Texas Supreme Court Hears Case Over Whether Attorneys’ Fees from Out‑of‑State Litigation Can Be Contract Damages

The Supreme Court of Texas heard oral argument over whether attorneys’ fees incurred in separate litigation may be recovered as contract damages after a breach of a Texas settlement agreement.

Petitioners’ counsel, identified in the record as Mister Duvose, told the justices that fees incurred in the New Mexico proceedings were a natural and foreseeable result of the defendant’s failure to comply with the settlement agreement and therefore should be recoverable as damages. "You can ordinarily get costs as a result of a breach of contract," Duvose said, arguing the trial court properly found some fees to be "reasonably necessary" consequences of the breach.

Respondent counsel, identified as Mister Smith, countered that recognizing such recoveries would require the Court to expand beyond existing precedent and undermine the American rule, which the parties and courts have long used to limit fee recovery. Smith told the…