All Underwriters v. Weisberg

• Decision Date: 18 August 2000
• Docket Number: No. 99-11778,99-11778
• Citation: 222 F.3d 1309
• Parties: (11th Cir. 2000) ALL UNDERWRITERS, All Underwriters subscribing to policy number 03789600 including Underwriters at Lloyds, London, Plaintiff-Counter-Defendant-Appellee, v. Mark WEISBERG, Robert Berzon, Defendants-Third-Party Plaintiffs-Counter-Claimants- Appellants.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1309

222 F.3d 1309 (11th Cir. 2000)

ALL UNDERWRITERS, All Underwriters subscribing to policy number 03789600 including

Underwriters at Lloyds, London, Plaintiff-Counter-Defendant-Appellee, v. Mark WEISBERG, Robert Berzon, Defendants-Third-Party Plaintiffs-Counter-Claimants-

Appellants.

No. 99-11778.

United States Court of Appeals, Eleventh Circuit.

Aug 18, 2000.

Appeal from the United States District Court for the Southern District of Florida.

Before ANDERSON, Chief Judge, and DUBINA and SMITH^*, Circuit Judges.

DUBINA, Circuit Judge:

This appeal involves the question of whether a district court may award attorney's fees pursuant to a state statute in a marine insurance contract dispute. The district court answered the question in the negative. We reverse.

I. Background

Appellants, Mark Weisberg and Robert Berzon ("Weisberg," "Berzon," or collectively, "Appellants"), entered into a marine insurance contract with Appellee, Underwriter's at Lloyds, London ("Underwriters"), to insure Appellants' 32 foot motor vessel named "After Hours." The policy provided hull and machinery coverage for $50,000, beginning on September 27, 1996, and extending for a one-year period. Underwriters issued the policy pursuant to Florida's Surplus Lines Law and delivered it to Weisberg's residence in Miami, Florida.

On November 16, 1996, the After Hours sank as a result of heavy winds and storm surge. Appellants made a claim for constructive total loss of the After Hours within four days of the sinking. After conducting an investigation, Underwriters filed a declaratory judgment action in the United States District Court for the Southern District of Florida seeking to have the contract deemed void ab initio due to alleged misrepresentations by Appellants in their application for insurance. Underwriters invoked the district court's admiralty jurisdiction pursuant to 28 U.S.C. § 1333 and sought the special admiralty procedures pursuant to Federal Rule of Civil Procedure 9(h). Appellants filed a counter-claim against Underwriters for breach of contract.

In their Answer and Counterclaim, Appellants demanded attorney's fees pursuant to Fla. Stat. § 627.428. The district court struck Appellants' demand for attorney's fees, finding that "[a]ny Florida law awarding attorney's fees to a prevailing party in the absence of bad faith clearly conflicts with federal maritime law and cannot be applied."

After the district court denied Underwriters' summary judgment motion, the Parties agreed to settle Appellants' claim for the full contractual value of Appellants' loss, plus costs and interest. In the settlement agreement, Appellants specifically reserved their right to appeal the district court's order striking their demand for attorney's fees and reserved their right to seek attorney's fees. After the district court entered judgment in favor of Appellants on their counter-claim, the Appellants filed a timely appeal on the issue of attorney's fees.

On appeal, this court faces two questions. First, we must decide whether Fla. Stat. § 627.428 is procedural or substantive law for Erie¹ purposes. If we hold that § 627.428 is substantive law, then we must decide whether a federal court may award attorney's fees pursuant to a state statute in a marine insurance controversy.

II. Standard of Review

This court reviews a district court's application of admiralty law de novo. See Isbrandtsen Marine Serv., Inc. v. M/V Inagua Tania, 93 F.3d 728, 733 (11th Cir.1996).

III. Analysis

A. Is Fla. Stat. § 627.428 Procedural or Substantive Law?

Underwriters contend that Fla. Stat. § 627.428 is procedural law, and thus, a federal court sitting in admiralty cannot apply it.² See Gasperini v. Center for Humanities, Inc., 518 U.S. 415, 427, 116 S.Ct. 2211, 135 L.Ed.2d 659 (1996) ("Under the Erie doctrine, federal courts sitting in diversity apply state substantive law and federal procedural law."). Underwriters correctly notes that this circuit has referred to Fla. Stat. § 627.428 as procedural. See Blasser Bros. v. Northern Pan-American Line, 628 F.2d 376, 386 (5th Cir.1980) ("The applicable statute, however, is a procedural one, and the parties must satisfy the statutory requirements.");³ Fidelity-Phenix Fire Ins. Co. of New York v. Cortez Cigar Co., 92 F.2d 882, 885 (5th Cir.1937) ("This statute is plainly a procedural one limited to the courts of Florida.").⁴ This court, however, has consistently held that "this right to attorneys' fees is applicable in federal courts sitting in Florida."⁵ Blasser Bros., 628 F.2d at 386; see also Steelmet, Inc. v. Caribe Towing Corp., 842 F.2d 1237, 1245 (11th Cir.1988); North Am. Life & Casualty Co. v. Wolter, 593 F.2d 609, 611 (5th Cir.1979); Meeks v. State Farm Mutual Auto. Ins. Co., 460 F.2d 776, 781 (5th Cir.1972); Coblentz v. American Sur. Co. of New York, 421 F.2d 187, 188 (5th Cir.1969). By applying Fla. Stat. § 627.428 in federal court, we have obviously viewed the statute as substantive law for Erie purposes.

Moreover, this court has referred to Fla. Stat. § 627.428 as substantive law for Erie purposes. See Windward Traders, Ltd. v. Fred S. James & Co. of New York, 855 F.2d 814, 817 n. 3 (11th Cir.1988). In Stuyvesant Insurance Co. of New York v. Nardelli, 286 F.2d 600 (5th Cir.1961), our predecessor court cited Orlando Candy Co. v. New Hampshire Fire Insurance Co. of Manchester, 51 F.2d 392 (S.D.Fla.1931), for the proposition that this statute applies to actions brought in federal courts sitting in Florida. See 286 F.2d at 604 n. 11. The district court, in Orlando Candy, reasoned that this "statute imposes a liability for judicially determined delinquency on the part of an insurer in the payment of its obligation. A corresponding right of recovery necessarily arises in favor of the beneficiary. The right thus created in favor of the beneficiary is a substantive right...." See 51 F.2d at 393.

In addition, the Florida state courts have viewed Fla. Stat. § 627.428 as substantive law. See Bitterman v. Bitterman, 714 So.2d 356, 363 (Fla.1998) ("The ability to collect attorney's fees from an opposing party, as well as the obligation to pay such fees, is substantive in nature."); L. Ross, Inc. v. R.W. Roberts Constr. Co., Inc., 481 So.2d 484, 485 (Fla.1986) ("The right to attorney fees is a substantive one...."). As the Fifth District Court of Appeals explained in L. Ross:

Statutes, such as 627.428, Florida Statutes (1983), which create a new right to attorney's fees creates a substantive right in favor of a limited class of potential plaintiffs (insureds) and a substantive burden or obligation upon a limited class of potential defendants (insurers). The right to an attorney's fee is substantive because it gives to a party who did not have that right the legal right to recover substance (money!) from a party who did not theretofore have the legal obligation to render or pay that money. The right is not merely a new or different remedy to enforce an already existing right and is, for that reason, not merely procedural.

See L. Ross, Inc. v. R.W. Roberts Constr. Co., Inc., 466 So.2d 1096, 1098 (Fla.App. 5th Dist.1985). Accordingly, we hold that Fla. Stat. § 627.428 is substantive law for Erie purposes.

B. Are Attorney's Fees Available in Marine Insurance Contract Disputes?

Appellants argue that the district court erred in holding that a federal maritime law existed on the issue of attorney's fees, thereby preempting the application of Fla. Stat. § 627.428. Accordingly, we must resolve whether federal or state law governs.

Federal courts have long considered actions involving marine insurance policies to be within the admiralty jurisdiction of the federal courts and governed by federal maritime law. See Wilburn Boat Co. v. Fireman's Fund Ins. Co., 348 U.S. 310, 321, 75 S.Ct. 368, 99 L.Ed. 337 (1955); New England Mut. Marine Ins. Co. v. Dunham, 78 U.S. (11 Wall.) 1, 33-34, 20 L.Ed. 90 (1870); Morewitz v. West of England Ship Owners Mut. Protection & Indem. Ass'n, 896 F.2d 495, 498-99 (11th Cir.1990); Morrison Grain Co., Inc. v. Utica Mut. Ins. Co., 632 F.2d 424, 428 n. 4 (5th Cir.1980). "But, when neither statutory nor judicially created maritime principles provide an answer to a specific legal question, courts may apply state law provided that the application of state law does not frustrate national interests in having uniformity in admiralty law." Coastal Fuels Mktg., Inc. v. Florida Express Shipping Co., Inc., 207 F.3d 1247, 1251 (11th Cir.2000); see also Offshore Logistics, Inc. v. Tallentire, 477 U.S. 207, 222-23, 106 S.Ct. 2485, 91 L.Ed.2d 174 (1986) ("[T]he extent to which state law may be used to remedy maritime injuries is constrained by a so-called 'reverse-Erie ' doctrine which requires that the substantive remedies afforded by the States conform to governing federal maritime standards."); Steelmet, Inc. v. Caribe Towing Corp., 779 F.2d 1485, 1488 (11th Cir.1986) ("One must identify the state law involved and determine whether there is an admiralty principle with which the state law conflicts, and, if there is no such admiralty principle, consideration must be given to whether such an admiralty rule should be fashioned. If none is to be fashioned, the state rule should be followed."). The parties in this case differ as to whether an applicable maritime principle governs the question at issue.

Underwriters argues that there exists a well-established maritime law prohibiting any award of attorney's fees in an admiralty action absent a contract provision, a federal statute, or bad faith in the litigation process. See Coastal Fuels, 207 F.3d at 1250; Noritake Co., Inc. v. M/V Hellenic Champion, 627 F.2d 724, 730 n. 5 (5th Cir.1980). Because Fla. Stat. § 627.428 allows an insured to collect attorney's fees based solely on whether he prevailed, Underwriters asserts that § 627.428 conflicts with established maritime law.

Appellants agree that, in general, attorney's fees are not recoverable in...