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NEWSFLASH--A PARTNERSHIP IS NOT AN INDIVIDUAL OR CORPORATION

For plaintiffs and defendants alike, the fees and expenses associated with litigation are usually a factor, if not the primary factor, that determines how and whether a case is asserted, defended, or settled. Consequently, one of the first questions that clients will ask when the issue of litigation comes up is whether they can recover their attorney fees from the other party. The answer will in many cases depend on whether recovery of attorney fees is authorized pursuant to Texas Civil Practice and Remedies Code Section 38.001. Under that particular law, a person may recover attorney fees from an individual or corporation if the claim is based upon one of the several incidents referenced in the law, such as a breach of an oral or written contract.

In Fleming & Associates v. Barton, the trial court ordered Fleming & Associates, a partnership, to pay Barton's attorney fees under Section 38.001. Fleming & Associates appealed the decision, arguing that, as it was neither a corporation nor an individual, it could not be held liable for the other party's attorney fees under Section 38.001. The appeals court ultimately ruled that the plain language of Section 38.001 did not permit an award of attorney fees against a partnership. Now, if you find it rather obvious that a partnership is neither an individual nor a corporation, you may be surprised that the appeals court in this case analyzed this issue at length and that this decision contradicts countless prior awards of attorney fees under this statute against those that were neither an individual nor a corporation.

Probably the primary reason that something seemingly so clear could be open to debate is that the predecessor statute to Section 38.001 authorized recovery of attorney fees against a "person or corporation", but when the legislature re-codified the portion of the law in which the predecessor statute to Section 38.001 was found (our laws are periodically rearranged and reworded after years of amendments and judicial interpretations in an effort to make them easier to comprehend but such changes generally do not affect the substance of the underlying laws), the statute was revised to authorize recovery against "individuals and corporations". While the terms "person" and "individual" may be synonymous in most contexts, these terms oftentimes have slightly different meanings in various legal contexts, with the term "individual" generally referring only to human beings and the term "person" including not only human beings but also legal beings such as corporations, partnerships, and limited liability companies.

The court in this case opted to base its decision upon the plain meaning of the language in the statute rather than legislative history or the consequences of a literal interpretation. However, it remains to be seen whether this decision will withstand further judicial scrutiny because the obvious question that begs to be answered is why the statute should only allow recovery of attorney fees against individuals and corporations and not partnerships or limited liability companies. That said, the legislature's reasoning in crafting our laws is not always evident or necessarily logical in every context. For now, plaintiffs and defendants alike will need to heed this decision when evaluating claims for recovery of attorney fees.

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