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Litigating the Amount of Contractual Attorney’s Fees

Posted by David Adelstein on April 14, 2017
Trial Perspectives / Comments Off on Litigating the Amount of Contractual Attorney’s Fees

Recovering attorney’s fees is a vital component of many claims. Parties that have a contractual or statutory basis to recover attorney’s fees want to know they will get a judgment for reasonable attorney’s fees if they prevail in the underlying action.   This oftentimes results in litigating the amount of fees.

There is authority that when parties seek fees pursuant to a statute, they are not entitled to fees associated with litigating the amount of fees. See State Farm Fire & Cas. Co. v. Palma, 629 So.2d 830 (Fla. 1993).

What about if a party seeks fees pursuant to a contract? Can the party recover attorney’s fees associated with litigating the amount of contractual fees?  The answer is it depends on the contractual attorney’s fees provision. The broader the scope the greater the chance a party will be entitled to attorney’s fees for litigating the amount of contractual fees owed to the prevailing party.

In Trial Practices, Inc. v. Hahn Loeser & Parks, LLP, 42 Fla.L.Weekly D848a (Fla. 2d DCA 2017), the Second District addressed whether a prevailing party is entitled to recover contractual attorney’s fees associated with litigating the amount of reasonable attorney’s fees.   The Court held yes based on the scope of the contractual attorney’s fees provision since contracting parties are free to contract on the scope and issue of attorney’s fees.

The provision at-issue read in material part:

…prevailing party in any action arising from or relating to this agreement will be entitled to recover all expenses of any nature incurred in any way in connection with the matter, whether incurred before litigation, during litigation, in an appeal, . . . or in connection with enforcement of a judgment, including, but not limited to, attorneys’ and experts’ fees.

The court held that this language in the attorney’s fees provision was broad enough to encompass fees associated with litigating the amount of fees.

Remember, contracting parties are fee to negotiate and contract on the issue of attorney’s fees.  Based on the provision, a prevailing party will be entitled to attorney’s fees for litigating the amount of fees.  This perhaps may make a party think twice regarding litigating the amount of contractual fees if the issue can get resolved without an evidentiary proceeding on the amount. 

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

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Prevailing Party for Purposes of Attorney’s Fees in Breach of Contract Claims

Posted by David Adelstein on November 03, 2016
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To be entitled to attorney’s fees, there needs to be a contractual or statutory basis to recover attorney’s fees (absent serving a proposal for settlement). There is oftentimes the misconception in breach of contract cases that the party that recovers a positive net judgment will automatically recover their attorney’s fees. While, certainly, sometimes this is the case, this is NOT what you should be banking on. The law has tried to progress to a point where it does not want certain cases to be driven solely by the prospect of recovering attorney’s fees just because you won $1.  

The Florida Supreme Court in Moritz v. Hoyt Enterprises, Inc., 604 So.2d 807 (Fla. 1992) held that in a breach of contract action the significant issues test applied to determine the prevailing party for purposes of awarding attorney’s fees.  A party prevails on the significant issues if the party prevails on any significant issue in the case that achieved a benefit sought by the parties in the action.

A year later, the Florida Supreme Court in Prosperi v. Code, Inc., 626 So.2d 1360 (Fla. 1993) addressed this significant issues test in the context of a construction lien action where the contractor received a net judgment in its favor but did not prevail on its construction lien (that provided a statutory basis for fees).  In this case, the owner prevailed on the contractor’s lien claim but the contactor prevailed in a breach of contract action and, therefore, recovered a net judgment in its favor.  For purposes of the case, a net judgment was “when the claimant fails to foreclose a mechanic’s lien but obtains a judgment for the underlying claim which exceeds any claim of the owner.”   Prosperi, 626 at n.1.   Here, the Court explained that recovering a net judgment is a significant factor to determine the prevailing party for purposes for purposes of attorney’s fees, but was NOT the only consideration. The equities of the case must be considered at the trial court’s discretion to determine the party that prevailed on the significant issues to be deemed the prevailing party for purposes of attorney’s fees.

Years later, this issue was brought up again to the Florida Supreme Court in Trytek v. Gale Industries, Inc., 3 So.3d 1194 (Fla. 2009), as to whether the significant issues test applied when a contractor obtained a net judgment against an owner on its lien even though the lien amount was reduced by the owner’s claim for repair costs.  In finding that the significant issues test applied, the court further explained that the trial court has discretion to examine all factors including issues litigated, claim amount, amount recovered, and counterclaims, and can determine that neither party was the prevailing party for purposes of attorney’s fees

As you can see, the trend to determine the prevailing party for purposes of attorney’s fees in a breach of contract action is to apply the significant issues test. Because the trial court has the discretion to examine the equities to determine the party that prevailed on the significant issues in a given case, there is not any objective or bright-line rule to refer to in order to determine whether your situation will deem you the prevailing party for purposes of attorney’s fees.   This component makes it challenging to predict how a trial judge or arbitrator may rule and whether a party will be deemed the prevailing party for purposes of attorney’s fees. Recovering a net judgment is still an important factor, but it will not be the sole deciding factor because the prospect of a party recovering $1 and being deemed the prevailing party for purposes of attorney’s fees may prevent that party from becoming reasonable with their settlement terms.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

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Proposals for Settlement when there is a Contractual or Statutory Basis for Attorney’s Fees

Posted by David Adelstein on October 16, 2016
Trial Perspectives / Comments Off on Proposals for Settlement when there is a Contractual or Statutory Basis for Attorney’s Fees

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In an earlier posting I talked about proposals for settlement / offers of judgment.   Again, these are used as a vehicle to create an argument for attorney’s fees down the road, particularly in cases where a party does not have a contractual or statutory basis to recover attorney’s fees. Please check out this article for more information on proposals for settlement because they have become an unnecessarily complicated vehicle with nuances that have resulted in an exorbitant amount of case law, some of which is conflicting. As a result, while the argument to recover fees is preserved by serving the proposal for settlement, it is an argument and not a guaranty.

Sometimes, parties with a contractual or statutory basis to recover attorney’s fees will still serve a proposal for settlement. This becomes tricky because the right to attorney’s fees per the contract or statute is not cut-off by virtue of the proposal for settlement.

Say, for example, a defendant serves a proposal for settlement. The plaintiff, however, prevails in the case through trial in a claim in which the plaintiff is entitled to contractual attorney’s fees. There are two considerations.  

First, when determining the merits of a proposal for settlement, you need to look at the “net” judgment, which would include attorney’s fees and costs incurred by the opposing party (party receiving offer that prevailed in the case) through the date of the offer. See Leon F. Cohn, M.D., P.A. v. Visual Health and Surgical Center, Inc., 125 So.3d 860, 863 (Fla. 4th DCA 2013) (“Because Cohn prevailed on the breach of contract claim and the contract contained a provision awarding attorney’s fees to the prevailing party, we reverse and remand for the trial court to reconsider the issue of Cohn’s entitlement to fees after conducting an evidentiary hearing to determine the total net judgment, which shall include the amount of fees and taxable costs incurred by Cohn in litigating the breach of contract claim up to the date of the offer.”). Since the proposal for settlement is based on the net judgment, to determine whether the above defendant would be a prevailing party for purposes of recovering its attorney’s fees from the date of the proposal on forward would require an analysis to see what the total net judgment to the plaintiff would be factoring in fees and taxable costs through the date the defendant served the proposal.   The issue in looking at the net judgment is to determine whether the defendant could offset some of the attorney’s fees entitled to the plaintiff by being entitled to attorney’s fees from the date of the proposal on forward.

Second, the proposal for settlement does not cut-off the opposing party’s contractual right to fees incurred after the proposal for settlement is served. See Tierra Holdings, Ltd. v. Mercantile Bank, 78 So.3d 558 (Fla. 1st DCA 2011).   The above plaintiff would still be entitled to its attorney’s fees if deemed the prevailing party under the contract through the trial.   The issue, as discussed above, is whether the defendant could offset some of the fees entitled to the plaintiff by being entitled to attorney’s fees from the date of the proposal on forward.

Let’s use real numbers. Assume the defendant served the proposal for settlement to the plaintiff for $100,000. The plaintiff has a contractual right to attorney’s fees. The plaintiff rejects the proposal for settlement and at trial the plaintiff is awarded $40,000. Now, let’s assume the total net judgment through the date of the proposal for settlement factoring in fees and costs entitled to the plaintiff as the prevailing party under the contract is $60,000.   This $60,000 is at least 25% less than the defendant’s proposal for settlement of $100,000, meaning the defendant would be entitled to its attorney’s fees from the date of the proposal on forward. Assume those reasonable fees are $75,000. Assume the plaintiff’s total reasonable fees are $90,000.

Under step one, the defendant would presumably be the prevailing party for purposes of fees per the proposal for settlement and be entitled to its reasonable fees of $75,000 from the date of the proposal through trial.   The reason being is that the total net judgment to the plaintiff at the time the defendant served the proposal when factoring in fees and costs was at least $25% less than the defendant’s proposal for settlement.

Under step two, the plaintiff is still entitled to its attorney’s fees for prevailing under the contract, which are $90,000 through trial. Thus, the $75,000 owed to the defendant in fees would simply be credited in a judgment given to the plaintiff (reducing the plaintiff’s judgment by $75,000). For example, if the court entered an attorney’s fees judgment, the plaintiff would be entitled to $15,000 in fees, or the difference between the $90,000 and the $75,000.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

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