Fighting Attorney Fee Demands for Dismissals in Florida
“To the victor belong the spoils” is a famous quote from New York Senator William L. Marcy made after his victory in the 1828 election. It has been a misconception in the mortgage banking litigation world that once a dismissal has been entered in Florida, either voluntarybds or involuntary, the defendant is always entitled to their spoils, i.e. attorney's fees and costs. While this is often the case, it is not automatic as there are some hurdles that a defendant must overcome in order to prove entitlement and a right to the spoils.
First, in Florida, a “prevailing party is one who prevails on the ‘significant issues tried before the court.'” Raza v. Deutsche Bank Nat. Trust Co., 100 So.3d 121, 123 (Fla. 2d DCA 2012). The court in Raza went on to hold that in cases involving both a voluntary and involuntary dismissal, Florida Rule of Civil Procedure 1.420(d) has been interpreted as “authorizing a trial court to award attorney's fees as costs to a defendant as the prevailing party when such an award is provided for either by statute or a contract between the parties.” Thus, as recognized by the Court in Raza, the defendant must first specify a correct ground for its entitlement to an award of attorney's fees, either by citing a statute or a contract. The standard Fannie Mae/Freddie Mac mortgage contains a provision allowing for the lender to collect its attorney's fees and costs. Typically, the defendant will rely on Florida Statute §57.105(7) and its reciprocal effect to allow the mortgage's attorney's fees and costs provision to apply to the borrower as well. However, there have been some instances in Florida where a defendant in a mortgage foreclosure action has attempted to seek attorney's fees pursuant to Florida Rule of Civil Procedure 1.420(d), which can significantly limit a defendant's overall recovery. In Creamer v. BAC Home Loans Servicing, LP, the court held that attorney's fees are not defined as costs in a mortgage or note, and hence, the prevailing borrower was only entitled to the costs in defending the action (i.e., filing fees, court reporter costs, etc.). See 159 So.3d 168, 169-170 (Fla. 2d DCA 2015). The mortgage in Creamer stated “[l]ender shall be entitled to collect all expenses incurred in pursuing the remedies provided in this paragraph 18, including, but not limited to, reasonable attorneys' fees and costs of title evidence.” See id (emphasis added). The note executed in Creamer further made the distinction between costs and attorneys' fees stating that the “[l]ender may require [b]orrower to pay costs and expenses including reasonable and customary attorneys' fees.” See id (emphasis added). The court ruled that “[w]here language of the parties' agreements do not define fees as costs, the trial court is correct to deny the award of fees sought as costs pursuant to rule 1.420(d).” See id. Therefore, if defense counsel seek their fees through the costs provision of Rule 1.420(d), lenders have the right to then challenge the defendant's claim of entitlement to attorney's fees.
Further, if defendant's counsel seeks their fees pursuant to Florida Statute §57.105(7), but the case was dismissed for the plaintiff's lack of standing, an argument then exists that the defendant is precluded from seeking these fees and costs pursuant to the Fifth District Court of Appeals' recent opinion in HFC Collection Center, Inc. v. Stephanie Alexander, 2016 WL 1600324 (Fla. 5th DCA April 22, 2016). In Alexander, the court held that the borrower could not use Florida Statute §57.105(7) as a basis for an attorney's fees award after her counsel successfully proved that the plaintiff was not the assignee to the credit card agreement between the lender and the borrower. See id at 3. Since there was no contract between them, the borrower was estopped from relying on the contract to obtain an attorney's fee award based on the terms of the contract. See id at 4. This holding can be used in a similar fashion with a mortgage. As discussed above, a mortgage typically has a clause allowing for the lender to recover attorneys' fees and costs. If the court, however, finds that a plaintiff failed to prove it has standing to foreclose a mortgage, a borrower should be estopped from seeking attorneys' fees and costs against a plaintiff based on that mortgage due to the lack of standing of the plaintiff. However, the unsuccessful plaintiff may not be fully in the clear as the court in Alexander also held that the court could impose sanctions on its own initiative against the lender pursuant to §57.105(1). See id at 6. Further, it is worth noting that the Alexander opinion is not final until the time to file a motion for rehearing has expired or the motion for rehearing has been disposed of by the court.
Second, in addition to pleading a proper ground for the recovery of attorney's fees and costs, a defendant must properly and timely request attorney's fees in its initial pleading filed in the case. Indeed, in Florida, the Supreme Court has long established that a claim for attorney's fees must be pled whether the claim is based on statute or contract. See Stockman v. Downs, 573 So.2d 835, 837 (Fla.1991), which the District Courts of Appeals have adopted in Fanelli v. HSBC Bank USA, 170 So.3d 72, 73 (Fla. 4th DCA 2015); Lopez v. Bank of America, N.A., 153 So.3d 922 (Fla. 2d DCA 2014); and Creamer v. BAC Home Loans Servicing, LP, 159 So.3d 168, 170 (Fla. 2d DCA 2015). The Florida Supreme Court further elaborated in Green v. Sun Harbor Homeowners' Ass'n, 730 So.3d 1261, 1263 (Fla. 1998), that the ruling in Stockman is “to be read to hold that the failure to set forth a claim for attorney fees in a complaint, answer, or counterclaim, if filed, constitutes a waiver.” The requirement for a party to plead its intent to seek attorney's fees is to give fair notice to the opposing party. Consequently, should a borrower not preserve the right in their initial pleading, then they are barred from seeking fees and costs in the future.
Third, the defendant must file its motion for costs and attorney's fees pursuant to Florida Rule of Civil Procedure 1.525 within thirty (30) days after the entry of the judgment which includes a judgment of dismissal or the service of a notice of voluntary dismissal. Furthermore, just because the defendant has properly plead its intent to seek attorney's fees and has timely filed its motion does not necessarily resolve all the procedural issues. The Fourth District Court of Appeals recently held that a motion for costs that was timely filed, but which languished on the court's docket for eighteen months with neither a request for a hearing nor the filing of supporting affidavits, was properly deemed abandoned by the trial court. See Grosso v. HSBC Bank USA, N.A., 2016 WL 1688564 (Fla. 4th DCA April 27, 2016); See also Ramos v. Deutsch Bank Nat. Trust Co., 2016 WL1696435 (Fla. 4th DCA April 27, 2016) (motion for attorney's fees languished on the docket for 22 months without a request for hearing or other final resolution by defendant); Berenson v. Deutsche Bank Nat. Trust Co., 2016 WL 1696441 (Fla 4th DCA April 27, 2016) (motion for attorney's fees languished on the docket for fourteen months without a request or other final resolution by the movant). The court in Grasso found that the trial court's inherent authority was properly used to deem the pending motion for costs abandoned and to close the case. See id at 2. The court also found no merit in the defendant's argument that the motion to tax costs should be treated as a separate post-judgment “action” to fall under Florida Rule of Civil Procedure 1.420(e), which requires notice to it to afford the party the opportunity to “re-commence prosecution of the action to avert dismissal.” See id at 1. The court found that the motion to tax costs was a motion, which does not qualify as an “action” under Florida Rule of Civil Procedure 1.420(e). Consequently, lenders may be able to argue that a borrower's motion for attorney's fees and costs has been abandoned if not timely acted upon. It should be noted, however, that Grosso, Ramos, and Berenson are not final opinions until the time to file a motion for rehearing has expired or the motion for rehearing has been disposed of by the court. Thus, until the opinions are final, you can expect numerous aged motions to be set for hearing by defense counsel in Florida in the upcoming weeks.
Lastly, a defendant is not entitled to attorney's fees based on a voluntary dismissal that is a result of successful loss mitigation. Specifically, the court in Kelly v. Bankunited, FSB, 159 So.3d 403, 406 (Fla. 4th DCA 2015), held that neither party is the prevailing party for purposes of the statute governing prevailing party attorney's fees following the execution of a short sale agreement as neither party “achieved their litigation objectives.” The court held that it must look at “the substance of litigation outcomes—not just procedural maneuvers—in determining the issue of which party prevailed for purposes of awarding attorney's fees.” Consequently, where both parties “compromise” in agreeing to a settlement to end the litigation, neither party is a prevailing party for purposes of attorney's fees. Nevertheless, while the defendant should not be entitled to attorney's fees based on a voluntary dismissal as a result of successful loss mitigation, the most prudent approach would be to have the defendant agree to waive his/her claim to attorney's fees and costs prior to the filing of the dismissal.
If after careful analysis it is determined that the defendant has done everything required to prove entitlement to attorney's fees, it will then be up to the lender and its attorney to potentially challenge the amount and reasonableness of the attorney's fees owed to the defendant. This can be done through the use of discovery, expert witness testimony, and ultimately argument at an evidentiary hearing.