Joyce v. Federated Nat'l Ins. Co.

Decision Date19 October 2017
Docket NumberNo. SC16–103,SC16–103
Citation228 So.3d 1122
Parties William JOYCE, et al., Petitioners, v. FEDERATED NATIONAL INSURANCE COMPANY, Respondent.
CourtFlorida Supreme Court

Tracy L. Markham of Avolio & Hanlon, P.C., St. Augustine, Florida; and Raymond T. Elligett, Jr., and Amy S. Farrior of Buell & Elligett, P.A., Tampa, Florida, for Petitioners

Derek J. Angell and Nicholas J. Mari of O'Connor & O'Connor, LLC, Winter Park, Florida; and A. Hinda Klein of Conroy Simberg, P.A., Hollywood, Florida, for Respondent

PARIENTE, J.

The issue in this case is whether trial courts may apply a contingency fee multiplier to an award of attorney's fees to a prevailing party only in "rare" and "exceptional" circumstances, as the Fifth District Court of Appeal held in Federated National Insurance Co. v. Joyce, 179 So.3d 492 (Fla. 5th DCA 2015). Petitioners, the insureds in a successful dispute with their homeowners' insurance carrier, assert that the Fifth District's opinion misapplied our precedent from Florida Patient's Compensation Fund v. Rowe, 472 So.2d 1145 (Fla. 1985), and its progeny. We have jurisdiction. See art. V, § 3(b)(3), Fla. Const.

We agree with Petitioners and conclude that the Fifth District erred by imposing a "rare" and "exceptional" circumstances requirement before a trial court may apply a contingency fee multiplier. We reaffirm our decisions regarding the requirements for the application of a contingency fee multiplier in Rowe, 472 So.2d 1145, Standard Guaranty Insurance Co. v. Quanstrom, 555 So.2d 828 (Fla. 1990), and Bell v. U.S.B. Acquisition Co., 734 So.2d 403 (Fla. 1999). Accordingly, we quash the Fifth District's decision.

FACTS

William and Judith Joyce, an elderly retired couple, filed a claim for insurance benefits with their homeowners' insurance carrier, Federated National Insurance Company ("Federated National"), following water damage to their home. Joyce, 179 So.3d at 493. Federated National denied coverage on the basis of alleged material misrepresentations made by the Joyces in the application process—namely, that the Joyces failed to disclose certain losses they had with their previous carrier. Id. The Joyces hired an attorney on a contingency fee basis because they could not afford an attorney at an hourly rate and filed suit against Federated National alleging that the insurer wrongfully denied their claim. After months of litigation, Federated National finally agreed to settle the claim. The parties stipulated that the Joyces were entitled to recover reasonable attorney's fees. The Joyces' right to recover attorney's fees is derived from section 627.428, Florida Statutes (2014), a fee-shifting statute which authorizes an award of attorney's fees only to an insured and provides, in relevant part:

(1) Upon the rendition of a judgment or decree by any of the courts of this state against an insurer and in favor of any named or omnibus insured or the named beneficiary under a policy or contract executed by the insurer, the trial court or, in the event of an appeal in which the insured or beneficiary prevails, the appellate court shall adjudge or decree against the insurer and in favor of the insured or beneficiary a reasonable sum as fees or compensation for the insured's or beneficiary's attorney prosecuting the suit in which the recovery is had.

At the fee hearing, the trial court heard testimony from the Joyces' attorney and fee expert and Federated National's fee expert. The trial court also examined certain evidence exhibits, including time records for the Joyces' attorney and a copy of the contingency fee agreement. After the hearing, the trial court awarded the Joyces $76,300 in attorney's fees, using a two-step process. First, the court calculated the "lodestar" amount—the number of hours reasonably incurred by the Joyces' attorney, multiplied by a reasonable hourly rate—as being $38,150, or 109 hours reasonably expended at a reasonable hourly rate of $350. In determining the lodestar amount, the trial court noted that it reviewed and considered the factors set forth in Florida Rule of Professional Conduct 4–1.5, in accordance with this Court's decisions in Rowe and Quanstrom.

Second, the trial court applied a contingency fee multiplier of 2.0 to the lodestar amount. In doing so, the trial court analyzed the following factors set forth in Quanstrom for determining whether a contingency fee multiplier is warranted: (1) whether the relevant market requires a contingency fee multiplier to obtain competent counsel; (2) whether the attorney was able to mitigate the risk of nonpayment in any way; and (3) whether any of the factors set forth in Rowe are applicable, especially the amount involved, the results obtained, and the type of fee arrangement between the attorney and his client. See Quanstrom, 555 So.2d at 834.

As to the first Quanstrom factor—the "relevant market"—the trial court relied on testimony from the Joyces' attorney and their fee expert that both were unaware of any other attorneys in St. Johns County who specialized in representing first-party plaintiffs against their respective insurance companies. The trial court also observed that the Joyces' fee expert testified that a contingency fee multiplier was necessary to obtain competent counsel, based on the expert having "interviewed attorneys that accept claims against insurance companies where claims have been denied."

The trial court cited to testimony from the Joyces' attorney that she took the Joyces' case with the "hope and expectation" that, should she be successful, the court would award a contingency fee multiplier when calculating her attorney's fees. She further testified that she would not have taken the case without that possibility because it would not have been economically feasible. Because she often fails to recover some or all of the fees owed on cases, the Joyces' attorney testified that the possibility of a contingency fee multiplier is critical in her decision whether to accept this type of case.

The trial court concluded that "there are few or no other attorneys who undertake this work who have offices in the St. Augustine area," and the Joyces would likely not have found another competent attorney in that area who would have agreed to take the case "without the possibility of a contingency fee multiplier." Likewise, the trial court explained, citing Massie v. Progressive Express Insurance Co., 25 So.3d 584, 585 (Fla. 1st DCA 2009), that use of a multiplier in this case is supported by "[e]xpert testimony that a party would have difficulty securing counsel without the opportunity for a multiplier."

As to the second Quanstrom factor, the trial court found that the Joyces' attorney could not have mitigated the risk of nonpayment. The court relied on testimony from the Joyces' attorney that the Joyces told her they could not pay a retainer, as well as testimony from the Joyces' fee expert that there was no meaningful way to have mitigated the risk of nonpayment in this case.

As to the third Quanstrom factor, the trial court found that the Rowe factors were present, including the amount involved, the results obtained, and the type of fee arrangement. Although the amount involved "was not exceptionally large," it was material to the Joyces and the results favored the Joyces. Also, the trial court observed that "these cases are difficult" and involve "complex" issues, including "policy interpretation, application of exclusion language, agency law, and other issues." Finally, the trial court explained that, based on the testimony, "this was a complex commercial case, with serious consequences to the [Joyces], especially after Federated [National] submitted a proposal for settlement."

The trial court concluded in its order that a multiplier of 2.0 was appropriate because "the likelihood of success at the outset was even at best." The trial court relied on the following language from Quanstrom:

If the trial court determines that success was more likely than not at the outset, it may apply a multiplier of 1 to 1.5; if the trial court determines that the likelihood of success was approximately even at the outset, the trial judge may apply a multiplier of 1.5 to 2.0; and if the trial court determines that success was unlikely at the outset of the case, it may apply a multiplier of 2.0 to 2.5.

555 So.2d at 834.

Federated National appealed both the trial court's calculation of the lodestar amount and its use of the contingency fee multiplier. On appeal, the Fifth District affirmed the lodestar amount but reversed the trial court's use of a contingency fee multiplier, concluding that the federal lodestar approach includes "a ‘strong presumption’ that the lodestar represents the ‘reasonable fee.’ " Joyce, 179 So.3d at 493 (quoting Progressive Express Ins. Co. v. Schultz, 948 So.2d 1027, 1030 (Fla. 5th DCA 2007) ). The Fifth District also quoted State Farm Florida Insurance Co. v. Alvarez, 175 So.3d 352 (Fla. 3d DCA 2015), which cited to the United States Supreme Court case of Perdue v. Kenny A. ex rel. Winn, 559 U.S. 542, 544, 130 S.Ct. 1662, 176 L.Ed.2d 494 (2010), for the proposition that a contingency fee multiplier is to be used only in " ‘rare’ and ‘exceptional’ circumstances." Joyce, 179 So.3d at 494. Lastly, the Fifth District concluded, in contradiction to the trial court that heard the testimony at the evidentiary hearing, that this case was not complex and that the Joyces had no trouble finding an attorney to represent them. Id.

This Court accepted review based on conflict with our precedent regarding the application of contingency fee multipliers.

ANALYSIS

We begin with an analysis of the relevant jurisprudence from this Court and the United States Supreme Court to understand the interplay between our jurisprudence and that of the United States Supreme Court regarding contingency fee multipliers. We then explain why we continue to adhere to our precedent, which does not utilize a "rare" and "exceptional" requirement before a...

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