Grayton Koenig v. Wells Fargo Bank, N.A.
740 F.3d 1035
| 5th Cir. | 2014Background
- In 2006 Richardson refinanced her Texas home with Wells Fargo; the loan was secured by a deed of trust.
- Richardson defaulted; Wells Fargo initiated foreclosure and sold the property to Freddie Mac after a failed forbearance plan.
- Richardson sued Wells Fargo (and related parties) in Texas state court alleging claims related to the foreclosure/eviction; Wells Fargo removed to federal court.
- The district court granted summary judgment for Wells Fargo, disposing of all claims.
- After final judgment, Wells Fargo moved for attorney’s fees under Federal Rule of Civil Procedure 54(d)(2), relying on an attorney‑fee provision in the deed of trust; the district court denied the motion holding the fees were an element of damages that must be proved at trial and so could not be pursued by post‑judgment motion.
- The Fifth Circuit reversed, holding contractual fees of the type here are recoverable via Rule 54(d)(2) because they are collateral litigation costs, not damages, under Texas law, and remanded for consideration of the fee motion on the merits.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a party may seek contractual attorney’s fees by post‑judgment motion under Fed. R. Civ. P. 54(d)(2) when fees are authorized by contract | Richardson: contractual fees are “an element of damages” (Advisory Committee Note) and thus must be proved at trial, so Rule 54(d)(2) is inapplicable | Wells Fargo: the deed‑of‑trust fees are costs of prosecuting/defending claims (collateral litigation costs) and fall within Rule 54(d)(2)’s ordinary motion procedure | The Fifth Circuit held Rule 54(d)(2) may be used to seek contractual attorney’s fees here because the specific fee provision covers defense/prosecution costs and those are not damages under Texas law |
| Whether Texas law treats the deed‑of‑trust attorney’s‑fee provision as damages or collateral costs | Richardson: the provision making disbursed amounts “additional debt” means fees are part of indebtedness (damages) | Wells Fargo: the “additional debt” clause governs collection mechanics; it does not convert litigation costs into damages | The court held the collection mechanism language does not make fees damages; fees remained collateral costs incurred to protect lender’s interest |
| Whether the Advisory Committee Note creates a blanket bar to Rule 54(d)(2) for contractual fee claims | Richardson: Advisory Note implies contractual fees are covered as damages | Wells Fargo: the Advisory Note is illustrative, not categorical; context and contract control | The court agreed with Wells Fargo and with circuits that reject a blanket rule; contract language and nature of claim determine applicability |
| Proper procedural route when contract authorizes fees but fees were not pleaded as a counterclaim pre‑judgment | Richardson/district court: fees must have been pled/claimed at trial or via counterclaim | Wells Fargo: moving under Rule 54(d)(2) is proper post‑judgment when fees are contractual and not damages | The Fifth Circuit held Wells Fargo may proceed under Rule 54(d)(2); remanded to decide the motion on the merits (district court could have allowed reopening but denial solely on procedural grounds was reversed) |
Key Cases Cited
- Romaguero v. Gegenheimer, 162 F.3d 893 (5th Cir. 1998) (standard of review for Rule 54(d)(2) questions)
- Erie R.R. Co. v. Tompkins, 304 U.S. 64 (U.S. 1938) (state substantive law governs in diversity cases)
- In re Nalle Plastics Family Ltd. P’ship, 406 S.W.3d 168 (Tex. 2013) (distinguishing attorney’s fees as damages vs. collateral costs under Texas law)
- Chambers v. NASCO, Inc., 501 U.S. 32 (U.S. 1991) (court should avoid rules that foster needless satellite litigation)
- Rissman v. Rissman, 229 F.3d 586 (7th Cir. 2000) (contractual attorney’s fees may be pursued under Rule 54(d)(2))
- Capital Asset Research Corp. v. Finnegan, 216 F.3d 1268 (11th Cir. 2000) (same)
- Am. Home Assur. Co. v. United Space Alliance, LLC, 378 F.3d 482 (5th Cir. 2004) (illustrating circumstances where fees are recoverable as damages, e.g., third‑party litigation)