Rethinking the application of contingency risk multipliers in fee awards - should Florida courts recede from Quanstrom?

• Author: Leviten, Aaron

In two recent opinions, Florida s Fifth District Court of Appeal affirmed trial court orders that increased attorney's fees from the lodestar by applying a contingency risk multiplier. In Bluegrass Art Cast, Inc., et al., v. Consolidated Erection Services, Inc., 864 So. 2d 1215 (Fla. 5th DCA 2004), and Holiday v. Nationwide Mutual Fire Insurance, 864 So. 2d 1215 (Fla. 5th DCA 2004), the Fifth District Court of Appeal held that a contingency fee multiplier applied despite the recent Florida Supreme Court ruling in Sarkis v. Allstate Insurance Co., 863 So. 2d 210 (Fla. 2003). In Allstate v. Sarkis, the court held that a contingency risk multiplier should not be used to compute attorneys' fees in an offer of judgment case. The Fifth District Court of Appeal in its Bluegrass Arts and Holiday decisions certified the following issue to the Florida Supreme Court for consideration:

In Light of the Supreme Court's Decision in Sarkis, May a Multiplier be Applied to Enhance an Award of Attorney's Fees Granted Under a Fee-shifting Statute Such as Section 627.428 Florida Statutes (2002). (1)

With the question certified to the Florida Supreme Court, the court as well as the lower courts must reexamine the future of the contingency risk multiplier in all circumstances in Florida litigation. Florida's foundational case on the risk multiplier, Standard Guaranty Insurance Co. v. Quanstrom, 555 So. 2d 828 (Fla. 1990), was premised upon the U.S. Supreme Court's decisions in Blanchard v. Bergeron, 489 U.S. 87, 109 S. Ct. 939 (1988), and Delaware Valley Citizen's Council for CleanAir, 483 U.S. 711 (1987). Now that the high court has retreated from these cases in City of Burlington v. Dague, 505 U.S. 557 (1992), the authority by which the Florida courts adopted the contingency risk multiplier now appears to have dissipated as well. In Dague, the Supreme Court held "that fee shifting statutes generally do not permit enhancement of a fee award beyond the lodestar amount to reflect" the contingency agreement between a party and his or her attorney. (2) The appellate court noted that F.S. [section] 627.428, like the statute that Sarkis upheld, did not allow a multiplier and lacked express authorization for the use of the enhancement. Pursuant to that analysis, the question certified by the Fifth District Court of Appeal begs the question: Should the Florida Supreme Court take the immense step of receding from over a decade of precedent formed under Quanstrom in the face of this "tidal shift" away from a multiplier? A careful review of the Dague case and other cases on the issue clearly suggest a resounding "Yes."

Quanstrom: Introduction of the Contingency Fee Multiplier

In Quanstrom the Florida Supreme Court classified three kinds of cases in which a contingency fee multiplier might be appropriate:

[A]lthough we reaffirm our decision in Rowe, concerning the lodestar approach as the basic starting point, we find that the use of the contingency fee multiplier should be modified. For better understanding, we find it appropriate to place attorney's fees cases into the following three categories: (1) public policy enforcement cases; (2) tort and contract claims; and (3) family law, eminent domain, and estate and trust matters. (3)

In category one cases, a multiplier is rarely applicable as the traditional lodestar approach is appropriate and a multiplier should not normally be awarded. The use of a multiplier in public policy enforcement cases is severely restricted, and no enhancement for risk is appropriate unless the applicant can establish that, without an adjustment, the prevailing party would have faced substantial difficulties in finding counsel. (4)

In the second category of cases, which includes most contract disputes and issues, including insurance related cases, the multiplier may be applied. In the third category of cases, family law and eminent domain, the courts have been very restricted in the awarding of multipliers, except in exceptional circumstances. The third category involves family law, eminent domain, and estate and trust proceedings, which have special factors that are relevant in setting the attorneys' fees. In some instances, a contingency fee arrangement is ethically prohibited or cannot be reasonably justified because payment in some amount is assured. In this third category of cases, a contingency fee multiplier is not justified, although the basic lodestar method of computing a reasonable fee "may be an appropriate starting point." (5)

The Florida Supreme Court laid out a number of factors in evaluating the need for a multiplier including:

1) whether the relevant market requires a contingency fee multiplier to obtain competent counsel;

2) whether the attorney was able to mitigate the risk of non-payment in any way; and

3) whether any of the factors set...