda, the employee sought review of the
TWC’s wage determination order under 61.062. See 2010 WL 5060638, at *10
(holding despite employee’s failure to cite 61.062 in his original petition, the plain
language demonstrated he sought review of the TWC decision under that section of
the statute). The court of appeals noted that the employee “did not recover, nor
could he recover, attorney’s fees with respect to his claim seeking judicial review
of the TWC decision.” Id. at *18 n.7. Bloch was also a case under section 61.062.
See 2014 WL 1203197, at *2 (stating employee “timely perfected a claim for
judicial review of the TWC’s order through the underlying suit” under section
61.062).

For these reasons, we hold the attorneys’ fees award was not authorized by
section 61.066(f) of the Texas Labor Code. Because the fees were not authorized
by statute, we need not determine whether the trial court correctly found that
Stewart non-suited its claims to avoid an unfavorable judgment. We sustain
Stewart’s second issue.

We note that appellees also argued in their motion below that they were
entitled to recover attorneys’ fees on equitable grounds, and in their reply that they
were entitled to recover their fees as sanctions for bad-faith abuse of the judicial

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process. But the trial court awarded fees based on its finding that Stewart
nonsuited its claims to avoid an unfavorable judgment, which appellees argued
allowed them to claim fees under section 61.066(f) as prevailing parties. There is
no indication in the record that the trial court made an equitable award of
attorneys’ fees or that it awarded fees as sanctions, and appellees do not argue on
appeal that the order should be upheld on either ground. Moreover, the findings
necessary to award sanctions are absent,4 and the cases appellees cited below in
support of an equitable award involved fees as damages or a common fund—
theories that do not apply to this case.5 Accordingly, we conclude that these
grounds do not support the trial court’s order.

4
See Polansky v. Berenji, 393 S.W.3d 362, 370 (Tex. App.—Austin 2012, no pet.)
(holding trial court abused its discretion to the extent it imposed sanctions on its own initiative
without a notice issued before a hearing, an evidentiary hearing, or factual findings).
5
In their motion, appellees cited, but did not discuss, the following three cases:
Nationwide Mut. Ins. v. Holmes, 842 S.W.2d 335, 341 (Tex. App.—San Antonio 1992, writ
denied); Baja Energy, Inc. v. Ball, 669 S.W.2d 836, 838–39 (Tex. App.—Eastland 1984, no
writ); Knebel v. Capital Nat’l Bank, 518 S.W.2d 795, 799 (Tex. 1974). In Nationwide, the court
of appeals stated that the general rule disallowing attorney’s fees should not apply because the
fees were not incurred prosecuting or defending the underlying cause of action. 842 S.W.2d at
342. Additionally, the court held the fees constituted damages because they were incurred due to
an “unconscionable” act by Nationwide. Id. Here, appellees did not assert that Stewart’s failure
to pay Nolte’s wage claim (the only one before the trial court) constituted unconscionable
conduct. Furthermore, the fees at issue here were awarded to appellees for defending the
underlying cause of action. In Baja Energy, Baja had represented to Ball that it owned certain
property when it did not, and the trial court awarded attorneys’ fees after Ball was sued for
trespassing by the third-party owner. 669 S.W.2d at 838. The court of appeals upheld the award
and noted that an exception to the general rule forbidding attorneys’ fees applies “when [a]
wrongful act or contractual violation involves the claimant in litigation with third parties and
forces the claimant to incur expenses to protect his interests.” Id. at 839. In this case, appellees
did not incur the fees in a different lawsuit filed by a third party due to the tortious conduct of
Stewart. Knebel involved an award of attorneys’ fees under the “common fund doctrine,” which
rests on the principle that “one who preserves or protects a common fund works for others as
well as for himself, and the others so benefited should bear their just share of the expenses,
including a reasonable attorney’s fee.” 518 S.W.2d at 799. Here, however, there is no common
fund.

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 CONCLUSION

Having sustained Stewart’s second issue, we reverse the order of the trial
court awarding attorneys’ fees to appellees and render judgment that appellees take
nothing.

/s/ J. Brett Busby
Justice

Panel consists of Chief Justice Frost and Justices Christopher and Busby.

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