Lane v. Head

• Decision Date: 28 June 1990
• Docket Number: No. 74183,74183
• Citation: 566 So.2d 508
• Parties: 15 Fla. L. Weekly S370 Paul G. LANE, et al., Petitioners, v. Thomas A. HEAD, et al., Respondents.
• Court: Florida Supreme Court

Page 508

566 So.2d 508

15 Fla. L. Weekly S370

Paul G. LANE, et al., Petitioners, v. Thomas A. HEAD, et al., Respondents.

No. 74183.

Supreme Court of Florida.

June 28, 1990.

Rehearing Denied Oct. 2, 1990.

Bruce Zeidel of Gorman & Zeidel, P.A., North Palm Beach, for petitioners.

Karen A. Gagliano and Jeff M. Brown of Lavalle, Wochna, Raymond & Rutherford, P.A., Boca Raton, for respondents.

Gary Gerrard of Haddad, Josephs & Jack, Coral Gables, amicus curiae for Academy of Florida Trial Lawyers.

KOGAN, Justice.

We have for review Head v. Lane, 541 So.2d 672 (Fla. 4th DCA 1989), based on express and direct conflict with First State Insurance Co. v. General Electric Credit, Auto Lease, Inc., 518 So.2d 927 (Fla. 3d DCA 1987). We have jurisdiction. Art. V, § 3(b)(3), Fla. Const. This case asks us to decide whether a trial court should apply the "lodestar" formula, see Florida Patient's Compensation Fund v. Rowe, 472 So.2d 1145 (Fla.1985), to enhance customary attorney's fees when the client and attorney have agreed to make those fees only partially contingent on the outcome of the case.

In the proceedings that gave rise to this controversy, Paul G. Lane filed a derivative suit on behalf of Pine Creek Development Corporation, in which he was a twenty-five percent shareholder. Defendants were all of the other shareholders. The suit claimed that the majority shareholders had usurped a corporate opportunity involving the purchase of real property. In connection with this action, Lane had agreed to pay his attorney costs plus the greater of $100.00 an hour or twenty-five percent of the amount actually recovered. Undisputed testimony below established that the attorney's customary reasonable fee in cases of this type was $150.00 per hour. This agreement thus constituted a "partial" contingency-fee arrangement, ¹ because the attorney would have received only two-thirds his usual fee had Lane lost the case.

Ultimately Lane obtained a judgment on behalf of the corporation totaling $604,800.00. His attorney then asked the court to tax reasonable attorneys' fees against the losing parties, as provided in section 607.147(5), Florida Statutes (1985). ²

The trial court found that Lane's attorney had expended 278 hours in prosecuting the case and that the attorney's reasonable fee was $150.00 per hour, for a total of $41,700.00. Neither party disputed these figures. The trial court concluded that Lane had only a fifty percent chance of prevailing at the outset of the suit; and it then applied a "multiplier" of two, thereby arriving at a total fee award of $83,400.00 to be taxed against the majority shareholders. ³ The multiplier was based on our decision in Rowe, 472 So.2d at 1151, which had established that a multiplier of two was permissible in a case involving a full contingency arrangement when the party's chances of prevailing were only one in two.

On appeal, the Fourth District held that the use of any multiplier was inappropriate in cases of a partial contingency-fee arrangement. However, the district court acknowledged the contrary holding of the Third District in First State Insurance, 518 So.2d at 928, which had found that a partial contingency-fee arrangement still required the use of a reduced multiplier.

Initially, we reject the contention of respondents that no attorneys' fees should have been awarded in this instance. Respondents rely on the final sentence of section 607.147(5), Florida Statutes (1985), which states:

This subsection [authorizing award of attorney's fees] shall not apply to any judgment rendered for the benefit of injured shareholders only and limited to a recovery of the loss or damage sustained by them.

(Emphasis added.) Respondent argues that the present judgment benefited only Lane and resulted only in a recovery of "losses" incurred by him.

We cannot accept this narrow reading of the statute. The loss in this instance was not personal to Lane, but inhered in the corporation itself. As an individual, he had suffered no "loss or damage." Rather, the improper actions of the majority shareholders had resulted in the loss of an opportunity available to the corporation as a whole. The limitation provided by the last sentence of section 607.147(5) clearly was meant to apply only in those situations in which a judgment is rendered to vindicate the personal rights of shareholders. We believe that if the right vindicated by the suit inheres primarily in the corporation and not shareholders as individuals, then attorneys fees are within the discretion of the trial court. Accordingly, respondents' claim is without merit in this instance.

We now turn to the application of our decision in Rowe to the facts of this case. At the outset, we note that we recently have modified the lodestar formula developed in Rowe. Standard Guaranty Ins. Co. v. Quanstrom, 555 So.2d 828 (Fla.1990). Accord State Farm Fire & Casualty Co. v. Palma, 555 So.2d 836 (Fla.1990); Bankers Life Ins. Co. v. Owens, 554 So.2d 1165 (Fla.1990). However, this modification expressly does not apply to those cases in which the trial court had set attorneys' fees prior to the date of the release of the Quanstrom opinion. Quanstrom, 555 So.2d at 834. Thus, the present case must be analyzed under Rowe as it existed prior to Quanstrom. ⁴ This is true even though this case must be remanded for further proceedings.

We agree with Lane's argument that, under this analysis, the trial court had discretion to apply a multiplier in this instance. The district court's ruling to the contrary therefore will be quashed. One of the purposes of Rowe was to encourage attorneys to take cases under contingency-fee arrangements, thereby making legal services more widely available to those who otherwise could not afford them. As is obvious, some contingency-fee cases will result in a financial loss to the lawyers who handle them. Accordingly, Rowe recognized that attorneys taking contingency-fee cases are entitled to a higher than usual reimbursement in successful contingency-fee cases, which would offset their other losses. The result was the endorsement of the use of a multiplier of no less than one and a half and no more than three, ⁵ depending on the likelihood of success at the outset of the suit. Rowe, 472 So.2d at 1151.

We believe that a multiplier also is within the trial court's discretion in those instances in which the contingency-fee arrangement is only partial. Accord First State Insurance, 518 So.2d at 928. Attorneys should be encouraged to take cases based on a partial contingency-fee arrangement, since this policy also will encourage attorneys to provide services to persons who otherwise could not afford the customary legal fee. No incentive would exist under the approach taken by the district court below, because no "enhancement" of the customary fee would be given to offset losses.

We agree, however, with the Third District in First State Insurance that attorneys taking partially contingent cases are not entitled to the same enhancement of the customary reasonable fee that would have been available if the fee arrangement had been fully contingent. The policy underlying Rowe does not authorize a windfall for lawyers.

Rather, we believe that when a fee arrangement is partially contingent, the court still has discretion to apply the appropriate multipliers mandated either by Rowe or Quanstrom, whichever is applicable. However, the enhancement over and above the customary reasonable fee then should be reduced; and this reduction should be roughly equal to the percentage of the attorney's customary reasonable fee that was guaranteed by the fee arrangement. Thus, if the contingency-fee arrangement guaranteed the attorney two-thirds of his or her customary reasonable fee, then the amount of additional compensation computed using the multipliers should be reduced by two-thirds. ⁶ These computations, however, are subject to all the other conditions of Rowe or, when applicable, Quanstrom.

In the present case, Lane's attorney customarily and reasonably received $150.00 per hour. He expended 278 hours in prosecuting Lane's case, and thus would usually have been entitled to $41,700.00 in fees. Based on the finding that Lane had only a one in two chance of prevailing, the trial court had discretion to multiply this "lodestar" figure by a factor of approximately two, in effect giving Lane's attorney an enhancement of an additional $150.00 per hour. Rowe, 472 So.2d at 1151. Up to this point, the trial court did not err.

However, the trial court abused its discretion by not then reducing the enhancement to correspond to the risk Lane's attorney actually took in this instance. Here, the partial contingency fee arrangement guaranteed the attorney $100.00 per hour, or two-thirds of his customary reasonable fee. ⁷ Accordingly, the additional $150.00 per hour awarded to Lane's attorney as an enhancement should have been reduced by a factor of two-thirds, which would produce a figure of $50.00 per hour. Under this computation, the trial court had presumptive discretion to award an overall fee of $150.00 per hour (the customary reasonable fee) plus $50.00 per hour (the enhancement for a partial contingency-fee arrangement in which the attorney risks losing only one-third of his customary reasonable fee). The total amount thus should have been $200.00 per hour, for a total fee of $55,600.00.

Because of the facts of this case, an additional reduction also was required. The arrangement between Lane and his attorneys specified that the fee would be costs plus the greater of $100.00 per hour or twenty-five percent of the recovery. As we stated in Rowe, in no event may a court tax attorney's fees that exceed the actual fee agreement between the plaintiff and plaintiff's counsel. Rowe, 472 So.2d at 1151. This principle applies even though the present fee arrangement was made prior to Rowe. Miami Children's Hosp. v. Tamayo, 529 So.2d 667, 668 (Fla.1988). ...