A case decided last week by Florida’s Second District Court of Appeal illustrates that attorneys’ fees are not guaranteed to any party in construction litigation and that payments by insurance carriers can be taken into account in making a determination as to who is entitled to an award of attorneys’ fees. Given how quickly attorneys’ fees can add up, this is a significant issue contractors should be aware of.
Background
This case began with the construction of University Community Hospital in Tampa, Florida. The general contractor hired a subcontractor to perform foundation work at the project. Pursuant to the contract, the subcontractor was to be paid $290,000.00 for this work. In September 2009, when the subcontractor completed its work, the general contractor refused to pay it, claiming it had damaged an existing building while performing the foundation work. The general contractor claimed that the costs of repairing the damage were approximately $580,000.00. The subcontractor filed a lien for the $290,000.00 is was owed. Ultimately, the relationship between the parties resulted in three separate lawsuits involving the parties and the surety that provided the payment bond for the project.
The Lawsuits
In the first lawsuit, the subcontractor filed suit against the surety to foreclose its construction lien against the payment bond. In the second lawsuit, the general contractor sued the subcontractor to recover the cost of making the repairs. Finally, in a third lawsuit, the general contractor sued the subcontractor’s insurance carrier, also seeking to recover the cost of making the repairs.
In the third lawsuit, the general contractor and the insurance carrier ultimately reached a settlement, whereby the insurance carrier paid $450,000.00 to the general contractor to resolve the claims for damages by the subcontractor to the existing building.
The first and second lawsuits for consolidated and headed to trial. Shortly before trial, the parties agreed that the subcontractor was owed $290,000.00 under its subcontract, leaving the only issue remaining for trial to be a determination of the amount of damages the subcontractor was responsible for. The jury determined this amount to be $266,000.00, resulting in a $23,000.00 verdict in favor of the subcontractor.
The subcontractor then asked the court to apply the $450,000.00 settlement against the $266,000.00 determination, to prevent the general contractor from receiving a double recovery. The trial court did, resulting in a $290,000.00 judgment in favor of the subcontractor against the general contractor, and the general contractor receiving nothing from the subcontractor.
The Attorneys’ Fees
Both the subcontractor and the general contractor then moved for an award of attorneys’ fees against the other. The trial court ultimately concluded that it should not take the settlement in the third lawsuit into account, and determined that as a result, neither party was the prevailing party for the purposes of litigation. This resulted in neither party being awarded attorneys’ fees, which the subcontractor appealed.
Before getting into the appeal, I want to point at that under Florida law, particularly in construction cases, trial courts are allowed to determine that neither party is the prevailing party and thus neither party is entitled to an award of attorneys’ fees. This case is a classic example of how that can arise, where one party is awarded the full amount of its contract, but the opposing party is awarded the damages caused by having to correct some of the first party’s work or repair other damage.
Jumping back to the appeal, on appeal, the subcontractor argued that the trial court erred when it failed to take into account the settlement that more than compensated the general contractor for the claimed damages in determining who the prevailing party was. The Second District Court of Appeal agreed.
First, the appellate court determined that the trial court should have considered the prior settlement as part of its analysis of who the prevailing party was. Second the appellate court examined how this settlement impacted the results of the two consolidated cases. The result was that the subcontractor was entitled to recover the full amount of its subcontract, while the general contractor was entitled to no recovery against the subcontractor. Based on this, the appellate court determined the subcontractor should have been the prevailing party for the purposes of attorneys’ fees and reversed the trial court’s contrary decision.
Key Takeaways
This case provides some important takeaways for contractors. First, there are a lot of paths to payment when a project goes sideways. Whether it’s the opposing party, a bond, or an insurance carrier, there are many options and all may be able to make you whole.
Second, this many options though can create issues if not all parties are part of the same litigation. Payments settling one case may impact other cases. Any settlement should try to resolve everything between all of the relevant parties.
Third, there are no guarantees you will recover your attorneys’ fees even if you end up with a judgment in your favor. In construction, it is not uncommon for each side to get a partial win, and this can result in a reduced or eliminated right to attorneys’ fees.