6 Fla. L. Weekly Supp. 351a
Insurance — Personal injury protection — Attorney’s fees — Attorney for health care provider, who was ultimately successful in arbitration, is entitled to compensation for pursuing an entitlement to litigate where attorney abandoned that pursuit and proceeded to arbitrate following subsequent controlling precedent — It was reasonable for health care provider to commence litigation to enforce its right to payment, to propound discovery, and to maintain a position adverse to arbitration until Third District Court of Appeals issued ruling that health care providers must arbitrate assigned PIP claims — It was reasonable to abandon that litigation rather than waste time of parties and trial court by holding a hearing, where trial court would have ordered arbitration and been required to stay the proceedings if plaintiff had pursued entitlement to litigate and required trial court to rule
DR. LUIS CASTILLO d/b/a MIAMI GARDENS CHIROPRACTIC CENTER, Plaintiff, vs. UNITED AUTOMOBILE INSURANCE COMPANY, Defendant. County Court in and for Dade County, Civil Division. Case No. 98-12023 SP 23. March 19, 1999. Reginald Richardson, Judge.
ORDER ON PLAINTIFF’S MOTION FOR ATTORNEYS FEES AND COSTS
On November 10, 1998, the Court held an evidentiary hearing on the Plaintiff’s Motion for Attorney’s Fees and Costs.
The Plaintiff originally filed suit for assigned PIP benefits in 1996. The claim was for chiropractic care provided to the Defendant’s insured commencing in February 1996. The Plaintiff had standing pursuant to an assignment of benefits received from the insured. In 1996 the Defendant moved to dismiss and compel arbitration pursuant to F.S. §627.736(5) and the terms of its policy. The Plaintiff propounded paper discovery and when the Defendant failed to respond, the Plaintiff obtained an ex parte order compelling discovery to which the Defendant also did not respond. The Defendant set several hearings on its Motion to Dismiss and Compel in 1997 but the motion was never heard.
In May 1997, the Plaintiff made written demand for arbitration and the parties agreed on the neutral arbitrator. The Plaintiff applied to the arbitrators for permission to propound discovery. Charles Kane testified that in other applications in other arbitrations before the same neutral arbitrator he had been successful in obtaining some discovery, albeit not everything he had applied for.
In April 1998 the trial court dismissed the 1996 case for lack of prosecution.
Before any ruling by the arbitrators on discovery the Defendant paid $4744 of the principal amount due on the claim on June 3, 1998 thereby exhausting benefits and paid interest thereon in the amount of $996.80 whereupon the Plaintiff filed this suit asserting entitlement to fees and costs by virtue of the June payments.
The Plaintiff claims entitlement for all work done from the commencement of the 1996 litigation until payment occurred in 1998 and for presenting the entitlement issues before this court. The Defendant counters that if any fee is due it is minimal and should only be attributable to work done after the arbitration demand arguing that the 1998 dismissal blotted out all entitlement to fees for court work done prior to that.
The Court heard testimony from Charles J. Kane, Esq. and Harley N. Kane, Esq. for the work done by each of them in this matter. Charles Kane is an attorney with 33 years of experience, a published author, lecturer on PIP and other topics and has had substantial experience in the practice of law. Harley Kane is also a lecturer in PIP and has approximately 6 years of practice experience. Both Messrs. Kane have significant appellate experience in PIP and other topics and, of recent note, Harley Kane was counsel for the provider in Delta Casualty Ins. Co. v. Pinnacle Medical, Inc. 1998 WL 672728 (Fla. 5th DCA, Docket Nos. 97-1429, 97-1588 and 97-3093, filed 10/02/98) [23 Fla. L. Weekly D2233] which declared the arbitration provision of F.S. §627.736(5) unconstitutional. The Kanes have been actively litigating this arbitration issue in various venues in this State and have participated in establishing the view in the Fourth District. Southeast Diagnostic Services, Inc. v. State Farm Mutual Automobile Ins. Co., 697 So.2d 989 (Fla. 4th DCA 1997). They commenced PIP work in November 1995 and since then have filed approximately 1100 PIP cases, mostly representing providers. They testified that they have received numerous awards in Dade, Broward and Palm Beach Counties at the rates they claim which are $250 per hour for Charles and $200 per hour for Harley.
Both Messrs. Kane testified that they performed the work detailed by their time sheet which showed a total of 20.4 hours allocated 12 hours for Harley Kane, 8.1 hours for Charles Kane, and .3 hours for Ms. Catherine Favitta, Esq., their former associate who did not testify. They identified and the Court received in evidence the written contingent fee retainer between them and the Plaintiff.
The Plaintiff’s expert testified that all work was compensable except the work by Ms. Favitta because she did not testify. The expert is an active litigator whose trial work includes personal injury and PIP work. He was familiar with the rates charged by attorneys for this work in the community and attested to the reputation and skill of both Charles and Harley Kane. He found all the Kanes’ work to be reasonable and compensable. At the time the 1996 case was filed there were no clear rulings by any Florida district court of appeals deciding the validity and application of the arbitration provision of F.S. §627.736(5). Only one lower appellate court had recently addressed the issue and ruled the provision unenforceable. After this suit was filed and after the Plaintiff’s counsel had propounded their discovery and provided memoranda to the court on this novel and complex issue, the Third and Fourth District Courts of Appeals issued rulings in 1997 that indicated that healthcare providers must arbitrate these assigned claims. Orion Ins. Co. v. Magnetic Imaging Systems, 696 So.2d 475 (Fla. 3rd DCA 1997); Southeast Diagnostic Services, Inc. v. State Farm Mutual Automobile Ins. Co., 697 So.2d 989 (Fla. 4th DCA 1997). The lower courts in the Third District then held themselves bound to compel arbitration. Spending time to have the trial judge rule on what was then a foregone conclusion was considered wasteful.
The Plaintiff shifted emphasis to arbitration dropping further pursuit in court. The discovery sought in arbitration was similar in content to the discovery that had been propounded in the 1996 court proceedings. Payment of the claim occurred before the arbitrators made any rulings.
The Plaintiff’s expert expressed his opinion that $250 per hour was a reasonable rate for Mr. Charles Kane and that $200 per hour was a reasonable for Mr. Harley Kane.
This expert testified that a contingent fee with the possibility for a multiplier was necessary to attract competent counsel in provider/PIP cases in this community because the providers are unable to pay normal hourly rates for this work due to the size of the claims and the means available to them. He expressed his opinion that a multiplier was applicable in this case. He noted that these cases provide a much higher risk for the Plaintiff’s attorney because of the high risk of being compelled to arbitrate where there are none of the usual safeguards found in court proceedings, most notably, no right of review for mistake of law, and where there is a prevailing party fee standard applied. After considering the Quanstrom and Rowe factors, he noted that this case presented a likelihood of success that was less than equal at the outset because (1) it was a provider by assignment case and (2) the risk of prevailing party attorneys fees has a chilling effect on the providers’ resolve. The Plaintiff’s attorneys achieved as complete a success as was possible by exhausting the available benefits and by collecting interest thereon for the Plaintiff who ultimately collected $4744.00 in benefits (94% of the total claim) and $996.80 in interest. He acknowledged that some attorneys do advertise for PIP work. There was no evidence presented to explain the basis on which these attorneys take those cases (i.e. do they agree to forego multipliers) nor was any evidence adduced to establish the competence of these advertising lawyers.
The Defendant presented one witness, their fee expert, an attorney with 8 years experience, who testified that he has an AV rating from Martindale Hubble, that he formerly defended and prosecuted PIP cases (about 90% defense and 10% plaintiff), that he was presently engaged in a plaintiff’s practice, and that he was familiar with the rates charged by attorneys in the community. He expressed his opinion that the Kanes should be compensated for only 3 of their claimed 20 hours of work. He expressed no clear opinion on the rates appropriate for them but did question a high rate for Mr. Charles Kane who permitted the 1996 litigation to lapse for lack of prosecution. He did confirm the highly contingent and undesirable nature of provider/PIP cases stating that he does not accept them because he does not want to be in arbitration. He agreed that a provider has little chance of success in arbitration and that the attorney then has little chance of achieving a fee. Arguing that the 1996 court work was unworthy of compensation, he said that everyone knew the views of the trial judge on the arbitration issue, everyone knew these cases could not be litigated, and that commencing such litigation was frivolous. He opined that propounding discovery before a judge who everyone knew would compel arbitration was unnecessary and wasteful. He also expressed his opinion that the Florida Arbitration Code does not permit arbitrators to grant an application for discovery.
The questions presented are:
(1) Is an attorney who was ultimately successful in arbitration entitled to compensation for pursuing an entitlement to litigate where he abandoned that pursuit and proceeded to arbitrate following subsequent controlling precedent?
(2) What, if any, effect does an intervening dismissal of the original litigation for lack of prosecution have on the attorneys’ entitlement to fees and costs?
(3) What are the reasonable hourly rates to be applied for the work of the Plaintiff’s attorneys?
(4) What are the reasonable hours compensable in this matter for each of the Plaintiff’s attorneys?
(5) What, if any, contingent fee multiplier is applicable in this case?
This case presents several novel and complex issues for the Court. There is a dearth of authority on how the courts are required to approach the question of reasonable fees in litigation that is interrupted or abandoned because of arbitration where the claimant ultimately prevails. But it is clear that attorneys fees recoverable under a statute allowing recovery of such fees in suit involving insurers or sureties include those incurred during arbitration proceedings. Insurance Co. of North America v. Acousti Engineering Co. of Florida, 579 So.2d 77 (Fla. 1991). It is also clear that the Plaintiff is the prevailing party in this case because the Defendant paid the claim after suit was filed, after the Defendant demanded arbitration and after the parties agreed on arbitrators. Once payment occurred no claims dispute remained and therefore no arbitrable issue remained.
When an insurer settles during suit it must pay attorney fees and costs. Wollard v. Lloyds & Cos., 439 So. 2d 217, 218 (Fla. 1983); Fitzgerald & Company, Inc. v. Roberts Electric, 533 So.2d 789 (Fla. 1st DCA 1988); Fortune Insurance Company v. Brito, 522 So.2d 1028 (Fla. 3rd DCA 1988). The commencement of contractual arbitration proceedings has the same effect as commencement of suit for the purposes hereof. The court has no discretion to deny attorneys fees after such a settlement. Avila v. Latin American Prop. & Cas. Ins. Co., 548 So.2d 894 (Fla. 3rd DCA 1989); Amador v. Latin American Ins. Co., 552 So.2d 1132 (Fla. 3rd DCA 1989); Losicco v. Aetna Casualty & Surety Co., 588 So.2d 681 (Fla. 3rd DCA 1991).
The lodestar method is the starting point used for calculating a reasonable fee. Standard Guaranty Insurance Company v. Quanstrom, 555 So. 2d 828 (Fla. 1990). The lodestar is the product of the reasonable hours expended and the reasonable hourly rate for the attorney. The product is then adjusted up or down depending on whether the relevant market requires a contingency multiplier to obtain competent counsel, whether the attorney was able to mitigate the risk of nonpayment in any way, and whether the Rowe factors are applicable, especially the amount involved, the results obtained, and the type of fee arrangement between the attorney and client. The broader list of factors adopted in Quanstrom followed Johnson v. Georgia Highway Express, 488 F.2d 714 (5th Cir. 1974) which lists the following factors:
1. The time and labor required;
2. The novelty and difficulty of the case;
3. The skill requisite necessary to perform the legal service properly;
4. The preclusion of other employment by the attorney due to acceptance of the case;
5. The customary fee;
6. Whether the fee is fixed or contingent;
7. Time limitations imposed by the circumstances;
8. The results obtained;
9. The experience, reputation and ability of the attorney;
10. The undesirability of the case;
11. The nature and length of the professional relationship with the client;
12. Awards in similar cases.
The Court is persuaded that the hourly rates of $250 and $200 per hour for Charles and Harley are reasonable and consistent with the usual and customary rates in the community for attorneys with their experience, reputation and ability.
The time and labor involved presents puzzling questions. At first blush it may seem appropriate to deny compensation for work done in litigation that was abandoned. However, given the complex and novel issue of the application of arbitration in these cases, and in recognition of the recent decision in Delta, it is obvious that this issue was far from settled when the 1996 litigation commenced. Certainly the filing of that action and the discovery propounded in 1996 made it clear to the Defendant that the Plaintiff meant to enforce its right to payment. The Court cannot agree that commencing litigation in 1996 was improper. The Plaintiff had the right to assert entitlement to court relief and the onus was on the Defendant to commence arbitration under the terms of its policy by making a written demand and, upon receiving opposition, to establish there was an enforceable agreement or provision to arbitrate, that there was a claims dispute, and that arbitration had not been waived. Fortune Ins. Co. v. USA Diagnostics, 684 So.2d 208 (Fla. 4th DCA 1996). The Plaintiff’s recognition that the battle on this issue appeared over in the Third District in 1997 and the move to arbitration was consistent with the primary objective of the suit, to get the Plaintiff paid promptly. Certainly, the initial meeting with the client, the review of the pertinent documents, the drafting of the complaint and the discovery propounded served both to educate the Plaintiff and the Defendant on the pertinent issues and certainly called the matter to the Defendant’s attention for further review and processing. Neither is the Court persuaded that no discovery may be had in arbitration. See Greenstein v. Baxas Howell Mobley, Inc., 538 So.2d 402, 403 (Fla. 3rd DCA 1991) (declining to enforce court sanctioned discovery in arbitration but suggesting that a party in arbitration can apply to the arbitrators for that relief). Indeed, there was testimony that such applications have succeeded. It was reasonable for the Plaintiff to commence litigation in 1996, to propound discovery, and to maintain a position adverse to arbitration until the Third District ruled. It was also reasonable to abandon that litigation rather than waste the time of the parties and the trial court by holding a hearing that was at that point in time a foregone conclusion. Had the Plaintiff pursued the entitlement to litigate and required the trial court to rule, the result would probably have been as the parties testified. The trial court would have ordered arbitration and would have been required to stay the proceedings pursuant to the mandatory stay provision of F.S. §682.03(3). The Plaintiff’s approach appears more efficient when time constraints are considered. Arguably, arbitration had commenced upon the Defendant’s written demand embodied in its Motion to Dismiss and Compel. Proceeding to hearing would have taken the time and labor of attorneys for both sides not to mention the time for the Court to give such further consideration to memoranda and evidence that such hearing would have required. The Plaintiff simply chose to avoid this waste of time in this case.
The very fact that 4 of the 5 district courts of appeal have since addressed this arbitration provision and that they currently do not agree on the constitutionality of the provision as to Article I, Section 21 of the Florida Constitution, and given the fact that only one of those districts have considered and addressed the due process provisions of Article I, Section 9, amply demonstrates the complexity of that issue that faced the Plaintiff’s attorneys when this case was taken in 1996.
Both sides experts agreed that these cases are undesirable and highly contingent. This supports the Plaintiff’s contention for application of a multiplier. The fact that the Plaintiff’s counsel did not pursue the arbitration issue to a hearing or appeal thereafter does not change the risk assumed at the outset.
I cannot accept the notion that the work done in the litigation cannot be considered in setting prevailing party attorneys fees after arbitration commenced. As noted above, from the Defendant’s perspective, arbitration commenced in 1996 with the Defendant’s Motion to Dismiss and Compel Arbitration. This was the written demand required by the policy. There was no need to further inform the Defendant about the details of who was the insured, when the accident occurred, and the other essentials of the claim which had already been imparted by service of the 1996 complaint. The one-page written demand served by the Plaintiff on the Defendant merely added the name and address of the Plaintiff’s arbitrator. The Defendant benefitted from the information supplied in the litigation which served to put the Defendant on notice and invited the Defendant to pay or commence a defense which it did. Thus, the litigation served to give the Defendant a head start in the process that was carried to its completion for the defense by the same attorney who defended the litigation.
The request to propound discovery in the arbitration appears appropriate for the reasons discussed above. The fact that the Defendant ultimately paid without a discovery order is not relevant. Certainly the Plaintiff had the right to try to obtain discovery and perhaps the Plaintiff’s resolve influenced the eventual payment of the claim.
The results achieved appear to be about as complete as was possible. The Plaintiff was paid 94% of the principal amount possible and was paid interest. Recognizing that this undoubtedly was not the only claim presented, it appears this was a complete recovery for the Plaintiff.
After considering all the Quanstrom and Rowe factors, I find that Charles Kane performed 8.1 hours of reasonable service and that Harley Kane performed 12 hours of reasonable service. I award no time for the services of Catherine Favitta.
Recognizing the difficulties with arbitration and the unsettled nature of the law when this case was taken by the Plaintiff’s attorneys, I find that the chances of success were less than equal at the outset. I also find that a multiplier was necessary to garner competent counsel such as the Kanes to pursue this claim. Accordingly, I find that a multiplier of 1.5 is applicable to this case.
I find that $200 per hour is a reasonable fee for the services of the Plaintiff’s expert, Amir Fleischer, Esq. and find that 3 hours was reasonable for his services and award for him a total of 600.00 as taxable costs. I award $183.00 as taxable costs for filing fees and service of process.
Judgment is entered for the Plaintiff in the amount of $ 4,425.00 as reasonable attorneys fees times a multiplier of 1.5, making a total sum of $ 6,637.50 for fees and $ 783.00 as costs including expert fees for a total sum of $ 7,420.50 for which let execution issue. Jurisdiction is reserved for an award of prejudgment interest on award fees.
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