Recovery of Attorneys’ Fees – Part I: Key Considerations in Attorneys’ Fee Provisions of Contracts
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For both client and attorney, there is nothing better than a sweet victory in litigation. However, this victory may be bittersweet if there is no recovery of attorneys’ fees. This blog post is one out of a series of blog posts that will discuss the recovery of attorneys’ fees and issues related to recovery. Specifically, this blog post will discuss contractual entitlement to attorneys’ fees.
As you may already know, the general rule in Florida is that entitlement to attorneys’ fees must be based on contract or statute. Including an attorneys’ fees provision in a contract sounds easy enough but there are a number of nuances to keep in mind, including the breadth or scope of the clause, the actual language used in the clause, and the issues that may ultimately be in the hands of the fact finder to decide.
Courts carefully scrutinize the language of attorneys’ fees clauses to determine if an award of fees is appropriate. Just because a contract includes a provision for an award for attorneys’ fees, the award is not automatic or guaranteed. Consequently, drafting practitioners must walk a fine line to ensure that the attorneys’ fees clause is not too broad and not too narrow. If an attorneys’ fee provision is too broad, courts are likely to deny an award of fees thereunder. For example, take a look at this attorneys’ fees provision from Village 45 Partners, LLC v. Racetrac Petroleum, Inc., 831 So. 2d 758 (Fla. 4th DCA 2002):
“in case of any violation, or attempted violation by [the original grantor’s] successors or assigns of any of the covenants or restrictions contained within this Agreement, [the grantee] its successors and assigns, may enforce this covenant and restriction by injunction or other appropriate proceedings and the prevailing party shall be entitled to recover its damages, costs and reasonable attorney’s fees”
In Village 45 Partners, LLC v. Racetrac Petroleum, Inc., a prospective purchaser brought a declaratory action and attempted to seek fees under the provision above. The court denied an award of attorneys’ fees because a prospective purchaser was not a successor or assign as prescribed in the provision. Had the provision been written differently, the provision could have included an award of attorneys’ fees for prospective purchasers. Additionally, the clause provided an award of attorneys’ fees for a violation or attempted violation of the covenants, which is distinct from an action for a declaratory judgment.
On the other hand, it is crucial that the attorneys’ fees provision is not drafted too narrowly as to preclude a recovery of fees. As an example, when there was a provision providing for attorneys’ fees if the contractor had to bring suit for collection, the contractor was precluded from using the clause to recover fees for a damages action. See Florida Hurricane Protection and Awning, Inc. v. Pastina, 43 So. 3d 893 (Fla. 4th DCA 2010). The explicit use of one particular cause of action precluded an award of attorneys’ fees for all other causes of action.
Given the fine line of what is too broad and too vague, you may be wondering what is a clause that a court has found to be directly on that line and not too broad or too vague. In The Waverly at Las Olas Condo. Ass’n v. Waverly Las Olas, 88 So. 3d 386 (Fla. 4th DCA 2012), the court awarded fees under the following provision:
- Litigation. In the event of any litigation between the parties under this Agreement, the prevailing party shall be entitled to reasonable attorneys’, paralegals’ and paraprofessionals’ fees and court costs at all trial and appellate levels. (emphasis added).
The appellate court upheld an award for attorneys’ fees for the entire litigation, including the fees incurred in determining the amount of fees because the clause specified that an award would be for “any litigation.” While this outcome is not guaranteed in every court or every case, this case proves to be favorable precedent for clients and attorneys alike.
Aside from precluding fees in particular actions, practitioners also want to avoid limiting the amount of fees that may be awarded by the court. In Western & Southern Life Ins. Co. v. Beebe, 61 So. 3d 1215 (Fla. 3d DCA 2011), the court awarded $350.00 per hour plus a multiplier on the issue of attorneys’ fees. However, there was a contract for $300.00 per hour and the court held that the stated amount acted as a cap on the amount of fees that the court could award. The takeaway from this case is to ensure that the fee provision is drafted in such a manner as to include for the greater of the stated hourly rate or the rate ordered by the court.
A final point of discussion for contractual entitlement to attorneys’ fees is the issue of the prevailing party. There is a circuit split on the determination of who is considered the prevailing party. In the Fourth and Fifth District Courts of Appeal, the courts look to the party who prevails on the “significant issues of the case.” On the other hand, in the First, Second, and Third District Courts of Appeal, the courts look to the party that obtains the judgment. Why does this matter? Depending on which rule the court follows, you may be entitled to fees or you may be out of luck.
Looking at a Fifth District Court of Appeal decision, in Granoff v. Seidle, 915 So. 2d 674 (Fla. 5th DCA 2005), the lower court awarded fees to the party that received the judgment. However, the appellate court reversed and remanded because the prevailing party was the party who prevailed on the significant issues. The issue in Granoff v. Seidle involved a dispute between neighbors. The Granoffs sued for trespass and ejectment because the Seidles established an easement by virtue of adding a fence, callbox, driveway, sod, irrigation system, and landscaping details. The Seidles counterclaimed for multiple causes of actions. In the end, the trial court allowed the driveway, sod, and irrigation to remain on the easement, but required the Seidles to remove the fence and all trees, bushes, shrubs, and signs. On the issue of attorneys’ fees, the trial court found the Seidles to be the prevailing party. However, the appellate court found this erroneous because the significant issue was the Seidles’ overuse and abuse of the easement and the result of the lawsuit was action on the part of the Seidles. Although not convincing to the court, the Seidles presented an argument that they were the prevailing party because they were permitted to keep more things on the property then they were required to move. As the significant issues were in favor of the Granoffs, the Granoffs were the prevailing party.
In sum, it is important for litigators to pay attention to the details on fee provisions at issue and for transactional attorneys to draft the attorneys’ fee provisions in such a manner to ensure recovery. Stay tuned for Part II of this series for a discussion of other issues related to statutory entitlement and recovery of attorneys’ fees.