An Analysis of Current Florida Law in Connection with Recovering: FEES ON FEES.

• Author: Koester, Edmond E.

Under the long-standing "American Rule," each party in litigation is responsible for its own attorneys' fees and costs absent a contractual or statutory basis to award fees to the prevailing party. (1) When fees are recoverable, the general rule is that a party may recover additional attorneys' fees for litigating the entitlement issue, but no fees as to the quantum, or reasonableness of the amount of fees. This article addresses how courts have reacted to and analyzed broad contractual prevailing party attorneys' fees provisions when determining whether a party can recover fees for litigating the reasonableness of the amount of fees.

"Fees on Fees" Generally Disallowed

In 1993, in State Farm Fire & Cas. Co. v. Palma, 629 So. 2d 830 (Fla. 1993), the Florida Supreme Court addressed whether an insured could recover the attorneys' fees incurred by the insured litigating the amount of attorneys' fees the insured was entitled to as the prevailing party under F.S. [section]627.428(1) (1983), which provides: (2)

Upon the rendition of a judgment or decree by any of the courts of this state against an insurer and in favor of any named or omnibus insured or the named beneficiary under a policy or contract executed by the insurer, the trial court or, in the event of an appeal in which the insured or beneficiary prevails, the appellate court shall adjudge or decree against the insurer and in favor of the insured or beneficiary a reasonable sum as fees or compensation for the insured's or beneficiary's attorney prosecuting the suit in which recovery is had. (3) The court explained that although it had not addressed the issue of a prevailing party's ability to recover its attorneys' fees expended in establishing entitlement to and the amount of attorneys' fees it is entitled to as the prevailing party, it had previously approved an award of fees for litigating entitlement to attorneys' fees in a worker's compensation case. (4) The court then, agreeing with the Fourth District Court of Appeal's reasoning in Cincinnati Ins. Co. v. Palmer, 297 So. 2d 96 (Fla. 4th DCA 1974), explained that, when an insured is compelled to sue to enforce an insurance contract based on the insurance company's contesting of a valid claim, the relief sought is both the policy proceeds and attorneys' fees pursuant to [section]627.428. (5) Thus, the court concluded that, because litigating the issue of whether a party is entitled to prevailing party attorneys' fees is rendered in procuring full payment of the judgment, and because the insured has an interest in the fee recovered, attorneys' fees may be properly awarded under [section]627.428 for litigating the issue of entitlement to attorneys' fees. (6) However, the court declared that attorneys' fees may not be awarded for litigating the amount of attorneys' fees. (7) In coming to this conclusion, the court reasoned that the statute does not support such a conclusion and further declared that such work inures solely to the attorney's benefit and cannot be considered services rendered in procuring full payment of the judgment. (8)

The court went on to recognize that the federal courts that have addressed the issue have not distinguished between entitlement to attorneys' fees and the amount of attorneys' fees, but have instead permitted fees for the entire time spent on the issue. (9) The court distinguished the holdings of the federal courts by emphasizing the court's conclusion comported with the plain language and purpose of [section]627.428, which the court had previously explained is "to discourage the contesting of valid claims against insurance companies and to reimburse successful insureds for their attorneys' fees when they are compelled to defend or sue to enforce their insurance contracts." (10) The court then further declared that the Florida Legislature was the proper party to expand the scope of [section]627.428 to include attorneys' fees for time spent litigating the amount of attorneys' fees, as opposed to the court. (11) Accordingly, the court quashed the decision below to the extent it authorized attorneys' fees pursuant to [section]627.428 for litigating the amount of fees. (12)

Fees Awarded for Litigating the Amount of Fees

Although Palma's rationale was based on the plain language and purpose of F.S. [section]627.428, the Florida Supreme Court's analysis and reasoning opened the door for other courts to explore the issue of recovering attorneys' fees expended establishing the amount of attorneys' fees. In Waverly at Las Olas Condominium Ass'n, Inc. v. Waverly Las Olas, LLC, 88 So. 3d 386 (Fla. 4th DCA 2012), after a condominium unit owner brought an action against the condominium association over parking spaces, the association filed a third-party complaint against the developer. After dismissal of the second amended third-party complaint with prejudice, the trial court awarded the developer $105,841.29 in prevailing party attorneys' fees and costs. (13) On appeal, the association argued the trial court erred in the amount of the attorneys' fees and costs awarded to the developer. (14) The award of attorneys' fees and costs arose out of paragraph 16 of the unit owner's purchase agreement with the developer, and provided: "Litigation. In the event of any litigation between the parties under this [a]greement, the prevailing party shall be entitled to reasonable attorneys', paralegals' and para-professionals' fees and court costs at all trial and appellate levels." (15)

Based on paragraph 16, the trial court awarded $80,657 for attorneys' fees incurred through the entry of the final judgment, $21,857.50 for litigating the amount of attorneys' fees, and $3,326.79 in taxable costs. (16) On appeal, the association argued that the Florida Supreme Court's analysis in Palma limited an attorneys' fees award to time spent in litigating the issue of entitlement only and not for litigating the amount of fees incurred. (17) The developer argued paragraph 16 of the unit owner's purchase agreement was broad enough to...