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Reasonable Attorney’s Fees for Breach of Express WarrantyPosted 6/5/08
The Texas Supreme Court recently held in Medical City Dallas, Ltd. v. Carlisle Corporation that reasonable and necessary attorney’s fees are recoverable in an action for breach of an express warranty if the express warranty at issue arises out of a written or oral contract.
In Medical City, Medical City Dallas (“MCD”) contracted with a roofing contractor to re-roof a building owned by MCD, and the roofing material was supplied by Defendant, Carlisle Corporation, which issued express warranties to MCD with regard to the roofing material. One of the express warranties was a Twenty Year Membrane Material Warranty, which promised that the roof membrane would not deteriorate prematurely. Shortly after the roof was installed, however, MCD discovered multiple leaks, and the leaks would continue to worsen over the next nine years to the point where the leaks became “continuous.” MCD then retained a consultant to inspect the roof, and the consultant advised MCD that the roofing material had material defects and exhibited premature signs of aging. The consultant also opined that the roof was in extremely poor condition and advised MCD to contact Carlisle to discuss warranty issues. After attempts to resolve the dispute failed, MCD sued the contractor and Carlisle for, among other things, breach of express warranties, and sought to recover the direct costs it incurred in replacing the roof, attorney??s fees, and costs.
At trial, the jury returned a verdict in favor of MCD, finding that Carlisle breached the Twenty Year Membrane Material Warranty. The jury awarded MCD $110,449.59 in damages and an additional $121,277.04 in attorney’s fees. Carlisle appealed, and the court of appeals reversed the award of attorney’s fees on the grounds that Section 38.001(8) of the Texas Civil Practices & Remedies Code, which allows for the recovery of reasonable and necessary attorney’s fees for claims based on oral or written contracts, did not specifically encompass breach of warranty claims.
MCD then petitioned the Texas Supreme Court to review the attorney’s fees issue, which the Court granted. On appeal, MCD argued that an express warranty is like a contract in that the party asserting it is seeking damages based upon an opponent’s failure to uphold its end of a bargain, and therefore, attorney’s fees are recoverable under Section 38.001(8) of the Texas Civil Practices & Remedies Code in a breach of express warranty action arising out of a written or oral contract.
The Texas Supreme Court was persuaded by MCD’s argument and held that while breach of warranty and breach of contract claims are distinct causes of action, a breach of an express warranty cause of action that involves a party seeking damages based on an opponent’s failure to uphold its end of the bargain is a claim based on a written or oral contract, and therefore, Section 38.001(8) of the Texas Civil Practices & Remedies Code applies to support an award of attorney??s fees in a breach of express warranty action arising out of a written or oral contract.
Additionally, the Court reiterated that the economic loss rule supports its’ holding that the breach of express warranty at issue in this case sounds in contract in that, “when the injury is only the economic loss to the subject of a contract itself, the action sounds in contract.” Furthermore, the Court stated, “recognizing that breach of an express warranty is founded on contract thus comports with a party’s expectations under the economic loss rule.”
In this case, the Court held that the type of damages sought by MCD supports the conclusion that its breach of express warranty claim was based in contract, which entitled MCD to recover attorney’s fees under Section 38.001(8) of the Texas Civil Practices & Remedies Code. Specifically, MCD claimed that the roof and the roofing materials were defective, which Carlisle expressly promised would not deteriorate prematurely. The jury found that the materials provided by Carlisle were defective, and therefore, Carlisle did not uphold its end of the bargain. Additionally, the damages sought by MCD support the conclusion that its breach of express warranty claim is based in contract, as MCD’s damages were economic injuries based on the defective roof and roofing materials. Consequently, the Texas Supreme Court reversed the court of appeals and held that attorney??s fees are recoverable in a cause of action for breach of an express warranty that is based on a contract.
Sean Michael Reagan, Leyh & Payne L.L.P.