In 2009, the Texas Supreme Court held that a plaintiff who obtained favorable jury findings but no damages was not entitled to attorney’s fees under contractual language entitling a prevailing party to such fees. Intercont’l Group P’ship v. KB Home Lone Star L.P., 295 S.W.3d 650, 652 (Tex. 2009).
Recently, in Epps v. Fowler, No. 10-0283, 2011 WL 3796618, at *2 (Tex. 2011), the Texas Supreme Court addressed whether a defendant is a prevailing party entitled to attorney’s fees when the plaintiff nonsuits a claim without prejudice.
The Texas Supreme Court held that when the plaintiff nonsuits without prejudice, the defendant is not a prevailing party unless the trial court determines, on the defendant’s motion, that the plaintiff took the nonsuit in order to avoid an unfavorable judgment.
The Texas Supreme Court also held that when the plaintiff nonsuits with prejudice, the defendant is a prevailing party because a nonsuit with prejudice immediately alters the legal relationship between the parties by its res judicata effect. This is in direct contrast to a nonsuit without prejudice, where the plaintiff remains free to re-file the same claims seeking the same relief.
In Fowler, the trial court did not have the opportunity to determine whether the plaintiff filed its Motion for Nonsuit in order to avoid an unfavorable judgment. As such, the Texas Supreme Court remanded the defendant’s claim for attorney’s fees under the contract to the trial court. On remand, the defendant will have the opportunity to move the trial court to find that the plaintiff filed its Motion for Nonsuit in order to avoid an unfavorable judgment. If the trial court makes such a finding, the defendant will be a prevailing party and entitled to recover attorney’s fees pursuant to the contract.