A defendant in a case brought under the Deceptive Trade Practices Act (the “DTPA”) is entitled to an award of attorney’s fees if the court finds that the plaintiff’s claim was (1) groundless and brought in bad faith, or (2) brought for the purpose of harassment. See Tex. Bus. & Com. Code Ann. § 17.50(c); McClung v. Wal-Mart, 866 F. Supp. 306, 310 (N.D. Tex. 1994). Whether a claim is groundless, brought in bad faith, or brought for the purpose of harassment is not a question for the jury. Rather, it is to be decided by the trial court. See Donwerth v. Preston II Chrysler-Dodge, Inc., 775 S.W.2d 634, 637 (Tex. 1989).
I. Groundless claim brought in bad faith
A case is not groundless “simply because a plaintiff failed to convince a jury of the truth of his allegations.” D.W. Knebel v. Port Enter., Inc., 760 S.W.2d 829, 832 (Tex. App.—Corpus Christi 1988, writ denied). Instead, courts will ask “whether the totality of the tendered evidence demonstrates an arguable basis in fact and law for the consumer’s claim.” Splettstosser v. Myer, 779 S.W.2d 806, 808 (Tex. 1989). If the evidence fails to demonstrate an arguable basis in fact and law, the trial court will deem the claim groundless. This does not mean that “no evidence” is synonymous with “groundless” though. See Donwerth, 775 S.W.2d at 637. This is because a court may consider legally inadmissible evidence in determining whether an arguable basis for the claim exists. See id.
A claim will be deemed groundless under the DTPA if the plaintiff is not a “consumer”. The Texas Supreme Court has stated that homeowners purchase homes equipped with many different systems and these systems are goods. Amstadt v. U.S. Brass Corp., 919 S.W.2d 644, 650 (Tex. 1996). If a problem with one of these systems is the basis of the claim, then the homeowners are consumers under the DTPA. Id. However, if the basis of the claim is a mere breach of contract, then the plaintiff may not be a “consumer” under the DTPA. See Riddick v. Quail Harbor Condo. Ass’n, Inc., 7 S.W.3d 663, 670-71 (Tex. App.—Houston [14th Dist.] 1999, no pet.). In these situations, if no good-faith argument exists for the plaintiff’s “consumer” status, the action is groundless. See id. at 678.
A claim will also be deemed groundless under the DTPA if it is a claim that the plaintiff is barred from bringing. This includes DTPA claims (1) based on a transaction for which the consideration paid exceeds the statutorily allowed sum; (2) with a plaintiff that is a business consumer with assets exceeding the statutory limit, or (3) for which a release of claim has been signed. See Haynesville Shale Rentals, LLC v. Total Equip. & Serv., Inc., No. CIV.A. H-12-0860, 2014 WL 1379884 (S.D. Tex. Apr. 8, 2014); Alcan Aluminum Corp. v. BASF Corp., 133 F. Supp. 2d 482 (N.D. Tex. 2001).
Even if a claim is not supported by the law, it will not be deemed groundless if there is a good-faith argument for the extension, modification, or reversal of existing law. See Angeles v. Brownsville Valley Reg’l Med. Ctr., Inc., 960 S.W.2d 854, 866 (Tex. App.—Corpus Christi-Edinburg 1997, pet. denied). Other than a claim the plaintiff is barred from bringing or a claim by a plaintiff who is not a true “consumer”, courts are resistant to find that a claim is groundless. This is because a claim is not groundless if a good-faith argument exists. Therefore, courts are more willing to conclude a claim is groundless in a well settled area of the law regarding the DTPA. See Baroid Equip., Inc. v. Odeco Drilling, Inc., 184 S.W.3d 1 (Tex. App.—Houston [1st Dist.] 2005, pet. denied).
In addition to being groundless, a claim must also be brought in bad faith for a defendant to be awarded attorney’s fees. Mere negligence or bad judgment is not enough to establish bad faith. See In re Frazin, 2017 WL 7050632, at *27. “To establish bad faith, it must be shown that the claim was motivated by a malicious or discriminatory purpose.” Alcan Aluminum Corp., 133 F. Supp. 2d at 506 (quoting McDuffie, 883 S.W.2d at 335). “[M]alice may be inferred from proof that the consumer did not have a good faith belief” in his claim. Knebel, 760 S.W.2d at 832. This may be the case when you have a sophisticated plaintiff who “knew or should have known that” its claim was not valid. See Haynesville Shale Rentals, LLC, 2014 WL 1379884 at *4.
II. Claim brought for the purpose of harassment
The Texas Business and Commerce Code states that a defendant is also entitled to attorney’s fees if the plaintiff brought the claim for the purpose of harassment. See Tex. Bus. & Com. Code Ann. § 17.50(c). This requires the court to find that the action was brought for the sole purpose of harassment. See Rutherford v. Riata Cadillac Co., 809 S.W.2d 535, 539 (Tex. App.—San Antonio 1992, writ denied). While this appears to create a second route to a defendant recovering attorney’s fees, most Texas courts have noted that a finding of harassment is often tied to a finding of groundlessness and bad faith. Donwerth, Inc., 775 S.W.2d at 638 (“it is difficult to conceive of a case which was not groundless but was brought for purposes of harassment”); Rutherford, 809 S.W.2d at 539; Baroid Equip., Inc., 184 S.W.3d at 20. As such, a defendant will likely have to prove groundlessness and bad faith to recover attorney’s fees.
Sara, a rising third year law student at Baylor Law School, is a 2022 summer associate for West Mermis PLLC. We look forward to having a fun, insightful, and productive summer term with Sara.
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