24 Fla. L. Weekly Supp. 223a

Online Reference: FLWSUPP 2403JURAInsurance — Homeowners — Sinkhole claims — Attorney’s fees — Contingency risk multiplier — Where there were significant liability issues raised by insurer, relatively modest damages, and few attorneys in relevant market qualified to handle complex sinkhole claim, availability of contingency risk multiplier was necessary to obtain competent counsel — Likelihood of success for purpose of deciding amount of multiplier should be assessed from viewpoint of counsel, not that of client — Where insurer had verified sinkhole activity prior to counsel undertaking representation but maintained that no evidence could confirm that activity occurred during policy period and had asserted other policy defenses, including late notice of loss, likelihood of success was approximately even at outset, justifying multiplier of 1.5

MARY JURADO, Plaintiff, vs. FIDELITY NATIONAL PROPERTY AND CASUALTY INSURANCE CO., Defendant. Circuit Court, 11th Judicial Circuit in and for Miami-Dade County, Civil Division. Case No. 13-6682. April 22, 2016. Michael A. Hanzman, Judge.

AMENDED FINAL JUDGMENT OFATTORNEY’S FEES AND COSTS

I. Introduction

This matter is before the Court upon “Plaintiff’s Verified Motion for Determination of Attorney’s Fees and Costs” as the prevailing party (by way of settlement) in this first party insurance dispute. See Florida Statute § 627.428. The Court conducted an evidentiary hearing on the Motion, has considered the parties arguments and legal authorities, and is otherwise familiar with the record. The matter is now ripe for disposition.

II. Relevant Facts

Plaintiff, Mary Jurado (“Plaintiff” or “Ms. Jurado”), brought this action in 2013 seeking compensation for damages to her home caused by “sinkhole activity” that occurred in 2007. Defendant, Fidelity National Property & Casualty Insurance Company (“Defendant” or “Fidelity”) denied the claim and raised a number of affirmative defenses. The parties then litigated this case until it was settled in August 2015, approximately two weeks before trial. The settlement provided that Ms. Jurado would be paid $80,000.00, and that Defendant would pay a “reasonable” attorney’s fee as determined by the Court. Thus, there is no issue of “entitlement,” and the Court is called upon only to adjudicate the “amount” of “reasonable” fees and costs to be paid.

The case is somewhat unusual for two reasons. First, sinkhole claims are rare in South Florida and, as a result, few local attorneys have the expertise to properly handle them. Secondly, the carrier sent “mixed” messages regarding coverage. In October 2009, shortly after the claim was first reported, it asserted that Ms. Jurado’s damages were “the result of faulty, inadequate and/or defective workmanship, settlement and/or earth movement,” and therefore “excluded” under the policy. See October 1, 2009 correspondence (Def. Ex. A).

Almost a year and a half later, Ms. Jurado’s public adjuster requested a “sinkhole inspection.” When Fidelity complied with this request — as it was statutorily obligated to do — it “verified sinkhole activity.” See January 12, 2012 correspondence (Def. Ex. B). Fidelity then notified Ms. Jurado that it had arranged “for three contractor’s” to provide a bid for the cost to “remediate/repair the sinkhole”; that “payment for the cost of the repairs” “would be made pursuant to your sinkhole endorsement”; and that “once you [Ms. Jurado]. . . have entered into a contract, we will pay the amount necessary to begin repairs.” Id.

Apparently Ms. Jurado’s public adjuster was not satisfied with the “bids” secured by Fidelity, thus triggering a “Neutral Evaluation Process” before the Florida Department of Financial Services. Prior to that process, however, the carrier changed its position yet again, advising Ms. Jurado that it had now “determined that there is no coverage under the insurance policy,” and that it would “make no payment on [her] claim.” See May 1, 2012 correspondence (Def. Ex. D). In this latest correspondence the carrier (through counsel) suggested (but does not explicitly assert) that the claim was untimely (“This Property Loss Notice was filed more than thirty (30) months after the date of loss”). Fidelity also maintained that the report it had procured — which confirmed “sinkhole activity” — was conducted “four and a half years postdate of loss,” and that the “initial reconnaissance and geo-physical investigation” did not confirm that “a sinkhole existed in the subsurface of your property on the date of loss, February 1, 2007.” The letter advised Ms. Jurado that “we must deny your claim absent an opinion from a geologist and/or engineer that your home was suffering from a sinkhole on the date of loss, February 1, 2007.” Id.

Although Fidelity again denied the claim, it was obligated to participate in the “Neutral Evaluation Process.” See § 627.7074, Fla. Stat. (2015). That “neutral evaluation” was conducted on September 13, 2012, and the resulting October 9, 2012 report recommended a remediation plan. Fidelity, however, continued to insist that Ms. Jurado had failed to comply with her contractual “duties after the loss,” and that no evidence confirmed sinkhole activity “on the date of loss.” See January 9, 2013 correspondence (Def. Ex. E). The carrier suggested that Ms. Jurado file a claim with the “insurance company who insured the residence on August 3, 2011,” the date sinkhole activity was discovered. Id.

This is the “posture” the case was in when Plaintiff’s counsel, Freemon & Miller, P.A., was retained on February 1, 2013. Prior to that time at least two other firms had declined the representation. See Plaintiff’s Ex. 2 and 3.

III. Analysis

The law governing the disposition of this motion is well settled, and requires that the Court first calculate the proper “lodestar” by determining “reasonable” hourly rates and multiplying those rates by the “reasonable” number of hours spent on the engagement. The Court is then called upon to decide whether a “contingency fee multiplier” is warranted and, if so, the appropriate multiplier to be employed. See Florida Patient’s Comp. Fund v. Rowe, 472 So. 2d 1145 (Fla. 1985); Standard Guar. Ins. Co. v. Quanstrom, 555 So. 2d 828 (Fla. 1990).

A. The Lodestar

The Court has carefully reviewed counsel’s billing records, the amount of time spent on this case by defense counsel,¹ and the opinions offered by the experienced and well prepared expert witnesses called by the parties — Matthew R. Danahy (Plaintiff’s expert) and Scott W. Dutton (Defendant’s expert). The Court also considered the legal authorities submitted by the parties on issues such as whether “travel time” is compensable, and whether “unreasonable” unit billing should be discounted. See, e.g., Citizens Prop. Ins. Corp. v. Pulloquinga, 183 So. 3d 1134 (Fla. 3d DCA 2015) [41 Fla. L. Weekly D30d] (travel time is generally not compensable); Browne v. Costales, 579 So. 2d 161 (Fla. 3d DCA 1991) (practice of unit billing a minimum amount for de minimis tasks was unacceptable and “serves to fuel the opprobrium felt for the legal profession”). The Court also has considered all “factors” set forth in Rowe and Florida Bar Rule 4-1.5(b).

Upon consideration of the evidence — both quantitatively and qualitatively — and all pertinent “factors” that inform its analysis, the Court finds that the “reasonable” number of compensable hours expended by Plaintiff’s counsel, and the “reasonable” hourly rates to be applied, are as follows:

Andrew P. McDonald	190 hours	$350.00 rate	=	$66,500.00
Gary L. Miller	10 hours	$425.00 rate	=	$4,250.00
David D. Barnhill	1.9 hours	$275.00 rate	=	$522.50
Bob G. Freeman	2.5 hours	$425.00 rate	=	$1,062.50
Donna Sanz	125 hours	$115.00 rate	=	$14,375.00
Kaley DeArmond	1.2 hours	$115.00 rate	=	$138.00

Thus, the total “Lodestar” is $ 86,848.00.

B. Whether a “Multiplier” is Warranted

Having calculated the “Lodestar,” the next question becomes whether, given the facts of this case, application of a contingency fee for “multiplier” is warranted. This requires that the Court consider:

(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; and

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

Citizens Prop. Ins. Corp. v. Pulloquinga, 183 So. 3d 1134, 1137 (Fla. 3d DCA 2015) [41 Fla. L. Weekly D30d].

As for the first issue, the Court finds that “there was no other counsel in the relevant market who would agree to represent” Ms. Jurado under the pure contingent fee agreement “she needed in light of her financial situation.” Id. Ms. Jurado was not in a position to pay any retainer, advance costs, or otherwise contribute to the expense of the litigation. She required an attorney willing to bear 100% of the risk associated with prosecuting the case. Plaintiff also presented evidence suggesting that very few lawyers in South Florida handle sinkhole claims; that even fewer have significant expertise in this complex area; and that at least two declined this representation. See, e.g., TRG Columbus Dev. Venture, Ltd. v. Sifontes, 163 So. 3d 548, 553 (Fla. 3d DCA 2015) [40 Fla. L. Weekly D796a] (“[t]he trial court heard direct evidence that competent counsel willing both to take such cases on a contingency fee basis and to try such cases to final judgment were few in number”).

While this establishes that a “contingency fee” contract was required by the client, it does not necessarily prove that the “relevant market” required the possibility of securing a “contingency fee multiplier to obtain counsel.” That is a separate question. See, e.g., U.S. Sec. Ins. Co. v. LaPour, 617 So. 2d 347 (Fla. 3d DCA 1993) (when attorney is hired on a contingency fee basis application of a multiplier is not automatic).

For example, in a case with strong liability, significant damages, and a solvent defendant, the possibility of recovering a “multiplier” paid by the opposing party is not needed to attract competent counsel. In such a situation attorneys would be “lined up” to undertake the representation with the prospect to be paid nothing more than the percentage of recovery agreed to by the client — a “recovery” which might include statutory or contractual attorney’s fees. The same is true in a case with clear liability involving a solvent defendant, even if the amount in controversy is small; an example being a first party insurance case where liability is admitted or obvious. Because in such a case there would likely be some recovery, and hence counsel would be virtually assured payment at their full hourly rates by a solvent defendant, the “market” would not require the prospect of a “multiplier” to obtain representation.

Finally, if the potential recovery were extremely large, but liability debatable, attorneys also would be willing to assume representation without regard to the possibility of securing any “fees” from the defendant, let alone a “multiplier.” This is yet another scenario where the client may require “contingency fee” representation, but the market would not require the possibility of a “contingency fee multiplier” to obtain competent counsel; the reason being that the potential “upside” of the case would enable the client to secure representation. See State Farm Florida Ins. Co. v. Alvarez, 175 So. 3d 352 (Fla. 3d DCA 2015) [40 Fla. L. Weekly D2155b] (to justify a multiplier “there should be evidence in the record, and the trial court should so find, that without risk-enhancement plaintiff would have faced substantial difficulties in finding counsel in the local or other relevant market”). Gimenez v. Am. Sec. Ins. Co., 8:08CV2495T24TGW, 2009 WL 2256088 (M.D. Fla. 2009) (multiplier is only appropriate when counsel would not accept representation absent the “possibility” of an enhancement).

The bottom line is that “multipliers” are intended to “level the playing field,” and should be applied only when the evidence shows that competent counsel could not be secured on a contingency fee basis sans the prospect of recovering a “reasonable” fee paid by the defendant together with a “multiplier.” Michnal v. Palm Coast Dev., Inc., 842 So. 2d 927 (Fla. 4th DCA 2003) [28 Fla. L. Weekly D688b]. They are not warranted simply because the client required contingent fee representation. See, e.g., Sun Bank of Ocala v. Ford, 564 So. 2d 1078 (Fla. 1990).

In this case there were significant liability issues and the damages were relatively modest (approximately $120,000.00 per Plaintiff’s proof of loss). As a result, counsel assumed significant risk as: (a) the complexity of the case would likely require that they expend substantial time and costs; and (b) there clearly was a prospect of no recovery. So without the possibility of a “multiplier,” counsel’s “upside” would in all likelihood be no more than their regular hourly rates (i.e. Lodestar). For this reason, the prospect of a multiplier to be paid by the defendant was needed to “obtain competent counsel.” Or put another way, competent counsel would not, in this case, assume the “risk” of the representation without the prospect of receiving more than their regular hourly rates, and given the amount at stake the only way that could occur would be through application of a “multiplier” to be paid by the defendant.

The Court also finds that given the facts of this case counsel was not able to mitigate the risk of non-payment, and that the Rowe factors, including the amount involved, the result obtained, and the type of fee agreement between counsel and their client, justify application of a multiplier.

C. The Appropriate Multiplier

If the trial court determines that success was more likely than not at the outset, it may apply a multiplier of 1 to 1.5; if the trial court determines that the likelihood of success was approximately even at the outset, the trial judge may apply a multiplier of 1.5 to 2.0; and if the trial court determines that success was unlikely at the outset of the case, it may apply a multiplier of 2.0 to 2.5. Accordingly, our Rowe decision is modified to allow a multiplier from 1 to 2.5.

Standard Guar. Ins. Co. v. Quanstrom, 555 So. 2d at 834. This formula reflects a universally accepted truism: “the greater the risk the greater the reward.”

The question then becomes whether the likelihood of “success” at the outset is evaluated from the perspective of the client, or the lawyer seeking the fee; two vantage points not always aligned. For example, assume going into the case there was clear liability and thus a 95% chance of a recovery. “Success” from the standpoint of the lawyer would be “likely” because any recovery would trigger a right to a “reasonable” fee. “Success” from the standpoint of the client, however, might be far less apparent if significant damage issues were present.

In this Court’s view, the likelihood of “success” for purposes of deciding the amount of a “multiplier” should be evaluated from the standpoint of the attorney seeking the fee, as this is the “risk” the “multiplier” is designed to reward; particularly in a case, such as this, where counsel’s fee agreement provided that they would be paid the greater of the contingency agreed to by the client or a court awarded “reasonable” fee to be paid by the defendant.^2 3 See Plaintiff’s Ex. 1. Thus, in a case like this — where the client has no stake in the outcome of the fee dispute — if it was “likely” at the outset that there would be some recovery that would trigger the right to recover a “reasonable” fee from a solvent defendant, the multiplier should be 1 to 1.5. If the prospect of any recovery was even at the outset, the multiplier should be 1.5-2.0, and if the prospect of any recovery was “unlikely at the outset” the multiplier should be 2.0 to 2.5.

In this case, a solvent defendant insurance carrier had verified “sinkhole activity” prior to counsel undertaking the representation. But it also maintained that no evidence could confirm that this “activity” occurred during the policy period, and had asserted other policy defenses, including late notice. This was therefore not a case where “success” (i.e., some recovery) was “more likely than not at the outset.” Nor was it a case — in this Court’s view — where “success” was “unlikely at the outset.” The Court finds that this case fits comfortably into the category where the “likelihood of success was approximately even at the outset,” justifying a multiplier of 1.5 to 2.0. The Court will therefore award a multiplier of 1.5.

For the foregoing reasons, it is hereby,

ORDERED AND ADJUDGED that:

Plaintiff shall recover from Defendant a reasonable attorney’s fees in the amount of $130,272.00, together with the costs stipulated to by the parties in the amount of $17,024.97, for a total of One Hundred Forty Seven Thousand Two Hundred Ninety Six dollars and Ninety Seven cents, ($147,296.97), plus pre-judgment interest of $16.95 per day commencing on August 17, 2015 through the date of this judgment; the total of which shall bear interest at the rate of 4.75% a year, for which let execution issue. Plaintiff shall also recover reasonable expert witness fees in the total amount of $17,500.00.

__________________

¹See Paton v. GEICO Gen. Ins. Co., SC14-282, 2016 WL 1163372 (Fla. 2016) [41 Fla. L. Weekly S115a] (opposing counsel’s billing records are relevant to the issue of reasonableness of time expended).

²In the overwhelming majority of these cases the client has no financial interest in the outcome of the “fee” dispute because the court award “reasonable” fee will exceed the amount that would be payable under the contingency agreement and, as a result, the entire fee award will be retained by counsel.

³In this case it makes no difference whether the “likelihood of success” at the outset is evaluated from the perspective of the lawyer or client as the Court concludes that from the vantage point of both the chance of success was “even.”