S.-Owners Ins. Co. v. Maronda Homes, Inc. of Fla.

• Decision Date: 25 March 2020
• Docket Number: Case No. 3:18-cv-1305-J-32MCR
• Court: U.S. District Court — Middle District of Florida
• Parties: SOUTHERN-OWNERS INSURANCE COMPANY Plaintiff, v. MARONDA HOMES, INC. OF FLORIDA, JROD PLASTERING LLC, JOSEPH MANALANSAN, and CHAMROEUN MANALANSAN, Defendants.

SOUTHERN-OWNERS INSURANCE COMPANY Plaintiff, v. MARONDA HOMES, INC. OF FLORIDA,

JROD PLASTERING LLC, JOSEPH MANALANSAN,

and CHAMROEUN MANALANSAN, Defendants.

Case No. 3:18-cv-1305-J-32MCR

UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF FLORIDA JACKSONVILLE DIVISION

March 25, 2020

ORDER

Having successfully convinced the Court to dismiss this case because the Court lacked subject matter jurisdiction over a state law claim, Defendants now return seeking attorneys' fees under state law as "prevailing parties." But lacking subject matter jurisdiction over the case, the Court is likewise without subject matter jurisdiction over the attorneys' fees claim. In reaching this conclusion, the Court must respectfully disagree with a non-binding Eleventh Circuit opinion to the contrary.

I. BACKGROUND

Southern-Owners Insurance Company filed a complaint for declaratory relief asking this Court to determine, among other things, whether Southern-Owners had a duty to defend or indemnify its insured, JROD Plastering LLC, and additional insured, Maronda Homes, Inc. of Florida, (collectively "Defendants") against a construction defect claim. (Doc. 1). Southern-Owners alleged diversity jurisdiction; however, the Court dismissed the Complaint without prejudice for lack of subject matter jurisdiction because Southern-Owners failed to satisfy the amount in controversy requirement. (Doc. 52).¹

Based on this dismissal, Maronda and JROD separately moved for attorneys' fees and costs under § 627.428, Florida Statutes,² and Federal Ruleof Civil Procedure 54(d). (Docs. 53, 54). Southern-Owners responded to both motions, (Docs. 57, 58), and Maronda and JROD replied, (Docs. 62, 63). Southern-Owners subsequently filed sur-replies. (Docs. 64, 65).

II. ANALYSIS

Although the parties spend most of their motions arguing whether Defendants are "prevailing parties," this case boils down to whether a federal court has the power to award fees based on state substantive law if it never had diversity jurisdiction over the underlying state claim to begin with. Because the Court finds that it lacks jurisdiction to award fees under § 627.428, it need not address whether Defendants are "prevailing parties" under the statute or the reasonableness of the requested fees.³

A. The Court Lacks Jurisdiction to Award Attorneys' Fees Under State Law

This declaratory judgment action was premised on diversity jurisdiction. (Docs. 1, 51). As the Court is without diversity jurisdiction over the declaratory action, it also lacks jurisdiction over a claim for attorneys' fees under § 627.428. See S.-Owners Ins. Co. v. Tomac of Fla., Inc., 687 F. Supp. 2d 665, 667-68 (S.D. Tex. 2010) ("[I]f this Court lacks jurisdiction to hear claims brought underFlorida or Texas law, it also lacks jurisdiction to entertain a request for fees pursuant to those [state] laws as well. Outside of the exercise of valid diversity jurisdiction, state laws have no bearing upon the authority of federal courts, and therefore cannot bestow fee-shifting power.").

While the Court finds this reasoning persuasive, a panel of the Eleventh Circuit came to the opposite conclusion in an unpublished opinion with facts nearly identical to those here. See Prime Ins. Syndicate, Inc. v. Soil Tech Distribs., Inc., 270 F. App'x 962 (11th Cir. 2008).⁴ In Prime, an insurer brought a declaratory action against its insured based on diversity jurisdiction. Id. at 963. The district court dismissed the complaint for lack of subject matter jurisdiction. Id. Subsequently, the insured moved for attorneys' fees under § 627.428, Florida Statutes. Id. In affirming an award of fees to the insured as the prevailing party, the Eleventh Circuit held that (1) a judgment on the merits is not necessary to trigger § 627.428, (2) a dismissal for lack of subject matter jurisdiction is sufficient to trigger the statute, and (3) despite its inability to adjudicate the merits for want of diversity jurisdiction, the district court retained jurisdiction to award fees under the statute because the fee award is "collateral" to the dismissal. Id. at 964-65.

Understandably, Defendants rely on Prime to support their claims for fees, as have a number of Middle and Southern District of Florida courts in awarding fees. See, e.g., Encompass Floridian Ins. Co. v. Dunn, No. 6:18-cv-228-Orl-41DCI, 2019 WL 2331649, at *1 (M.D. Fla. May 9, 2019) (relying on Prime to award fees under § 627.428 after a dismissal for lack of subject matter jurisdiction); Capitol Specialty Ins. Corp. v. Ortiz, No. 17-23329-Civ-SCOLA/TORRES, 2019 WL 383868, at *4 (S.D. Fla. Jan. 15, 2019) (same); Mid-Continent Cas. Co. v. G.R. Constr. Mgmt., Inc, No. 2:17-cv-55-FtM-38CM, 2018 WL 2945613, at *2 (M.D. Fla. May 25, 2018) (relying on Prime to award fees under § 627.428 after a dismissal for lack of ripeness).

In holding that the district court properly exercised jurisdiction to award fees, Prime recognized that "a district court may not adjudicate the merits of a claim once it has determined that it lacks subject matter jurisdiction . . . ." Prime, 270 F. App'x at 964 (citing Stanley v. CIA, 639 F.2d 1146, 1157 (5th Cir. Mar. 16, 1981)). However, the court reasoned, "that is not what we have here. The court's award of attorney's fees was collateral to the merits of the case and was therefore within the court's jurisdiction, even after the court determined it lacked subject matter jurisdiction over the underlying suit." Id. at 965 (emphasis added).

Respectfully, the Court finds this holding unpersuasive for two reasons. First, Prime's reasoning appears to conflict with published Eleventh Circuitprecedent. Second, the cases Prime relies on are distinguishable from Prime's facts and do not establish a federal court's jurisdiction to award fees based on a state statute in the absence of diversity jurisdiction.

1. Prime's reasoning conflicts with prior Eleventh Circuit precedent.

Key to its determination that the district court retained jurisdiction to award fees under § 627.428 is Prime's assertion that a fee award under that statute is "collateral to the merits of the case." Prime, 270 F. App'x at 965. This appears to contradict the reasoning of Certain British Underwriters at Lloyds of London, England v. Jet Charter Service, Inc., 739 F.2d 534 (11th Cir. 1984), a case which Prime did not discuss.

In Jet Charter, an insurer filed a diversity action against its insured seeking a declaratory judgment. Id. The district court granted the insured's motion for summary judgment, but reserved jurisdiction to award attorneys' fees under § 627.428. Id. The insurer appealed the order and the insured moved to dismiss the appeal on the basis "that the grant of summary judgment without an award of attorney's fees is not a final, appealable order under 28 U.S.C. § 1291." Id. at 535. Thus, the court explored whether such an order is appealable. Id. To aid in its determination, the court applied Florida law to determine whether an award of fees under § 627.428 is collateral, or integral, to the merits. Id. at 536.

The Eleventh Circuit stated that "an award of attorney's fees under Sec. 627.428 is 'an integral part of the merits' and must be part of any final judgment."⁵ Id.; see Phillips v. Certain Underwriters at Lloyd's London, No. 6:04-cv-1430-Orl-DAB, 2005 WL 5926927, at *4 (M.D. Fla. Oct. 21, 2005) ("The Eleventh Circuit [in Jet Charter] has interpreted [§ 627.428], indicating that an award of attorney fees to a prevailing insured upon rendition of a judgment against insurer is not part of the costs and collateral to the main claim but, rather, is an integral part of the merits of the case and part of the plaintiff's damages."); see also Laborers Local 938 Joint Health & Welfare Tr. Fund v. B.R. Starnes Co. of Fla., 827 F.2d 1454, 1458 (11th Cir. 1987) ("Given that the federal court dismissed the case for lack of subject matter jurisdiction and the merits of the state claims have yet to be tried, it would be inappropriate to award fees under [Florida law] at this time.").⁶

In reaching its conclusion, Jet Charter cited a Florida case which held that "attorney's fees recoverable by statute are to be regarded as 'costs' only when made so by statute. Otherwise, they are to be treated as an element of damages." Prudential Ins. Co. of Am. v. Lamm, 218 So. 2d 219, 219 (Fla. 3d DCA 1969) (citing State ex rel. Royal Ins. Co. v. Barrs, 99 So. 668 (Fla. 1924)). According to Jet Charter, Lamm stands for the proposition that if a statute specifies that attorneys' fees should be taxed as costs, then the fees are collateral to the merits; but if the statute mandates that they be incorporated into the final judgment, then the fees are integral to the merits. See Jet Charter, 739 F.2d at 536. By its own terms, fees under § 627.428 are integral to the merits. See § 627.428(3) ("When so awarded, compensation or fees of the attorney shall be included in the judgment or decree rendered in the case.").Subsequent Florida cases provide support for this position. See Spiegel v. Williams, 545 So. 2d 1360, 1362 (Fla. 1989) (agreeing with Lamm); Smith v. Sitomer, 550 So. 2d 461, 462 (Fla. 1989) (agreeing with Spiegel).⁷

Although a number of federal district courts in Florida have found jurisdiction to award fees on similar facts and agreed with Prime that attorneys' fees are, in general, collateral to the merits, all did so in a conclusory manner and did not address the apparent conflict with Jet Charter. See Landmark Equity Fund II, LLC v. Residential Fund 76, LLC, No. 13-20122-CIV-HUNT, 2014 WL 12603175, at *1 (S.D. Fla. May 12, 2014) (awarding fees under a contractual provision); Oliva v. NBTY, Inc., No. 11-80850-CIV-DIMITROULEAS, 2012 WL 12849958, at *5-6 (S.D. Fla. Apr. 26, 2012) (awarding fees under Florida's offer of judgment statute); Nat'l Union Fire Ins. Co. of Pittsburgh v. F. Vicino Drywall, Inc., No. 10-60273-CV-GOLD/McALILEY, 2011 WL 13214289, at *3 (S.D. Fla. Aug. 22, 2011) (awarding fees under § 627.428).

Even...