9 Fla. L. Weekly Supp. 424a

Insurance — Personal injury protection — Default — Relief from judgment — Meritorious defenses, even if shown by the record, would not alone entitle defendant to avoid default — Claims manager’s affidavit containing no explanation for inaction other than vague reference to workload and statement that she made a mistake was insufficient to prove excusable neglect — No gross abuse of discretion in refusal to set aside default — No merit to claim that default should be set aside because it causes unjust enrichment — Attorney’s fees — Prevailing party — Contingency risk multiplier — Error to award multiplier where nothing in record indicates that fee was contingent on recovery — Consideration of difficulty of case and likelihood of success relates to amount of multiplier, not entitlement to multiplier — Costs — Parking and postage costs are miscellaneous office expenses that should not have been taxed

OMNI INSURANCE COMPANY, Appellant, vs. JORGE HERNANDEZ, Appellee. Circuit Court, 9th Judicial Circuit (Appellate) in and for Orange County. Case No. CVA1-00-5. L.C. Case No. CCO-99-3956. March 1, 2002. Appeal from the County Court for Orange County, Jerry L. Brewer, Judge. Counsel: R. J. Diaz, for Appellant. Steven J. Kirschner, for Appellee.

(Before PERRY, MIHOK, and ROCHE, JJ.)

FINAL ORDER AND OPINION AFFIRMING IN PARTAND REVERSING IN PART

(PER CURIAM.) Omni Insurance Company (“Omni”) appeals the nonfinal order entered by the county court denying its motion to set aside the default judgment entered by the clerk in favor of Hernandez due to Omni’s failure to file any responsive pleadings. Omni also appeals the final order granting attorney’s fees and costs to Hernandez.

Hernandez filed his Complaint on April 23, 1999, asserting that Omni wrongfully denied payment of PIP benefits for injuries sustained in an auto accident. On May 6, 1999, the Insurance Commissioner sent the Complaint to Omni by certified mail. On June 8, 1999, in response to a motion by Hernandez, the Clerk of the County Court entered a default against Omni. It was only on July 16, 1999, a day after Hernandez moved for attorney’s fees and costs, that Omni’s counsel filed a notice of appearance. On July 16, 1999, a final default judgment was entered for $5,539.04, the amount requested in the Complaint plus $638.40 in interest.

On July 20, 1999, Omni filed a motion to set aside the default. Omni attached an affidavit from Susan Love, claims supervisor, who stated that due to “an honest mistake on my part,” Omni’s counsel was not notified of the lawsuit until June 25, 1999. Love did not explain her “mistake” other than to state that she “managed various civil claims against Omni at various stages of litigation, to include trial.” Finally, Love stated that she notified defense counsel of the Complaint on June 25, 1999. Nothing in the record explains why Omni’s counsel waited until July 13, 1999, to attempt to participate.

The trial court heard Omni’s motion to set aside the default on August 16, 1999. There is no transcript of that hearing in the record.

Hernandez’s attorney filed a motion for attorney’s fees and costs, and filed an affidavit in support of that motion on December 6, 1999. In that affidavit, the attorney listed the arguments that Omni had made in its motion to set aside the default, including meritorious defenses, excusable neglect, due diligence, and lack of coverage. The affidavit stated: “Given the issues raised by the Defendant in this case, counsel for the Plaintiff should be entitled to the maximum multiplier allowed by law.” The attorney also stated that he is a sole practitioner who “had to put other work aside and had to refuse business in order to put the time necessary into the representation of my client to obtain his PIP benefits.”

The record does contain a transcript of the December 14, 1999, hearing on Hernandez’s motion for attorney’s fees and costs. Hernandez’s attorney’s expert referred to a contract in which Hernandez agreed to pay his attorney a fee of $275 per hour. (The contract itself is not in the record.) Hernandez’s attorney also submitted timesheets and ledgers showing that he claimed 48 hours of work, plus various costs totalling $170.50. Omni objected to some of the time entries, asserted that $200 per hour would be more reasonable, and disputed that it should be taxed costs for courthouse parking and postage, which altogether amounted to $20.85.

The trial court heard testimony from experts for both sides on whether a multiplier should be applied to increase the attorney’s fees. Hernandez’s expert claimed that a multiplier would be appropriate under the principles the Florida Supreme Court set out in Standard Guaranty Ins. Co. v. Quanstrom, 555 So. 2d 828 (Fla. 1990). Specifically, he claimed that a multiplier should be awarded because probability of recovery was low and therefore difficulty of obtaining counsel was high. (R. 229-230; T-19-20.) Since Hernandez was not listed as an insured on the Omni policy (he was driving his mother’s car), Omni had “85 percent, 90 percent chance of prevailing,” according to Hernandez’s expert. He also asserted that the disputed $20.85 was within the court’s discretion to award.

Omni’s expert denied that the case was unusually difficult, calling it “pretty standard” with everyday issues, making it inappropriate for the award of a multiplier.

On December 14, 1999, the county court issued an order which stated:

1. The Court finds that the Affidavit filed on behalf of Defendant [by] Susan Love dated 15th day of July, 1999 is inadequate to show any valid reason for the delay in responding to the suit papers on behalf of the Defendant, Omni Insurance Company so that Defendant has not shown excusable neglect.

2. The Motion to Set Aside the Default and the Final Default Judgment is hereby DENIED.

On December 15, the county court issued an order on attorney’s fees and costs. Adopting Hernandez’s attorney’s time sheet, the judge found that 48 hours were spent on pursuing the PIP benefits. He also found that counsel was entitled to $250 per hour; that counsel was entitled to a 1.5 multiplier “due to the Court’s finding of the level of difficulty of the case and the likelihood of the Plaintiff prevailing against the Defendant as well as other factors as set out in applicable case law”; and that therefore Hernandez was entitled to $18,000 in attorney’s fees. The judge also ruled that Plaintiff’s expert was entitled to fees and assessed the full $170.50 in costs requested by Hernandez’s attorney.

This appeal followed. Omni asserts that it defaulted due to “corporate mishandling” of the Complaint, and that such mishandling is considered excusable neglect. Omni further asserts that it had defenses to the action below which were recognized by the trial court as meritorious. Omni argues that consideration of those defenses should supersede any analysis of excusable neglect, to prevent unjust enrichment from a default judgment. Omni claims that it was an abuse of discretion for the trial court to not vacate the default judgment because in letting it stand, the court created insurance coverage where none had existed. Omni further claims that it was an abuse of discretion under the Quanstrom analysis for the trial court to award a fee multiplier, and reiterates its argument that the parking and postage costs were not taxable.

In response, Hernandez asserts that Omni’s affidavit insufficiently explained how the neglect occurred, a failure which would have forced the trial judge to engage in speculation in order to find excusable neglect. Hernandez further asserts that Omni’s defenses to the merits of his lawsuit are not part of the record on appeal and therefore should not be considered by this Court. Hernandez argues that the trial judge appropriately took the Quanstrom factors into consideration in awarding the fee multiplier, and that it was within the trial court’s discretion to award the parking and postage costs.

In order to secure a reversal of the order denying the motion to vacate the default judgment, Appellant must show a gross abuse of discretion. Safetitle, Inc. v. Fidelity Nat’l Title Ins., 701 So. 2d 565 (Fla. 5th DCA 1997); Tire Kingdom, Inc. v. Bowman, 480 So. 2d 221 (Fla. 5th DCA 1985). The standard of review of the decision to award fee multipliers and costs is abuse of discretion. Baker v. Falcon Power, Inc. 788 So. 2d 1104 (Fla. 5th DCA 2001); Elliot v. Pallotti, 654 So. 2d 1300 (Fla. 5th DCA 1995).Refusal to Vacate Default/Excusable Neglect

Rule 1.540(b)(1), Florida Rules of Civil Procedure, states: “On motion and upon such terms as are just, the court may relieve a party or a party’s legal representative from a final judgment, decree, order or proceeding for the following reasons: mistake, inadvertence, surprise, or excusable neglect.”

Florida has a long-standing policy of liberality in granting motions to set aside default judgments. See North Shore Hospital, Inc. v. Barber, 143 So. 2d 849 (Fla. 1962). “A default will be set aside upon a showing of excusable neglect, a meritorious defense, and due diligence.” Rosenblatt v. Rosenblatt, 528 So. 2d 74 (Fla. 4th DCA 1988); see also Lindell Motors, Inc. v. Morgan, 727 So. 2d 1112 (Fla. 2nd DCA 1999).

Contrary to Omni’s assertion, the trial court’s order on the motion to vacate the default judgment said nothing about the existence of affirmative defenses. The order stated only that the motion was denied because no excusable neglect had been shown. If the trial judge made any statements about meritorious defenses in the hearing on the motion to vacate the default judgment, they are not before this Court because Omni did not provide a transcript of that hearing. See, e.g., Engram v. Bryan, 779 So. 2d 586 (Fla. 5th DCA 2001) (without transcript, appellate court unable to determine whether trial court reached erroneous conclusions during hearing on motion to vacate default).

However, even if the record did show the defenses Omni claims, Omni is incorrect in asserting that those defenses alone would entitle it to avoid the default. It is insufficient just to show that meritorious defenses exist; the moving party must also show a “legal excuse” for its default, or excusable neglect. Tire Kingdom, 480 So. 2d at 222. Therefore, the pertinent question here is whether the trial judge grossly abused his discretion in refusing to vacate the default judgment on the grounds that Omni’s affidavit was insufficient to establish excusable neglect.

“The court is vested with broad discretionary power in determining whether the facts constitute excusable neglect justifying the vacating of a default and a showing of a gross abuse of discretion is necessary on appeal to justify a reversal of the trial court’s ruling on a motion to vacate.” Id. (citing North Shore Hospital, 143 So. 2d 849). Despite the liberal policy toward vacating default judgments, Florida courts require more than a statement that a mistake was made. “The requirement that the defendant demonstrate excusable neglect requires more than a conclusionary statement. A party moving to vacate a default must set forth facts explaining or justifying the mistake or inadvertence by affidavit or other sworn statement.” Inter-Atlantic Ins. Services, Inc. v. Hernandez, 632 So. 2d 1069, 1070 (Fla. 3d DCA 1994) (emphasis and citations omitted). If the moving party does not explain, the appellate court will be prevented from finding a gross abuse of discretion. Id.

Moreover, the mere failure of the defendant itself to act is not the same as excusable neglect. Goldome v. Davis, 567 So. 2d 909 (Fla. 2d DCA 1990). In Safetitle, 701 So. 2d 565, the Fifth District affirmed the denial of a motion to vacate a default judgment because Safetitle had not sustained its burden of proving excusable neglect; the insurance adjustor on whom a third-party complaint had been served failed to respond in any manner, even after opposing counsel called the adjustor before moving for default. The Fifth District affirmed the trial court’s finding that the adjustor’s inaction was not excusable neglect. Id. at 567-68.

In cases in which the Fifth District has found excusable neglect, the moving party was required to explain its inaction more than Omni did here. For example, in Acceleration National Ins. Co. v. Simmons, 769 So. 2d 1146 (Fla. 5th DCA 2000), the insured individual never notified the insurer of the automobile accident, and the suit papers never reached the appropriate individuals at the insurance company, precluding it from participating in the litigation before the default was entered. See also SunTrust Banks of Florida, Inc. v. Don Wood, Inc., 693 So. 2d 99, 101 (Fla. 5th DCA 1997) (excusable neglect found for default because service of complaint had been made improperly on a clerical employee while the company president and the office manager were understandably unaware of it). Also, courts often find excusable neglect when counsel misplaces a file or a breakdown in the attorney’s office communication system leads to inadvertent misplacement. See, e.g., Atlantic Asphalt & Equipment Co., Inc. v. Mairena, 578 So. 2d 292 (Fla. 3d DCA 1991).

Following the above-cited cases, Omni’s affidavit, which contained no explanation other than a vague reference to the claims manager’s workload and a statement that she simply made a mistake, is insufficient to meet Omni’s burden of proving excusable neglect.

Further, “[a]bsent a transcript of the evidentiary hearing, this court would normally be unable to determine whether the trial court erred in concluding that [Appellant] failed to establish excusable neglect.” Engram, 779 So. 2d 586. Here, the record on appeal only evidences the affidavit and the trial court’s order, which specifically referred to the affidavit as insufficient. Since the trial court’s conclusion is supported by the record and applicable caselaw, there is no reason for this Court to find that the trial judge grossly abused his discretion in refusing to set aside the default.

Omni’s argument that the default judgment should be set aside because it causes unjust enrichment — creating insurance coverage where none existed — also is unavailing. The unjust enrichment argument could be made about any default judgment. Insurance companies are not afforded their own standard for avoiding default judgments. Like any party, Omni had the burden of proving that its neglect was excusable and that the trial court’s finding amounted to a gross abuse of discretion. Omni failed to do so.Attorney’s Fees/Use of a Multiplier

The statute that authorizes an award of attorney’s fees to Hernandez is § 627.428(1), Florida Statutes, which provides:

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 Florida Patient’s Compensation Fund v. Rowe, 472 So. 2d 1145, 1150-51 (Fla. 1985), the Florida Supreme Court held that statutes authorizing the payment of attorney’s fees to prevailing parties are constitutional, and that the federal lodestar method should be used to calculate fees (the lodestar amount is the number of hours reasonably spent by the attorney multiplied by a reasonable hourly rate). The Supreme Court stated that in order to determine reasonable attorney fees, courts should use the criteria set out in Disciplinary Rule 2-106(b) of the Florida Bar Code of Professional Responsibility, which is now Rule of Professional Conduct 4-1.5(b). Some of those criteria were time and labor required, novelty and difficulty of the issue, customary charges in a specific locality, and results obtained. Id. at 1150. In Quanstrom, 555 So. 2d 828, the Florida Supreme Court modified the principles of Rowe. The court discussed the award of fee multipliers in tort and contract cases, and stated:

Here, we reaffirm the principles set forth in Rowe, including the code provisions, and find that the trial court should consider the following factors in determining whether a multiplier is necessary: (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. Evidence of these factors must be presented to justify the utilization of a multiplier. We find that the multiplier is still a useful tool which can assist trial courts in determining a reasonable fee in this category of cases when a risk of nonpayment is established. However, we find that the multiplier in Rowe should be modified as follows: 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.

Id. at 834.¹

The term “multiplier” seems to be synonymous with “contingent fee multiplier” and “contingency risk multiplier,” because Florida courts do not award fee multipliers except in cases in which lawyers and clients have fee arrangements that are at least partially contingent on recovery. See Lane v. Head, 566 So. 2d 508 (Fla. 1990); Worobec v. Morse, 722 So. 2d. 227 (Fla. 5th DCA 1998); Dean Witter Reynolds, Inc. v. Wood, 676 So. 2d 464 (Fla. 5th DCA 1996). Further, the Florida Supreme Court emphasizes that there must be evidence in the record of “risk of nonpayment” to counsel and corresponding difficulty for the client to obtain competent counsel to justify the award of a multiplier. Bell v. U.S.B. Acquisition Co., 734 So. 2d 403, 409-10 (Fla. 1999); Quanstrom, 555 So. 2d at 834.

Here, nothing in the record indicates that Hernandez’s attorney’s fees were contingent on recovery. The testimony from the hearing on fees indicates otherwise, as witnesses spoke of a contract in which Hernandez agreed to pay his attorney $275 per hour. Further, there is no evidence on the record that risk of nonpayment was acknowledged or assumed at the time Hernandez and his attorney made their fee arrangement. There is no evidence that this plaintiff or someone in his position would have difficulty obtaining counsel, especially counsel he agreed to pay $275 per hour.

Hernandez’s attorney merely asserted that he “should be entitled” to the “maximum” allowable multiplier, and his expert just offered a conclusion that the probability of Omni’s prevailing “would” make it difficult to obtain counsel in a case such as this. The trial court’s order only mentioned the difficulty of prevailing on the merits and “other factors” without enumerating them. Under Quanstrom, however, consideration of the difficulty of the case and (un)likelihood of success relates to how much of a multiplier is to be awarded, not entitlement to one. It is only after the court determines, based on the Quanstrom factors, that a multiplier is needed that such an analysis of probability of success is appropriate. See Quanstrom, 555 So. 2d at 834. Finally, since Hernandez’s attorney is getting paid for his time spent on this case, his argument that he gave up other work in order to represent this client is unavailing.

Since the requisite evidence and findings to justify a fee multiplier are absent here, this Court reverses the multiplier award. Nonetheless, this Court affirms the base award of attorney’s fees and costs. The trial judge accepted and adopted Hernandez’s attorney’s time sheet showing 48 hours expended, but apparently felt that $250 per hour was more reasonable than either $200 or $275, the amounts given by the competing experts in this case. That decision was within the trial court’s discretion to make. See Hartford Acc. & Indem. Co. v. Bosworth, 382 So. 2d 1345 (Fla. 5th DCA 1980).²Disputed Costs

This Court also reverses the award of $20.85 for parking and postage, because those costs were “miscellaneous office expenses” that should not have been taxed. See, e.g., Stanley v. Stanley, 756 So. 2d 210, 213 (Fla. 4th DCA 2000). The award of $170.50 for costs is reduced accordingly.

Based on the foregoing, it is hereby

ORDERED AND ADJUDGED that:

1) The denial of the motion to vacate the default judgment is AFFIRMED.

2) The award of attorney’s fees for 48 hours at $250 per hour is AFFIRMED; however, the award of a multiplier of 1.5 is REVERSED. Consequently, the award for attorney’s fees is $12,000 rather than $18,000.

3) The award of $20.85 for miscellaneous costs is REVERSED; therefore, $20.85 must be subtracted from the cost award of $170.50, making the net cost award $149.65.

4) No other portions of the trial court’s judgment were challenged on appeal; therefore, the rest of the trial court’s order is AFFIRMED. (PERRY, MIHOK, and ROCHE, JJ., concur.)

__________________

¹The fact that judgment was won by default here does not eliminate the need to analyze whether or not the multiplier award is appropriate. See Dreese v. Craftsman Auto Electric, Inc. 620 So. 2d 1097 (Fla. 4th DCA 1993).

²In a PIP insurance case, it is not considered inappropriate for the attorney’s fees to amount to substantially more than the plaintiff’s recovery. See State Farm Fire & Cas. Co. v. Palma, 555 So. 2d 836 (Fla. 1990).

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