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Texas Supreme Court Rules That Attorney Billing Information Of Party Opposing Attorneys’ Fees Is Not Discoverable

06.28.17
(Article from Insurance Law Alert, June 2017)

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The Texas Supreme Court ruled that attorney billing information is protected work-product, and that a party does not waive privilege by challenging the opposing party’s fee request if it does not use its own fees as a comparator or seek to recover any portion of its own fees.  In re National Lloyds Ins. Co., 2017 WL 2501107 (Tex. June 9, 2017).

In this multi-district litigation, various homeowners sued their insurers and claims adjustors, alleging underpayment of property damage claims arising from hail storms.  Among other damages, homeowners sought attorneys’ fees incurred in prosecuting their claims.  In connection with their fee claim, homeowners sought discovery regarding the insurer’s attorney billing information.  In arguing that such information was relevant to their own attorneys’ fee requests, homeowners noted that the insurer’s counsel had previously provided expert testimony stating that an opposing party’s fees were relevant in determining a reasonable fee award.  The insurers argued that the discovery request was overbroad and sought information that was irrelevant and protected by attorney-client and work-product privilege.  The court agreed that the records were protected work-product and granted the insurer’s mandamus relief.

The Texas Supreme Court ruled that a request to produce all billing records invades a party’s work-product privilege because “cumulatively, billing records constitute a mechanical compilation of information that, at least incidentally, reveals an attorney’s strategy and thought processes.”  Additionally, the court refused to require production of redacted versions of the billing records, noting that redaction would insufficiently mask counsel’s thought processes and legal strategies.  The court explained that even aggregate fee summaries reveal legal strategy because, for example, a “dramatic increase in mid-litigation spending could imply an upcoming filing or significant research expenditures related to elevated concerns over recent litigation events.”  The court acknowledged that an opposing party may waive privilege through offensive use of its own billing records, but found that the insurer did not do so here.

Privilege aside, the court also ruled that interrogatories that request hourly rates, total amount billed and total reimbursable expenses were objectionable, where, as here, the opposing party did not use its own billing records as “yardsticks by which to assess the reasonableness of those sought by the [requesting party].”  The court explained that “an opposing party’s litigation expenditures are not ipso facto reasonable or necessary; indeed parties who are not seeking to shift responsibility for their fees may freely choose to spend more or less time or money than would be ‘reasonable’ or ‘necessary’ for parties who are.”

Finally, the Texas Supreme Court found that the trial court erred in ordering the production of the insurer’s billing records pursuant to state discovery rules governing expert witnesses.  Under Rule 192.3, a party is entitled to discover facts known by a testifying expert relating to “mental impressions and opinions formed, any bias of the expert witness, and documents provided to or reviewed by the expert in anticipation of testimony.”  Tex. R. Civ. P. 192.3.  However, the party requesting information pursuant to Rule 192.3 must use the specific discovery methods set forth in Rule 195 – disclosures, expert reports and oral depositions.  Because homeowners sought discovery of billing information through interrogatories and requests for production, the court ruled that the exception to work-product protection under Rule 192.3 does not apply.