William and Judith Joyce filed a claim with their insurer, Federated National, after suffering water damage to their home. Instead of agreeing to cover the loss, Federated National denied the Joyces’ claim alleging they made material misrepresentations on their insurance application by failing to disclose prior losses they had with their previous carrier.
The Joyces hired an attorney to represent them against Federated National on a contingency fee basis, as they could not afford to pay someone at an hourly rate. They filed suit alleging that the claim had been wrongfully denied. Ultimately, after months of litigation, Federated National conceded coverage for the loss and settled the claim. The parties then stipulated that the Joyces’ attorney was entitled to recover attorney’s fees, and the matter went to an evidentiary hearing. The trial court awarded $76,300.00 in attorney’s fees to their counsel based on:
- the “lodestar” amount – the number of hours reasonably incurred times the reasonable hourly rate, and
- a contingency fee multiplier of 2.0 to the “lodestar’ amount.
The trial court had looked to Guaranty Insurance Co. v. Quanstrom,1 for guidance in applying the multiplier where the Quanstrom court determined that,
[i]f the trial court determines that success was more likely than not at the outset, it may apply a multiplier of 1 to 1.5; if the trial court determines that the likelihood of success was approximately even at the outset, the trial judge may apply a multiplier of 1.5 to 2.0; and if the trial court determines that success was unlikely at the outset of the case, it may apply a multiplier of 2.0 to 2.5.
As such, the trial court justified the 2.0 multiplier based on its assessment that “the likelihood of success at the outset was even at best.”
Federated National appealed both the trial court’s calculation of the lodestar amount and the use of the contingency fee multiplier. The Fifth District Court of Appeal affirmed the lodestar amount but reversed the trial court’s use of the contingency fee multiplier, finding that a contingency fee can only be awarded in “rare” and “exceptional” circumstances.
The Florida Supreme Court reversed the appellate court2 and in so reasoning,
- analyzed the relevant case law from the Florida Supreme Court and the United States Supreme Court to understand the interplay between the two regarding contingency fee multipliers;
- explained why it made the determination to adhere to Florida Supreme Court precedent, which does not utilize a “rare” and “exceptional” requirement before a trial court may apply a contingency fee multiplier;3
- explained why it ultimately rejected the United States Supreme Court precedent, which has eliminated a contingency fee multiplier to attorney’s fees awards under Federal Statutes.
With regards to the first and third aspects, the supreme court reconciled its decision with unfavorable United States Supreme Court precedent (particularly City of Burlington v. Dague,4 that has rejected the contingency fee multiplier award under Federal Statutes):
To the extent that Respondents…ask us to eliminate the contingency fee multiplier in all but the “rare” and “exceptional” case where attorney’s fees are awarded, we decline to adopt the reasoning of the United States Supreme Court…First, this Court is not bound, in interpreting state statutes or prevailing party attorney’s fees in contracts, by United States Supreme Court precedent interpreting awards of attorney’s fees in federal statutes. Second, with all due deference to the United States Supreme Court, we do not accept the Dague majority’s rationale for rejecting contingency fee multipliers. Justice Scalia, writing for the majority in Dague, couched his disapproval of contingency fee multipliers by reasoning that the multipliers incentivize nonmeritorious claims, so that those claims are effectively raised as often as meritorious claims…
To the contrary, the contingency fee multiplier provides trial courts with the flexibility to ensure that lawyers, who take a difficult case on a contingency fee basis, are adequately compensated. We also do not agree that the contingency fee multiplier encourages “nonmeritorious claims” and would, instead, posit that solely because a case is “difficult” or “complicated” does not mean that the case is nonmeritorious.
The court also rejected the rationale in Dague to the extent that it found that the enhancement for contingency,
‘[w]ould likely duplicate in substantial part favors already subsumed in the lodestar.’ 505 U.S. at 562, 112 S.Ct. 2638. Although the lodestar amount takes into account a variety of factors, significantly, it does not include a consideration of whether the relevant market requires a contingency fee multiplier to obtain competent counsel. Importantly, this factor requires the court to consider whether the attorney’s client would have been able to obtain counsel absent the availability of a contingency fee multiplier.
Finally, the court disagreed with Dague to the extent that it found the availability of contingency fee multipliers “make the setting of fees more complex and arbitrary,” finding that there was no support in state courts for such a proposition.
The court also noted that it had previously reaffirmed its commitment to the contingency fee multiplier even after unfavorable decisions had been rendered by the U.S. Supreme Court on the issue.5 “Bell evidences this Court’s separation from federal precedent in this area. This Court chose to continue to allow the use of multipliers, noting their usefulness in helping parties secure legal representation and their importance in ensuring access to courts.”6
Finally, in applying the contingency fee multiplier to the Joyce case, the court found that the trial court’s determination after hearing all of the evidence, was correct:
…[t]hese cases are difficult, the issues involved were complex, involving policy interpretation, application of exclusion language, agency law, and other issues…[it involved] serious consequences to the [Joyces], especially after Federated submitted a proposal for settlement.
The record also showed that Federated National continued to dispute the Joyces’ claim after they knew they had made a full disclosure regarding their prior claims, and continued litigation until it was ultimately found in discovery that Federated National had been incorrect about the application all along, and thus, they finally conceded coverage. The record also revealed that the Joyces’ attorney spent over 100 hours on the case, and that there were no other attorneys in St. Johns County who specialized in this type of litigation.
After performing this in-depth analysis, ultimately the court found that the trial court had properly applied the Rowe factors in its determination of a 2.0 multiplier, and that their conclusion was based on competent, substantial evidence. They held that the Fifth District erred by not only applying a “rare” and “exceptional” requirement for contingency fee multipliers, but in substituting its judgment on the Rowe factors based on its disagreement with the trial court’s conclusions based on findings of fact, and quashed the Fifth District’s opinion.7
In sum, the court found:
We affirm our adherence to the use of contingency fee multipliers in [Florida] and make clear that there is not a “rare” and exceptional” circumstances requirement before a contingency fee multiplier can be applied.
This is an important decision for those who bring action against their insurance carriers, as it will help continue to level the playing field by encouraging attorneys who represent policyholders to take difficult cases. It does so by allowing for a contingency fee multiplier in cases that an attorney may not have otherwise taken, without limiting it to only “rare” and “exceptional” circumstances.
1 Guaranty Insurance Co. v. Quanstrom, 555, So.2d 828 (Fla. 1990).
2 Joyce v. Federated Nat’l Ins. Co., No. SC16-103, 2017 WL 4684352 (Fla. Oct. 19, 2017).
3 The court does an in-depth analysis of how the Fifth District and the cases it relied upon took the “rare” and “exceptional”/“extraordinary” out of context, describing how in Quanstrom the term was actually “referring to preserving flexibility in terms of the overall framework – for example, the different criteria for different categories of cases—for computing fees in those rare and extraordinary cases which might otherwise be pigeonholed into a particular category or which may yield a much smaller fee than would otherwise be reasonable.” Further in State Farm Fire & Cas. Co. v. Palma, 555 So. 2d 836 (Fla. 1990), the court’s use of the word “rare” was a reference not to the use of the multiplier itself, but rather to the need for flexibility in certain cases with respect to the application of the factors considered in determining the amount of the multiplier.
4 City of Burlington v. Dague, 505 U.S. 557, 112 S. Ct. 2638, 120 L. Ed. 2d 449 (1992).
5 See Bell v. U.S. B. Acquisition Co., 734 So.2d 403 (Fla. 1999).
6 Joyce at *8 citing to, Bell at 411.
7 The court also disapproved of State Farm Florida Insurance Co. v. Alvarez, 175 So.3d 352 (Fla. 3d DCA 2015) for which the Fifth District relied, to the extent that it is inconsistent with its decision.