United States Court of Appeals
Fifth Circuit
IN THE UNITED STATES COURT OF APPEALS FILED
FOR THE FIFTH CIRCUIT March 30, 2006
______________________
Charles R. Fulbruge III
No. 05-50711 Clerk
______________________
SOILA CAMACHO, SONIA DENISE GROVER,
TEXAS WELFARE REFORM ORGANIZATION,
EL PASO COUNTY HOSPITAL
d/b/a R.E. THOMASON GENERAL HOSPITAL,
Plaintiffs - Appellants,
v.
TEXAS WORKFORCE COMMISSION,
TEXAS HEALTH AND HUMAN SERVICES COMMISSION,
and TEXAS DEPARTMENT OF HUMAN SERVICES,
Defendants - Appellees.
______________________
Appeal from the United States District Court
for the Western District of Texas
_____________________
Before: KING, SMITH, and BENAVIDES, Circuit Judges.
BENAVIDES, Circuit Judge:
After successfully challenging rules adopted by the Texas
Workforce Commission and successfully defending that judgment
before this Court, Appellants sought attorney’s fees. The
district court denied their application. The parties are now
before us again, but this time the sole issue on appeal is
whether the district court erred under Erie R.R. Co. v. Tompkins,
304 U.S. 64 (1938), by refusing to apply the fee-award provision
of the Texas Declaratory Judgment Act. We affirm, finding
Appellants’ claim foreclosed by precedent directly on point:
Utica Lloyd’s of Texas v. Mitchell, 138 F.3d 208 (5th Cir. 1998).
I. BACKGROUND
The Appellants, Soila Camacho, Sonia Denise Grover, Texas
Welfare Reform Organization, and El Paso County Hospital District
sued the Appellees, Texas Workforce Commission, Texas Health and
Human Services Commission, and Texas Department of Human Services
in state court. Appellants challenged rules adopted in 2003 by
the Texas Workforce Commission which limited eligibility for
Medicaid health coverage. They sought relief under the Texas
Declaratory Judgment Act (“DJA”). Appellees removed to federal
court, asserting federal question jurisdiction. The district
court invalidated the rules at issue, holding that they were
contrary to the plain meaning of the Medicaid statute. We
affirmed. See Comacho v. Texas Workforce Comm’n, 408 F.3d 229
(5th Cir. 2005).
Appellants then filed an application for attorney’s fees in
the district court. They specified the fee award provision of
the DJA as the statute entitling them to the award. See TEX. CIV.
PRAC. & REM. CODE § 37.009 (Vernon 1997). Section 37.009 provides,
“In any proceeding under this chapter, the court may award costs
and reasonable and necessary attorney’s fees as are equitable and
just.” The district court denied the application, citing Fifth
2
Circuit precedent holding that the DJA is a procedural statute
that does not apply in federal court. This appeal followed.
II. STANDARD OF REVIEW
We review a denial of attorney’s fees for abuse of
discretion. Adams v. Unione Mediterranea Di Sicurta, 364 F.3d
646, 656 (5th Cir. 2004). Underlying questions of law, like the
Erie question presented here, are reviewed de novo. Id.
III. DISCUSSION
A. Utica Lloyd’s of Texas v. Mitchell
Under Erie, federal courts apply state substantive law “to
any issue or claim which has its source in state law.” C. WRIGHT,
A. MILLER, & E. COOPER, 19 FEDERAL PRACTICE AND PROCEDURE (2d ed.
2002) § 4520. Yet, federal law, rather than state law,
invariably governs procedural matters in federal courts. E.g.,
Motorola Communic’s & Elec., Inc. v. Dale, 665 F.2d 771, 774 (5th
Cir. 1982). In Utica, this Court squarely held that the DJA is
procedural for Erie purposes: “a party may not rely on the Texas
DJA to authorize attorney’s fees in a diversity case because the
statute is not substantive law.” 138 F.3d at 210.1
1
Utica is not distinguishable on the ground that this case
arrived in federal court via federal question, rather than diversity,
jurisdiction. The statement in Utica that the DJA does not apply in “a
diversity case” likely reflects the frequently assumed, but erroneous,
proposition that Erie applies only in diversity cases. “The Erie case and the
Supreme Court decisions following it apply in federal question cases as well.”
WRIGHT, MILLER & COOPER, supra, page 3, § 4520.
3
Two panels of this Court subsequent to Utica reached the
opposite result and applied the DJA in federal court. Kona Tech.
Corp. v. S. Pac. Transp. Co., 225 F.3d 595, 604 (5th Cir. 2000);
In re Garza, 2004 WL 249596, *4 (5th Cir. Feb. 10, 2004)
(unpublished). Neither of these decisions affects the
precedential value of Utica because the earliest of conflicting
panel decisions controls. See Southard v. Texas Bd. of Criminal
Justice, 114 F.3d 539, 549 (5th Cir. 1997). Two other post-Utica
panels have reaffirmed the viability of Utica and held that this
Court’s precedent forecloses the use of the DJA in federal court.
See Olander v. Compass Bank, 363 F.3d 560, 567–68 (5th Cir.
2004); Van v. Anderson, 66 Fed. Appx. 524 (5th Cir. Apr. 14,
2003) (unpublished).
B. UTICA AND OLANDER ARE NOT DISTINGUISHABLE
Appellants maintain that Utica and Olander can be
distinguished. They point out that the instant case involves a
challenge brought against state agencies, whereas Utica and
Olander were disputes between private parties. They contend that
this distinction is important because Texas has decided to waive
its sovereign immunity to allow private parties to recover
attorney’s fees against the state in declaratory judgment
actions. See Texas Educ. Agency v. Leeper, 893 S.W.2d 432, 446
(Tex. 1994). Because a state’s waiver of sovereign immunity is a
4
fundamental policy decision, they argue, state agencies should be
susceptible to awards of attorney’s fees under the DJA in federal
court.
Appellants’ effort to distinguish Utica and Olander is not
persuasive. The intention of a state in waiving sovereign
immunity is that the state “be treated in the same manner as any
private litigant.” Driskill v. State, 787 S.W.2d 369, 370–71
(Tex. 1990); see also United States v. Orleans, 425 U.S. 807, 814
(1976) (“The Federal Tort Claims Act is a limited waiver of
sovereign immunity, making the Federal Government liable to the
same extent as a private party for certain torts.”) (emphasis
added). A government that has waived sovereign immunity is
entitled to “assert the same defenses available to private
citizens.” Starnes v. United States, 139 F.3d 540, 542 (5th Cir.
1995). Refusing to extend Utica and Olander to Texas agencies
would treat the state differently than private litigants, who,
under those precedents, are not subject to attorney’s fees
awards. Accordingly, applying Utica and Olander to cases
involving the state is perfectly consistent with Texas’s waiver
of sovereign immunity.
Appellants argue that the Supreme Court’s recent decision in
Lapides v. Board of Regents requires us to carve out an exception
to Utica. 535 U.S. 613 (2002). We disagree. Lapides held that
5
a state waives its sovereign immunity when it removes a case from
state court to federal court. The Supreme Court noted that it
would “seem anomalous or inconsistent for a State both (1) to
invoke federal jurisdiction, thereby contending that the
‘Judicial power of the United States’ extends to the case at
hand, and (2) to claim Eleventh Amendment immunity, thereby
denying that the ‘Judicial power of the United States’ extends to
the case at hand.” Id. at 619. There is no comparable anomaly
in the instant case. Appellees did invoke federal jurisdiction
by removing the case to federal court, but they did not
simultaneously deny the same. Indeed, Appellees do not argue any
form of sovereign immunity defense. Furthermore, contrary to
Appellants’ claim, Appellees have not effectively “regained”
their sovereign immunity by removing to federal court. Appellees
were treated exactly like private parties in federal court. In
short, this case falls squarely within the holdings of Utica and
Olander, and the Supreme Court’s Lapides decision is inapposite.
C. UTICA DOES NOT CONFLICT WITH PRIOR PRECEDENT
Appellants also argue that Utica is not binding because it
conflicts with prior precedent. Appellants contend that Utica
failed to conduct a proper Erie analysis, as required by this
Court’s prior opinions. “Whether a particular provision is
substantive or procedural for Erie purposes is determined by
6
looking to the ‘twin aims’ of the Erie doctrine: the
discouragement of forum shopping and the avoidance of inequitable
administration of the laws.” Herbert v. Wal-Mart Stores, 911
F.2d 1044, 1047 (5th Cir. 1990). Because Utica made no such
analysis, Appellants argue, “it is of no effect.”
Published panel opinions are ordinarily binding on
subsequent panels. Completely disregarding decisions under the
“conflict exception” is a disfavored practice that is to be
avoided if possible. See United States v. Alvarado-Santilano,
434 F.3d 794, 798 (5th Cir. 2005). If Appellants’ argument were
to succeed, it would represent a serious erosion of the principle
of precedent and a dramatic expansion of the conflict exception.
Appellants argue that Utica is inconsistent with general Erie
principles and that Utica’s “analysis” was wrong. They do not,
however, point to any case that contradicts Utica’s specific
holding that the DJA is procedural. Disregarding precedent where
it arguably conflicted with general principles or employed flawed
analysis would invite parties to re-argue the merits of every
prior panel decision. This is because to ask whether a prior
decision’s analysis was correct is essentially to ask whether it
was rightly decided. Thus, we reject Appellants’ effort to
undermine the precedential effect of Utica by referencing broad
principles of Erie analysis.
7
Appellants also argue that Utica conflicts more specifically
with this Court’s earlier decision in Ashland Chemical Inc. v.
Barco Inc., 123 F.3d 261 (1997). Appellants contend that Ashland
held that refusing to apply fee-shifting statutes in federal
court would result in forum shopping and that such statutes are
substantive for Erie purposes. Appellants misread Ashland.
First, Ashland recognized, as has the Supreme Court, that not all
state attorney’s fees laws are applicable in federal court under
Erie. Id. at 265. Second, Ashland did not state, much less
hold, that all fee-shifting rules implicate the problem of forum
shopping. Rather, it expressed this concern only about the
specific attorney’s fees law at issue in that case. Id. at 265
n.3 (“The Local Rule . . . implicates the Erie problem of forum
shopping.”). The Supreme Court has taken a nuanced approach in
determining whether particular attorney’s fees laws are
procedural or substantive under Erie. See Chambers v. NASCO,
Inc., 501 U.S. 32 (1991). Accordingly, the statement in Ashland,
regarding a law not at issue here, does not undermine Utica. In
sum, Utica is binding because Appellants have not identified a
prior decision that conflicts with its specific holding that the
DJA is procedural for Erie purposes.
8
D. UTICA’S HOLDING FOLLOWS FROM GENERAL ERIE PRINCIPLES
We need not go further to affirm the judgment of the
district court. Utica is good law and is not distinguishable
from the case at bar. Nevertheless, since Appellants mount such
a vigorous attack on the reasoning of Utica, we find it prudent
to explain why we believe Utica’s holding comports with general
Erie principles.
Appellants argue that a correct Erie analysis2 compels the
conclusion that the DJA applies in federal court. They contend
that (1) no federal statute, rule, or policy conflicts with the
DJA and (2) failing to apply the DJA in federal court would
promote forum shopping and cause the inequitable administration
of the laws. See Hanna v. Plummer, 380 U.S. 460, 465–68 (1965).
These arguments fail.
The DJA does conflict with a federal policy: the “American
Rule” that “parties are ordinarily required to bear their own
attorney’s fees.” Buckhannon Bd. & Care Home, Inc. v. W. Va.
Dep’t Health & Human Res., 532 U.S. 598, 602 (2001). In light of
the American Rule, generally applied in federal court, we have
been instructed that state law does not always control the issue
2
We agree with Appellants that, when courts divide substance from procedure
under Erie, they should not ordinarily rest on state court opinions
characterizing statutes as “procedural” or “substantive” in cases unrelated to
the Erie doctrine. See Guaranty Trust Co. v. York, 326 U.S. 99, 108–09
(1945).
9
of attorney’s fees. See Chambers, 501 U.S. at 51–52. Rather, we
are to apply state attorney’s fee law only when it “embod[ies] a
substantive policy.” Id. at 52.
The DJA does not represent “substantive policy” under
Chambers. The Supreme Court explained in Chambers that
substantive fee-shifting statutes include those “which permit[] a
prevailing party in certain classes of litigation to recover
fees.” Id. Thus, laws requiring fee awards for prevailing
parties in actions to enforce an insurance policy are substantive
for Erie purposes. Id. By contrast, laws providing for fees due
to an opponent’s bad-faith litigation tactics are procedural.
Id. at 53. In reaching this conclusion, the Supreme Court
emphasized that bad-faith fee awards were “not tied to the
outcome of litigation.” Id.
Fifth Circuit decisions following Chambers recognize that
only fee-shifting statutes limiting fee awards to prevailing
parties are substantive for Erie purposes. In Ashland, this
Court held that the fee-shifting rule at issue there was
substantive because “unlike the imposition of bad-faith sanctions
in Chambers, [the award was] tied to the outcome of the case.”
123 F.3d at 265. Similarly, in Exxon Corp. v. Burglin, we
distinguished fee-shifting statutes “that hinge an award on
success in the underlying lawsuit” from those that do not. 42
10
F.3d 948, 951 (5th Cir. 1995). “This difference tracks the
blurry line between substance and procedure in Erie and the Rules
Enabling Act.” Id. at 952.
The “tied to the outcome” test suggested by the Supreme
Court in Chambers reflects the more general policy concerns
expressed in Hanna. Where an award of attorney’s fees is
discretionary and does not depend on the outcome of the case, it
is difficult for a party to predict whether the law will result
in an additional benefit or an additional liability. We do not
believe that parties would select their forum based upon the
availability of such a law. Nor does refusing to enforce such a
law in federal court result in the inequitable administration of
the laws. See Chambers, 501 U.S. at 53.
Turning back to the statute at issue here, the DJA does not
tie fee awards to the outcome of litigation. The Texas Supreme
Court has held that fee awards under the DJA do not depend upon a
finding that a party “substantially prevailed.” Barsho v. Medina
County Underground Water Conserv. Dist., 925 S.W.2d 618, 637
(Tex. 1996). Rather, the DJA provides the trial court “a measure
of discretion” to decide when awarding fees is “equitable and
just.” Bocquet v. Herring, 972 S.W.2d 19, 20–21 (1998). In its
discretion, a trial court may “grant attorney’s fees to the
nonprevailing party.” Cartwright v. Cologne Production, __ S.W.
11
3d __, 2006 WL 22681, *6 (Tex. App.—Corpus Christi Jan. 5, 2006,
no pet.); see generally 16 TEX. JUR. § 66 (2006) (collecting cases
holding that “attorney fees [under the DJA] are discretionary and
can be awarded to either party, even a non-prevailing party”).
At oral argument, Appellants contended that no Texas court
has ever affirmed fees awarded to a nonprevailing party. Given
the clear language in the cases cited above, we doubt the
relevancy of this contention. In any event, it is incorrect.
See Maris v. McCraw, 902 S.W.2d 191 (Tex. App.—Eastland, 1995,
writ denied); McLendon v. McLendon, 862 S.W.2d 662 (Tex.
App.—Dallas, 1993, writ denied) (affirming an award of more than
$1 million in attorney’s fees to the plaintiffs even though
“[t]he trial court denied the declaratory relief sought”); Blue
Cross Blue Shield of Texas v. Duenez, 2005 WL 1244609 (Tex.
App.—Corpus Christi, May 26, 2005, pet. filed) (mem. op.).3
Based on the foregoing reasons, we conclude that the DJA is
procedural for Erie purposes under Chambers and its Fifth Circuit
progeny.
3
Appellants cite a single case from an intermediate Texas court of appeals
which suggests that only “the prevailing party” may be “entitled” to
attorney’s fees under the DJA. Anderson Mill Util. Dist. v. Robbins, __
S.W.3d __, 2005 WL 2170355, *6 (Tex. App.—Austin, Sep. 8, 2005, no pet.). As
shown above, this is contrary to the weight of Texas authority and, more
importantly, to rulings of the Texas Supreme Court.
12
IV. CONCLUSION
We have considered Appellants’ efforts to escape the rule of
Utica Lloyd’s of Texas v. Mitchell and found them inadequate.
Accordingly, the district court’s judgment denying attorney’s
fees is AFFIRMED.
13
Camacho v. Texas Workforce Commission
Court: Court of Appeals for the Fifth Circuit
Date filed: 2006-03-30
Citations: 445 F.3d 407
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