If you’re a business owner, work for a business, or do business with businesses, then there’s a new law in Texas that you must know! You need to know this new law because you can now win your attorney’s fees from more businesses for certain types of lawsuits. If you own a business, then you need to know that you may now be liable for attorney’s fees in more types of lawsuits.
What types of lawsuits?
If you want to win your attorney’s fees, then you need to know the types of lawsuits that the new law applies to. The new law affects lawsuits a person or business organization may file based on:
- An oral or written contract;
- Rendered services;
- Performed labor;
- Furnished material;
- Freight or express overcharges;
- Lost or damaged freight or express;
- Killed or injured stock; or
- A sworn account
—See Tex. Civ. Prac. & Rem. Code § 38.001
If you have a written contract that specifically addresses attorney’s fees, then the terms of the contract will most likely apply. However, if your written contract doesn’t address attorney’s fees, then the new law will most likely apply.
This is such a huge change because you were previously quite limited on the businesses that you could win your attorney’s fees from.
You Couldn’t Always Win Your Attorney’s Fees
Before this recent change in the law, if a plaintiff filed a lawsuit for one or more of those eight reasons and the defendant was an individual or a corporation, the plaintiff could recover:
- The expenses for the lawsuit,
- The amount of the claim, and
- Attorney’s fees!
So, what was the big deal?
If a plaintiff filed a lawsuit for one or more of those eight reasons and the defendant was not specifically an individual or a corporation, the plaintiff could only recover:
- The expenses for the lawsuit, and
- The amount of the claim.
This meant that business organizations such as limited liability companies (LLCs), limited partnerships, limited liability partnerships, professional entities, professional associations, and professional limited liability companies did not have to pay plaintiff’s attorney’s fees under the same circumstances that an individual or corporation would have to.
—See Tex. Civ. Prac. Rem. Code § 38.001 (prior to 2021 amendment)
The New Law Opens the Door
You can now win your attorney’s fees, expenses for the lawsuit, and the amount of the claim against defendants who are individuals or business organizations if you sue for one of those eight reasons.
However, the Texas Legislature specified that you cannot win your attorney’s fees for those cases if the defendant is a:
- quasi-governmental entity authorized to perform a function by state law,
- a religious organization,
- a charitable organization, or
- a charitable trust
—See Tex. Civ. Prac. & Rem. Code § 38.001(b)
How Does It Affect Your Business?
Let’s presume that you’re a member of an LLC that owns a restaurant. The restaurant manager wants to a hire a world-famous head chef, but the head chef wants more than just a salary. In fact, her attorney drew up a contract and sends it to you. After glancing over it, you sign it in your capacity as a member.
Three-weeks later, you get a call from her attorney. It turns out you should have read that contract a little closer. Despite the contract, the restaurant manager refuses to hire the head chef’s little brother as a sous chef because the restaurant has a sous chef with 20 years of experience.
Also, the Limited-Edition Lamborghini that was part of her signing bonus is sold out – no one in the office tried to order one. The attorney tells you that the head chef is considering legal options.
Under the old law, the head chef could not win attorney’s fees if she sued the LLC for breach of contract. Under the new law, she can actually win attorney’s fees if she sues the LLC for breach of contract.
The lesson is that if your business organization is about to be involved in one of the eight things mentioned above, like entering into contract or performing labor, speak to an attorney before doing it.
That way, you know what you’re legally required to do and what the other person or organization is legally required to do. It’s cheaper and less stressful in the long run – if you do what you’re legally required to do, you won’t have to worry about paying for a plaintiff’s attorney’s fees at the end of litigation.
–Authored by William “Bill” Benda, Esq.,
Matthew Harris Law, PLLC – Civil Litigation Division
1101 Broadway, Lubbock, Texas, 79401-3303
Tel: (806) 702-4852 | Fax: (800) 985-9479