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Unfair and Deceptive Acts and Practices: 12.8.5.1 Where Arbitration Restricts Prevailing Consumer’s Right to Fees

Where a UDAP statute authorizes a prevailing consumer to recover attorney fees, but the arbitration clause or the rules of the applicable arbitration service provider restrict the award of such fees, this limitation is generally found to be unconscionable.1099 The result should be the same where an award of UDAP attorney fees to a prevailing consumer is mandatory under the statute, but the arbitration service provider rules make this discretionary with the arbitrator.

Unfair and Deceptive Acts and Practices: 12.8.5.3 Where Arbitration Agreement Provides That Consumer Must Pay a Prevailing Defendant’s Attorney Fees and Costs

Arbitration clauses or the rules of an arbitration service provider may contain a “loser pays rule” that requires non-prevailing plaintiffs in arbitration to pay the attorney fees and costs of the prevailing defendant. These “loser-pays” provisions often have the effect of substantially rewriting the attorney fee provision of the UDAP statute, which typically only authorizes attorney fees and costs for a prevailing consumer, not for a prevailing defendant.

Unfair and Deceptive Acts and Practices: 12.8.6.1 When Are Such Fees Awarded?

Attorney fees can be awarded for appellate work,1110 as long as the consumer’s judgment is preserved in at least some respect on appeal.1111 A UDAP plaintiff can also recover fees for prevailing on a cross-appeal as long as the appellate decision does not merely vacate an adverse ruling but creates at least some material alteration of the parties’ legal relationship.1112

Unfair and Deceptive Acts and Practices: 12.8.7.1 Attorney Fees for Legal Services and Other Public Interest Attorneys

Public interest and pro bono attorneys have consistently been held entitled to attorney fees for successful UDAP cases,1122 as is true under other fee-shifting statutes such as the Truth in Lending Act.1123 The Wisconsin Supreme Court has detailed why the policy reasons underlying UDAP attorney fee provisions support awards to legal services offices.1124 Legal services offices have finite resources, and cannot absorb litigation costs without

Unfair and Deceptive Acts and Practices: 12.8.7.2 Paralegals and Law Clerks

The Supreme Court has held that, at least under federal attorney fee statutes, work by paralegals and law clerks should be separately compensated where that is the standard billing practice in the relevant legal community.1126 Consistent with the Supreme Court’s position, UDAP cases generally grant compensation for work by paralegals, law clerks, and law students.1127

Unfair and Deceptive Acts and Practices: 12.8.10.1 Introduction

In most states a UDAP statute will authorize attorney fees only for prevailing consumers, but some UDAP statutes explicitly provide for attorney fees for either prevailing party. Consumers in those states must understand the risks involved in litigation.

These provisions should be construed narrowly to avoid chilling aggressive enforcement of the UDAP statute.1154 There are several arguments a consumer can make as to why a prevailing seller should not be awarded attorney fees pursuant to the UDAP statute.

Unfair and Deceptive Acts and Practices: 12.8.10.2 Has the Seller Prevailed?

Generally, a seller will only be awarded fees if it “prevails,” so the seller’s request for fees can be challenged by arguing that the seller has not prevailed. Obtaining summary judgment against the consumer’s UDAP complaint is sufficient.1155 But where attorney fees are awarded to the prevailing party “after judgment,” voluntary dismissal1156 or abandonment1157 of the UDAP action prior to judgment is insufficient.

Unfair and Deceptive Acts and Practices: 12.8.10.3 Tougher Standard for Sellers’ Fees Where Award Is Discretionary for Either Party

No state UDAP statute now mandates attorney fees for a prevailing seller,1164 but a number of UDAP statutes indicate that attorney fees may be awarded, in the court’s discretion, to the prevailing party.1165 One court identified a non-exclusive list of factors to guide the court’s discretion: the scope and history of the litigation, the ability of the opposing party to satisfy an award of fees, whether an award of fees would deter others from acting in similar circumstances, the merits of th

Unfair and Deceptive Acts and Practices: 12.8.10.4.3 Meaning of “bad faith”

To prove “bad faith,” Texas courts hold that the seller must show malice by the consumer.1180 That a case is groundless does not show that it was brought in bad faith.1181 Bad faith implies intent and knowledge that the suit is groundless, and the seller must offer evidence of this intent and knowledge.1182 Bad faith can be found where a consumer makes demands more to punish the seller than to resolve differences,

Unfair and Deceptive Acts and Practices: 12.8.10.4.4 Meaning of “groundless”

“Groundless” does not mean that the consumer fails to recover.1189 Under the definition used by most courts, a claim is “groundless” only if “there is no arguable basis in law or fact to support the cause of action and the claim is not supported by a good-faith argument for the extension, modification, or reversal of existing law.”1190 If there are few or no decisions on an issue, the court is less likely to find that raising the issue is groundless.11

Unfair and Deceptive Acts and Practices: 12.8.10.4.6 Procedural and calculation issues

The Texas Supreme Court has held that whether the seller is awarded attorney fees is for the court, not the jury, to decide.1203 The party seeking fees has the burden to secure affirmative findings on the question of bad faith, harassment, or groundlessness.1204 In considering a “bad faith” claim, the court may consider evidence not otherwise admissible.1205 However, a hearing is unnecessary if adequate grounds already exist in the record.

Unfair and Deceptive Acts and Practices: 12.8.10.5 Authority for Seller’s Attorney Fees Where No Explicit Authorization in UDAP Statute

Where a UDAP statute does not explicitly provide for a seller’s attorney fees, the court should not find that such a recovery is implied.1210 A seller may, however, claim attorney fees based on other grounds. For example, a creditor may seek fees for defending a UDAP counterclaim based on a provision in the credit contract providing for the creditor’s attorney fees in any collection action.

Unfair and Deceptive Acts and Practices: 12.8.11.1 Why Attorney Fees Must Be Adequate and Should Not Be Limited by Size of Damage Award

A major attorney fee issue in any UDAP case is how the fee award should be calculated. UDAP litigants face a particular problem of judicial aversion to granting large attorney fees where the consumer damage award is minimal.1220 However, in many cases courts have awarded UDAP attorney fees that were many times more than the damages awarded in the same case.1221