Florida Business Litigation Update: Prevailing Party Attorneys’ Fees
Contracts are negotiated to establish clear rules to govern the parties’ working relationship, and to cast foreseeability for damages resulting from a breach of these rules. Transactional counsel are paid handsomely to scrupulously scribe the details of the parties’ agreement and to ensure the contract adequately documents the complete understanding of the parties. Typically, contracts today include prevailing party attorneys’ fees provisions. Thus, when the relationship sours, the parties fully appreciate the exposure of paying their own attorneys’ fees as well as their opponent if a lawsuit arising under the contract is unsuccessful.
Enter the trial lawyer and all semblance of clarity transmutes to chaos. A breach of contract claim becomes a multi-count pleading bolstered by theories of tort, statutory violations, and common law. Forgetting the underlying exposure for the breach of contract claim, which holds a predictable calculation, the expectation of attorneys’ fees calculations become rightfully frightening.
The recent case of Effective Teleservices, Inc. v. Smith, 39 Fla.L.Weekly D234a (Fla. 4th DCA January 29, 2014), however, returns the chaos to a blurred clarity. In Smith, the plaintiff sued for breach of contract, statutory violations, and under a sundry of common law theories. Only the contract and statutory theories provided for fee-shifting events. The plaintiff prevailed on all counts and sought his fees. At the fee hearing, the plaintiff failed to differentiate the time spent on the “fee-enabled” claims from the common law claims. Still, over the defendant’s objection, the trial court found that the plaintiff was entitled to all of his fees because the claims were bound by common facts.
Florida’s Fourth District Court of Appeal reversed, holding, “[T]he party seeking fees has the burden to allocate them to the issues for which fees are awardable or to show that the issues were so intertwined that allocation is not feasible.” The Smith Court then explained the concept of “inextricably intertwined”:
Claims are “inextricably intertwined” when a determination of the issues in one action would necessarily be dispositive of the issues raised in the other. Conversely, claims are separate and distinct when they could support an independent action and are not simply alternative theories of liability for the same wrong. … [T]he court must evaluate the relationship between the claims and where the claims involve a common core of facts and are based on related legal theories, a full fee may be awarded. But, where the claims are separate and distinct, fees should be apportioned accordingly. The burden remains on the movant to apportion time attributable to claims for which either contractual or statutory basis for fees exist.
Id. (internal citations omitted). A copy of the Smith decision is available here.
The lessons to be gleaned from Smith are two-fold. First, trial lawyers need to take pains to document their time in such a manner as to enable the differentiation of time expended on each count. Second, transactional lawyers need to be cognizant of the issue and creatively draft language to encompass all “related” causes of action, not merely causes of action for the breach of such agreement, within the prevailing party fee provision. Stated a little differently, there remains a solid, value-added place for lawyers throughout the entire spectrum of the relationship.
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