Texas Civil Practice and Remedies Code 38.001 for Breach of Fiduciary Duty

Can a Plaintiff Recover Attorney’s Fees Under Texas Civil Practice and Remedies Code 38.001 for a Tort Cause of Action

Texas is one of the more liberal jurisdictions in allowing the recovery of attorney’s fees in breach of contract actions, but generally attorney’s fees are not recoverable in tort actions. The typical claim for wrongdoing among owners of closely-held companies sounds in tort—usually breach of fiduciary duties or conversion.

Section 38.001 of the Texas Civil Practice and Remedies Code provides: “A person may recover reasonable attorney’s fees from an individual or corporation, in addition to the amount of a valid claim and costs, if the claim is for: (8) an oral or written contract.” Texas courts have developed a significant exception to the general rule that permits recovery of attorney’s fees on a tort claim that is so intertwined with the contract which underlies the cause of action such that the tort action is “intrinsically founded on the interpretation of the contract.”[1]

[1] See High Plains Wire Line Servs., Inc. v. Hysell Wire Line Servs., Inc., 802 S.W.2d 406, 408 (Tex. App.—Amarillo 1991, no writ).

However, in 2006, the Texas Supreme Court in Tony Gullo Motors I, L.P. v. Chapa,[2] overruled a line of cases that had permitted the recovery of attorney’s fees incurred on tort claims where the facts of the tort claim were so “inextricably intertwined” with the facts of a contract claim, as to make segregation difficult. The doctrine was not based on the application of Section 38.001 to the tort claim but on the difficulty of segregation. Chapa overruled the “inextricably intertwined” doctrine and required segregation. However, in dicta, the Chapa Court made the sweeping statement that “For fraud, she could recover economic damages, mental anguish, and exemplary damages, but not attorney’s fees.”[3]

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

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