O'Steen et al v. Lafayette State Bank
Filing
23
ORDER reversing and remanding Bankruptcy Court's March 8, 2018 Order as to the denial of attorney's fees and affirming as to the denial of costs. The Clerk is directed to close the file. Signed by Judge Timothy J. Corrigan on 11/14/2019. (SRW)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
JACKSONVILLE DIVISION
In re:
John Riley O’Steen and
Ashley Koon O’Steen,
Debtors,
________________________________
BK Case No. 3:14-bk-4766-PMG
JOHN RILEY O’STEEN and
ASHLEY KOON O’STEEN,
v.
Appellants,
Case No. 3:18-cv-369-J-32
LAFAYETTE STATE BANK,
Appellee.
ORDER
Under Florida’s reciprocal attorney’s fee statute, Fla. St. § 57.105(7), is
an award of attorney’s fees to the prevailing party mandatory or discretionary?
This bankruptcy appeal is before the Court on the O’Steen debtors’ appeal of
the Bankruptcy Court’s Order denying the O’Steens’ amended motion for
attorney’s fees and costs following the entry of judgment in their favor in an
adversary proceeding brought by appellee, Lafayette State Bank (“the Bank”).
The parties filed briefs and numerous record excerpts and state they do not wish
to mediate. See Docs. 3, 4, 5, 10, 11, 12.1 The Court held oral argument on
October 15, 2019, the record of which is incorporated by reference.
I.
Standard of Review
The Court is sitting in an appellate capacity and reviews the Bankruptcy
Court’s legal conclusions de novo and its factual findings for clear error. In re
Hood, 727 F.3d 1360, 1363 (11th Cir. 2013) (citation omitted).
II.
Background2
The O’Steens were dairy farmers in Lafayette County, Florida, who filed
a Chapter 12 bankruptcy petition in 2014. The Bank was a long-time creditor
of the O’Steens. The Bank’s $3.6 million claim was secured by the O’Steen’s
real property, equipment, and livestock, valued at $1,996,451.00, with the
remaining debt unsecured.
At the Bank’s urging, the Court converted the
O’Steens’ Chapter 12 case to a Chapter 11 and later to a Chapter 7, from which
the O’Steens sought a discharge.3
Because the record excerpts (which are in many parts and subparts) do
not include docket numbers on their face, this Order refers to the bankruptcy
record using this Court’s CM/ECF docket and attachment number, listing the
PageID number printed in the header of each page where necessary or helpful.
1
Unless otherwise cited, these facts are drawn from the Bankruptcy
Court’s Findings of Fact, Conclusions of Law and Memorandum Opinion
(“Memorandum Opinion”) (Doc. 4-165), and its Order on Amended Motion to
Award Attorney’s Fees and Costs Pursuant to Contract Terms (“Attorney’s Fee
Order” or “Order”) (Doc. 4-2).
2
3
See Docs. 11-3, 11-8.
2
In December 2015, the Bank filed an adversary proceeding objecting to
the
O’Steens’
Chapter
7
discharge
and
seeking
to
determine
the
dischargeability of the O’Steens’ debt to the Bank. The parties litigated for
over two years, culminating in a two-day trial in which the Bank sought to
demonstrate that the O’Steens had transferred or concealed cattle and other
property during their bankruptcy case, they had manipulated the claims in the
case, and they had not provided required financial information.
In its nineteen page Memorandum Opinion, the Bankruptcy Court
weighed the evidence as to each claim, and, noting that the “denial of a debtor’s
discharge is an extraordinary remedy,” with exceptions “construed in favor of
the debtor and against the objecting party,” found the Bank failed to
demonstrate by a preponderance of the evidence the elements of any of their
claims, all of which required proof of willful, fraudulent, intentional, or
malicious conduct.
Doc. 4-165 at 2.
The Bankruptcy Court entered Final
Judgment in favor of the O’Steens and against the Bank on the Bank’s
adversary complaint, and directed the entry of the O’Steens’ discharge in their
Chapter 7 case.
Thereafter, the O’Steens timely moved to recover $38,800.00 in attorney’s
fees and $6,230.14 in costs pursuant to the parties’ contractual attorney’s fees
3
provisions and Florida law, and the bankruptcy costs rule.4 The Bankruptcy
Court conducted a hearing and denied the motion, finding “it ‘would be unjust’
to require the Bank to pay the [O’Steens’] attorneys’ fees and costs.” Doc. 4-2
at 6 (citation omitted).
The O’Steens take this timely appeal, arguing that because the parties’
contract included an attorney’s fee provision by which the Bank could recover
its fees from the O’Steens,5 Florida’s reciprocal attorney’s fee statute, Fla. St. §
57.105(7), mandates that they recover their fees as the prevailing party, and
the Bankruptcy Court erred as a matter of law by holding otherwise. The
The O’Steens had included a request for attorney’s fees and costs in
their Answer to the Bank’s Adversary Complaint. See Stockman v. Downs, 573
So. 2d 835, 837 (Fla. 1991) (holding that, with limited exception, “a claim for
attorney’s fees, whether based on statute or contract, must be pled”).
4
The attorney’s fee provision is included in the Promissory Notes which
memorialized the Bank’s loans to the O’Steens. The June 18, 2014 Note
attached to the O’Steens’ amended motion for fees (which the O’Steens state,
without challenge, is representative of the other Notes) states:
5
ATTORNEYS’ FEES; EXPENSES: Lender may hire or
pay someone else to help collect this Note if Borrower does not
pay. Borrower will pay Lender the amount of these costs and
expenses, which includes, subject to any limits under
applicable law, Lender’s reasonable attorneys’ fees and
Lender’s legal expenses whether or not there is a lawsuit,
including reasonable attorneys’ fees and legal expenses for
bankruptcy proceedings (including efforts to modify or vacate
any automatic stay or injunction) and appeals, if not prohibited
by applicable law. Borrower also will pay any court costs, in
addition to all other sums provided by law.
Doc. 4-172, at 16 (CM/ECF Page ID 2257).
4
O’Steens alternatively argue that if fees are not mandated under the reciprocal
attorney’s fee statute, the Bankruptcy Court abused its discretion in declining
to award them their fees.6
III.
Analysis
Under the “bedrock principle known as the ‘American rule,’” “[e]ach
litigant pays his own attorney’s fees, win or lose, unless a statute or contract
provides otherwise.” Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242,
253 (2010) (citations omitted).
Although this is an appeal of a federal
bankruptcy case, the underlying source of the possible fee is a contract (the
promissory note) which states on its face that it is governed by federal laws
applicable to the lender (the Bank) and, to the extent not pre-empted by federal
law, by Florida law.
See Doc. 4-172 at 16 (CM/ECF PageID 2257).
The
parties agree that Florida law governs the fee issue arising out of this contract.
The contract language provides that the Bank may recover its fees for
bankruptcy proceedings if it prevails.
However, Florida has a reciprocal
attorney’s fee statute, Florida Statute § 57.105(7), which “aims to even the
playing field” by “engraft[ing] a reciprocity condition onto contractual attorneys’
The O’Steens do not raise any arguments as to why the costs ruling
under Rule 7054(b)(1) of the Federal Rules of Bankruptcy Procedure should be
reversed and they have therefore waived that issue. See, e.g., Access Now, Inc.
v. Southwest Airlines Co., 385 F.3d 1324, 1330 (11th Cir. 2004) (noting “well
settled” principle that “a legal claim or argument that has not been briefed
before the court is deemed abandoned and its merits will not be addressed”).
6
5
fees provisions” such that either side may benefit from a contract’s otherwise
one-sided attorney’s fee provision. Pier 1 Cruise Experts v. Revelex Corp., 929
F.3d 1334, 1344 (11th Cir. 2019) (quoting Fla. Hurricane Prot. & Awning, Inc.
v. Pastina, 43 So. 3d 893, 895 (Fla. 4th DCA 2010)). In relevant part, Florida
Statute § 57.105(7) provides—
If a contract contains a provision allowing attorney’s fees to a
party when he or she is required to take any action to enforce the
contract, the court may also allow reasonable attorney’s fees to the
other party when that party prevails in any action, whether as
plaintiff or defendant, with respect to the contract.
Fla. St. § 57.105(7) (emphasis added).
Thus, if the contract between a creditor and debtor provides for attorney’s
fees for the creditor in bankruptcy proceedings, a prevailing debtor in that
action may likewise seek fees under Florida’s reciprocal attorney’s fee statute.
In re Martinez, 416 F.3d 1286, 1288 (11th Cir. 2005) (holding that Florida’s
reciprocal attorney’s fee statute applies to prevailing debtors in bankruptcy
discharge actions).
Focusing on the statute’s use of the word “may,” the Bankruptcy Court
(and the Bank) read this statute as permitting—but not requiring—the court to
award fees to a prevailing debtor. Thus, the Bankruptcy Court, exercising its
discretion, considered the record and determined a fee award was not
warranted. The O’Steens argue the fee award is mandatory.
6
In Florida, “[i]t is a fundamental principle of statutory interpretation that
legislative intent is the ‘polestar’ that guides this Court’s interpretation.”
Borden v. East-European Ins. Co., 921 So. 2d 587, 595 (Fla. 2006) (citation
omitted). Where the statutory language is “clear and unambiguous,” the court
need look no further to glean legislative intent. Id. (citation omitted). While
an initial reading of the statute seemingly supports the Bank’s position, Florida
courts interpreting the meaning of this statute have nearly universally
determined that this statute accords courts no discretion—a prevailing party
must be awarded its attorney’s fees if the parties’ contract contained a fee
provision. In Landry v. Countrywide Home Loans, Inc., 731 So. 2d 137, 140
(Fla. 1st DCA 1999), the court explained the meaning of the statute as follows:
We recognize that section 57.105(2)[7] uses the permissive “may”
with regard to the trial court’s ability to award a prevailing party
attorney’s fee. However, we believe the discretion granted by use
of “may” pertains to the determination of a prevailing party in an
action founded on a contract.
Once the prevailing party
determination has been made, we believe section 57.105(2) “now
mandates that contractual attorney’s fees provisions be reciprocal
obligations.”
Landry, 731 So. 2d at 140 (citations omitted). See also Holiday Square Owners
Ass’n, Inc. v. Tsetsenis, 820 So. 2d 450, 453 (Fla. 5th DCA 2002) (citing Landry
as authority for the proposition that under Florida’s reciprocal attorney’s fee
Earlier decisions such as Landry referenced § 57.105(2), which was
renumbered and became § 57.105(7) without further change.
7
7
statute, “[t]he award is mandatory, once the lower court determines a party has
prevailed”). But the placement of the word “may” in the statute’s sentence
seems to belie Landry’s analysis—the sentence says “if” the contract provides
fees to one side, the court “may” award a fee to the other party, “when” that
other party prevails.
Thus, the prevailing party determination is a
precondition to the court’s exercise of discretion to award a fee to the other side.
However, other courts facing the same argument the Bank makes here
have followed Landry. See Peter M. Blauzvern DDS, PC v. Brican Am., Inc.,
No. 10-20782-CIV-SEITZ, 2017 WL 8894626, at *4 (S.D. Fla. May 9, 2017)
(rejecting defendant’s argument that use of “may” in § 57.105(7) accorded court
discretion, stating that “Florida courts have held that, although the statute uses
the term ‘may,’ an award of fees is mandatory once a court determines that a
party has prevailed”) (citing Landry, 731 So. 2d at 140, and Holiday Square,
820 So. 2d at 453); In re Full Gospel Assembly of Delray Beach, 371 B.R. 559,
562-63 (S.D. Fla. 2007) (granting reconsideration where court determined it had
“incorrectly applied the law” by believing that § 57.105(7)’s use of “may”
accorded it discretion to decline to enforce reciprocal fee provision) (citing, inter
alia, Landry, 731 So. 2d at 140).
Numerous other courts, including the Eleventh Circuit, have pronounced
that the rule is “mandatory,” even though the discretionary nature of the fees
was not the specific issue before them. See, e.g., Sequoia Fin. Sols., Inc. v.
8
Warren, 660 F. App’x 725, 728 (11th Cir. 2016) (reciting the language of the
Florida statute and stating “[t]he award of attorneys’ fees under § 57.105(7) is
mandatory for the prevailing party”) (citing Holiday Square, 820 So. 2d at 453);
Rabco Corp. v. Steele Plaza, LLC, No. 6:16-cv-1858-Orl-40KRS, 2018 WL
7982921, at *3 (M.D. Fla. Aug. 9, 2018) (“Once a court determines that a party
has ‘prevailed’ under § 57.105(7), an award of fees is mandatory.”) (citing
Holiday Square, 820 So. 2d at 453); Mihalyi v. LaSalle Bank, N.A., 162 So. 3d
113, 115 (Fla. 4th DCA 2014) (“Assuming the request for attorney’s fees is
properly pled, ‘the award is mandatory, once the lower court determines that a
party has prevailed’”) (citing Holiday Square, 820 So. 2d at 453).
Still other courts find the prevailing party “is entitled” to its fees if the
contract provision is triggered. See, e.g., In re Mowji, 228 B.R. 321, 323 (M.D.
Fla. 1999) (holding debtor was “entitled” to attorney’s fees under Florida’s
reciprocal fee statute because parties’ contract included provision for fees and
judgment had been entered in debtor’s favor in the adversary proceeding);
Venezia v. JP Morgan Mortg. Acquisition Corp., 279 So. 3d 145, 146 (Fla. 4th
DCA 2019) (reversing and remanding for grant of attorney’s fees, stating that
“[t]he entitlement to fees under section 57.105(7) applies when the party
seeking fees prevails and is a party to the contract containing the fee
provision”); CalAtlantic Grp., Inc. v. Dau, 268 So. 3d 265, 269 (Fla. 5th DCA
2019) (remanding with instructions to award attorney’s fees where plaintiff was
9
“entitled” to its fees under § 57.105(7) because it prevailed on a claim that was
within the scope of the parties’ contract); Floyd v. Bank of Am., N.A., 262 So. 3d
270, 270 (Fla. 5th DCA 2019) (remanding for an award of attorney’s fees where
appellant was “entitled” to her fees under § 57.105(7) because she prevailed
below); Ajax Paving Indus., Inc. v. Hardaway Co., 824 So. 2d 1026, 1028-29 (Fla.
2d DCA 2002) (reversing and remanding for an award of attorney’s fees where
plaintiff was “entitled” to fees because it prevailed and the parties’ contract
reciprocally applied to the plaintiff) (citing, inter alia, Landry, 731 So. 2d at
139-40, and Holiday Square, 820 So. 2d at 453-54); Oakwood Plaza, L.P. v.
D.O.C. Optics Corp., 708 So. 2d 959, 960 (Fla. 4th DCA 1998) (remanding for
further findings and holding it would be “a departure from the essential
requirements of law” to deny attorney’s fees to the petitioner, who would be
“entitled” to its fees if it was the prevailing party because the parties’ lease
included an attorney’s fee provision), rev. denied, 725 So. 2d 1107 (Fla. 1998),8
abrogated on other grounds by Caufield v. Cantele, 837 So. 2d 371 (Fla. 2002).
See also Martinez v. TRG Oasis (Tower Two) Ltd., LP, No. 2:08-cv-611-FtM29SPC, 2009 WL 774094, at *1 (Mar. 19, 2009) (finding defendants were
The Court rejects the O’Steens’ contention (see Reply, Doc. 12, at 1) that
the Florida Supreme Court’s denial of review in Oakwood equates to a
determination that the Florida Supreme Court has adopted the view that fees
are mandatory. See, e.g., Watson v. Dugger, 945 F. 2d 367, 369-70 (11th Cir.
1991) (explaining that the denial of review by the Florida Supreme Court is “not
necessarily a decision on the merits”).
8
10
“eligible” for an award of attorney’s fee because plaintiff did not dispute the
agreement and defendants were the prevailing party, but documentation was
insufficient to award any fee) (citing Landry, 731 So. 2d at 139-40).
Moreover, while not directly addressing whether the court has discretion,
the Eleventh Circuit’s Martinez opinion includes language which makes it
highly doubtful, stating that “Florida law . . . guarantees that contractual
provisions for attorney’s fees cannot be one-sided” and holding that “a
prevailing debtor in a dischargeability action brought by his creditor can
recover his attorney’s fees” under Florida’s reciprocal attorney’s fee statute.
416 F.3d at 1288 (emphasis added).
The two bankruptcy court decisions upon which the Bankruptcy Court
here relied looked only at the statutory language and did not address any of the
contrary Florida decisions. See In re Estrada, No. 6:03-bk-9952-KSJ, 2004 WL
3202201, at *2 (M.D. Fla. Dec. 10, 2004) (“Section 57.105(2) is clearly
discretionary providing that the court ‘may’ allow attorney fees to the prevailing
party in a contractual dispute.”); In re Bower, No. 08-8212-PMG, 2010 WL
3959614, at *7 (M.D. Fla. Sept. 30, 2010) (quoting Estrada regarding meaning
of statute’s use of “may,” and stating that “[t]he provisions of § 57.105(2) leave
the determination as to whether to award attorney’s fees to the court’s
discretion”).
11
While snippets from a few other cases can be read to agree with that
interpretation, those decisions either fail to account for the contrary Florida
authorities, or the issue before them was not the same. See, e.g., Dorvil v.
Nationstar Mortg. LLC, No. 17-23193-CIV-MARTINEZ, 2019 WL 1992932, at
*20-21 (S.D. Fla. Mar. 26, 2019) (explaining that § 57.105(7) “allows this court
to impose the attorneys’ fee provision reciprocally, which it chooses to do here,”
in a case where the court rejected defendant’s argument that the action was
outside the contract) (emphasis supplied); Rochlin v. Cunningham, 739 So. 2d
1215, 1218 (Fla. 4th DCA 1999) (stating “Section 57.105(2) gives the trial court
discretion to award attorney’s fees to the prevailing party . . . . ” in a case where
the appellate court further held the “trial court properly awarded” attorney’s
fees to prevailing party pursuant to the parties’ contract) (emphasis in original).
The Bank also points to various rules of statutory construction, noting
that the dictionary definition shows “may” is permissive; that elsewhere in the
same statute, the legislature uses the mandatory word, “shall;” that the
legislature did not change “may” to “shall” when making other amendments to
the same statute; that statutes awarding attorney’s fees are to be strictly
construed because they are in derogation of the common law rule; and that in
the context of other Chapter 57 fee award statutes, the word “may” is deemed
to afford discretion. See Appellee’s Brief (Doc. 10) at 11-14 (citing, inter alia,
Black’s Law Dictionary, 1379 (7th ed. 1999) (definition of “may”); Borden v.
12
East-European Ins. Co., 921 So. 2d 587, 595 (Fla. 2006) (“[A]ll parts of a statute
must be read together in order to achieve a consistent whole.”) (citation
omitted); Willis Shaw Exp., Inc. v. Hilyer Sod, Inc., 849 So. 2d 276, 278 (Fla.
2003) (holding language of statute must be strictly construed where it is in
derogation of common law rule that each party pays its own fees); In re Vulpetti,
182 B.R. 923, 926 (Bankr. S.D. Fla. 1995) (holding fee award under § 57.115
(which provides that “court may award” fees in connection with execution on a
judgment), “clearly is discretionary”). These are good points. But they fail to
account for the Landry decision and its formidable progeny. While the Bank
contends that Landry is not incompatible with its position (arguing that its
reference to discretion in finding a prevailing party does not take away from the
discretion to award a fee), no case supports that argument and it cannot be
reconciled with the nearly universal interpretation embraced by the numerous
cases cited above.
If the Court were writing on a clean slate, the result here could
conceivably be different. But this is a matter of Florida law and where, as here,
the Florida Supreme Court has not spoken, the Court must follow the decisions
of Florida’s intermediate courts, unless there is some “persuasive indication”
that the state’s highest court would hold otherwise. Allstate Life Ins. v. Miller,
424 F. 3d 1113, 1116 (11th Cir. 2005). The two bankruptcy decisions and rules
of statutory construction relied on by the Bank are not “persuasive” enough to
13
overcome the weight of authority of Florida’s intermediate courts, which has
also been followed by other federal decisions. This Court will likewise follow.
The Bankruptcy Court therefore erred in finding the award of attorney’s
fees was discretionary under Florida Statute 57.105(7), and that decision is
reversed.
If the O’Steens were the prevailing party, and if the parties’
contracts (only one of which was cited to this Court) would have resulted in an
award of fees to the Bank had it prevailed,9 the O’Steens must be awarded their
reasonable attorney’s fees under Florida Statute 57.105(7).
This case is
remanded so the Bankruptcy Court can reach those decisions in the first
instance. The Bankruptcy Court’s order denying costs under Bankruptcy Rule
7054(b)(1) is affirmed.
Accordingly, it is hereby
ORDERED:
The Bankruptcy Court’s March 8, 2018 Order on Amended Motion to
Award Attorney’s Fees and Costs Pursuant to Contract Terms, which denied
the debtors’ motion, is REVERSED AND REMANDED as to the denial of
The Court presumes those requirements were satisfied for purposes of
this appeal, but the Bankruptcy Court’s Attorney’s Fee Order was not explicit.
The Court notes that the Bank’s counsel agreed at oral argument that the
O’Steens were the prevailing party and further agreed that had the Bank
prevailed, the parties’ contract would have resulted in a fee award to the Bank.
9
14
attorney’s fees and is AFFIRMED as to the denial of costs.
The Clerk is
directed to close the file.
DONE AND ORDERED in Jacksonville, Florida this 14th day of
November, 2019.
TIMOTHY J. CORRIGAN
United States District Judge
s.
Copies:
Counsel of record
Bankruptcy Clerk of Court
15
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?