ACCEPTED
14-15-00093-CV
FOURTEENTH COURT OF APPEALS
HOUSTON, TEXAS
12/7/2015 4:14:26 PM
CHRISTOPHER PRINE
CLERK
NO. 14-15-00093-CV
FILED IN
14th COURT OF APPEALS
IN THE COURT OF APPEALS HOUSTON, TEXAS
FOR THE FOURTEENTH DISTRICT OF 12/7/2015 4:14:26 PM
TEXAS
CHRISTOPHER A. PRINE
HOUSTON, TEXAS Clerk
STATE FARM LLOYDS,
Appellant
v.
GINGER HANSON,
Appellee
On Appeal from Cause No. 2012-68087
In the 281st Judicial District Court
Harris County, Texas
APPELLANT STATE FARM LLOYDS’
REPLY BRIEF
Bruce E. Ramage
State Bar No. 5492500
ramage@mdjwlaw.com
Kevin G. Cain
State Bar No. 24012371
cain@mdjwlaw.com
Levon G. Hovnatanian
State Bar No. 10059825
hovnatanian@mdjwlaw.com
MARTIN, DISIERE, JEFFERSON & WISDOM, L.L.P.
808 Travis, Suite 1800
Houston, Texas 77002
Telephone: (713) 632-1700
Facsimile: (713) 222-0101
ORAL ARGUMENT REQUESTED
TABLE OF CONTENTS
PAGE
TABLE OF CONTENTS ...........................................................................................i
INDEX OF AUTHORITIES................................................................................... iii
I. HANSON FAILS TO IDENTIFY ANY EVIDENCE THAT THE
SHINGLES WERE IN A SATISFACTORY STATE BEFORE THE
STORM...........................................................................................................1
II. HANSON FAILS TO IDENTIFY ANY PROBATIVE EVIDENCE
THAT THE WIND CAUSED DAMAGE TO THE SHINGLES.................. 1
III. HANSON FAILS TO IDENTIFY EVIDENCE SHOWING THAT
THE SHINGLES CHANGED FROM A SATISFACTORY STATE
TO AN UNSATISFACTORY STATE ON JUNE 1, 2012. ..........................3
IV. FREEMAN DID NOT RULE OUT OVERDRIVEN STAPLES AS
THE CAUSE OF THE PULL THROUGH DAMAGE. ................................3
V. HANSON HAS NOT SHOWN SHE WAS EXCUSED FROM
SATISFYING THE POLICY’S CONDITION PRECEDENT
REQUIRING HER TO REPAIR THE SUPPOSED DAMAGE IN
ORDER TO BE ENTITLED TO REPLACEMENT COST
BENEFITS. .....................................................................................................4
VI. HANSON FAILS TO IDENTIFY SUFFICIENT EVIDENCE TO
ESTABLISH THAT SHE SEGREGATED THE CLAIMED
ATTORNEY’S FEES. ....................................................................................5
VII HANSON HAS FAILED TO SHOW THAT RULE 167 DOES NOT
PRECLUDE HER RECOVERY OF DAMAGES AND
ATTORNEY’S FEES THAT ACCRUED AFTER DECEMBER 4,
2013. ...............................................................................................................6
VIII. HANSON FAILS TO SHOW THAT SHE PROPERLY
SEGREGATED RECOVERABLE ATTORNEY’S FEES FROM
THOSE THAT ARE NOT RECOVERABLE. ..............................................8
IX. HANSON HAS FAILED TO SHOW THAT THE ATTORNEY’S
FEE AWARD IS NOT EXCESSIVE...........................................................10
i
CONCLUSION .......................................................................................................13
CERTIFICATE OF COMPLIANCE ......................................................................13
CERTIFICATE OF SERVICE ...............................................................................14
ii
INDEX OF AUTHORITIES
PAGE
Cases
Alief Indep. Sch. Dist. v. Perry,
440 S.W.3d 228 (Tex. App.—Houston [14th Dist.] 2013,
pet. denied) ............................................................................................................9
Ashford Partners, Ltd. v. ECO Res., Inc.,
401 S.W.3d 35 (Tex. 2012) ...................................................................................7
Brasel v. Manhattan Homeowners Ass’n,
2014 WL 2809816 (Tex. App.—Houston [1st Dist.] 2014,
no pet.) .................................................................................................................12
Citizens Nat’l Bank v. NXS Constr., Inc.,
387 S.W.3d 74 (Tex. App.—Houston [14th Dist.] 2012,
no pet.) .............................................................................................................8, 10
El Apple I, Ltd. v. Olivas,
370 S.W.3d 757 (Tex. 2012) .................................................................................6
Farmers Group Ins., Inc. v. Poteet,
434 S.W.3d 316 (Tex. App.—Fort Worth 2014,
pet. denied) ....................................................................................................10, 12
Farrar v. Hobby,
506 U.S. 103 (1992) ..........................................................................................11
Flagship Hotel, Ltd. v. City of Galveston,
117 S.W.3d 552 (Tex. App.—Texarkana 2003,
pet. denied) ............................................................................................................9
Flint & Assocs. v. Intercontinental Pipe & Steel, Inc.,
739 S.W.2d 622 (Tex. App.—Dallas 1987,
writ denied)..........................................................................................................12
Long v. Griffin,
442 S.W.3d 253 (Tex. 2014) .................................................................................6
iii
Saitchick v. American Motorists Ins. Co.,
554 F.Supp. 209 (S.D. N.Y.) .............................................................................4, 5
Schenck v. Ebby Halliday Real Estate, Inc.,
803 S.W.2d 361 (Tex. App.—Fort Worth 1990,
no writ) ................................................................................................................10
Smith v. Patrick W.Y. Tam Trust,
296 S.W.3d 545 (Tex. 2009) .............................................................................11
Stewart Title Guar. Co. v. Aiello,
941 S.W.2d 68 (Tex. 1997) ...................................................................................9
USAA County Mut. Ins. Co. v. Cook,
241 S.W.3d 93 (Tex. App.—Houston [1st Dist.] 2007,
no pet.) .................................................................................................................12
Wal-Mart Stores, Inc. v. Merrell,
313 S.W.3d 837 (Tex. 2010) .................................................................................2
Ware v. United Lloyd’s,
2013 WL 1932812 (Tex. App.—Beaumont 2013,
no pet.) ...........................................................................................................11, 12
Statutes
TEX. CIV. PRAC. & REM. CODE § 38.001...................................................................7
Rules
TEX. R. CIV P. 167 .....................................................................................................6
TEX. R. CIV. P. 167(b) ...............................................................................................7
TEX. R. CIV. P. 167.4(a) ............................................................................................7
iv
I. HANSON FAILS TO IDENTIFY ANY EVIDENCE THAT THE
SHINGLES WERE IN A SATISFACTORY STATE BEFORE THE
STORM.
Hanson claims that her testimony that a home inspector “did not find any
damage to the home at all that was not cosmetic” establishes that the shingles were
in a satisfactory state at the time she purchased the home in 2011. Appellee’s Brief
at 4. However, nothing shows he climbed onto the roof and inspected the shingles.
3:34-35. She also relies on the seller’s disclosure from the 2011 purchase in an
attempt to show that the shingles were not damaged. Appellee’s Brief at 4.
However, as Hanson acknowledges, that shows at best that the seller was simply
not aware of any unsealed shingles. Appellee’s Brief at 4.
Finally, she contends that an underwriting report that State Farm prepared
approximately 11 months before the purported storm “did not reflect any concerns
about the roof at all.” Appellee’s Brief at 4. However, there is no evidence anyone
climbed up on the roof to examine the shingles. One cannot determine the
presence of unsealed shingles from the ground. 6:71-72. Nor can overdriven
staples be seen from the ground. 5:254. The only way to detect them is to lift the
corners of shingles and look at the staples. 5:254.
II. HANSON FAILS TO IDENTIFY ANY PROBATIVE EVIDENCE
THAT THE WIND CAUSED DAMAGE TO THE SHINGLES.
Hanson cites Kimmel’s testimony that the wind lifted unsealed shingles and
pulled them through the staples. Appellant’s Brief at 6-10. However, Kimmel’s
1
conclusions are not probative evidence because they do not exclude construction
defects as a cause of the damage.
Kimmel repeatedly states that shingles were pulled through the staples, but
never states how he differentiates the damage from that caused by overdriven
staples. For example, he states,
“Now in this exhibit if you see that fastener just pulled with it. The
nail came completely out. Okay. And that’s not what’s happening
here. It’s actually pulling through the staple. There’s a staple on the
roof and it’s pulled through the staple.”
3:178-79. He continued, “In this instance, in her roof, it’s pulled through that
fastener so it’s actually torn right there at the fastener. So it is damage, it’s got
actual direct physical loss.” 3:179. The mere fact that the shingles were unsealed
was what Kimmel based his conclusions on: “And the depiction – the shingles are
lifting up, just like I told you, so that tells me that these fasteners are pulled . . . .”
3:180. But he never ruled out that the unsealed shingles were torn at the fastener
because the staples were overdriven. See Wal-Mart Stores, Inc. v. Merrell, 313
S.W.3d 837, 838 (Tex. 2010). He did not state how he could differentiate between
pull through damage and overdriven-staple damage. Nor did he show that
unsealed shingles could not have been torn by overdriven staples.
2
III. HANSON FAILS TO IDENTIFY EVIDENCE SHOWING THAT THE
SHINGLES CHANGED FROM A SATISFACTORY STATE TO AN
UNSATISFACTORY STATE ON JUNE 1, 2012.
Hanson attempts to deflect attention from the lack of evidence showing that
the shingles became unsealed on June 1, 2012 by relying on evidence that trees fell
over on a golf course. Appellee’s Brief at 15. Even if that were evidence of high
winds at Hanson’s house, it is not evidence that any supposed damage to the
shingles occurred that day.
Hanson also relies on evidence that other neighbors were having work
performed on their roofs. Appellee’s Brief at 16. But nothing shows that those
roofs were not in a condition similar to Hanson’s. Unsealed shingles are common
on roofs over five years old. 5:240. That other roofs in her neighborhood were
being worked on is not evidence that wind caused pull through shingle damage or
caused the shingles to unseal on June 1, 2012.
IV. FREEMAN DID NOT RULE OUT OVERDRIVEN STAPLES AS THE
CAUSE OF THE PULL THROUGH DAMAGE.
Hanson contends Freeman ruled out overdriven staples as a cause of damage
to the shingles. Appellee’s Brief at 12. However, Freeman limited his testimony
to only the most severe type of overdriven staple. He considered a staple to be
overdriven if it penetrated the plywood decking:
A. Typically when it’s overdriven in my experience it will go
down into the decking.
3
Q. What will?
A. The fastener.
4:11-12.
The undisputed evidence showed that a staple was overdriven if it merely
penetrated the top layer of shingles. 5:252. A properly driven staple is flush with
the surface of the top layer of shingles. 5:252. The roof had numerous staples that
were flush with the top surface of the bottom layer indicating they were overdriven
through the top layer. 5:252. A staple can also be overdriven when it does not
completely penetrate the top layer. 5:248. Freemen never ruled out these other
types of overdriven staples as alternate causes of the damage. Kimmel did not rule
out any kind of overdriven staple as a cause of the damage. Consequently, their
testimony was not probative evidence. See Merrell, 313 S.W.3d at 838.
V. HANSON HAS NOT SHOWN SHE WAS EXCUSED FROM
SATISFYING THE POLICY’S CONDITION PRECEDENT
REQUIRING HER TO REPAIR THE SUPPOSED DAMAGE IN
ORDER TO BE ENTITLED TO REPLACEMENT COST BENEFITS.
Hanson can only muster one opinion in which a court held that the insured
could recover replacement cost benefits without first repairing the damage.
Appellee’s Brief at 20. Hanson contends that the opinion in Saitchick v. American
Motorists Insurance Co., 554 F.Supp. 209 (S.D. N.Y.), supports her recovery of
replacement cost benefits. There, the insurer asserted that the insureds had not
satisfied the condition precedent for recovery. Id. at 216. The insureds asserted
4
that “various equitable axioms,” including estoppel, precluded the insurer from
relying on the condition precedent. Id. The court based its conclusion that the
insureds were entitled to replace cost benefits based on “equitable considerations”
and case law. Id. at 217 (stating, “I find that both case law and equitable
considerations render replacement cost the appropriate method of valuing
plaintiffs’ damages.”). Here, Hanson never asserted estoppel as an affirmative
defense to her required satisfaction of the condition precedent. In fact, she never
asserted or pled that she was not required to satisfy the condition precedent.
Additionally, Hanson failed to show that she could not recover replacement cost
benefits under the policy after recovering the proceeds of a judgment for actual
cash value and performing the repairs.
VI. HANSON FAILS TO IDENTIFY SUFFICIENT EVIDENCE TO
ESTABLISH THAT SHE SEGREGATED THE CLAIMED
ATTORNEY’S FEES.
In order to support her deficient attempt to comply with the lodestar method
for proving attorney’s fees, Hanson is forced to reduce the requirements in Long
and El Apple to “at least some indication of the time spent on various parts of the
case.” Appellee’s Brief at 25. But both require much more. “To establish the
number of hours reasonably spent on the case, the fee application and record must
include proof documenting the performance of specific tasks, the time required for
those tasks, the person who performed the work, and his or her specific rate.” El
5
Apple I, Ltd. v. Olivas, 370 S.W.3d 757, 765 (Tex. 2012). “[G]eneralities about
tasks performed provide insufficient information for the fact finder to meaningfully
review whether the tasks and hours were reasonable and necessary under the
lodestar method.” Long v. Griffin, 442 S.W.3d 253, 255 (Tex. 2014).
While she claims that the evidence here is “vastly different” from that in
Long and El Apple, that is not the standard. Hanson fails to show how the notation
“preparation for trial” permits the trial court to determine whether the time
expended was reasonable and necessary. Appellee’s Brief at 25. Plainly, it does
not. It does not even identify what was done to prepare for trial. Because it does
not document the performance of “specific tasks,” but gives only a general
category of work it is insufficient.
Moreover, she fails to show how entries giving the total time expended for a
day, but listing four tasks permits a meaningful review of whether the time spent
on each was reasonable and necessary. Obviously, the trial court has no way of
determining reasonableness and necessity without knowing the amount of time
expended on each task.
VII HANSON HAS FAILED TO SHOW THAT RULE 167 DOES NOT
PRECLUDE HER RECOVERY OF DAMAGES AND ATTORNEY’S
FEES THAT ACCRUED AFTER DECEMBER 4, 2013.
Hanson states that the “language” of rule 167 “makes it clear that the
$15,000 attorney’s fee award must be included in the equation” determining
6
whether Hanson recovered 80 percent of State Farm’s offer. Appellee’s Brief at
27. Conspicuously absent is any reference to any such language. Nor does
Hanson establish that an attorney’s fee award is a “monetary claim.”
The statute provides, "If a settlement offer made under this rule is rejected,
and the judgment to be awarded on the monetary claims covered by the offer is
significantly less favorable to the offeree than was the offer, the court must award
the offeror litigation costs against the offeree from the time the offer was rejected
to the time of judgment." Rule 167.4(a). Here, the judgment awarded only
$12,878 for breach of contract, the monetary claim. Attorney’s fees are simply an
add on amount and their recovery is entirely dependent on a successful breach of
contract claim. TEX. CIV. PRAC. & REM. CODE § 38.001 (stating “A person may
recover reasonable attorney’s fees from an individual or corporation, in addition to
the amount of a valid claim . . . .” (emphasis added)); Ashford Partners, Ltd. v.
ECO Resources, Inc., 401 S.W.3d 35, 40 (Tex. 2012). “A judgment award on
monetary claims is significantly less favorable than an offer to settle those claims
if: (1) the offeree is a claimant and the judgment would be less than 80 percent of
the offer. . . .” Rule 167(b). The $12,878 award on the breach of contract
monetary claim is only 43 percent of State Farm’s $30,000 offer on that claim. CR
1541. Consequently, the rule applies.
7
VIII. HANSON FAILS TO SHOW THAT SHE PROPERLY SEGREGATED
RECOVERABLE ATTORNEY’S FEES FROM THOSE THAT ARE
NOT RECOVERABLE.
Hanson fails to offer any basis for her expert’s opinion that only five percent
of the fees incurred were for claims for which they were not recoverable. She cites
no testimony showing how he arrived at that percentage. She states, “Segregated
attorney’s fees can be established with evidence of unsegregated fees and a rough
percentage of the amount attributable to the covered vs. non-covered claims.”
Appellee’s Brief at 29. But her expert’s five percent figure does not even rise to
the level of a rough percentage.
Hanson complains that the way the attorney applied a percentage to
segregate attorney’s fees in Citizens Nat’l Bank v. NXS Constr., Inc., 387 S.W.3d
74, 88 (Tex. App.—Houston [14th Dist.] 2012, no pet.), is not the standard for
segregation. But Hanson’s expert offered no methodology for coming up with the
five percent that he applied to determine what fees were incurred on claims for
which they were not recoverable:
A. Chapa is a case that basically says when you have different
causes of action -- like here we've got a breach of contract cause of
action and we've got a bad faith cause of action. And it says you need
to apportion your time to each in case you're not successful on one of
them.
But what basically happens is in this case we're trying to get a
new roof. So 95 percent of the time that we spend on this case is
towards that. And that -- so in other words, the breach of -- the work
8
you do for breach of contract and bad faith is inextricably intertwined.
That's the terminology they use.
I would estimate that 5 percent of the time that we've spent was
spent solely on bad faith issues.
5:18-19. He provided nothing showing how he arrived at the five percent estimate.
He did not identify the amount of time that was spent on the extra contractual
claims. He did not identify the amount of time expended on the claims against
Traise whom Hanson had nonsuited. In short, the five percent segregation is based
on nothing more than the ipse dixit of the expert and is nothing but a bare
conclusion that is not probative evidence.
Nor do the authorities on which Hanson relies show that an unsupported
percentage is probative evidence of segregation. She relies on dicta in a footnote
in Flagship Hotel, Ltd. v. City of Galveston, 117 S.W.3d 552, 565 n.7 (Tex.
App.—Texarkana 2003, pet. denied), that a “rough percentage” of the amount
attributable to a breach of contract claim can be sufficient to segregate. However,
segregation by a percentage was not an issue in the case. The court never held that
an unsupported percentage was sufficient evidence of segregation. Again, in
Stewart Title Guaranty Co. v. Aiello, 941 S.W.2d 68, 73 (Tex. 1997), the
percentage based segregation was not challenged and the court did not address
whether it was sufficient. In Alief Independent School District v. Perry, 440
S.W.3d 228, 246 (Tex. App.—Houston [14th Dist.] 2013, pet. denied), the
9
defendant never challenged how the plaintiff’s expert arrived at the percentage he
applied for segregation. Here, State Farm has. In Schenck v. Ebby Halliday Real
Estate, Inc., 803 S.W.2d 361, 369 (Tex. App.—Fort Worth 1990, no writ), the
percentage that was applied was not challenged as lacking support. The court did
not hold that an expert witness can simply declare that a certain percentage should
apply without showing what he based the percentage on.
In the end, the only courts that have addressed the sufficiency of a
percentage based segregation in the cases the parties have cited were the ones in
Farmers Group Ins., Inc. v. Poteet, 434 S.W.3d 316, 332 (Tex. App.—Fort
Worth 2014, pet. denied), and Citizens Nat’l Bank v. NXS Construction, Inc., 387
S.W.3d 74, 88 (Tex. App.—Houston [14th Dist.] 2012, no pet.). In Poteet, the
court held that applying a blanket percentage to the total amount of attorney’s fees
claimed was not evidence of segregation. 434 S.W.3d at 332, 333. That is what
Hanson’s expert did here. 5:18-19. In NXS Construction, the percentage was
based on the attorney deducting fees attributable to claims for which they were not
recoverable. 387 S.W.3d at 87-88. Hanson’s expert did not do that. 5:18-19.
IX. HANSON HAS FAILED TO SHOW THAT THE ATTORNEY’S FEE
AWARD IS NOT EXCESSIVE.
The appellants spill a lot of ink trying to rebut the supreme court’s assertion
that “the degree of the plaintiff’s overall success goes to the reasonableness of a
fee award” and “‘the most critical factor in determining the reasonableness of a
10
fee award is the degree of success obtained.’” Smith v. Patrick W.Y. Tam
Trust, 296 S.W.3d 545, 548 (Tex. 2009) (quoting Farrar v. Hobby, 506 U.S.
103 (1992)). Appellee’s Brief at 33-36. They imply that that is only true in civil
rights cases. Appellee’s Brief at 33-36. However, Smith was not a civil rights
case. Id. at 546.
There, the plaintiffs sought damages for breach of a commercial lease. Id.
The plaintiff sought $200,000 in damages, but the jury awarded only $65,000. The
supreme court concluded that the $62,438.75 fee sought “was unreasonable in light
of the amount involved and the results obtained, and in the absence of evidence
that such fees were warranted due to circumstances unique to this case.” 1 Id. at
548. Thus, the court’s statements quoted above were neither limited nor applied to
civil rights cases.
Other courts also recognize that the degree of success is the most critical
factor in determining the reasonableness of an attorney’s fee award. In Ware v.
United Lloyd’s, 2013 WL 1932812, *3 (Tex. App.—Beaumont 2013, no pet.), the
only factor the court applied was the degree of success obtained. It affirmed the
trial court’s refusal to award attorney’s fees where the plaintiff recovered $7833.01
1
Nor did State Farm heavily rely on the holding in Farrar as appellants incorrectly assert.
Appellee’s Brief at 35. State Farm referred to Farrar only once in Appellant’s Brief (stating in a
parenthetical to the citation to Smith, “(quoting Farrar v. Hobby, 506 U.S. 103 (1992))).”
11
in damages and sought $133,947 in attorney’s fees. Id. at *3. See also Brasel v.
Manhattan Homeowners Ass’n, 2014 WL 2809816 (Tex. App.—Houston [1st
Dist.] 2014, no pet.), and Farmers Group Ins. Inc. v. Poteet, 434 S.W.3d 316 (Tex.
App.—Fort Worth 2014, pet. denied) (both recognizing “the most critical factor in
determining the reasonableness of a fee award is the degree of success obtained.”).
Hanson also cites a long list of cases that have supposedly “held fee awards
reasonable even when the amount of fees far surpasses the amount of actual
damages.” Appellee’s Brief at 38. Here, the fees surpass the damages by a ratio of
nearly six to one. Only two cases on which Hanson relies involved that type of
fees to damages ratio. However, in Flint & Assocs. v. Intercontinental Pipe &
Steel, Inc., 739 S.W.2d 622, 626 (Tex. App.—Dallas 1987, writ denied), the fees
were not excessive because trial lasted four weeks. Here, trial lasted four days.
The case does not establish that the fees here were not excessive. In USAA County
Mutual Insurance Company v. Cook, 241 S.W.3d 93, 102-03 (Tex. App.—Houston
[1st Dist.] 2007, no pet.), the plaintiff recovered $23,310 in fees and $1926.56 in
damages. However, the amount originally demanded was $2126.56, so the degree
of success was 90 percent. See id. at 103. Here, the degree of success was only
about 33 percent based of Hanson’s demand during trial and about 25 percent of
what she sought before trial. CR 1541. Cook does not establish that the attorney’s
fee award here is not excessive.
12
CONCLUSION
State Farm respectfully requests the Court to grant the relief sought in
Appellant’s Brief.
Respectfully submitted,
MARTIN, DISIERE, JEFFERSON & WISDOM, L.L.P.
By: /s/ Bruce E. Ramage
Bruce E. Ramage
State Bar No. 5492500
ramage@mdjwlaw.com
Kevin G. Cain
State Bar No. 24012371
cain@mdjwlaw.com
Levon G. Hovnatanian
State Bar No. 10059825
hovnatanian@mdjwlaw.com
808 Travis, 20th Floor
Houston, Texas 77002
(713) 632-1700 – Telephone
(713) 222-0101 – Facsimile
ATTORNEYS FOR APPELLANT
STATE FARM LLOYDS
CERTIFICATE OF COMPLIANCE
This is to certify that this computer-generated Appellant State Farm Lloyds’
Reply Brief contains 2941 words.
/s/ Bruce E. Ramage
Bruce E. Ramage
Dated: December 7, 2015
13
CERTIFICATE OF SERVICE
This is to certify that a true and correct copy of the foregoing Appellant
State Farm Lloyds’ Reply Brief has been forwarded to the individual(s) listed
below, by the method indicated, on this 7th day of December, 2015:
Mr. Richard D. Daly
rdaly@dalyblack.com
Mr. John Black
jblack@dalyblack.com
Ms. Melissa Waden Wray
mwray@dalyblack.com
RICHARD DALY LAW FIRM
2211 Norfolk Street, Ste. 800
Houston, Texas 77098
(via e-filing and e-mail)
(Attorneys for appellee Ginger Hanson)
/s/ Bruce E. Ramage
Bruce E. Ramage
14