Revisiting the Standard Attorneys’ Fee and Cost Provision
The conventional wisdom among litigators in Florida is that a prevailing party in a contract dispute is unlikely to recover all of its attorneys’ fees and costs in litigation, even though the operative agreement contains a prevailing party fee and cost provision. Although fee and cost reductions by courts are sometimes the result of perceived overbilling, overstaffing, or excessive rates, incomplete recoveries are more often a function of Florida substantive law and the limitations of the “standard” attorneys’ fee and cost provision contained in the vast majority of contracts.
Generally, fee and cost provisions drafted in Florida and elsewhere contain some variation on the following language: “In the event of a dispute between the parties regarding the terms or enforcement of this contract, the prevailing party in any such action shall recover its reasonable attorney’s fees and costs from the non-prevailing party.” As will be discussed in more detail below, Florida courts will not permit the recovery of fees expended in litigating or quantifying the amount of recoverable fees (“fees for fees”) or award nontaxable costs when a fee and cost provision is drafted in this manner. In many commercial disputes, claims for fees and costs may approach or even exceed the value of the primary claim, meaning that the amounts left unrecoverable under the “standard” fee provision can be quite significant.
This article recognizes that the “standard” fee and cost provision inadequately protects parties to contracts who desire the broadest possible ability to recover legal expenses in the event of a dispute. Accordingly, this article proposes that fee and cost provisions in contracts governed by Florida law be redrafted to expressly permit the recovery of fees for fees and costs not taxable under the Statewide Uniform Guidelines for Taxation of Costs (the “uniform guidelines”)1 when broad fee and cost recovery is desirable. The authors conclude by providing two sample fee and cost provisions that have been drafted based on the proposals contained in this article.
Principles Governing the Recovery of Attorneys’ Fees and Costs in Florida
• Fees for Fees — Florida courts follow the “American rule” that attorneys’ fees may be recovered by a successful litigant only when authorized by contract, statute, or court rule.2 However, when a contract between the parties contains a provision entitling the prevailing party to recover its attorneys’ fees, courts are required to enforce the attorneys’ fee provision like any other valid contractual provision.3 Accordingly, “[w]hen the parties by contract determine that the prevailing party in any litigation shall be entitled to attorney’s fees, the question before the court is not whether fees should be awarded; the issue is which is the prevailing party.”4
Before the Florida Supreme Court’s decision in State Farm Fire & Casualty Co. v. Palma, 629 So. 2d 830, 832 (Fla. 1993), the district courts of appeal were split as to whether a prevailing party’s entitlement to attorneys’ fees should include the ability to recover fees incurred in litigating or quantifying the amount of recoverable fees.5 In Palma, a majority of the Florida Supreme Court held that fees incurred in determining the prevailing party’s entitlement to fees are properly recoverable, but that fees incurred in litigating or quantifying the amount of fees due to the prevailing party are not recoverable.6 The Palma majority based its holding on a narrow interpretation of the language of F.S. §627.428, which permits a prevailing insured to recover reasonable attorneys’ fees and costs from the insurer in a dispute arising under an insurance contract, but does not specifically permit an award of fees for fees.7 Consistent with the “American rule,” the Palma majority emphasized that “[i]f the scope of section 627.428 is to be expanded to include fees for time spent litigating the amount of attorney’s fees, then the [l]egislature, rather than this [c]ourt, is the proper party to do so.”8 The three dissenting justices argued that the majority’s holding was premised on an unduly narrow reading of the language of F.S. §627.428 and conflicted with the position taken by the federal courts, which generally permit the recovery of fees for fees.9
Appellate courts have routinely followed Palma in holding that fees incurred in litigating the amount of awardable fees generally are not recoverable in Florida.10 However, a number of post- Palma decisions have held that fees for fees may be awarded in appropriate circumstances. For example, the Third and Fourth districts have held that fees for fees are recoverable when attorneys’ fees are awarded as a sanction,11 and the Second and Fourth districts have held that nonmoneyed spouses may recover fees for fees in marital dissolution cases.12
• Nontaxable Costs — Court costs are generally recoverable by the prevailing party in litigation pursuant to F.S. §57.041. In addition, the majority of contracts with attorneys’ fees provisions also make reference to the recovery of court costs. In Florida, awards of costs are guided by the uniform guidelines, which divide costs into three categories: 1) litigation costs that should be taxed; 2) litigation costs that may be taxed; and 3) litigation costs that should not be taxed.13 A number of significant costs are not included in either the “should be taxed” or “may be taxed” categories, including 1) electronic research charges; 2) copying costs for documents that are not filed with the court or obtained in discovery; 3) expert witness fees for services other than testimony or preparation of a court-ordered report; 4) court reporter fees for nonevidentiary hearings; and 5) attorney and expert travel expenses.14 Awards of other substantial costs, such as mediator fees, are made discretionary by the uniform guidelines.15
The uniform guidelines expressly state that they are “advisory” and that “taxation of costs in any particular proceeding is within the broad discretion of the trial court.”16 Furthermore, the uniform guidelines make clear that they are “not intended to limit the amount of costs recoverable under a contract or statute.”17 Despite these caveats, appellate decisions have made it clear that the uniform guidelines generally set the benchmark by which trial courts are to award costs in Florida.18 Even when contractual fee and cost provisions were at issue, the Second and Fourth districts held in Midway Services, Inc. v. Custom Manufacturing & Engineering, Inc., 974 So. 2d 427, 430 (Fla. 2d DCA 2007), and Wood v. Panton & Co. Realty, Inc., 950 So. 2d 534, 535 (Fla. 4th DCA 2007), respectively, that contracts providing for the recovery of “all costs” or “all costs and expenses” by the prevailing party should be construed as extending to only those costs that are taxable pursuant to the uniform guidelines.19 However, Midway and Wood are equally clear that cost items that are not taxable pursuant to the uniform guidelines are nevertheless awardable when the operative contract specifically identifies those costs as being recoverable by the prevailing party.20
It is not clear under Midway and Wood whether Florida courts will permit the recovery of nontaxable costs pursuant to the uniform guidelines when the operative contract contains language generally providing for an award of taxable and nontaxable costs (as defined by the uniform guidelines) without specifying particular nontaxable costs as being recoverable. However, federal courts have upheld generic language of this sort,21 and enforcement would be consistent with the uniform guidelines’ deference to contractual cost provisions.
Recommended Revisions to the “Standard” Fee and Cost Provision in Florida
As noted above, Florida substantive law leaves a significant amount of fees and costs arguably unrecoverable pursuant to a “standard” fee and cost provision. In a commercial dispute of any size, the attorneys’ fees expended in litigating the amount of fees, conducting associated discovery, and redacting billing narratives, together with nontaxable expert witness fees, copying costs, and the like, can easily reach six figures.
Although litigators might be able to present arguments as to why fees for fees and nontaxable costs should be recovered in particular cases, the more effective approach going forward would seem to be for transactional attorneys to include express language within fee and cost provisions entitling the prevailing party to recover fees for fees and specified costs that would otherwise not be taxable. Midway and Wood speak directly to this issue and hold that nontaxable costs may be recovered when specifically enumerated in the contract.
Although there appears to be no Florida decision addressing whether courts will enforce express fees for fees language in contracts, the rationale of Palma and the general principles governing the enforcement of attorneys’ fee provisions in Florida strongly suggest that fees for fees provisions are binding on the parties as long as the language is clear.
There is little justification for maintaining the “standard” fee and cost language in contracts governed by Florida law — except perhaps in the unusual transaction in which the parties desire a prevailing party provision, but for some reason do not wish to provide for the broadest possible recovery of litigation expenses. Indeed, the prevalence of the “standard” provision following cases such as Palma, Midway, and Wood appears to have resulted less from a conscious choice on the part of parties to transactions and more from a breakdown in communication between litigators and transactional attorneys as to the narrow manner in which appellate courts have construed generic language permitting the recovery of “reasonable attorney’s fees and costs” or from the unwillingness of transactional attorneys to draft a longer form provision that might be deemed offensive to the contracting parties.
The model fee and cost provisions set forth below are provided as alternatives to language that simply provides for the recovery of “reasonable attorney’s fees and costs” by the prevailing party. Both the “long form” and “short form” alternatives expressly provide for the recovery of fees for fees and nontaxable costs by the prevailing party. The authors believe that the “long form” alternative is generally preferable when the potential amounts at issue in fee and cost disputes justify detailed and precise language to protect the interests of the parties to the transaction.
It is sometimes the case, however, that a particular client requires a shorter fee and cost provision due to space limitations ( e.g., on a single-page front and back form contract presented to all customers). Accordingly, a “short form” alternative is presented with less detailed language, particularly in the itemized list of recoverable costs. Although the language of the “short form” alternative is less precise than the “long form” alternative, the authors nevertheless believe that it represents a substantial improvement upon the “standard” fee and cost provision currently prevalent in contracts governed by Florida law.
Initially, some attorneys might be concerned about the breadth of the proposed form language and the potential for their clients to be assessed with large fee and costs awards in the event that they do not ultimately prevail in any dispute under the contract. However, the “standard” fee and cost provision, either by its terms or by operation of F.S. §57.105(7), also provides for reciprocal recovery.22 If the transaction is such that the parties desire the ability to recover litigation expenses, there are exceedingly few transactions in which, using hypothetical numbers, 75 percent recovery under the “standard” fee and cost provision would be desirable, but 95 percent recovery under the proposed forms set forth below would not.
A related concern is that a broader fee and cost provision could provide an incentive for excessive or bad faith litigation practices that might unduly increase the fee and cost award. This issue is, however, at least partially addressed by the “reasonableness” restriction in the proposed forms set forth below. Although excessive litigation is not an unwarranted concern, Florida courts routinely scrutinize legal bills and cost invoices for reasonableness, and there is no reason to believe that they will not continue to do so in interpreting expanded fee and cost language.
Alternative 1 — Long Form
Attorneys’ Fees and Costs. In the event of a legal action or other proceeding arising under this Agreement or a dispute regarding any alleged breach, default, claim, or misrepresentation arising out of this Agreement, whether or not a lawsuit or other proceeding is filed, the prevailing party shall be entitled to recover its reasonable attorneys’ fees and costs, whether incurred before suit, during suit, or at the appellate level. The prevailing party shall also be entitled to recover any attorneys’ fees and costs incurred in litigating the entitlement to attorneys’ fees and costs, as well as in determining or quantifying the amount of attorneys’ fees and costs due to it.
Recoverable Costs. The reasonable costs that the prevailing party shall be entitled to recover pursuant to Paragraph [#] of this Agreement shall include any costs that are taxable pursuant to any applicable statute, rule, or guideline (including, but not limited to, the Statewide Uniform Guidelines for Taxation of Costs), as well as costs not taxable thereunder. Such recoverable costs shall specifically include, but not be limited to, 1) costs of investigation; 2) costs of copying documents and other materials, whether for discovery, filing with the court, internal review, or any other purpose; 3) costs for electronic discovery; 4) Westlaw, Lexis Nexis, or other electronic research service charges; 5) telephone charges; 6) mailing, commercial delivery service, and courier charges; 7) travel expenses, whether for investigation, depositions, hearings, trial, or any other purpose; 8) information technology support charges; 9) any and all consultant or expert witness fees, whether or not such fees are incurred in connection with a court-ordered report or testimony at a deposition, hearing, or trial; 10) court reporter and transcript fees, whether for deposition, trial, or an evidentiary or non-evidentiary hearing; 11) mediator fees; and 12) any other reasonable cost incurred by the prevailing party in connection with the dispute.
Alternative 2 — Short Form
Attorneys’ Fees and Costs. In the event of a dispute arising under this Agreement, whether or not a lawsuit or other proceeding is filed, the prevailing party shall be entitled to recover its reasonable attorneys’ fees and costs, including attorneys’ fees and costs incurred in litigating entitlement to attorneys’ fees and costs, as well as in determining or quantifying the amount of recoverable attorneys’ fees and costs. The reasonable costs to which the prevailing party is entitled shall include costs that are taxable under any applicable statute, rule, or guideline, as well as non-taxable costs, including, but not limited to, costs of investigation, copying costs, electronic discovery costs, telephone charges, mailing and delivery charges, information technology support charges, consultant and expert witness fees, travel expenses, court reporter fees, and mediator fees, regardless of whether such costs are otherwise taxable.23
The “standard” fee and cost provision has proven woefully inadequate in protecting clients’ abilities to recover the expenses of litigation in contractual disputes governed by Florida substantive law. The authors believe that the sums often at issue in fee and cost disputes warrant a rewriting of prevailing party provisions to, at the very least, provide for the recovery of fees incurred in litigating the amount of recoverable fees and for an award of costs that otherwise would not be taxable under the uniform guidelines. Although a prevailing party’s ability to obtain the broadest possible recovery of the actual costs and fees incurred in any dispute will depend on how the underlying agreement is drafted, the authors hope that these suggestions will provide the impetus for transactional attorneys to reconsider the “standard” language.
1 In re Amendments to Uniform Guidelines for Taxation of Costs, 915 So. 2d 612, 616-17 (Fla. 2005).
2 See, e.g., State Firm Fire & Cas. Co. v. Palma, 629 So. 2d 830, 832 (Fla. 1993); Moakley v. Smallwood, 826 So. 2d 221, 223-24 (Fla. 2002).
3 Sybert v. Combs, 555 So. 2d 1313, 1314 (Fla. 5th D.C.A. 1990); see also Himebaugh v. Weber Inv. Corp., 700 So. 2d 19, 21 (Fla. 5th D.C.A. 1997).
4 Himebaugh v. Weber Inv. Corp., 700 So. 2d 19, 21 (Fla. 5th D.C.A. 1997).
5 See Palma, 629 So. 2d at 831-32 (discussing split in authority).
6 Id. at 833.
8 Id. ; see also Whitten v. Progressive Cas. Ins. Co., 410 So. 2d 501, 505 (Fla. 1982) (recognizing that “[s]tatutes authorizing an award of attorneys’ fees are in derogation of the common law” and, “[t]herefore, such statutes must be strictly construed”).
9 Palma, 629 So. 2d at 834. As noted in Palma, federal courts typically award fees for fees. See Sheet Metal Workers’ Int’l Ass’n, Local 15, AFL-CIO v. Law Fabrication, LLC, 237 Fed. App’x 543 (11th Cir. 2007) (recognizing difference between federal and Florida law on fees for fees).
10 See, e.g., Wight v. Wight, 880 So. 2d 692, 695 (Fla. 2d D.C.A. 2004); Oruga Corp. v. AT&T Wireless of Fla., Inc., 712 So. 2d 1141, 1145 (Fla. 3d D.C.A. 1998); see generally James C. Hauser, Attorney’s Fees in Florida §7.11 (2d ed. 1977 and Supp. 2010).
11 See Condren v. Bell, 853 So. 2d 609 (Fla. 4th D.C.A. 2003); Bates v. Islamorada, 939 So. 2d 171 (Fla. 3d D.C.A. 2006); Bennett v. Berges, 50 So. 3d 1154, 1161 (Fla. 4th D.C.A. 2010). However, other cases have held that fees for fees are not awardable pursuant to Fla. Stat. §57.105(1). See Pierpont v. Pierpont, 578 So. 2d 780 (Fla. 2d D.C.A. 1991); Yakavonis v. Dolphin Petroleum, Inc., 934 So. 2d 615 (Fla. 4th D.C.A. 2006). The apparent conflict might be explained on the basis that the sanctions awards in Bates and Bennett were based on the court’s inherent authority to sanction litigants for bad faith conduct and noncompliance with court orders. In Pierpont and Yakavonis, by contrast, the fee award was based upon statutory language that did not specifically provide for the recovery of fees for fees. In Condren, the fee award was based upon both Fla. Stat. §57.105(1), and Fla. R. Civ. P. 1.730(c). See Condren v. Bell, Case No. No. CL 98-4393 AE, 2004 WL 5338608 at *1-*2 (Fla. 15th Cir. Dec. 6, 2007). The Condren trial court mentioned §57.105(1), only in passing and relied primarily upon Rule 1.730(c), which permits an award of attorneys’ fees and costs and “other appropriate remedies” for a party’s failure to comply with a mediation agreement. See id. at *2. Although the Fourth District’s opinion in Condren provides some authority for the proposition that fees for fees are available under §57.105(1), the more recent Yakavonis decision from the same court squarely holds that an award of fees for fees is not available under §57.105(1), suggesting that Condren ’s holding was premised on the more expansive language of Rule 1.730(c).
12 See Baker v. Baker, 35 So. 3d 76 (Fla. 2d D.C.A. 2010); Schneider v. Scheider, 32 So. 3d 151 (Fla. 4th D.C.A. 2010). However, the ability to recover such fees is more circumscribed in the Second District than the Fourth District. Compare Schneider, 32 So. 3d 151 (holding that fees for fees are recoverable for temporary fee awards to nonmoneyed spouse), with Wight v. Wight, 880 So. 2d 692 (Fla. 2d D.C.A. 2004) (holding that fees for litigating amount of fees incurred in obtaining final judgment in dissolution cases are not recoverable).
13 Uniform Guidelines, 915 So. 2d at 616-17.
14 See id., §§I(B), I(C), I(E); see also Wood v. Panton & Co. Realty, Inc., 950 So. 2d 534, 535 (Fla. 4th D.C.A. 2007) (holding that electronic research charges are not recoverable under uniform guidelines).
15 See Uniform Guidelines, 915 So. 2d at 616-17, §III(A).
16 Id. at 614; see also Midway Servs., Inc. v. Custom Mfg. & Eng’g, Inc., 974 So. 2d 427, 430 (Fla. 2d D.C.A. 2007) (noting that the Uniform Guidelines are “advisory guidelines that were created to help courts assess costs”).
17 Uniform Guidelines, 915 So. 2d at 614.
18 See, e.g., Midway, 974 So. 2d at 430; Wood, 950 So. 2d at 525; Seminole County v. Koziara, 881 So. 2d 83, 85 (Fla. 5th D.C.A. 2004).
19 See Midway, 974 So. 2d at 430; Wood, 950 So. 2d at 525.
20 See Midway, 974 So. 2d at 430 (“[I]f the contract specifically provides for certain costs that are not recoverable under the uniform guidelines, the contract controls.”); Wood, 950 So. 2d at 525 (distinguishing cases in which a “contractual provision define[s] the scope of ‘costs’ to be awarded to a prevailing party” from those in which the contract simply provides for the recovery of “all costs”).
21 See, e.g., Columbia Data Products, Inc. v. Symantec Corp., Case No. No. 6:06-cv-66-Orl-28KRS, 2008 WL 4365925, at *3 (M.D. Fla. Sept. 23, 2008) (enforcing contract provision stating that “costs (taxable or otherwise)” were recoverable on basis that such language “clearly sets forth the parties’ intent that the prevailing party could recover litigation expenses in addition to taxable costs”).
22 Fla. Stat. §57.105(7) (“If a contract contains a provision allowing attorney’s fees to a party when he or she is required to take any action to enforce the contract, the court may also allow reasonable attorney’s fees to the other party when that party prevails in any action, whether as plaintiff or defendant with respect to the contract.”).
23 The authors do not suggest that these model fee and costs provisions are ideally suited to every transaction. Instead, these alternatives are proposed merely as improvements upon the narrow fee and cost provisions currently prevalent in contracts, assuming that the parties desire a broader ability to recover attorneys’ fees and costs under Florida substantive law than “standard” fee and cost provisions currently allow. If either alternative is used, its language should be modified as appropriate based on the nature of the transaction and the goals of the client.
James E. Foster is an AV-rated attorney and a shareholder in the Orlando office of Akerman Senterfitt. Foster focuses his practice on complex commercial litigation and bankruptcy disputes. Foster is a graduate of the University of Miami School of Law, cum laude , and Dickinson College.
Vincent Falcone is an associate in the Orlando office of Akerman Senterfitt. Falcone focuses his practice on complex commercial litigation and securities litigation. Falcone is a graduate of Columbia University School of Law and Boston College, magna cum laude .
This column is submitted on behalf of the Trial Lawyers Section, Craig Anthony Gibbs, chair, and D. Matthew Allen, editor.