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NO. 10-0628 IN THE SUPREME COURT OF TEXAS TEXAS

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NO. 10-0628 IN THE SUPREME COURT OF TEXAS TEXAS Powered By Docstoc
					                              NO. 10-0628

                                IN THE
                      SUPREME COURT OF TEXAS
_______________________________________________________________________
            TEXAS ELECTRIC UTILITY CONSTRUCTION, LTD.,
                                        Petitioner,

                                   v.

      INFRASOURCE UNDERGROUND CONSTRUCTION SERVICES, LLC,
                                             Respondent.
________________________________________________________________________
              On Petition for Review from the 12th Court of Appeals
                                   Tyler, Texas
________________________________________________________________________

                 RESPONSE TO PETITION FOR REVIEW
_______________________________________________________________________

                                        Jeffrey J. Wolf
                                        Texas Bar No. 21849012
                                        Patrick C. Patterson
                                        Texas Bar No. 15603560
                                        THE WOLF LAW FIRM, P.C.
                                        1360 N. White Chapel Blvd. Suite 100
                                        Southlake, Texas 76092
                                        (817) 552-9653
                                        (817) 552-0300 (Fax)

                                        Michael L. Dunn
                                        Texas Bar No. 06246900
                                        SMEAD, ANDERSON & DUNN
                                        P.O. Box 3343
                                        Longview, TX 75606
                                        (903) 232-1880
                                        (903) 232-1889 (Fax)

                                        ATTORNEYS FOR RESPONDENT
                                        INFRASOURCE UNDERGROUND
                                        CONSTRUCTION SERVICES, LLC
                       IDENTITY OF PARTIES & COUNSEL

Pursuant to the Texas Rule of Appellant Procedure 38.1(a), the following is a list of the
parties and their counsel:

PLAINTIFF/PETITIONER:              Texas Electric Utility Construction, Ltd. (“Petitioner”)

TRIAL AND APPELLATE COUNSEL FOR
PLAINTIFF/PETITIONER:                     Joann N. Wilkins
                                          State Bar No. 21487100
                                          jwilkins@brlaw.com
                                          David M. Weaver
                                          State Bar No. 21007150
                                          BURFORD & RYBURN, L.L.P.
                                          3100 Lincoln Plaza
                                          Dallas, Texas 75201
                                          (214) 740-3120
                                          (214) 740-2833 (Fax)

DEFENDANT/RESPONDENT:              InfraSource Underground Construction Services, LLC
                                   (“InfraSource”)

TRIAL AND APPELLATE COUNSEL FOR
DEFENDANT/RESPONDENT:                     Michael L. Dunn (Trial and appellate counsel)
                                          State Bar No. 06246900
                                          mdunn@smeadlaw.com
                                          SMEAD, ANDERSON & DUNN
                                          P.O. Box 3343
                                          Longview, TX 75606
                                          (903) 232-1880
                                          (903) 232-1889 (Fax)

                                          Jeffrey J. Wolf          (Appellate counsel)
                                          State Bar No. 21849012
                                          jwolf@wolflawpc.com
                                          Patrick C. Patterson
                                          State Bar No. 15603560
                                          THE WOLF LAW FIRM, P.C.
                                          1360 N. White Chapel Blvd., Suite 100
                                          Southlake, Texas 76092
                                          (817) 552-9653
                                          (817) 552-0300 (Fax)



                                             ii
                                          TABLE OF CONTENTS

IDENTITY OF PARTIES & COUNSEL................................................................... i

TABLE OF CONTENTS ........................................................................................... iii

TABLE OF AUTHORITIES ...................................................................................... iv-vi

PRELIMINARY STATEMENT ................................................................................ 1

ISSUES PRESENTED ............................................................................................... 2

    1) Should this Court depart from the American Rule to allow a party to
       recover attorneys‟ fees incurred in a prior personal injury lawsuit as “actual
       damages” in a later filed conversion case?
    2) Should this Court consider departing from the general rule disallowing
       recovery of attorneys‟ fees from a third party as “actual damages,” where,
       as here, proximate cause does not exist as a matter of law?

STATEMENT OF THE CASE .................................................................................. 2

NATURE OF THE CASE .......................................................................................... 2

COURSE OF PROCEEDINGS .................................................................................. 3

SUMMARY OF THE ARGUMENT ......................................................................... 4

ARGUMENT & AUTHORITIES .............................................................................. 4-15

         A. The Trial Court Properly Declined to Adopt an “Equitable
            Exception” to the American Rule .......................................................................5-9
         B. No Texas Court Has Allowed Recovery of Attorneys‟ Fees as
            Actual Damages in a Conversion Case ................................................................10-11
         C. This Court Should Decline to Depart from the American Rule
            Where, as Here, the Conversion Was Not a Proximate Cause of
            Petitioner‟s Attorneys‟ Fees as a Matter of Law ............................................ 11-15

CONCLUSION & PRAYER ..................................................................................... 15-16

CERTIFICATE OF SERVICE ................................................................................... 17




                                                           iii
                                             TABLE OF AUTHORITIES

                                                                                                                           Page(s)
CASES

Akin, Gump v. Nat’l Develop. & Research Corp.,
    299 S.W.3d 106 (Tex. 2009) ...........................................................................................5, 6, 12

Baja Energy, Inc. v. Ball,
   669 S.W.2d 836 (Tex. App.—Eastland 1986, no writ)........................................................8, 14

Clifton v. Jones,
    634 S.W.2d 883 (Tex. App.—El Paso 1982, no writ) .............................................................10

Crum & Forster, Inc. v. Monsanto Co.,
   887 S.W.2d 103 (Tex. App.—Texarkana 1994, judgm‟t vacated by agreement) ...................18

Dalton S.S. Corp. v. W.R. Zanes & Co.,
   354 S.W.2d 354 (Tex. Civ. App.—Fort Worth 1962, no writ) ..................................................5

El Dorado Motors, Inc. v. Koch,
    168 S.W.3d 360 (Tex. App.—Dallas 2005, no pet.) ..................................................................5

Ford Motor Co. v. Ledesma,
   242 S.W.3d 32 (Tex. 2007) ......................................................................................................12

George Thomas Homes v. Tension Systems, Inc.,
   763 S.W.2d 797 (Tex. App.—El Paso 1988, no writ) .............................................................11

Haden v. David J. Sacks, P.C.,
   222 S.W.3d 580 (Tex. App.—Houston [1st Dist.] 2007), rev‟d on other grounds, 262
   S.W.3d 919 (Tex. 2008)...........................................................................................................10

Holloway v. TEUC,
   282 S.W.3d 207 (Tex. App.—Tyler 2009, no. pet.) .................................................................3

Holy Cross Church of God in Christ v. Wolf,
   44 S.W.2d 562 (Tex. 2001) ......................................................................................................11

IHS Cedars Treatment Ctr. of DeSoto, Tex. Inc. v. Mason,
   143 S.W.3d 794 (Tex. 2003)..............................................................................................12, 13

Intercontinental Group Part. v. KB Home Lone Star LP,
    295 S.W. 3d 650 (Tex. 2009) ....................................................................................................5

Interstate Contr. Corp. v. City of Dallas,
    2001 U.S. Dist. LEXIS 777 (N.D. Tex. 2001) ...........................................................................5




                                                                 iv
Jay Fikes & Assoc. v. Walton,
   578 S.W.2d 885 (Tex. Civ. App.—Amarillo 1979, writ ref‟d n.r.e.) ......................................11

Lear Siegler, Inc. v. Perez,
   819 S.W.2d 470 (Tex. 1991) ....................................................................................................12

Lesikar v. Rappeport,
   33 S.W.3d 282 (Tex. App.—Texarkana 2000, pet. denied) ................................................7, 14

Lopez v. Vehicle Removal Corp.,
   225 S.W.3d 891 (Tex. App.—Dallas 2007, pet. denied) ...........................................................5

MBM Fin. Corp. v. Woodlands Operating Co.,
  292 S.W.3d 660 (Tex. 2009) .....................................................................................................5

Naschke v. Gulf Coast Conference,
   187 S.W.3d 653 (Tex. Civ. App.—Houston [14th Dist.] 2006, pet denied) .............................5

Nationwide Mut. Ins. Co. v. Holmes,
   842 S.W.2d 335 (Tex. App.—San Antonio, writ denied)....................................................7, 14

Peterson v. Dean Witter Reynolds, Inc.,
   805 S.W.2d 541 (Tex. App.—Dallas 1991, no writ) .................................................................5

Roberts v. Healey,
   991 S.W.2d 873 (Tex. App.—Houston [14th Dist.] 1999, pet. denied) ............................ 12, 13

Standard Fire Ins. Co. v. Stephenson,
   963 S.W.2d 81 (Tex. App.—Beaumont 1997, no pet.) .......................................................8, 14

Swoboda v. Wilshire Credit,
   975 S.W.2d 770 (Tex. App.—Corpus Christi 1998, pet. denied), ...........................................11

Tony Gullo Motors I, L.P. v. Chapa,
   212 S.W.3d 299 (Tex. 2006) .....................................................................................................5

Turner v. Turner,
   385 S.W.2d 230 (Tex. 1964) ......................................................................................................6

Walker T. Virgil Constr. Co. v. Flores,
   710 S.W.2d 159 (Tex. App.—Corpus Christi 1986, no writ) ..................................................10

Western Invs., Inc. v. Urena,
   162 S.W.3d 547 (Tex. 2005) ......................................................................................................2

Winkle Cherry-Olds-Pontiac, Inc. v. Condon,
   830 S.W.2d 740 (Tex. App.—Corpus Christi, writ dism‟d) ....................................................10



                                                                 v
Worldwide Asset Purchasing v. Rent-A-Center,
  290 S.W.3d 554 (Tex. App.—Dallas 2009, no pet.) ................................................................10

OTHER AUTHORITIES

Restatement (Second) of Torts § 914(2) ..........................................................................................6

Restatement (Second) of Torts § 431.............................................................................................12




                                                               vi
                                        NO. 10-0628

                                 IN THE
                       SUPREME COURT OF TEXAS
________________________________________________________________________

                TEXAS ELECTRIC UTILITY CONSTRUCTION, LTD.,
                                         Petitioner,

                                              v.

      INFRASOURCE UNDERGROUND CONSTRUCTION SERVICES, LLC,
                                       Respondent.
________________________________________________________________________

           On Petition for Review from the 12TH Court of Appeals, Tyler
                            (Cause No. C23,781-2007)
________________________________________________________________________

                 RESPONSE TO PETITION FOR REVIEW
________________________________________________________________________

TO THE HONORABLE TEXAS SUPREME COURT:

       Respondent      InfraSource      Underground         Construction   Services,   LLC

(“InfraSource”) responds to the Petition for Review filed by Texas Electric Utility

Construction, Ltd. (“Petitioner”), and states as follows:

                             PRELIMINARY STATEMENT

       No Texas court has allowed recovery of attorneys‟ fees incurred by a party in the

defense of a prior personal injury lawsuit as actual damages in a later-filed conversion

case simply because the personal injury plaintiff in the prior lawsuit used the converted

piece of equipment.     This Court should decline Petitioner‟s invitation to create an

“equitable exception” to the centuries-old American Rule particularly since proximate

cause does not exist as a matter of law in this case.


                                              1
                                ISSUES PRESENTED

1)    Should this Court depart from the American Rule to allow a party to
      recover attorneys’ fees incurred in a prior personal injury lawsuit as
      “actual damages” in a later filed conversion case?

2)    Should this Court consider departing from the general rule disallowing
      recovery of attorneys’ fees from a third party as “actual damages,”
      where, as here, proximate cause does not exist as a matter of law?

                            STATEMENT OF THE CASE

Nature of the Case

      InfraSource performed electrical work in Nacogdoches County for Deep East

Texas Electric Cooperative (“Deep East Texas”) (C.R. 120).              Nolan Holloway

(“Holloway”), an InfraSource new hire (previously Petitioner‟s employee, along with his

crew) (C.R. 119-121), used Petitioner‟s piece of equipment known as a “rollagon.” (C.R.

120). As he used the rollagon to remove a guy wire, Holloway suffered an electrical

shock. (C.R. 128-129). Holloway believed he was authorized to use his former

employer‟s rollagon, but no written record substantiated his belief. (C.R. 121-122).

      In April 2006, Holloway sued Petitioner and Deep East Texas and alleged that

Petitioner provided a defective rollagon, failed to properly maintain the rollagon, and/or

had failed to remove the rollagon from the worksite in a timely manner (the “Holloway

Lawsuit”). (C.R. 12-16). Petitioner countered that Holloway used the rollagon without

permission. Id. Petitioner joined InfraSource and alleged that Holloway‟s unauthorized

use of the rollagon was conversion. Id. Petitioner ultimately obtained a take-nothing

summary judgment in the Holloway Lawsuit (a ruling affirmed by the Tyler Court of

Appeals.) See Holloway v. TEUC, 282 S.W.3d 207 (Tex. App.—Tyler 2009, no. pet.).


                                            2
(C.R. 18). Prior to entry of summary judgment against Holloway, Petitioner severed its

conversion claim into a separate case. (C.R. 2-3).

Course of the Proceeding

      After the severance, Petitioner continued to pursue its conversion claim against

InfraSource (C.R. 4-10). Petitioner sought to recover as actual damages (1) conversion

damages for “loss of use of the rollagon during its unauthorized use by the InfraSource

entities in performing their contract with [Deep East Texas]” and (2) attorneys‟ fees and

expenses incurred in the defense of the Holloway Lawsuit “as a legal consequence of

InfraSource‟s negligence and intentional wrongful acts in converting and trespassing on

the rollagon.” (C.R. 9). InfraSource stipulated that InfraSource (through Holloway)

converted the rollagon, and that the reasonable market value for two weeks of use of the

rollagon was $10,000.00. (C.R. 323-24). Petitioner then moved for summary judgment

that InfraSource was legally responsible for its attorneys‟ fees incurred in the defense of

the Holloway Lawsuit based on the stipulated conversion. (C.R. 17-87). InfraSource

filed a competing summary judgment motion, which responded that Petitioner could not

recover attorneys‟ fees incurred in the defense of the Holloway Lawsuit as actual

damages in the conversion case as a matter of law. (C.R. 88-232). Infrasource urged to

the trial court, as it does here, that no Texas court has recognized an “equitable

exception” to the American Rule to allow recovery of attorneys‟ fees incurred in a prior

personal injury lawsuit as actual damages in a conversion case and that proximate cause

did not exist as a matter of law. (C.R. 95-98). The trial court granted summary judgment

in favor of InfraSource. (C.R. 327-328). Petitioner appealed. (C.R. 329-30). The Tyler


                                            3
Court of Appeals affirmed summary judgment in favor of Infrasource.             TEUC v.

Infrasource Under. Const. Serv., L.L.C., 2010 WL 2638066 (Tex. App.—Tyler

2010)(mem. op.).

                           SUMMARY OF THE ARGUMENT

       Petitioner invites this Court to create an “equitable exception” to the American

Rule that would allow recovery of attorneys‟ fees (incurred in a prior personal injury

lawsuit) as actual damages in a later-filed conversion case. InfraSource urges this Court

to decline any invitation to create a new category of damages recoverable in conversion

cases which have not been recognized by the Texas legislature or any Texas court.

Equity does not require that attorneys‟ fees incurred in the defense of a personal injury

case (unrelated to any damage to the converted property) be allowed as actual damages in

a later conversion case.

       The Petition for Review also must be denied because, contrary to well-established

Texas law, a party cannot recover “economic damages” that only philosophically can be

traced to the acts of another. Petitioner‟s attorneys‟ fees incurred in the prior personal

injury lawsuit were not proximately caused by the stipulated conversion as a matter of

law.

                           ARGUMENT & AUTHORITIES

A.     The Trial Court Properly Declined to Adopt an “Equitable Exception” to the
       American Rule.

       Neither the Texas legislature nor any Texas court has adopted the “equitable

exception” to the American Rule in a conversion case. Based on the current state of the


                                            4
law, the trial court correctly granted, and the Tyler Court of Appeals correctly affirmed,

summary judgment in favor of InfraSource. In doing so, both courts followed the Dallas,

Fort Worth, El Paso, Houston (14th), and other courts, which have declined the invitation

to establish an equitable exception to the American Rule in deference to the precedent of

this Court and to the policy-making role of the Texas legislature.1 This Court has

consistently adhered to the American Rule. See, e.g., Intercontinental Group Part. v. KB

Home Lone Star LP, 295 S.W.3d 650, 653 n. 7 (Tex. 2009)(citing MBM Fin. Corp. v.

Woodlands Operating Co., 292 S.W.3d 660, 669 (Tex. 2009)(“Texas has long followed

the „American Rule‟ prohibiting fee awards unless specifically provided by contract or

statute”) and Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299, 310-11 (Tex. 2006)

(“Absent a contract or statute, trial courts do not have inherent authority to require a

losing party to pay the prevailing party's fees.”)).

         Most recently, this Court declined to depart from the American Rule in a legal

malpractice case. In Akin, Gump v. Nat’l Develop. & Research Corp., 299 S.W.3d 106

(Tex. 2009), National Development & Research Corp (“NDRC”) claimed Akin, Gump

improperly handled a lawsuit. NDRC sought to recover attorneys‟ fees paid to Akin


1
  Dallas: Lopez v. Vehicle Removal Corp., 225 S.W.3d 891, 893-94 (Tex. App.—Dallas 2007, pet. denied); El Dorado
Motors, Inc. v. Koch, 168 S.W.3d 360, 366 (Tex. App.—Dallas 2005, no pet.); G.R.A.V.I.T.Y. Enter., Inc. v. Reese
Supply Co., 177 S.W.3d 537, 546-47 (Tex. App.—Dallas 2005, pet. denied); Burnside Air Conditioning & Heating,
Inc. v. T.S. Young Corp., 113 S.W.3d 889, 898-99 (Tex. App.—Dallas 2003, no pet.); Peterson v. Dean Witter
Reynolds, Inc., 805 S.W.2d 541, 549 (Tex. App.—Dallas 1991, no writ); Fort Worth: Dalton Steamship Corp. v. W.R.
                                                                                              th
Zanes & Co., 354 S.W.2d 621, 624 (Tex. Civ. App.—Fort Worth 1962, no writ); Houston-14 : Naschke v. Gulf Coast
Conference, 187 S.W.3d 653, 655 (Tex. Civ. App.—Houston [14th Dist.] 2006, pet. denied); Martin-Simon v.
                                                           th
Womack, 68 S.W. 3d 793, 798 (Tex. App.—Houston [14 Dist.] 2001, pet denied); El Paso: Cupples Coiled Pipe, Inc.
v. Esco Supply Co., 591 S.W. 2d 615, 619 (Tex. Civ. App. – El Paso 1979, writ ref’d n.r.e.). See also Interstate Contr.
Corp. v. City of Dallas, 2001 U.S. Dist. LEXIS 777 *7-8 (N.D. Tex. 2001) and the cases summarized at pp. 6-9, infra.
2
  Petitioner, attempts to list cases where various courts have “recognized, or at least noted,” the “equitable
exception” Petitioner urges this Court to adopt. The overwhelming majority of these cases, however, merely

                                                          5
Gump as actual damages in the subsequent malpractice case. In holding that the evidence

was legally sufficient to support a finding that some of the fees paid by NDRC were

“proximately caused” by Akin Gump‟s negligence, this Court expressly declined to adopt

an “equitable exception” to the American Rule, reasoning:

        Citing Turner v. Turner, 385 S.W.3d 230, 233 (Tex. 1964), NDR
        acknowledges the general rule that a party may not recover attorneys‟ fees
        for the litigation in which it is involved unless recovery is authorized by
        statute or contract. It urges adoption of the “tort of another” exception.
        [citing Restatement (Second) of Torts § 914(2)]…. NDR contends that
        under the exception, it can recover the attorney‟s fees it had to pay for
        appealing the Panda judgment…. Because the general rule does not apply
        to NDR‟s [malpractice] claim, we need not and do not address whether the
        exception set out in section 914(2) of the Second Restatement should be
        adopted as Texas law.…. The situation before us does not involve the
        American Rule that prevails in Texas.

299 S.W.3d at 119.

        Undeterred by this Court‟s statement that the American Rule “prevails in Texas,”

Petitioner nevertheless argues that “the law is not static; and the courts, whenever reason

and equity demand, have been the primary instruments for changing the common law

through a continual re-evaluation of common law concepts in light of current

conditions.” (Petition at p.12). However, a close examination of the cases cited by

Petitioner demonstrates there is no compelling reason to depart from the American Rule

in this conversion case:2




2
   Petitioner, attempts to list cases where various courts have “recognized, or at least noted,” the “equitable
exception” Petitioner urges this Court to adopt. The overwhelming majority of these cases, however, merely
“note” that the losing party advanced the same argument Petitioner makes here and the court summarily rejected
it.


                                                      6
                            1st Court of Appeals

Massey v. Columbus State Bank, 35 S.W.3d 697, 701-02 (Tex. App.—Houston [1st
Dist.] 2000, pet. denied) (attorneys‟ fees awarded for filing false and defamatory
complaints against bank; not a “third party” case involving “equitable exception”)
(disapproved by Martin-Simon v. Womack, 68 S.W.3d 793, 797-99 (Tex. App.—
Houston [14th Dist.] 2001, pet. denied)).
Pileco, Inc. v. HCI, Inc., 735 S.W.2d 561, 563 (Tex. App.—Houston [1st Dist.]
1987, writ ref‟d n.r.e) (court summarily rejects Pileco‟s reliance on Baja
“equitable exception” to recover attorneys‟ fees; not a “third party” case involving
“equitable exception”).

                            3rd Court of Appeals

Qwest Communications Int’l, Inc. v. AT&T Corp., 114 S.W.3d 15, 32-33 (Tex.
App.—Austin 2003), rev’d on other grounds, 167 S.W.3d 324 (Tex. 2005): (court
mentions Baja “equitable exception” but does not apply it because attorneys‟ fees
were sought based on “bad faith” appeal; not a “third party” case involving
“equitable exception”).
Pacesetter Pools, Inc. v. Pierce Homes, Inc., 86 S.W.3d 827, 834-35 (Tex. App.—
Austin 2002, no pet.) (court rejected attempt to apply Baja “equitable exception”
to obtain recovery of attorneys‟ fees incurred in prior arbitration).
McCall v. Tana Oil & Gas Corp., 82 S.W.3d 337, 344 (Tex. App.—Austin 2001),
rev’d on other grounds, 104 S.W.3d 80 (Tex. 2003) (court declined application of
Baja “equitable exception” because attorneys‟ fees were not sought from third
party; applied exception cited in Alyeska Pipeline Serv. Co. v. Wilderness Society,
95 S. Ct. 1612 (1975) (“fees recoverable where litigant acted in bad faith,
vexatiously, wantonly, or for oppressive reasons”)).


                            4th Court of Appeals

Estate of Arlitt v. Paterson, 995 S.W.2d 713, 721 (Tex. App.—San Antonio 1999,
pet. denied), overruled on other grounds Belt v. Oppenheimer, Blend, Harrison &
Tate, Inc., 192 S.W.3d 780 (Tex. 2006) (attorneys‟ fees incurred in a will contest
were damages proximately caused by Paterson‟s legal malpractice in drafting that
will).
Nationwide Mut. Ins. Co. v. Holmes, 842 S.W.2d 335, 341-42 (Tex. App.—San
Antonio 1992, writ denied) (attorneys‟ fees incurred as a direct and proximate
result of insurer‟s wrongful refusal to provide defense to insured were recoverable;
not a “third party” case involving “equitable exception”).



                                     7
                            6th Court of Appeals

Lesikar v. Rappeport, 33 S.W.3d 282, 287-92 (Tex. App.—Texarkana 2000, pet.
denied) (In dicta, court found “costs incurred in correcting the wrongful conduct
of Lesikar [transfer of oil lease under false pretenses] could have been recovered if
there was factually sufficient evidence.”).
Crum & Forster, Inc. v. Monsanto Co., 887 S.W.2d 103, 129 (Tex. App.—
Texarkana 1994, judgm‟t vacated by agreement) (Monsanto was entitled to
recover attorneys‟ fees expended after Mary Carter agreements were executed
since fees were the “legal consequence” of the agreements).

                            7th Court of Appeals

IBP, Inc. v. Klumpe, 101 S.W.3d 461, 477-78 (Tex. App.—Amarillo 2001, pet.
denied) (“material fact issue existed as to whether Klumpe‟s actions in improperly
taking [proprietary information] resulted in damages to IBP in the nature of
additional attorney‟s fees” incurred to limit dissemination of that information).


                            9th Court of Appeals

Standard Fire Ins. Co. v. Stephenson, 963 S.W.2d 81, 90-91 (Tex. App.—
Beaumont 1997, no pet.) (recovery of legal fees allowed where fees were incurred
in fighting insurer‟s wrongful conduct in fixing a death investigation to deny
coverage in workers‟ compensation case).


                           11th Court of Appeals

Baja Energy, Inc. v. Ball, 669 S.W.2d 836, 837-39 (Tex. App.—Eastland 1986, no
writ) (court acknowledged general rule that attorneys‟ fees are not recoverable as
damages, but held that equity would allow recovery by Ball under egregious
facts—Baja capped well Ball had assigned to a third party without telling him,
which caused fees to be incurred in defending trespass action brought by new
owner of well).
Telfair v, Bridges, 161 S.W.3d 167, 170 (Tex. App.—Eastland 2005, no pet.)
(Recognized Baja “equitable exception” but did not apply it because “prior
litigation” involved the same parties).




                                      8
                                            13th Court of Appeals

         GXG, Inc. v. Texacal Oil & Gas, 977 S.W.2d 403, 424-25 (Tex. App.—Corpus
         Christi 1998, pet. denied) (approved recovery of attorneys‟ fees incurred by
         Texacal in defending actions brought by oil royalty owners which were “a direct
         consequence of ... [GXG‟s] breach of the sale and purchase agreement which
         resulted in ... an inability to meet Texacal‟s obligations to other interest holders”).


                                             8th Court of Appeals

         Powell v. Narried, 463 S.W.2d 43, 46 (Tex. Civ. App.—El Paso 1971, writ ref‟d
         n.r.e.) (attorneys‟ fees incurred in lawsuit by employee not awarded, though
         clearly caused by insurance broker falsely representing to Narried that he was
         “covered” by workers‟ compensation policy, which broker failed to procure).


                                            14th Court of Appeals

         P&S Corp. v. Park, 2006 WL 1168804 (Tex. App.—Houston [14th Dist.] May 4,
         2006, no pet.)(mem. op.) (ground for award of attorneys‟ fees was “vexatious, bad
         faith” exception and breach of settlement agreement; not “third party” case
         involving “equitable exception”).

         These cases demonstrate that the “equitable exception” has only been embraced in

a handful of cases to allow recovery of attorneys‟ fees as actual damages. In these cases,

equity demanded recovery of attorneys‟ fees proximately caused by either egregious

behavior or nondisclosure of information. None of these cases involved attorneys‟ fees

incurred in the defense of a prior personal injury lawsuit.3 None of these cases allowed

3
  Petitioner’s proposed exception to the “American Rule” would create a slippery slope. For example, it would turn
a common car wreck case into two lawsuits-one for the car wreck itself and a second lawsuit to recover attorney’s
fees incurred in the car wreck case. To illustrate, it is a common occurrence for a passenger (P) injured in a car
wreck to sue the other driver (D-2) even though his own driver (D-1) was actually at fault. In that situation, D-1 has
committed a tort against D-2 in causing the collision. When P sues D-2 for injuries sustained in that collision, D-2
will incur attorney’s fees in its defense. Following Petitioner’s logic, D-2 (Petitioner) would claim that D-1's
(InfraSource) tort of causing the collision (conversion) foreseeably resulted in P (Holloway) suing D-2 (Petitioner)
which caused D-2 (Petitioner) to incur attorney’s fees. One can envision many similar scenarios in product liability
and other personal injury tort cases with multiple Defendants where some parties are found not at fault when
others are. The exception advocated by Petitioner would swallow the rule and should be rejected.


                                                          9
recovery of attorneys‟ fees as damages in a conversion case. None of these cases suggest

that this Court should depart from the historical norm in every tort case (particularly a

case that involves only a technical conversion).

B.    No Texas Court Has Allowed Recovery of Attorneys’ Fees from a Third Party
as Actual Damages in a Conversion Case.


       Contrary to Petitioner‟s attempt to gloss over the distinction, Texas courts have

maintained a rigid separation of two concepts: (1) attorneys‟ fees awarded incidental to

the recovery of actual damages (as in a contract or DTPA action), and (2) recovery of

attorneys‟ fees as actual damages. Petitioner asks this Court to recognize the latter, and it

is the latter which have not been recognized as recoverable in any reported conversion

case. There is a general “settled prohibition against recovery of attorneys‟ fees as actual

damages.” Haden v. David J. Sacks, P.C., 222 S.W.3d 580, 597 (Tex. App.—Houston

[1st Dist.] 2007) (opin. on reh‟g), rev’d on other grounds, 262 S.W.3d 919 (Tex. 2008);

Worldwide Asset Purchasing v. Rent-A-Center, 290 S.W.3d 554, 570 (Tex. App.—Dallas

2009, no pet. h.).

       This prohibition extends to conversion cases. Texas courts have recognized only

four categories of “actual damages” in conversion cases: (1) loss of value or use of the

converted property (Winkle Cherry-Olds-Pontiac, Inc. v. Condon, 830 S.W.2d 740, 746

(Tex. App.—Corpus Christi, writ dism‟d)); (2) lost profits (where the converting

defendant had actual notice of the fact that conversion of the property would result in

same) (Id.) (3) shipping costs (related to shipping the converted property) (Walker T.




                                             10
Virgil Constr. Co. v. Flores, 710 S.W.2d 159, 161 (Tex. App.—Corpus Christi 1986, no

writ)); and (4) travel expenses (incurred in inspecting the converted property) (Clifton v.

Jones, 634 S.W.2d 883, 887 (Tex. App.—El Paso 1982, no writ)).              Each of these

categories of “actual damages” specifically relates to the converted property.

       In contrast, attorneys‟ fees which do not specifically relate to the converted

property (as is the case here) have not been held to be recoverable as actual damages in

conversion cases. Jay Fikes & Assoc. v. Walton, 578 S.W.2d 885, 888 (Tex. Civ. App.—

Amarillo 1979, writ ref‟d n.r.e.); George Thomas Homes v. Tension Systems, Inc., 763

S.W.2d 797, 800 (Tex. App.—El Paso 1988, no writ). This is so regardless of whether

the fees are sought in the same suit or, as with the general prohibition embodied by the

American Rule, in a subsequent action. Swoboda v. Wilshire Credit, 975 S.W.2d 770,

781 (Tex. App.—Corpus Christi 1998, pet. denied), overruled in part on other grounds by

Holy Cross Church of God in Christ v. Wolf, 44 S.W.2d 562 (Tex. 2001) (citing Neese v.

Radford, 19 S.W. 141, 142 (Tex. 1892)).

       Consistent with the American Rule, no Texas court has ever awarded a litigant

attorneys‟ fees incurred in a prior personal injury lawsuit as actual damages in a

subsequent conversion action without a contractual or statutory basis for doing so. This

Court should decline Petitioner‟s invitation to be the first.

C.     This Court Should Decline to Depart from the American Rule Where, as
       Here, the Conversion Was Not a Proximate Cause of Petitioner’s Attorneys’
       Fees as a Matter of Law.

       Even if this Court were inclined to consider Petitioner‟s request to create new law,

the cases cited by Petitioner make clear that recoverable “actual damages” must be


                                              11
proximated caused by a wrongful act. Thus, Petitioner is required to establish that the

attorneys‟ fees incurred in the defense of the Holloway Lawsuit were proximately

caused4 by InfraSource‟s technical conversion, which Petitioner cannot do as a matter of

law.

        Proximate cause has two elements: cause in fact and foreseeability. Western

Invs., Inc. v. Urena, 162 S.W.3d 547, 551 (Tex. 2005). Cause in fact or legal cause is

established when the act or omission was a substantial factor in bringing about the

injury, and, without it, the harm would not have occurred. IHS Cedars Treatment Ctr. of

DeSoto, Tex. Inc. v. Mason, 143 S.W.3d 794, 799 (Tex. 2003).5 Cause in fact does not

exist when the defendant's act does no more than furnish a condition which makes the

injury possible. Id. Any act that does nothing more than put a person at a particular place

at a particular time is too remote to constitute a legal cause. Roberts v. Healey, 991

S.W.2d 873, 878-879 (Tex. App.—Houston [14th Dist.] 1999, pet. denied). Causation in

merely a "philosophic sense” is insufficient as a matter of law. Lear Siegler, Inc. v.

Perez, 819 S.W.2d 470, 472 (Tex. 1991) (quoting Restatement (Second) of Torts § 431,

cmt. a (1965)).




4
  The handful of cases cited by Petitioner in which the equitable exception was embraced all involve factual
circumstances where the wrongful conduct forced a litigant to incur attorneys’ fees. In other words, either
egregious conduct or nondisclosure of information was the proximate cause of attorneys’ fees as damages.
5
  In Ford Motor Co. v. Ledesma, 242 S.W.3d 32 (Tex. 2007), this Court again emphasized the importance of the
“substantial factor” requirement in establishing causation. This Court held that the long-used Pattern Jury Charge
definition of producing cause was insufficient because it did not adequately convey the concept that a producing
cause must be a substantial cause. Id. at 46. See also Akin, Gump, supra at 122 (“Cause in fact must be
established by proof that (1) the negligent act or omission was a substantial factor in bringing about the harm at
issue.…”).


                                                       12
           Based on this caselaw, the question presented is whether InfraSource‟s stipulated

conversion of Petitioner‟s rollagon was anything more than a “philosophic” cause of

Petitioner incurring attorneys‟ fees in the defense of the Holloway Lawsuit. Clearly, the

legal cause of Petitioner‟s attorneys‟ fees incurred in the defense of the prior personal

injury lawsuit was Holloway's decision to file that lawsuit. Holloway alleged that the

rollagon was defective, poorly maintained and improperly left at the worksite by

Petitioner. InfraSource's stipulated conversion did not cause any defect or any lack of

maintenance of the rollagon nor did Infrasource leave the equipment at the worksite. No

party in the Holloway Lawsuit alleged that Infrasource‟s stipulated conversion caused

Holloway‟s injuries.           Infrasource‟s technical conversion did nothing more than put

Holloway and the rollagon at a particular place at a particular time (which is legally

insufficient to establish proximate cause). See IHS Cedars Treatment Ctr. v. Mason, 143

S.W.3d 794, 799-801 (Tex. 2003)(assuming hospital and doctor negligently discharged

Mason four days early, this did not “proximately cause” her injuries in car wreck 28

hours later with Mason‟s psychward roommate, also alleged to have been negligently

discharged). Roberts v. Healey, 991 S.W.2d 873, 878-79 (Tex. App.—Houston [14th

Dist.] 1999, pet. denied)(attorneys‟ failure to pursue and obtain protective order against

client‟s unstable husband did not proximately cause client‟s children‟s deaths at hands of

husband). InfraSource‟s conversion of the equipment is no more a “legal cause” of

Petitioner‟s defense costs than the rollagon‟s presence at the worksite, or even

Holloway‟s birth.6 At best, Petitioner can only demonstrate "philosophic” causation,

6
    After all, had Holloway never been born, he never would have hurt himself at the InfraSource worksite or sued


                                                        13
which is legally insufficient to allow recovery of attorneys‟ fees incurred in the defense

of the Holloway Lawsuit as actual damages in this conversion case.7

        Petitioner cites no Texas case (and there is none) holding that attorneys‟ fees

incurred in a personal injury lawsuit can be proximately caused by an act of conversion.

As discussed above, damages recognized as recoverable in conversion cases all relate to

the inspection, shipment, or use of converted property itself.                             Holloway‟s mere

unauthorized use of the rollagon is simply too remote to have foreseeably caused

Holloway‟s alleged personal injuries. Moreover, InfraSource‟s technical conversion did

not cause Holloway to file a meritless personal injury lawsuit against Petitioner (as

determined by the trial court and the Tyler Court of Appeals in affirming summary

judgment against Holloway).8 This Court should decline Petitioner‟s invitation to create



Petitioner, and Petitioner would not have incurred defense costs in the Holloway Lawsuit. So, was Holloway’s birth
a “cause” of Petitioner’s claimed damages? In a “philosophic” sense, yes. An extreme example to be sure, but an
apt illustration of the logic of Petitioner’s novel “causation” theory.
7
 The fact of “conversion” was based on Holloway’s mistaken belief that he had permission to use the rollagon and
that InfraSource did not document the agreement with Petitioner to use that piece of equipment. Had that
agreement been properly documented, there would have been no cause of action for conversion, yet Holloway
would still have used the rollagon and would have still ended up getting shocked for the exact same “proximate
cause” reasons. Thus, it was not the technical “conversion” of the rollagon that caused Holloway’s injuries.
Moreover, the “conversion” was certainly not the proximate cause of Holloway’s decision to sue Petitioner.
8
  As discussed above, in the cases cited by Petitioner in its attempt to transfer the costs of Holloway’s decisions
from itself to InfraSource, the party upon whom litigation costs were imposed performed some affirmative act to
intentionally inflict damage upon the non-offending party. In Lesikar (though costs were not imposed, for reasons
of incompetent proof), Rappaport tried to cheat Lesikar out of ownership in a company. In Standard Fire, the
insurance company intentionally torpedoed a fire investigation so as to cheat the wife out of a wrongful death
workers’ compensation benefit. In both of these cases, the fees awarded were the proximate result of the conduct
of the party against whom fees were awarded.

In both Nationwide and Baja, the fees awarded were incurred specifically because the party against whom they
were awarded had knowledge of information that it had a duty to disclose to another but failed to disclose. In
both cases, it was the deliberate withholding of this information that proximately caused the innocent party to
incur attorneys’ fees, not the independent actions of another party suing them for personal injury damages.



                                                        14
a new category of damages in conversion cases, particularly where only “philosophic”

causation exists.

        In this case, Infrasource‟s conversion allowed Holloway to use the rollagon but

did not cause his injuries or cause him to sue Petitioner. Some other wrongful act

(defects in the rollagon, fault on the part of Deep East Texas, 9 Holloway‟s negligent use

of the equipment) caused Holloway‟s injuries, which led him to file a lawsuit (found to

be without merit), which caused Petitioner to incur attorneys‟ fees. Because there is no

causal nexus between InfraSource‟s technical conversion and Petitioner‟s attorneys‟ fees

incurred in the defense of Holloway‟s meritless lawsuit, this Court should deny the

Petition for Review.

                                     CONCLUSION & PRAYER

        Texas courts have long adhered to the “American Rule” requiring parties to bear

their own attorneys‟ fees. Neither the Texas legislature nor this Court have adopted the

“equitable exception” which Petitioner urges this Court to embrace. Even those courts

that have adopted the “equitable exception” have done so only in cases of egregious

behavior or nondisclosure of information where equity demanded that attorneys‟ fees

were part of the actual damages proximately caused by the wrongful conduct or

nondisclosure.



In short, Petitioner cannot cite a single case in which a third party committed no intentional act, and had no
reasonable foresight that such an act would cause another to incur attorneys’ fees in a later legal action brought
by or against another, and those fees were then awarded against the third party.
9
 If anything, Petitioner should be seeking its fees from Deep East Texas, as the Tyler Court of Appeals did not
excuse Deep East Texas from Holloway’s lawsuit on summary judgment. 282 S.W.3d at 214-15.


                                                       15
        No Texas court has held that attorneys‟ fees incurred in a personal injury lawsuit

are recoverable as damages in a conversion case, because such damages are unrelated to

the converted property itself. Even if this Court were inclined to consider the “equitable

exception” urged by Petitioner, the attorneys‟ fees incurred in the Holloway Lawsuit

were not proximately caused by Infrasource‟s stipulated conversion and “philosophic”

causation is deficient as a matter of law.

       For any or all of these reasons, this is not the proper case to consider adoption of

the “equitable exception” to the American Rule and this Court should deny the Petition

for Review.




                                             16
                                         Respectfully submitted,



                                         _____/s/______________________
                                         Jeffrey J. Wolf
                                         Texas Bar No. 21849012
                                         Patrick C. Patterson
                                         Texas Bar No. 15603560
                                         THE WOLF LAW FIRM, P.C.
                                         1360 N. White Chapel Blvd.; Suite 100
                                         Southlake, Texas 76092
                                         (817) 552-9653
                                         (817) 552-0300 (Fax)

                                         and

                                         Michael L. Dunn
                                         Texas Bar No. 06246900
                                         SMEAD, ANDERSON & DUNN
                                         P.O. Box 3343
                                         Longview, TX 75606
                                         (903) 232-1880
                                         (903) 232-1889 (Fax)


                            CERTIFICATE OF SERVICE

       The undersigned certifies that a true and correct copy of the foregoing instrument
has been served this _29th day of November, 2010 upon the following:

Joann N. Wilkins                         Via Certified Mail, Return Receipt Requested
David M. Weaver
BURFORD & RYBURN, LLP
3100 Lincoln Plaza
Dallas, Texas 75201

                                  _________/s/_______________
                                  Jeffrey J. Wolf




                                           17

				
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