PRE-SUIT SETTLEMENT OFFERS AND CONSTRUCTION LIEN ACTIONS

shutterstock_127849640It is unfortunate, but in certain matters, a construction lien foreclosure action is not actually driven by the principal amount in dispute.  Oh no.  Rather, it is driven by attorney’s fees.  That’s right.  Attorney’s fees. This is true even though Florida applies the significant issues test to determine the prevailing party for purposes of attorney’s fees.  However, oftentimes  the prospect of attorney’s fees is enough for parties to fear that exposure. 

 

There is a 1985 Florida Supreme Court case that I like to cite if applicable, C.U. Associates, Inc. v. R.B. Grove, Inc., 472 So.2d 1177, 1179 (Fla. 1985), that finds, “in order to be a prevailing party entitled to the award of attorney’s fees pursuant to section 713.29 [a construction lien claim], a litigant must have recovered an amount exceeding that which was earlier offered in settlement of the claim.”  Accord Sullivan v. Galske, 917 So.2d 412 (Fla. 2d DCA 2006) (explaining that although contractor is receiving a judgment in his favor, he may not be the prevailing party if the homeowner offered to settle prior to the lawsuit for an amount equal to or greater  than the award in the judgment).

 

If there is a pre-suit settlement offer on the table, and it is a good faith offer (which presumably it is), than that offer can very well come into play to determine whether the party that will the action should be deemed the prevailing party for purposes of attorney’s fees.  This is still good law.  Therefore, before readily dismissing a pre-suit offer, consider the potential ramifications if you are unable to beat this offer at trial. Banking on attorney’s fees may not be prudent if there is a pre-suit offer that is within striking distance from where you need to be or can very well be a likely outcome based on a reasonable argument raised by 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.

 

RECEIVING A $0 VERDICT AND STILL BEING DEEMED THE PREVAILING PARTY FOR PURPOSES OF ATTORNEY’S FEES

shutterstock_336450779Low and behold, a party can be the prevailing party for purposes of attorney’s fees even if that party is awarded $0.  That’s right, even if the party is awarded a big fat zero, they can still be the prevailing party for purposes of being entitled to attorney’s fees.   This is because a party is the prevailing party if they prevail on the significant issues in the case.  A party can prevail on the significant issues even if that party is awarded $0. Whoa!

 

For example, in Coconut Key Homeowner’s Association, Inc. v. Gonzalez, 43 Fla.L.Weekly D1045a (Fla. 4th DCA 2018), a homeowner sued her homeowner’s association claiming the association breached its governing documents. There was a basis for fees under Florida’s homeowner’s association law (and there likely was a basis under the governing documents).  At trial, the jury held that the association breached its governing documents, but awarded the homeowner nothing ($0). The trial court also issued injunctive relief in favor of the homeowner.  The homeowner claimed she should be deemed the prevailing party for purposes of attorney’s fees; however, this was denied by the trial court  based on the $0 verdict and no fees were awarded to the homeowner.

 

On appeal, however, the Fourth District took a different stance.  The Court, relying on other Florida appellate decisions, maintained that the homeowner could be deemed the prevailing party despite receiving no monetary award:

 

While the prevailing party determination does not depend solely on the magnitude of relief Gonzalez [homeowner] obtained, she was required, at the least, to secure some relief on the merits of her claim to achieve such status. “ [P]laintiffs may be considered a ‘prevailing party’ for attorney’s fees purposes if they succeed on any significant issue in litigation which achieves some of the benefit the parties sought in bringing suit.’ ”  Although there is ongoing debate in the courts on whether a plaintiff who recovers no money damages can be a prevailing party, a party who receives affirmative judicial or equitable relief is clearly considered a prevailing party under the law. Gonzalez was indisputably a prevailing party on her injunctive claim in equity, regardless of her marginal victory on the breach count. Thus, prevailing party attorney fees should be awarded to Gonzalez in this dispute. 

Gonzalez, supra (internal citations omitted).

 

The Fourth District  justified declaring the homeowner the prevailing party because an injunction was also issued in her favor.  Hence, she did receive some benefit by bringing the suit even if she recovered no monetary damages.  However, even if the homeowner did not bring a claim for injunctive relief, it is highly likely the same result would have been reached by the Fourth District.  Since the jury found that the association breached the governing documents, the homeowner would have achieved some benefit in bringing the suit and, therefore, prevailed on the significant issues.  Gonzalez, supra (“When there is a prevailing party statute or contract, reasonable attorney fees must be awarded.”). 

 

As of now, it is uncertain how this would be reconciled with the significant issues test to determine the prevailing party in a construction lien action.  Case law has held that a court has discretion to determine no party is the prevailing party for purposes of attorney’s fees in a construction lien action.  Putting this aside, however, this holding should apply to breach of contract cases and to other potential statutory claims that afford a basis for attorney’s fees to the prevailing party. Despite a party receiving no monetary award, they may still be deemed the prevailing party for purposes of attorney’s fees if they prevail on the significant issues in the case (e.g., the jury determined the other party committed a breach). 

 

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.

 

APPELLATE ATTORNEY’S FEES AND THE SIGNIFICANT ISSUES TEST

shutterstock_379140319The significant issues test to determine the prevailing party in construction lien actions (which, by the way, also applies to breach of contract actions) applies to appellate attorney’s fees too!  Under this test, the trial court has discretion to determine which party prevailed on the significant issues of the case for purposes of attorney’s fees.  The trial court also has discretion to determine that neither party was the prevailing party for purposes of attorney’s fees

 

In a recent decision, Bauer v. Ready Windows Sales & Service Corp., 42 Fla. L. Weekly D1417a (Fla. 3d DCA 2017), there were competing motions for appellate attorney’s fees.   Both parties believed they should be deemed the prevailing party under Florida Statute s. 713.29 (statute that authorizes prevailing party attorney’s fees under Florida’s Construction Lien Law).    The appellate court held that neither party was the prevailing party under the significant issues test:  “[W]e conclude that each party lost on their appeal, while each party successfully defended that part of the judgment in their favor on the other party’s cross-appeal. Because both parties prevailed on significant issues, this Court finds that appellate fees are not warranted for either party.” Bauer, supra

 

Attorney’s fees can very easily drive construction lien and bond disputes.  Just remember, the significant issues test to determine the prevailing party for purposes of attorney’s fees applies to fees incurred at the trial court and appellate court levels.  This test has a subjective component that gives a court an easy out—determine that neither party prevailed on the significant issues or, as in the above case, both parties prevailed on the significant issues, meaning neither party is entitled to 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.

QUICK NOTE: ATTORNEY’S FEES AND THE SIGNIFICANT ISSUES TEST

imagesAttorney’s fees become a component of damages that parties seek to recover whenever there is a contractual or statutory basis for them to recover their fees.  Parties want to be able to recover all or substantially most of the attorney’s fees they incurred in pursuing their claim. (In my experience, recovering all of the fees incurred is very challenging.)  But, to be entitled to attorney’s fees, a party has to be deemed the prevailing party.  There is the sentiment that as long as you recover a positive net judgment (even if it is for $100 when your claim was for $50,000) then you will be able to recover your attorney’s fees which will likely exceed the amount that was ever in dispute.  With this sentiment, certain disputes become solely driven by attorney’s fees.  Now, there is a trend for the prevailing party for purposes of attorney’s fees for certain disputes such as construction lien actions and breach of contract actions to be determined by the significant issues test.  While recovering a net judgment is important, there are other equitable considerations a court or arbitrator can consider to determine the party that prevailed on the significant issues for purposes of awarding attorney’s fees.  This article explains more.  

 

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.