13 Fla. L. Weekly Supp. 688a
Attorney’s fees — Insurance — Personal injury protection — Contingency risk multiplier — Difficulty in obtaining counsel — Where expert witness testified that there was significant risk in assuming cases in which countersignature of medical bills is in contention due to divergence of legal theories on issue, and enhanced fee is necessary to obtain competent counsel in such risky cases, medical provider established that securing counsel without multiplier would be difficult — Inability to mitigate risk of loss — Where expert testified that due to small sums involved in PIP cases and rarity of large settlements it is unlikely that attorneys can use fees earned in successful suits to offset losses, and counsel could not enter into fee contract with provider not capable of shouldering high cost of litigation, provider established that counsel could not mitigate risk of loss
UNITED AUTOMOBILE INSURANCE COMPANY, a Florida Corporation, Appellant, v. KENDALL SOUTH MEDICAL CENTER, a/a/o ALIONA REYES, Appellee. Circuit Court, 11th Judicial Circuit (Appellate) in and for Miami-Dade County. Case No. 05-221 AP. L.C. Case No. 02-9710 SP 25. UNITED AUTOMOBILE INSURANCE COMPANY, a Florida Corporation, Appellant, v. MIAMI CHIROPRACTIC ASSOCIATES, a/a/o BLANCA MUNOZ, Appellee. Case No. 05-220 AP. L.C. Case No. 01-7696 SP 25. April 25, 2006. On appeal from a decision of the County Court of Miami-Dade County. Counsel: Michael Neimand, Monica Barnes and Mark Gatica, United Automobile Insurance Company Trial Division, for Appellant. David Sampedro, Panter, Panter & Sampedro, P.A., for Miami Chiropractic Associates. Maria Sampedro-Iglesia, Jose Iglesia, P.A., for Kendall South Medical Center.
(Before MUIR, WILSON and LANDO, JJ.)
OPINION1
(MUIR and LANDO, Judges.) Before the Court are two appeals filed by United Automobile Insurance Company (United Auto). United Auto is seeking review of two separate trial courts’ decisions to award a contingency risk multiplier to the attorneys of the Appellees, Miami Chiropractic Associates and Kendall South Medical Center. For the reasons set forth below, this Court is affirming the trial courts’ decisions based on the following findings of fact and conclusions of law.FINDINGS OF FACT
The Appellees, Miami Chiropractic Associates and Kendall South Medical Center, are medical providers who have been assigned the right to collect PIP (personal injury protection) benefits directly from the Appellant, United Auto, for services rendered to United Auto’s insured claimants. After unsuccessful attempts to receive payment for the medical bills submitted, Miami Chiropractic Associates and Kendall South Medical Center sued United Auto respectively in 2001 and 2002, for failure to pay any of the outstanding medical bills. Both trial courts ruled in favor of the Appellees, and ordered United Auto to pay the Appellees’ attorneys’ fees.
At the fee hearings, (conducted on April 2005 and May 2005) the trial courts computed the attorneys’ fees based on the lodestar method. The Appellees sought to include a risk multiplier to adjust the lodestar fee upward to reflect the contingent nature of the litigation. In support of this request, both Appellees presented the expert testimony of Mark Goldman, Esquire, an attorney with extensive fee litigation experience. Based on this testimony, other expert testimony, the evidence presented, and the factors enumerated in controlling case law, both courts granted the request for a fee multiplier.
In reaching their decision, the trial courts found that: (1) the relevant market did require a contingency fee arrangement to obtain competent counsel, (2) counsel for the Appellees were retained on a contingency fee basis under which a contingency risk factor must be considered, (3) the risk of non-payment could not be off-set or mitigated, and (4) the law regarding an insurer’s obligation to pay for medical bills which were not countersigned by the insured was unsettled.
Consequently, the trial courts enhanced the attorney fee awards by a multiplier of 1.5. for the risk of loss and the risk of nonpayment. United Auto is now appealing the determination to award the multiplier, contending there is no substantial competent evidence to support a threshold determination that a multiplier should be applied.
At issue is whether in light of controlling law and the evidence presented, the trial courts abused their discretion in awarding a contingency risk multiplier. Specifically, whether these PIP cases, which entailed issues regarding counter signatures, warranted enhancement of the prevailing parties’ counsels’ lodestar fee to reflect the degree of risk presented by these specific cases.
STANDARD OF REVIEW
In cases involving the propriety of awarding a risk multiplier to an attorney’s fee award, the standard of review is the abuse of discretion standard. State Farm Ins. Co. v. Palma, 629 So. 2d 830 (Fla. 1993); United Auto Ins. Co. v. Padron, 775 So. 2d 372 (Fla. 3d DCA 2000). Under this standard, appellate courts accord broad deference to the trial court’s judgment and findings of fact, giving trial courts essentially unfettered discretion to determine whether to apply a multiplier, and to set the appropriate fee amount. Standard Guaranty Insurance Co. v. Quanstrom, Id. at 830-831 (the application of a multiplier is not mandatory in contingency fee basis cases); National Found. Life Insurance Co. v. Wellington, 526 So. 2d 766 (Fla. 3d DCA 1988); Askowitz v. Susan Feuer Interior Design, Inc., 563 So. 2d 752, 754 (Fla. 3d DCA 1990). However, if the trial court’s decision is based upon an erroneous interpretation of the law, or exceeds the trial court’s legally prescribed power, an appellate court will find an abuse of discretion, and the discretionary decision will not be affirmed. Kearney v. Ross, 743 So. 2d 578 (Fla. 4th DCA 1999); Padovano, FLORIDA APPELLATE PRACTICE, § 9.5 Discretionary Decisions, at 135 (ed. 2003).
Applying this standard of review to the present cases, this Court finds that the trial courts’ decisions do not exceed the limits of the discretion conferred. Accordingly, this court is affirming their decisions.
CONCLUSIONS OF LAW
Enhancement Factors/ Risk Multiplier
Standard Guaranty Ins. Co. v. Quanstrom, 555 So. 2d 828 (Fla. 1990) provides the analytical framework by which to determine the propriety of applying a contingent risk multiplier in tort or contract cases in which the fee is contingent rather than fixed. In Quanstrom, the Florida Supreme Court identified the following 3 relevant factors to be considered: (1) whether the relevant market requires a multiplier to obtain competent counsel, (2) whether the attorney was unable to mitigate the risk of nonpayment, and (3) whether any of the factors set forth in Rowe are applicable especially the amount involved, the result obtained and the type of fee arrangement. Id., at 834.
In subsequent decisions following Quanstrom, Florida’s District Courts of Appeal have expounded upon the first Quanstrom factor. In Rosenberg v. Ross, 613 So. 2d 505, 506 (Fla. 3d DCA 1993), a case involving the award of attorney fees in the recovery of a promissory note, the Third District Court of Appeal clarified when an upward adjustments to the lodestar fee may be awarded by the trial court based on the relevant market norms. The court particularly noted that the novelty and difficulty of the case, which is reflected in the lodestar figure, is not a contingency factor for gauging whether the relevant market requires a multiplier to obtain competent counsel. Rather, the probability of success, as assessed at the outset of the case by the relevant market, determines whether a contingency bonus is merited. Any multiple merited is awarded proportionally to the probability of success. Therefore, attorneys who agree at the outset to undertake contingency-fee cases in light of the odds against success are entitled to a contingency bonus if successful.
In Jones v. Minnesota Mut. Life Insur. Co., 759 So. 2d 723, 725 (Fla. 4th DCA 2000), the Fourth District Court of Appeal listed the following factors for determining whether the relevant market requires a multiplier: the availability of competent counsel in the market place, the likelihood of recovery, the likelihood that competent attorneys with the skill and experience to handle [the case] would have accepted [it] absent a multiplier and the ability of the defendant to respond to an award.
In essence, both courts characterize the relevant-market approach as an assessment of the availability of competent attorneys willing to accept contingency cases in which the probability of success is tenuous at the outset, and in which there is no financial incentive to assume the risk of losing.
Notably there are no Florida district court cases which specifically address the second Quanstrom factor — mitigation of the risk of nonpayment. However, the Quanstrom factors were patterned after its federal counterpart, Pennsylvania v. Delaware Valley Citizen’s Council for Clean Air (II), 483 U.S. 711, 716 (1987). In Delaware Valley (II), the Supreme Court considered whether the risk of nonpayment may be minimized by an agreement to pay, win or lose. The Court, citing Jones v. Central Soya Co., 748 F. 2d 586, 593 (11th Cir. 1984), observed that when a party is ultimately liable for its attorney’s fees, win or lose, the attorney has not assumed the risk of nonpayment; and therefore there is no basis for adjusting the lodestar fee upwards. Implicit in the court’s decision is the premise that attorneys who will receive their fee, irrespective of the results, have mitigated the risk of non-payment. Consequently mitigation could be measured by the fee agreement.
Based on the above decisions collectively, trial courts, which have tabulated the lodestar figure and are contemplating adjusting upward such a figure, should base their decision on the contingent nature of success and the contingent nature of payment to satisfy the two critical Quanstrom factors.
A review of the record discloses that both trial courts did appropriately consider and apply these factors in reaching their decision. In assessing the need for a multiplier, both trial courts relied on the Appellees’ expert witness, Mark Goldman, who identified a number of contingency fee risks that justified enhancement of the fee.
First Quanstrom Factor: Obtaining Counsel & the Relevant Market
In particular, Mr. Goldman provided testimony in which he declared that the attorneys, who undertook the instant cases, faced and overcame at the outset substantive and procedural hurdles for the class of PIP cases in which counter signature was in contention.
Specifically, Mr. Goldman testified that prior to 2003, insurance companies continually avoided payment of medical claims assigned by the insured to their medical providers. Historically, the law was unclear as to whether every submitted medical invoice required the insured’s counter signature as a prerequisite to payment for medical services rendered. Mr. Goldman noted that some courts interpreted the state law as requiring a counter signature on every medical invoice form submitted to the insurance company. Other courts interpreted the law as not applicable when benefits have been assigned. Therefore, invoice forms were not required to be counter signed to be in compliance. Thus, there was no widespread agreement on the criteria for enforcing the payment of medical fees. As a result, the proof necessary to establish entitlement to compensation for medical services was extensively litigated yielding different results, Mr. Goldman testified.
Mr. Goldman particularly noted that in this case counsel for the Appellees were operating in a vacuum since the courts were not in accord prior to 2003.2 Thus, there was significant risk in assuming these cases based on the divergence of legal theories among the courts regarding counter signature cases. In his expert opinion, a contingency risk multiple was particularly appropriate in this case since he, himself, would have been unwilling to take on this risky litigation in which there was no guarantee of success on the merits.
Responding to concerns raised by United Auto as to whether the Appellees must provide specific evidence of their substantial difficulties in finding counsel in the local or other relevant market, Mr. Goldman testified that this contention is theoretically unsound. Mr. Goldman noted that this assumes that clients have adequate information concerning the legal market. Referencing Flores v. Mercury Casualty Co., __ Fla. L. Weekly Supp. __ ,(Fla. 11th Cir. Ct., 2004) (unpublished), a previous case in which Mr. Goldman served as an expert witness, Mr. Goldman noted that the eleventh judicial circuit has accepted his expert opinion that clients cannot identify which particular lawyer is competent to handle their particular problem. Thus, as a general rule, the public is regarded as unable to accurately evaluate a legal claim, and therefore, must rely on the lawyer’s assessment of the case.3
Finally, Mr. Goldman concluded that based on the risks taken and the results achieved, an enhanced fee was necessary since counter signature cases were not merely routine PIP cases but were instead risky at the outset.
By virtue of this testimony, this Court finds it is clear from the record that the first Quanstrom factor — as to the difficulty in securing competent counsel without a multiplier — was established.
Second Quanstrom Factor: Mitigating Risk of Nonpayment
This Court further finds that there is competent substantial evidence to support the second Quanstrom factor, i.e., whether the risk of nonpayment could be mitigated.
United Auto contends that attorneys who operate on a contingency-fee basis pool the risks of their various cases so that successful cases, in effect, will subsidize unsuccessful cases. Thus, the higher fee earned when victorious will offset the unsuccessful cases where no fee is awarded. Therefore, taking a case on a contingency fee basis does not address “why counsel was unable to mitigate his risk by accepting other cases from the assignee, or that this case prevented counsel from taking other cases from different clients” — United Auto contends.
This too was addressed by Mr. Goldman. In rebuttal, Mr. Goldman testified that this argument ignores the fact that large settlements in PIP cases are rare. Such cases, which almost always involve a small sum, rarely generate significant funds even when successful. Therefore, it is unlikely that attorneys can use the fee earned in successful suits to offset losses. Thus, United Auto’s windfall analysis is simply unrealistic.
Mr. Goldman further observed that counsel could not mitigate the impact of the risk of loss by other means, such as entering into a fee contract with the client to insure payment win or lose. Many clients are not capable of shouldering the typically high cost of litigation.
Based on this testimony, the Court finds that the record reflects that counsel could not mitigate the risk of loss — the second Quanstrom factor.
Third Quanstrom Factor: Lodestar Components
The third Quanstrom factor (comprising of the results obtained, the contingency arrangement, and the amount involved) is reflected in the lodestar analysis. Under Quanstrom, certain factors set forth in Florida Patient’s Compensation Fund v. Rowe, 472 So. 2d 1145 (Fla. 1985) may be re-examined when determining whether to apply a multiplier even though previously used within the initial lodestar calculation. Therefore, the requisite evidence required to meet the third Quanstrom factor has already been determined in the lodestar component. Thus, this Court concludes that the uncontested lodestar fee is sufficient record evidence establishing the third Quanstrom factor.
SUMMATION
In summation, this Court finds that the trial courts have appropriately considered and applied each of the benchmark factors for implementing a fee enhancement as established in Quanstrom.
In reviewing the record, the trial courts’ decisions to adjust the lodestar amount, to reflect the contingent nature of the counter signature claims, were based on the probability or likelihood of success, viewed at the outset of the cases. The record reflects that counsel, in undertaking these cases, confronted substantive legal obstacles and assumed an immitigable risk of nonpayment. Accordingly, the trial courts did not abuse their discretion in awarding counsel a contingency risk multiplier since the fee awards are fully supported by the record and are justified by the risks presented by the litigation. (WILSON, J. concurs.)
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1For purposes of judicial economy, the above captioned appeals have been consolidated by this Court into a single opinion. Both appeals involve common questions of facts and law, and are virtually identical in every material respect. Therefore, they will be reviewed under identical legal standards.
2In particular, Mr. Goldman referenced Total Healthcare of Fla. Inc. (Oscar Blas) v. United Auto. Ins. Co., 9 Fla. L. Weekly Supp. 659 (Fla. 11th Cir. Ct. 2003), decided in 2003, which conclusively determined that Florida’s law does not require counter signatures on medical invoice forms.
3We concur. In Delaware Valley (II), Id., a case in which Quanstrom was premised upon, Justice O’Connor acknowledged the difficulty of assessing the appropriate market. She ruled that an enhancement of the lodestar fee must be based on the market’s treatment of the contingency case as a class rather than on a case-specific assessment. Id., at 731. Therefore, in the relevant market context, obtaining legal counsel is not based on the specific difficulty incurred by the individual party, but on a lawyer’s unique position to gauge at the outset the risk presented by a particular class of cases.
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