Beyond Statute, Rule, and Contract: Equity as a Basis for Awarding Attorneys’ Fees
An award of attorneys’ fees is in derogation of common law,1 but has occasionally been permitted at equity. At law, a court may only award attorneys’ fees when the award is expressly provided for by statute, rule, or contract.2 At equity, courts may award attorneys’ fees under limited circumstances. Given their equitable roles, probate, guardianship, trust, and family courts have occasion to award attorneys’ fees as a matter of fairness to the parties. Derived from the historic powers of chancery, modern courts have the inherent, although limited, authority to award attorneys’ fees on equitable grounds.
Since the merger of law and equity, Florida courts have been reluctant to expand judicial authority to award attorneys’ fees beyond statute, rule, or contract.3 Of course, the probate, guardianship, trust, and domestic relation statutes often provide entitlements to attorneys’ fees. When an attorney renders services to a decedent’s estate, the attorney may apply for statutory fees.4 When an attorney renders services to a guardian or ward,5 to a trust,6 or for the purpose of conducting post-marital litigation,7 the attorney may apply for statutory fees. Yet while numerous other statutes8 provide for fee-shifting in probate, guardianship, trust, and family law, they are not the only basis for awarding attorneys’ fees.
Beyond statute, rule, or contract, Florida courts have recognized three equitable grounds for awarding attorneys’ fees. First, a court may award fees based upon inequitable conduct. Second, a court may award fees based on an attorney’s efforts to create a common fund. Third, a court may award fees based on a person’s efforts to preserve assets in trust. To better serve their clients, practitioners before probate, guardianship, and family courts should familiarize themselves with these equitable fee entitlements.
The Florida Supreme Court crystallized the inequitable conduct doctrine as a basis for fees in Bitterman v. Bitterman, 714 So. 2d 356 (Fla. 1998), cert. denied, 525 U.S. 1187 (1999), in 1998. The inequitable conduct doctrine permits an award of attorneys’ fees when a party has exhibited egregious conduct or acted in bad faith.9 The doctrine recognizes a court’s inherent power to police abuses of the judicial process. In Bitterman, a co-personal representative raised picayune objections to standard petitions for the administration of estate assets.10 He also opposed compromise. After outlining the co-personal representative’s acts of bad faith, the court taxed attorneys’ fees under the inequitable conduct doctrine.11
The Florida Supreme Court later extended the inequitable conduct doctrine to include vexatious conduct by attorneys in Moakley v. Smallwood, 826 So. 2d 221, 226 (Fla. 2002). However, the court cautioned that trial courts must “sparingly and cautiously” exercise their inherent authority to award attorneys’ fees against an attorney.12 Presumably, a court’s inherent authority to sanction an attorney for vexatious conduct arises from its role in regulating the conduct of attorneys as its officers. Therefore, an appropriate balance must be struck between condemning unprofessional tactics and chilling zealous advocacy.13 In accordance with due process, any court considering such sanctions should issue an order to show cause and provide an evidentiary hearing to the accused attorney. After the hearing, the sanctioning court must make factual findings of bad faith “with a high degree of specificity.”14
Although rarely applied, the inequitable conduct doctrine promotes several public policies in probate and family cases. Avoiding the unnecessary diminution of an estate’s assets is a central goal. The inequitable conduct doctrine should deter vexatious litigation tactics aimed at diminution.15 The doctrine not only extends to misconduct during litigation, but also extends to misconduct before the litigation.16 Thus, the doctrine encourages litigants to police themselves. Litigants can be penalized for hiding estate assets,17 or for objecting to routine distributions from the estate.18 As commentators have discussed in the context of probate litigation, the doctrine provides “another arrow in the quiver of personal representatives who are forced to defend groundless litigation.”19 The inequitable conduct doctrine can serve to streamline estate litigation through deterrence despite its infrequent application.
Based on equity, a court may also award attorneys’ fees under the common fund doctrine.20 The common fund doctrine supports an award of fees “where counsel has been employed to obtain or to create a fund for the joint benefit of both parties.”21 Recognized at chancery, Florida courts have awarded fees on this ground for more than a century.22 Fees will often be awarded under the common fund doctrine in cases involving multiple beneficiaries with common, and not adversarial, interests. Although the Florida Legislature has codified the common fund doctrine into statutes which may provide broader authority for an award of attorneys’ fees in the contexts of trusts and estates,23 the common law basis may apply beyond those contexts and will be available if those statutes are ever amended or repealed.
To support a request for fees based on the common fund doctrine at equity, an attorney must show that the legal services benefited the parties.24 For one example, a party may receive attorneys’ fees by creating a common fund for a decedent’s children to share in life insurance proceeds.25 As another example, a party may receive attorneys’ fees for restoring assets to an estate which had been diverted from the deceased by fraud during his lifetime.26 This long-standing equitable basis for fees should attract counsel to assist minor and incapacitated beneficiaries in receiving orderly distributions from an estate.
After some scholarly analysis, courts have reduced the common fund doctrine to a formulaic application.27 The doctrine requires:
1) The existence of a fund over which the court has jurisdiction and from which fees can be awarded;
2) The commencement of litigation by one party which is terminated successfully;
3) The existence of a class which received, without otherwise contributing to the lawsuit, substantial benefit as a result of the litigation;
4) The creation, preservation, protection, or increase of the fund as a direct and proximate result of the efforts of counsel for that party; and
5) A reasonable relationship between the benefit established and the fees incurred.
Fee applicants may stumble over the third element, if the other class members have “contributed” to the lawsuit by paying their own attorneys to obtain benefits.28 “The doctrine rests on the perception that persons who obtain the benefit of a lawsuit without contributing to its cost are unjustly enriched at the successful litigant’s expense.”29
Finally, “courts of equity have traditionally awarded attorneys’ fees to persons, who at their own expense, have successfully maintained suits for preservation of trust funds.”30 While this basis has recently been codified by statute,31 a long line of prestatutory cases may provide additional precedent for attorneys’ fees within the trust context. Where the friend of a ward successfully petitions to remove a guardian in order to preserve the ward’s assets, the ward’s friend is entitled to receive his or her attorneys’ fees at equity.32 Moreover, trustees can themselves seek attorneys’ fees for bringing a declaratory judgment action against the beneficiary of a testamentary trust.33 Trustees can also recover fees for defending a trust in good faith,34 for defending against their removal by beneficiaries,35 and for defending against suits by co-trustees.36 An award will turn upon whether the litigant has prevailed on a matter which either restores assets to the trust, or fulfills the grantor’s intent.
Florida courts continue to follow the American rule that each party should bear its own attorneys’ fees in litigation absent a statute, rule, or contract which provides for the payment of fees. However, practitioners in probate, guardianship, trust, and family law should consider alternative grounds for an award of attorneys’ fees at equity. Fee-shifting may deter those who seek to frustrate equity, as well as encourage those who seek to foster it.
1 Rivera v. Deauville Hotel, Employers Service Corp., 277 So. 2d 265, 266 (Fla. 1973).
2 Pepper’s Steel & Alloys, Inc. v. United States, 850 So. 2d 462, 465 (Fla. 2003).
3 Weisenberg v. Carlton, 233 So. 2d 659, 660 (Fla. 2d D.C.A.), cert. denied, 240 So. 2d 643 (1970) (after examining nationwide precedent, the Second D.C.A. cited a rule that courts only had the inherent power to award attorneys’ fees in certain equitable actions).
4 Fla. Stat. §§733.106(3), 733.609, 733.6171 (2005).
5 Fla. Stat. §744.108(1) (2005).
6 Fla. Stat. §737.2035(2) (2005).
7 Fla. Stat. §61.16(1) (2005).
8 See generally J. Hauser , Attorneys’ fees in Florida (Matthew Bender & Co. 2002).
9 Bitterman, 714 So. 2d at 365.
10 Id. at 358.
11 Id. at 365.
12 Moakley, 826 So.2d at 225.
13 Id. at 226.
14 Id. at 227.
15 See, e.g., Mettler v. Mettler, 569 So. 2d 496, 498 (Fla. 4th D.C.A. 1990) (awarding attorneys’ fees under the doctrine, because a former spouse had dissipated the marital estate).
16 Bitterman, 714 So. 2d at 365.
17 See, e.g., Jahnke v. Jahnke, 804 So. 2d 513, 518 (Fla. 3d D.C.A. 2001) (awarding fees under the doctrine because a former spouse concealed marital assets).
18 See, e.g., Hoyt v. Hoyt, 814 So. 2d 1254, 1255 (Fla. 2d D.C.A. 2002) (awarding fees under the doctrine because a personal representative denied a family allowance contrary to state statute).
19 M. Simon and W. Hennessey, Estates, Trusts, and Guardianships: 1998 Survey of Florida Law, 23 Nova L. Rev. 119, 125 (Fall 1998).
20 Boeing Co. v. Van Gemert, 444 U.S. 472, 478 (1980); Lewis v. Gaillard, 70 Fla. 172, 176, 69 So. 797, 798 (1915).
21 Amos v. Burwell & Sibley, 106 Fla. 550, 551, 143 So. 607, 607 (1932).
22 State v. Florida Central R.R. Co., 16 Fla. 703, 705 (1878).
23 Fla Stat. §§733.106(3), 737.2035(2) (2005).
24 In re Gleason’s Estate, 74 So. 2d 360, 362 (Fla. 1954); First Nat’l Bank in Ft. Myers v. Hill, 194 So. 2d 675, 680 (Fla. 2d D.C.A. 1967).
25 Hamilton v. Liberty Nat’l Life Ins. Co., 207 So. 2d 472, 477 (Fla. 2d D.C.A.), cert. denied, 212 So. 2d 878 (1968).
26 First Nat’l Bank of Miami v. Knowles, 138 So. 2d 95, 96 (Fla. 3d D.C.A.), cert. denied, 143 So. 2d 494 (1962).
27 Hurley v. Slingerland, 480 So. 2d 104, 107-08 (Fla. 4th D.C.A. 1985); Fidelity & Casualty Co. of N.Y. v. O’Shea, 397 So. 2d 1196, 1998 (Fla. 2d D.C.A. 1981).
28 Hurley, 480 So. 2d at 108.
29 Van Gemert, 444 U.S. at 478.
30 In re Guardianship of Dean, 319 So. 2d 589, 591 (Fla. 2d D.C.A. 1975).
31 Fla. Stat. §§737.627, 737.2035 (2005); Republic Nat’l Bank v. Araujo, 697 So. 2d 164, 166 (Fla. 3d D.C.A. 1997).
33 West Coast Hospital Ass’n v. Florida Nat’l Bank of Jacksonville, 100 So. 2d 807, 812 (Fla. 1958).
34 Vazquez v. Goodrich, 206 So. 2d 54, 55 (Fla. 3d D.C.A. 1968).
35 Powell v. Cocowitch, 94 So. 2d 589, 592 (Fla. 1957).
36 Ball v. Mills, 376 So. 2d 1174, 1179-82 (Fla. 1st D.C.A. 1979), cert. denied, 388 So. 2d 1116 (1980).
Theodore “Ted” E. Karatinos received his J.D. from Stetson University College of Law and currently serves Stetson as an adjunct professor teaching civil litigation. He practices law in Tampa.
Hugh C. Umsted received his J.D. from Stetson University College of Law. He currently serves as the vice chair of the Probate and Trust Litigation Committee of the Real Property, Probate and Trust Law Section of The Florida Bar. He practices law in New Port Richey.
This column is submitted on behalf of the Real Property, Probate and Trust Law Section, Julius J. Zschau, chair, and William P. Sklar and Richard R. Gans, editors.