First Baptist Church of Cape Coral, Fla., Inc. v. Compass Constr., Inc.

• Decision Date: 30 May 2013
• Docket Number: Nos. SC11–1278,SC11–1280.,s. SC11–1278
• Citation: 115 So.3d 978
• Parties: FIRST BAPTIST CHURCH OF CAPE CORAL, FLORIDA, INC., Petitioner, v. COMPASS CONSTRUCTION, INC., Respondent. First Baptist Church of Cape Coral, Florida, Inc., Petitioner, v. Compass Construction, Inc., Respondent.
• Court: Florida Supreme Court

115 So.3d 978

FIRST BAPTIST CHURCH OF CAPE CORAL, FLORIDA, INC., Petitioner,

v.COMPASS CONSTRUCTION, INC., Respondent.

First Baptist Church of Cape Coral, Florida, Inc., Petitioner,

v.Compass Construction, Inc., Respondent.

Nos. SC11–1278, SC11–1280.

Supreme Court of Florida.

May 30, 2013.

W. Gus Belcher of Nuckolls, Johnson & Belcher, P.A., Fort Myers, FL, for Petitioner.

Curtright C. Truitt of Curtright C. Truitt, P.A., Fort Myers, FL, for Respondent.

POLSTON, C.J.

We review the Second District Court of Appeal's decisions in Compass Construction, Inc. v. First Baptist Church of Cape Coral, Florida, Inc., 61 So.3d 1273 (Fla. 2d DCA 2011), and Compass Construction, Inc. v. First Baptist Church of Cape Coral, Florida, Inc., 61 So.3d 497 (Fla. 2d DCA 2011). The Second District certified that its decisions are in direct conflict with the Fourth District Court of Appeal's decision in Wolfe v. Nazaire, 758 So.2d 730 (Fla. 4th DCA 2000)( Wolfe II ), concerning the validity of an alternative fee recovery clause in a fee agreement that uses an hourly rate as the other basis for payment.¹

We hold that such a clause is valid. Accordingly, we quash the Second District's decisions in First Baptist and remand for reinstatement of the judgment awarding attorney's fees. We also approve the Fourth District's decision in Wolfe II to the extent that it recognizes the validity of an alternative fee recovery clause with an hourly-rate alternative.

I. BACKGROUND

The Second District explained the facts of the First Baptist cases as follows:

Compass and First Baptist were both named as defendants in an action arising from a construction accident.[ ²] First Baptist defended the main action and also pursued a cross-claim for contractual indemnity against Compass. Ultimately, First Baptist prevailed against the plaintiff in the main action and on its cross-claim for indemnity.

Compass conceded that First Baptist was entitled to an award of attorney's fees as part of its indemnity claim. However, the parties disagreed about the appropriate hourly rate at which the fee for First Baptist's attorney should be calculated. Compass argued that the fee for First Baptist's attorney must be limited to the hourly rate actually charged and billed to the client. First Baptist contended that its attorney was entitled to a fee calculated on the basis of a substantially higher hourly rate.

First Baptist had insurance coverage for the claim made against it in the main action. The insurance company assigned an attorney to represent First Baptist and provided a defense to the plaintiff's claims. The attorney assigned to the case had a written fee agreement with the insurance company for the defense of personal injury and wrongful death cases brought against the company's insureds, such as First Baptist. In accordance with the agreement, the attorney billed the insurance company for his services at the rate of $170 per hour. The insurance company's obligation to pay the agreed hourly rate was not contingent in any respect.

The agreement contained an additional provision which [provided that “[s]hould anyone other than the [insurance company] be required to pay attorney's fees ... the hourly rate for attorney's fees would be $300.00 ..., or such amount as is determined by the [c]ourt, whichever is higher.”] Such provisions are generally seen in contingency fee agreements. This court has previously described a similar provision as “an alternative fee recovery clause.”

After a hearing, the trial court ruled that First Baptist could recover from Compass “a reasonable fee to be later determined by this [c]ourt even if that amount is greater than the amount [First Baptist's] counsel charged First Baptist Church.” The trial court determined at a later hearing that First Baptist's attorney reasonably and necessarily expended 115.40 hours in the defense of the plaintiff's claims and that a reasonable hourly rate for the services of First Baptist's counsel was $350 per hour. Based on these findings, the trial court entered a final judgment awarding First Baptist attorney's fees in the amount of $40,390.

First Baptist, 61 So.3d at 1274–75 (citations omitted).

On appeal, the Second District reversed the award calculated at the higher rate, holding that “the trial court was limited by the noncontingent fee agreement between First Baptist and its attorney in making the award of fees against Compass.” Id. at 1274 (emphasis added). However, the Second District certified conflict with the Fourth District's decision in Wolfe II, 758 So.2d 730, which concluded that an alternative fee recovery clause that used an hourly rate as the other basis for payment left it “clearly within the trial court's discretion to enter an award in an amount higher than the agreed upon hourly rate set forth in the contract.” Id. at 1277 (quoting Wolfe II, 758 So.2d at 733).³

II. ANALYSIS

First Baptist argues that the Second District erred by reversing the trial court's fee award that, in accordance with the fee agreement's alternative fee recovery clause, required Compass to pay prevailing party reasonable attorney's fees in an amount greater than First Baptist's insurance company owed under the agreement's hourly rate. We agree.⁴

In Florida Patient's Compensation Fund v. Rowe, 472 So.2d 1145, 1151 (Fla.1985), which involved a statutory fee-shifting provision entitling the prevailing party to recover reasonable attorney's fees from the nonprevailing party, this Court approved the federal lodestar method for determining court-awarded fees ⁵ and established the rule that “in no case should the court-awarded fee exceed the fee agreement reached by the attorney and his client.” Later, this Court recognized that Rowe 's prohibition against the court-awarded fee exceeding the fee agreement also applies where fees are awarded pursuant to a contractual fee-shifting provision. See Standard Guar. Ins. Co. v. Quanstrom, 555 So.2d 828, 834 (Fla.1990) (holding that the caps discussed in Rowe are applicable to contract claims); see also Kuhnlein, 662 So.2d at 311 n. 3 (recognizing that “ Rowe and Quanstrom are fee-shifting cases [where] the adverse party is required by statute or contract to pay attorney fees of the prevailing party”).

We have since applied Rowe to cap fees awarded under both contingency and hourly fee agreements. For example, in Miami Children's Hospital v. Tamayo, 529 So.2d 667, 667–68 (Fla.1988), we held that the defendant could not be required to pay the plaintiffs more in prevailing party attorney's fees than the plaintiffs would owe their attorney under their contingency fee contract. Moreover, in Perez–Borroto v. Brea, 544 So.2d 1022, 1023 (Fla.1989), we held that “the principles of Rowe must apply equally to both plaintiff and defendant” and limited the fees awarded to the prevailing defendant under the same statutory fee-shifting provision at issue in Tamayo to the amount the defendant owed his attorney under their hourly fee agreement.

In response to Rowe, attorneys began including in their fee agreements what the Second District in this case calls an “alternative fee recovery clause.” See First Baptist, 61 So.3d at 1275. This clause generally provides for an attorney's fee of the greater of either (i) a specified fee if the fee is paid by the client, or (ii) a court-awarded reasonable fee if the fee is paid by a third-party pursuant to a fee-shifting provision. See id.; see also Wolfe II, 758 So.2d at 732.

Over twenty years ago, we approved the use of an alternative fee recovery clause to require the losing party to pay prevailing party attorney's fees in an amount that exceeded what the prevailing party would have been required to pay her attorney under the contingency-fee clause of her contract. See Kaufman v. MacDonald, 557 So.2d 572, 573 (Fla.1990). In so holding, we reasoned as follows:

[Defendant] argues that as in Tamayo the court-awarded attorney's fee cannot exceed the percentage of recovery prescribed by the contingent fee contract. However, this case differs from Tamayo in that the fee contract provided that the attorney's compensation upon recovery ... would be either a specified percentage of the recovery or the amount awarded by the court under the prevailing party statute—whichever yielded the higher fee. Thus, unlike Tamayo, the court-awarded fee did not exceed the fee agreement reached by [plaintiff] and her attorney.

Id.; see also Fla. Patient's Comp. Fund v. Moxley, 557 So.2d 863, 864 (Fla.1990) (holding that plaintiffs, who entered a contingency fee agreement containing an alternative fee recovery clause similar to that in Kaufman, were entitled to the higher reasonable attorney's fee awarded by the court and that the alternative fee provision kept the award from violating Rowe 's prohibition against recovering an amount exceeding the fee agreement); Wilson v. Wasser, 562 So.2d 339, 340 (Fla.1990) (relying on Kaufman and Moxley to uphold an alternative fee recovery clause that included a contingency fee as the other basis for payment).

Additionally, we have repeatedly recognized that the principles of Rowe and its progeny apply to court-awarded reasonable attorney's fees in fee-shifting cases. See, e.g., Tamayo, 529 So.2d at 668 (holding “that all the factors contained in Rowe apply whenever the lodestar approach applies”); Kuhnlein, 662 So.2d at 311 (recognizing that Rowe 's “lodestar approach ... must be applied in statutory fee-shifting cases”). And, in reviewing court-awarded reasonable attorney's fees, we have held that requiring the losing party to pay an amount exceeding the prevailing party's fee agreement does not violate Rowe 's prohibition against awarding fees in excess of the fee agreement if the agreement contains an alternative fee recovery clause. See Kaufman, 557 So.2d at 573;Moxley, 557 So.2d at 864;see also Wasser, 562 So.2d at 340.

The reasoning we used to uphold alternative fee recovery clauses with contingency fee...