FORT LAUDERDALE BUSINESS LITIGATION: CONTRACTS AND UNILATERAL ATTORNEY FEE PROVISIONS

Attorneys’ fee provisions in contracts can significantly influence how a dispute will be resolved. An aggrieved party can become emboldened if an attorneys’ fees award is available as a prevailing party. At first blush, it may appear prudent for a business to have its contract contain an attorneys’ fee provision which allows it to claim attorneys’ fees if it prevails, but not allow the other party to claim attorneys’ fees if the opposing party prevails. Florida law generally requires that all attorneys’ fee provisions be treated as if they are mutual. The Florida Supreme Court recently resolved a “circuit split” which appeared to permit some litigation parties to continue to gain the benefit of a unilateral attorneys’ fee provision without that provision being applied mutually. Peter Mavrick is a Fort Lauderdale business litigation lawyer, and also advocates for clients in Palm Beach, Boca Raton, and Miami, Florida. The Mavrick Law Firm represents clients in breach of contract litigation, trade secret litigation, non-compete agreement litigation, employment litigation, trademark litigation, and other legal disputes in federal and state courts and in arbitration.

The default “American Rule” generally provides that parties pay for their own attorneys’ fees unless there is a contract or statute governing attorneys’ fees. When litigants in business litigation sue for bogus claims or engage in litigation misconduct, courts may order that the other party be compensated for their attorneys’ fees. § 57.105(1)-(4), Florida Statutes (describing the standard by which attorneys’ fees may be awarded against a party that brought improper claims or defenses). In contrast, traditional English law allows courts to order losers in litigation to pay the attorneys’ fees of the victors.

The character of business litigation can change dramatically depending upon whether litigants can be awarded their attorneys’ fees. It may not make economic sense for a plaintiff to pursue a claim when the potential recovery is outweighed by the cost of retaining counsel and prosecuting litigation. When a litigant can potentially be awarded his or her attorneys’ fees, it may incentivize litigation over smaller claims which would not have otherwise been worth pursuing. It is not uncommon for the attorneys’ fee awards in such cases to dwarf the matter at issue.

Some areas of law have asymmetric attorneys’ fee provisions. Typically, these asymmetric attorneys’ fee provisions are present when the parties are thought to not have the same capability to engage in litigation, such as in labor law matters or consumer protection matters. For example, in wage and hour matters, a prevailing employee generally is entitled to attorneys’ fees while the employer does not have that right. 29 U.S.C. § 216. This can create the perverse incentive for employee attorneys to attempt to bully employers with the threat of attorneys’ fees for claims which are mediocre at best.

Because of the strategic importance of attorneys’ fees provisions in lawsuits, it may be tempting for businesses to have unilateral attorneys’ fees in their contracts. Florida has a statute which causes these asymmetric attorneys’ fees provisions to essentially be applied mutually. Section 57.105(7), Florida Statutes, allows a prevailing party in litigation to claim their attorneys’ fees if there is an asymmetric attorney-fee provision in their opponent’s favor.

If a contract contains a provision allowing attorney’s fees to a party when he or she is required to take any action to enforce the contract, the court may also allow reasonable attorney’s fees to the other party when that party prevails in any action, whether as plaintiff or defendant, with respect to the contract […]. Section 57.105(7), Florida Statutes.

Formerly, Florida courts split on the issue as to whether a business litigation claim for “account stated” qualified under § 57.105(7)’s requirement of mutuality in enforcement of unilateral attorneys’ fees provisions. The Florida Supreme Court resolved that split in Ham v. Portfolio Recovery Associates, LLC, SC18-2142, 2020 WL 7778178 (Fla. Dec. 31, 2020). Prior to Ham, some courts permitted parties in business litigation to sue under a claim of “account stated” to avoid the application of § 57.105(7) instead of as a breach of contract because of the way § 57.105(7) was worded. This essentially gave plaintiffs the opportunity to decide whether attorneys’ fees would be at issue in any case. If the plaintiff believed it had a very high likelihood of success, it could sue under a breach of contract and invoke the attorney fee provision. If the plaintiff was unsure of the outcome of litigation or did not think the defendant was a “deep pocket,” the plaintiff could make essentially the same claim under the cause of action of account stated.

Ham held that the text of § 57.105(7) was too broad to permit such a result. Ham explained that a claim for account stated was essentially adjudicating the parties’ relationship, which was based upon a contract. Thus, the unilateral attorney fee provision would be applied mutually.

Creative counsel may successfully draft an attorneys’ fee provision that essentially permits only one side to seek attorneys’ fees, sidestepping the mutuality requirement of § 57.105(7). This might be accomplished by narrowing the types of matters which attorneys’ fees may be awarded to those matters which only one party truly benefits. For example, a commercial landlord may have a lease that provides for prevailing party attorneys’ fees arising from the collection of rent. While a landlord could be vulnerable to an adverse attorney fee award if it failed on such a claim, the collection of rent is generally not something that a tenant typically can be the “prevailing party” on, nor is it the type of claim that a tenant could bring. This effectively provides the hypothetical commercial landlord with unilateral attorneys’ fees as a prevailing party, despite Florida’s prohibition on such contract provisions. This strategy has been successfully applied previously. Subway Restaurants, Inc. v. Thomas, 860 So. 2d 462 (Fla. 4th DCA 2003) (finding that § 57.105(7) did not apply because the contract with the attorneys’ fee provision limited attorneys’ fee awards to prevailing parties for collections of rent, rather than limiting recovery only to the landlord); Indemnity Insurance Co. of North America v. Chambers, 732 So.2d 1141 (Fla. 4th DCA 1999) (finding that § 57.105(7) did not apply when agreement narrowed the scope of the attorneys’ fee provision to collection matters only). However, the Florida Supreme Court’s decision in Ham may be a harbinger of an expansion in interpretation of § 57.105(7). Accordingly, this method of creative contract interpretation might not be as effective in the future.

Peter Mavrick is a Fort Lauderdale business litigation attorney who also practices business litigation in Palm Beach, Boca Raton, and Miami-Dade. This article does not serve as a substitute for legal advice tailored to a particular situation.