Effective Teleservices, Inc. v. Smith

• Decision Date: 26 February 2014
• Docket Number: Nos. 4D11–2264,4D11–4481.,s. 4D11–2264
• Citation: 132 So.3d 335
• Parties: EFFECTIVE TELESERVICES, INC., and Dilip Barot, Appellants, v. Allerd Charles SMITH, Appellee.
• Court: Florida District Court of Appeals

132 So.3d 335

EFFECTIVE TELESERVICES, INC., and Dilip Barot, Appellants,

v.Allerd Charles SMITH, Appellee.

Nos. 4D11–2264, 4D11–4481.

District Court of Appeal of Florida, Fourth District.

Jan. 29, 2014.

Rehearing Denied Feb. 26, 2014.

Kevin F. Richardson of Clyatt & Richardson, P.A., West Palm Beach, for appellant Effective Teleservices, Inc.

Larry A. Klein of Holland & Knight, LLP, West Palm Beach, and E. Cole Fitzgerald, III, and James Burnham of Fitzgerald, Mayans & Cook, P.A., West Palm Beach, for appellant Dilip Barot.

John Beranek, Robert N. Clarke and Richard Doran of Ausley & McMullen, Tallahassee, and Peter M. Feaman of Peter M. Feaman, P.A., Boynton Beach, for appellee.

MAY, J.

In this consolidated appeal, a company and board chair appeal attorneys' fees and cost judgments resulting from an employment dispute. Discovery violations in the underlying litigation resulted in a default judgment on liability in favor of the employee. A subsequent motion for attorneys' fees and costs resulted in a second and third judgment against the company and board chair. From these attorneys' fees and cost judgments, the company and board chair appeal. They argue the judgments contain multiple errors. We agree in part and reverse.

The employee became the president and chief operating officer of the company. Two agreements contained the terms of his employment: an employment agreement and a business agreement. Two years later, the employee took sick leave to undergo necessary medical treatment, and the company fired him.

The employee filed a complaint against the company, the board chair, and others, who are not parties to this appeal. The relevant claims against the company included: (1) breach of the employment agreement; and (2) violation of the Family Medical Leave Act (FMLA). The relevant claims against the board chair included: (1) breach of the business agreement; (2) breach of fiduciary duty; and (3) fraud in the inducement.

The complaint alleged that the company breached the employment agreement by failing to: provide a sufficient basis for the employee's termination, pay the employee an annual bonus, and compensate the employee for vacations. The FMLA claim alleged that the company wrongfully terminated him, and that the termination was retaliatory in nature. The breach of the business agreement claim against the board chair alleged that he withheld a loan, withheld stock shares, and failed to conduct and disclose the results of an audit. The breach of fiduciary duty claim included similar allegations. The fraud in the inducement claim focused on conduct that occurred before the employee entered into the business agreement.

The trial court struck the company's and board chair's pleadings as a sanction for multiple discovery violations and entered a default judgment on liability. The case proceeded to trial on damages only, which resulted in an award of $1,371,646 against the company for breach of the employment agreement and violation of the FMLA, and $8,700,286 against the board chair for breach of the business agreement, breach of fiduciary duty, and fraud in the inducement. We affirmed. Effective Teleservices, Inc. v. Smith, 79 So.3d 35 (Fla. 4th DCA 2012).

The employee moved to tax attorneys' fees and costs against the company and board chair. The employee's motion sought fees for only three claims: breach of the employment agreement, breach of the business agreement, and violation of the FMLA. The employee maintained that the FMLA and article 5.08 of the employment agreement allowed for recovery of fees against the company. The employee sought fees against the board chair based on article 14.7 of the business agreement. The employee later filed a memorandum arguing that, because the claims were inextricably intertwined, he was entitled to fees against both the company and the board chair for work done on all claims. ¹

During the fee hearing, the employee's counsel acknowledged that only the employment agreement, business agreement, and FMLA claims provided a basis to recover prevailing party attorneys' fees. In spite of this, he admitted that he did not allocate his time among the claims that provided a basis for fees and those that did not. And yet, he admitted spending two-and-a-half hours allocating his time among the various claims after entry of the damages award and his filing of the attorneys' fees motion.

He testified that it was not feasible to keep time records on a count-by-count basis. It was more reasonable to keep them on a “timeline” basis. Even so, he did not do that. He acknowledged that with respect to the claims against the company, the breach of employment agreement claim focused on conduct that occurred in 2005 while the FMLA claim focused on conduct that occurred between June 2004 and May 2005. Regarding the claims against the board chair, the breach of fiduciary duty claim focused on conduct after June 2003, the fraud in the inducement claim centered on conduct before June 2003, and the breach of business agreement claim focused on conduct between June 2003 and May 2005.

The employee's counsel admitted that the business agreement against the board chair was irrelevant to the FMLA or breach of employment agreement claims against the company, that each count sought separate remedies, and that the breaches of the respective agreements were different in nature. He further admitted that the claims against the company were not alternative theories of liability against the board chair, and that a finding of liability on the claims against the company did not dispose of the claims against the board chair.

The employee's fee expert testified that the claims were all inextricably intertwined:

We are dealing with one transaction. You have got the stuff leading up to the contracts, which was the fraud in the inducement, so you had to get into the facts relating to what led the parties to sign these two contracts. Then you have the actual contracts themselves, one being an employment contract, one being a business agreement. And then you have the breach of fiduciary duty, which is kind of the performance of the contract.

The employee's counsel testified that one reason he sought fees against the board chair was because he treated the company as his alter ego.

Both attorneys who represented the employee testified regarding the work performed and the hours billed. Mr. Feaman testified that all of the attorneys worked under his supervision and entered their time contemporaneously. He had personal knowledge of the work performed and the time billed. He reviewed the bills monthly and deleted time he considered excessive.

Mr. Doran testified that the hours billed by another partner were reasonable and most of that work was performed in his presence. He testified that the hours billed and rates charged by an associate were reasonable. He outlined the associate's level of experience and explained the type of work performed. He also testified to the reasonableness of hours billed by a law clerk and paralegal. He edited the bills as necessary, deleting redundant or inexplicable time.

The trial court issued a detailed, seven-page order finding the employee's case arose “out of a common core of operative facts and that the facts are inextricably intertwined between all of the counts of [the] case.” The trial court concluded that the “common core of facts” was “premised on related legal theories arising out of the negotiation, execution and performance of both the employment and business agreements.” The court determined that it was impractical to apportion the time on a claim-by-claim basis. The trial court ordered the defendants jointly and severally liable for $1,446,737.29 in fees.

The trial court further found that the company was the alter ego of the board chair. The trial court issued an amended order and judgment in which it slightly reduced the fee award to $1,434,737.29. The trial court subsequently entered a cost judgment. From these judgments, the defendants appeal.

The company and board chair both argue the trial court erred in finding that the employee's claims were inextricably intertwined. They maintain that the claims were separate and distinct as a matter of law. The employee responds that the trial court properly determined the claims were “related and intertwined,” justifying a joint and several fee award against both the company and the board chair for all claims.

We have de novo review. Anglia Jacs & Co. v. Dubin, 830 So.2d 169, 171 (Fla. 4th DCA 2002).

“ ‘[T]he party seeking fees has the burden to allocate them to the issues for which fees are awardable or to show that the issues were so intertwined that allocation is not feasible.’ ” Chodorow v. Moore, 947 So.2d 577, 579 (Fla. 4th DCA 2007) (quoting Lubkey v. Compuvac Sys., Inc., 857 So.2d 966, 968 (Fla. 2d DCA 2003)).

“Claims are ‘inextricably intertwined’ when a ‘determination of the issues in one action would necessarily be dispositive of the issues raised in the other.’ ” Anglia Jacs & Co., 830 So.2d at 172 (quoting Cuervo v. W. Lake Village II Condo. Ass'n, 709 So.2d 598, 599–600 (Fla. 3d DCA 1998)). Conversely, “claims are separate and distinct when they could support an independent action and are not simply alternative theories of liability for the same wrong.” Avatar Dev. Corp. v. DePani Constr., Inc., 883 So.2d 344, 346 (Fla. 4th DCA 2004).

The trial court relied primarily on Centex–Rooney Construction Co. v. Martin County, 725 So.2d 1255 (Fla. 4th DCA 1999), in deciding that the claims were inextricably intertwined. We find the case distinguishable. In Centex–Rooney, a county sought damages against a construction company, its surety, and other subcontractors for defective construction of a government building. Id. at 1256, 1260. The trial court entered an attorney's fee award against both the company and its surety. Id. at 1257. On appeal, the construction company argued that the fee award was excessive...