Introduction. The case of Rhormoos Venture v. UTSW DVA Healthcare, LLP, addressed the issue of whether a tenant is legally permitted to terminate a commercial lease based upon the landlord’s material breach of the lease. 16-0006, 2019 WL 1873428 (Tex. Apr. 26, 2019). The court reviewed its prior decisions on this issue and found that the material breach of a commercial lease is in fact a legal basis for the tenant to terminate the lease. The court also found that the tenant as the prevailing party was entitled to recover attorney fees but failed to present sufficient evidence in support of the over $1,000,000 attorney fee award.
Background. The landlord, Rhormoss Venture, and the tenant, UT Southwestern DVA Healthcare, LLP (UTSW), entered into a commercial lease of a building in Dallas, Texas. Subsequently, water problems arose on the leased space penetrating the concrete foundation and floor tiles.
UTSW operated a dialysis clinic and state health inspectors criticized the operations because of the problems created by the water. UTSW notified Rhormoos of the problems and Rhormoos did not fix them.
UTSW thought the building was unsuitable for its “intended commercial purpose” and terminated the lease, while allegedly owing $250,000 in unpaid rent. UTSW sued Rhormoos for breach of contract, breach of implied warranty of suitability, and for a declaratory judgment that Rhormoos failed to remedy the water problems and resulting defects and that UTSW had the right to terminate the lease. UTSW did not submit a claim for money damages to the jury, other than for attorney fees. Rhormoos answered the lawsuit and also filed a counterclaim alleging that UTSW breached the lease.
Based upon the jury’s verdict, the trial court found in favor of UTSW and awarded it $1,025,000 in attorney fees for the trial and preparation of the case and subsequent appeals. Rhormoss appealed. The court of appeals upheld the trial court judgment in its entirety and Rhormoss filed a petition for review by the Texas Supreme Court.
Texas Supreme Court’s findings and holdings. The Texas Supreme Court discussed its prior 1988 decision in Davidow and stated that it stood for the proposition that an implied warranty exists in commercial leases that the premises are suitable for their intended commercial use. The court went on to hold that termination by the tenant of a commercial lease is an available remedy for the landlord’s breach of this implied warranty or material breach of the lease. Thus, the court affirmed the decision of the court of appeals on this issue.
The court also addressed UTSW’s right to recover attorney fees. The lease provisions entitled the prevailing party in an action to enforce the lease to recover reasonable attorney fees. The court found that UTSW was the prevailing party entitled to recover attorney fees.
However, the court found that the evidence presented by UTSW through its attorney’s testimony on attorney fees was conclusory and legally insufficient to support the fee award. In this regard the court stated:
“We understand Howard’s testimony that $ 800,000 in attorney’s fees for trial work may seem unreasonable for a breach of lease case that implicated roughly $300,000 in damages. We also understand Howard’s position that opposing counsel’s actions drove the cost of litigation, in most instances, and that made UTSW’s $ 800,000 in requested attorney’s fees necessary, even reasonable. However true this may be, Howard’s justification for why his fees should be $800,000—searching through “millions” of emails and reviewing “hundreds of thousands” of papers in discovery, more than forty depositions taken, and a forty-page motion for summary judgment—is too general to establish that the requested fees were reasonable and necessary. Without detail about the work done, how much time was spent on the tasks, and how he arrived at the $ 800,000 sum, Howard’s testimony lacks the substance required to uphold a fee award…. Attorneys should not have to take the stand for days and testify to every detail of a three-year-long case, but they must provide more than what Howard has said here. We conclude that Howard’s testimony is legally insufficient to support the attorney’s fee award.”
Apparently, UTSW did not offer its attorney’s invoices or any detailed documentation into evidence to support its claim for attorney fees. The court concluded that the record did not provide the required detailed evidence to support the award of attorney fees, reversed the court of appeals judgment on this issue and remanded the case to the trial court for a redetermination of attorney fees consistent with the opinion
Lessons learned. A landlord should take a tenant’s complaints seriously regarding defects in the leased premises. Otherwise, the landlord may open the door for the tenant to legally terminate the lease. Further, in any case where the plaintiff is claiming attorney fees, it would be wise for the plaintiff to present invoices or timesheets detailing the legal services provided by each attorney or paralegal who worked on the case as well as the rates charged for those services, to support the expert testimony on reasonable and necessary attorney fees. Otherwise, the trial court may deny a plaintiff’s claim for attorney fees for failing to provide sufficient evidence.