Diamond Aircraft Piloting a Change in Floridas Attorneys Fees Law

Jan 14, 2013   

In Florida, in the absence of a written “prevailing party” clause in a contract or another such contractual basis for fees, prevailing civil litigants generally may recover their attorneys fees from non-prevailing parties pursuant to statutory fee provisions, such as the fees provision of the Florida Deceptive and Unfair Trade Practices Act (“FDUTPA”), available here,  and Floridas offer of judgment/demand for judgment statute, available here.

Application of these statutory provisions often triggers complicated legal issues.

For example, a prevailing party in “any civil litigation resulting from an act or practice involving a violation” of the FDUTPA may recover its reasonable fees. Fla. Stat. § 501.2105(1) (emphasis added).  Thus, in civil litigation brought under FDUTPA, where the court ultimately decides that no violation of FDUTPA has resulted, because the substantive law of a different state governs the unfair trade claims, not Florida law, then the prevailing party in the action cannot recover its attorneys fees under FDUTPA, right?

Separately, because Floridas offer of judgment statute governs “any civil action for damages,” i.e., monetary relief, then the statute provides a basis for fees whenever the action involves a request for money damages, right? Fla. Stat. § 768.79(1) (emphasis added).

The answer to the foregoing questions, as with many issues within our legal system, is that it depends.

In Diamond Aircraft Industries, Inc. v. Alan Horowitch, No. SC11-1371 (Fla. January 10, 2013), slip opinion available here, upon certification by the U.S. Court of Appeals for the Eleventh Circuit. the Florida Supreme Court recently clarified these and other important attorneys fees questions with no apparent controlling law.

Diamond Aircraft involved a contract dispute between a resident of the State of Arizona (the plaintiff), who contracted to buy a jet aircraft for $850,000 from Diamond Aircraft Industries, Inc. (the defendant, a Florida corporation for jurisdictional purposes).  Diamond Aircraft failed to deliver the aircraft as contracted but offered to complete the transaction for a new purchase price of more than $1.3 million.  The sales contract contained a forum selection clause designating Florida as the exclusive venue for any disputes under the contract.

The plaintiff filed an action in state court seeking specific performance of the contract and asserting breach of contract and breach of the implied covenants of good faith and fair dealing.  The action was removed to federal court.  After removal, the plaintiff amended his complaint to assert four claims:  (1) specific performance of the contract; and, in the alternative, (2) breach of contract; (3) breach of the implied covenants of good faith and fair dealing; and (4) deceptive trade practices under FDUTPA.

Pursuant to Floridas offer of judgment statute, Diamond Aircraft served a general offer of judgment for $40,000 “to resolve all claims that were or could have been asserted . . . in the Amended Complaint.” Diamond Aircraft (slip op.) at 4 (quoting the offer of judgment at issue).  The plaintiff rejected the offer and the parties subsequently moved for summary judgment.  The trial court applied Florida law to the specific performance claims, as well as the claims for breach of contract and breach of implied covenants, finding in favor of Diamond Aircraft on all three of those claims.  With regard to the remaining deceptive trade practices claim, the court permitted the claim to proceed past summary judgment, but held that Arizona law “ not Florida law “ applied, as most of the business contacts at issue occurred in Arizona.  After a non-jury trial, the federal district court entered judgment in favor of Diamond Aircraft, the defendant.

Diamond Aircraft then moved for its attorneys fees as the prevailing party in litigation pursuant to two separate statutory bases:  (1) its offer of judgment, under Fla. Stat. § 768.79; and (2) the fees provision in FDUTPA, Fla. Stat. § 501.2105.

The district court denied the motion for fees, holding that § 768.79 was inapplicable because the amended complaint contained both an equitable claim for non-monetary relief (specific performance) and, in the alterative, a monetary claim based either on breach of contract, breach of implied covenants, or deceptive trade practices under FDUTPA.  The district court also ruled that Diamond Aircraft was not entitled to fees under FDUTPA, because Arizona law applied to the trade practices claim, but, unlike Florida law, did not contain an applicable statutory attorneys fees provision.

Diamond Aircraft appealed the district courts ruling to the U.S. Eleventh Circuit Court of Appeals. In relevant part, the Eleventh Circuit, whose opinion is available here, concluded that Florida law had not yet squarely addressed certain critical issues in dispute and it thus certified four questions to the Florida Supreme Court, addressed below.

1.      DOES FLA. STAT. § 501.2105 [FDUTPAS FEE PROVISION] ENTITLE A PREVAILING DEFENDANT TO AN ATTORNEYS FEE AWARD IN A CASE IN WHICH A PLAINTIFF BRINGS AN UNFAIR TRADE PRACTICES CLAIM UNDER THE FDUTPA, BUT THE DISTRICT COURT DECIDES THAT THE SUBSTANTIVE LAW OF A DIFFERENT STATE GOVERNS THE UNFAIR TRADE PRACTICES CLAIM, AND THE DEFENDANT ULTIMATELY PREVAILS ON THAT CLAIM?

The Florida Supreme Court in Diamond Aircraft answered this question in the affirmative, holding that the plaintiff invoked FDUTPA by filing the action, even though Florida law ultimately was held not to apply.

Among other reasons supporting its holding, the Florida Supreme Court noted the “well-established” rule that, because a statute awarding attorneys fees is in “derogation” of the common law rule (or the so-called “American Rule”) that each party must pay its own attorneys fees, the statute must be “strictly construed.” Id. (slip op.) at 7 (citation omitted).  For general background regarding the “American Rule,” see here[http://www.justice.gov/usao/eousa/foia_reading_room/usam/title4/civ00220.htm].  In contrast to the American Rule, the so-called “English Rule” for fees provides that a losing party pays the prevailing partys attorneys fees irrespective of any contractual or statutory basis for fees.  The Supreme Court also cited to various authorities, including the plain language of FDUTPA, a legislative summary of the statute, and Florida appellate decisions from the Third District Court of Appeal and the Fourth District Court of Appeal, for its conclusion that FDUTPAs attorneys fee provision applies to claims initially asserted “under” FDUTPA, even upon a subsequent determination that FDUTPA does not apply to those claims. Id. (slip op.) at 10 (citing, among other authority, Rustic Village, Inc. v. Friedman, 417 So. 2d 305 (Fla. 3d DCA 1982) and Brown v. Gardens by the Sea South Condo. Assn, 424 So. 2d 181 (Fla. 4th DCA 1983)).

The Florida Supreme Court specifically held in Diamond Aircraft that, “[b]y invoking FDUTPA and seeking redress under its remedial provisions, [the plaintiff] exposed himself to both the benefits and the possible consequences of that act’s provisions,” even if the application of the law of another jurisdiction ultimately negated the FDUTPA claim. Id. (slip op.) at 11. The court added that, “simply because FDUTPA is ultimately held to have no application and does not provide a plaintiff with a basis for recovery after the provisions of the act have been invoked does not negate a defendants status as a prevailing party in an action filed by a plaintiff under that act.” Id. (slip op.) at 12 (original emphasis) (citing Brown and Rustic Village).  In other words, a plaintiff “cannot assert and invoke the protections of [FDUTPA] by filing a legal action under its provisions, but then rely on the acts ultimate inapplicability as a shield against the application of the acts attorney’s fees provision.” Id. (slip op.) at 13.

2.      IF FLA. STAT. § 501.2105 [FDUTPAS FEE PROVISION] APPLIES UNDER THE CIRCUMSTANCES DESCRIBED IN THE PREVIOUS QUESTION, DOES IT APPLY ONLY TO THE PERIOD OF LITIGATION UP TO THE POINT THAT THE DISTRICT COURT HELD THAT THE PLAINTIFF COULD NOT PURSUE THE FDUTPA CLAIM BECAUSE FLORIDA LAW DID NOT APPLY TO HIS UNFAIR TRADE PRACTICES CLAIM, OR DOES IT APPLY TO THE ENTIRETY OF THE LITIGATION?

Having concluded that FDUTPAs fee provision did apply under the circumstances described in the previous certified question, the Florida Supreme Court concluded next that a prevailing defendant is entitled to fees only for the period of litigation until a court finds that FDUTPA does not apply to the plaintiffs claim.  Such conclusion, as clarified in Diamond Aircraft, was consistent with the decisions of other Florida appellate courts that had interpreted FDUTPA and excluded from any FDUTPA fee award those parts of an action clearly unrelated to or beyond the scope of a FDUTPA violation. Id. (slip op.) at 15-16 (citation omitted).

3.      DOES FLA. STAT. § 768.79 [FLORIDAS OFFER OF JUDGMENT STATUTE] APPLY TO CASES THAT SEEK EQUITABLE RELIEF IN THE ALTERNATIVE TO MONEY DAMAGES; AND, EVEN IF IT DOES NOT GENERALLY APPLY TO SUCH CASES, IS THERE ANY EXCEPTION FOR CIRCUMSTANCES IN WHICH THE CLAIM FOR EQUITABLE RELIEF IS SERIOUSLY LACKING IN MERIT?

The Florida Supreme Court answered both these questions in the negative.

As a threshold matter, the Diamond Aircraft court confirmed that Floridas offer of judgment statute applied in the case, because “there was no conflict of law problem, as the choice-of-law provision required the application of Florida law,” and the trial court in fact had applied the substantive law of Florida to the majority of the plaintiffs claims. Id. (slip op.) at 18.

As to the specific questions presented, the Florida Supreme Court first concluded as a general rule that Floridas offer of judgment statute does not apply to cases in which a plaintiff seeks both equitable and monetary relief and in which the defendant has served a general offer of judgment that seeks a release of all claims. Id. (slip op.) at 24-25.  It also concluded that the statute does not provide an exception to this rule for equitable claims that lack “serious merit,” or for equitable claims that are pleaded in the alternative, as “an equitable claim in the alternative to a monetary claim is still part of the same civil action.” Id. (slip op.) at 26.

In reaching those conclusions, the Florida Supreme Court left unresolved the question of whether a party could utilize the offer of judgment statute in an action involving mixed claims for monetary and non-monetary relief, where the opposing party served an offer directed specifically to the monetary claim only “ as opposed to a general offer directed to all the claims.

4.      UNDER FLA. STAT. § 768.79 [FLORIDAS OFFER OF JUDGMENT STATUTE] AND RULE 1.442 [OF THE FLORIDA RULES OF CIVIL PROCEDURE], IS A DEFENDANTS OFFER OF JUDGMENT VALID IF, IN A CASE IN WHICH THE PLAINTIFF DEMANDS ATTORNEYS FEES, THE OFFER PURPORTS TO SATISFY ALL CLAIMS BUT FAILS TO SPECIFY WHETHER ATTORNEYS FEES ARE INCLUDED AND FAILS TO SPECIFY WHETHER ATTORNEYS FEES ARE PART OF THE LEGAL CLAIM?

The Florida Supreme Court answered this question in the negative.  As noted in Diamond Aircraft, Florida Rule of Civil Procedure 1.442 implements the offer of judgment statute, and rule 1.442 was amended in 1996 to require greater detail in an offer of settlement under the statute.  Thus, as the Florida Supreme Court found in Diamond Aircraft, the procedural rule and the statute both must be strictly construed.  Because the offer of judgment at issue in Diamond Aircraft did not state whether the offer included attorneys fees, as expressly required by rule 1.442, the court found that “the offer would have been invalid and unenforceable,” even if the statute applied. Id.(slip op.) at 32.  The court also distinguished earlier cases that had been decided prior to 1996, involving the less stringent rule 1.442 prior to its amendment.

In sum, as shown in Diamond Aircraft, fee disputes after a resolution on the merits can lead to significant additional litigation between the parties.

The Florida Supreme Courts recent decision in Diamond Aircraft implicates key strategic decisions at all stages of litigation, including, for plaintiffs, whether or not to bring deceptive trade practices claims under FDUTPA, as doing so now exposes those plaintiffs to attorneys fees under Fla. Stat. § 501.2105 if the trade claims fail, especially in actions involving choice-of-law issues; and, for both plaintiffs and defendants, the manner in which demands for judgment and offers of judgment, respectively, are made under Fla. Stat. § 768.79.

Diamond Aircraft also leaves open the possibility that the Florida legislature might amend Floridas attorneys fees statutes, an issue we will continue to monitor.

The attorneys at Fuerst Ittleman David & Joseph have extensive experience in all areas of complex civil and criminal litigation, including international and domestic business disputes and trade cases.  Please contact us by email at contact@fidjlaw.com or telephone at 305.350.5690 with any questions.