Legal Document: SCOTT M. SEIDEL vs. HEALTH CARE SERVICE CORPORATION

On August 22, 2018 a HCSC Response to Response to Garnishor s Motion for Summary Judgment - RESPONSE was filed involving a dispute between Seidel, Scott M., and Health Care Service Corporation, for GARNISHMENT in the District Court of Dallas County.

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FILED
DALLAS COUNTY
7/10/2019 9:00 PM
FELICIA PITRE
DISTRICT CLERK

Loaidi Grove
No. DC-18-11733

SCOTT M. SEIDEL, Chapter 7 Trustee of § IN THE DISTRICT COURT OF
The Bankruptcy Estate of Walnut Hill §
Physicians’ Hospital, LLC, §
§
Garnishor, §
§
v. §
§ DALLAS COUNTY, TEXAS
HEALTH CARE SERVICE §
CORPORATION d/b/a BLUE CROSS AND §
BLUE SHIELD OF TEXAS, A DIVISION §
OF HEALTH CARE SERVICE §
CORPORATION, §
§
Garnishee. § 191ST JUDICIAL DISTRICT

Garnishee Health Care Service Corporation’s
Response to Garnishor’s Motion for Summary Judgment

The motion for summary judgment filed by Garnishor, Scott M. Seidel, Chapter 7 Trustee

of The Bankruptcy Estate of Walnut Hill Physicians’ Hospital, LLC (“Garnishor” or the “Trustee”)

should be denied because, although HCSC does not dispute that the $3,350 mistakenly paid out by

HCSC on September 5, 2018 was subject to the garnishment writ, the Trustee (1) is not entitled to

its attorney’s fees as a garnishor and (2) even if it was entitled to an attorney’s fees award, the

Trustee’s attorney’s fees evidence is legally insufficient under Texas Supreme Court precedent.

I. Argument

a. Administrative Delay Caused Release of the September 5, 2018 Funds.

HCSC does not dispute that $3,350 was mistakenly released to the judgment-debtor on

September 5, 2018 and does not dispute that amount was subject to the Trustee’s writ of

garnishment. HCSC has offered to pay $3,350 to the Trustee.
b. Garnishor is Not Entitled to Recover its Attorney’s Fees.

In Rohrmoos Venture v. UTSW DVA Healthcare, LLP, No. 16-0006, ___ S.W.3d __, 2019

Tex. LEXIS 389, at *32 (Tex. Apr. 26, 2019), the Texas Supreme Court recently clarified the

proper way to establish a legally sufficient attorney's fee award. The Court stated that, to secure

an award of attorney’s fees from an opponent, the prevailing party must prove that:

(1) recovery of attorney's fees is legally authorized, and (2) the requested
attorney's fees are reasonable and necessary for the legal representation . . ..

Rohrmoos, 2019 Tex. LEXIS 389, at *32. Here, the Garnishor failed to satisfy either requirement.

i. Garnishor is not legally authorized to recover attorney’s fees under
Texas Rule of Civil Procedure 677.

Legal authorization begins with the American Rule, which provides that a prevailing party

has no inherent right to recover attorney’s fees from the non-prevailing party unless there is

specific statutory or contractual authority allowing it. Id. at *32 (citing e.g., Tony Gullo Motors I,

LP v. Chapa, 212 S.W.3d 299, 310-11 (Tex. 2006)). “An award of attorney's fees may not be

supplied by implication but must be provided for by the express terms of the statute in

question.” GE Capital Corp. v. ICO, Inc., 230 S.W.3d 702, 709 (Tex. App.—Houston [14th Dist.]

2007, pet. denied) (citing First City Bank-Farmer's Branch, Texas v. Guex, 677 S.W.2d 25, 30

(Tex. 1984)).

Allocation of costs, including attorney’s fees, in garnishment proceedings is governed

by Rule 677, which states:

Where the garnishee is discharged upon his answer, the costs of the proceeding,
including a reasonable compensation to the garnishee, shall be taxed against the
plaintiff; where the answer of the garnishee has not been controverted and the
garnishee is held thereon, such costs shall be taxed against the defendant and
included in the execution provided by this section, where the answer is contested,
the costs shall abide the issue of such contests.

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Tex. R. Civ. P. 677; Pallida, LLC v. Uballe, No. 03-18-00365-CV, 2018 Tex. App. LEXIS 10836,

at *8 (Tex. App.—Austin Dec. 28, 2018, no pet.)

Here, the Trustee’s reliance on Rule 677 as the basis for awarding a garnishor its attorney’s

fees is misplaced because nothing in Rule 677 allows the garnishor in a garnishment action to

recover his attorney’s fees. Henry v. Ins. Co. of N. Am., 879 S.W.2d 366, 369 (Tex. App.—Houston

[14th Dist.] 1994, no writ). Rule 677 only gave a garnishee the right to recover attorney’s fees, not

a garnishor. General Elec., 230 S.W.3d at 710; see Zeecon Wireless Internet, LLC v. Am. Bank of

Tex., N.A., 305 S.W.3d 813, 823 n.4 (Tex. App.—Austin 2010, no pet.) (dissent, J. Patterson)

(recognizing authority that garnishor is not entitled to award of attorney’s fees); Pallida, LLC,

2018 Tex. App. LEXIS 10836, at *10 (citing Henry and General Elec. in recognition that garnishor

cannot recover its attorney’s fees under Rule 677).

If the Texas Supreme Court had intended that garnishors could recover attorney’s fees

under Rule 677, they would have provided for it, just as the legislature provided for the recovery

of the judgment creditor’s attorney’s fees in the turnover relief statute. See Tex. Civ. Prac. & Rem.

Code § 31.002(e) (providing for recovery of judgment creditor’s attorneys' fees in a turnover

proceeding).

Contrary to the Trustee’s misunderstanding, Rule 677 has “consistently been construed to

afford the garnishee recovery of attorney’s fees, not the garnishor or a judgment debtor.” Cadle

Co. v. Int'l Bank of Commerce, No. 04-06-00456-CV, 2007 Tex. App. LEXIS 1952, at *14 (Tex.

App.—San Antonio Mar. 14, 2007, pet. denied) (citing Henry, 897 S.W.2d at 369). In fact, “no

contractual or statutory authority exists for the award of attorney’s fees to the garnishor in a

garnishment action.” Id. (citing Henry, 897 S.W.2d at 369-70). Therefore, as a matter of law,

attorney’s fees are not recoverable by the garnishor in a garnishment action.

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As such, the Trustee/Garnishor is not legally authorized to recover its attorney’s fees under

Rule 677.

ii. The Trustee’s attorney’s fees evidence is legally insufficient to prove
fees were reasonable and necessary under Texas law.

The Trustee seeks over $20,000 in attorney’s fees in relation to a $3,350 garnishment action

but has not proven those fees were reasonable and necessary.

In Rohrmoos, the Texas Supreme Court recently clarified what evidence a party must put

forward to provide a legally sufficient to recover attorney’s fees. When a claimant wishes to obtain

attorney’s fees from the opposing party, the claimant must prove that the requested fees are both

reasonable and necessary. Rohrmoos, 2019 Tex. LEXIS 389, at *37.

General, conclusory testimony devoid of any real substance will not support a fee award.

Thus, a claimant seeking an award of attorney's fees must prove the attorney’s reasonable hours

worked and reasonable rate by presenting sufficient evidence to support the fee award sought. Id.

at *68-69.

Sufficient evidence includes, at a minimum, evidence of (1) particular services performed,

(2) who performed those services, (3) approximately when the services were performed, (4) the

reasonable amount of time required to perform the services, and (5) the reasonable hourly rate for

each person performing such services. Id. at *69 (citing El Apple I, Ltd. v. Olivas, 370 S.W.3d 757,

762-53 (Tex. 2012)) (emphasis added). In El Apple, the Court clarified that a lodestar calculation

requires certain basic proof, including itemizing specific tasks, the time required for those tasks,

and the rate charged by the person performing the work. Id. at *53-54 (citing City of Laredo v.

Montano, 414 S.W.3d 731, 736 (Tex. 2013)).

The Court ultimately overturned the fee award in El Apple, concluding that the evidence

was legally insufficient to support the reasonableness and necessity of the fee award. Id. at 763-

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64. The plaintiff’s attorneys in El Apple merely testified to the number of hours they spent on the

case and generically attributed those hours to “the number of discovery instruments and pleadings,

the number of depositions and witness interviews, as well as the quality of representation.” Id. at

759. That was not enough. Id. at 762-63.

Also, in Long v. Griffin, 442 S.W.3d 253, 255-56 (Tex. 2014), the Court overturned the fee

award based on a general affidavit similar to the one submitted by the Trustee, stating:

Here, as in El Apple and Montano, the affidavit supporting the request for attorney's
fees only offers generalities. It indicates that one attorney spent 300 hours on the
case, another expended 344.50 hours, and the attorneys' respective hourly rates. The
affidavit posits that the case involved extensive discovery, several pretrial hearings,
multiple summary judgment motions, and a four and one-half day trial, and that
litigating the matter required understanding a related suit that settled after ten years
of litigation. But no evidence accompanied the affidavit to inform the trial court
[of] the time spent on specific tasks. . . .[W]ithout any evidence of the time
spent on specific tasks, the trial court had insufficient information to
meaningfully review the fee request.

Id. (citations omitted) (emphasis added). Likewise, in Rohrmoos, the Court concluded the evidence

was legally insufficient to support an attorney’s fee award because the substance of the attorney’s

testimony was “too general to establish that the requested fees were reasonable and

necessary.” Rohrmoos, 2019 Tex. LEXIS 389, at *25 (“Without detail about the work done, how

much time was spent on the tasks, and how he arrived at the $800,000 sum, [attorney]'s testimony

is legally insufficient to support the attorney’s fee award.”)

Here, the Trustee’s fee affidavit falls short of the Texas Supreme Court’s minimum

requirements for legally sufficient evidence of attorney’s fees. Specifically, the affidavit does not

itemize the specific tasks performed, state when those tasks were performed and by whom, or

establish the reasonableness amount of time required to perform those tasks. Instead, similar to the

attorney’s fees evidence rejected in Rohrmoos and Long, the Trustee merely offers generalities

about its work: “the Firm spent time preparing the Application, arranging for service of the writ,

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locating counsel for Garnishee after Garnishee’s default, negotiating a new answer date, preparing

discovery requests . . .” Trustee’s Mot. Ex. 1 at ¶ 13. Without evidence to inform the Court of the

time spent on specific tasks and the reasonableness of that time, the Trustee’s requested fee award

cannot be meaningfully reviewed and is insufficient evidence of attorney’s fees under Texas law.

See Rohrmoos, 2019 Tex. LEXIS 389, at *25; Long, 442 S.W.3d at 255-56.

Therefore, even if the Trustee was entitled to its attorney’s fees as a garnishor—which it is

not—the Trustee has not provided sufficient evidence that its fees are reasonable and necessary.

iii. The Trustee’s requested attorney’s fees are not reasonable and
necessary.

As explained above, the Trustee has not provided sufficient evidence of its requested fees

that would allow HCSC and the Court to evaluate the requested fees. The Trustee has not identified

the specifics tasks its counsel undertook, when those tasks were undertaken, or what was a

reasonable amount of time for those tasks, which leaves HCSC in the dark on the specifics of the

Trustee’s requested fees.

For instance, HCSC does not know whether the Trustee’s requested fees are limited to its

counsel’s tasks under this cause number or the Trustee lumped in fees it allegedly incurred when

the Trustee concurrently pursued discovery from HCSC under Case No. 17-32255-BJH-7, In re:

Walnut Hill Physicians Hospital, LLC in the United States Bankruptcy Court for the Northern

District of Texas. Including fees incurred under a different cause number in a different court is

improper and not allowed for under any of the Texas garnishment rules. Moreover, any fees or

costs that the Trustee seeks to recover from that separate proceeding were incurred due to the

Trustee’s unilateral and unnecessary decision to conduct discovery on materially similar topics in

two separate forums.

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Also, the Trustee incurred unreasonable or unnecessary fees by running up the costs of this

garnishment proceeding. On October 18, 2018, HCSC disclosed the $3,350 payment of which the

Trustee complains. See Ex. 7 to the Trustee’s Mot. On March 27, 2019, HCSC produced a

spreadsheet confirming that the $3,350 payment was the only payment HCSC owed or made to

the judgment-debtor since the writ of garnishment was served.

The Trustee generated unreasonable and unnecessary attorney’s fees when itdecided to

litigate similar issues against HCSC in separate forums and unnecessarily prepare a motion for

summary judgment seeking attorney’s fees that the Trustee legally cannot recover as a garnishor.

See Henry, 879 S.W.2d at 369; General Elec., 230 S.W.3d at 710; see Zeecon Wireless Internet,

LLC, 305 S.W.3d at 823 n.4; Pallida, LLC, 2018 Tex. App. LEXIS 10836, at *10. As such, even

if the Court considers the Trustee’s generic, legally insufficient attorney’s fees evidence, the

Trustee’s attorney’s fees were not reasonable or necessary. For these reasons, the Trustee’s

requested attorney’s fees should be denied. See Affidavit of Michael H. Bernick, attached as

Exhibit A.

PRAYER

HCSC, therefore, prays that the Court deny the Trustee’s motion for summary judgement

and that HCSC have all such other and further relief, general and special, at law or in equity, to

which it may be justly entitled.

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Respectfully submitted,

REED SMITH LLP

By: /s/ Michael H. Bernick
Lloyd A. Lim
Texas Bar No. 24056871
Michael H. Bernick
Texas Bar No. 24078227
811 Main Street, Suite 1700
Houston, Texas 77002
Tel. 713.469.3834
Fax. 713.469.3899
llim@reedsmith.com
mbernick@reedsmith.com

Attorney for Garnishee
Health Care Service Corporation
d/b/a Blue Cross and Blue Shield
of Texas, a Division of Health
Care Service Corporation

CERTIFICATE OF SERVICE

This is to certify that a true and correct copy of the foregoing pleading has been served by
electronic transmission via the Court’s ECF system on this the 10th day of July, 2019, to all counsel
of record.

Davor Rukavina
Julian P. Vasek
MUNSCH HARDT KOPF & HARR, P.C.
500 N. Akard Street, Suite 3800
Dallas, Texas 75201
drukavina@munsch.com
jvasek@munsch.com

By: /s/ Michael H. Bernick
Michael H. Bernick

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No. DC-18-11733

AFFIDAVIT OF MICHAEL H. BERNICK

STATE OF TEXAS §
§
COUNTY OF HARRIS §

BEFORE ME, the undersigned authority, on this day personally appeared affiant,

Michael H. Bernick, who, after being by me duly sworn on oath, deposed and stated as

follows:

1. I am over the age of twenty-one (21) years and am fully competent to
testify herein. I have knowledge of and am familiar with the facts set forth herein, and I
swear that all the facts and statements contained in this Affidavit are true and correct and
are based on my personal knowledge.

2. I am an attorney licensed to practice law in the State of Texas and have
been a practicing trial lawyer in Texas and in good standing with the bar since 2011. I
am an attorney with the law firm of Reed Smith, LLP in Houston, Texas. I have
regularly practiced in Harris County and Dallas County since September, 2013. My firm
rendered legal services on behalf of Garnishee Health Care Service Corporation d/b/a
Blue Cross and Blue Shield of Texas, a Division of Health Care Service Corporation
(“Garnishee” or “HCSC”) in connection with the action filed by Garnishor Scott M.
Seidel, Chapter 7 Trustee of the Bankruptcy Estate of Walnut Hill Physicians’ Hospital,
LLC (“Garnishor”) in the above-styled and numbered cause.

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3. Rule 677 of the Texas Rules of Civil Procedure governs awards of
attorney’s fees under Texas garnishment action. As several Texas courts have recognized,
nothing in Rule 677 allows a garnishor to recover its costs and attorney’s fees.

4. Moreover, under Texas law, the Trustee has not provided sufficient
evidence of its requested fees that would allow HCSC and the Court to evaluate the
reasonableness and necessity of the requested fees. The Trustee has not identified the
specifics tasks itscounsel undertook, when those tasks were undertaken, or what was a
reasonable amount of time for those tasks, which leaves HCSC in the dark on the
specifics of the Trustee’s requested fees.

5. For instance, HCSC does not know whether the Trustee’s requested fees
are limited to its counsel’s tasks under this cause number or the Trustee lumped in fees it
allegedly incurred when the Trustee concurrently pursued discovery from HCSC under
Case No. 17-32255-BJH-7, In re: Walnut Hill Physicians Hospital, LLC in the United
States Bankruptcy Court for the Northern District of Texas. Including fees incurred under
a different cause number in a different court is improper and not allowed for under any of
the Texas garnishment rules. Moreover, any fees or costs that the Trustee seeks to recover
from that separate proceeding were incurred due to the Trustee’s unilateral and
unnecessary decision to conduct discovery on materially similar topics in two separate
forums.

6. Also, the Trustee incurred unreasonable or unnecessary fees by running up
the costs of this garnishment proceeding. On October 18, 2018, HCSC disclosed the
$3,350 payment of which the Trustee complains. On March 27, 2019, HCSC produced a
spreadsheet confirming that the $3,350 payment was the only payment HCSC owed or
made to the judgment-debtor since the writ of garnishment was served.

7. The Trustee generated unreasonable and unnecessary attorney’s fees when
it decided to litigate similar issues against HCSC in separate forums and unnecessarily
prepare a motion for summary judgment seeking attorney’s fees that the Trustee legally
cannot recover as a garnishor. As such, even if one considers the Trustee’s generic,
legally insufficient attorney’s fees evidence, the Trustee’s attorney’s fees were not
reasonable or necessary.

8. In my opinion, the Trustee is not entitled to recover its attorney’s fees
under Rule 677, the Trustee did not provide sufficient evidence of the reasonableness and
necessity of its fees, and the amount of fees sought is unreasonable and unnecessary
based on the limited information provided and the reasons stated above.

9. For these reasons, the Trustee’s requested attorney’s fees should be
denied.

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Further affiant sayeth not.

SUBSCRIBED TO AND SWORN TO BEFORE ME on this 10th day of July
2019, to certify which witness my hand and seal of office.

KAREN s WRIGHT
My Notary ID # 3509527
~res May 27, 2022
THE STAT~ OF. TEXAS

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