Does the loser pay? Five beliefs about Texas lawsuits that cost people money

The short answer on attorney's fees

Not as a general rule. Texas, like the rest of the United States, generally requires each side to pay its own lawyers, win or lose. The exceptions come from a statute or a contract: Section 38.001 of the Texas Civil Practice and Remedies Code lets a party recover reasonable attorney's fees on certain claims, including claims on an oral or written contract, and many business contracts contain their own fee clause. If neither applies, the winner usually pays its own fees.

I have litigated in Texas since 1995, for plaintiffs and defendants, and this is the misunderstanding I correct most often in first meetings. It is followed closely by four others that lead people into costly decisions. This guide takes them one at a time. It is general information; whether fees or any other rule applies to your dispute is a question for a licensed Texas attorney who has read your documents.

Myth one: the loser always pays

Section 38.001 lists the claims where fees may be recovered from an individual or organization, with exceptions for certain quasi-governmental, religious and charitable entities. The list includes claims for rendered services, performed labor, furnished material, a sworn account and an oral or written contract, among others. Fraud, many tort claims and claims under other statutes are not on that list, although some other statutes have their own fee provisions.

There are conditions. Under Section 38.002, the claimant must be represented by an attorney, must present the claim to the opposing party, and cannot recover fees if the just amount owed is tendered within 30 days after the claim is presented. That is one reason a well-drafted demand letter matters: it can start that clock.

Contracts add another layer. A prevailing-party clause can allow the winner to recover fees on any claim related to the contract, and sometimes on claims the statute would not cover. Other statutes have their own rules. Under the Texas trade secrets statute, for example, Section 134A.005 allows a court to award fees for willful and malicious misappropriation, and also against a party who brings a claim in bad faith.

Why the fee question shapes strategy on both sides

Whether fees can be recovered changes the economics of a case for everyone. A plaintiff with a contract claim and a fee clause can pursue a modest debt without the legal bill swallowing the recovery. A defendant facing that same clause knows that every month of litigation may add to what it could owe, not just to what it spends. That pressure is often what brings a case to settlement.

It also cuts the other way. A plaintiff who expects to recover fees and then loses may face the other side's fee claim under the same clause. I look at the fee picture in the first meeting, before advising anyone to sue or to dig in on defense, and I explain how it fits with the rest of the cost analysis in my guide on what drives the cost of a business lawsuit.

Reading the fee clause in your own contract

If you have a written contract, find the attorney's fee provision before you decide anything else. It may be labeled attorney's fees, costs of enforcement, or prevailing party, and it may sit inside a longer section on disputes or remedies. The exact words matter. A clause that covers fees incurred to enforce the agreement may be read more narrowly than one that covers any dispute arising out of or relating to it.

Look at who the clause benefits, too. Some contracts let only one party recover fees, typically the party that wrote the contract. Others define the prevailing party in ways that leave room for argument when both sides win something. And some clauses tie fee recovery to steps such as written notice or mediation first, which a party can forfeit by skipping them.

• Whether the clause is one-way or mutual
• Which disputes it covers: enforcement only, or anything related to the contract
• How it defines the prevailing party
• Any notice, cure or mediation steps required first
• Whether it also covers expert fees and other costs

Myth two: if I am right, I will win

Being right and being able to prove it are different things. A court or arbitrator decides based on evidence: signed documents, emails, records and credible witnesses. A handshake deal, a change agreed by phone or a promise made in a meeting with no one else present can all be true and still hard to establish. Clients are sometimes surprised that their own emails, written in frustration, become the most-quoted evidence in the case.

Even a clear win on liability does not guarantee a check. Damages must be proven with reasonable certainty, and a judgment against a party with no assets may be difficult to collect. Part of my job at the start is to test your case the way the other side will, so that the strategy rests on what can be proven and collected, not just on what happened.

The other side will also have a story, and it may be more persuasive than you expect. In business disputes, both parties usually believe they were wronged, and each can point to documents that seem to prove it. A realistic view of how a neutral decision-maker will see both versions is worth more than certainty about your own.

Myth three: there is plenty of time to sue

Texas law sets deadlines, called limitations periods, for filing claims, and once one passes, a valid claim can be lost entirely. Under Section 16.004 of the Civil Practice and Remedies Code, suits for debt, fraud and breach of fiduciary duty must be brought within four years after the claim accrues. Section 16.051 sets a residual four-year period for claims with no express limitations period. Some claims have shorter deadlines: Section 16.003 sets two years for claims such as conversion of personal property, and Section 16.010 sets three years after discovery for misappropriation of trade secrets.

Those numbers are not a reason to wait. When a claim accrues can be disputed, contracts sometimes shorten the time to bring claims or require notice first, and evidence and witnesses fade. If the goal is a court order to stop ongoing harm, such as a former employee using your customer list, delay can undercut your case long before limitations expire; I discuss that in my guide on signs a former employee took your trade secrets.

Myth four: my company can speak for itself in any court

Owners of small companies often assume they can represent their LLC or corporation the way they would represent themselves. In Texas justice court, where small claims are heard, an owner, officer, partner or employee may represent the entity. Above that level, in county and district court, Texas courts have long required a corporation or other entity to appear through a licensed attorney.

The practical risk is an owner who receives a district court petition, plans to handle it personally, and loses time that should have gone to a timely answer. I explain where the line sits, and what an owner can safely do without a lawyer, in my guide on whether you can represent your business in court yourself.

Myth five: settling means admitting you were wrong

Many clients resist settlement because it feels like a confession. It is not. Settlement agreements commonly state that no party admits liability, and businesses settle claims they believe they would win every day, because a known cost is better than an uncertain verdict and months of distraction. A settlement is a business decision about risk, time and money. Sound advice can point either way: sometimes toward settling a case you would probably win, sometimes toward pressing on when an offer is too low. The right answer depends on the numbers, the risks and the client's goal, not on pride.

The process that produces many settlements is protected as well. Under Section 154.073 of the Civil Practice and Remedies Code, communications made in mediation and other alternative dispute resolution procedures are generally confidential and cannot be used as evidence against the participant in later proceedings, with limited exceptions. That gives both sides room to explore a resolution without handing the other side a weapon.

The expensive decisions these beliefs lead to

Each myth on its own seems harmless. In practice, they show up as specific decisions that make disputes longer and more expensive. These are the patterns I see most often in Dallas cases.

• Filing suit on a modest claim expecting the other side to cover the legal bill
• Refusing a fair offer because being right should be enough
• Waiting a year to act on a claim that needed a court order in weeks
• Answering a district court lawsuit personally on behalf of a company
• Walking out of mediation because settling feels like losing
• Writing angry emails that later become exhibits

Getting a straight answer about your own case

Every one of these questions turns on specifics: the wording of your contract, the claims involved, the dates, the evidence and the parties. Bring me what you have and we can talk it through by phone or at my downtown Dallas office. I read your documents first, then tell you plainly whether fees are likely recoverable, which deadlines apply, how strong the evidence looks and what your realistic options are.

I represent businesses and individuals on both sides of disputes, which means I spend a good part of my time thinking about how the other side sees a case. That perspective is what lets me give you an assessment you can actually plan around, rather than the one you might hope to hear.

Questions people ask me