Roy and Grace Whittenburg created separate trusts for each of their many grandchildren (the descendants), and each trust holds interests in a 200,000-acre ranch in New Mexico and Colorado that the descendants had litigated over for more than a decade.¹ Their settlement agreements, the Partial Settlement Agreement (PSA) and the Comprehensive Settlement Agreement (CSA), provided that if the parties could not agree to partition the ranch in kind, further partition proceedings could be filed, and the CSA set sole venue for its enforcement in Randall County, Texas.² When the parties could not agree, one group of descendants (Angela Kate) filed partition proceedings in New Mexico, and another group (John Burk) challenged the partition, producing lengthy litigation; John Burk eventually consented but the partition has not been accomplished.³

Angela Kate sued John Burk in Texas for breaching the settlement agreements, seeking as her damages the extra attorney's fees she incurred in the New Mexico litigation.¹ After a bench trial the court found that John Burk breached by failing to comply with the "Partition in Kind Requirement," that the breach caused Angela Kate to incur $216,112 in reasonable and necessary fees in the New Mexico litigation beyond what she would have incurred had he complied, and that she incurred $541,531.83 in fees in this suit, but it rendered a take-nothing judgment because those fees were not damages in a breach-of-contract suit.² The Seventh Court of Appeals (Amarillo) affirmed, concluding that the American Rule bars recovery of attorney's fees as damages for breach of contract.³ The vehicle in this Court is a petition for review filed by Angela Kate, argued February 12, 2026, and decided May 15, 2026.⁴

Petition for review from the Seventh Court of Appeals (Amarillo) after a bench trial; argued February 12, 2026, and decided May 15, 2026.⁵

Angela Kate presents two issues:¹ 1. When attorney's fees in other litigation result from a party's breach of a settlement agreement, whether those fees are recoverable as actual damages. 2. If she recovers actual damages for breach, whether she may recover her attorney's fees for prosecuting this suit (unbriefed in the petition).

The Court did not state a standard of review. It decided as a matter of law whether the fees found by the trial court are recoverable as damages notwithstanding the American Rule, and applied the lodestar framework for the fees incurred in this suit.¹

Whether fees from the prior litigation are recoverable as breach-of-contract damages.

Angela Kate (Petitioners): The American Rule generally bars recovery of fees for prosecuting or defending the same suit, but it does not apply when a party seeks as actual damages fees incurred in other litigation, and the Court then applies the ordinary rules for recovering damages for the cause of action, as in the attorney-negligence context of Akin Gump.¹ She adds that the courts of appeals conflict on whether fees caused by breach of a settlement agreement are recoverable under the general rules of contract damages.²

John Burk (Respondents): This is a suit about nothing but attorney's fees, brought in Texas because the fees apparently are not recoverable in New Mexico, and the claim is precluded by the American Rule, which bars recovery of fees unless authorized by contract or statute, by the principle that fees are not damages, and by the rule against suits solely for fees.³

Angela Kate argued that the courts of appeals disagree about whether attorney's fees caused by breach of a settlement agreement are recoverable under general contract-damages rules, and that John Burk did not deny the conflict or the issue's importance.¹

• Direct damages. Asked whether fees are direct or consequential damages, petitioners' counsel said fees in other litigation directly caused by violating a settlement agreement are recoverable as damages. (Oral Argument, 0:09:07; 0:10:10)
• Same wrongful act. Respondents' counsel argued the New Mexico partition rested on the same breach, drawing on a U.S. Supreme Court decision about a second suit based on the same wrongful act. (Oral Argument, 0:19:20; 0:24:13)
• Why not New Mexico. Asked why the client did not bring the claim in New Mexico, petitioners' counsel said the settlement agreement required breach claims to be litigated in Texas. (Oral Argument, 0:02:38)
• Carve-out for settlements. Asked why settlement agreements should be carved out, petitioners' counsel said he was not suggesting that; the American rule concerns fees for prosecuting or defending the same claim. (Oral Argument, 0:11:45)
• Not a wrongful act. On rebuttal, petitioners' counsel said the New Mexico proceeding involved no wrongful act, only an agreed, administrative partition to carry out the parties' agreement. (Oral Argument, 0:40:43)
• Narrowest rule. Asked for the narrowest rule, petitioners' counsel said fees incurred in other litigation in violation of a settlement agreement should be recoverable if contract damages otherwise allow. (Oral Argument, 0:42:28)
• American rule. Petitioners' counsel agreed the American rule encourages litigation, but said parties who reach a settlement create a countervailing interest. (Oral Argument, 0:39:49)
• Narrow precedent. Respondents' counsel closed by saying the Court has only twice held attorney's fees can be damages, both times narrowly. (Oral Argument, 0:36:06)

None

Holding

The American Rule does not bar recovery of attorney's fees incurred in prior litigation as breach-of-contract damages so long as the breach was not a basis for the prior litigation, and because the fees here were incurred in a partition proceeding brought before the breach, Angela Kate may recover the $216,112 in excess fees as actual damages.¹

Reasoning

The fees are actual damages. In a contract action actual damages may be recovered when the loss is the natural, probable, and foreseeable consequence of the breach, and the trial court found John Burk's breach caused Angela Kate to incur the extra fees.² Additional fees were the natural, probable, and foreseeable result of John Burk's attempt to stop the agreed partition, which the settlement agreements were meant to avoid.³

The American Rule. The Court has said twice that the American Rule does not always bar recovery of fees incurred in prior litigation as damages, in Akin Gump (a malpractice suit) and Nalle Plastics, which said that fees may be included in compensatory damages if the underlying suit concerns a claim for fees as an element of damages.⁴ The rule's purpose of promoting meritorious litigation is not offended, because parties would be less inclined to settle if they could not recover the expenses of further litigation caused by a breach.⁵ The Court cited the single-action rule and the federal rule against recovering costs of the former action when it concerned the same wrongful act, and concluded that the bar applies only when the breach was a basis for the prior litigation.⁶

The breach was not a basis for the New Mexico litigation. The partition action was filed before the wrongful act, John Burk's attempt to stop the partition, occurred, and Angela Kate could not bring the contract suit in New Mexico because the CSA set venue in Randall County, so there was no forum shopping.⁷ She can recover only the fees directly attributable to the breach, the $216,112 in excess fees, and the Court noted parties can avoid this cost by specifying whether fee shifting is available in their settlement agreements.⁸

Fees in this suit. Because she is now entitled to damages on her breach claim, she is also entitled to her reasonable and necessary fees in this suit under Civil Practice and Remedies Code Section 38.001, but because the results obtained changed significantly, the trial court should have the opportunity to reconsider the amount.⁹

Disposition

Court of appeals' judgment reversed, judgment rendered awarding Angela Kate $216,112 as damages, and the case remanded to the trial court to enter a complete judgment, including reconsideration of the reasonable and necessary attorney's fees in this suit.¹⁰

Vote Breakdown

Majority Opinion by Justice Busby

Joined by Blacklock, C.J., and Bland, Devine, Hawkins, Huddle, Lehrmann, Sullivan, and Young, JJ.