Tag Archives: attorneys’ fees

THERE DOES NOT HAVE TO BE A PREVAILING PARTY FOR PURPOSES OF ATTORNEY’S FEES IN CONSTRUCTION LIEN DISPUTE

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Just because you are suing to foreclose your construction lien does NOT mean you will automatically recover your attorney’s fees as the prevailing party.   There does NOT have to be a prevailing party for purposes of recovering attorney’s fees.  This means a court or arbitrator could rule that neither party was the prevailing party for purposes of attorney’s fees; thus, neither party can recover their attorney’s fees from the other (or presumed losing) party.  This is an important consideration because it is impossible to predict on the frontend whether a court or arbitrator will deem you the prevailing party for purposes of recovering your attorney’s fees. This is because a court or arbitrator is to employ the significant issues test to determine which party prevailed on the significant issues to be deemed the prevailing party; and, again, a court or arbitrator could find neither party prevailed on the significant issues, hence there is no prevailing party.

 

This issue was clarified the hard way in Wells v. Halmac Development, Inc., 41 Fla.L.Weekly D924a (Fla. 3d DCA 2016) when an arbitrator ruled that neither party was the prevailing party for purposes of awarding attorney’s fees.  (Check here for a history of this dispute.) The attorney’s fees incurred in the arbitration were probably significant so a party believed it should have been declared the prevailing party for purposes of attorney’s fees and continued to fight this issue in court when the arbitration award was trying to be confirmed and enforced.  The fight turned acrimonious–there were motions for sanctions served and two appeals. 

 

Of applicability here, one of the appeals dealt with whether the trial court should have granted attorney’s fees pursuant to a motion for sanctions due to the opposing party continuing to try to declare itself as the prevailing party after (a) the arbitrator determined there would be no prevailing party and (b) the arbitrator’s determination corresponded with the law.  The Third District held that the motion for sanctions should have been granted awarding the party attorney’s fees because the continuous fight to be declared the prevailing party was not colorable under the law—the law was clear that there did NOT have to be a prevailing party for purposes of attorney’s fees in a construction lien action.  On this point, the Third District stated:

 

In fact, at the time Castro filed his motion requesting the trial court to declare him the prevailing party, the Florida Supreme Court had already weighed in on this issue and had explicitly “reject[ed] the notion that in every construction lien case the trial court is compelled to find a prevailing party.” Trytek, 3 So. 3d at 1204 n. 13. The Trytek court further emphasized that there might not always be a “prevailing party” in these types of suits and held that “the possibility that neither party is a ‘prevailing party’ is consistent with an application of the ‘significant issues’ test of Moritz and .” Id. at 1203. Most notably for our analysis, Trytek made it clear that Hollub and similar cases should not be read to mean that a prevailing party must be declared in a construction lien action:

We do not construe any of the appellate cases concerning prevailing party attorneys’ fees to mandate that there be a prevailing party, only that where a “prevailing party” is determined, the entitlement to attorneys’ fees is mandatory. See Pennington & Assocs., Inc. v. Evans, 932 So.2d 1253, 1254 (Fla. 5th DCA 2006); Hollub Constr. Co. v. Narula, 704 So.2d 689, 690 (Fla. 3d DCA 1997); Grant v. Wester, 679 So.2d 1301, 1308 (Fla. 1st DCA 1996); Sanfilippo v. Larry Giacin Tile Co., 390 So.2d 413, 414 (Fla. 4th DCA 1980). We reject the notion that in every construction lien case the trial court is compelled to find a prevailing party. See Kenmark Constr., Inc. v. Cronin, 765 So.2d 129 (Fla. 2d DCA 2000) (declining to announce a bright-line rule that a trial court must find a prevailing party in every construction lien action).

Id. at 1204 n. 13.

The Trytek decision — issued in 2009 — represented the settled law in Florida well before the arbitration proceedings in this case, and the arbitrator specifically relied upon and cited to Trytek in its determination that “there is no prevailing party for the purposes of an award of attorney’s fees.” Therefore, Castro’s counsel knew or should have known that any claim that Castro was entitled to be declared the prevailing party, after the arbitrator clearly determined there was no prevailing party, “[w]ould not be supported by the application of then-existing law to those material facts.” § 57.105(1)(b), Fla. Stat. (2012). This court has already and necessarily made this very determination when we held (in the prior appeal) that the trial court had no legal basis upon which to overturn the arbitrator’s determination (that there was no prevailing party) and to declare that Castro was the prevailing party.

Wells, supra. 

 

If you extract anything from this case, it is that a court or arbitrator does NOT have to deem a party the prevailing party in a construction lien case. The court or arbitrator will do this by finding that neither party prevailed on the significant issues of the case (as determined by the court or arbitrator).  As such, neither party is the prevailing party and neither party is entitled to attorney’s fees from the opposing party.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

 

QUICK NOTE: CGL INSURER LIABLE FOR ATTORNEY’S FEES IF IT UNJUSTIFIABLY REFUSED TO PROVIDE YOU DEFENSE

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If your CGL (or liability) insurer unjustifiably refuses to provide you a defense in a lawsuit, the insurer is liable for the reasonable attorney’s fees and costs you incur in defending that lawsuit.  The operative word is “unjustifiably.”  For instance, if you get sued and your CGL insurer refuses to provide you a defense and you retain private counsel to defend you, the CGL insurer will be liable for your attorney’s fees and costs if it should have provided you a duty defend in connection with that suit.  Of course, on the other hand, if the CGL insurer justifiably refused to defend you (based on the allegations in the lawsuit / claim and coverage under the policy) then it will not be liable for your reasonable attorney’s fees and costs.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

CGL INSURER LIABLE FOR ATTORNEY’S FEES JUDGMENT AGAINST INSURED

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Commercial general liability (CGL) policies contain a section called “Supplementary Payments – Coverages A and B.”   This section states in relevant part:

 

1.  We [insurer] will pay, with respect to any claim we investigate or settle, or any “suit” against an insured we defend:

            e.  All costs taxed against the insured in the “suit.”

 

In the recent decision, Mid-Continent Casualty Co. v. Treace, 41 Fla. L. Weekly D60c (Fla. 5th DCA 2015), an owner obtained a judgment against its contractor in a construction defect case.  The court then entered a judgment for attorney’s fees and costs in favor of the owner.  The owner then initiated a proceeding against the contractor’s CGL insurer to recover the judgments.  The trial court refused to allow the owner to recover its attorney’s fees against the insurer and the owner appealed.  On appeal, the Fifth District examined the above language in the contractor’s CGL policy that said the insurer would pay for “[a]ll costs taxed against the insured in the ‘suit.’”   In examining this language, the court found that the language “‘all court costs’ could be read to include attorney’s fees, especially since there was no definition of that term in the policy…[T]he insurer did not, but could have, defined ‘court costs’ to specifically exclude attorney’s fees.”  Treace, supra.    For this reason, the court held that the attorney’s fees judgment was recoverable by the owner against the contractor’s CGL insurer.

 

This case provides a strong argument for a claimant that recovers a judgment against an insured in a construction defect lawsuit that includes attorney’s fees that attorney’s fees are recoverable under the insured’s CGL policy. 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

ATTORNEY’S FEES AGAINST COMMON LAW PAYMENT BONDS

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On sophisticated construction projects (federal, Florida public, or Florida private projects), it is not uncommon for a prime (general) contractor to require that certain subcontractors furnish the prime contractor a payment bond.  When the subcontractor furnishes the prime contractor a payment bond, this bond is a common law bond because it is not a bond furnished in accordance with a statutory requirement.  Unlike a statutory payment bond (whether furnished per the Miller Act, Florida Statute s. 255.05, Florida Statute s. 713.23, or Florida Statute s. 337.18) there are no statutory prerequisites in order for a claimant to preserve rights under the common law payment bond.

 

For instance, if the subcontractor that furnished a payment bond has an unpaid subcontractor or supplier, these entities can pursue claims directly against the subcontractor’s payment bond instead of the prime contractor’s (statutory) payment bond. Thus, if the subcontractor’s unpaid subcontractors or suppliers failed to preserve their rights against the prime contractor’s (statutory) payment bond, they can still pursue rights against the subcontractor’s common law payment bond.

 

In USA f/u/b/o Vulcan Materials v. Volpe Const., 622 F.2d 880 (5th Cir. 1980), an earthwork subcontractor furnished a payment bond on a federal project (where the prime contractor would have furnished a Miller Act payment bond).  The subcontractor had an unpaid supplier of fill.  Amongst other claims, the supplier sued the earthworks subcontractor’s payment bond.  The Fifth Circuit found that not only was this payment bond a common law bond, but the supplier (bond claimant) was entitled to attorney’s fees pursuant to Florida Statute s. 627.756.

 

Florida Statute s. 627.756 provides:

 

(1) Section 627.428 (entitlement to attorney’s fees) applies to suits brought by owners, subcontractors, laborers, and materialmen against a surety insurer under payment or performance bonds written by the insurer under the laws of this state to indemnify against pecuniary loss by breach of a building or construction contract. Owners, subcontractors, laborers, and materialmen shall be deemed to be insureds or beneficiaries for the purposes of this section.

 

Thus, even if the bond is a common law payment bond, an unpaid claimant can still recover their attorney’s fees.  Thus, the unpaid claimant gets the benefit of not having to comply with statutory prerequisites to preserve rights under the prime contractor’s payment bond and the recovery of attorney’s fees against a common law payment bond.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

FEDERAL GOVERNMENT CONTRACTING AND RECOVERY OF ATTORNEY’S FEES UNDER THE EQUAL ACCESS TO JUSTICE ACT (“EAJA”)

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The ability to recover attorney’s fees against the federal government is a consideration before initiating a dispute against the government, whether in federal court or in an administrative proceeding.

 

The Equal Access to Justice Act (referred to as the “EAJA”) authorizes a court to award reasonable attorney’s fees and costs to a prevailing, eligible contractor in an action brought by or against the United States.  28 U.S.C. s. 2412(d)(1)(a).  The purpose of the EAJA has been explained as follows:

 

“The purpose of the EAJA is to eliminate legal expenses as a barrier to challenges of unreasonable government action. Accordingly, the EAJA authorizes this court to award attorney fees and expenses incurred by contractors who prevail in litigation against the government provided the contractors do not exceed certain size and net worth limitations. The government may escape liability for legal expenses if its actions were substantially justified or if special circumstances make the award unjust.  The burden is on the government to present a substantial justification for its actions.”

Community Heating & Plumbing Co., Inc. v. Garrett, 2 F.3d 1143, 1145 (Fed.Cir. 1993) (internal citations and quotations omitted)

 

First, the contractor needs to be eligible to recover fees under the EAJA.  Not every contractor is eligible.  Such eligible contractors are defined by the EAJA as:

 

“(i) an individual whose net worth did not exceed $2,000,000 at the time the civil action was filed, or (ii) any owner of an unincorporated business, or any partnership, corporation, association, unit of local government, or organization, the net worth of which did not exceed $7,000,000 at the time the civil action was filed, and which had not more than 500 employees at the time the civil action was filed….”

28 U.S.C. 2412 (d)(2)(B)

 

Second, the contractor needs to be the prevailing party.  A prevailing contractor under the EAJA is a contractor that recovers a judgment on the merits in its favor.  Ulysses, Inc. v. U.S., 117 Fed.Cl. 772, 777 (Fed.Cl. 2014).   The government however, can avoid the award of fees against it if it proves it was substantially justified in advancing its position.  Substantial justification is a subjective standard determined on a case-by-case basis:

 

“In determining whether to award attorney’s fees under EAJA, the Court looks to whether the Government’s position prior to and throughout litigation had a reasonable basis in both law and fact. While the appropriateness of the Government’s position might vary on individual matters, the Court considers the totality of circumstances to determine whether that position was substantially justified. In the words of the United States Supreme Court, ‘While the parties’ postures on individual matters may be more or less justified, the EAJA … favors treating a case as an inclusive whole, rather than as atomized line-items.’”

Ulysses, 117 Fed.Cl. at 778 (internal quotations and citations omitted). 

 

Stated more simplistically, the government must prove that it advanced a position “justified to a degree that could satisfy a reasonable person.”  BCPeabody Construction Services, Inc. v. U.S., 117 Fed.Cl. 408, 413 (Fed.Cl. 2014) (internal quotation and citation omitted).

 

And third, even if the contractor is eligible to recover attorney’s fees under the EAJA and prevails against the government, this does NOT mean that it will recover 100% of the fees it incurred in the action.  The EAJA provides a statutory cap of $125/hour for attorney’s fees time unless the “court determines that an increase in the cost of living or a special factor, such as the limited availability of qualified attorneys or the proceedings involved, justifies a higher fee.” 28 U.S.C. s. 2412(d)(2)(A).  Unfortunately, exceeding this hourly cap has nothing to do with the novelty of the issues, the competence of the attorney, or the results obtained.  BCPeadbody Construction Services, 117 Fed.Cl. at 415. This means that contractors should not bank on exceeding the statutory cap in recovering attorney’s fees against the government.

 

Importantly, there is also a relevant EAJA for administrative proceedings initiated prior to or instead of  any civil action in court.   5 U.S.C. s. 504.  This administrative EAJA largely mirrors the EAJA discussed above for civil actions, but applies to administrative proceedings. See Melkonyan v. Sullivan, 501 U.S. 89 (1991).

 

Before proceeding with a dispute against the federal government in federal court or an administrative proceeding, consider whether you have a basis under the EAJA to recover attorney’s fees.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

A SUPPLIER AND SUBCONTRACTOR’S PURSUIT OF ATTORNEY’S FEES IN MILLER ACT PAYMENT BOND ACTION

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While the Miller Act does not provide a statutory basis for the recovery of attorney’s fees, this does not mean that attorney’s fees cannot be recovered in a Miller Act payment bond action against the surety and prime contractor.  If the underlying contract between the claimant and its customer provides for the recovery of attorney’s fees, this can support a basis to recover attorney’s fees against the surety and prime contractor in a Miller Act payment bond action.

 

The Eleventh Circuit in U.S. f/u/b/o Southeastern Municipal Supply Co., Inc. v. National Union Fire Ins. Co. of Pittsburg, 876 F.2d 92 (11th Cir. 1989), held that a subcontractor’s supplier could recover attorney’s fees against the Miller Act surety based on a contractual provision between the supplier and the subcontractor. Other federal circuits have found similarly.  See GE Supply v. C&G Enterprises, Inc., 212 F.3d 14 (1st Cir. 2000) (supplier to prime contractor entitled to recover attorney’s fees based on attorney’s fees provision included in invoices sent to contractor with each delivery); U.S. f/u/b/o Maddux Supply Co. v. St. Paul Fire & Marine Ins. Co., 86 F.3d 332 (4th Cir. 1996) (surety liable to supplier for attorney’s fees and interest based on subcontractor’s credit application with supplier); U.S. f/u/b/o Carter Equipment Co., Inc. v. H.R. Morgan, Inc., 554 F.2d 164 (5th Cir. 1977) (finding that equipment rental supplier to subcontractor could recover attorney’s fees against surety based on contractual provision between supplier and subcontractor).

 

In pursuing a Miller Act action, it is good practice to look at the underlying contract, purchase order, or documentation forming the agreement to determine if there is a contractual basis to recover attorney’s fees.  If there is, this basis should be specifically pled in the complaint against the Miller Act surety (as well as the prime contractor as the principal of the bond) to support a basis to recover attorney’s fees.  This contractual basis should not be overlooked.  In addition, suppliers and subcontractors on federal projects may want to ensure that such a contractual basis is included in their respective agreements in the event that a Miller Act action needs to be pursued.  While suppliers will typically have a contractual provision in their agreement with their customer that allows them to recover attorney’s fees in collection efforts, there are circumstances where a prime contractor may not want to include an attorney’s fees provision in its subcontract.  One reason for this may be because the prime contractor does not want to give the subcontractor a basis to recover attorney’s fees in a Miller Act action.  Although this may not help the prime contractor in a lawsuit initiated by the subcontractor’s supplier (where there is a contractual provision for attorney’s fees between the supplier and subcontractor), the lack of a contractual basis could force a subcontractor to consider how it wants to proceed knowing it does not have a basis to recover attorney’s fees in its Miller Act action.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

ATTORNEY’S FEES UNDER (A) FLORIDA’S DECEPTIVE AND UNFAIR TRADE PRACTICES ACT AND (B) OFFERS OF JUDGMENT

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In Florida, a party can recover attorney’s fees if it has a contractual or statutory basis. If a party has neither a contractual or statutory basis to recover attorney’s fees, another vehicle is to serve an Offer of Judgment (also known as a Proposal for Settlement).  Whether there is an argument to recover attorney’s fees is an important consideration.

 

A. Attorney’s Fees Under The Florida Deceptive and Unfair Trade Practices Act

 

The Florida Deceptive and Unfair Trade Practices Act (“FDUTPA”) is a consumer-protection related law designed to allow parties to sue other parties for deceptive and unfair trade or business practices. FDUTPA is discussed in more detail in https://floridaconstru.wpengine.com/actual-damages-under-floridas-deceptive-and-unfair-trade-practices-act/. There are certain circumstances when asserting a FDUTPA claim is worthwhile and should be explored such as when a party is looking for a statutory basis to recover attorney’s fees.

 

FDUTPA contains a statutory basis to recover attorney’s fees. Section 501.2105 of FDUTPA provides in relevant part:

 

 “(1) In any civil litigation resulting from an act or practice involving a violation of this part, except as provided in subsection (5), the prevailing party, after judgment in the trial court and exhaustion of all appeals, if any, may receive his or her reasonable attorney’s fees and costs from the nonprevailing party.”

 

 

The reason the word “may” is highlighted is because this is permissive, not mandatory, language. In other words, it is not automatic or mandatory that attorney’s have to be awarded to the prevailing party, but they could (i.e., may) be awarded. This is an important distinction. However, recently, Florida decisions have indicated that attorney fees should be mandatorily awarded to the prevailing party in a FDUTPA action.

 

Recently, in Bull Motors, LLC v. Alicia Borders, 39 Fla. L. Weekly D28a (Fla. 3d DCA 2013), the Third District stated:

 

“FDUTPA’s attorneys’ fees provision recognizes the policy of protecting consumers from unfair and deceptive trade practices and the need to attract private attorneys to take such cases by assuring them of a legal fee proportionate to their effects if their clients prevail. Such an award requires that the client prevail by recovering a judgment and, if there are counterclaims, by recovering a net judgment in the entire case. There is no express requirement of proportionality between the amount of the FDUTPA judgment and the attorney’s fees and costs incurred in obtaining the judgment.”

Bull Motors, supra (internal quotations omitted).

 

 

Bull Motors relied on the Florida Supreme Court’s decision in Diamond Aircraft Indus., Inc. v. Horowitch, 107 So.3d 362 (Fla. 2013).  In Diamond Aircraft, a plaintiff asserted a FDUTPA claim against a defendant. However, it was determined that FDUTPA did not apply because Arizona law, not Florida law, governed the case. Thus, the defendant prevailed under the plaintiff’s FDUTPA claim. A question certified to the Florida Supreme Court to answer was whether FDUTPA entitled a prevailing party to attorney’s fees if the court determines that FDUTPA does not apply to the case because the substantive law of another state (in this case, Arizona) applied. The Court stated that it did (or answered the question in the affirmative) holding that by a plaintiff asserting a FDUTPA claim, it exposes itself to both the benefits and potential consequences of the statute. Further, the Court expressed: “Under FDUTPA, a prevailing party is entitled to reasonable attorney’s fees and costs in civil litigation arising from a violation of that act ‘after judgment in the trial court and exhaustion of all appeals.’” Diamond Aircraft, supra, at 370 quoting Fla.Stat. s. 501.2105.

 

Hence, even though the statute contains permissive language, there is strong legal authority that would mandatorily entitle a prevailing party to recover attorney’s fees. This cuts both ways. This means that a plaintiff could expose itself to attorney’s fees by improperly asserting a FDUTPA claim without facts to support a deceptive or unfair trade practice or without evidence to support actual damages as provided under the statute.  Plaintiffs need to be cognizant of this before asserting a FDUTPA claim.

 

B. Attorney’s Fees By Serving Offers of Judgment

 

 

 

Moreover, Bull Motors discussed the vehicle to create an argument for the recoverability of attorney’s fees known as offers of judgment or proposals for settlement (“Offer of Judgment”). The Offer for Judgment statute in Florida Statute 768.79 provides in material portion:

 

“In any civil action for damages filed in the courts of this state, if a defendant files an offer of judgment which is not accepted by the plaintiff within 30 days, the defendant shall be entitled to recover reasonable costs and attorney’s fees incurred by her or him or on the defendant’s behalf pursuant to a policy of liability insurance or other contract from the date of filing of the offer if the judgment is one of no liability or the judgment obtained by the plaintiff is at least 25 percent less than such offer….If a plaintiff files a demand for judgment which is not accepted by the defendant within 30 days and the plaintiff recovers a judgment in an amount at least 25 percent greater than the offer, she or he shall be entitled to recover reasonable costs and attorney’s fees incurred from the date of the filing of the demand.”

 

 

In a nutshell, a defendant can recover its attorney’s fees if it serves an Offer of Judgment and the plaintiff gets a $0 judgment against the defendant or the plaintiff gets a judgment of at least 25% less than the offer. For example, and using simple math, let’s say the defendant serves an Offer of Judgment for $100,000 and the plaintiff obtains a net judgment against the defendant for $50,000. In this situation, the defendant could be entitled to its attorney’s fees from the date of the Offer of Judgment and forward since the plaintiff obtained a judgment of at least 25% less than its $100,000 Offer.

 

And, if a plaintiff serves an Offer of Judgment, it can recover its attorney’s fees if gets a net judgment of at least 25% greater than the Offer. Let’s say the plaintiff serves a $100,000 Offer of Judgment and recovers a net judgment against the defendant for $150,000. In this situation, the plaintiff could be entitled to its attorney’s fees from the date of the Offer of Judgment and forward since the plaintiff obtained a judgment of at least 25% greater than its $100,000 Offer.

 

However, serving Offers of Judgment are not sure-things under Florida law that will guarantee a party to attorney’s fees even if the math (shown above) works. There are numerous Florida decisions that find defects in Offers of Judgment (including technical defects) that ultimately prevent a party from recovering its attorney’s fees. Both Bulls Motor and Diamond Aircraft are examples of decisions whereby the Courts found flaws in the Offers of Judgment. Offers of Judgment do not apply to claims for equitable relief, only claims for damages. Thus, parties need to be crystal clear that the Offers only apply to claims for damages. But it is unfortunately not that simple. The Florida Supreme Court in Diamond Aircraft stated:

 

“Courts have also held that when a plaintiff seeks both monetary and nonmonetary relief, and a party makes a general offer of settlement, section 768.79 is not applicable. The reasoning adopted in those decisions is that strict construction of the phrase “any civil action for damages” in the offer of judgment statute does not include a claim for equitable relief, or one that involves claims for both monetary and nonmonetary relief.
***
We hold that section 768.79 does not apply to an action in which a plaintiff seeks both damages and equitable relief, and in which the defendant has served a general offer of judgment that seeks release of all claims.”
Diamond Aircraft, 107 So.3d at 373-74 (internal citations omitted); accord Bull Motors, supra (“The offer of judgment statute, section 768.79…does not apply to cases that, as here, involve a general offer seeking release of all claims in the case, both equitable and monetary.”).

 

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

APPRECIATING THE RISKS OR FRUSTRATIONS OF ARBITRATION

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Arbitration, just like litigation, can come with its own risks and frustrations. Once an arbitration award is rendered, the prevailing party will usually file an action or move to compel a circuit court to confirm the arbitrator’s award so that the award is turned into a judgment. However, a party that does not like the arbitrator’s award, will try to move to modify or vacate the award in accordance with Florida’s Arbitration Code (Florida Statutes Chapter 682). Although there are specific statutory grounds in order to move to modify or vacate an arbitrator’s award (and the motion must be filed within a specific window of time – typically, 90 days after delivery of the award), non-prevailing parties will still make an effort to vacate or modify the award with the circuit court within their required time parameters. The bases to modify or vacate an award are different than appellate rights afforded to litigants in court because an arbitration award is not supposed to be vacated or modified if an arbitrator erred as to the law.

 

The case of Wells v. Castro, 38 Fla. L. Weekly D1509a (Fla. 3d DCA 2013), illustrates certain frustrations. Without going into the factual details of the dispute, an arbitrator entered an award in favor of a claimant (party demanding arbitration) against one respondent (party responding to the demand for arbitration) and against the claimant as to another respondent. All of the parties agreed that the arbitrator is vested with the authority to determine the prevailing party for purposes of being entitled to attorneys’ fees. The respondent that prevailed as to the claimant’s claim wanted to be the prevailing party in order to recover its attorneys’ fees. However, the arbitrator found that neither party was the prevailing party meaning neither the respondent nor claimant would be entitled to recover their attorneys’ fees (as to the claimant’s claim against the prevailing respondent). Notably, under the Florida Supreme Court’s decision in Trytek v. Gale Indus., Inc., 3 So.3d 1194 (Fla. 2009), a court is to look at which party prevailed on the significant issues in the case for purposes of determining the prevailing party and has discretion to determine that there is not a prevailing party; stated differently, there is now uncertainty as to whether a party will be deemed the prevailing party and be entitled to their attorneys’ fees under the “significant issues” standard.

 

The respondent that prevailed moved the circuit court to essentially modify the arbitration award arguing that the arbitrator erroneously concluded that neither party was the prevailing party and that the respondent should have been deemed the prevailing party because it prevailed as to the claimant’s claims. The trial court granted the motion and deemed the respondent the prevailing party for purposes of being entitled to attorneys’ fees.

 

On appeal through a petition for a writ of mandamus (in this case, an appeal for the appellate court to order the trial court to confirm the arbitrator’s award), the Third District reversed the trial court maintaining: (a) the parties agreed to have the arbitrator determine the issue of prevailing party for purposes of attorneys’ fees (and need to live by that determination) and (b) an arbitrator’s error of law is not a basis to vacate or modify an award.   Thus, if the arbitrator erred in determining the prevailing party under Florida caselaw, the parties need to live with that determination because they agreed to have the arbitrator determine this issue in their arbitration.

 

While there are certain benefits to arbitration, it can come with its own risks and frustrations.  Again, the reasons to modify or vacate the award are limited under Florida statute and not designed to correct an arbitrator’s potential errors in law.  Also, if the parties want the arbitrator to determine the prevailing party for purposes of attorneys’ fees (which makes sense since the arbitrator will be the most familiar with the factual nature of the dispute), the parties will more than likely have to live by that determination.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

ARGUMENTS TO RECOVER ATTORNEYS’ FEES AGAINST A MILLER ACT PAYMENT BOND

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For those subcontractors and suppliers providing labor, services, or materials to federal construction projects, understanding your rights under the Federal Miller Act (40 USC s. 3131 et seq.) is important. Among other things, the Miller Act advises what a subcontractor and supplier need do to preserve a right against the prime contractor’s payment bond, from providing the prerequisite notice of nonpayment to the surety within 90 days from final furnishing / performance (if there is no privity of contract with the prime contractor) to ensuring suit is filed in federal court within a year from final furnishing / performance. Obtaining a copy of the payment bond and understanding these timeframes is critical to an unpaid subcontractor or supplier; otherwise, their claim will be barred against the payment bond.

 

One of the downsides to Miller Act bond claims is that there is no statutory right to the recovery of attorneys’ fees under the Federal Miller Act. This means that every dollar spent on lawyers is potentially reducing the amount in recovery because there is no avenue to recoup those attorneys’ fees under the Miller Act.  Unless this claim is significant, this downside often demotivates a supplier or subcontractor from filing suit in federal court against a Miller Act payment bond.

 

There are, however, arguments to recover attorneys’ fees in a Miller Act action.  The first argument is if there is an underlying contract involving the claimant relating to the project that provides for attorneys’ fees (such as the contract between the subcontractor and prime contractor), the claimant can recover its attorneys’ fees.  See, e.g., U.S. f/u/b/o Southeastern Mun. Supply Co., Inc. v. National Union Fire Ins. Co. of Pittsburg, 876 F.2d 92 (11th Cir. 1989) (finding that attorneys’ fees provision in contract between supplier and subcontractor was enforceable to enable supplier to recover attorneys’ fees against Miller Act surety).

 

There is also a second argument that attorneys’ fees should be recoverable in Florida against a Miller Act bond under a 1968 Fifth Circuit Court of Appeal’s decision in United States Fidelity and Guaranty Co. v. Hendry Corp., 391 F.2d 13, 20-21 (5th Cir. 1968). This case analyzed Florida law to fill in the gap to determine whether attorneys’ fees were recoverable under the Miller Act (since the Act is silent on the issue). In doing so, the Fifth Circuit analyzed Florida’s Insurance Code and maintained that provisions in Florida’s Insurance Code (still in effect today) allow for the recoverability of attorneys’ fees in a Miller Act bond dispute.

 

Parties pursuing Miller Act actions for Florida-based federal projects should plead for attorneys’ fees whether through a contractual provision and/or the Fifth Circuit’s ruling in Hendry Corp.  Now, it is uncertain whether the Fifth Circuit’s ruling would still apply today; however, it is an argument that should still be pursued in furtherance of trying to recover attorneys’ fees in an action against a Miller Act payment bond, especially if there is not an underlying contract that provides for attorneys’ fees.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

FURTHER CONFUSION TO RECOVERING ATTORNEYS’ FEES IN A LIEN ACTION

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Recovering attorneys’ fees in a lien action is becoming more and more convoluted. Recent caselaw has made it more challenging for a party prevailing in a lien action to recover their attorneys’ fees. Now, the test to recover attorneys’ fees is the “significant issues test,” i.e., which party prevailed on the significant issues in the case. In other words, a party could win the lien action yet still not be entitled to recover their attorneys’ fees. Plus, the determination of the significant issues is in the discretion of the judge, meaning it is very difficult to predict whether a party will recover any attorney fees even if they prevail on the lien action.

 
The case of GMPF Framing, LLC v. Villages at Lake Lily Associates, LLC, 100 So.3d 243 (Fla. 5th DCA 2012), illustrates the challenges in recovering attorneys’ fees. In this case, a lienor recorded a claim of lien and filed a lien foreclosure action. However, instead of just suing to foreclose the lien, the lienor also sued for unjust enrichment and for an equitable lien (both counts which are difficult counts for a lienor / contractor to prevail on against an owner). The owner prevailed on the lien claim and the trial court awarded the owner attorneys’ fees. However, on appeal, the Fifth District Court of appeal reversed because it was undetermined which party won on the significant issues because the equitable lien and unjust enrichment claims remained pending even though the trial court discharged the lien. In particular, the Fifth District found that it is possible that the lienor could prevail on these remaining counts and be deemed the prevailing party by prevailing on the significant issues in the case.

 
This decision complicates how attorneys’ fees are awarded in a lien action and, to that end, which party will be deemed the prevailing party. A lien action is a statutory action that statutorily entitles a party to prevailing party attorneys‘ fees. See Fla.Stat. s. 713.29. The other counts in this lawsuit (unjust enrichment and equitable lien) have no statutory or contractual basis for attorneys‘ fees. Thus, they really should not factor in as to which party won on the significant issues of the lien action–the action that entitles a party to attorneys‘ fees. Unfortunately, this is not how the GMPF Framing Court ruled (nor does it appear to be how other Florida appellate courts will rule), which may have the undesirable effect of motivating lienors to sue on otherwise improper liens by simply coupling their lien claim with another claim and hope they are still able to prevail on the significant issues even if the lien claim is discharged.

 

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.