by Jason M. Ellison and Manuel Farach
Lawyers in Florida have historically operated under the premise that “fees for fees”1 are awarded only through the fee entitlement stage of litigation, and that the prevailing party in a lawsuit involving a contract with a prevailing party fees provision is typically awarded its fees through such entitlement award — and specifically excluding any litigation concerning the “amount” of attorneys’ fees. Recent decisions, however, have changed this view and have created a new environment for attorneys’ fees litigation. This article discusses Waverly at Las Olas Condominium Association, Inc. v. Waverly Las Olas, LLC, 88 So. 3d 386 (Fla. 4th DCA 2012), and Nationstar Mortgage LLC v. Glass, 219 So. 3d 896 (Fla. 4th DCA 2017), review granted, 2018 WL 2069328 (Fla. Feb. 13, 2018), two of the cases changing the landscape, and seeks a common thread between the two lines of authority that may assist practitioners in their pending cases. As it appropriately highlights the commonality between the two lines of caselaw, we first deal with the “fees for fees” issue.
The “no fees for fees” standard is most commonly attributed to the Florida Supreme Court’s opinion in State Farm Fire & Casualty Co. v. Palma, 629 So. 2d 830 (Fla. 1993). Prior to Palma, the district courts of appeal did not agree as to whether “fees for fees” were recoverable.2 It was hoped that Palma would provide clarity and resolve the issue, but the opinion failed to go so far as to declare “fees for fees” allowable or not allowable on a general basis. Instead, the opinion held that “fees for fees” were not recoverable on a narrow basis, i.e., F.S. §627.428 and the caselaw interpreting the same, but did not answer the question of whether they were absolutely prohibited. The Palma court stated that “[o]ur conclusion that statutory fees may be awarded for litigating the issue of entitlement to attorneys’ fees but not the amount of attorneys’ fees comports with the purpose of [§]627.428 and with the plain language of the statute.”3 While some courts interpreted Palma as an overall prohibition against the recovery of fees for litigating the amount of attorneys’ fees, several courts pointed to Palma’s reliance on F.S. §627.428 and questioned whether the prohibition applied in all cases.
In 2012, the Fourth District Court of Appeal rendered its Waverly opinion. A close reading of Waverly reveals it was Palma’s intentional reliance and direct reference to F.S. §627.428 upon which Waverly turned to distinguish Palma. The Waverly court held that “the contractual prevailing party fee provision was broad enough to encompass time spent in litigating the amount of fees, and that Palma’s statutory analysis is inapplicable to the contractual basis for fees.”4 Notwithstanding an excellent Florida Bar Journal article highlighting this departure from Palma,5 the Waverly decision has, for the most part, flown under the radar of the average practitioner, and those aware of the decision were left asking whether other courts agree with Waverly or whether other courts found Palma to be all-encompassing and exclude fees for fees in all cases, including contract-based claims.
Does Subsequent Caselaw Support or Distinguish Waverly?
As is sometimes the case in our profession, the answer is both — as many courts have applied the Palma standard in cases of contractual prevailing party fee litigation, essentially holding that Palma is dispositive on the issue and bars “fees for fees.6 However, other courts have noted the distinction highlighted by Waverly (even if not expressly citing Waverly), and have looked specifically to the contractual provision when considering whether to award “fees for fees.”7
The inquiry does not end here. Caselaw in which a contractual fee provision was at issue has been divided concerning the breadth of the attorneys’ fee provision as to whether “fees for fees” litigation is encompassed. Certain cases provide that to recover “fees for fees,” a contract needs to expressly provide and state the same (e.g., Chavez v. Mercantil Commercebank, N.A, 2015 WL 136388 (S.D. Fla. Jan. 9, 2015)), while other cases suggest that a broad brush “all reasonable fees and costs” provision is sufficient to encompass “fees for fees” litigation (e.g., Federal Auto Loans Inc. v. Business Acquisitions Brokerage, Inc., 839 So. 2d 767 (Fla. 4th DCA 2003)).
The Second District Court of Appeal may have broken the impasse with its recent opinion of Trial Practices, Inc. v. Hahn Loeser & Parks, LLP, 228 So. 3d 1184 (Fla. 2d DCA 2017). Trial Practices falls in line with the trending cases that Palma does not prevent “fees for fees” awards arising out of a contractual provision, finding that Palma is restricted to fees awarded pursuant to a statute. Moreover, the Trial Practices court found that a contractual provision stating that the “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…” was dispositive. The Trial Practices court points back to Waverly, relying heavily on the decision and, specifically, a fee-shifting provision that broadly encompasses all claims that were connected to the contract at issue.
Recent federal caselaw cites Waverly and Trial Practices for the premise that parties are able to contract for any terms, provided they are not illegal or in violation of public policy, and that contracting as to the type of recoverable attorneys’ fees is within parties’ rights.8 Apple Glen Investors, L.P. held that, “in this respect, Trial Practices and Waverly support the conclusion that the parties to a contract may agree to the type of recoverable attorneys’ fees. Indeed, it is a fundamental principle of contract law that parties may agree to any terms, provided that they are not illegal or in violation of public policy. In light of the federal policy to award fees for litigating the amount of fees, no plausible argument can be made that a provision of fees for fees would be illegal or contrary to public policy.”9
The breadth of the Trial Practices and Waverly contractual provisions are evident. It should be noted, however, that neither contractual provision expressly addresses recovering attorneys’ fees in the situation of “fees for fees” litigation. Accordingly, such broad fee provisions in the Second and Fourth districts appear to support entitlement to “fees for fees.” Although the Florida Supreme Court has yet to acknowledge a “Waverly effect,” it appears that subsequent authority in Florida and federal decisions construing Florida law10 are moving toward permitting “fees for fees” awards when based on broad attorneys’ fee contractual provisions.
Cases Holding No Standing Results in No Award of Attorneys’ Fees
Another recent hot-button issue concerning litigation and recovery of attorneys’ fees is encompassed in the Fourth District’s opinion in Nationstar Mortgage v. Glass, 219 So. 3d 896 (Fla. 4th DCA 2017). Specifically, Glass was a mortgage foreclosure case in which the court affirmed the dismissal of the foreclosure suit due to the lender plaintiff not having an enforceable interest in the mortgage interest (commonly referred to as “standing”). While an apparent win for the borrower, victory on this issue created a not-so-desirable result for the borrower on a different issue:
“In foreclosure lawsuits, the Florida courts require the lender to establish standing to bring suit at the time the lawsuit was filed. Thus, where the foreclosing plaintiff does not establish its right to enforce the mortgage note at the time of the filing of the suit, there is no ability to enforce the terms of the note, including the provision regarding attorneys’ fees.”11
The court’s analysis is straightforward. First, the court referenced the Third District Court of Appeal’s recent decision in Bank of New York Mellon Trust Co., N.A. v. Fitzgerald, 215 So. 3d 116 (Fla. 3d DCA 2017), wherein the Third District stated “[b]ecause the trial court found no contract existed between the parties, which would entitle one to recover attorneys’ fees in the first place, there [was] no basis to invoke the compelled mutuality provisions of [§]57.105(7).”12 Fitzgerald based its holding on Florida Medical Center, Inc. v. McCoy, 657 So. 2d 1248, 1252 (Fla. 4th DCA 1995), an earlier Fourth District case in which the court held “there is no basis to invoke the compelled mutuality provisions” of F.S. §57.107(5) if there is no contract between the parties.
This discussion begs the question of the effect of Glass (and to the extent litigation ensues concerning “fees for fees,” the effect of Waverly) on fee awards in fraudulent misrepresentation litigation, especially cases involving fraudulent inducement into a contract. The question is especially relevant since Glass is on appeal to the Florida Supreme Court at the time of the publication of this article. The Florida Supreme Court’s prior opinion in Katz v. Van Der Noord, 546 So. 2d 1047 (Fla. 1989), may seem to answer the question.
In Katz, buyer and seller entered into a contract for the sale of a mobile home park where the seller violated a contractual provision before closing. As a result of the breach, the buyer repudiated the contract, did not close, and sued for breach instead. The trial and appellate courts found seller breached the contract, and based on buyer’s repudiation, judicially rescinded the contract and ordered the return of buyer’s deposit. Buyer then moved for an award of its attorneys’ fees based upon the prevailing party fees provision in the contract; seller defended on the basis there no longer was a contract under which to award attorneys’ fees. The Florida Supreme Court succinctly stated the proposition that a situation in which a contract is rescinded by court action is different than a situation in which a contract never existed:
“We agree with Leitman that ‘[t]he distinction between no contract at all and one that is unenforceable makes all the difference....’ 439 So. 2d at 320. Accord Giltex Corp. v. Diehl. We hold that when parties enter into a contract and litigation later ensues over that contract, attorney’s fees may be recovered under a prevailing-party attorney’s fee provision contained therein even though the contract is rescinded or held to be unenforceable. The legal fictions which accompany a judgment of rescission do not change the fact that a contract did exist. It would be unjust to preclude the prevailing party to the dispute over the contract which led to its rescission from recovering the very attorney’s fees which were contemplated by that contract. This analysis does no violence to our recent opinion in Gibson v. Courtois in which we held that the prevailing party is not entitled to collect attorney’s fees under a provision in the document which would have formed the contract where the court finds that the contract never existed.”
One can easily see that Glass does no harm to the holding of Katz because the two lines of cases are discussing two different legal concepts: a prohibition against awarding attorneys’ fees when there is no contract formed (Glass), and the ability of a court to award attorneys’ fees when it imposes the legal remedy of rescission of a validly formed contract (Katz). In the first case, it would be unfair to award fees because the parties never agreed to such a contractual provision and in the second case it would be unfair not to award fees because failure to do so would give the wrongdoer a windfall and would fail to put the aggrieved party back into the position where it should be.
Conclusion — A New Normal?
While not readily apparent, there is a common thread running through these decisions. First, it appears courts are consistently holding that Palma does not act as a complete prohibition to an award of “fees for fees.” Second, courts will now closely examine the text of contractual fee provisions and may more broadly interpret the provisions. Depending on the appellate district in which the litigation is pending, the specific contractual provision at issue, and even the argument of counsel, a particular award may turn on whether the court finds “fee for fee” litigation to be encompassed by a particular contractual provision. Savvy practitioners, however, will likely revisit their contracts to examine the breadth of their contractual attorneys’ fee provisions to ensure they fall in line with this gradual shift in fee-for-fee litigation. Until the Florida Supreme Court takes up this issue again, the new normal may be that fees for fees are recoverable in contract litigation. Finally, practitioners may want to revisit arguments attacking the existence of a contract to make sure their merit arguments do not create impediments to fee awards.
1 Meaning an award of attorneys’ fees for proving the amount of attorneys’ fees.
2 Ganson v. State, Dep’t of Admin., 554 So. 2d 522 (Fla. 1st DCA 1989); Tiedeman v. City of Miami, 529 So. 2d 1266 (Fla. 3d DCA 1988); Gibson v. Walker, 380 So. 2d 531 (Fla. 5th DCA 1980); and State Farm Mut. Auto. Ins. Co. v. Moore, 597 So. 2d 805 (Fla. 2d DCA 1992). See also Adam G. Rabinowitz & Beverly A. Pohl, The Right to Recover “Fees for Fees” Based on a Contractual Prevailing Party the Fee Provision, 87 Fla. Bar J. 8 (Apr. 2013)
3 Palma, 629 So. 2d at 833.
4 Emphasis added.
5 Rabinowitz & Pohl, The Right to Recover “Fees for Fees” Based on a Contractual Prevailing Party the Fee Provision.
6 See North Dade Church of God, Inc. v. JM Statewide, Inc., 851 So. 2d 194, 196 (Fla. 3d DCA 2003); Tamar Diamonds, Inc. v. Splendid Diamonds LLC, 2011 WL 382576, at *7 (S.D. Fla. 2011); Chavez v. Mercantil Commercebank, N.A., 2015 WL 136388 (S.D. Fla. Jan. 9, 2015).
7 Mangel v. Bob Dance Dodge, Inc., 739 So. 2d 720, 724 (Fla. 5th DCA 1999); Mediplex Constr. of Fla., Inc. v. Schaub, 856 So. 2d 13, 15 (Fla. 4th DCA 2003); Griffith v. Griffith, 941 So. 2d 1285, 1286 (Fla. 4th DCA 2006); Air Turbine Technology, Inc. v. Atlas Copco AB, 2010 WL 11505462 (S.D. Fla. Sept. 29, 2010).
8 Apple Glen Inv’rs, L.P. v. Express Scripts, Inc., No. 814RCVR1527RTR33TGW, 2018 WL 2945629, at *13 (M.D. Fla. May 25, 2018), report and recommendation adopted, No. 8:14-CV-1527-T-33TGW, 2018 WL 2937469 (M.D. Fla. June 11, 2018).
10 Apple Glen Inv’rs, L.P. v. Express Scripts, Inc., No. 814RCVR1527RTR33TGW, 2018 WL 2945629, at *13 (M.D. Fla. May 25, 2018), report and recommendation adopted, No. 8:14-CV-1527-T-33TGW, 2018 WL 2937469 (M.D. Fla. June 11, 2018); Gottlieb & Gottlieb, P.A. v. Crants, No. 814CV00895T33MAP, 2017 WL 9398655, at *4 (M.D. Fla. Apr. 10, 2017), report and recommendation adopted, No. 8:14-CV-895-T-33MAP, 2017 WL 1458249 (M.D. Fla. Apr. 25, 2017).
11 Internal quotations omitted. Glass, 219 So. 3d at 899.
12 Id. at 121 (citing Alexander, 190 So. 3d at 1117) (internal quotations omitted).
MANUEL FARACH is a member in the Ft. Lauderdale office of McGlinchey Stafford, PLLC, where he practices real estate, business, and appellate law. He serves on the executive council of the Business Law Section, for which he has chaired several committees.
JASON M. ELLISON is a principal of Ellison & Lazenby, PLLC, in St. Petersburg. He advises clients in business and real estate matters, including contract litigation, mortgage foreclosure, lender liability, foreign judgment domestication, deficiency judgments, judgment collection, covenants not to compete, and creditor’s rights in bankruptcy.
This column is submitted on behalf of the Business Law Section, Michael B. Chesal, chair, and Paige Greenlee, editor.