MEMORANDUM OPINION AND ORDER
SIDNEY A. FITZWATER, District Judge.
Following a jury trial and verdict in its favor, plaintiff Siwell, Inc. d/b/a Capital Mortgage Services ("Siwell") moves for attorney's fees and costs under Tex. Civ. Prac. & Rem. Code Ann. § 38.001 (West 2017). Defendant Leverage Financial, LLC ("Leverage") moves under Fed. R. Civ. P. 50(b) for judgment as a matter of law, or, alternatively, for a new trial, contending that Siwell submitted insufficient evidence of damages. For the reasons that follow, the court denies both motions.
Siwell purchased a home mortgage loan ("Bozeman Loan") from Leverage, which it later sold to the Federal National Mortgage Association ("Fannie Mae"). Fannie Mae determined that the Bozeman Loan had been materially misrepresented because Bozeman did not live in the property as her primary residence. Fannie Mae first demanded that Siwell repurchase the loan, but later required that Siwell make Fannie Mae whole by compensating Fannie Mae for the difference between the purchase price and the ultimate sale price. Siwell sued Leverage for breach of contract.
In a breach of contract action under Texas law, "[a] person may recover reasonable attorney's fees from an individual or corporation, in addition to the amount of a valid claim and costs[.]" Tex. Civ. Prac. & Rem. Code Ann. § 38.001.
As a threshold matter, Siwell contends that the court should not consider whether Texas law allows recovery of fees against an LLC because Leverage failed to raise this argument until its response to Siwell's motion for attorney's fees. In Siwell's amended reply, it contends that Leverage is raising an affirmative defense because it is asserting "an independent reason (unrelated to the merits) why the plaintiff should not recover." P. Am. Reply ¶ 15 (citing MAN Engines & Components, Inc. v. Shows, 434 S.W.3d 132, 137 (Tex. 2014)). And Siwell concludes that, because affirmative defenses are waived if not pleaded, see Rule 8(c), the court cannot consider Leverage's argument. The court disagrees.
Because Siwell bears the burden of proving that it is entitled to attorney's fees, it must establish each element of the statute under which it seeks fees. See Smith, 296 S.W.3d at 547. If Siwell does not prove that Leverage is an entity that, by statute, can be liable for such fees, Siwell is not entitled to such fees as a matter of law. This is not an affirmative defense. See Seminole Pipeline Co. v. Broad Leaf Partners, Inc., 979 S.W.2d 730, 759 (Tex. App. 1998, no pet.) (holding as to statutory cap on damages: "If an intentional tort and/or malice is not pled and proven by the plaintiff, the cap automatically applies. Thus, we do not view the statutory cap as an affirmative defense."). Leverage therefore is not asserting an affirmative defense that is waived if not pleaded or otherwise asserted.
Where, as here, the court is exercising diversity jurisdiction, it is Erie-bound
This court recently considered this question in Hoffman v. L & M Arts, 2015 WL 1000838 (N.D. Tex. Mar. 6, 2015) (Fitzwater, J.), aff'd in part, rev'd in part on other grounds, 838 F.3d 568 (5th Cir. 2016).
Id. at *10. On appeal, the Fifth Circuit declined to consider this court's interpretation of § 38.001 because the panel had held that there was no compensable breach of contract. But the panel "note[d] that an intervening decision by the Court of Appeals of Texas support[ed] [this] court's Erie guess that an LLC like [the defendant] is not `an individual or corporation' under section 38.001(8)." Hoffman v. L & M Arts, 838 F.3d 568, 583 n. 14 (5th Cir. 2016) (citing Choice! Power, L.P. v. Feeley, 501 S.W.3d 199, 214 (Tex. App. 2016, no pet.)). And at least one Texas court of appeals has cited Hoffman approvingly, see Alta Mesa Holdings, L.P. v. Ives, 488 S.W.3d 438, 455 (Tex. App. 2016, pet. denied), and this court is unaware of any contrary authority. Accordingly, the court concludes that § 38.001 bars recovery of attorney's fees from Leverage, an LLC.
The court concludes that Siwell has failed to meet its burden to show that it is entitled to recover attorney's fees from Leverage, and it denies Siwell's motion for attorney's fees.
The court now turns to Leverage's motion for judgment as a matter of law, or, alternatively, for a new trial.
A motion for judgment as a matter of law "`challenges the legal sufficiency of the evidence to support the verdict.'" Jacobs v. Tapscott, 516 F.Supp.2d 639, 643 (N.D. Tex. 2007) (Fitzwater, J.) (quoting Hodges v. Mack Trucks, Inc., 474 F.3d 188, 195 (5th Cir. 2006)), aff'd, 277 Fed. Appx. 483 (5th Cir. 2008).
Brennan's Inc. v. Dickie Brennan & Co., 376 F.3d 356, 362 (5th Cir. 2004) (brackets, citations, and internal quotation marks omitted). The court will "`uphold a jury verdict unless the facts and inferences point so strongly and so overwhelmingly in favor of one party that reasonable [jurors] could not arrive at any verdict to the contrary.'" Goodner v. Hyundai Motor Co., 650 F.3d 1034, 1039 (5th Cir. 2011) (quoting Cousin v. Trans Union Corp., 246 F.3d 359, 366 (5th Cir. 2001)). "In other words, the `jury verdict must be upheld unless there is no legally sufficient evidentiary basis for a reasonable jury to find as the jury did.'" Id. at 1039-40 (quoting Foradori v. Harris, 523 F.3d 477, 495 (5th Cir. 2008)).
Leverage's sole ground for obtaining judgment as a matter of law is that Siwell failed to present sufficient evidence of damages at trial. According to Siwell, it suffered damages when it paid the sum of $84,100 to Fannie Mae to make it whole after Fannie Mae's loss on the subsequent sale of the Bozeman Loan. At trial, Royce Lewis ("Lewis"), Siwell's CEO, testified as to this payment:
Siwell maintains that this testimony conclusively establishes damages. Leverage contends that Lewis' testimony is insufficient evidence of damages because, according to Leverage, Siwell still retains the right to pull the $84,100 out of the custodial account in which it is deposited. Leverage notes that Siwell had previously deposited $123,457.13 in a custodial account from which both Fannie Mae and Siwell could withdraw after Fannie Mae demanded repurchase of the Bozeman Loan. Lewis testified that this is normal procedure in his dealings with Fannie Mae. But Fannie Mae never removed the funds from the custodial account, and Siwell withdrew the sum years later. According to Lewis, Siwell deposited the sum of $84,100 after it received a make-whole demand from Fannie Mae.
The court concludes that Siwell presented a legally sufficient evidentiary basis for a reasonable jury to find that Siwell incurred damages. Leverage notes that a September 1, 2015 report from Fannie Mae listed the payment as "pending," and it posits that the payment may still be pending. D. Br. 3 (quoting Tr. 269-70). But Lewis specifically refuted this theory in his trial testimony:
Tr. 269-70. Lewis' testimony, which the jury was entitled to believe, proves that Siwell's damages are not speculative, but have been realized through final payment of Fannie Mae's make-whole demand. Accordingly, the court concludes that this testimony provided a sufficient evidentiary basis for a reasonable jury to have found that Fannie Mae received the $84,100 sum that it demanded from Siwell,
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For the foregoing reasons, the court denies Siwell's motion for attorney's fees and denies Leverage's motion for judgment as a matter of law, or, alternatively, for a new trial.