You may remember Dateless Dan from a couple of months ago. In a series of TV ads Dateless saw two beautiful women come to life in front of two truck drivers who were drinking Buzzard Breath beer. Dateless Dan was shocked when, after drinking a case of the beer, the two women failed to materialize. He sued the bottlers of Buzzard Breath for false advertising, claiming emotional distress, mental injury and financial loss in excess of $10,000. Before the case went to trial, the bottlers of Buzzard Breath beer offered Dateless $2,000 to settle, largely as a nuisance. After Dateless declined, the case went to trial. A jury awarded Dateless $0. Can Buzzard Breath Brewery make Dateless Dan pay the attorneys’ fees it paid to defend Dan’s claims?

Texas Legislature. Theoretically, but not in this case. This year’s session of the Texas Legislature made amendments to Texas law allowing parties to recover some amount of their attorneys’ fees and costs (which would not otherwise be recoverable) if

    1. they make a settlement offer that complies with the statute, and
    2. the judgment that is ultimately rendered is “significantly less favorable to the rejecting party than was the settlement offer.”  Attorneys’ fees that might be recoverable are capped at 50% of a plaintiff’s economic damages or 100% of any noneconomic or punitive damages.

Therefore, the plaintiff never has to come out of pocket to pay any attorneys’ fees. Instead a plaintiff’s recovery is only reduced by any attorney’s fees that a defendant might be awarded. In this case, where the jury awarded Dateless $0, Buzzard Breath cannot “recover” any attorneys’ fees, whether awarded by the Court or not. Because plaintiff had no monetary recovery, there is nothing that Buzzard Breath can offset against.

When first filed, HB 274 promised sweeping changes potentially subjecting unsuccessful plaintiffs to the risk of personal liability for defendants’ fees. In the resulting law that will become effective September 1, 2011, plaintiffs who reject qualifying settlement offers risk having their entire recovery offset by the defendant’s fees; however, they still do not have to come out of pocket. Consumer advocates decried the House Bill as a sham because a successful plaintiff in a personal injury case cannot recover attorneys’ fees against an unreasonable defendant (attorneys’ fees are generally recoverable only in specific circumstances which do not include personal injury cases).

Had Buzzard Breath acted sooner it might have had the relief it wanted. The rule change allows for the early dismissal of lawsuits “that have no basis in law or in fact” by motion and without evidence. If Buzzard Breath requested dismissal before trial, the court must rule within 45 days. Unlike the settlement statute, whether the motion to dismiss is granted or denied, even in part, the court must award costs and reasonable fees to the winning side.

Tilting the Scales in Your Favor.  Assemble all your information, confer with your attorney and fully evaluate your case very early in the process. Assess your risks and your exposure to weigh the merits of an early settlement. Then, if your case is filed after September 1, 2011, consider whether these changes in the law might be beneficial for you to explore.

Tilting the Scales to Manage Your Legal RiskIf you frequently use a contract in your business relationships, you might want to consider addressing the allocation of legal expenses if the contract is litigated. Beware the two edged sword if a prevailing party is awarded its attorneys’ fees.