Revisiting the standard attorneys' fee and cost provision.

• Author: Foster, James E.
• Position: Trial Lawyers Forum

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. [section] 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. [section] 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. [section] 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...