Why This Matters to Everyday Texans
If you’ve ever considered suing someone over a contract—or worried about being sued—one question always comes up:
“Can I recover my attorneys’ fees?”
In Texas, the answer used to be frustratingly limited. But a key statutory change has made attorneys’ fees more widely available in business disputes—especially those involving LLCs and corporations.
This shift has real consequences for lawsuits, settlement leverage, and litigation strategy.
The Statute: Tex. Civ. Prac. & Rem. Code § 38.001
Texas law provides:
“A person may recover reasonable attorney’s fees from an individual or organization… if the claim is for:
(1) rendered services;
(2) performed labor;
(3) furnished material;
(4) freight or express overcharges;
(5) lost or damaged freight or express;
(6) killed or injured stock;
(7) a sworn account; or
(8) an oral or written contract.”
— Tex. Civ. Prac. & Rem. Code § 38.001
The Big Change: “Individual” → “Individual or Organization”
Old Rule (Pre-2021)
Historically, Texas courts interpreted § 38.001 to allow recovery of attorneys’ fees only against individuals—not LLCs or corporations.
That meant:
- You could win a contract case against a company
- But still eat your own legal fees
This created a strange loophole where business defendants had an advantage.
New Rule (Current Law)
The Texas Legislature fixed this by amending the statute to explicitly include:
“individual or organization”
Now, “organization” includes:
- Corporations
- LLCs
- Partnerships
- Other legal entities
Result: You can now recover attorneys’ fees in contract claims against businesses—not just people.
What Types of Claims Qualify?
The statute still applies to specific claim categories, most importantly:
1. Breach of Contract
The most common use:
- Written contracts (leases, service agreements, promissory notes)
- Oral contracts (yes, if enforceable)
2. Sworn Accounts
Common in:
- Business debt collection
- Vendor disputes
3. Services, Labor, or Materials
Relevant in:
- Construction disputes
- Contractor claims
- Professional services
Key Limitation: You Must Prevail on the Claim
To recover fees, you generally must:
- Win the case, and
- Recover damages on a qualifying claim
Texas courts have made clear:
Attorneys’ fees are not standalone—they are tied to a successful underlying claim.
Important Procedural Requirements
1. Presentment Requirement
The statute requires that:
“the claimant must present the claim to the opposing party”
— Tex. Civ. Prac. & Rem. Code § 38.002(2)
This means:
- A demand letter (usually sufficient)
- Giving the other side a chance to pay
If they don’t pay within 30 days, fees become recoverable.
2. Reasonableness and Necessity
Even if fees are allowed, they must be:
- Reasonable, and
- Necessary
Courts often rely on:
- Billing records
- Expert testimony
- The Arthur Andersen factors (case law)
Strategic Impact in Real Cases
For Plaintiffs
- Stronger leverage in settlement
- More viable to pursue smaller claims
- Increased likelihood of full recovery
For Defendants (Especially Businesses)
- Greater litigation exposure
- Higher cost of losing
- More incentive to settle early
Common Misconceptions
❌ “I can always recover attorneys’ fees if I win”
Not true—only certain claims qualify.
❌ “Contracts must include a fee provision”
Not necessarily—§ 38.001 can provide fees even if the contract is silent.
❌ “This only applies to individuals”
No longer true—the law now explicitly includes organizations.
Practical Example
A contractor sues an LLC for unpaid work under a written agreement:
- Damages: $15,000
- Attorneys’ fees: $10,000
Before the amendment:
→ Fees likely not recoverable
After the amendment:
→ Fees likely recoverable
That’s a game-changing difference.
Final Takeaway
The expansion of Tex. Civ. Prac. & Rem. Code § 38.001has quietly but significantly reshaped Texas litigation:
- Businesses are no longer shielded from fee exposure
- Contract enforcement is more powerful
- Settlement dynamics have shifted in favor of prevailing parties
If you’re involved in a dispute—whether as a business owner or individual—this statute may be one of the most important tools (or risks) in your case.
At David C. Barsalou, Attorney at Law, PLLC, we help clients navigate business, family, tax, estate planning, and real estate matters ranging from document drafting to litigation with clarity and confidence. If you’d like guidance on your situation, schedule a consultation today. Call us at (713) 397-4678, email barsalou.law@gmail.com, or reach us through our Contact Page. We’re here to help you take the next step.
