15 Fla. L. Weekly Supp. 309b

Attorney’s fees — Insurance — Personal injury protection — Prevailing party — Hours — Abuse of discretion to fail to separate issue of insured’s unreasonable refusal to attend independent medical examinations, on which insurer prevailed, from issue of whether payment of PIP benefits were recoverable for services rendered within 30 days prior to IME cutoff, on which medical provider prevailed, when calculating reasonable number of hours expended by provider’s counsel — Contingency risk multiplier — Abuse of discretion to award 2.5 contingency risk multiplier for litigation of novel legal issue where issue was first decided in sister case, payment of benefits within 30 days of IME cutoff did not become issue until four years into litigation when provider stipulated that failure to attend IME was unreasonable, and there is no competent substantial evidence that provider had substantial difficulties finding counsel — Abuse of discretion to fail to reduce fee award by taking into account that provider recovered only $356 of $3,550 initially sought

[Editor’s note: Appeal pending, 3rd District Court of Appeals, Case No. 3D08-383]

U.S. SECURITY INSURANCE COMPANY, Appellant, vs. ADVANCE HEALTH SERVICES, III, INC. (As Assignee of Jorge Lamora), Appellee. Circuit Court, 11th Judicial Circuit (Appellate) in and for Miami-Dade County. Case No. 06-483 AP. L.C. Case No. 00-11492 CC 25. January 22, 2008. An Appeal from the County Court for Miami-Dade County, Wendall Graham, J. Counsel: Michael A. Nuzzo, Michael A. Nuzzo, P.A.; and David B. Pakula, David B. Pakula, P.A., for Appellant. George A. David, George A. David, P.A.; and Meena Lopez, Marc L. Goldman, P.A., for Appellee.

(Before JON I. GORDON, MARIA KORVICK, VICTORIA SIGLER, JJ.)

(Per Curiam.) Jorge Lamora and his wife, Leslie Lamora received medical treatment at Advance Health Services, Inc. (“Advance Health”) following a car accident. Jorge and Leslie signed assignments of benefits to Advance Health. Advance Health submitted bills to U.S. Security for chiropractic treatment for Mr. Lamora. Mr. Lamora was notified that he was to submit to two IMEs on August 29, 2000 and August 30, 2000. He did not attend. On September 1, 2000, Mr. Lamora was notified that he was in breach of his insurance policy as a result of his failure to attend his IMEs. Mr. Lamora continued to receive treatment with Advance Health and additional bills were submitted to U.S. Security.

Advance Health filed suit seeking to recover PIP benefits. In its answer U.S. Security raised five affirmative defenses: 1) the insurer complied with its obligations under the insurance contract; 2) payment and setoff; 3) medical bills were excessive; 4) Mr. Lamora’s failure to attend mandatory IME and breach of other policy terms and conditions; and 5) cancellation of the policy before the date of the accident.

Prior to trial, Advance Health stipulated that Mr. Lamora’s refusal to submit to an IME was unreasonable, and the bills submitted after September 1, 2000 were not recoverable. As a result of this stipulation, Advance Health’s claim was reduced from $3,550.00 to $356.00. The parties stipulated that the dispositive issue was whether the bills submitted within the 30 days prior to the IME cutoff were recoverable.

During the April 15, 2004 trial setting, the trial judge heard extensive argument from both sides on the thirty day issue. On April 14, 2005, the trial judge entered a final judgment in favor of U.S. Security but declined to certify the question to the Third District Court of Appeal. The trial judge granted Advance Health’s motion for rehearing.¹ On May 18, 2006, final judgment was entered in favor of Advance Health in the amount of $356.00, the PIP benefits resulting from bills received within 30 days before the IME cutoff.

U.S. Security appealed the decision but voluntarily dismissed the appeal. The only issue remaining was that of fees and costs to be awarded to Advance Health. Advance Health’s fee expert opined that all of the time incurred from the onset of the litigation, related to recovering any PIP benefits and therefore all the time incurred in the case was recoverable. Advance Health’s expert testified that this was a novel case of first impression and U.S. Security intended to “go to the mat” to achieve its end.

U.S. Security claims that on cross examination, Advance Health’s attorney agreed that it took her four years to stipulate that Mr. Lamora unreasonably refused to submit to an IME. The trial judge did not separate the time that Defendant’s attorney had spent on the IME issue from that of the payment of PIP benefits. U.S. Security’s expert testified that the insurer prevailed on the issue of whether Mr. Lamora unreasonably refused to attend the IME. Therefore, most of the time incurred before the April 15, 2004 stipulation was not recoverable.

On the issue of the contingency multiplier, Advance Health’s expert testified that the relevant market required a multiplier to obtain competent counsel. U.S. Security’s expert testified that the relevant market did not require a contingency multiplier to attract competent counsel for this type of case.

Advance Health’s expert testified that although the medical provider only recovered 10% of the benefits it originally sought, it made new law. He also opined that the results were what Advance Health sought to recover in its early settlement offer to the insurer. U.S. Security claims that new law was not made in this case but in the sister case involving Mrs. Lamora.

The trial court entered its judgment for attorney’s fees of 150 hours for Ms. Lopez at a rate of $300 an hour and Mr. David for 100 hours at a rate of $350.00. The court awarded a 2.5 contingency multiplier finding that Advance Health’s attorneys should be awarded for U.S. Security’s “litigating risky issues to the mat.”

The trial judge awarded attorney’s fees totaling $198,000 after applying the multiplier to the lodestar amounts. When costs, interest and expert fees were added, the total judgment came to $208,286.90.

U.S. Security appeals the trial court’s decision arguing: 1) the lower court erroneously determined that time spent on the losing issue of whether Mr. Lamora unreasonably refused to attend an IME could not be segregated out; 2) the lower court abused its discretion by awarding a 2.5 contingency risk multiplier based on the Insurer’s litigation of a novel legal issue that did not surface until four years after the onset of the litigation; 3) the lower court abused its discretion by refusing to reduce the $198,000 fee award by taking into account the results obtained where Advance Health initially sought $3,550 and ultimately recovered only $356.

Advance Health argues: 1) the trial court did not abuse its discretion by not agreeing with U.S. Security’s hard line position that Advance’s attorneys were only entitled to nominal time spent on a test case that U.S. Security litigated “to the mat” and lost; 2) the issue of whether or not an insurer is responsible for payment of medical bills received within 30 days of an unreasonable refusal to attend an IME was known to both U.S. Security and Advance at the outset of litigation in this case; 3) Advance Health properly presented competent evidence of the difficulty of finding competent counsel through its expert witness, the facts of this case and Florida law; 4) the instant case facts as well as application of the ruling in the case of State Farm Fire and Casualty v. Palma, 555 So. 2d 836 (Fla. 1990) refutes U.S. Security’s claim that Advance did not achieve a successful outcome in this case.

The standard of review to be applied in appellate cases for attorney’s fee award is abuse of discretion. DiStefano Construction, Inc. v. Fidelity and Deposit Co. of Maryland, 597 So. 2d 248 (Fla. 1992). The standard of review applied, once it is determined that attorney’s fees are awardable, with respect to the application of a multiplier, is abuse of discretion. Holiday v. Nationwide Mutual Fire Ins. Co., 864 So. 2d 1215 (Fla. 5th DCA 2004).

Florida Statute §627.428 states:

(1) Upon the rendition of a judgment or decree by any of the courts of this state against an insurer and in favor of any named or omnibus insured or the named beneficiary under a policy or contract executed by the insurer, the trial court or, in the event of an appeal in which the insured or beneficiary prevails, the appellate court shall adjudge or decree against the insurer and in favor of the insured or beneficiary a reasonable sum as fees or compensation for the insured’s or beneficiary’s attorney prosecuting the suit in which the recovery is had.

In 1985 the Florida Supreme Court held that in setting a reasonable attorney’s fee, courts should apply the factors enunciated in the Florida Bar Code of Professional Responsibility (4-1.5 Rules Regulating The Florida Bar) which set forth 8 factors to be considered in determining the “lodestar” (or base fee) amount. The Court further determined that the trial court may then add or subtract from the fee, “based upon a contingency risk factor and the results obtained.” Florida Patient’s Compensation Fund v. Rowe, 472 So. 2d 1145 (Fla. 1985). Under the formula espoused in Rowe, courts are to tabulate the reasonable number of hours expended by counsel and multiply that by the reasonable, prevailing hourly rate. Rowe, 472 So. 2d 1150.

In 1990, the Florida Supreme Court in Standard Guaranty Insurance Co. v. Quanstrom, 555 So. 2d 828 (Fla. 1990) expanded its holding in Rowe and determined that different types of cases require different criteria be applied. The Court held that fee cases should be categorized to determine which factors need be applied:

1. Public policy enforcement cases;

2. Tort and contract claims;

3. Family law, eminent domain, and estate and trust matters.

The categories were not all-inclusive.

Category two cases, as is the instant case, require that the court apply the following three (3) additional factors:

1. Whether the relevant market requires a contingency fee multiplier to obtain competent counsel;

2. Whether the attorney was able to mitigate the risk of nonpayment in any way;

3. Whether any of the factors set forth in Rowe are applicable, especially the amount involved, the results obtained and type of fee arrangement between the attorney and his client.

The Supreme Court of Florida held that “evidence of these factors must be presented to justify the utilization of multiplier.” In addition, the court established the range of multipliers to be applied in these cases which range from 1 to 2.5. Further, the Court instructed that the trial court is precluded from considering the contingent nature of the fee when determining a reasonable hourly rate, but it should be taken into consideration when determining whether to apply a multiplier. The ability to obtain competent counsel is the most prominent factor to consider when applying a contingency fee multiplier. Bell v. U.S.B. Acquisition Co., Inc., 734 So. 2d 403, 411 (Fla. 1999) (noting that “[a] primary rationale for the contingency risk multiplier is to provide access to competent counsel for those who could not otherwise afford it); Quanstrom, 555 So. 2d at 834. The difficulty in obtaining competent counsel is best proven through Plaintiff’s direct testimony. Progressive Express Ins. Co. v. Schultz, 2006 WL 2986379 (Fla. 5th Cir. Ct. 2006). One factor to be considered as guide in determining reasonableness of an attorney fees award is beneficial results, if any, of services. Lumbermens Mut. Cas. Co. v. Quintana, 366 So. 2d 529 (Fla. 3d DCA 1979).

U.S. Security’s first argument on appeal is valid. The lower court erroneously determined that time spent on the losing issue of whether Mr. Lamora unreasonably refused to attend an IME could not be segregated out. It took Advance Health four years to admit that Mr. Lamora’s refusal to attend the IME was unreasonable. The issue of whether Mr. Lamora’s refusal to attend the IME was reasonable is a jury question. The issue of whether payment of PIP benefits within 30 days prior to the IME cutoff was recoverable is a question of law, thus creating two separate issues. As a result, U.S. Security was successful in its affirmative defense that it raised in its answer. Therefore, the trial court abused it discretion when calculating the attorney’s fees award in the final judgment by not separating the two issues involved in this case and calculating a reasonable number of hours expended by counsel.

U.S. Security’s argument that the lower court abused its discretion by awarding a 2.5 contingency risk multiplier based on the Insurer’s litigation of a novel legal issue that did not surface until four years after the onset of the litigation is valid. This case was not a novel legal issue because it was determined in its sister case. Moreover, payment of PIP benefits did not become the sole issue until Advance Health stipulated that Mr. Lamora’s failure to attend the IME was unreasonable. Furthermore, a review of the record below reveals no substantial competent evidence that Advance Health had substantial difficulties in finding counsel to represent it. A representative from Advance Health did not testify at the fee hearing. The only testimony regarding representation was that of Advanced Health’s expert stating that the lawyer initially representing Mr. Lamora in handling the IME no-show did not represent Advance Health. There was no other evidence addressing this question. Furthermore, the trial court failed to set forth with any specificity what evidence in the record supported its finding, particularly with regard to the requirement of a determination as to the difficulty in finding counsel in the relevant market, the first factor which must be addressed under Quanstrom, 555 So. 2d at 828. The instant case does not support the ultimate conclusion that the Plaintiff actually had difficulty obtaining counsel. An expert witness’ opinion does not provide the proof necessary to justify an award of attorney fees. Chiropractic Clinics, 2006 WL 3007359 at 3 [14 Fla. L. Weekly Supp. 25a]. As such, the trial court abused its discretion and erred in applying the multiplier to calculate the award of fees.

U.S. Security’s argument that the lower court abused its discretion by refusing to reduce the $198,000 fee award by taking into account the results obtained where Advance Health initially sought $3,550 and ultimately recovered only $356. However, Advance Health cites to State Farm Fire & Cas. Co. v. Palma, 555 So.2d 836 (Fla. 1990), where the action was for declaratory relief which asked the Court to declare that thermographic examinations in musculoskeletal injuries and nerve root impingement were not necessary medical treatment as defined under Florida Statute 627.736 (Personal Injury Protection) and, therefore, were not reimbursable to the plaintiff, or any plaintiff, under her PIP coverage in the insurance policy issued by State Farm. The insured was awarded $600.00 in the case and the attorney’s fees award amounted to $253,500.00. In Palma, there was a six-day trial, twelve medical experts testified, it was a novel legal issue that was appealed to the Fourth District Court where it reversed and remanded to the trial court. In computing the attorney’s fee, the trial court found that 650 was a reasonable amount of hours and that a reasonable hourly rate was $150. Further, the trial court applied a multiplier of 2.6. State Farm’s counsel expended 731 hours on the case. On the appeal for attorney’s fees, the Fourth District Court of Appeal affirmed and found the fee to be reasonable in light of the extraordinary circumstances. The Supreme Court of Florida affirmed the Fourth District’s decision.

The facts in the Palma case are distinguishable from this case. The issue in the Palma case was much more complex. The extent of the work for trial preparation in the Palma case was by far more tedious than that of this case. This case did not go to trial, no medical experts testified, there was more than one issue being argued in which both the plaintiff and defendant were successful. The decision was appealed to the Third District Court of Appeal but withdrawn by U.S. Security. As a result, this case does not bear any similarities to that of Palma because of the complexity and amount of trial preparation required in that case. Therefore, the trial court abused its discretion by not reducing the fee award and taking into account the results obtained in this instance.

Accordingly, the Attorneys Fees Awarded by the trial judge is REVERSED, REMANDED for reconsideration in the absence of a multiplier.

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¹It should be noted that in the final judgment, the trial court makes reference to a separate case filed by Advance Health a/a/o Leslie Lamora against U.S. Security with the same issue of payment of the pre-IME no-show medical bills. The trial court, in this case, granted plaintiff’s Motion for Rehearing after the appellate decision was rendered in that case.