The right to recover "fees for fees" based on a contractual prevailing party fee provision.

• Author: Rabinowitz, Adam G.
• Position: Florida - Cover story

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A client's complete vindication for the successful pursuit or defense of litigation often includes the ability to be made whole, including an award of attorneys' fees as the prevailing party. However, a client's complete satisfaction is sometimes tempered by the precedent established in 1993 by the Florida Supreme Court in State Farm Fire & Casualty Co. v. Palma, 629 So. 2d 830 (Fla. 1993). Based on Palma, for two decades the prevailing assumption in Florida's legal community has been that attorneys' fees may only be recovered for litigating the issue of entitlement to fees, and not for litigating the amount of fees to be awarded. Stated another way, the accepted rubric has been that a client cannot be awarded "fees for fees." But in the right circumstances, as illustrated by a recent decision from the Fourth District Court of Appeal, that "rule" may be inapplicable.

In Waverly at Las Olas Condominium Association, Inc. v. Waverly Las Olas, LLC, 88 So. 3d 386 (Fla. 4th DCA 2012), the Fourth District distinguished Palma and affirmed a judgment awarding attorneys' fees, including "fees for fees," when the substantive basis for the award was a broad contractual provision authorizing fees for "any litigation between the parties under [the] [a]greement." The prevailing party in Waverly successfully argued to the trial court, and on appeal, that denying "fees for fees" would have been unfaithful to the parties' unambiguous (contractual) intent that the prevailing party in "any litigation" arising under the contract would be made whole by recovering all fees reasonably expended in the litigation.

Other exceptions to Palma's rule precluding "fees for fees" exist, but the "contract" exception recognized in Waverly will likely be widely applicable, since many contracts contain a prevailing party fee provision. Thus, Waverly is an important development in the law for attorneys drafting such contracts, or for litigation counsel moving to recover fees for their clients. A nonprevailing party will still have the right to challenge the reasonableness of the amount to be awarded (time expended and hourly rates), but when the contractual fee provision is broad enough to encompass recovery of "fees for fees," as in Waverly, in doing so, the nonprevailing party will necessarily be responsible for the additional fees incurred by the prevailing party in that phase of the litigation. (1) Whether this change will foster more settlements of fee claims remains to be seen.

The method to challenge the reasonableness of the amount of fees sought, including the elements of a successful fee application, the applicable factors to be considered in assessing reasonableness of the fees sought, and the use of expert testimony, is a subject beyond the scope of this article. Here, the authors focus on the legal right to recover fees for those efforts.

Palma and its Progeny

Before Palma, the district courts conflicted with respect to the "fees for fees" issue. The First, Third, and Fifth districts found that in certain situations "fees for fees" were, in fact, recoverable, while the Second District held that the time spent litigating the issue of the amount of attorneys' fees was not compensable. (2)

In 1993, the Florida Supreme Court resolved the conflict, adopting a restrictive view, at least with regard to the statute at issue. In Palma, an insured sued State Farm for failing to pay medical bills for injuries sustained in an automobile accident. (3) Attorneys' fees were recoverable under F.S. 627.428(1), which governs fees between an insurer and its insureds. (4) The relevant portion of the statute, designed to discourage insurance companies from contesting valid claims, (5) provides that when a beneficiary prevails over the insurer, "a reasonable sum as fees or compensation for the insured's or beneficiary's attorney" shall be awarded. (6) The Supreme Court reasoned that permitting recovery to the insureds' attorney for time spent establishing entitlement to fees comported with the purpose and language of the statute, but awarding fees for the time spent establishing the amount did not.

Palma also reasoned that because the insured had not actually expended any funds under a contingency fee agreement, and the dispute over the amount of fees to be awarded inured only to the benefit of the attorneys, awarding "fees for fees" was not contemplated by...