Reed Smith Client Alerts

Texas Civil Practice and Remedies Code section 38.001 provides a statutory basis for a plaintiff to recover attorneys’ fees for prevailing and recovering damages on certain claims, including breach of contract. The statute previously only allowed recovery of attorneys’ fees against individuals and corporations, sparing other business entities like LLCs and partnerships from such awards. The Texas Legislature has now broadened the scope of section 38.001 to allow for recovery of attorneys’ fees against “organizations,” which includes partnerships and LLCs, for lawsuits filed on or after September 1, 2021.

Section 38.001 of the Texas Civil Practice and Remedies Code has been amended to allow recovery of attorneys’ fees against all types of for-profit business organizations ‒ not just individuals and corporations ‒ for lawsuits filed on or after September 1, 2021.

As section 38.001 was previously written, a party could only recover its attorneys’ fees where the party brought one of the listed claims (like breach of contract) against an “individual” or a “corporation.” Texas courts strictly interpreted the statute to preclude attorneys’ fees awards where a claim was brought against a limited liability company, partnership, or other entity. See, e.g., Alta Mesa Holdings, L.P. v. Ives, 488 S.W.3d 438, 452-55 (Tex. App. ‒ Houston [14th Dist.] 2016, pet. denied). On September 1, 2021, section 38.001 was amended to replace “corporation” with “organization” as defined in section 1.002 of the Business Organizations Code. Section 1.002 defines “Organization,” as “a corporation, limited or general partnership, limited liability company, business trust, real estate investment trust, joint venture, joint stock company, cooperative, association, bank, insurance company, credit union, savings and loan association, or other organization, regardless of whether the organization is for-profit, nonprofit, domestic, or foreign.” Thus, attorneys’ fees can now be sought under section 38.001 for certain claims against many types of legal organizations, including LLCs and partnerships. However, the newly amended section 38.001 expressly excludes “a quasi-governmental entity authorized to perform a function by state law, a religious organization, a charitable organization, or a charitable trust” from having to pay attorneys’ fees under the statute.