The Austin Court of Appeals recently held that a plaintiff’s notice of non-suit precludes a defendant from recovering attorney’s fees as prevailing party under a written agreement.  In this case, the plaintiffs bought a house from defendants under a standard-form sales contract promulgated by the Texas Real Estate Commission.   Plaintiffs brought suit against defendants for failing to disclose alleged defects to the house and sought attorney’s fees.  Defendants also requested attorney’s fees.  Section 17 of the contract provides that the prevailing party is entitled to attorney’s fees.  Plaintiffs nonsuited their claims prior to trial leaving only the defendant’s claim for attorney’s fees unresolved.  The trial court entered a take nothing judgment against the plaintiffs (despite the nonsuit) and awarded the defendants attorney’s fees.

The court of appeals reversed the take-nothing judgment against the plaintiffs because the trial court had no discretion but to dismiss the plaintiffs’ claims without prejudice once the notice of nonsuit was filed.  More importantly, however, the court reversed the attorney’s fees award and held that the defendants were not prevailing parties because they had not prevailed on the merits of any legal proceeding related to the contract.  The court of appeals stated:

Because the court did not adjudicate the [plaintiffs’] claims, and because the [defendants] brought no claim for relief on which they could prevail other than their request for attorney’s fees, the [defendants] did not prevail on any claims that would entitled them to attorney’s fees under the terms of contract.

The court of appeals also rejected defendants’ argument that allowing parties to nonsuit at the last minute to avoid liability for attorney’s fees was poor public policy.  The court distinguished a case in which a party sought statutory attorney’s fees after a partial nonsuit.  The court’s opinion in Fowler v. Epps can be found here.