Intertwined Attorneys’ Fees and Exemplary Damages

The Houston Lawyer

The Supreme Court of Texas sets new ground rules for recovery of attorneys’ fees in mixed contract and tort cases, delimiting federal constitutional boundaries of exemplary damages in Tony Gullo Motors I, L.P. and Brien Garcia v. Chapa, ___ S.W.3rd ____, 50 Tex. Sup. Ct. J. 278 (Dec. 22, 2006).

Ms. Chapa paid Gullo $30,200 for a Toyota Highlander “Limited.” When she arrived at the dealership, she was given a base-model Highlander instead. She later accepted delivery of another base-model based on Gullo’s representations that the engine in the base model was the same as the “Limited” and that Gullo would install certain upgrades. Gullo failed to install the upgrades.

Chapa sued for breach of contract, fraud and DTPA violations. A jury found economic damages of $7,213, mental anguish damages of $21,693, exemplary damages of $250,000, and attorneys’ fees of $20,000. The trial court granted judgment on the contract claim, but denied claims for attorneys’ fees because they were not segregated. The court of appeals disagreed and awarded her all amounts found by the jury, but reduced exemplary damages to $125,000. The Supreme Court found error by court of appeals under the one-satisfaction rule. The Court first concluded that because Gullo did not contest damage awards for breach of contract, Chapa was entitled to recover her economic damages under a breach of contract theory. But, the Court looked further to determine entitlement to more.

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