Gassaway v. TMGN 121, LLC, A Texas limited liability company

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF TEXAS

LUBBOCK DIVISION

GRANT MICHAEL GASSAWAY,

Appellant,

v. No. 5:19-CV-082-H

TMGN 121, LLC,

Appellee.

MEMORANDUM OPINION AND ORDER

In this bankruptcy appeal, Grant Gassaway challenges the Bankruptcy Court’s entry

of judgment against him, claiming that each of the following actions constituted an abuse of

discretion or an error of law: the (1) entry of default judgment; (2) entry of a judgment of

non-dischargeability; (3) award of exemplary damages; and (4) award of attorney’s fees.

After reviewing the record and finding no abuse of discretion or error of law as to the first

three issues, the Court affirms the judgment of the Bankruptcy Court as to those issues. In

light of a recent Texas Supreme Court case clarifying Texas law with respect to the evidence

required to sustain an award of attorney’s fees, which issued after the Bankruptcy Court

entered judgment in this case, the Court remands this matter to the Bankruptcy Court for

the limited purpose of allowing the Bankruptcy Court to make findings of fact regarding the

calculation of attorney’s fees under the lodestar method.

1. Factual Background

TMGN entered into a leasing agreement with GMG Teas, LLC, an entity owned by

Gassaway, in February 2015 for retail lease space located at 5733 State Highway 121, Suite

100, The Colony, Texas 75056. Record, Volume 1 (“R. Vol. 1”) at 26-48. Gassaway and

GMG required TMGN to modify the space prior to executing the lease. Affidavit of Yoram

Avneri, Appendix in Support of Appellant’s Brief (“App.”) 382 at 7. GMG took

possession of the leased premises on September 1, 2015. See Deposition of Grant Gassaway

94:1-95:19, R. Vol. 1. Under the terms of the lease, the first rent payment was due at the

Commencement Date of December 30, 2015. Jd. at 95:20-96:12. Gassaway executed a

personal guaranty for all of GMG’s liabilities on the lease. Jd. at 136:22-139:20. GMG

defaulted by failing to make any rent payments, and TMGN provided it with timely notice

of default. App. 378 at Ex. 8.

In April 2017, Gassaway testified under oath in an underlying state-court proceeding

that he had falsified financial statements to make GMG appear to be a stronger candidate

for tenancy than it otherwise would have been. Gassaway Dep. 65:2-—70:1. Gassaway

stated that he and his real estate broker decided to “add another zero” to the end of each of

his financial statements. Jd. at 65:2-71:11. These misrepresentations provided incorrect

values as to Gassaway’s assets, ownership history in real estate, income levels, job titles, and

net worth. App. 298-300. On April 13, 2018, Gassaway filed a petition for relief under

Chapter 7 of the Bankruptcy Code in the United States Bankruptcy Court for the Northern

District of Texas. R. Vol. 7 at 3-10.

TMGN filed an Original Complaint to Determine Nondischargeability of Debt in the

Bankruptcy Court on July 24, 2018. App. 4-24. After not receiving any response to the

Complaint, TMGN moved for Entry of Default against Gassaway. R. Vol. 3 at 1-123. On

January 10, 2019, the Clerk for the Bankruptcy Court submitted its Entry of Default. R.

Vol. 4 at 5-7. On March 15, 2019, TMGN filed its Motion for Default Judgment. R. Vol. 5

at 1-118. Gassaway filed an Original Answer to the Complaint, a Response to the Motion

for Default Judgment, and a Declaration on April 8, 2019. R. Vol. 6 at 11-19. Two days

later, the Bankruptcy Court conducted a hearing on TMGN’s Motion for Default Judgment

and orally granted that motion. App. 477-95.

On April 19, 2019, Gassaway filed an Objection to Entry of Judgment as Proposed.

R. Vol. 6 at 20-29. On April 22, 2019, the Court entered judgment, awarding TMGN a

non-dischargeable judgment against Gassaway in the amount of $778,821.02. The

judgment included (a) $262,383.49 owed pursuant to the personal guaranty;

(b) $524,766.98 in exemplary damages; (c) $68,879.76 for attorney’s fees; and (d) $790.79

for costs of court. Jd. at 30-32. On May 1, 2019, Gassaway filed notice of this appeal, and

briefing completed in late October. Jd. at 33-35; Dkt. Nos. 6, 8, 9.

Zs Standards of Review

This Court reviews the Bankruptcy Court’s conclusions of law de novo and its

findings of fact for clear error. See In re Thaw, 769 F.3d 366, 368 (5th Cir. 2014); Matter of

Chu, 679 F. App’x 316, 318 (Sth Cir. 2017). Mixed questions of law and fact are reviewed

de novo. In re McLain, 516 F.3d 301, 307 (Sth Cir. 2008). Because Gassaway’s argument

regarding the award of exemplary damages is a challenge to a conclusion of law, the Court

reviews the award of exemplary damages de novo.

Matters within a bankruptcy judge’s discretion, including evidentiary rulings, are

reviewed for abuse of discretion. See In re Vallecito Gas, LLC, 771 F.3d 929, 932 (5th Cir.

2014); In re Vitro S.A.B. de CV, 701 F.3d 1031, 1042 (5th Cir. 2012). “A bankruptcy court

abuses its discretion when it applies an improper legal standard or rests its decision on

findings of fact that are clearly erroneous.” In re TWL Corp., 712 F.3d 886, 891 (5th Cir.

2013).

Di Analysis

A. The Bankruptcy Court did not abuse its discretion in entering a default

judgment against Gassaway despite his untimely appearance and objection.

A bankruptcy court’s entry of a default judgment is reviewed for abuse of discretion.

In re OCA, Inc., 551 F.3d 359, 366 (Sth Cir. 2008). “Because of the seriousness of a default

judgment . . . even a slight abuse of discretion may justify reversal.” Jd. (citing Lacy v. Sitel

Corp., 227 F.3d 290, 292 (Sth Cir. 2000)). Whether a defendant’s failure to answer was

willful, however, is a factual inquiry that is reviewed for clear error. CJC Holdings, Inc. v.

Wright & Lato, Inc., 979 F.2d 60, 64 (Sth Cir. 1992). Federal Rule of Civil Procedure 55(c)

dictates that a trial court “may set aside an entry of default for good cause,” and it may set

aside a final default judgment under Federal Rule of Civil Procedure 60(b), which provides

for relief from a final order.

In determining whether good cause exists to set aside a default, the Fifth Circuit has

primarily considered three factors: “whether the default was willful, whether setting it aside

would prejudice the adversary, and whether a meritorious defense is presented.” United

States v. One Parcel of Real Property, 763 F.2d 181, 183 (5th Cir. 1985). Subsequent Fifth

Circuit decisions have made this test disjunctive, and any single factor may be sufficient to

support a trial court’s refusal to set aside an entry of default. Matter of Dierschke, 975 F.2d

181, 183-84 (Sth Cir. 1992). Additionally, courts have considered “other factors including

whether: (1) the public interest was implicated, (2) there was a significant financial loss to

the defendant, and (3) the defendant acted expeditiously to correct the default.” Jd. at 184.

Here, Gassaway’s willfulness in failing to answer TMGN’s allegations precludes him

from showing that the Bankruptcy Court abused its discretion in refusing to set aside the

entry of default and entering a default judgment. The Bankruptcy Court weighed

Gassaway’s credibility and found that Gassaway acted willfully in failing to answer

TMGN’s Complaint. Specifically, the Bankruptcy Court stated, “Mr. Gassaway has filed

other pleadings in [the underlying bankruptcy case]. Mr. Gassaway knows how to file an

answer to the complaint... And I’m not accepting his statement under his declaration that

he was unable to because he could not afford counsel.” App. 491.

Notably, Gassaway does not dispute that he was aware of TMGN’s Complaint over

the several months during which he failed to answer it. His appearance before the

Bankruptcy Court to contest the entry of default judgment is a form of “late-breaking

diligence” that “pales in comparison to the kind of post-service conduct that [the Fifth

Circuit has] found to foreclose a finding of willfulness.” Wooten v. McDonald Transit Assocs.,

Inc., 788 F.3d 490, 501 (Sth Cir. 2015). “Willful failure alone may constitute sufficient

cause” for a court to deny a motion to set aside a default, and Gassaway showed such

willful failure in the adversarial proceedings before the Bankruptcy Court. Dierschke, 975

F.2d at 184-85.

While Gassaway’s willfulness in failing to defend against TMGN’s allegations in the

Bankruptcy Court is independently sufficient to prevent the Court from reversing the denial

of Gassaway’s motion to set aside the default, Gassaway has also failed to show that default

judgment prevented him from presenting any meritorious defense. At the hearing before the

Bankruptcy Court on Gassaway’s motion to set aside the entry of default, counsel for

Gassaway implied that his client had a meritorious defense on the grounds that he did not

act with fraudulent intent: “I don’t agree with the representations as to the statements of Mr.

Gassaway from his deposition. I do believe that there is lack of the intent element to satisfy

any of those claims that have been being [sic] brought forward.” App. 487.

Yet, as TMGN notes in its brief, Gassaway testified at his deposition that he added

zeros to the end of his financial statement to make his company appear more attractive as a

commercial tenant. See Gassaway Dep. 65:2-71:11. Gassaway presents no argument for

why this behavior would not qualify as fraudulent or how he intended to present a

meritorious defense against the fraud claims if the Bankruptcy Court had set aside the

default. Accordingly, the Court will not vacate the default judgment because Gassaway

“does not demonstrate that there is a possibility that the outcome of the suit after a full trial

will be contrary to the result achieved by the default.” Scott v. Carpanzano, 556 F. App’x

288, 296 (5th Cir. 2014) (citing In re OCA, Inc., 551 F.3d at 373) (internal quotation marks

omitted).

B. The judgment of non-dischargeability rests on TMGN’s statutory fraud

claim, and therefore the Bankruptcy Court committed no error in awarding

a judgment of non-dischargeability.

Gassaway argues that the Bankruptcy Court committed an error of law or an abuse

of discretion by awarding a judgment of non-dischargeability, which he claims rested on

TMGN’s claim under the Texas DTPA. Because Gassaway’s argument that the

Bankruptcy Court erroneously determined Gassaway’s debt to TMGN to be non-

dischargeable pursuant to 11 U.S.C. § 523(a)(2) is a claim that the Bankruptcy Court applied

the wrong legal standard, the Court reviews the Bankruptcy Court’s determination de novo.

Matter of JFK Capital Holdings, LLC, 880 F.3d 747, 751 (Sth Cir. 2018).

Although Gassaway attacks the validity of the non-dischargeability determination on

the grounds that TMGN lacked standing under the DTPA, the record indicates that the

Bankruptcy Court’s judgment of non-dischargeability did not rest on the DTPA but rather

on TMGN’s statutory-fraud claim and that the statutory-fraud claim provides an adequate

basis for the judgment of non-dischargeability.

Under Tex. Bus. & Com. Code § 27.01(a), fraud in a real estate transaction consists

of a “false representation of a past or existing material fact, when the false representation is

(A) made to a person for the purpose of inducing that person to enter into a contract; and

(B) relied on by that person in entering into that contract.” TMGN pled the statutory-fraud

cause of action as a basis for its non-dischargeability claim. See R. Vol. 1, pgs. 5-114.

Gassaway did not challenge TMGN’s statutory-fraud claim in the Bankruptcy Court, and

he does not do so in this appeal. TMGN’s Br. 23, Dkt. No. 8; Gassaway’s Br. 12-14, Dkt.

No. 6. Moreover, a statutory-fraud claim under Tex. Bus. & Com. Code § 27.01 may

support a judgment of non-dischargeability. See In re Johnson, 1993 U.S. App. LEXIS

39471, at *1, 7-9 (5th Cir. 1993); In re Rosenbaum, No. 08-43029, 2011 WL 4553440, at *1

(E.D. Tex. Sept. 29, 2011). Accordingly, the Court finds that the Bankruptcy Court

committed no error in awarding a judgment of non-dischargeability to TMGN and upholds

the judgment of non-dischargeability.

The Bankruptcy Court did not apply the wrong legal standard by awarding

exemplary damages, and the parties have not shown any other error related

to the calculation of damages.

Gassaway argues that the Bankruptcy Court committed an error of law by awarding

exemplary damages on TMGN’s statutory-fraud claim pursuant to Tex. Bus. & Com. Code

§ 27.01(e) without weighing the six statutory factors enumerated in Tex. Civ. Prac. & Rem.

Code § 41.011(a). He objects to the Bankruptcy Court’s exemplary-damages award of twice

TMGN’s economic damages and contends that the size of the award reinforces the need to

weigh the statutory factors on the record. Gassaway’s Br. 16-17. Gassaway also argues

that the Bankruptcy Court erred in denying him a bifurcated hearing on the amount of

exemplary damages. Because Gassaway’s argument is a claim that the Bankruptcy Court

applied an incorrect legal standard in assessing exemplary damages, the Court reviews the

award de novo.

le Gassaway did not waive his objection to the award of exemplary

damages.

TMGN argues that Gassaway waived any objections to the award of exemplary

damages by failing to object to the award at the hearing regarding TMGN’s Motion for

Default Judgment. See TMGN’s Br. 26. TMGN, however, does not provide supporting

authority for this proposition, and the record indicates otherwise. Jd.

Gassaway’s April 19, 2019 Objection to Entry of Judgment argued that “exemplary

damages and attorneys’ fees are not established by, and cannot be calculated from,

Plaintiff's pleadings and supporting documents upon the standards for the same under

Texas law.” App. 459. The Court finds that this objection sufficiently preserved the issue of

exemplary damages for appeal.

ii. While Tex. Civ. Prac. & Rem. Code § 41.011(a) requires the trier of

fact to consider any evidence of the defendant’s net worth, among

other considerations, the Bankruptcy Court implicitly considered

such evidence.

When “determining the amount of exemplary damages, the trier of fact shall

consider evidence, if any,” that relates to “(1) the nature of the wrong; (2) the character of

the conduct involved; (3) the degree of culpability of the wrongdoer; (4) the situation and

sensibilities of the parties concerned; (5) the extent to which such conduct offends a public

sense of justice and propriety; and (6) the net worth of the defendant.” Tex. Civ. Prac. &

Rem. Code § 41.011(a). Exemplary damages may not exceed twice the amount of

economic damages. Tex. Civ. Prac. & Rem. Code § 41.008(b).

On appeal, Gassaway asserts that the Bankruptcy Court failed to consider evidence

of the final factor, the defendant’s net worth, but the record contradicts that assertion. In his

objections to the proposed judgment, Gassaway cited the six Section 41.011(a) factors to the

Bankruptcy Court. App. 462. The Bankruptcy Court stated on the record that it had

reviewed Gassaway’s filings in connection with TMGN’s motion for default judgment, see

id. at 490, and this Court has no reason to doubt that the Bankruptcy Court reviewed

Gassaway’s objections to the entry of judgment. Additionally, the Court agrees with

TMGN that the Bankruptcy Court’s knowledge and awareness of Gassaway’s financial

condition has not been reasonably called into question on appeal given the Bankruptcy

Court’s management of the underlying proceedings. See TMGN’s Br. 28.

Gassaway has not cited to, and the Court has not located, any authority holding that

the factfinder’s consideration of the Section 41.011(a) factors must occur explicitly on the

record. The only Texas case to which he cites in the relevant section of his brief states only

that a trial court “should take into consideration” the Section 41.011(a), which merely

reframes the statutory language. Copeland v. Cooper, No. 05-13-00541-CV, 2015 WL 83307,

at *6 (Tex. App.—Daallas, Jan. 7, 2015). Thus, the Court holds that it was not error for the

Bankruptcy Court to award exemplary damages without explicitly detailing the Section

41.011(a) factors on the record.

iii. | Gassaway was not entitled to a bifurcated hearing on the amount of

exemplary damages.

Gassaway also claims that the Bankruptcy Court erred by denying him a bifurcated

hearing on the amount of exemplary damages. Gassaway’s Reply Br. 6-7, Dkt. No. 9.

Fifth Circuit precedent, however, forecloses this argument. Although Texas courts are

required to bifurcate liability from punitive damages, within the federal system “bifurcation

is a case-specific procedural matter within the sole discretion of the district court.” Nester v.

Textron, Inc., 888 F.3d 151, 163 (5th Cir. 2018). Because Gassaway cannot show that the

Bankruptcy Court abused its discretion, the Court will not reverse the award of punitive

damages for a failure to bifurcate. See First Tex. Sav. Ass’n v. Reliance Ins. Co., 950 F.2d 1171,

1174 n.2 (Sth Cir. 1992) (citing Gonzalez—Marin v. Equitable Life Assur. Soc., 845 F.2d 1140,

1145 (1st Cir. 1988)).

iv. Gassaway’s claim that the Bankruptcy Court failed to properly

offset TMGN’s recovery from another defendant cannot prevail, but

nor can TMGN obtain up to three times the amount of actual

damages in exemplary damages under the DTPA tie-in statute.

Gassaway argues that the Bankruptcy Court incorrectly calculated the maximum

amount of punitive damages available under Tex. Civ. Prac. & Rem. Code § 41.008(b) by

failing to properly offset TMGN’s recovery from another defendant, placing the maximum

possible exemplary damages at $368,766.98 rather than the $524,766.98 that the Bankruptcy

Court awarded. Gassaway’s Br. 17-18. While Gassaway does not specify his basis for

asserting that TMGN recovered $78,000 from another defendant, neither does TMGN

attack this argument in its brief.

Although the basis for Gassaway’s offset claim is uncertain, Texas law does not

demand an offset for the amount recovered from another defendant. Exemplary-damage

calculations “are based on the [judge’s] award of actual damages, not the amount actually

recovered by the plaintiff in the judgment.” Gilcrease v. Garlock, Inc., 211 S.W.3d 448, 458

(Tex. App.—El Paso 2006, no pet.) (collecting cases). Thus, the Bankruptcy Court did not

err by not applying an offset.

TMGN implicitly responds to the offset argument by claiming in its brief that Section

27.015 of the Texas Business & Commerce Code provides a “tie-in” to the DTPA and

10

allows TMGN to recover exemplary damages up to three times the amount of actual

damages. Dkt. No. 8 at 25-26. Because the Court concludes that the Bankruptcy Court did

not err by refusing to apply an offset, however, the Court need not address TMGN’s

argument.

D. The Bankruptcy Court’s failure to require segregation of attorney’s fees

was not an abuse of discretion, but the Texas Supreme Court’s recent

decision in Rohrmoos Venture v. UTSW DVA Healthcare, LLP requires a

limited remand to permit additional findings of fact as to the

reasonableness and necessity of the fees.

The Court “reviews the bankruptcy court’s award of attorney’s fees for abuse of

discretion.” Jn re Babcock & Wilcox Co., 526 F.3d 824, 826 (5th Cir. 2008). A bankruptcy

court abuses its discretion when it “(1) applies an improper legal standard or follows

improper procedures in calculating the fee award or (2) rests its decision on findings of fact

that are clearly erroneous.” Jd. (internal citation omitted). The Bankruptcy Court’s findings

of fact are reviewed for clear error, and its legal conclusions are reviewed de novo. Id.

i. Gassaway did not waive his objection to the award of attorney’s

fees.

TMGN argues that Gassaway waived any objections to the award of attorney’s fees

by failing to object to the award at the hearing regarding TMGN’s Motion for Default

Judgment. See TMGN’s Br. 29. TMGN, however, provides the Court with no authority for

this proposition, and the record indicates otherwise. Jd.

Gassaway’s April 19, 2019 Objection to Entry of Judgment argued that “exemplary

damages and attorneys’ fees are not established by, and cannot be calculated from,

Plaintiff's pleadings and supporting documents upon the standards for the same under

Texas law.” App. 459. This objection sufficiently preserved the issue of attorney’s fees for

the purposes of appeal.

11

ii. Texas law governs the award of attorney’s fees and the

reasonableness of the fee award in this case.

“State law controls both the award of and the reasonableness of fees awarded where

state law supplies the rule of decision.” Mathis v. Exxon Corp., 302 F.3d 448, 461 (Sth Cir.

2002). Because Texas substantive law applies to the statutory-fraud claim on which the

award of attorney’s fees was based, Texas law also governs the award of attorney’s fees and

reasonableness of that fee award in this case. See id. As discussed above, Tex. Bus. & Com.

Code § 27.01(e) entitles a successful statutory-fraud plaintiff to “reasonable and necessary

attorney’s fees.” Accordingly, the statutory basis for the award of attorney’s fees is not in

question.

iii. | The Bankruptcy Court did not abuse its discretion in failing to

require TMGN to segregate attorney’s fees by claim.

Gassaway argues that, because TMGN brought multiple claims and only some of

those claims were successful, the Bankruptcy Court abused its discretion in failing to require

TMGN to segregate fees according to TMGN’s various claims and in awarding the

requested fees without requiring segregation. Under Texas law, “fee claimants have always

been required to segregate fees between claims for which they are recoverable and claims for

which they are not.” Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299, 311 (Tex. 2006).

However, “when the causes of action involved in the [underlying] suit are dependent upon

the same set of facts or circumstances and thus are intertwined to the point of being

inseparable, the party suing for attorney’s fees may recover the entire amount covering all

claims.” Biliouris v. Sundance Res., Inc., No. 3:07-CV-1591-N, 2010 U.S. Dist. LEXIS

143214, at *7 (N.D. Tex. Nov. 3, 2010) (quoting Stewart Title Guar. Co. v. Sterling, 822

S.W.2d 1, 11-12 (Tex. 1991)).

12

Here, although the Court finds that TMGN’s DTPA claims were not recoverable, the

statutory-fraud and DTPA claims were so intertwined as to preclude application of the

fee-segregation requirement. In an analogous case, the Texas Court of Appeals held that a

plaintiff was not required to segregate attorney’s fees between a statutory-fraud claim under

Section 27.01 and a breach-of-contract claim because both claims arose from the same facts:

contracts between the parties, the defendant’s false representations to the plaintiff, and

injury to the plaintiff. Gonyea v. Kerby, No. 10-12-00182-CV, 2013 WL 4040117, at *6—7

(Tex. App.—Waco Aug. 8, 2013, pet. denied) (citing Chapa, 212 S.W.3d at 313-14).

Similarly, TMGN’s statutory-fraud claim and its DTPA claims rest on identical facts:

Gassaway made misrepresentations, those misrepresentations induced TMGN to enter into

a real estate leasing contract with Gassaway, and TMGN suffered financial injury as a

result. Accordingly, the Court finds that TMGN was not required to segregate its fees. See

Ski River Dev., Inc. v. McCalla, 167 S.W.3d 121, 143 (Tex. App.—Waco 2005, pet. denied).

iv. The Texas Supreme Court’s decision in Rohrmoos Venture v. UTSW

DVA Healthcare, LLP, which issued after the Bankruptcy Court

entered judgment in this case, requires a lodestar calculation to

support an award of attorney’s fees.

Under Texas law, courts consider the following factors in determining whether an

award of attorney’s fees is reasonable:

(1) the time and labor required, novelty and difficulty of the questions

involved, and skill required to properly perform the legal service; (2) the

likelihood the lawyer's acceptance of the particular employment will preclude

other employment; (3) the fee customarily charged in the locality for similar

legal services; (4) the amount involved and results obtained; (5) the time

limitations imposed by the client or by the circumstances; (6) the nature and

length of the professional relationship with the client; (7) the experience,

reputation, and ability of the lawyer or lawyers performing the services; and

(8) whether the fee is fixed or contingent on results obtained or uncertainty of

collection before the legal services have been rendered.

13

Arthur Andersen & Co. v. Perry Equipment Corp., 945 S.W.2d 812, 818 (Tex. 1997) (citing Tex.

Disciplinary R. Prof. Conduct 1.04). Litigants seeking attorney’s fees are “not required to

present evidence on each of these factors.” City of Laredo v. Negrete, No. 04-08-00737-CV, □

2010 WL 454921, at *9 (Tex. App.—San Antonio Feb. 10, 2010, pet. denied) (citing Burnside

Air Conditioning & Heating, Inc. v. T.S. Young Corp., 113 S.W.3d 889, 897-98 (Tex. App.—

Dallas 2003, no pet.)).

Many Texas appellate courts held in cases decided until April 2019 that an

attorney’s testimony regarding the overall fee and the reasonableness of that fee was

sufficient to sustain an award of attorney’s fees pursuant to a fee-shifting statute or

contractual provision. See Metroplex Mailing Servs., LLC v. RR Donnelley & Sons Co., 410

S,W.3d 889, 900 (Tex. App.—Dallas 2013, no pet.); JeffKaiser, PC v. State, No. 03-15-00019-

CV, 2016 WL 1639731, at *5 (Tex. App.—Austin Apr. 20, 2016, pet. denied); Jimoh v.

Nwogo, No. 01-13-00675-CV, 2014 WL 7335158, at *7 (Tex. App.—Houston [Ist Dist.]

Dec. 23, 2014, no pet.); Ferrant v. Graham Assocs. Inc., No. 02-12-00190-CV, 2014 WL

1875825, at *9 (Tex. App —Fort Worth May 8, 2014, no pet.).

But on April 26, 2019, four days after the Bankruptcy Court entered judgment

against Gassaway, the Texas Supreme Court held in Rohrmoos Venture v. UTSW DVA

Healthcare, LLP that, to sustain any fee award over a timely challenge on appeal, a party

seeking attorney’s fees must submit at least “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.” 578 S.W.3d 469, 501-02 (Tex.

14

2019). Rohrmoos held that a lodestar calculation must be performed in all fee-shifting

situations, abrogating Metroplex and its progeny. See id. at 496.

Here, although Muckleroy’s affidavit generally described the legal services he

conducted in connection with the case, Muckleroy did not provide the number of hours

spent on each task or on all tasks in the aggregate, and he did not provide the hourly rate he

used to calculate his requested fee award. App. 399-403. Accordingly, the Muckleroy

affidavit is insufficient under Rohrmoos, which precludes this Court from sustaining the

Bankruptcy Court’s award of attorney’s fees to TMGN. Given Rohrmoos, additional

findings are necessary before the Court may review this award.

v. The Court remands to the Bankruptcy Court for the limited purpose

of making additional factual findings as to the reasonableness and

necessity of the fee award.

Finding no error in the Bankruptcy Court’s award of attorney’s fees under Texas law

as it existed at the time the Bankruptcy Court entered judgment against Gassaway, the

Court declines to vacate the fee award. Rather, the Court remands this matter to the

Bankruptcy Court for the limited purpose of conducting further proceedings to determine

the reasonableness and necessity of the fee award in light of the lodestar requirement

imposed by Rohrmoos. See Matter of HECI Expl. Co., Inc., 862 F.2d 513, 516 (Sth Cir. 1988)

(describing an order of limited remand that required the bankruptcy court to clarify the basis

for a conclusion of law).

The Bankruptcy Court should conduct proceedings as necessary, make findings as to

the reasonableness and necessity of the fee award under Rohrmoos, and transmit its

determination to this Court. See generally In re Martin, No. EC-92-1005-RJP, 1993 WL

13938047 (B.A.P. 9th Cir. Dec. 14, 1993) (noting that the Bankruptcy Appellate Panel

ordered a four-month limited remand for the bankruptcy court to make a factual

15

determination); Jn re Scott, 437 B.R. 376, 378 n.4 (B.A.P. 9th Cir. 2010) (discussing a similar

order of limited remand). After the Bankruptcy Court transmits its determination and

records thereof to this Court, Gassaway’s appeal will be deemed to be fully submitted, and

this Court will resolve the attorney’s-fees issue.

4. Conclusion

After reviewing the record, the Court finds no abuse of discretion or error of law in

the Bankruptcy Court’s entry of default judgment, entry of a non-dischargeable judgment, or

award of exemplary damages. Because the Court finds that the Texas Supreme Court’s

decision in Rohrmoos requires a lodestar calculation that includes the number of hours spent

on particular legal services and the reasonable hourly rate for such services, the Court

remands this matter to the Bankruptcy Court for further proceedings. The Bankruptcy

Court should conduct proceedings as necessary, make a determination, and transmit that

determination to this Court, at which time Gassaway’s appeal will be deemed fully

submitted and resolved.

So ordered on February (3. 2020. :

goo Ka

JAMES WESLEY HENDRIX

ITED STATES DISTRICT JUDGE

16