Texas Legislature Clarifies Limits on Recovering Attorneys’ Fees in Breach of Contract Cases

If you’ve ever found yourself analyzing a party’s potential exposure in a breach of contract action, you may have come across a quirk of Texas law: While Texas has historically allowed fee-shifting in contract actions against corporations, it generally does not permit recovery of attorneys’ fees against limited liability companies, limited partnerships and other entities that are not organized as corporations.

The perceived inequity, inconsistency and illogic of this rule has become troubling in recent years – after all, no one likes having to explain to a client that a meritorious breach of contract action may not make economic sense because attorneys’ fees won’t be included in the final recovery.