22nd Century Props., LLC v. FPH Props., LLC

• Decision Date: 01 April 2015
• Docket Number: No. 4D13–3537.,4D13–3537.
• Citation: 160 So.3d 135
• Parties: 22ND CENTURY PROPERTIES, LLC and David F. Damerau, Appellants, v. FPH PROPERTIES, LLC, Appellee.
• Court: Florida District Court of Appeals

160 So.3d 135

22ND CENTURY PROPERTIES, LLC and David F. Damerau, Appellants

v.FPH PROPERTIES, LLC, Appellee.

No. 4D13–3537.

District Court of Appeal of Florida, Fourth District.

April 1, 2015.

Justin R. Infurna of The Infurna Law Firm, P.A., Orlando, for appellants.

Matthew C. Sanchez, Benjamin E. Olive, and Kara L. Strochlic of Hackleman, Olive & Judd, P.A., Fort Lauderdale, for appellee.

Opinion

GROSS, J.

This case arises from a real estate venture gone awry. In 2002, appellants 22nd Century Properties, LLC and its principal, David Damerau, entered into a contract with appellee FPH Properties, LLC (“FPH”) whereby FPH agreed to front appellants money to purchase and develop three properties for profit. When the dust settled, only two properties sold and Damerau occupied the third as his homestead. As to the two sold properties, FPH discovered that appellants had falsified documents to maximize their share of the profit and minimize that of FPH. FPH brought suit and obtained a final judgment in excess of $1,500,000.

This appeal concerns a $631,969.50 attorney's fee award pursuant to the offer of judgment statute. As their primary issue, appellants assert the award constitutes an abuse of discretion since it includes charges for excessive, duplicate, and unnecessary billing entries. Given the twisty, expansive development of the case and appellants' elaborate attempts to shield discovery of their fraud, we find no error in the attorney's fees award and affirm.

Factual Background

Appellants entered into an agreement with FPH for the express purpose of acquiring, renovating or developing, and selling for profit single family homes in South Florida. FPH agreed to contribute capital to purchase the properties, 22nd Century promised to develop and renovate the properties, and Damareu guaranteed 22nd Century's obligations. Before purchasing property, 22nd Century was obligated to provide FPH a “pro forma” outlining the terms of the proposed purchase, renovation, and ultimate sale. If Damareu or anyone affiliated with him had an interest in the proposed property, the agreement required disclosure.

The financial parameters of the deal were that FPH agreed to invest up to $500,000 per property, contingent upon the pro forma. Following the sale of a property, the proceeds were to be distributed as follows: first, FPH would be paid back its investment as well as 9% interest; second, 22nd Century could retain the remainder up to the amount paid to FPH in interest; and finally, if there were any funds left over, FPH and 22nd Century would split them evenly. In the event the property sale did not yield enough profit to cover FPH's investment, 22nd Century was required to make up the difference, with Damerau guaranteeing this obligation.

Pursuant to the agreement, 22nd Century presented FPH with pro formas for three properties, all of which FPH approved. For the first two properties (“Properties 1 and 2”), FPH agreed to invest $150,000 each, eventually receiving—based on appellants' “final accounting”—respective profits of $55,349.00 and $58,353.04. As to the third property (“Property 3”), FPH invested $400,000. However, appellants never sold the property, and thus claimed they did not need to reimburse FPH for anything other than its contributed capital. As it turned out, Damerau resided in Property 3 and claimed it as his personal homestead.

Procedural Posture

After noticing discrepancies between the pro formas, HUD settlement statements, and “final accountings” submitted for Properties 1 and 2, FPH filed suit against appellants, initially alleging counts for inspection of books and records, accounting, breach of agreement, and breach of fiduciary duty. After conducting discovery, FPH learned that appellants falsified the HUD settlement statements and other documents to increase 22nd Century's share of the profits and used the three properties as a mechanism to charge FPH for expenses unrelated to the properties. Additionally, FPH believed that appellants induced FPH to invest in Property 3 under the false pretense that it would be sold for profit, all the while knowing Damerau would retain it for his personal residence. Based on what it had uncovered in discovery, FPH amended its complaint to include claims for punitive damages and fraud.

Through the discovery process, appellants' scheme unfolded like a peeled onion: each discovery request uncovered a new layer of the ploy. During the six-year period between the filing of the case and its August 2012 bench trial, FPH filed twenty-seven discovery-related motions, moved four times for contempt/sanctions, and twice amended its complaint to address newly discovered information. As the trial court explained in an order on FPH's motion for contempt and sanctions entered on August 30, 2012, the day before trial, the delay and complexity in the case stemmed from appellants' fraudulent or deceptive discovery tactics. The court rejected the drastic sanctions of default, the striking of pleadings, and contempt but went on to state that

this Court will not stand idly by and permit a party to file forged and fraudulent documents, to delay proceedings and to provide falsified responses to discovery requests. [Appellants] ha[ve] interfered with [FPH's] discovery in the matter, as well as this Court's ability to fairly adjudicate the pertinent issues. While this Court, in no way, condones the actions of [the appellants,] Florida courts have long recognized that where a less restrictive alternative is available for assuring the fair trial guarantee and the use of the alternative does not unduly burden the expeditious disposition of the cause, the alternative procedure should be opted for. Miami Herald Publishing Co. v. Lewis, 426 So.2d 1, 8 (Fla.1982). Other remedies to [FPH] would include vigorous cross-examination of [the appellants] on their interrogatory and deposition responses. As such, this Court finds that [FPH] is entitled to recover reasonable attorneys' fees for the extra work [it] had to undertake.

(Emphasis added).

Following a bench trial, the trial court entered judgment in FPH's favor, finding appellants jointly and severally liable for $1,524,087.11 in damages on account of fraud, breach of fiduciary duty, and breach of contract. The trial court further determined that appellants were liable for punitive damages, although it did not set an amount. In its order, the trial court explained its ruling by stating that the appellants failed to provide FPH with any documents relating to the properties that substantiated the amount actually paid for acquiring and developing the properties. As to the three properties, the order stated appellants damaged FPH by not selling Property 3 and caused further injury by “creat[ing] fictitious contracts, settlement statements and distribution statements which were intended to and did defraud FPH from its rightful share of the [venture's] profits” regarding Properties 1 and 2. This Court affirmed the final judgment without opinion. See 22nd Century Props., LLC v. FPH Props., LLC, 145 So.3d 858 (Fla. 4th DCA 2014).

Attorney's Fees Hearing

Following the final judgment, FPH moved for attorney's fees and prejudgment interest pursuant to its prior demands for judgment. In October 2010, two years before the bench trial, FPH served the appellants with a demand for judgment pursuant to section 768.79, Florida Statutes (2006), offering to settle the case for $1,000,000.00. In the offer, FPH agreed not only to resolve all claims between the parties but also to dismiss its “pending Motion for Leave to Amend Complaint to Add a Claim for Punitive Damages.” November 2011 and July 2012 demands for judgment specifically addressed the punitive damages count.

In its motion, FPH requested $660,756.50 in attorney's fees based upon 2,362.60 attorney hours and 203 paralegal hours over an 84–week period. Since the appellants contested this amount, the trial court addressed the matter via evidentiary hearing.

FPH's Evidence

At the evidentiary hearing, FPH focused its case on the expert testimony of Joshua Spector, an attorney who reviewed the case file. Spector characterized the case as voluminous, as evidenced by “19 boxes of pleadings” resulting in “an inordinate number of wins for the judgment creditor, and losses for the judgment debtor.” After reviewing in excess of 1600 discreet billing entries, Spector found FPH's fees request reasonable “given the rather incredible nature of th[e] case and the breadth and depth of misrepresentations by the” appellants. However, Spector did opine that FPH's requested fees should be reduced for certain attorney hours that “could have been spent by a paralegal.” Further, he reduced the fee amount by five percent for FPH's unsuccessful appellate proceedings, where it opposed the removal of a predecessor judge by a writ of prohibition. Ultimately, this court found in appellants' favor and granted the writ.

In justifying the attorney's fee award, Spector described the case as particularly “complex” and “very difficult ... to prosecute,” as it involved numerous rounds of discovery, “more than 125 subpoenas to third parties,” and 95 potential trial witnesses “to contend with the misrepresentations put on by” the appellants. Such “an inordinate amount of work,” in Spector's opinion, derived not from FPH's overzealousness but from the appellants' “vast and complicated misrepresentations,” which necessitated that FPH's lawyers locate “an incredible number of fact witnesses, or potential fact witnesses, many of whom [it] turned out had nothing to do with the development.” As Spector explained, when one “erect[s] a fraudulent artifice, such as [occurred in this case,] it's going to cause a lot of work.”

On cross-examination, appellants attempted to establish through Spector that FPH's legal work was duplicative and excessive. For example, given the circumstances of the case, Spector did not believe deposing Damerau more than ten times was excessive since...