The “American Rule”
Florida courts have adopted the “American Rule” with respect to awarding attorney’s fees to a prevailing party in litigation.1 The “American Rule” provides that “in the absence of legislation providing otherwise, litigants must pay their own attorney’s fees.”2 Indeed, Florida courts have held that attorney’s fees are not recoverable unless a statute or a contract specifically authorizes their recovery.3 In other words, if a statute or contract is silent as to entitlements to attorney’s fees, each party must bear its own fees and costs. The public policy behind fee provisions is to make the prevailing party whole. Prevailing party fee provisions are designed to put the prevailing party in the position it would have been in had the matter been resolved without litigation.4 While this seems a simple concept, implementing these statutory and/or contractual provisions can be quite complex depending on the nature of the lawsuit and the procedural tactics utilized in the case.
In general, a prevailing party is one that prevails on the significant issues in a case, when the party obtains the benefits sought in the litigation.5 Courts apply a balancing test to determine which party has prevailed in a lawsuit.6 Once the prevailing party is ascertained, the Court must award fees if the party has a contractual or statutory right to fees. If one party prevails on a certain aspect of the case, while another party prevails on another aspect of the case, the court applies a balancing test to determine how to allocate attorney’s fees.7 Both parties may be considered prevailing parties under certain circumstances. In such a situation, the party adjudged liability for a greater amount of attorney’s fees may be required to pay the difference between each party’s fees to the other party.
In Florida, community associations are creatures of statute, meaning that their creation and ongoing operations are governed by statute. Chapters 718, 719 and 720 of the Florida Statutes govern the establishment and operation of condominiums, cooperatives and homeowner’s associations, respectively. Indeed, each of these Chapters contains several provisions providing for the recovery of attorney’s fees by the prevailing party.8 In addition, the Declaration of Covenants and Restrictions governing these communities may also contain provisions providing entitlement to attorney’s fees to the prevailing party in a given dispute. A Declaration contains “attributes of a covenant running with the land” and operates as a contract among unit owners and the association, spelling out mutual rights and obligations of the parties thereto.”9 Thus, the Declaration itself constitutes a contract and if it contains provisions providing for recovery of attorney’s fees by the prevailing party, such party may rely on the Declaration as a basis for recovering such fees. In a suit involving a community association, therefore, a prevailing party may rely on both statutory and contractual provisions to seek attorney’s fees.
Within Chapter 718, the “Condominium Act,” the primary provision setting forth an entitlement to prevailing party attorney’s fees is § 718.303(1). Said section states, in pertinent part:
Each unit owner, each tenant and other invitee, and each association is governed by, and must comply with the provisions of, this chapter, the declaration, the documents creating the association, and the association bylaws which shall be deemed expressly incorporated into any lease of a unit. Actions for damages or for injunctive relief, or both, for failure to comply with these provisions may be brought by the association or by a unit owner…The prevailing party in any such action…is entitled to recover reasonable attorney’s fees.10
This section enables a prevailing party in an action between a unit owner and condominium association to recover prevailing party attorney’s fees, subject to the conditions stated within that section.
Chapter 719, governing cooperatives, also contains prevailing party attorney’s fees provisions. For instance, a cooperative unit owner who prevails in his or her action for damages or injunctive relief is entitled to recover reasonable attorney’s fees.11 In addition, if a contract or lease between a cooperative unit owner and a developer provides for attorney’s fees to the developer, should any litigation arise under the provisions of the contract or lease, the court must also allow reasonable attorney’s fees to the unit owner when the unit owner prevails in any action by or against the unit owner with respect to the contract or lease.12
Proposals for Settlement
An award of prevailing party attorney’s fees pursuant to a Declaration or the Florida Statutes cited above may be complicated by a proposal for settlement, served pursuant to Florida Statutes § 768.79 and Fla. R. Civ. P. 1.442. Litigants utilize proposals for settlement, or offers of judgment, as a tool for shifting risk. Generally, the purpose of the proposal for settlement is to promote early resolution of civil litigation by imposing an added financial burden on a party who has refused to accept a fair offer of settle-ment.13 If served by defendant to plaintiff, the defendant will recover attorney’s fees if the judgment obtained by the plaintiff is 25% less than the amount of the proposal or if there is a judgment of no liability. Similarly, if the offer is made from plaintiff to defendant, the plaintiff will recover its attorney’s fees if the judgment is in favor of the plaintiff for an amount in excess of 25% of the amount of the plaintiff’s proposal.14
Complications can arise when a party prevails under a contractual provision but the other party prevails under the proposal for settlement. As described below, a recent decision by the First District Court of Appeals of Florida suggests that a valid proposal for settlement does not cut off, as of the date of the proposal, the pre-existing contractual rights of the other party.15
In Tierra Holdings, Ltd. v. Mercantile Bank, appellant, Tierra, challenged a trial court’s order on the parties’ competing claims for attorney’s fees.16 At the hearing on the parties’ motions for fees, Mercantile conceded that Tierra was entitled to recover some fees and costs given Tierra’s valid proposal for settlement; and Tierra conceded that Mercantile was the prevailing party in regard to the breach of contract claim and thus entitled to recover some fees and costs under the contract. Tierra argued, however, that Mercantile could recover only those fees and costs incurred up to the date of Tierra’s proposal for settlement.
The trial court awarded Tierra its costs and attorney’s fees incurred after the date of its valid proposal for settlement. The trial court also awarded Mercantile Bank all of its costs and attorney’s fees incurred through trial in connection with its breach of contract claim.17 Tierra appealed, arguing that its valid proposal for settlement cut off Mercantile Bank’s entitlement to fees under the contract which were incurred after the date of the proposal.18 The court disagreed, and held that Florida Statutes § 768.79 must be strictly construed and that as written, did not support an argument that a valid proposal for settlement acts to cut off the rights of a prevailing party under a contract.19
Based on the foregoing, in the context of a community association, a prevailing party’s entitlement to attorney’s fees based on the governing Declaration will not be cut off by a proposal for settlement. Rath-er, the court will likely award fees in the manner set forth in Tierra, offsetting the award to the prevailing party by the amount of attorney’s fees incurred by the party who served the proposal for settlement, awarding the difference to the prevailing party.
57.105 Sanctions
A party may also seek fees pursuant to Florida Statutes § 57.105, which allows a party in litigation to seek an award of fees as a sanction against the losing party and the losing party’s attorney for maintaining a frivolous claim or defense. The standard for obtaining § 57.105 fees is quite high. The court must find that at the time of filing the claim lacks a basis in material facts or then-existing law.20 Case law also suggests that the court must make an express finding of bad faith.21
Florida law relating to prevailing party attorney’s fees can be complex because of the interplay of various statutes, public policy, and contractual entitlements. Especially within the context of community associations, where governing Declarations are usually the source of claims, it is important to understand how a prevailing party’s entitlement is derived and maintained.
1 A prevailing party is defined as a party in whose favor a judgment is rendered, regardless of the amount of damages awarded. Black’s Law Dictionary (9th ed. 2009); See also Wayne Paint Co. v. Gulfview Apartments of Marco Island, 739 So. 2d 1259 (Fla. 2d DCA 1999)(holding that a prevail-ing party, for the purpose of determining an entitle-ment to attorney’s fees is the party who prevails on the significant issues in litigation).
2 Talbott v. American Isuzu Motors, Inc., 934 So.2d 643, 650 (Fla. 2d DCA 2006); See also Buckhannon Board and Care Home, Inc., et al. v. West Virginia Department of Health And Human Resources, et al., 532 U.S. 598, 602 (2001) (finding that “In the United States, parties are ordinarily required to bear their own attorney’s fees—the prevailing party is not entitled to collect from the loser.”); See Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 247, 95 S.Ct. 1612, 44 L.Ed.2d 141 (1975). Under this “American Rule,” we follow “a general practice of not awarding fees to a prevailing party absent explicit statutory authority.” Key Tronic Corp. v. United States, 511 U.S. 809, 819, 114 S.Ct. 1960, 128 L.Ed.2d 797 (1994)
3 Civix Sunrise, GC, LLC v. Sunrise Road Maintenance Association, Inc., et al., 997 So.2d 433, 434 (Fla. 2d DCA 2008). In contrast, the “Eng-lish rule” permits an award of attorney’s fees and costs irrespective of whether a contract or statute provides an entitlement to same. See Florida Pa-tient’s Compensation Fund v. Rowe, 472 So. 2d 1145, 1147-48 (Fla. 1985).
4 Grider-Garcia v. State Farm Mut. Auto., 14 So. 3d 1120, 1121 (Fla. 5th DCA 2009); See also Mikes v. City of Hollywood, 687 So. 2d 1381, 1384 (Fla. 4th DCA 1997)(finding that “Costs, a compensatory monetary award to the winning party, is a judicial attempt to make the winning party as whole as he was prior to the litigation. The theory being that the prevailing party should not lose anything, at least financially, by virtue of having established the righteousness of his claim”). (emphasis added).
5 Trytek v. Gale Industries, Inc., 3 So.3d 1194 (Fla. 2009), citing Moritz v. Hoyt Enterprises, Inc., 604 So.2d 807 (Fla. 1992).
6 Munao, Munao, Munao, & Munao v. Homeowners Ass’n of La Buona Vita Mobile Home Park, Inc., 740 So.2d 73 (Fla. 4th DCA 1999).
7 Anglia Jacs & Co., Inc. v. Dubin, 830 So. 2d 169, 172 (Fla. 4th DCA 2002); See also id. (indicating that “When a party prevails on only a portion of the claims made in the litigation, the trial court must evaluate the relationship between the successful and unsuccessful claims and determine whether the investigation and prosecution of the successful claims can be separated from the un¬successful claims”); Florida Patient’s Comp. Fund v. Rowe, 472 So. 2d 1145, 1151 (Fla. 1985) holding modified by Standard Guar. Ins. Co. v. Quanstrom, 555 So. 2d 828 (Fla. 1990)(stating that “In adjusting the fee based upon the success of the litigation, the court should indicate that it has considered the relationship between the amount of the fee award¬ed and the extent of success”).
8 Notably, Chapter 718, Florida Statutes contains prevailing party attorney’s fee entitle¬ments in the following sections: 718.111, 718.112, 718.1124, 718.116, 718.1224, 718.125, 718.1255, 718.302, 718.303, 718.401, 718.5011, 718.506, and 718.612. Moreover, Chapter 720, Florida Stat¬ues contains prevailing party fee entitlements in the following sections: 720.304, 720.305, 720.3085, 720.30851, 720.311, and 720.402.
9 Cohn v. Grand Condominium Ass’n, Inc., 62 So.3d 1120 (Fla. 2011)(citing Woodside Vill. Condo. Ass’n v. Jahren, 806 So.2d 452, 456 (Fla. 2002) (quoting Pepe v. Whispering Sands Condo. Ass’n, 351 So.2d 755, 757 (Fla. 2d DCA 1977)).
10 Id.
11 Fla. Stat. § 719.303(1)
12 Fla.Stat. § 719.111
13 See National Healthcorp Ltd. Partner¬ship v. Close, 787 So.2d 22 (Fla. 2d DCA 2001); Goode v. Udhwani, 648 So.2d 247 (4th DCA 1994).
14 Fla. Stat. § 768.79 and Fla. R. Civ. P. 1.442.
15 Tierra Holdings, Ltd. v. Mercantile Bank, 78 So.3d 558, 566 (Fla. 1st DCA 2011).
16 Id. at 559.
17 Id.
18 Id.
19 Id.; See also Id. at 563 (stating that Fla. Stat. § 768.79 and Fla. R. Civ. P. 1.442 must be strict¬ly construed because they are in derogation of the common law rule that each party pay its own fees and because they serve as a penalty).
20 Martin County Conservation Alliance v. Martin County, 73 So. 3d 856, 858 (Fla. 1st DCA 2011).
21 Santini v. Cleveland Clinic Florida, 65 So. 3d 22, 36 (Fla. 4th DCA 2011), reh’g denied (July 26, 2011)
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