Hat tip to Lee Weintraub of the Florida Construction Law Authority for bringing my attention to a controversy brewing in Florida’s mechanics lien law concerning the award of attorney fees in a lien foreclosure action. According to Mr. Weintraub’s post, We Need A Fix To The Lien Law’s Broken Attorney Fees Statute, a problem with the state’s attorney fees statute was recently exasperated by an appeals decision in Continental Casualty Co. v. Baylor, and its expected that interested groups will be seeking a legislative change.  This blog will review the problem at play, and the problem with creating a solution.

Florida Statutes Allow Recovery of Attorney Fees In Lien Foreclosure Actions

Levelset publishes FAQs for every state on its Resources page, and each state includes an answer to this question: “Can I Include Attorney’s Fees, Collection Costs, or Other Amounts in the Lien Total?”  This is part of the FAQs suite because it’s a very popular question. Claimants deciding whether to proceed with a lien foreclosure action are always wondering if attorney fees are recoverable, because if they are, it’s a lot easier to justify the proceeding.

As we’ve explained in previous posts, the American Rule is that everyone pays their own attorney fees.  This is the rule unless an exception applies.  The most popular American exception is when the parties include an attorney fees provision within their contract.

In the mechanics lien context this exception rarely applies, because in many instances, the claimant isn’t even suing the party they conracted with when pursuing a lien foreclosure action (because they are pursuing a claim against the property and/or property owner). Nevertheless, because mechanics lien statutes are designed to protect lien claimants, most states statutorily provide for the recovery of attorney fees.

Such is the case in Florida.  Florida Statute § 713.29 provides:

In any action brought to enforce a lien or to enforce a claim against a bond under this part, the prevailing party is entitled to recover a reasonable fee for the services of her or his attorney for trial and appeal or for arbitration, in an amount to be determined by the court, which fee must be taxed as part of the prevailing party’s costs, as allowed in equitable actions.

Simple enough, eh?

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Florida Cases Make Attorney Fees Statute Useless and Uncertain

The problem in Florida, as Mr. Weintraub explains, is that no one can figure out whether attorneys fees are or are not recoverable in a lien foreclosure action. Wait?  What?  What about F.S. 713.29?

Florida Statute § 713.29 clearly provides that the “prevailing party” can recover its attorney fees, but determining who is or who is not the prevailing party has become a judicial nightmare resulting in judges throwing up their arms and saying – in a lot of instances – “nobody wins.”

Here is what the court says in Continental Casualty Co v. Baylor, a case opinion released in September 2012:

Under this statute, the party who has prevailed on the “significant issues” is the party entitled to an attorney’s fee award . . . When there is a determination that neither side prevailed, the tribunal may decline to award fees even where there is a judgment entered in favor of one party.

Notice that the courts have inserted the phrase “significant issues” into the statute, which does not use this phrase. The courts began to read “significant issues” into the statute, and then they started to see that in many cases each side is victorious on certain “significant issues.”  As a result, there are times when one side wins or another side wins, but no one really “wins.”

Anyone involved in litigation knows this about every case:  No one ever wins 100%.   No one ever really wins in general.  Litigation is a lose-lose proposition. Nevertheless, the courts have to respect the statute providing for attorney fees and there has to be a “prevailing party” in every case.  Even if its close to a lose-lose for both sides, there has got to be someone who won, right?

That’s the point that Mr. Weintraub makes in his blog post, and it’s also the basis for which he claims the legislature may do in future sessions to address this attorney fees provision that has eroded into oblivion in Florida.

How Can Florida Fix It’s Attorneys Fees in Mechanics Lien Statute?

This is a tough question.  As Mr. Weintraub warns in his blog post, if you create a bright line rule that says anyone who is awarded money is the prevailing party, you could face a situation where someone sues for $50,000 and gets awarded $50 being deemed the “prevailing party.”  Clearly, this is not fair.  But is the alternative solution – making everything gray and awarding no one fees – really fair?

As a potential solution, consider the alternative type of attorney fees statute discussed in the Continental Casualty Co case, which applies when a suit is filed against an insurance company or bonding company.

“Under these sections,” the court explained, “the claimant is not required to be the prevailing party on the significant issues in order to recover attorney’s fees, but need only obtain a judgment– no matter how minimal the amount of damages awarded.”

Might we see a change towards this type of attorney fee provision in Florida’s future?  Stay tuned to the Construction Payment Blog through the next legislative sessions and we’ll let you know.